[Title 17 CFR ]
[Code of Federal Regulations (annual edition) - April 1, 2021 Edition]
[From the U.S. Government Publishing Office]



[[Page i]]

          

          Title 17

Commodity and Securities Exchanges


________________________

Part 240

                         Revised as of April 1, 2021

          Containing a codification of documents of general 
          applicability and future effect

          As of April 1, 2021
                    Published by the Office of the Federal Register 
                    National Archives and Records Administration as a 
                    Special Edition of the Federal Register

[[Page ii]]

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[[Page iii]]







As of April 1, 2021

Title 17, Part 240 to End,

Revised as of April 1, 2020

Is Replaced by

Title 17, Part 240

and

Title 17, Part 241 to End



[[Page v]]





                            Table of Contents



                                                                    Page
  Explanation.................................................     vii

  Title 17:
          Chapter II--Securities and Exchange Commission 
          (Continued)                                                3
  Finding Aids:
      Table of CFR Titles and Chapters........................     801
      Alphabetical List of Agencies Appearing in the CFR......     821
      Table of OMB Control Numbers............................     831
      List of CFR Sections Affected...........................     837

[[Page vi]]





                     ----------------------------

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 17 CFR 240.0-1 
                       refers to title 17, part 
                       240, section 0-1.

                     ----------------------------

[[Page vii]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
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    To determine whether a Code volume has been amended since its 
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Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
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EFFECTIVE AND EXPIRATION DATES

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OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

[[Page viii]]

Many agencies have begun publishing numerous OMB control numbers as 
amendments to existing regulations in the CFR. These OMB numbers are 
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PAST PROVISIONS OF THE CODE

    Provisions of the Code that are no longer in force and effect as of 
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the Code prior to the LSA listings at the end of the volume, consult 
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for 1949-1963, 1964-1972, 1973-1985, and 1986-2000.

``[RESERVED]'' TERMINOLOGY

    The term ``[Reserved]'' is used as a place holder within the Code of 
Federal Regulations. An agency may add regulatory information at a 
``[Reserved]'' location at any time. Occasionally ``[Reserved]'' is used 
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INCORPORATION BY REFERENCE

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established by statute and allows Federal agencies to meet the 
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This material, like any other properly issued regulation, has the force 
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Federal Register will approve an incorporation by reference only when 
the requirements of 1 CFR part 51 are met. Some of the elements on which 
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    (a) The incorporation will substantially reduce the volume of 
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    (b) The matter incorporated is in fact available to the extent 
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alphabetical list of agencies publishing in the CFR are also included in 
this volume.
    An index to the text of ``Title 3--The President'' is carried within 
that volume.

[[Page ix]]

    The Federal Register Index is issued monthly in cumulative form. 
This index is based on a consolidation of the ``Contents'' entries in 
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the revision dates of the 50 CFR titles.

REPUBLICATION OF MATERIAL

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INQUIRIES

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Connect to NARA's website at www.archives.gov/federal-register.
    The e-CFR is a regularly updated, unofficial editorial compilation 
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of the Federal Register and the Government Publishing Office. It is 
available at www.ecfr.gov.

    Oliver A. Potts,
    Director,
    Office of the Federal Register
    April 1, 2021







[[Page xi]]



                               THIS TITLE

    Title 17--Commodity and Securities Exchanges is composed of five 
volumes. The first two volumes, containing parts 1-40 and 41-199, 
comprise Chapter I--Commodity Futures Trading Commission. The third 
volume contains Chapter II--Securities and Exchange Commission, parts 
200-239. The fourth volume, comprising part 240, contains additional 
regulations of the Securities and Exchange Commission. The fifth volume, 
comprising part 241 to end, contains the remaining regulations of the 
Securities and Exchange Commission and Chapter IV--Department of the 
Treasury. The contents of these volumes represent all current 
regulations codified under this title by the Commodity Futures Trading 
Commission, the Securities and Exchange Commission, and the Department 
of the Treasury as of April 1, 2021.

    The OMB control numbers for the Securities and Exchange Commission 
appear in Sec.  200.800 of chapter II. For the convenience of the user, 
Sec.  200.800 is reprinted in the Finding Aids sections of volume 4, 
containing part 240, and volume 5, containing part 241 to end.

    For this volume, Robert J. Sheehan, III was Chief Editor. The Code 
of Federal Regulations publication program is under the direction of 
John Hyrum Martinez, assisted by Stephen J. Frattini.

[[Page 1]]



              TITLE 17--COMMODITY AND SECURITIES EXCHANGES




                      (This book contains part 240)

  --------------------------------------------------------------------
                                                                    Part

chapter ii--Securities and Exchange Commission (Continued)..         240

[[Page 3]]



       CHAPTER II--SECURITIES AND EXCHANGE COMMISSION (CONTINUED)




  --------------------------------------------------------------------
Part                                                                Page
240             General rules and regulations, Securities 
                    Exchange Act of 1934....................           5

[[Page 5]]



PART 240_GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 1934-
-Table of Contents



  Subpart A_Rules and Regulations Under the Securities Exchange Act of 
                                  1934

                      Rules of General Application

Sec.
240.0-1 Definitions.
240.0-2 Business hours of the Commission.
240.0-3 Filing of material with the Commission.
240.0-4 Nondisclosure of information obtained in examinations and 
          investigations.
240.0-5 Reference to rule by obsolete designation.
240.0-6 Disclosure detrimental to the national defense or foreign 
          policy.
240.0-8 Application of rules to registered broker-dealers.
240.0-9 Payment of fees.
240.0-10 Small entities under the Securities Exchange Act for purposes 
          of the Regulatory Flexibility Act.
240.0-11 Filing fees for certain acquisitions, dispositions and similar 
          transactions.
240.0-12 Commission procedures for filing applications for orders for 
          exemptive relief under Section 36 of the Exchange Act.
240.0-13 Commission procedures for filing applications to request a 
          substituted compliance or listed jurisdiction order under the 
          Exchange Act.
240.3a1-1 Exemption from the definition of ``Exchange'' under Section 
          3(a)(1) of the Act.
240.3a4-1 Associated persons of an issuer deemed not to be brokers.
240.3a4-2--240.3a4-6 [Reserved]
240.3a5-1 Exemption from the definition of ``dealer'' for a bank engaged 
          in riskless principal transactions.
240.3a5-2 Exemption from the definition of ``dealer'' for banks 
          effecting transactions in securities issued pursuant to 
          Regulation S.
240.3a5-3 Exemption from the definition of ``dealer'' for banks engaging 
          in securities lending transactions.

   Definition of ``Equity Security'' as Used in Sections 12(g) and 16

240.3a11-1 Definition of the term ``equity security''.

                        Miscellaneous Exemptions

240.3a12-1 Exemption of certain mortgages and interests in mortgages.
240.3a12-2 [Reserved]
240.3a12-3 Exemption from sections 14(a), 14(b), 14(c), 14(f), and 16 
          for securities of certain foreign issuers.
240.3a12-4 Exemptions from sections 15(a) and 15(c)(3) for certain 
          mortgage securities.
240.3a12-5 Exemption of certain investment contract securities from 
          sections 7(c) and 11(d)(1).
240.3a12-6 Definition of ``common trust fund'' as used in section 
          3(a)(12) of the Act.
240.3a12-7 Exemption for certain derivative securities traded otherwise 
          than on a national securities exchange.
240.3a12-8 Exemption for designated foreign government securities for 
          purposes of futures trading.
240.3a12-9 Exemption of certain direct participation program securities 
          from the arranging provisions of sections 7(c) and 11(d)(1).
240.3a12-10 Exemption of certain securities issued by the Resolution 
          Funding Corporation.
240.3a12-11 Exemption from sections 8(a), 14(a), 14(b), and 14(c) for 
          debt securities listed on a national securities exchange.
240.3a12-12 Exemption from certain provisions of section 16 of the Act 
          for asset-backed securities.
240.3a40-1 Designation of financial responsibility rules.
240.3a43-1 Customer-related government securities activities incidental 
          to the futures-related business of a futures commission 
          merchant registered with the Commodity Futures Trading 
          Commission.
240.3a44-1 Proprietary government securities transactions incidental to 
          the futures-related business of a CFTC-regulated person.
240.3a51-1 Definition of ``penny stock''.
240.3a55-1 Method for determining market capitalization and dollar value 
          of average daily trading volume; application of the definition 
          of narrow-based security index.
240.3a55-2 Indexes underlying futures contracts trading for fewer than 
          30 days.
240.3a55-3 Futures contracts on security indexes trading on or subject 
          to the rules of a foreign board of trade.
240.3a55-4 Exclusion from definition of narrow-based security index for 
          indexes composed of debt securities.

         Security-Based Swap Dealer and Participant Definitions

240.3a67-1 Definition of ``major security-based swap participant.''
240.3a67-2 Categories of security-based swaps.
240.3a67-3 Definition of ``substantial position.''
240.3a67-4 Definition of ``hedging or mitigating commercial risk.''
240.3a67-5 Definition of ``substantial counterparty exposure.''

[[Page 6]]

240.3a67-6 Definition of ``financial entity.''
240.3a67-7 Definition of ``highly leveraged.''
240.3a67-8 Timing requirements, reevaluation period and termination of 
          status.
240.3a67-9 Calculation of major participant status by certain persons.
240.3a67-10 Foreign major security-based swap participants.

Further Definition of Swap, Security-Based Swap, and Security-Based Swap 
   Agreement; Mixed Swaps; Security-Based Swap Agreement Recordkeeping

240.3a68-1a Meaning of ``issuers of securities in a narrow-based 
          security index'' as used in section 3(a)(68)(A)(ii)(III) of 
          the Act.
240.3a68-1b Meaning of ``narrow-based security index'' as used in 
          section 3(a)(68)(A)(ii)(I) of the Act.
240.3a68-2 Requests for interpretation of swaps, security-based swaps, 
          and mixed swaps.
240.3a68-3 Meaning of ``narrow-based security index'' as used in the 
          definition of ``security-based swap.''
240.3a68-4 Regulation of mixed swaps.
240.3a68-5 Regulation of certain futures contracts on foreign sovereign 
          debt.
240.3a69-1 Safe Harbor Definition of ``security-based swap'' and 
          ``swap'' as used in sections 3(a)(68) and 3(a)(69) of the 
          Act--insurance.
240.3a69-2 Definition of ``swap'' as used in section 3(a)(69) of the 
          Act--additional products.
240.3a69-3 Books and records requirements for security-based swap 
          agreements.
240.3a71-1 Definition of ``security-based swap dealer.''
240.3a71-2 De minimis exception.
240.3a71-2A Report regarding the ``security-based swap dealer'' and 
          ``major security-based swap participant'' definitions 
          (Appendix A to 17 CFR 240.3a71-2)
240.3a71-3 Cross-border security-based swap dealing activity.
240.3a71-4 Exception from aggregation for affiliated groups with 
          registered security-based swap dealers.
240.3a71-5 Substituted compliance for foreign security-based swap 
          dealers.
240.3a71-6 Substituted compliance for security-based swap dealers and 
          major security-based swap participants.

                               Definitions

240.3b-1 Definition of ``listed''.
240.3b-2 Definition of ``officer''.
240.3b-3 [Reserved]
240.3b-4 Definition of ``foreign government,'' ``foreign issuer'' and 
          ``foreign private issuer''.
240.3b-5 Non-exempt securities issued under governmental obligations.
240.3b-6 Liability for certain statements by issuers.
240.3b-7 Definition of ``executive officer''.
240.3b-8 Definitions of ``Qualified OTC Market Maker, Qualified Third 
          Market Maker'' and ``Qualified Block Positioner''.
240.3b-9--240.3b-10 [Reserved]
240.3b-11 Definitions relating to limited partnership roll-up 
          transactions for purposes of sections 6(b)(9), 14(h) and 
          15A(b)(12)-(13).
240.3b-12 Definition of OTC derivatives dealer.
240.3b-13 Definition of eligible OTC derivative instrument.
240.3b-14 Definition of cash management securities activities.
240.3b-15 Definition of ancillary portfolio management securities 
          activities.
240.3b-16 Definitions of terms used in Section 3(a)(1) of the Act.
240.3b-17 [Reserved]
240.3b-18 Definitions of terms used in Section 3(a)(5) of the Act.
240.3b-19 Definition of ``issuer'' in section 3(a)(8) of the Act in 
          relation to asset-backed securities.

                    Clearing of Security-Based Swaps

240.3Ca-1 Stay of clearing requirement and review by the Commission.
240.3Ca-2 Submission of security-based swaps for clearing.

                 Registration and Exemption of Exchanges

240.6a-1 Application for registration as a national securities exchange 
          or exemption from registration based on limited volume.
240.6a-2 Amendments to application.
240.6a-3 Supplemental material to be filed by exchanges.
240.6a-4 Notice of registration under Section 6(g) of the Act, amendment 
          to such notice, and supplemental materials to be filed by 
          exchanges registered under Section 6(g) of the Act.
240.6h-1 Settlement and regulatory halt requirements for security 
          futures products.
240.6h-2 Security future based on note, bond, debenture, or evidence of 
          indebtedness.
240.7c2-1 [Reserved]

                 Hypothecation of Customers' Securities

240.8c-1 Hypothecation of customers' securities.
240.9b-1 Options disclosure document.
240.10a-1--240.10a-2 [Reserved]

           Manipulative and Deceptive Devices and Contrivances

240.10b-1 Prohibition of use of manipulative or deceptive devices or 
          contrivances with respect to certain securities exempted from 
          registration.
240.10b-2 [Reserved]

[[Page 7]]

240.10b-3 Employment of manipulative and deceptive devices by brokers or 
          dealers.
240.10b-4 [Reserved]
240.10b-5 Employment of manipulative and deceptive devices.
240.10b5-1 Trading ``on the basis of'' material nonpublic information in 
          insider trading cases.
240.10b5-2 Duties of trust or confidence in misappropriation insider 
          trading cases.
240.10b-6--240.10b-8 [Reserved]
240.10b-9 Prohibited representations in connection with certain 
          offerings.
240.10b-10 Confirmation of transactions.
240.10b-13 [Reserved]
240.10b-16 Disclosure of credit terms in margin transactions.
240.10b-17 Untimely announcements of record dates.
240.10b-18 Purchases of certain equity securities by the issuer and 
          others.
240.10b-21 Deception in connection with a seller's ability or intent to 
          deliver securities on the date delivery is due.

                        Reports Under Section 10A

240.10A-1 Notice to the Commission Pursuant to Section 10A of the Act.
240.10A-2 Auditor independence.
240.10A-3 Listing standards relating to audit committees.

                     Requirements Under Section 10C

240.10C-1 Listing standards relating to compensation committees.

            Adoption of Floor Trading Regulation (Rule 11a-1)

240.11a-1 Regulation of floor trading.
240.11a1-1(T) Transactions yielding priority, parity, and precedence.
240.11a1-2 Transactions for certain accounts of associated persons of 
          members.
240.11a1-3(T) Bona fide hedge transactions in certain securities.
240.11a1-4(T) Bond transactions on national securities exchanges.
240.11a1-5 Transactions by registered competitive market makers and 
          registered equity market makers.
240.11a1-6 Transactions for certain accounts of OTC derivatives dealers.
240.11a2-2(T) Transactions effected by exchange members through other 
          members.

            Adoption of Regulation on Conduct of Specialists

240.11b-1 Regulation of specialists.

          Exemption of Certain Securities From Section 11(d)(1)

240.11d1-1 Exemption of certain securities from section 11(d)(1).
240.11d1-2 Exemption from section 11(d)(1) for certain investment 
          company securities held by broker-dealers as collateral in 
          margin accounts.
240.11d2-1 Exemption from Section 11(d)(2) for certain broker-dealers 
          effecting transactions for customers security futures products 
          in futures accounts.

                  Securities Exempted From Registration

240.12a-4 Exemption of certain warrants from section 12(a).
240.12a-5 Temporary exemption of substituted or additional securities.
240.12g-6 Exemption for securities issued pursuant to section 4(a)(6) of 
          the Securities Act of 1933 or Regulation Crowdfunding.
240.12a-7 Exemption of stock contained in standardized market baskets 
          from section 12(a) of the Act.
240.12a-8 Exemption of depositary shares.
240.12a-9 Exemption of standardized options from section 12(a) of the 
          Act.
240.12a-10 Exemption of security-based swaps from section 12(a) of the 
          Act.
240.12a-11 Exemption of security-based swaps sold in reliance on 
          Securities Act of 1933 Rule 240 (Sec.  230.240) from section 
          12(a) of the Act.

               Regulation 12B: Registration and Reporting

                                 General

240.12b-1 Scope of regulation.
240.12b-2 Definitions.
240.12b-3 Title of securities.
240.12b-4 Supplemental information.
240.12b-5 Determination of affiliates of banks.
240.12b-6 When securities are deemed to be registered.
240.12b-7 [Reserved]

                           Formal Requirements

240.12b-10 Requirements as to proper form.
240.12b-11 Number of copies; signatures; binding.
240.12b-12 Requirements as to paper, printing and language.
240.12b-13 Preparation of statement or report.
240.12b-14 Riders; inserts.
240.12b-15 Amendments.

                   General Requirements as to Contents

240.12b-20 Additional information.
240.12b-21 Information unknown or not available.
240.12b-22 Disclaimer of control.
240.12b-23 Incorporation by reference.
240.12b-24 [Reserved]
240.12b-25 Notification of inability to timely file all or any required 
          portion of a Form 10-K, 20-F, 11-K, N-CEN, N-CSR, 10-Q, or 10-
          D.

[[Page 8]]

                                Exhibits

240.12b-30 Additional exhibits.
240.12b-31 Omission of substantially identical documents.
240.12b-32 [Reserved]
240.12b-33 Annual reports to other Federal agencies.

                           Special Provisions

240.12b-35 [Reserved]
240.12b-36 Use of financial statements filed under other acts.
240.12b-37 Satisfaction of filing requirements.

      Certification by Exchanges and Effectiveness of Registration

240.12d1-1 Registration effective as to class or series.
240.12d1-2 Effectiveness of registration.
240.12d1-3 Requirements as to certification.
240.12d1-4 Date of receipt of certification by Commission.
240.12d1-5 Operation of certification on subsequent amendments.
240.12d1-6 Withdrawal of certification.

    Suspension of Trading, Withdrawal, and Striking From Listing and 
                              Registration

240.12d2-1 Suspension of trading.
240.12d2-2 Removal from listing and registration.

                            Unlisted Trading

240.12f-1 Applications for permission to reinstate unlisted trading 
          privileges.
240.12f-2 Extending unlisted trading privileges to a security that is 
          the subject of an initial public offering.
240.12f-3 Termination or suspension of unlisted trading privileges.
240.12f-4 Exemption of securities admitted to unlisted trading 
          privileges from sections 13, 14, and 16.
240.12f-5 Exchange rules for securities to which unlisted trading 
          privileges are extended.
240.12f-6 [Reserved]

            Extensions and Temporary Exemptions; Definitions

240.12g-1 Exemption from section 12(g).
240.12g-2 Securities deemed to be registered pursuant to section 
          12(g)(1) upon termination of exemption pursuant to section 
          12(g)(2) (A) or (B).
240.12g-3 Registration of securities of successor issuers under section 
          12(b) or 12(g).
240.12g-4 Certifications of termination of registration under section 
          12(g).
240.12g-6 Exemption for securities issued pursuant to section 4(a)(6) of 
          the Securities Act of 1933 or Regulation Crowdfunding.
240.12g3-2 Exemptions for American depositary receipts and certain 
          foreign securities.
240.12g5-1 Definition of securities ``held of record''.
240.12g5-2 Definition of ``total assets''.
240.12h-1 Exemptions from registration under section 12(g) of the Act.
240.12h-2 [Reserved]
240.12h-3 Suspension of duty to file reports under section 15(d).
240.12h-4 Exemption from duty to file reports under section 15(d).
240.12h-5 Exemption for subsidiary issuers of guaranteed securities and 
          subsidiary guarantors.
240.12h-6 Certification by a foreign private issuer regarding the 
          termination of registration of a class of securities under 
          section 12(g) or the duty to file reports under section 13(a) 
          or section 15(d).
240.12h-7 Exemption for issuers of securities that are subject to 
          insurance regulation.

Regulation 13A: Reports of Issuers of Securities Registered Pursuant to 
                               Section 12

                             Annual Reports

240.13a-1 Requirements of annual reports.
240.13a-2 [Reserved]
240.13a-3 Reporting by Form 40-F registrant.

                              Other Reports

240.13a-10 Transition reports.
240.13a-11 Current reports on Form 8-K (Sec.  249.308 of this chapter).
240.13a-13 Quarterly reports on Form 10-Q (Sec.  249.308a of this 
          chapter).
240.13a-14 Certification of disclosure in annual and quarterly reports.
240.13a-15 Controls and procedures.
240.13a-16 Reports of foreign private issuers on Form 6-K (17 CFR 
          249.306).
240.13a-17 Reports of asset-backed issuers on Form 10-D (Sec.  249.312 
          of this chapter).
240.13a-18 Compliance with servicing criteria for asset-backed 
          securities.
240.13a-19 Reports by shell companies on Form 20-F.
240.13a-20 Plain English presentation of specified information.

  Regulation 13b-2: Maintenance of Records and Preparation of Required 
                                 Reports

240.13b2-1 Falsification of accounting records.
240.13b2-2 Representations and conduct in connection with the 
          preparation of required reports and documents.

                            Regulation 13D-G

240.13d-1 Filing of Schedules 13D and 13G.
240.13d-2 Filing of amendments to Schedules 13D or 13G.

[[Page 9]]

240.13d-3 Determination of beneficial owner.
240.13d-4 Disclaimer of beneficial ownership.
240.13d-5 Acquisition of securities.
240.13d-6 Exemption of certain acquisitions.
240.13d-7 Dissemination.
240.13d-101 Schedule 13D--Information to be included in statements filed 
          pursuant to Sec.  240.13d-1(a) and amendments thereto filed 
          pursuant to Sec.  240.13d-2(a).
240.13d-102 Schedule 13G--Information to be included in statements filed 
          pursuant to Sec.  240.13d-1(b), (c), and (d) and amendments 
          thereto filed pursuant to Sec.  240.13d-2(b).
240.13e-1 Purchase of securities by the issuer during a third-party 
          tender offer.
240.13e-2 [Reserved]
240.13e-3 Going private transactions by certain issuers or their 
          affiliates.
240.13e-4 Tender offers by issuers.
240.13e-100 Schedule 13E-3, Transaction statement under section 13(e) of 
          the Securities Exchange Act of 1934 and Rule 13e-3 (Sec.  
          240.13e-3) thereunder.
240.13e-101 [Reserved]
240.13e-102 Schedule 13E-4F. Tender offer statement pursuant to section 
          13(e) (1) of the Securities Exchange Act of 1934 and Sec.  
          240.13e-4 thereunder.
240.13f-1 Reporting by institutional investment managers of information 
          with respect to accounts over which they exercise investment 
          discretion.
240.13h-1 Large trader reporting.
240.13k-1 Foreign bank exemption from the insider lending prohibition 
          under section 13(k).
240.13n-1 Registration of security-based swap data repository.
240.13n-2 Withdrawal from registration; revocation and cancellation.
240.13n-3 Registration of successor to registered security-based swap 
          data repository.
240.13n-4 Duties and core principles of security-based swap data 
          repository.
240.13n-5 Data collection and maintenance.
240.13n-6 Automated systems.
240.13n-7 Recordkeeping of security-based swap data repository.
240.13n-8 Reports to be provided to the Commission.
240.13n-9 Privacy requirements of security-based swap data repository.
240.13n-10 Disclosure requirements of security-based swap data 
          repository.
240.13n-11 Chief compliance officer of security-based swap data 
          repository; compliance reports and financial reports.
240.13n-12 Exemption from requirements governing security-based swap 
          data repositories for certain non-U.S. persons.
240.13p-1 Requirement of report regarding disclosure of registrant's 
          supply chain information regarding conflict minerals.
240.13q-1 Disclosure of payments made by resource extraction issuers.

                Regulation 14A: Solicitations of Proxies

240.14a-1 Definitions.
240.14a-2 Solicitations to which Sec.  240.14a-3 to Sec.  240.14a-15 
          apply.
240.14a-3 Information to be furnished to security holders.
240.14a-4 Requirements as to proxy.
240.14a-5 Presentation of information in proxy statement.
240.14a-6 Filing requirements.
240.14a-7 Obligations of registrants to provide a list of, or mail 
          soliciting material to, security holders.
240.14a-8 Shareholder proposals.
240.14a-9 False or misleading statements.
240.14a-10 Prohibition of certain solicitations.
240.14a-12 Solicitation before furnishing a proxy statement.
240.14a-13 Obligation of registrants in communicating with beneficial 
          owners.
240.14a-14 Modified or superseded documents.
240.14a-15 Differential and contingent compensation in connection with 
          roll-up transactions.
240.14a-16 Internet availability of proxy materials.
240.14a-17 Electronic shareholder forums.
240.14a-18 Disclosure regarding nominating shareholders and nominees 
          submitted for inclusion in a registrant's proxy materials 
          pursuant to applicable state or foreign law, or a registrant's 
          governing documents.
240.14a-20 Shareholder approval of executive compensation of TARP 
          recipients.
240.14a-21 Shareholder approval of executive compensation, frequency of 
          votes for approval of executive compensation and shareholder 
          approval of golden parachute compensation.
240.14a-101 Schedule 14A. Information required in proxy statement.
240.14a-102 [Reserved]
240.14a-103 Notice of Exempt Solicitation. Information to be included in 
          statements submitted by or on behalf of a person pursuant to 
          Sec.  240.14a-6(g).
240.14a-104 Notice of Exempt Preliminary Roll-up Communication. 
          Information regarding ownership interests and any potential 
          conflicts of interest to be included in statements submitted 
          by or on behalf of a person pursuant to Sec.  240.14a-2(b)(4) 
          and Sec.  240.14a-6(n).
240.14b-1 Obligation of registered brokers and dealers in connection 
          with the prompt forwarding of certain communications to 
          beneficial owners.
240.14b-2 Obligation of banks, associations and other entities that 
          exercise fiduciary powers in connection with the prompt

[[Page 10]]

          forwarding of certain communications to beneficial owners.

  Regulation 14C: Distribution of Information Pursuant to Section 14(c)

240.14c-1 Definitions.
240.14c-2 Distribution of information statement.
240.14c-3 Annual report to be furnished security holders.
240.14c-4 Presentation of information in information statement.
240.14c-5 Filing requirements.
240.14c-6 False or misleading statements.
240.14c-7 Providing copies of material for certain beneficial owners.
240.14c-101 Schedule 14C. Information required in information statement.

                             Regulation 14D

240.14d-1 Scope of and definitions applicable to Regulations 14D and 
          14E.
240.14d-2 Commencement of a tender offer.
240.14d-3 Filing and transmission of tender offer statement.
240.14d-4 Dissemination of tender offers to security holders.
240.14d-5 Dissemination of certain tender offers by the use of 
          stockholder lists and security position listings.
240.14d-6 Disclosure of tender offer information to security holders.
240.14d-7 Additional withdrawal rights.
240.14d-8 Exemption from statutory pro rata requirements.
240.14d-9 Recommendation or solicitation by the subject company and 
          others.
240.14d-10 Equal treatment of security holders.
240.14d-11 Subsequent offering period.
240.14d-100 Schedule TO. Tender offer statement under section 14(d)(1) 
          or 13(e)(1) of the Securities Exchange Act of 1934.
240.14d-101 Schedule 14D-9.
240.14d-102 Schedule 14D-1F. Tender offer statement pursuant to rule 
          14d-1(b) under the Securities Exchange Act of 1934.
240.14d-103 Schedule 14D-9F. Solicitation/recommendation statement 
          pursuant to section 14(d)(4) of the Securities Exchange Act of 
          1934 and rules 14d-1(b) and 14e-2(c) thereunder.

                             Regulation 14E

240.14e-1 Unlawful tender offer practices.
240.14e-2 Position of subject company with respect to a tender offer.
240.14e-3 Transactions in securities on the basis of material, nonpublic 
          information in the context of tender offers.
240.14e-4 Prohibited transactions in connection with partial tender 
          offers.
240.14e-5 Prohibiting purchases outside of a tender offer.
240.14e-6 Repurchase offers by certain closed-end registered investment 
          companies.
240.14e-7 Unlawful tender offer practices in connection with roll-ups.
240.14e-8 Prohibited conduct in connection with pre-commencement 
          communications.
240.14f-1 Change in majority of directors.

   Regulation 14N: Filings Required by Certain Nominating Shareholders

240.14n-1 Filing of Schedule 14N.
240.14n-2 Filing of amendments to Schedule 14N.
240.14n-3 Dissemination.
240.14n-101 Schedule 14N--Information to be included in statements filed 
          pursuant to Sec.  240.14n-1 and amendments thereto filed 
          pursuant to Sec.  240.14n-2.

              Exemption of Certain OTC Derivatives Dealers

240.15a-1 Securities activities of OTC derivatives dealers.

           Exemption of Certain Securities From Section 15(a)

240.15a-2 Exemption of certain securities of cooperative apartment 
          houses from section 15(a).
240.15a-3 [Reserved]
240.15a-4 Forty-five day exemption from registration for certain members 
          of national securities exchanges.
240.15a-5 Exemption of certain nonbank lenders.

                   Registration of Brokers and Dealers

240.15a-6 Exemption of certain foreign brokers or dealers.
240.15a-7--240.15a-9 [Reserved]
240.15a-10 Exemption of certain brokers or dealers with respect to 
          security futures products.
240.15a-11 [Reserved]
240.15b1-1 Application for registration of brokers or dealers.
240.15b1-2 [Reserved]
240.15b1-3 Registration of successor to registered broker or dealer.
240.15b1-4 Registration of fiduciaries.
240.15b1-5 Consent to service of process to be furnished by nonresident 
          brokers or dealers and by nonresident general partners or 
          managing agents of brokers or dealers.
240.15b1-6 Notice to brokers and dealers of requirements regarding lost 
          securityholders and unresponsive payees.
240.15b2-2 Inspection of newly registered brokers and dealers.
240.15b3-1 Amendments to application.

[[Page 11]]

240.15b5-1 Extension of registration for purposes of the Securities 
          Investor Protection Act of 1970 after cancellation or 
          revocation.
240.15b6-1 Withdrawal from registration.
240.15b7-1 Compliance with qualification requirements of self-regulatory 
          organizations.
240.15b7-3T Operational capability in a Year 2000 environment.
240.15b9-1 Exemption for certain exchange members.
240.15b9-2 Exemption from SRO membership for OTC derivatives dealers.
240.15b11-1 Registration by notice of security futures product broker-
          dealers.

               Rules Relating to Over-the-Counter Markets

240.15c1-1 Definitions.
240.15c1-2 Fraud and misrepresentation.
240.15c1-3 Misrepresentation by brokers, dealers and municipal 
          securities dealers as to registration.
240.15c1-4 [Reserved]
240.15c1-5 Disclosure of control.
240.15c1-6 Disclosure of interest in distribution.
240.15c1-7 Discretionary accounts.
240.15c1-8 Sales at the market.
240.15c1-9 Use of pro forma balance sheets.
240.15c2-1 Hypothecation of customers' securities.
240.15c2-3 [Reserved]
240.15c2-4 Transmission or maintenance of payments received in 
          connection with underwritings.
240.15c2-5 Disclosure and other requirements when extending or arranging 
          credit in certain transactions.
240.15c2-6 [Reserved]
240.15c2-7 Identification of quotations.
240.15c2-8 Delivery of prospectus.
240.15c2-11 Publication or submission of quotations without specified 
          information.
240.15c2-12 Municipal securities disclosure.
240.15c3-1 Net capital requirements for brokers or dealers.
240.15c3-1a Options (Appendix A to 17 CFR 240.15c3-1).
240.15c3-1b Adjustments to net worth and aggregate indebtedness for 
          certain commodities transactions (Appendix B to 17 CFR 
          240.15c3-1).
240.15c3-1c Consolidated computations of net capital and aggregate 
          indebtedness for certain subsidiaries and affiliates (Appendix 
          C to 17 CFR 240.15c3-1).
240.15c3-1d Satisfactory Subordination Agreements (Appendix D to 17 CFR 
          240.15c3-1).
240.15c3-1e Deductions for market and credit risk for certain brokers or 
          dealers (Appendix E to 17 CFR 240.15c3-1).
240.15c3-1f Optional market and credit risk requirements for OTC 
          derivatives dealers (Appendix F to 17 CFR 240.15c3-1)
240.15c3-1g Conditions for ultimate holding companies of certain brokers 
          or dealers (Appendix G to 17 CFR 240.15c3-1).
240.15c3-2 [Reserved]
240.15c3-3 Customer protection--reserves and custody of securities.
240.15c3-3a Exhibit A--formula for determination reserve requirement of 
          brokers and dealers under Sec.  240.15c3-3.
240.15c3-3b Exhibit B--Formula for determination of security-based swap 
          customer reserve requirements of brokers and dealers under 
          Sec.  240.15c3-3.
240.15c3-4 Internal risk management control systems for OTC derivatives 
          dealers.
240.15c3-5 Risk management controls for brokers or dealers with market 
          access.
240.15c6-1 Settlement cycle.

 Regulation 15D: Reports of Registrants Under the Securities Act of 1933

                             Annual Reports

240.15d-1 Requirement of annual reports.
240.15d-2 Special financial report.
240.15d-3 Reports for depositary shares registered on Form F-6.
240.15d-4 Reporting by Form 40-F Registrants.
240.15d-5 Reporting by successor issuers.
240.15d-6 Suspension of duty to file reports.

                              Other Reports

240.15d-10 Transition reports.
240.15d-11 Current reports on Form 8-K (Sec.  249.308 of this chapter).
240.15d-13 Quarterly reports on Form 10-Q (Sec.  249.308 of this 
          chapter).
240.15d-14 Certification of disclosure in annual and quarterly reports.
240.15d-15 Controls and procedures.
240.15d-16 Reports of foreign private issuers on Form 6-K [17 CFR 
          249.306].
240.15d-17 Reports of asset-backed issuers on Form 10-D (Sec.  249.312 
          of this chapter).
240.15d-18 Compliance with servicing criteria for asset-backed 
          securities.
240.15d-19 Reports by shell companies on Form 20-F.
240.15d-20 Plain English presentation of specified information.

       Exemption of Certain Issuers From Section 15(d) of the Act

240.15d-21 Reports for employee stock purchase, savings and similar 
          plans.
240.15d-22 Reporting regarding asset-backed securities under section 
          15(d) of the Act.
240.15d-23 Reporting regarding certain securities underlying asset-
          backed securities under section 15(d) of the Act.
240.15g-1 Exemptions for certain transactions.

[[Page 12]]

240.15g-2 Penny stock disclosure document relating to the penny stock 
          market.
240.15g-3 Broker or dealer disclosure of quotations and other 
          information relating to the penny stock market.
240.15g-4 Disclosure of compensation to brokers or dealers.
240.15g-5 Disclosure of compensation of associated persons in connection 
          with penny stock transactions.
240.15g-6 Account statements for penny stock customers.
240.15g-8 Sales of escrowed securities of blank check companies.
240.15g-9 Sales practice requirements for certain low-priced securities.
240.15g-100 Schedule 15G--Information to be included in the document 
          distributed pursuant to 17 CFR 240.15g-2.
240.15l-1 Regulation best interest.

             National and Affiliated Securities Associations

240.15Aa-1 Registration of a national or an affiliated securities 
          association.
240.15Aj-1 Amendments and supplements to registration statements of 
          securities associations.
240.15Al2-1 [Reserved]
240.15Ba1-1 Definitions.
240.15Ba1-2 Registration of municipal advisors and information regarding 
          certain natural persons.
240.15Ba1-3 Exemption of certain natural persons from registration under 
          section 15B(a)(1)(B) of the Act.
240.15Ba1-4 Withdrawal from municipal advisor registration.
240.15Ba1-5 Amendments to Form MA and Form MA-I.
240.15Ba1-6 Consent to service of process to be filed by non-resident 
          municipal advisors; legal opinion to be provided by non-
          resident municipal advisors.
240.15Ba1-7 Registration of successor to municipal advisor.
240.15Ba1-8 Books and records to be made and maintained by municipal 
          advisors.
240.15Ba2-1 Application for registration of municipal securities dealers 
          which are banks or separately identifiable departments or 
          divisions of banks.
240.15Ba2-2 Application for registration of non-bank municipal 
          securities dealers whose business is exclusively intrastate.
240.15Ba2-4 Registration of successor to registered municipal securities 
          dealer.
240.15Ba2-5 Registration of fiduciaries.
240.15Ba2-6 [Reserved]
240.15Ba2-6T Temporary registration as a municipal advisor; required 
          amendments; and withdrawal from temporary registration.
240.15Bc3-1 Withdrawal from registration of municipal securities 
          dealers.
240.15Bc4-1 Persons associated with municipal advisors.
240.15Bc7-1 Availability of examination reports.

Registration of Government Securities Brokers and Government Securities 
                                 Dealers

240.15Ca1-1 Notice of government securities broker-dealer activities.
240.15Ca2-1 Application for registration as a government securities 
          broker or government securities dealer.
240.15Ca2-2 [Reserved]
240.15Ca2-3 Registration of successor to registered government 
          securities broker or government securities dealer.
240.15Ca2-4 Registration of fiduciaries.
240.15Ca2-5 Consent to service of process to be furnished by non-
          resident government securities brokers or government 
          securities dealers and by non-resident general partners or 
          managing agents of government securities brokers or government 
          securities dealers.
240.15Cc1-1 Withdrawal from registration of government securities 
          brokers or government securities dealers.

  Registration and Regulation of Security-based Swap Dealers and Major 
                    Security-based Swap Participants

240.15Fb1-1 Signatures.
240.15Fb2-1 Registration of security-based swap dealers and major 
          security-based swap participants.
240.15Fb2-3 Amendments to Form SBSE, Form SBSE-A, and Form SBSE-BD.
240.15Fb2-4 Nonresident security-based swap dealers and major security-
          based swap participants.
240.15Fb2-5 Registration of successor to registered security-based swap 
          dealer or major security-based swap participant.
240.15Fb2-6 Registration of fiduciaries.
240.15Fb3-1 Duration of registration.
240.15Fb3-2 Withdrawal from registration.
240.15Fb3-3 Cancellation or revocation from registration.
240.15Fb6-1 [Reserved]
240.15Fb6-2 Associated person certification.
240.15Fh-1 Scope and reliance on representations.
240.15Fh-2 Definitions.
240.15Fh-3 Business conduct requirements.
240.15Fh-4 Antifraud provisions for security-based swap dealers and 
          major security-based swap participants; special requirements 
          for security-based swap dealers acting as advisors to special 
          entities.
240.15Fh-5 Special requirements for security-based swap dealers and 
          major security-based swap participants acting as 
          counterparties to special entities.
240.15Fh-6 Political contributions by certain security-based swap 
          dealers.
240.15Fi-1 Definitions.
240.15Fi-2 Acknowledgment and verification of security-based swap 
          transactions.

[[Page 13]]

240.15Fi-3 Security-based swap portfolio reconciliation.
240.15Fi-4 Security-based swap portfolio compression.
240.15Fi-5 Security-based swap trading relationship documentation.
240.15Fk-1 Designation of chief compliance officer for security-based 
          swap dealers and major security-based swap participants.
240.15Ga-1 Repurchases and replacements relating to asset-backed 
          securities.
240.15Ga-2 Findings and conclusions of third-party due diligence 
          reports.

       Reports of Directors, Officers, and Principal Shareholders

240.16a-1 Definition of terms.
240.16a-2 Persons and transactions subject to section 16.
240.16a-3 Reporting transactions and holdings.
240.16a-4 Derivative securities.
240.16a-5 Odd-lot dealers.
240.16a-6 Small acquisitions.
240.16a-7 Transactions effected in connection with a distribution.
240.16a-8 Trusts.
240.16a-9 Stock splits, stock dividends, and pro rata rights.
240.16a-10 Exemptions under section 16(a).
240.16a-11 Dividend or interest reinvestment plans.
240.16a-12 Domestic relations orders.
240.16a-13 Change in form of beneficial ownership.

          Exemption of Certain Transactions From Section 16(b)

240.16b-1 Transactions approved by a regulatory authority.
240.16b-2 [Reserved]
240.16b-3 Transactions between an issuer and its officers or directors.
240.16b-4 [Reserved]
240.16b-5 Bona fide gifts and inheritance.
240.16b-6 Derivative securities.
240.16b-7 Mergers, reclassifications, and consolidations.
240.16b-8 Voting trusts.

          Exemption of Certain Transactions From Section 16(c)

240.16c-1 Brokers.
240.16c-2 Transactions effected in connection with a distribution.
240.16c-3 Exemption of sales of securities to be acquired.
240.16c-4 Derivative securities.

                         Arbitrage Transactions

240.16e-1 Arbitrage transactions under section 16.

  Preservation of Records and Reports of Certain Stabilizing Activities

240.17a-1 Recordkeeping rule for national securities exchanges, national 
          securities associations, registered clearing agencies and the 
          Municipal Securities Rulemaking Board.
240.17a-2 Recordkeeping requirements relating to stabilizing activities.
240.17a-3 Records to be made by certain exchange members, brokers and 
          dealers.
240.17a-4 Records to be preserved by certain exchange members, brokers 
          and dealers.
240.17a-5 Reports to be made by certain brokers and dealers.
240.17a-6 Right of national securities exchange, national securities 
          association, registered clearing agency or the Municipal 
          Securities Rulemaking Board to destroy or dispose of 
          documents.
240.17a-7 Records of non-resident brokers and dealers.
240.17a-8 Financial recordkeeping and reporting of currency and foreign 
          transactions.
240.17a-9T Records to be made and retained by certain exchange members, 
          brokers and dealers.
240.17a-10 Report of revenue and expenses.
240.17a-11 Notification provisions for brokers and dealers.
240.17a-12 Reports to be made by certain OTC derivatives dealers.
240.17a-13 Quarterly security counts to be made by certain exchange 
          members, brokers, and dealers.
240.17a-14 Form CRS, for preparation, filing and delivery of Form CRS.
240.17a-18 [Reserved]
240.17a-19 Form X-17A-19 Report by national securities exchanges and 
          registered national securities associations of changes in the 
          membership status of any of their members.
240.17a-21 Reports of the Municipal Securities Rulemaking Board.
240.17a-22 Supplemental material of registered clearing agencies.
240.17a-25 Electronic submission of securities transaction information 
          by exchange members, brokers, and dealers.
240.17d-1 Examination for compliance with applicable financial 
          responsibility rules.
240.17d-2 Program for allocation of regulatory responsibility.
240.17f-1 Requirements for reporting and inquiry with respect to 
          missing, lost, counterfeit or stolen securities.
240.17f-2 Fingerprinting of securities industry personnel.

         Nationally Recognized Statistical Rating Organizations

240.17g-1 Application for registration as a nationally recognized 
          statistical rating organization.

[[Page 14]]

240.17g-2 Records to be made and retained by nationally recognized 
          statistical rating organizations.
240.17g-3 Annual financial and other reports to be filed or furnished by 
          nationally recognized statistical rating organizations.
240.17g-4 Prevention of misuse of material nonpublic information.
240.17g-5 Conflicts of interest.
240.17g-6 Prohibited acts and practices.
240.17g-7 Disclosure requirements.
240.17g-8 Policies, procedures, and internal controls.
240.17g-9 Standards of training, experience, and competence for credit 
          analysts.
240.17g-10 Certification of providers of third-party due diligence 
          services in connection with asset-backed securities.
240.17h-1T Risk assessment recordkeeping requirements for associated 
          persons of brokers and dealers.
240.17h-2T Risk assessment reporting requirements for brokers and 
          dealers.
240.17Ab2-1 Registration of clearing agencies.
240.17Ab2-2 Determinations affecting covered clearing agencies.
240.17Ac2-1 Application for registration of transfer agents.
240.17Ac2-2 Annual reporting requirement for registered transfer agents.
240.17Ac3-1 Withdrawal from registration with the Commission.
240.17Ad-1 Definitions.
240.17Ad-2 Turnaround, processing, and forwarding of items.
240.17Ad-3 Limitations on expansion.
240.17Ad-4 Applicability of Sec. Sec.  240.17Ad-2, 240.17Ad-3 and 
          240.17Ad-6(a) (1) through (7) and (11).
240.17Ad-5 Written inquiries and requests.
240.17Ad-6 Recordkeeping.
240.17Ad-7 Record retention.
240.17Ad-8 Securities position listings.
240.17Ad-9 Definitions.
240.17Ad-10 Prompt posting of certificate detail to master 
          securityholder files, maintenance of accurate securityholder 
          files, communications between co-transfer agents and 
          recordkeeping transfer agents, maintenance of current control 
          book, retention of certificate detail and ``buy-in'' of 
          physical over-issuance.
240.17Ad-11 Reports regarding aged record differences, buy-ins and 
          failure to post certificate detail to master securityholder 
          and subsidiary files.
240.17Ad-12 Safeguarding of funds and securities.
240.17Ad-13 Annual study and evaluation of internal accounting control.
240.17Ad-14 Tender agents.
240.17Ad-15 Signature guarantees.
240.17Ad-16 Notice of assumption or termination of transfer agent 
          services.
240.17Ad-17 Lost securityholders and unresponsive payees.
240.17Ad-18 Year 2000 Reports to be made by certain transfer agents.
240.17Ad-19 Requirements for cancellation, processing, storage, 
          transportation, and destruction or other disposition of 
          securities certificates.
240.17Ad-20 Issuer restrictions or prohibitions on ownership by 
          securities intermediaries.
240.17Ad-21T Operational capability in a Year 2000 environment.
240.17Ad-22 Standards for clearing agencies.
240.17Ad-24 Exemption from clearing agency definition for certain 
          registered security-based swap dealers, registered security-
          based swap execution facilities, and entities engaging in 
          dealing activity in security-based swaps that are eligible for 
          an exception under Sec.  240.3a71-2(a) (or subject to the 
          period set forth in Sec.  240.3a71-2(b)).

  Capital, Margin and Segregation Requirements for Security-Based Swap 
           Dealers and Major Security-Based Swap Participants

240.18a-1 Net capital requirements for security-based swap dealers for 
          which there is not a prudential regulator.
240.18a-1a Options.
240.18a-1b Adjustments to net worth for certain commodities 
          transactions.
240.18a-1c Consolidated computations of net capital for certain 
          subsidiaries and affiliates of security-based swap dealers.
240.18a-1d Satisfactory subordinated loan agreements.
240.18a-2 Capital requirements for major security-based swap 
          participants for which there is not a prudential regulator.
240.18a-3 Non-cleared security-based swap margin requirements for 
          security-based swap dealers and major security-based swap 
          participants for which there is not a prudential regulator.
240.18a-4 Segregation requirements for security-based swap dealers and 
          major security-based swap participants.
240.18a-4a Exhibit A--Formula for determination of security-based swap 
          customer reserve requirements under Sec.  240.18a-4.
240.18a-5 Records to be made by certain security-based swap dealers and 
          major security-based swap participants.
240.18a-6 Records to be preserved by certain security-based swap dealers 
          and major security-based swap participants.
240.18a-7 Reports to be made by certain security-based swap dealers and 
          major security-based swap participants.
240.18a-8 Notification provisions for security-based swap dealers and 
          major security-based swap participants.
240.18a-9 Quarterly security counts to be made by certain security-based 
          swap dealers.

[[Page 15]]

240.18a-10 Alternative compliance mechanism for security-based swap 
          dealers that are registered as swap dealers and have limited 
          security-based swap activities.

              Suspension and Expulsion of Exchange Members

240.19a3-1 [Reserved]
240.19b-3 [Reserved]
240.19b-4 Filings with respect to proposed rule changes by self-
          regulatory organizations.
240.19b-5 Temporary exemption from the filing requirements of Section 
          19(b) of the Act.
240.19b-7 Filings with respect to proposed rule changes submitted 
          pursuant to Section 19(b)(7) of the Act.
240.19c-1 Governing certain off-board agency transactions by members of 
          national securities exchanges.
240.19c-3 Governing off-board trading by members of national securities 
          exchanges.
240.19c-4 Governing certain listing or authorization determinations by 
          national securities exchanges and associations.
240.19c-5 Governing the multiple listing of options on national 
          securities exchanges.
240.19d-1 Notices by self-regulatory organizations of final disciplinary 
          actions, denials, bars, or limitations respecting membership, 
          association, participation, or access to services, and summary 
          suspensions.
240.19d-2 Applications for stays of disciplinary sanctions or summary 
          suspensions by a self-regulatory organization.
240.19d-3 Applications for review of final disciplinary sanctions, 
          denials of membership, participation or association, or 
          prohibitions or limitations of access to services imposed by 
          self-regulatory organizations.
240.19d-4 Notice by the Public Company Accounting Oversight Board of 
          disapproval of registration or of disciplinary action.
240.19g2-1 Enforcement of compliance by national securities exchanges 
          and registered securities associations with the Act and rules 
          and regulations thereunder.
240.19h-1 Notice by a self-regulatory organization of proposed admission 
          to or continuance in membership or participation or 
          association with a member of any person subject to a statutory 
          disqualification, and applications to the Commission for 
          relief therefrom.

           Securities Whistleblower Incentives and Protections

240.21F-1 General.
240.21F-2 Whistleblower status, award eligibility, confidentiality, and 
          retaliation protections.
240.21F-3 Payment of award.
240.21F-4 Other definitions.
240.21F-5 Amount of award.
240.21F-6 Criteria for determining amount of award.
240.21F-7 Confidentiality of submissions.
240.21F-8 Eligibility and forms.
240.21F-9 Procedures for submitting original information.
240.21F-10 Procedures for making a claim for a whistleblower award in 
          SEC actions that result in monetary sanctions in excess of 
          $1,000,000
240.21F-11 Procedures for determining awards based upon a related 
          action.
240.21F-12 Materials that may be used as the basis for an award 
          determination and that may comprise the record on appeal.
240.21F-13 Appeals.
240.21F-14 Procedures applicable to the payment of awards.
240.21F-15 No amnesty.
240.21F-16 Awards to whistleblowers who engage in culpable conduct.
240.21F-17 Staff communications with individuals reporting possible 
          securities law violations.
240.21F-18 Summary disposition.

      Inspection and Publication of Information Filed Under the Act

240.24b-1 Documents to be kept public by exchanges.
240.24b-2 Nondisclosure of information filed with the Commission and 
          with any exchange.
240.24b-3 Information filed by issuers and others under sections 12, 13, 
          14, and 16.
240.24c-1 Access to nonpublic information.
240.31 Section 31 transaction fees.
240.31T Temporary rule regarding fiscal year 2004.
240.36a1-1 Exemption from Section 7 for OTC derivatives dealers.
240.36a1-2 Exemption from SIPA for OTC derivatives dealers.

Subpart B--Rules and Regulations Under the Securities Investor Protection 
Act of 1970 [Reserved]

     Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 
77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 78g, 78i, 
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4, 78o-10, 78p, 
78q, 78q-1, 78s, 78u-5, 78w, 78x, 78dd, 78ll, 78mm, 80a-20, 80a-23, 80a-
29, 80a-37, 80b-3, 80b-4, 80b-11, and 7201 et seq., and 8302; 7 U.S.C. 
2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 1350; Pub. L. 111-203, 939A, 
124 Stat. 1376 (2010); and Pub. L. 112-106, sec. 503 and 602, 126 Stat. 
326 (2012), unless otherwise noted.
    Section 240.3a4-1 also issued under secs. 3 and 15, 89 Stat. 97, as 
amended, 89 Stat. 121 as amended;

[[Page 16]]

    Section 240.3a12-8 also issued under 15 U.S.C. 78a et seq., 
particularly secs. 3(a)(12), 15 U.S.C. 78c(a)(12), and 23(a), 15 U.S.C. 
78w(a);
    Section 240.3a12-10 also issued under 15 U.S.C. 78b and c;
    Section 240.3a12-9 also issued under secs. 3(a)(12), 7(c), 11(d)(1), 
15 U.S.C. 78c(a)(12), 78g(c), 78k(d)(1));
    Sections 240.3a43-1 and 240.3a44-1 also issued under sec. 3; 15 
U.S.C. 78c;
    Sections 3a67-1 through 3a67-9 and 3a71-1 and 3a71-2 are also issued 
under Pub. L. 111-203, Sec. Sec.  712, 761(b), 124 Stat. 1841 (2010).
    Sections 240.3a67-10, 240.3a71-3, 240.3a71-4, and 240.3a71-5 are 
also issued under Pub. L. 111-203, section 761(b), 124 Stat. 1754 
(2010), and 15 U.S.C. 78dd(c).
    Sections 240.3a71-3 and 240.3a71-5 are also issued under Pub. L. 
111-203, sec. 761(b), 124 Stat. 1754 (2010), and 15 U.S.C. 78dd(c).
    Section 240.3b-6 is also issued under 15 U.S.C. 77f, 77g, 77h, 77j, 
77s(a).
    Section 240.3b-9 also issued under secs. 2, 3 and 15, 89 Stat. 97, 
as amended, 89 Stat. 121, as amended (15 U.S.C. 78b, 78c, 78o);
    Section 240.9b-1 is also issued under sec. 2, 7, 10, 19(a), 48 Stat. 
74, 78, 81, 85; secs. 201, 205, 209, 120, 48 Stat. 905, 906, 908; secs. 
1-4, 8, 68 Stat. 683, 685; sec. 12(a), 73 Stat. 143; sec. 7(a), 74 Stat. 
412; sec. 27(a), 84 Stat. 1433; sec. 308(a)(2), 90 Stat. 57; sec. 505, 
94 Stat. 2292; secs. 9, 15, 23(a), 48 Stat. 889, 895, 901; sec. 230(a), 
49 Stat. 704; secs. 3, 8, 49 Stat. 1377, 1379; sec. 2, 52 Stat. 1075; 
secs. 6, 10, 78 Stat. 570-574, 580; sec. 11(d), 84 Stat. 121; sec. 18, 
89 Stat. 155; sec. 204, 91 Stat. 1500; 15 U.S.C. 77b, 77g, 77j, 77s(a), 
78i, 78o, 78w(a);
    Section 240.10b-10 is also issued under secs. 2, 3, 9, 10, 11, 11A, 
15, 17, 23, 48 Stat. 891, 89 Stat. 97, 121, 137, 156, (15 U.S.C. 78b, 
78c, 78i, 78j, 78k, 78k-1, 78o, 78q).
    Section 240.12a-7 also issued under 15 U.S.C. 78a et seq., 
particularly secs. 3(a)(12), 15 U.S.C. 78c(a)(12), 6, 15 U.S.C. 78(f), 
11A, 15 U.S.C. 78k, 12, 15 U.S.C. 78(l), and 23(a)(1), 15 U.S.C. 
78(w)(a)(1).
    Sections 240.12b-1 to 240.12b-36 also issued under secs. 3, 12, 13, 
15, 48 Stat. 892, as amended, 894, 895, as amended; 15 U.S.C. 78c, 78l, 
78m, 78o;
    Section 240.12b-15 is also issued under secs. 3(a) and 302, Pub.L. 
No. 107-204, 116 Stat. 745.
    Section 240.12b-25 is also issued under 15 U.S.C. 80a-8, 80a-24(a), 
80a-29, and 80a-37.
    Section 240.12g-3 is also issued under 15 U.S.C. 77f, 77g, 77h, 77j, 
77s(a).
    Section 240.12g3-2 is also issued under 15 U.S.C. 77f, 77g, 77h, 
77j, 77s(a).
    Section 240.13a-10 is also issued under secs. 3(a) and 302, Pub.L. 
No. 107-204, 116 Stat. 745.
    Section 240.13a-11 is also issued under secs. 3(a) and 306(a), Pub. 
L. 107-204, 116 Stat. 745.
    Section 240.13a-14 is also issued under secs. 3(a) and 302, Pub. L. 
No. 107-204, 116 Stat. 745.
    Section 240.13a-15 is also issued under secs. 3(a) and 302, Pub. L. 
No. 107-204, 116 Stat. 745.
    Section 240.13d-3 is also issued under Public Law 111-203 Sec.  766, 
124 Stat. 1799 (2010).
    Sections 240.13e-4, 240.14d-7, 240.14d-10 and 240.14e-1 also issued 
under secs. 3(b), 9(a)(6), 10(b), 13(e), 14(d) and 14(e), 15 U.S.C. 
78c(b), 78i(a)(6), 78j(b), 78m(e), 78n(d) and 78n(e) and sec. 23(c) of 
the Investment Company Act of 1940, 15 U.S.C 80a-23(c);
    Sections 240.13e-4 to 240.13e-101 also issued under secs. 3(b), 
9(a)(6), 10(b), 13(e), 14(e), 15(c)(1), 48 Stat. 882, 889, 891, 894, 
895, 901, sec. 8, 49 Stat. 1379, sec. 5, 78 Stat. 569, 570, secs. 2, 3, 
82 Stat. 454, 455, secs. 1, 2, 3-5, 84 Stat. 1497, secs. 3, 18, 89 Stat. 
97, 155; 15 U.S.C. 78c(b), 78i(a)(6), 78j(b), 78m(e), 78n(e), 78o(c); 
sec. 23(c) of the Investment Company Act of 1940; 54 Stat. 825; 15 
U.S.C. 80a-23(c);
    Section 240.13f-2(T) also issued under sec. 13(f)(1) (15 U.S.C. 
78m(f)(1));
    Section 240.13p-1 is also issued under sec. 1502, Pub. L. 111-203, 
124 Stat. 1376.
    Section 240.13q-1 is also issued under sec. 1504, Pub. L. 111-203, 
124 Stat. 2220.
    Sections 240.14a-1, 240.14a-3, 240.14a-13, 240.14b-1, 240.14b-2, 
240.14c-1, and 240.14c-7 also issued under secs. 12, 15 U.S.C. 781, and 
14, Pub. L. 99-222, 99 Stat. 1737, 15 U.S.C. 78n;
    Sections 240.14a-3, 240.14a-13, 240.14b-1 and 240.14c-7 also issued 
under secs. 12, 14 and 17, 15 U.S.C. 781, 78n and 78g;
    Sections 240.14c-1 to 240.14c-101 also issued under sec. 14, 48 
Stat. 895; 15 U.S.C. 78n;
    Section 240.14d-1 is also issued under 15 U.S.C. 77g, 77j, 77s(a), 
77ttt(a), 80a-37.
    Section 240.14e-2 is also issued under 15 U.S.C. 77g, 77h, 77s(a), 
77sss, 80a-37(a).
    Section 240.14e-4 also issued under the Exchange Act, 15 U.S.C. 78a 
et seq., and particularly sections 3(b), 10(a), 10(b), 14(e), 15(c), and 
23(a) of the Exchange Act (15 U.S.C. 78c(b), 78j(a), 78j(b), 78n(e), 
78o(c), and 78w(a)).
    Section 240.15a-6, also issued under secs. 3, 10, 15, and 17, 15 
U.S.C. 78c, 78j, 78o, and 78q;
    Section 240.15b1-3 also issued under sec. 15, 17; 15 U.S.C. 78o 78q;
    Sections 240.15b1-3 and 240.15b2-1 also issued under 15 U.S.C. 78o, 
78q;
    Section 240.15b2-2 also issued under secs. 3, 15; 15 U.S.C. 78c, 
78o;
    Sections 240.15b10-1 to 240.15b10-9 also issued under secs. 15, 17, 
48 Stat. 895, 897, sec. 203, 49 Stat. 704, secs. 4, 8, 49 Stat. 1379, 
sec. 5, 52 Stat. 1076, sec. 6, 78 Stat. 570; 15 U.S.C. 78o, 78q, 12 
U.S.C. 241 nt.;
    Section 240.15c2-6, also issued under secs. 3, 10, and 15, 15 U.S.C. 
78c, 78j, and 78o.
    Section 240.15c2-11 also issued under 15 U.S.C. 78j(b), 78o(c), 
78q(a), and 78w(a).
    Section 240.15c2-12 also issued under 15 U.S.C. 78b, 78c, 78j, 78o, 
78o-4 and 78q.
    Section 240.15c3-1 is also issued under 15 U.S.C. 78o(c)(3), 78o-
10(d), and 78o-10(e).
    Sections 240.15c3-1a, 240.15c3-1e, 240.15c3-1f, 240.15c3-1g are also 
issued under Pub. L. 111-203, secs. 939, 939A, 124. Stat. 1376 (2010) 
(15 U.S.C. 78c, 15 U.S.C. 78o-7 note).

[[Page 17]]

    Section 240.15c3-3 is also issued under 15 U.S.C. 78c-5, 78o(c)(2), 
78(c)(3), 78q(a), 78w(a); sec. 6(c), 84 Stat. 1652; 15 U.S.C. 78fff.
    Section 240.15c3-3(o) is also issued under Pub. L. 106-554, 114 
Stat. 2763, section 203.
    Section 240.15c3-3a is also issued under Pub. L. 111-203, Sec. Sec.  
939, 939A, 124. Stat. 1376 (2010) (15 U.S.C. 78c, 15 U.S.C. 78o-7 note).
    Section 240.15d-5 is also issued under 15 U.S.C. 77f, 77g, 77h, 77j, 
77s(a).
    Section 240.15d-10 is also issued under 15 U.S.C. 80a-20(a) and 80a-
37(a), and secs. 3(a) and 302, Pub. L. No. 107-204, 116 Stat. 745.
    Section 240.15d-11 is also issued under secs. 3(a) and 306(a), Pub. 
L. 107-204, 116 Stat. 745.
    Section 240.15d-14 is also issued under secs. 3(a) and 302, Pub. L. 
No. 107-204, 116 Stat. 745.
    Section 240.15d-15 is also issued under secs. 3(a) and 302, Pub. L. 
No. 107-204, 116 Stat. 745.
    Section 240.15l-1 is also issued under Pub. L. 111-203, sec. 913, 
124 Stat. 1376, 1827 (2010).
    Sections 240.15Ba1-1 through 240.15Ba1-8 are also issued under sec. 
975, Public Law 111-203, 124 Stat. 1376 (2010).
    Section 240.15Bc4-1 is also issued under sec. 975, Public Law 111-
203, 124 Stat. 1376 (2010).
    Sections 240.15Ca1-1, 240.15Ca2-1, 240.15Ca2-2, 240.15Ca2-3, 
240.15Ca2-4, 240.15Ca2-5, 240.15Cc1-1 also issued under secs. 3, 15C; 15 
U.S.C. 78c, 78o-5;
    Sections 240.15Fh-1 through 240.15Fh-6 and 240.15Fk-1 are also 
issued under sec. 943, Pub. L. 111-203, 124 Stat. 1376.
    Section 240.15Ga-1 is also issued under sec. 943, Pub. L. 111-203, 
124 Stat. 1376.
    Section 240.15Ga-2 is also issued under sec. 943, Pub. L. 111-203, 
124 Stat. 1376. Section 240.16a-1(a) is also issued under Public Law 
111-203 Sec.  766, 124 Stat. 1799 (2010).
    Section 240.17a-3 also issued under secs. 2, 17, 23a, 48 Stat. 897, 
as amended; 15 U.S.C. 78d-1, 78d-2, 78q; secs. 12, 14, 17, 23(a), 48 
Stat. 892, 895, 897, 901; secs. 1, 4, 8, 49 Stat. 1375, 1379; sec. 
203(a), 49 Stat. 704; sec. 5, 52 Stat. 1076; sec. 202, 68 Stat. 686; 
secs. 3, 5, 10, 78 Stat. 565-568, 569, 570, 580; secs. 1, 3, 82 Stat. 
454, 455; secs. 28(c), 3-5, 84 Stat. 1435, 1497; sec. 105(b), 88 Stat. 
1503; secs. 8, 9, 14, 18, 89 Stat. 117, 118, 137, 155; 15 U.S.C. 78l, 
78n, 78q, 78w(a);
    Section 240.17a-4 also issued under secs. 2, 17, 23(a), 48 Stat. 
897, as amended; 15 U.S.C. 78a, 78d-1, 78d-2; sec. 14, Pub. L. 94-29, 89 
Stat. 137 (15 U.S.C. 78a); sec. 18, Pub. L. 94-29, 89 Stat. 155 (15 
U.S.C. 78w);
    Section 240.17a-14 is also issued under Public Law 111-203, sec. 
913, 124 Stat. 1376 (2010)
    Section 240.17a-23 also issued under 15 U.S.C. 78b, 78c, 78o, 78q, 
and 78w(a).
    Section 240.17f-1 is also authorized under sections 2, 17 and 17A, 
48 Stat. 891, 89 Stat. 137, 141 (15 U.S.C. 78b, 78q, 78q-1);
    Section 240.17g-7 is also issued under sec. 943, Pub. L. 111-203, 
124 Stat. 1376.
    Section 240.17g-8 is also issued under sec. 938, Pub. L. 111-203, 
124 Stat. 1376.
    Section 240.17g-9 is also issued under sec. 936, Pub. L. 111-203, 
124 Stat. 1376.
    Section 240.17h-1T also issued under 15 U.S.C. 78q.
    Sections 240.17Ac2-1(c) and 240.17Ac2-2 also issued under secs. 17, 
17A and 23(a); 48 Stat. 897, as amended, 89 Stat. 137, 141 and 48 Stat. 
901 (15 U.S.C. 78q, 78q-1, 78w(a));
    Section 240.17Ad-1 is also issued under secs. 2, 17, 17A and 23(a); 
48 Stat. 841 as amended, 48 Stat. 897, as amended, 89 Stat. 137, 141, 
and 48 Stat. 901 (15 U.S.C. 78b, 78q, 78q-1, 78w);
    Sections 240.17Ad-5 and 240.17Ad-10 are also issued under secs. 3 
and 17A; 48 Stat. 882, as amended, and 89 Stat. (15 U.S.C. 78c and 78q-
1);
    Section 240.17Ad-7 also issued under 15 U.S.C. 78b, 78q, and 78q-1.
    Section 240.17Ad-17 is also issued under Pub. L. 111-203, section 
929W, 124 Stat. 1869 (2010).
    Section 240.17Ad-22 is also issued under 12 U.S.C. 5461 et seq.
    Sections 240.18a-1, 240.18a-1a, 240.18a-1b, 240.18a-1c, 240.18a-1d, 
240.18a-2, 240.18a-3, and 240.18a-10 are also issued under 15 U.S.C. 
78o-10(d) and 78o-10(e).
    Section 240.18a-4 is also issued under 15 U.S.C. 78c-5(f).
    Section 240.19b-4 is also issued under 12 U.S.C. 5465(e).
    Sections 240.19c-4 also issued under secs. 6, 11A, 14, 15A, 19 and 
23 of the Securities Exchange Act of 1934 (15 U.S.C. 78o-3, and 78s);
    Section 240.19c-5 also issued under Sections 6, 11A, and 19 of the 
Securities Exchange Act of 1934, 48 Stat. 885, as amended, 89 Stat. 111, 
as amended, and 48 Stat. 898, as amended, 15 U.S.C. 78f, 78k-1, and 78s.
    Section 240.21F is also issued under Pub. L. 111-203, Sec.  922(a), 
124 Stat. 1841 (2010).
    Section 240.31-1 is also issued under sec. 31, 48 Stat. 904, as 
amended (15 U.S.C. 78ee).

    Editorial Note: Nomenclature changes to part 240 appear at 57 FR 
36501, Aug. 13, 1992, and 57 FR 47409, Oct. 16, 1992.
    Note: In Sec. Sec.  240.0-1 to 240.24b-3, the numbers to the right 
of the decimal point correspond with the respective rule numbers of the 
rules and regulations under the Securities Exchange Act of 1934.
    ATTENTION ELECTRONIC FILERS
    THIS REGULATION SHOULD BE READ IN CONJUNCTION WITH REGULATION S-T 
(PART 232 OF THIS CHAPTER), WHICH GOVERNS THE PREPARATION AND SUBMISSION 
OF DOCUMENTS IN ELECTRONIC FORMAT. MANY PROVISIONS RELATING TO THE 
PREPARATION AND SUBMISSION OF DOCUMENTS IN PAPER FORMAT CONTAINED IN 
THIS REGULATION ARE SUPERSEDED BY THE PROVISIONS OF REGULATION S-T FOR 
DOCUMENTS REQUIRED TO BE FILED IN ELECTRONIC FORMAT.

[[Page 18]]



  Subpart A_Rules and Regulations Under the Securities Exchange Act of 
                                  1934

                      Rules of General Application



Sec.  240.0-1  Definitions.

    (a) As used in the rules and regulations in this part, prescribed by 
the Commission pursuant to Title I of the Securities Exchange Act of 
1934 (48 Stat. 881-905; 15 U.S.C. chapter 2B), unless the context 
otherwise specifically requires:
    (1) The term Commission means the Securities and Exchange 
Commission.
    (2) The term act means Title I of the Securities Exchange Act of 
1934.
    (3) The term section refers to a section of the Securities Exchange 
Act of 1934. \1\
---------------------------------------------------------------------------

    \1\ The provisions of paragraph (a)(3) of 17 CFR 240.0-1 relate to 
the terminology of rules and regulations as published by the Securities 
and Exchange Commission and are inapplicable to the terminology 
appearing in the Code of Federal Regulations.
---------------------------------------------------------------------------

    (4) The term rules and regulations refers to all rules and 
regulations adopted by the Commission pursuant to the act, including the 
forms for registration and reports and the accompanying instructions 
thereto.
    (5) The term electronic filer means a person or an entity that 
submits filings electronically pursuant to Rules 100 and 101 of 
Regulation S-T (Sec. Sec.  232.100 and 232.101 of this chapter, 
respectively).
    (6) The term electronic filing means a document under the federal 
securities laws that is transmitted or delivered to the Commission in 
electronic format.
    (b) Unless otherwise specifically stated, the terms used in this 
part shall have the meaning defined in the act.
    (c) A rule or regulation which defines a term without express 
reference to the act or to the rules and regulations, or to a portion 
thereof, defines such term for all purposes as used both in the act and 
in the rules and regulations, unless the context otherwise specifically 
requires.
    (d) Unless otherwise specified or the context otherwise requires, 
the term prospectus means a prospectus meeting the requirements of 
section 10(a) of the Securities Act of 1933 as amended.

    Cross References: For definition of ``listed'', see Sec.  240.3b-1; 
``officer'', Sec.  240.3b-2; ``short sale'', Sec.  240.3b-3. For 
additional definitions, see Sec.  240.15c1-1.

[13 FR 8178, Dec. 22, 1948, as amended at 13 FR 9321, Dec. 31, 1948; 19 
FR 6730, Oct. 20, 1954; 58 FR 14682, Mar. 18, 1993; 62 FR 36459, July 8, 
1997]



Sec.  240.0-2  Business hours of the Commission.

    (a) The principal office of the Commission, at 100 F Street, NE, 
Washington, DC 20549, is open each day, except Saturdays, Sundays, and 
Federal holidays, from 9 a.m. to 5:30 p.m., Eastern Standard Time or 
Eastern Daylight Saving Time, whichever currently is in effect in 
Washington, DC, provided that hours for the filing of documents pursuant 
to the Act or the rules and regulations thereunder are as set forth in 
paragraphs (b) and (c) of this section.
    (b) Submissions made in paper. Paper documents filed with or 
otherwise furnished to the Commission may be submitted to the Commission 
each day, except Saturdays, Sundays and federal holidays, from 8 a.m. to 
5:30 p.m., Eastern Standard Time or Eastern Daylight Saving Time, 
whichever is currently in effect.
    (c) Electronic filings. Filings made by direct transmission may be 
submitted to the Commission each day, except Saturdays, Sundays and 
federal holidays, from 8 a.m. to 10 p.m., Eastern Standard Time or 
Eastern Daylight Saving Time, whichever is currently in effect.

    Cross References: For registration and exemption of exchanges, see 
Sec. Sec.  240.6a-1 to 240.6a-3. For forms for permanent registration of 
securities, see Sec.  240.12b-1. For regulations relating to 
registration of securities, see Sec. Sec.  240.12b-1 to 240.12b-36. For 
forms for applications for registration of brokers and dealers, see 
Sec. Sec.  240.15b1-1 to 240.15b9-1.

[58 FR 14682, Mar. 18, 1993, as amended at 65 FR 24801, Apr. 27, 2000; 
68 FR 25799, May 13, 2003; 73 FR 973, Jan. 4, 2008]



Sec.  240.0-3  Filing of material with the Commission.

    (a) All papers required to be filed with the Commission pursuant to 
the Act or the rules and regulations thereunder shall be filed at the 
principal office in Washington, DC. Material may be filed by delivery to 
the Commission,

[[Page 19]]

through the mails or otherwise. The date on which papers are actually 
received by the Commission shall be the date of filing thereof if all of 
the requirements with respect to the filing have been complied with, 
except that if the last day on which papers can be accepted as timely 
filed falls on a Saturday, Sunday or holiday, such papers may be filed 
on the first business day following.
    (b) The manually signed original (or in the case of duplicate 
originals, one duplicate original) of all registrations, applications, 
statements, reports, or other documents filed under the Securities 
Exchange Act of 1934, as amended, shall be numbered sequentially (in 
addition to any internal numbering which otherwise may be present) by 
handwritten, typed, printed, or other legible form of notation from the 
facing page of the document through the last page of that document and 
any exhibits or attachments thereto. Further, the total number of pages 
contained in a numbered original shall be set forth on the first page of 
the document.
    (c) Each document filed shall contain an exhibit index, which should 
immediately precede the exhibits filed with such document. The index 
shall list each exhibit filed and identify by handwritten, typed, 
printed, or other legible form of notation in the manually signed 
original, the page number in the sequential numbering system described 
in paragraph (b) of this section where such exhibit can be found or 
where it is stated that the exhibit is incorporated by reference. 
Further, the first page of the manually signed document shall list the 
page in the filing where the exhibit index is located.

[44 FR 4666, Jan. 23, 1979, as amended at 45 FR 58828, Sept. 5, 1980]



Sec.  240.0-4  Nondisclosure of information obtained in examinations 
and investigations.

    Information or documents obtained by officers or employees of the 
Commission in the course of any examination or investigation pursuant to 
section 17(a) (48 Stat. 897, section 4, 49 Stat. 1379; 15 U.S.C. 78q(a)) 
or 21(a) (48 Stat. 899; 15 U.S.C. 78u(a)) shall, unless made a matter of 
public record, be deemed confidential. Except as provided by 17 CFR 
203.2, officers and employees are hereby prohibited from making such 
confidential information or documents or any other non-public records of 
the Commission available to anyone other than a member, officer or 
employee of the Commission, unless the Commission or the General 
Counsel, pursuant to delegated authority, authorizes the disclosure of 
such information or the production of such documents as not being 
contrary to the public interest. Any officer or employee who is served 
with a subpoena requiring the disclosure of such information or the 
production of such documents shall appear in court and, unless the 
authorization described in the preceding sentence shall have been given, 
shall respectfully decline to disclose the information or produce the 
documents called for, basing his or her refusal upon this section. Any 
officer or employee who is served with such a subpoena shall promptly 
advise the General Counsel of the service of such subpoena, the nature 
of the information or documents sought, and any circumstances which may 
bear upon the desirability of making available such information or 
documents.

[44 FR 50836, Aug. 30, 1979, as amended at 53 FR 17459, May 17, 1988; 76 
FR 71876, Nov. 21, 2011]



Sec.  240.0-5  Reference to rule by obsolete designation.

    Wherever in any rule, form, or instruction book specific reference 
is made to a rule by number or other designation which is now obsolete, 
such reference shall be deemed to be made to the corresponding rule or 
rules in the existing general rules and regulations.

[13 FR 8179, Dec. 22, 1948]



Sec.  240.0-6  Disclosure detrimental to the national defense or foreign
policy.

    (a) Any requirement to the contrary notwithstanding, no registration 
statement, report, proxy statement or other document filed with the 
Commission or any securities exchange shall contain any document or 
information which, pursuant to Executive order, has been classified by 
an appropriate department or agency of the United States

[[Page 20]]

for protection in the interests of national defense or foreign policy.
    (b) Where a document or information is omitted pursuant to paragraph 
(a) of this section, there shall be filed, in lieu of such document or 
information, a statement from an appropriate department or agency of the 
United States to the effect that such document or information has been 
classified or that the status thereof is awaiting determination. Where a 
document is omitted pursuant to paragraph (a) of this section, but 
information relating to the subject matter of such document is 
nevertheless included in material filed with the Commission pursuant to 
a determination of an appropriate department or agency of the United 
States that disclosure of such information would not be contrary to the 
interests of national defense or foreign policy, a statement from such 
department or agency to that effect shall be submitted for the 
information of the Commission. A registrant may rely upon any such 
statement in filing or omitting any document or information to which the 
statement relates.
    (c) The Commission may protect any information in its possession 
which may require classification in the interests of national defense or 
foreign policy pending determination by an appropriate department or 
agency as to whether such information should be classified.
    (d) It shall be the duty of the registrant to submit the documents 
or information referred to in paragraph (a) of this section to the 
appropriate department or agency of the United States prior to filing 
them with the Commission and to obtain and submit to the Commission, at 
the time of filing such documents or information, or in lieu thereof, as 
the case may be, the statements from such department or agency required 
by paragraph (b) of this section. All such statements shall be in 
writing.

[33 FR 7682, May 24, 1968]



Sec.  240.0-8  Application of rules to registered broker-dealers.

    Any provision of any rule or regulation under the Act which 
prohibits any act, practice, or course of business by any person if the 
mails or any means or instrumentality of interstate commerce are used in 
connection therewith, shall also prohibit any such act, practice, or 
course of business by any broker or dealer registered pursuant to 
section 15(b) of the Act, or any person acting on behalf of such a 
broker or dealer, irrespective of any use of the mails or any means or 
instrumentality of interstate commerce.

[29 FR 12555, Sept. 3, 1964]



Sec.  240.0-9  Payment of fees.

    All payment of fees shall be made by wire transfer, or by certified 
check, bank cashier's check, United States postal money order, or bank 
money order payable to the Securities and Exchange Commission, omitting 
the name or title of any official of the Commission. Payment of filing 
fees required by this section shall be made in accordance with the 
directions set forth in Sec.  202.3a of this chapter.

[72 FR 6014, Feb. 1, 2008]



Sec.  240.0-10  Small entities under the Securities Exchange Act for 
purposes of the Regulatory Flexibility Act.

    For purposes of Commission rulemaking in accordance with the 
provisions of Chapter Six of the Administrative Procedure Act (5 U.S.C. 
601 et seq.), and unless otherwise defined for purposes of a particular 
rulemaking proceeding, the term small business or small organization 
shall:
    (a) When used with reference to an ``issuer'' or a ``person,'' other 
than an investment company, mean an ``issuer'' or ``person'' that, on 
the last day of its most recent fiscal year, had total assets of $5 
million or less;
    (b) When used with reference to an ``issuer'' or ``person'' that is 
an investment company, have the meaning ascribed to those terms by Sec.  
270.0-10 of this chapter;
    (c) When used with reference to a broker or dealer, mean a broker or 
dealer that:
    (1) Had total capital (net worth plus subordinated liabilities) of 
less than $500,000 on the date in the prior fiscal year as of which its 
audited financial statements were prepared pursuant to Sec.  240.17a-
5(d) or, if not required to file such statements, a broker or dealer

[[Page 21]]

that had total capital (net worth plus subordinated liabilities) of less 
than $500,000 on the last business day of the preceding fiscal year (or 
in the time that it has been in business, if shorter); and
    (2) Is not affiliated with any person (other than a natural person) 
that is not a small business or small organization as defined in this 
section;
    (d) When used with reference to a clearing agency, mean a clearing 
agency that:
    (1) Compared, cleared and settled less than $500 million in 
securities transactions during the preceding fiscal year (or in the time 
that it has been in business, if shorter);
    (2) Had less than $200 million of funds and securities in its 
custody or control at all times during the preceding fiscal year (or in 
the time that it has been in business, if shorter); and
    (3) Is not affiliated with any person (other than a natural person) 
that is not a small business or small organization as defined in this 
section;
    (e) When used with reference to an exchange, mean any exchange that:
    (1) Has been exempted from the reporting requirements of Sec.  
242.601 of this chapter; and
    (2) Is not affiliated with any person (other than a natural person) 
that is not a small business or small organization as defined in this 
section;
    (f) When used with reference to a municipal securities dealer that 
is a bank (including any separately identifiable department or division 
of a bank), mean any such municipal securities dealer that:
    (1) Had, or is a department of a bank that had, total assets of less 
than $10 million at all times during the preceding fiscal year (or in 
the time that it has been in business, if shorter);
    (2) Had an average monthly volume of municipal securities 
transactions in the preceding fiscal year (or in the time it has been 
registered, if shorter) of less than $100,000; and
    (3) Is not affiliated with any person (other than a natural person) 
that is not a small business or small organization as defined in this 
section;
    (g) When used with reference to a securities information processor, 
mean a securities information processor that:
    (1) Had gross revenues of less than $10 million during the preceding 
fiscal year (or in the time it has been in business, if shorter);
    (2) Provided service to fewer than 100 interrogation devices or 
moving tickers at all times during the preceding fiscal year (or in the 
time that it has been in business, if shorter); and
    (3) Is not affiliated with any person (other than a natural person) 
that is not a small business or small organization under this section; 
and
    (h) When used with reference to a transfer agent, mean a transfer 
agent that:
    (1) Received less than 500 items for transfer and less than 500 
items for processing during the preceding six months (or in the time 
that it has been in business, if shorter);
    (2) Transferred items only of issuers that would be deemed ``small 
businesses'' or ``small organizations'' as defined in this section; and
    (3) Maintained master shareholder files that in the aggregate 
contained less than 1,000 shareholder accounts or was the named transfer 
agent for less than 1,000 shareholder accounts at all times during the 
preceding fiscal year (or in the time that it has been in business, if 
shorter); and
    (4) Is not affiliated with any person (other than a natural person) 
that is not a small business or small organization under this section.
    (i) For purposes of paragraph (c) of this section, a broker or 
dealer is affiliated with another person if:
    (1) Such broker or dealer controls, is controlled by, or is under 
common control with such other person; a person shall be deemed to 
control another person if that person has the right to vote 25 percent 
or more of the voting securities of such other person or is entitled to 
receive 25 percent or more of the net profits of such other person or is 
otherwise able to direct or cause the direction of the management or 
policies of such other person; or
    (2) Such broker or dealer introduces transactions in securities, 
other than registered investment company securities or interests or 
participations in insurance company separate accounts, to such other 
person, or introduces accounts of customers or other brokers

[[Page 22]]

or dealers, other than accounts that hold only registered investment 
company securities or interests or participations in insurance company 
separate accounts, to such other person that carries such accounts on a 
fully disclosed basis.
    (j) For purposes of paragraphs (d) through (h) of this section, a 
person is affiliated with another person if that person controls, is 
controlled by, or is under common control with such other person; a 
person shall be deemed to control another person if that person has the 
right to vote 25 percent or more of the voting securities of such other 
person or is entitled to receive 25 percent or more of the net profits 
of such other person or is otherwise able to direct or cause the 
direction of the management or policies of such other person.
    (k) For purposes of paragraph (g) of this section, ``interrogation 
device'' shall refer to any device that may be used to read or receive 
securities information, including quotations, indications of interest, 
last sale data and transaction reports, and shall include proprietary 
terminals or personal computers that receive securities information via 
computer-to-computer interfaces or gateway access.

[47 FR 5222, Feb. 4, 1982, as amended at 51 FR 25362, July 14, 1986; 63 
FR 35514, June 30, 1998; 70 FR 37617, June 29, 2005]



Sec.  240.0-11  Filing fees for certain acquisitions, dispositions and
similar transactions.

    (a) General. (1) At the time of filing a disclosure document 
described in paragraphs (b) through (d) of this section relating to 
certain acquisitions, dispositions, business combinations, 
consolidations or similar transactions, the person filing the specified 
document shall pay a fee payable to the Commission to be calculated as 
set forth in paragraphs (b) through (d) of this section.
    (2) Only one fee per transaction is required to be paid. A required 
fee shall be reduced in an amount equal to any fee paid with respect to 
such transaction pursuant to either section 6(b) of the Securities Act 
of 1933 or any applicable provision of this rule; the fee requirements 
under section 6(b) shall be reduced in an amount equal to the fee paid 
the Commission with respect to a transaction under this regulation. No 
part of a filing fee is refundable.
    (3) If at any time after the initial payment the aggregate 
consideration offered is increased, an additional filing fee based upon 
such increase shall be paid with the required amended filing.
    (4) When the fee is based upon the market value of securities, such 
market value shall be established by either the average of the high and 
low prices reported in the consolidated reporting system (for exchange 
traded securities and last sale reported over-the-counter securities) or 
the average of the bid and asked price (for other over-the-counter 
securities) as of a specified date within 5 business days prior to the 
date of the filing. If there is no market for the securities, the value 
shall be based upon the book value of the securities computed as of the 
latest practicable date prior to the date of the filing, unless the 
issuer of the securities is in bankruptcy or receivership or has an 
accumulated capital deficit, in which case one-third of the principal 
amount, par value or stated value of the securities shall be used.
    (5) The cover page of the filing shall set forth the calculation of 
the fee in tabular format, as well as the amount offset by a previous 
filing and the identification of such filing, if applicable.
    (b) Section 13(e)(1) filings. At the time of filing such statement 
as the Commission may require pursuant to section 13(e)(1) of the 
Exchange Act, a fee of one-fiftieth of one percent of the value of the 
securities proposed to be acquired by the acquiring person. The value of 
the securities proposed to be acquired shall be determined as follows:
    (1) The value of the securities to be acquired solely for cash shall 
be the amount of cash to be paid for them:
    (2) The value of the securities to be acquired with securities or 
other non-cash consideration, whether or not in combination with a cash 
payment for the same securities, shall be based upon the market value of 
the securities to be received by the acquiring person as established in 
accordance with paragraph (a)(4) of this section.

[[Page 23]]

    (c) Proxy and information statement filings. At the time of filing a 
preliminary proxy statement pursuant to Rule 14a-6(a) or preliminary 
information statement pursuant to Rule 14c-5(a) that concerns a merger, 
consolidation, acquisition of a company, or proposed sale or other 
disposition of substantially all the assets of the registrant (including 
a liquidation), the following fee:
    (1) For preliminary material involving a vote upon a merger, 
consolidation or acquisition of a company, a fee of one-fiftieth of one 
percent of the proposed cash payment or of the value of the securities 
and other property to be transferred to security holders in the 
transaction. The fee is payable whether the registrant is acquiring 
another company or being acquired.
    (i) The value of securities or other property to be transferred to 
security holders, whether or not in combination with a cash payment for 
the same securities, shall be based upon the market value of the 
securities to be received by the acquiring person as established in 
accordance with paragraph (a)(4) of this section.
    (ii) Notwithstanding the above, where the acquisition, merger or 
consolidation is for the sole purpose of changing the registrant's 
domicile, no filing fee is required to be paid.
    (2) For preliminary material involving a vote upon a proposed sale 
or other disposition of substantially all the assets of the registrant, 
a fee of one-fiftieth of one percent of the aggregate of the cash and 
the value of the securities (other than its own) and other property to 
be received by the registrant. In the case of a disposition in which the 
registrant will not receive any property, such as at liquidation or 
spin-off, the fee shall be one-fiftieth of one percent of the aggregate 
of the cash and the value of the securities and other property to be 
distributed to security holders.
    (i) The value of the securities to be received (or distributed in 
the case of a spin-off or liquidation) shall be based upon the market 
value of such securities as established in accordance with paragraph 
(a)(4) of this section.
    (ii) The value of other property shall be a bona fide estimate of 
the fair market value of such property.
    (3) Where two or more companies are involved in the transaction, 
each shall pay a proportionate share of such fee, determined by the 
persons involved.
    (4) Notwithstanding the above, the fee required by this paragraph 
(c) shall not be payable for a proxy statement filed by a company 
registered under the Investment Company Act of 1940.
    (d) Section 14(d)(1) filings. At the time of filing such statement 
as the Commission may require pursuant to section 14(d)(1) of the Act, a 
fee of one-fiftieth of one percent of the aggregate of the cash or of 
the value of the securities or other property offered by the bidder. 
Where the bidder is offering securities or other non-cash consideration 
for some or all of the securities to be acquired, whether or not in 
combination with a cash payment for the same securities, the value of 
the consideration to be offered for such securities shall be based upon 
the market value of the securities to be received by the bidder as 
established in accordance with paragraph (a)(4) of this section.

[51 FR 2476, Jan. 17, 1986, as amended at 58 FR 14682, Mar. 18, 1993; 61 
FR 49959, Sept. 24, 1996; 73 FR 17813, Apr. 1, 2008]



Sec.  240.0-12  Commission procedures for filing applications for orders
for exemptive relief under Section 36 of the Exchange Act.

    (a) The application shall be in writing in the form of a letter, 
must include any supporting documents necessary to make the application 
complete, and otherwise must comply with Sec.  240.0-3. All applications 
must be submitted to the Office of the Secretary of the Commission. 
Requestors may seek confidential treatment of their applications to the 
extent provided under Sec.  200.81 of this chapter. If an application is 
incomplete, the Commission, through the Division handling the 
application, may request that the application be withdrawn unless the 
applicant can justify, based on all the facts and circumstances, why 
supporting materials have not been submitted and undertakes to submit 
the omitted materials promptly.

[[Page 24]]

    (b) An applicant may submit a request electronically. The electronic 
mailbox to use for these applications is described on the Commission's 
Web site at http://www.sec.gov in the ``Exchange Act Exemptive 
Applications'' section. In the event the electronic mailbox is revised 
in the future, applicants can find the appropriate mailbox by accessing 
the ``Electronic Mailboxes at the Commission'' section.
    (c) An applicant also may submit a request in paper format. Five 
copies of every paper application and every amendment to such an 
application must be submitted to the Office of the Secretary at 100 F 
Street, NE., Washington, DC 20549-1090. Applications must be on white 
paper no larger than 8\1/2\ by 11 inches in size. The left margin of 
applications must be at least 1\1/2\ inches wide, and if the application 
is bound, it must be bound on the left side. All typewritten or printed 
material must be on one side of the paper only and must be set forth in 
black ink so as to permit photocopying.
    (d) Every application (electronic or paper) must contain the name, 
address and telephone number of each applicant and the name, address, 
and telephone number of a person to whom any questions regarding the 
application should be directed. The Commission will not consider 
hypothetical or anonymous requests for exemptive relief. Each applicant 
shall state the basis for the relief sought, and identify the 
anticipated benefits for investors and any conditions or limitations the 
applicant believes would be appropriate for the protection of investors. 
Applicants should also cite to and discuss applicable precedent.
    (e) Amendments to the application should be prepared and submitted 
as set forth in these procedures and should be marked to show what 
changes have been made.
    (f) After the filing is complete, the applicable Division will 
review the application. Once all questions and issues have been answered 
to the satisfaction of the Division, the staff will make an appropriate 
recommendation to the Commission. After consideration of the 
recommendation by the Commission, the Commission's Office of the 
Secretary will issue an appropriate response and will notify the 
applicant. If the application pertains to a section of the Exchange Act 
pursuant to which the Commission has delegated its authority to the 
appropriate Division, the Division Director or his or her designee will 
issue an appropriate response and notify the applicant.
    (g) The Commission, in its sole discretion, may choose to publish in 
the Federal Register a notice that the application has been submitted. 
The notice would provide that any person may, within the period 
specified therein, submit to the Commission any information that relates 
to the Commission action requested in the application. The notice also 
would indicate the earliest date on which the Commission would take 
final action on the application, but in no event would such action be 
taken earlier than 25 days following publication of the notice in the 
Federal Register.
    (h) The Commission may, in its sole discretion, schedule a hearing 
on the matter addressed by the application.

[63 FR 8102, Feb. 18, 1998, as amended at 73 FR 973, Jan. 4, 2008; 76 FR 
43891, July 22, 2011]



Sec.  240.0-13  Commission procedures for filing applications to request
a substituted compliance or listed jurisdiction order under the Exchange
Act.

    (a) The application shall be in writing in the form of a letter, 
must include any supporting documents necessary to make the application 
complete, and otherwise must comply with Sec.  240.0-3. All applications 
must be submitted to the Office of the Secretary of the Commission, by a 
party that potentially would comply with requirements under the Exchange 
Act pursuant to a substituted compliance or listed jurisdiction order, 
or by the relevant foreign financial regulatory authority or 
authorities. If an application is incomplete, the Commission may request 
that the application be withdrawn unless the applicant can justify, 
based on all the facts and circumstances, why supporting materials have 
not been submitted and undertakes to submit the omitted materials 
promptly.
    (b) An applicant may submit a request electronically. The electronic 
mailbox to use for these applications is

[[Page 25]]

described on the Commission's website at www.sec.gov in the ``Exchange 
Act Substituted Compliance and Listed Jurisdiction Applications'' 
section. In the event electronic mailboxes are revised in the future, 
applicants can find the appropriate mailbox by accessing the 
``Electronic Mailboxes at the Commission'' section.
    (c) All filings and submissions filed pursuant to this rule must be 
in the English language. If a filing or submission filed pursuant to 
this rule requires the inclusion of a document that is in a foreign 
language, a party must submit instead a fair and accurate English 
translation of the entire foreign language document. A party may submit 
a copy of the unabridged foreign language document when including an 
English translation of a foreign language document in a filing or 
submission filed pursuant to this rule. A party must provide a copy of 
any foreign language document upon the request of Commission staff.
    (d) An applicant also may submit a request in paper format. Five 
copies of every paper application and every amendment to such an 
application must be submitted to the Office of the Secretary at 100 F 
Street NE., Washington, DC 20549-1090. Applications must be on white 
paper no larger than 8\1/2\ by 11 inches in size. The left margin of 
applications must be at least 1\1/2\ inches wide, and if the application 
is bound, it must be bound on the left side. All typewritten or printed 
material must be set forth in black ink so as to permit photocopying.
    (e) Every application (electronic or paper) must contain the name, 
address, telephone number, and email address of each applicant and the 
name, address, telephone number, and email address of a person to whom 
any questions regarding the application should be directed. The 
Commission will not consider hypothetical or anonymous requests for a 
substituted compliance or listed jurisdiction order. Each applicant 
shall provide the Commission with any supporting documentation it 
believes necessary for the Commission to make such determination, 
including information regarding applicable requirements established by 
the foreign financial regulatory authority or authorities, as well as 
the methods used by the foreign financial regulatory authority or 
authorities to monitor and enforce compliance with such rules. 
Applicants should also cite to and discuss applicable precedent.
    (f) Amendments to the application should be prepared and submitted 
as set forth in these procedures and should be marked to show what 
changes have been made.
    (g) After the filing is complete, the staff will review the 
application. Once all questions and issues have been answered to the 
satisfaction of the staff, the staff will make an appropriate 
recommendation to the Commission. After consideration of the 
recommendation and a vote by the Commission, the Commission's Office of 
the Secretary will issue an appropriate response and will notify the 
applicant.
    (h) The Commission shall publish in the Federal Register a notice 
that a complete application has been submitted. The notice will provide 
that any person may, within the period specified therein, submit to the 
Commission any information that relates to the Commission action 
requested in the application. The notice also will indicate the earliest 
date on which the Commission would take final action on the application, 
but in no event would such action be taken earlier than 25 days 
following publication of the notice in the Federal Register.
    (i) The Commission may, in its sole discretion, schedule a hearing 
on the matter addressed by the application.

[79 FR 47369, Aug. 12, 2014, as amended at 85 FR 6350, Feb. 4, 2020]



Sec.  240.3a1-1  Exemption from the definition of ``Exchange'' under
Section 3(a)(1) of the Act.

    (a) An organization, association, or group of persons shall be 
exempt from the definition of the term ``exchange'' under section 
3(a)(1) of the Act, (15 U.S.C. 78c(a)(1)), if such organization, 
association, or group of persons:
    (1) Is operated by a national securities association;
    (2) Is in compliance with Regulation ATS, 17 CFR 242.300 through 
242.304; or
    (3) Pursuant to paragraph (a) of Sec.  242.301 of Regulation ATS, 17 
CFR 242.301(a), is not required to comply

[[Page 26]]

with Regulation ATS, 17 CFR 242.300 through 242.304.
    (b) Notwithstanding paragraph (a) of this section, an organization, 
association, or group of persons shall not be exempt under this section 
from the definition of ``exchange,'' if:
    (1) During three of the preceding four calendar quarters such 
organization, association, or group of persons had:
    (i) Fifty percent or more of the average daily dollar trading volume 
in any security and five percent or more of the average daily dollar 
trading volume in any class of securities; or
    (ii) Forty percent or more of the average daily dollar trading 
volume in any class of securities; and
    (2) The Commission determines, after notice to the organization, 
association, or group of persons, and an opportunity for such 
organization, association, or group of persons to respond, that such an 
exemption would not be necessary or appropriate in the public interest 
or consistent with the protection of investors taking into account the 
requirements for exchange registration under section 6 of the Act, (15 
U.S.C. 78f), and the objectives of the national market system under 
section 11A of the Act, (15 U.S.C 78k-1).
    (3) For purposes of paragraph (b) of this section, each of the 
following shall be considered a ``class of securities'':
    (i) Equity securities, which shall have the same meaning as in Sec.  
240.3a11-1;
    (ii) Listed options, which shall mean any options traded on a 
national securities exchange or automated facility of a national 
securities exchange;
    (iii) Unlisted options, which shall mean any options other than 
those traded on a national securities exchange or automated facility of 
a national securities association;
    (iv) Municipal securities, which shall have the same meaning as in 
section 3(a)(29) of the Act, (15 U.S.C. 78c(a)(29));
    (v) Corporate debt securities, which shall mean any securities that:
    (A) Evidence a liability of the issuer of such securities;
    (B) Have a fixed maturity date that is at least one year following 
the date of issuance; and
    (C) Are not exempted securities, as defined in section 3(a)(12) of 
the Act, (15 U.S.C. 78c(a)(12));
    (vi) Foreign corporate debt securities, which shall mean any 
securities that:
    (A) Evidence a liability of the issuer of such debt securities;
    (B) Are issued by a corporation or other organization incorporated 
or organized under the laws of any foreign country; and
    (C) Have a fixed maturity date that is at least one year following 
the date of issuance; and
    (vii) Foreign sovereign debt securities, which shall mean any 
securities that:
    (A) Evidence a liability of the issuer of such debt securities;
    (B) Are issued or guaranteed by the government of a foreign country, 
any political subdivision of a foreign country or any supranational 
entity; and
    (C) Do not have a maturity date of a year or less following the date 
of issuance.

[63 FR 70917, Dec. 22, 1998, as amended at 74 FR 52372, Oct. 9, 2009; 83 
FR 38911, Aug. 7, 2018]



Sec.  240.3a4-1  Associated persons of an issuer deemed not to be brokers.

    (a) An associated person of an issuer of securities shall not be 
deemed to be a broker solely by reason of his participation in the sale 
of the securities of such issuer if the associated person:
    (1) Is not subject to a statutory disqualification, as that term is 
defined in section 3(a)(39) of the Act, at the time of his 
participation; and
    (2) Is not compensated in connection with his participation by the 
payment of commissions or other remuneration based either directly or 
indirectly on transactions in securities; and
    (3) Is not at the time of his participation an associated person of 
a broker or dealer; and
    (4) Meets the conditions of any one of paragraph (a)(4) (i), (ii), 
or (iii) of this section.
    (i) The associated person restricts his participation to 
transactions involving offers and sales of securities:
    (A) To a registered broker or dealer; a registered investment 
company (or

[[Page 27]]

registered separate account); an insurance company; a bank; a savings 
and loan association; a trust company or similar institution supervised 
by a state or federal banking authority; or a trust for which a bank, a 
savings and loan association, a trust company, or a registered 
investment adviser either is the trustee or is authorized in writing to 
make investment decisions; or
    (B) That are exempted by reason of section 3(a)(7), 3(a)(9) or 
3(a)(10) of the Securities Act of 1933 from the registration provisions 
of that Act; or
    (C) That are made pursuant to a plan or agreement submitted for the 
vote or consent of the security holders who will receive securities of 
the issuer in connection with a reclassification of securities of the 
issuer, a merger or consolidation or a similar plan of acquisition 
involving an exchange of securities, or a transfer of assets of any 
other person to the issuer in exchange for securities of the issuer; or
    (D) That are made pursuant to a bonus, profit-sharing, pension, 
retirement, thrift, savings, incentive, stock purchase, stock ownership, 
stock appreciation, stock option, dividend reinvestment or similar plan 
for employees of an issuer or a subsidiary of the issuer;
    (ii) The associated person meets all of the following conditions:
    (A) The associated person primarily performs, or is intended 
primarily to perform at the end of the offering, substantial duties for 
or on behalf of the issuer otherwise than in connection with 
transactions in securities; and
    (B) The associated person was not a broker or dealer, or an 
associated person of a broker or dealer, within the preceding 12 months; 
and
    (C) The associated person does not participate in selling an 
offering of securities for any issuer more than once every 12 months 
other than in reliance on paragraph (a)(4)(i) or (iii) of this section, 
except that for securities issued pursuant to rule 415 under the 
Securities Act of 1933, the 12 months shall begin with the last sale of 
any security included within one rule 415 registration.
    (iii) The associated person restricts his participation to any one 
or more of the following activities:
    (A) Preparing any written communication or delivering such 
communication through the mails or other means that does not involve 
oral solicitation by the associated person of a potential purchaser; 
Provided, however, that the content of such communication is approved by 
a partner, officer or director of the issuer;
    (B) Responding to inquiries of a potential purchaser in a 
communication initiated by the potential purchaser; Provided, however, 
That the content of such responses are limited to information contained 
in a registration statement filed under the Securities Act of 1933 or 
other offering document; or
    (C) Performing ministerial and clerical work involved in effecting 
any transaction.
    (b) No presumption shall arise that an associated person of an 
issuer has violated section 15(a) of the Act solely by reason of his 
participation in the sale of securities of the issuer if he does not 
meet the conditions specified in paragraph (a) of this section.
    (c) Definitions. When used in this section:
    (1) The term associated person of an issuer means any natural person 
who is a partner, officer, director, or employee of:
    (i) The issuer;
    (ii) A corporate general partner of a limited partnership that is 
the issuer;
    (iii) A company or partnership that controls, is controlled by, or 
is under common control with, the issuer; or
    (iv) An investment adviser registered under the Investment Advisers 
Act of 1940 to an investment company registered under the Investment 
Company Act of 1940 which is the issuer.
    (2) The term associated person of a broker or dealer means any 
partner, officer, director, or branch manager of such broker or dealer 
(or any person occupying a similar status or performing similar 
functions), any person directly or indirectly controlling, controlled 
by, or under common control with such broker or dealer, or any employee 
of such broker or dealer, except that any person associated with a 
broker or dealer whose functions are solely clerical or ministerial and 
any person who is required under the laws of any State to register as a 
broker or

[[Page 28]]

dealer in that State solely because such person is an issuer of 
securities or associated person of an issuer of securities shall not be 
included in the meaning of such term for purposes of this section.

[50 FR 27946, July 9, 1985]



Sec. Sec.  240.3a4-2--240.3a4-6  [Reserved]



Sec.  240.3a5-1  Exemption from the definition of ``dealer'' for a bank
engaged in riskless principal transactions.

    (a) A bank is exempt from the definition of the term ``dealer'' to 
the extent that it engages in or effects riskless principal transactions 
if the number of such riskless principal transactions during a calendar 
year combined with transactions in which the bank is acting as an agent 
for a customer pursuant to section 3(a)(4)(B)(xi) of the Act (15 U.S.C. 
78c(a)(4)(B)(xi)) during that same year does not exceed 500.
    (b) For purposes of this section, the term riskless principal 
transaction means a transaction in which, after having received an order 
to buy from a customer, the bank purchased the security from another 
person to offset a contemporaneous sale to such customer or, after 
having received an order to sell from a customer, the bank sold the 
security to another person to offset a contemporaneous purchase from 
such customer.

[68 FR 8700, Feb. 24, 2003]



Sec.  240.3a5-2  Exemption from the definition of ``dealer'' for banks
effecting transactions in securities issued pursuant to Regulation S.

    (a) A bank is exempt from the definition of the term ``dealer'' 
under section 3(a)(5) of the Act (15 U.S.C. 78c(a)(5)), to the extent 
that, in a riskless principal transaction, the bank:
    (1) Purchases an eligible security from an issuer or a broker-dealer 
and sells that security in compliance with the requirements of 17 CFR 
230.903 to a purchaser who is not in the United States;
    (2) Purchases from a person who is not a U.S. person under 17 CFR 
230.902(k) an eligible security after its initial sale with a reasonable 
belief that the eligible security was initially sold outside of the 
United States within the meaning of and in compliance with the 
requirements of 17 CFR 230.903, and resells that security to a purchaser 
who is not in the United States or to a registered broker or dealer, 
provided that if the resale is made prior to the expiration of any 
applicable distribution compliance period specified in 17 CFR 
230.903(b)(2) or (b)(3), the resale is made in compliance with the 
requirements of 17 CFR 230.904; or
    (3) Purchases from a registered broker or dealer an eligible 
security after its initial sale with a reasonable belief that the 
eligible security was initially sold outside of the United States within 
the meaning of and in compliance with the requirements of 17 CFR 
230.903, and resells that security to a purchaser who is not in the 
United States, provided that if the resale is made prior to the 
expiration of any applicable distribution compliance period specified in 
17 CFR 230.903(b)(2) or (b)(3), the resale is made in compliance with 
the requirements of 17 CFR 230.904.
    (b) Definitions. For purposes of this section:
    (1) Distributor has the same meaning as in 17 CFR 230.902(d).
    (2) Eligible security means a security that:
    (i) Is not being sold from the inventory of the bank or an affiliate 
of the bank; and
    (ii) Is not being underwritten by the bank or an affiliate of the 
bank on a firm-commitment basis, unless the bank acquired the security 
from an unaffiliated distributor that did not purchase the security from 
the bank or an affiliate of the bank.
    (3) Purchaser means a person who purchases an eligible security and 
who is not a U.S. person under 17 CFR 230.902(k).
    (4) Riskless principal transaction means a transaction in which, 
after having received an order to buy from a customer, the bank 
purchased the security from another person to offset a contemporaneous 
sale to such customer or, after having received an order to sell from a 
customer, the bank sold the security to another person to offset a

[[Page 29]]

contemporaneous purchase from such customer.

[72 FR 56567, Oct. 3, 2007]



Sec.  240.3a5-3  Exemption from the definition of ``dealer'' for banks
engaging in securities lending transactions.

    (a) A bank is exempt from the definition of the term ``dealer'' 
under section 3(a)(5) of the Act (15 U.S.C. 78c(a)(5)), to the extent 
that, as a conduit lender, it engages in or effects securities lending 
transactions, and any securities lending services in connection with 
such transactions, with or on behalf of a person the bank reasonably 
believes to be:
    (1) A qualified investor as defined in section 3(a)(54)(A) of the 
Act (15 U.S.C. 78c(a)(54)(A)); or
    (2) Any employee benefit plan that owns and invests, on a 
discretionary basis, not less than $25,000,000 in investments.
    (b) Securities lending transaction means a transaction in which the 
owner of a security lends the security temporarily to another party 
pursuant to a written securities lending agreement under which the 
lender retains the economic interests of an owner of such securities, 
and has the right to terminate the transaction and to recall the loaned 
securities on terms agreed by the parties.
    (c) Securities lending services means:
    (1) Selecting and negotiating with a borrower and executing, or 
directing the execution of the loan with the borrower;
    (2) Receiving, delivering, or directing the receipt or delivery of 
loaned securities;
    (3) Receiving, delivering, or directing the receipt or delivery of 
collateral;
    (4) Providing mark-to-market, corporate action, recordkeeping or 
other services incidental to the administration of the securities 
lending transaction;
    (5) Investing, or directing the investment of, cash collateral; or
    (6) Indemnifying the lender of securities with respect to various 
matters.
    (d) For the purposes of this section, the term conduit lender means 
a bank that borrows or loans securities, as principal, for its own 
account, and contemporaneously loans or borrows the same securities, as 
principal, for its own account. A bank that qualifies under this 
definition as a conduit lender at the commencement of a transaction will 
continue to qualify, notwithstanding whether:
    (1) The lending or borrowing transaction terminates and so long as 
the transaction is replaced within one business day by another lending 
or borrowing transaction involving the same securities; and
    (2) Any substitutions of collateral occur.

[72 FR 56567, Oct. 3, 2007]

   Definition of ``Equity Security'' as Used in Sections 12(g) and 16



Sec.  240.3a11-1  Definition of the term ``equity security.''

    The term equity security is hereby defined to include any stock or 
similar security, certificate of interest or participation in any profit 
sharing agreement, preorganization certificate or subscription, 
transferable share, voting trust certificate or certificate of deposit 
for an equity security, limited partnership interest, interest in a 
joint venture, or certificate of interest in a business trust; any 
security future on any such security; or any security convertible, with 
or without consideration into such a security, or carrying any warrant 
or right to subscribe to or purchase such a security; or any such 
warrant or right; or any put, call, straddle, or other option or 
privilege of buying such a security from or selling such a security to 
another without being bound to do so.

[67 FR 19673, Apr. 23, 2002]

                        Miscellaneous Exemptions



Sec.  240.3a12-1  Exemption of certain mortgages and interests in
mortgages.

    Mortgages, as defined in section 302(d) of the Emergency Home 
Finance Act of 1970, which are or have been sold by the Federal Home 
Loan Mortgage Corporation are hereby exempted from the operation of such 
provisions of the Act as by their terms do not apply to

[[Page 30]]

an ``exempted security'' or to ``exempted securities''.

(Sec. 3(a)(12), 48 Stat. 882, 15 U.S.C. 78(c))

[37 FR 25167, Nov. 28, 1972]



Sec.  240.3a12-2  [Reserved]



Sec.  240.3a12-3  Exemption from sections 14(a), 14(b), 14(c), 14(f) and
16 for securities of certain foreign issuers.

    (a) Securities for which the filing of registration statements on 
Form 18 [17 CFR 249.218] are authorized shall be exempt from the 
operation of sections 14 and 16 of the Act.
    (b) Securities registered by a foreign private issuer, as defined in 
Rule 3b-4 (Sec.  240.3b-4 of this chapter), shall be exempt from 
sections 14(a), 14(b), 14(c), 14(f) and 16 of the Act.

[44 FR 70137, Dec. 6, 1979, as amended at 47 FR 54780, Dec. 6, 1982; 56 
FR 30067, July 1, 1991]



Sec.  240.3a12-4  Exemptions from sections 15(a) and 15(c)(3) for certain
mortgage securities.

    (a) When used in this Rule the following terms shall have the 
meanings indicated:
    (1) The term whole loan mortgage means an evidence of indebtedness 
secured by mortgage, deed of trust, or other lien upon real estate or 
upon leasehold interests therein where the entire mortgage, deed or 
other lien is transferred with the entire evidence of indebtedness.
    (2) The term aggregated whole loan mortgage means two or more whole 
loan mortgages that are grouped together and sold to one person in one 
transaction.
    (3) The term participation interest means an undivided interest 
representing one of only two such interests in a whole loan mortgage or 
in an aggregated whole loan mortgage, provided that the other interest 
is retained by the originator of such participation interest.
    (4) The term commitment means a contract to purchase a whole loan 
mortgage, an aggregated whole loan mortgage or a participation interest 
which by its terms requires that the contract be fully executed within 2 
years.
    (5) The term mortgage security means a whole loan mortgage, an 
aggregated whole loan mortgage, a participation interest, or a 
commitment.
    (b) A mortgage security shall be deemed an ``exempted security'' for 
purposes of subsections (a) and (c)(3) of section 15 of the Act provided 
that, in the case of and at the time of any sale of the mortgage 
security by a broker or dealer, such mortgage security is not in default 
and has an unpaid principal amount of at least $50,000.

[39 FR 19945, June 5, 1974]



Sec.  240.3a12-5  Exemption of certain investment contract securities
from sections 7(c) and 11(d)(1).

    (a) An investment contract security involving the direct ownership 
of specified residential real property shall be exempted from the 
provisions of sections 7(c) and 11(d)(1) of the Act with respect to any 
transaction by a broker or dealer who, directly or indirectly, arranges 
for the extension or maintenance of credit on the security to or from a 
customer, if the credit:
    (1) Is secured by a lien, mortgage, deed of trust, or any other 
similar security interest related only to real property: Provided, 
however, That this provision shall not prevent a lender from requiring 
(i) a security interest in the common areas and recreational facilities 
or furniture and fixtures incidental to the investment contract if the 
purchase of such furniture and fixtures is required by, or subject to 
the approval of, the issuer, as a condition of purchase; or (ii) an 
assignment of future rentals in the event of default by the purchaser or 
a co-signer or guarantor on the debt obligation other than the issuer, 
its affiliates, or any broker or dealer offering such securities;
    (2) Is to be repaid by periodic payments of principal and interest 
pursuant to an amortization schedule established by the governing 
instruments: Provided, however, That this provision shall not prevent 
the extension of credit on terms which require the payment of interest 
only, if extended in compliance with the other provisions of this rule; 
and
    (3) Is extended by a lender which is not, directly or indirectly 
controlling, controlled by, or under common control with the broker or 
dealer or the

[[Page 31]]

issuer of the securities or affiliates thereof.
    (b) For purposes of this rule:
    (1) Residential real property shall mean real property containing 
living accommodations, whether used on a permanent or transient basis, 
and may include furniture or fixtures if required as a condition of 
purchase of the investment contract or if subject to the approval of the 
issuer.
    (2) Direct ownership shall mean ownership of a fee or leasehold 
estate or a beneficial interest in a trust the purchase of which, under 
applicable local law, is financed and secured by a security interest 
therein similar to a mortgage or deed of trust, but it shall not include 
an interest in a real estate investment trust, an interest in a general 
or limited partnership, or similar indirect interest in the ownership of 
real property.

(Sec. 3(a)(12), 48 Stat. 882, as amended 84 Stat. 718, 1435, 1499 (15 
U.S.C. 78c(12)); sec. 7(c), 48 Stat. 886, as amended 82 Stat. 452 (15 
U.S.C. 78g(c)); sec. 11(d)(1), 48 Stat. 891 as amended 68 Stat. 636 (15 
U.S.C. 78k(d)(1)); sec. 15(c), 48 Stat. 895, as amended 52 Stat. 1075, 
84 Stat. 1653 (15 U.S.C. 78o(c)); sec. 23(a), 48 Stat. 901, as amended 
49 Stat. 704, 1379 (15 U.S.C. 78w(a)))

[40 FR 6646, Feb. 13, 1975]



Sec.  240.3a12-6  Definition of ``common trust fund'' as used in 
section 3(a)(12) of the Act.

    The term common trust fund as used in section 3(a)(12) of the Act 
(15 U.S.C. 78c(a)(12)) shall include a common trust fund which is 
maintained by a bank which is a member of an affiliated group, as 
defined in section 1504(a) of the Internal Revenue Code of 1954 (26 
U.S.C. 1504(a)), and which is maintained exclusively for the collective 
investment and reinvestment of monies contributed thereto by one or more 
bank members of such affiliated group in the capacity of trustee, 
executor, administrator, or guardian; Provided, That:
    (a) The common trust fund is operated in compliance with the same 
state and federal regulatory requirements as would apply if the bank 
maintaining such fund and any other contributing banks were the same 
entity; and
    (b) The rights of persons for whose benefit a contributing bank acts 
as trustee, executor, administrator, or guardian would not be diminished 
by reason of the maintenance of such common trust fund by another bank 
member of the affiliated group.

(15 U.S.C. 78c(b))

[43 FR 2392, Jan. 17, 1978]



Sec.  240.3a12-7  Exemption for certain derivative securities traded 
otherwise than on a national securities exchange.

    Any put, call, straddle, option, or privilege traded exclusively 
otherwise than on a national securities exchange and for which 
quotations are not disseminated through an automated quotation system of 
a registered securities association, which relates to any securities 
which are direct obligations of, or obligations guaranteed as to 
principal or interest by, the United States, or securities issued or 
guaranteed by a corporation in which the United States has a direct or 
indirect interest as shall be designated for exemption by the Secretary 
of the Treasury pursuant to section 3(a)(12) of the Act, shall be exempt 
from all provisions of the Act which by their terms do not apply to any 
``exempted security'' or ``exempted securities,'' provided that the 
securities underlying such put, call, straddle, option or privilege 
represent an obligation equal to or exceeding $250,000 principal amount.

(15 U.S.C. 78a et seq., and particularly secs. 3(a)(12), 15(a)(2) and 
23(a) (15 U.S.C. 78c(a)(12), 78o(a)(2) and 78w(a)))

[49 FR 5073, Feb. 10, 1984]



Sec.  240.3a12-8  Exemption for designated foreign government securities
for purposes of futures trading.

    (a) When used in this Rule, the following terms shall have the 
meaning indicated:
    (1) The term designated foreign government security shall mean a 
security not registered under the Securities Act of 1933 nor the subject 
of any American depositary receipt so registered, and representing a 
debt obligation of the government of
    (i) The United Kingdom of Great Britain and Northern Ireland;

[[Page 32]]

    (ii) Canada;
    (iii) Japan;
    (iv) The Commonwealth of Australia;
    (v) The Republic of France;
    (vi) New Zealand;
    (vii) The Republic of Austria;
    (viii) The Kingdom of Denmark;
    (ix) The Republic of Finland;
    (x) The Kingdom of the Netherlands;
    (xi) Switzerland;
    (xii) The Federal Republic of Germany;
    (xiii) The Republic of Ireland;
    (xiv) The Republic of Italy;
    (xv) The Kingdom of Spain;
    (xvi) The United Mexican States;
    (xvii) The Federative Republic of Brazil;
    (xviii) The Republic of Argentina;
    (xix) The Republic of Venezuela;
    (xx) The Kingdom of Belgium; or
    (xxi) The Kingdom of Sweden.
    (2) The term qualifying foreign futures contracts shall mean any 
contracts for the purchase or sale of a designated foreign government 
security for future delivery, as ``future delivery'' is defined in 7 
U.S.C. 2, provided such contracts require delivery outside the United 
States, any of its possessions or territories, and are traded on or 
through a board of trade, as defined at 7 U.S.C. 2.
    (b) Any designated foreign government security shall, for purposes 
only of the offer, sale or confirmation of sale of qualifying foreign 
futures contracts, be exempted from all provisions of the Act which by 
their terms do not apply to an ``exempted security'' or ``exempted 
securities.''

(15 U.S.C. 78a et seq., and particularly secs. 3(a)(12), and 23(a) 15 
U.S.C. 78c(a)(12), and 78w(a))

[49 FR 8599, Mar. 8, 1984, as amended at 51 FR 25998, July 18, 1986; 52 
FR 8877, Mar. 20, 1987; 52 FR 42279, Nov. 4, 1987; 53 FR 43863, Oct. 31, 
1988; 57 FR 1378, Jan. 14, 1992; 59 FR 54815, Nov. 2, 1994; 60 FR 62326, 
Dec. 6, 1995; 61 FR 10274, Mar. 13, 1996; 64 FR 10567, Mar. 5, 1999; 64 
FR 29553, June 2, 1999]



Sec.  240.3a12-9  Exemption of certain direct participation program 
securities from the arranging provisions of sections 7(c) and 11(d)(1).

    (a) Direct participation program securities sold on a basis whereby 
the purchase price is paid to the issuer in one or more mandatory 
deferred payments shall be deemed to be exempted securities for purposes 
of the arranging provisions of sections 7(c) and 11(d)(1) of the Act, 
provided that:
    (1) The securities are registered under the Securities Act of 1933 
or are sold or offered exclusively on an intrastate basis in reliance 
upon section 3(a)(11) of that Act;
    (2) The mandatory deferred payments bear a reasonable relationship 
to the capital needs and program objectives described in a business 
development plan disclosed to investors in a registration statement 
filed with the Commission under the Securities Act of 1933 or, where no 
registration statement is required to be filed with the Commission, as 
part of a statement filed with the relevant state securities 
administrator;
    (3) Not less than 50 percent of the purchase price of the direct 
participation program security is paid by the investor at the time of 
sale;
    (4) The total purchase price of the direct participation program 
security is due within three years in specified property programs or two 
years in non-specified property programs. Such pay-in periods are to be 
measured from the earlier of the completion of the offering or one year 
following the effective date of the offering.
    (b) For purposes of this rule:
    (1) Direct participation program shall mean a program financed 
through the sale of securities, other than securities that are listed on 
an exchange, quoted on NASDAQ, or will otherwise be actively traded 
during the pay-in period as a result of efforts by the issuer, 
underwriter, or other participants in the initial distribution of such 
securities, that provides for flow-through tax consequences to its 
investors; Provided, however, That the term ``direct participation 
program'' does not include real estate investment trusts, Subchapter S 
corporate offerings, tax qualified pension and profit sharing plans 
under sections 401 and 403(a) of the Internal Revenue Code (``Code''), 
tax shelter annuities under section 403(b) of the Code, individual 
retirement plans under section 408 of the Code, and any issuer, 
including a separate account, that is registered under the Investment 
Company Act of 1940.

[[Page 33]]

    (2) Business development plan shall mean a specific plan describing 
the program's anticipated economic development and the amounts of future 
capital contributions, in the form of mandatory deferred payments, to be 
required at specified times or upon the occurrence of certain events.
    (3) Specified property program shall mean a direct participation 
program in which, at the date of effectiveness, more than 75 percent of 
the net proceeds from the sale of program securities are committed to 
specific purchases or expenditures. Non-specified property program shall 
mean any other direct participation program.

[51 FR 8801, Mar. 14, 1986]



Sec.  240.3a12-10  Exemption of certain securities issued by the 
Resolution Funding Corporation.

    Securities that are issued by the Resolution Funding Corporation 
pursuant to section 21B(f) of the Federal Home Loan Bank Act (12 U.S.C. 
1421 et seq.) are exempt from the operation of all provisions of the Act 
that by their terms do not apply to any ``exempted security'' or to 
``exempted securities.''

[54 FR 37789, Sept. 13, 1989]



Sec.  240.3a12-11  Exemption from sections 8(a), 14(a), 14(b), and 14(c)
for debt securities listed on a national securities exchange.

    (a) Debt securities that are listed for trading on a national 
securities exchange shall be exempt from the restrictions on borrowing 
of section 8(a) of the Act (15 U.S.C. 78h(a)).
    (b) Debt securities registered pursuant to the provisions of section 
12(b) of the Act (15 U.S.C. 78l(b)) shall be exempt from sections 14(a), 
14(b), and 14(c) of the Act (15 U.S.C. 78n(a), (b), and (c)), except 
that Sec. Sec.  240.14a-1, 240.14a-2(a), 240.14a-9, 240.14a-13, 240.14b-
1, 240.14b-2, 240.14c-1, 240.14c-6 and 240.14c-7 shall continue to 
apply.
    (c) For purposes of this section, debt securities is defined to mean 
any securities that are not ``equity securities'' as defined in section 
3(a)(11) of the Act (15 U.S.C. 78c(a)(11)) and Sec.  240.3a11-1 
thereunder.

[59 FR 55347, Nov. 7, 1994]



Sec.  240.3a12-12  Exemption from certain provisions of section 16 of
the Act for asset-backed securities.

    Asset-backed securities, as defined in Sec.  229.1101 of this 
chapter, are exempt from section 16 of the Act (15 U.S.C. 78p).

[70 FR 1620, Jan. 7, 2005]



Sec.  240.3a40-1  Designation of financial responsibility rules.

    The term financial responsibility rules for purposes of the 
Securities Investor Protection Act of 1970 shall include:
    (a) Any rule adopted by the Commission pursuant to sections 8, 
15(c)(3), 17(a) or 17(e)(1)(A) of the Securities Exchange Act of 1934;
    (b) Any rule adopted by the Commission relating to hypothecation or 
lending of customer securities;
    (c) Any rule adopted by any self-regulatory organization relating to 
capital, margin, recordkeeping, hypothecation or lending requirements; 
and
    (d) Any other rule adopted by the Commission or any self-regulatory 
organization relating to the protection of funds or securities.

(Secs. 3, 15(c)(3), 17(a) and 23 (15 U.S.C. 78c, 78o, 78q(a) and 78u))

[44 FR 28318, May 15, 1979]



Sec.  240.3a43-1  Customer-related government securities activities
incidental to the futures-related business of a futures commission 
merchant registered with the Commodity Futures Trading Commission.

    (a) A futures commission merchant registered with the Commodity 
Futures Trading Commission (``CFTC'') is not a government securities 
broker or government securities dealer solely because such futures 
commission merchant effects transactions in government securities that 
are defined in paragraph (b) of this section as incidental to such 
person's futures-related business.
    (b) Provided that the futures commission merchant maintains in a 
regulated account all funds and securities associated with such 
government securities transactions (except funds and securities 
associated with transactions under paragraph (b)(1)(i) of this section 
and does not advertise that it is in the

[[Page 34]]

business of effecting transactions in government securities otherwise 
than in connection with futures or options on futures trading or the 
investment of margin or excess funds related to such trading or the 
trading of any other instrument subject to CFTC jurisdiction, the 
following transactions in government securities are incidental to the 
futures-related business of such a futures commission merchant:
    (1) Transactions as agent for a customer--
    (i) To effect delivery pursuant to a futures contract; or
    (ii) For risk reduction or arbitrage of existing or 
contemporaneously created postions in futures or options on futures;
    (2) Transactions as agent for a customer for investment of margin 
and excess funds related to futures or options on futures trading or the 
trading of other instruments subject to CFTC jurisdiction, provided 
further that,
    (i) Such transactions involve Treasury securities with a maturity of 
less than 93 days at the time of the transation.
    (ii) Such transactions generate no monetary profit for the futures 
commission merchant in excess of the costs of executing such 
transactions, or
    (iii) Such transactions are unsolicited, and commissions and other 
income generated on transactions pursuant to this paragraph (b)(2)(iii) 
(including transactional fees paid by the futures commission merchant 
and charged to its customer) do not exceed 2% of such futures commission 
merchant's total commission revenues;
    (3) Exchange of futures for physicals transactions as agent for or 
as principal with a customer; and
    (4) Any transaction or transactions that the Commission exempts, 
either unconditionally or on specified terms and conditions, as 
incidental to the futures-related business of a specified futures 
commission merchant, a specified category of futures commission 
merchants, or futures commission merchants generally.
    (c) Definitions. (1) Customer means any person for whom the futures 
commission merchant effects or intends to effect transactions in 
futures, options on futures, or any other instruments subject to CFTC 
jurisdiction.
    (2) Regulated account means a customer segregation account subject 
to the regulations of the CFTC; provided, however, that, where such 
regulations do not permit to be maintained in such an account or require 
to be maintained in a separate regulated account funds or securities in 
proprietary accounts or funds or securities used as margin for or excess 
funds related to futures contracts, options on futures or any other 
instruments subject to CFTC jurisdiction that trade outside the United 
States, its territories, or possessions, the term regulated account 
means such separate regulated account or any other account subject to 
record-keeping regulations of the CFTC.
    (3) Unsolicited transaction means a transaction that is not effected 
in a discretionary account or recommended to a customer by the futures 
commission merchant, an associated person of a futures commission 
merchant, a business affiliate that is controlled by, controlling, or 
under common control with the futures commission merchant, or an 
introducing broker that is guaranteed by the futures commission 
merchant.
    (4) Futures and futures contracts mean contracts of sale of a 
commodity for future delivery traded on or subject to the rules of a 
contract market designated by the CFTC or traded on or subject to the 
rules of any board of trade located outside the United States, its 
territories, or possessions.
    (5) Options on futures means puts or calls on a futures contract 
traded on or subject to the rules of a contract market designated by the 
CFTC or traded or subject to the rules of any board of trade located 
outside the United States, its territories, or possessions.

[52 FR 27969, July 24, 1987]



Sec.  240.3a44-1  Proprietary government securities transactions 
incidental to the futures-related business of a CFTC-regulated person.

    (a) A person registered with the Commodity Futures Trading 
Commission (``CFTC''), a contract market designated by the CFTC, such a 
contract

[[Page 35]]

market's affiliated clearing organization, or any floor trader or such a 
contract market (hereinafter referred to collectively as a ``CFTC-
regulated person'') is not a government securities dealer solely because 
such person effects transactions for its own account in government 
securities that are defined in paragraph (b) of this section as 
incidental to such person's futures-related business.
    (b) Provided that a CFTC-regulated person does not advertise or 
otherwise hold itself out as a government securities dealer except as 
permitted under rule 3a43-1 (Sec.  240.3a43-1) the following 
transactions in government securities for its own account are incidental 
to the futures-related business of such a CFTC-regulated person:
    (1) Transactions to effect delivery of a government security 
pursuant to a futures contract;
    (2) Exchange of futures for physicals transactions with (i) a 
government securities broker or government securities dealer that has 
registered with the Commission or filed notice pursuant to section 
15C(a) of the Act or (ii) a CFTC-regulated person;
    (3) Transactions (including repurchase agreements and reverse 
repurchase agreements) involving segregated customer funds and 
securities or funds and securities held by a clearing organization with 
(i) a government securities broker or government securities dealer that 
has registered with the Commission of filed notice pursuant to section 
15C(a) of the Act or (ii) a bank;
    (4) Transactions for risk reduction or arbitrage of existing or 
contemporaneously created positions in futures or options on futures 
with (i) a government securities broker or government securities dealer 
that has registered with the Commission or filed notice pursuant to 
section 15C(a) of the Act or (ii) a CFTC-regulated person;
    (5) Repurchase and reverse repurchase agreement transactions between 
a futures commission merchant acting in a proprietary capacity and 
another CFTC-regulated person acting in a proprietary capacity and 
contemporaneous offsetting transactions between such a futures 
commission merchant and (i) a government securities broker or government 
securities dealer that has registered with the Commission or filed 
notice pursuant to section 15C(a) of the Act, (ii) a bank, or (iii) a 
CFTC-regulated person acting in a proprietary capacity; and
    (6) Any transaction or transactions that the Commission exempts, 
either unconditionally or on specified terms and conditions, as 
incidental to the futures related business of a specified CFTC-regulated 
person, a specified category of CFTC-regulated persons, or CFTC-
regulated persons generally.
    (c) Definitions--(1) Segregated customer funds means funds subject 
to CFTC segregation requirements.
    (2) Futures and futures contracts means contracts of sale of a 
commodity for future delivery traded on or subject to the rules of a 
contract market designated by the CFTC or traded on or subject to the 
rules of any board of trade located outside the United States, its 
territories, or possessions.
    (3) Options on futures means puts or calls on a futures contract 
traded on or subject to the rules of a contract market designated by the 
CFTC or traded on or subject to the rules of any board of trade located 
outside the United States, its territories, or possessions.

[52 FR 27970, July 24, 1987]



Sec.  240.3a51-1  Definition of ``penny stock''.

    For purposes of section 3(a)(51) of the Act, the term ``penny 
stock'' shall mean any equity security other than a security:
    (a) That is an NMS stock, as defined in Sec.  242.600(b)(48), 
provided that:
    (1) The security is registered, or approved for registration upon 
notice of issuance, on a national securities exchange that has been 
continuously registered as a national securities exchange since April 
20, 1992 (the date of the adoption of Rule 3a51-1 (Sec.  240.3a51-1) by 
the Commission); and the national securities exchange has maintained 
quantitative listing standards that are substantially similar to or 
stricter than those listing standards that were in place on that 
exchange on January 8, 2004; or
    (2) The security is registered, or approved for registration upon 
notice of

[[Page 36]]

issuance, on a national securities exchange, or is listed, or approved 
for listing upon notice of issuance on, an automated quotation system 
sponsored by a registered national securities association, that:
    (i) Has established initial listing standards that meet or exceed 
the following criteria:
    (A) The issuer shall have:
    (1) Stockholders' equity of $5,000,000;
    (2) Market value of listed securities of $50 million for 90 
consecutive days prior to applying for the listing (market value means 
the closing bid price multiplied by the number of securities listed); or
    (3) Net income of $750,000 (excluding non-recurring items) in the 
most recently completed fiscal year or in two of the last three most 
recently completed fiscal years;
    (B) The issuer shall have an operating history of at least one year 
or a market value of listed securities of $50 million (market value 
means the closing bid price multiplied by the number of securities 
listed);
    (C) The issuer's stock, common or preferred, shall have a minimum 
bid price of $4 per share;
    (D) In the case of common stock, there shall be at least 300 round 
lot holders of the security (a round lot holder means a holder of a 
normal unit of trading);
    (E) In the case of common stock, there shall be at least 1,000,000 
publicly held shares and such shares shall have a market value of at 
least $5 million (market value means the closing bid price multiplied by 
number of publicly held shares, and shares held directly or indirectly 
by an officer or director of the issuer and by any person who is the 
beneficial owner of more than 10 percent of the total shares outstanding 
are not considered to be publicly held);
    (F) In the case of a convertible debt security, there shall be a 
principal amount outstanding of at least $10 million;
    (G) In the case of rights and warrants, there shall be at least 
100,000 issued and the underlying security shall be registered on a 
national securities exchange or listed on an automated quotation system 
sponsored by a registered national securities association and shall 
satisfy the requirements of paragraph (a) or (e) of this section;
    (H) In the case of put warrants (that is, instruments that grant the 
holder the right to sell to the issuing company a specified number of 
shares of the company's common stock, at a specified price until a 
specified period of time), there shall be at least 100,000 issued and 
the underlying security shall be registered on a national securities 
exchange or listed on an automated quotation system sponsored by a 
registered national securities association and shall satisfy the 
requirements of paragraph (a) or (e) of this section;
    (I) In the case of units (that is, two or more securities traded 
together), all component parts shall be registered on a national 
securities exchange or listed on an automated quotation system sponsored 
by a registered national securities association and shall satisfy the 
requirements of paragraph (a) or (e) of this section; and
    (J) In the case of equity securities (other than common and 
preferred stock, convertible debt securities, rights and warrants, put 
warrants, or units), including hybrid products and derivative securities 
products, the national securities exchange or registered national 
securities association shall establish quantitative listing standards 
that are substantially similar to those found in paragraphs (a)(2)(i)(A) 
through (a)(2)(i)(I) of this section; and
    (ii) Has established quantitative continued listing standards that 
are reasonably related to the initial listing standards set forth in 
paragraph (a)(2)(i) of this section, and that are consistent with the 
maintenance of fair and orderly markets;
    (b) That is issued by an investment company registered under the 
Investment Company Act of 1940;
    (c) That is a put or call option issued by the Options Clearing 
Corporation;
    (d) Except for purposes of section 7(b) of the Securities Act and 
Rule 419 (17 CFR 230.419), that has a price of five dollars or more;
    (1) For purposes of paragraph (d) of this section:
    (i) A security has a price of five dollars or more for a particular 
transaction if the security is purchased or sold in that transaction at 
a price of

[[Page 37]]

five dollars or more, excluding any broker or dealer commission, 
commission equivalent, mark-up, or mark-down; and
    (ii) Other than in connection with a particular transaction, a 
security has a price of five dollars or more at a given time if the 
inside bid quotation is five dollars or more; provided, however, that if 
there is no such inside bid quotation, a security has a price of five 
dollars or more at a given time if the average of three or more 
interdealer bid quotations at specified prices displayed at that time in 
an interdealer quotation system, as defined in 17 CFR 240.15c2-7(c)(1), 
by three or more market makers in the security, is five dollars or more.
    (iii) The term ``inside bid quotation'' shall mean the highest bid 
quotation for the security displayed by a market maker in the security 
on an automated interdealer quotation system that has the 
characteristics set forth in section 17B(b)(2) of the Act, or such other 
automated interdealer quotation system designated by the Commission for 
purposes of this section, at any time in which at least two market 
makers are contemporaneously displaying on such system bid and offer 
quotations for the security at specified prices.
    (2) If a security is a unit composed of one or more securities, the 
unit price divided by the number of shares of the unit that are not 
warrants, options, rights, or similar securities must be five dollars or 
more, as determined in accordance with paragraph (d)(1) of this section, 
and any share of the unit that is a warrant, option, right, or similar 
security, or a convertible security, must have an exercise price or 
conversion price of five dollars or more;
    (e)(1) That is registered, or approved for registration upon notice 
of issuance, on a national securities exchange that makes transaction 
reports available pursuant to Sec.  242.601, provided that:
    (i) Price and volume information with respect to transactions in 
that security is required to be reported on a current and continuing 
basis and is made available to vendors of market information pursuant to 
the rules of the national securities exchange;
    (ii) The security is purchased or sold in a transaction that is 
effected on or through the facilities of the national securities 
exchange, or that is part of the distribution of the security; and
    (iii) The security satisfies the requirements of paragraph (a)(1) or 
(a)(2) of this section;
    (2) A security that satisfies the requirements of this paragraph 
(e), but does not otherwise satisfy the requirements of paragraph (a), 
(b), (c), (d), (f), or (g) of this section, shall be a penny stock for 
purposes of section 15(b)(6) of the Act (15 U.S.C. 78o(b)(6));
    (f) That is a security futures product listed on a national 
securities exchange or an automated quotation system sponsored by a 
registered national securities association; or
    (g) Whose issuer has:
    (1) Net tangible assets (i.e., total assets less intangible assets 
and liabilities) in excess of $2,000,000, if the issuer has been in 
continuous operation for at least three years, or $5,000,000, if the 
issuer has been in continuous operation for less than three years; or
    (2) Average revenue of at least $6,000,000 for the last three years.
    (3) For purposes of paragraph (g) of this section, net tangible 
assets or average revenues must be demonstrated by financial statements 
dated less than fifteen months prior to the date of the transaction that 
the broker or dealer has reviewed and has a reasonable basis for 
believing are accurate in relation to the date of the transaction, and:
    (i) If the issuer is other than a foreign private issuer, are the 
most recent financial statements for the issuer that have been audited 
and reported on by an independent public accountant in accordance with 
the provisions of 17 CFR 210.2-02; or
    (ii) If the issuer is a foreign private issuer, are the most recent 
financial statements for the issuer that have been filed with the 
Commission or furnished to the Commission pursuant to 17 CFR 240.12g3-
2(b); provided, however, that if financial statements for the issuer 
dated less than fifteen months prior to the date of the transaction have 
not been filed with or furnished to the Commission, financial statements 
dated within fifteen months prior to

[[Page 38]]

the transaction shall be prepared in accordance with generally accepted 
accounting principles in the country of incorporation, audited in 
compliance with the requirements of that jurisdiction, and reported on 
by an accountant duly registered and in good standing in accordance with 
the regulations of that jurisdiction.
    (4) The broker or dealer shall preserve, as part of its records, 
copies of the financial statements required by paragraph (g)(3) of this 
section for the period specified in 17 CFR 240.17a-4(b).

[57 FR 18032, Apr. 28, 1992, as amended at 58 FR 58101, Oct. 29, 1993; 
70 FR 40631, July 13, 2005; 70 FR 46090, Aug. 9, 2005; 83 FR 50221, Oct. 
4, 2018; 83 FR 58427, Nov. 19, 2018]



Sec.  240.3a55-1  Method for determining market capitalization and 
dollar value of average daily trading volume; application of the 
definition of narrow-based security index.

    (a) Market capitalization. For purposes of Section 
3(a)(55)(C)(i)(III)(bb) of the Act (15 U.S.C. 
78c(a)(55)(C)(i)(III)(bb)):
    (1) On a particular day, a security shall be 1 of 750 securities 
with the largest market capitalization as of the preceding 6 full 
calendar months when it is included on a list of such securities 
designated by the Commission and the CFTC as applicable for that day.
    (2) In the event that the Commission and the CFTC have not 
designated a list under paragraph (a)(1) of this section:
    (i) The method to be used to determine market capitalization of a 
security as of the preceding 6 full calendar months is to sum the values 
of the market capitalization of such security for each U.S. trading day 
of the preceding 6 full calendar months, and to divide this sum by the 
total number of such trading days.
    (ii) The 750 securities with the largest market capitalization shall 
be identified from the universe of all NMS securities as defined in 
Sec.  242.600 of this chapter that are common stock or depositary 
shares.
    (b) Dollar value of ADTV. (1) For purposes of Section 3(a)(55)(B) of 
the Act (15 U.S.C. 78c(a)(55)(B)):
    (i)(A) The method to be used to determine the dollar value of ADTV 
of a security is to sum the dollar value of ADTV of all reported 
transactions in such security in each jurisdiction as calculated 
pursuant to paragraphs (b)(1)(ii) and (iii).
    (B) The dollar value of ADTV of a security shall include the value 
of all reported transactions for such security and for any depositary 
share that represents such security.
    (C) The dollar value of ADTV of a depositary share shall include the 
value of all reported transactions for such depositary share and for the 
security that is represented by such depositary share.
    (ii) For trading in a security in the United States, the method to 
be used to determine the dollar value of ADTV as of the preceding 6 full 
calendar months is to sum the value of all reported transactions in such 
security for each U.S. trading day during the preceding 6 full calendar 
months, and to divide this sum by the total number of such trading days.
    (iii)(A) For trading in a security in a jurisdiction other than the 
United States, the method to be used to determine the dollar value of 
ADTV as of the preceding 6 full calendar months is to sum the value in 
U.S. dollars of all reported transactions in such security in such 
jurisdiction for each trading day during the preceding 6 full calendar 
months, and to divide this sum by the total number of trading days in 
such jurisdiction during the preceding 6 full calendar months.
    (B) If the value of reported transactions used in calculating the 
ADTV of securities under paragraph (b)(1)(iii)(A) is reported in a 
currency other than U.S. dollars, the total value of each day's 
transactions in such currency shall be converted into U.S. dollars on 
the basis of a spot rate of exchange for that day obtained from at least 
one independent entity that provides or disseminates foreign exchange 
quotations in the ordinary course of its business.
    (iv) The dollar value of ADTV of the lowest weighted 25% of an index 
is the sum of the dollar value of ADTV of each of the component 
securities comprising the lowest weighted 25% of such index.

[[Page 39]]

    (2) For purposes of Section 3(a)(55)(C)(i)(III)(cc) of the Act (15 
U.S.C. 78c(a)(55)(C)(i)(III)(cc)):
    (i) On a particular day, a security shall be 1 of 675 securities 
with the largest dollar value of ADTV as of the preceding 6 full 
calendar months when it is included on a list of such securities 
designated by the Commission and the CFTC as applicable for that day.
    (ii) In the event that the Commission and the CFTC have not 
designated a list under paragraph (b)(2) of this section:
    (A) The method to be used to determine the dollar value of ADTV of a 
security as of the preceding 6 full calendar months is to sum the value 
of all reported transactions in such security in the United States for 
each U.S. trading day during the preceding 6 full calendar months, and 
to divide this sum by the total number of such trading days.
    (B) The 675 securities with the largest dollar value of ADTV shall 
be identified from the universe of all NMS securities as defined in 
Sec.  242.600 of this chapter that are common stock or depositary 
shares.
    (c) Depositary Shares and Section 12 Registration. For purposes of 
Section 3(a)(55)(C) of the Act (15 U.S.C. 78c(a)(55)(C)), the 
requirement that each component security of an index be registered 
pursuant to Section 12 of the Act (15 U.S.C. 78l) shall be satisfied 
with respect to any security that is a depositary share if the deposited 
securities underlying the depositary share are registered pursuant to 
Section 12 of the Act and the depositary share is registered under the 
Securities Act of 1933 (15 U.S.C. 77a et seq.) on Form F-6 (17 CFR 
239.36).
    (d) Definitions. For purposes of this section:
    (1) CFTC means Commodity Futures Trading Commission.
    (2) Closing price of a security means:
    (i) If reported transactions in the security have taken place in the 
United States, the price at which the last transaction in such security 
took place in the regular trading session of the principal market for 
the security in the United States.
    (ii) If no reported transactions in a security have taken place in 
the United States, the closing price of such security shall be the 
closing price of any depositary share representing such security divided 
by the number of shares represented by such depositary share.
    (iii) If no reported transactions in a security or in a depositary 
share representing such security have taken place in the United States, 
the closing price of such security shall be the price at which the last 
transaction in such security took place in the regular trading session 
of the principal market for the security. If such price is reported in a 
currency other than U.S. dollars, such price shall be converted into 
U.S. dollars on the basis of a spot rate of exchange relevant for the 
time of the transaction obtained from at least one independent entity 
that provides or disseminates foreign exchange quotations in the 
ordinary course of its business.
    (3) Depositary share has the same meaning as in Sec.  240.12b-2.
    (4) Foreign financial regulatory authority has the same meaning as 
in Section 3(a)(52) of the Act (15 U.S.C. 78c(a)(52)).
    (5) Lowest weighted 25% of an index. With respect to any particular 
day, the lowest weighted component securities comprising, in the 
aggregate, 25% of an index's weighting for purposes of Section 
3(a)(55)(B)(iv) of the Act (15 U.S.C. 78c(a)(55)(B)(iv)) (``lowest 
weighted 25% of an index'') means those securities:
    (i) That are the lowest weighted securities when all the securities 
in such index are ranked from lowest to highest based on the index's 
weighting methodology; and
    (ii) For which the sum of the weight of such securities is equal to, 
or less than, 25% of the index's total weighting.
    (6) Market capitalization of a security on a particular day:
    (i) If the security is not a depositary share, is the product of:
    (A) The closing price of such security on that same day; and
    (B) The number of outstanding shares of such security on that same 
day.
    (ii) If the security is a depositary share, is the product of:
    (A) The closing price of the depositary share on that same day 
divided by the number of deposited securities represented by such 
depositary share; and

[[Page 40]]

    (B) The number of outstanding shares of the security represented by 
the depositary share on that same day.
    (7) Outstanding shares of a security means the number of outstanding 
shares of such security as reported on the most recent Form 10-K, Form 
10-Q, Form 10-KSB, Form 10-QSB, or Form 20-F (17 CFR 249.310, 249.308a, 
249.310b, 249.308b, or 249.220f) filed with the Commission by the issuer 
of such security, including any change to such number of outstanding 
shares subsequently reported by the issuer on a Form 8-K (17 CFR 
249.308).
    (8) Preceding 6 full calendar months means, with respect to a 
particular day, the period of time beginning on the same day of the 
month 6 months before and ending on the day prior to such day.
    (9) Principal market for a security means the single securities 
market with the largest reported trading volume for the security during 
the preceding 6 full calendar months.
    (10) Reported transaction means:
    (i) With respect to securities transactions in the United States, 
any transaction for which a transaction report is collected, processed, 
and made available pursuant to an effective transaction reporting plan, 
or for which a transaction report, last sale data, or quotation 
information is disseminated through an automated quotation system as 
described in Section 3(a)(51)(A)(ii) of the Act (15 U.S.C. 
78c(a)(51)(A)(ii); and
    (ii) With respect to securities transactions outside the United 
States, any transaction that has been reported to a foreign financial 
regulatory authority in the jurisdiction where such transaction has 
taken place.
    (11) U.S. trading day means any day on which a national securities 
exchange is open for trading.
    (12) Weighting of a component security of an index means the 
percentage of such index's value represented, or accounted for, by such 
component security.

[66 FR 44514, Aug. 23, 2001, as amended at 70 FR 43750, July 29, 2005]



Sec.  240.3a55-2  Indexes underlying futures contracts trading for 
fewer than 30 days.

    (a) An index on which a contract of sale for future delivery is 
trading on a designated contract market, registered derivatives 
transaction execution facility, or foreign board of trade is not a 
narrow-based security index under Section 3(a)(55) of the Act (15 U.S.C. 
78c(a)(55)) for the first 30 days of trading, if:
    (1) Such index would not have been a narrow-based security index on 
each trading day of the preceding 6 full calendar months with respect to 
a date no earlier than 30 days prior to the commencement of trading of 
such contract;
    (2) On each trading day of the preceding 6 full calendar months with 
respect to a date no earlier than 30 days prior to the commencement of 
trading such contract:
    (i) Such index had more than 9 component securities;
    (ii) No component security in such index comprised more than 30 
percent of the index's weighting;
    (iii) The 5 highest weighted component securities in such index did 
not comprise, in the aggregate, more than 60 percent of the index's 
weighting; and
    (iv) The dollar value of the trading volume of the lowest weighted 
25% of such index was not less than $50 million (or in the case of an 
index with 15 or more component securities, $30 million); or
    (3) On each trading day of the preceding 6 full calendar months, 
with respect to a date no earlier than 30 days prior to the commencement 
of trading such contract:
    (i) Such index had at least 9 component securities;
    (ii) No component security in such index comprised more than 30 
percent of the index's weighting; and
    (iii) Each component security in such index was:
    (A) Registered pursuant to Section 12 of the Act (15 U.S.C. 78) or 
was a depositary share representing a security registered pursuant to 
Section 12 of the Act;
    (B) 1 of 750 securities with the largest market capitalization that 
day; and

[[Page 41]]

    (C) 1 of 675 securities with the largest dollar value of trading 
volume that day.
    (b) An index that is not a narrow-based security index for the first 
30 days of trading pursuant to paragraph (a) of this section, shall 
become a narrow-based security index if such index has been a narrow-
based security index for more than 45 business days over 3 consecutive 
calendar months.
    (c) An index that becomes a narrow-based security index solely 
because it was a narrow-based security index for more than 45 business 
days over 3 consecutive calendar months pursuant to paragraph (b) of 
this section shall not be a narrow-based security index for the 
following 3 calendar months.
    (d) Definitions. For purposes of this section:
    (1) Market capitalization has the same meaning as in Sec.  240.3a55-
1(d)(6).
    (2) Dollar value of trading volume of a security on a particular day 
is the value in U.S. dollars of all reported transactions in such 
security on that day. If the value of reported transactions used in 
calculating dollar value of trading volume is reported in a currency 
other than U.S. dollars, the total value of each day's transactions 
shall be converted into U.S. dollars on the basis of a spot rate of 
exchange for that day obtained from at least one independent entity that 
provides or disseminates foreign exchange quotations in the ordinary 
course of its business.
    (3) Lowest weighted 25% of an index has the same meaning as in Sec.  
240.3a55-1(d)(5).
    (4) Preceding 6 full calendar months has the same meaning as in 
Sec.  240.3a55-1(d)(8).
    (5) Reported transaction has the same meaning as in Sec.  240.3a55-
1(d)(10).

[66 FR 44514, Aug. 23, 2001]



Sec.  240.3a55-3  Futures contracts on security indexes trading on or
subject to the rules of a foreign board of trade.

    When a contract of sale for future delivery on a security index is 
traded on or subject to the rules of a foreign board of trade, such 
index shall not be a narrow-based security index if it would not be a 
narrow-based security index if a futures contract on such index were 
traded on a designated contract market or registered derivatives 
transaction execution facility.

[66 FR 44514, Aug. 23, 2001]



Sec.  240.3a55-4  Exclusion from definition of narrow-based security
index for indexes composed of debt securities.

    (a) An index is not a narrow-based security index if:
    (1)(i) Each of the securities of an issuer included in the index is 
a security, as defined in section 2(a)(1) of the Securities Act of 
1933(15 U.S.C. 77b(a)(1)) and section 3(a)(10) of the Act (15 U.S.C. 
78c(a)(10)) and the respective rules promulgated thereunder, that is a 
note, bond, debenture, or evidence of indebtedness;
    (ii) None of the securities of an issuer included in the index is an 
equity security, as defined in section 3(a)(11) of the Act (15 U.S.C. 
78c(a)(11)) and the rules promulgated thereunder;
    (iii) The index is comprised of more than nine securities that are 
issued by more than nine non-affiliated issuers;
    (iv) The securities of any issuer included in the index do not 
comprise more than 30 percent of the index's weighting;
    (v) The securities of any five non-affiliated issuers included in 
the index do not comprise more than 60 percent of the index's weighting;
    (vi) Except as provided in paragraph (a)(1)(viii) of this section, 
for each security of an issuer included in the index one of the 
following criteria is satisfied:
    (A) The issuer of the security is required to file reports pursuant 
to section 13 or section 15(d) of the Act (15 U.S.C. 78m and 78o(d));
    (B) The issuer of the security has a [Worldwide market value of its 
outstanding common equity held by non-affiliates of $71 million or more;
    (C) The issuer of the security has outstanding securities that are 
notes, bonds, debentures, or evidences of indebtedness having a total 
remaining principal amount of at least $1 billion;
    (D) The security is an exempted security as defined in section 
3(a)(12) of the Act (15 U.S.C. 78c(a)(12)) and the rules promulgated 
thereunder; or

[[Page 42]]

    (E) The issuer of the security is a government of a foreign country 
or a political subdivision of a foreign country;
    (vii) Except as provided in paragraph (a)(1)(viii) of this section, 
for each security of an issuer included in the index one of the 
following criteria is satisfied
    (A) The security has a total remaining principal amount of at least 
$250,000,000; or
    (B) The security is a municipal security, as defined in section 
3(a)(29) of the Act (15 U.S.C. 78c(a)(29)) and the rules promulgated 
thereunder that has a total remaining principal amount of at least 
$200,000,000 and the issuer of such municipal security has outstanding 
securities that are notes, bonds, debentures, or evidences of 
indebtedness having a total remaining principal amount of at least $1 
billion; and
    (viii) Paragraphs (a)(1)(vi) and (a)(1)(vii) of this section will 
not apply to securities of an issuer included in the index if:
    (A) All securities of such issuer included in the index represent 
less than 5 percent of the index's weighting; and
    (B) Securities comprising at least 80 percent of the index's 
weighting satisfy the provisions of paragraphs (a)(1)(vi) and 
(a)(1)(vii) of this section; or
    (2)(i) The index includes exempted securities, other than municipal 
securities, as defined in section 3(a)(29) of the Act and the rules 
promulgated thereunder, that are:
    (A) Notes, bonds, debentures, or evidences of indebtedness; and
    (B) Not equity securities, as defined in section 3(a)(11) of the Act 
(15 U.S.C. 78c(a)(11)) and the rules promulgated thereunder; and
    (ii) Without taking into account any portion of the index composed 
of such exempted securities, other than municipal securities, the 
remaining portion of the index would not be a narrow-based security 
index: meeting all the conditions under paragraph (a)(1) of this 
section.
    (b) For purposes of this section:
    (1) An issuer is affiliated with another issuer if it controls, is 
controlled by, or is under common control with, that issuer.
    (2) For purposes of this section, control means ownership of 20 
percent or more of an issuer's equity, or the ability to direct the 
voting of 20 percent or more of the issuer's voting equity.
    (3) The term issuer includes a single issuer or group of affiliated 
issuers.

[71 FR 39542, July 13, 2006]

         Security-Based Swap Dealer and Participant Definitions

    Source: 77 FR 30751, May 23, 2012, unless otherwise noted.



Sec.  240.3a67-1  Definition of ``major security-based swap participant.''

    (a) General. Major security-based swap participant means any person:
    (1) That is not a security-based swap dealer; and
    (2)(i) That maintains a substantial position in security-based swaps 
for any of the major security-based swap categories, excluding both 
positions held for hedging or mitigating commercial risk, and positions 
maintained by any employee benefit plan (or any contract held by such a 
plan) as defined in paragraphs (3) and (32) of section 3 of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1002) for the primary 
purpose of hedging or mitigating any risk directly associated with the 
operation of the plan;
    (ii) Whose outstanding security-based swaps create substantial 
counterparty exposure that could have serious adverse effects on the 
financial stability of the United States banking system or financial 
markets; or
    (iii) That is a financial entity that:
    (A) Is highly leveraged relative to the amount of capital such 
entity holds and that is not subject to capital requirements established 
by an appropriate Federal banking agency (as defined in 15 U.S.C. 
78c(a)(72)); and
    (B) Maintains a substantial position in outstanding security-based 
swaps in any major security-based swap category.
    (b) Scope of designation. A person that is a major security-based 
swap participant in general shall be deemed to be a major security-based 
swap participant with respect to each security-based swap it enters 
into, regardless of the category of the security-based swap or

[[Page 43]]

the person's activities in connection with the security-based swap, 
unless the Commission limits the person's designation as a major 
security-based swap participant to specified categories of security-
based swaps.



Sec.  240.3a67-2  Categories of security-based swaps.

    For purposes of section 3(a)(67) of the Act, 15 U.S.C. 78c(a)(67), 
and the rules thereunder, the terms major security-based swap category, 
category of security-based swaps and any similar terms mean either of 
the following categories of security-based swaps:
    (a) Debt security-based swaps. Any security-based swap that is 
based, in whole or in part, on one or more instruments of indebtedness 
(including loans), or on a credit event relating to one or more issuers 
or securities, including but not limited to any security-based swap that 
is a credit default swap, total return swap on one or more debt 
instruments, debt swap, debt index swap, or credit spread.
    (b) Other security-based swaps. Any security-based swap not 
described in paragraph (a) of this section.



Sec.  240.3a67-3  Definition of ``substantial position.''

    (a) General. For purposes of section 3(a)(67) of the Act, 15 U.S.C. 
78c(a)(67), and Sec.  240.3a67-1, the term substantial position means 
security-based swap positions that equal or exceed either of the 
following thresholds in any major category of security-based swaps:
    (1) $1 billion in daily average aggregate uncollateralized outward 
exposure; or
    (2) $2 billion in:
    (i) Daily average aggregate uncollateralized outward exposure; plus
    (ii) Daily average aggregate potential outward exposure.
    (b) Aggregate uncollateralized outward exposure--(1) General. 
Aggregate uncollateralized outward exposure in general means the sum of 
the current exposure, obtained by marking-to-market using industry 
standard practices, of each of the person's security-based swap 
positions with negative value in a major security-based swap category, 
less the value of the collateral the person has posted in connection 
with those positions.
    (2) Calculation of aggregate uncollateralized outward exposure. In 
calculating this amount the person shall, with respect to each of its 
security-based swap counterparties in a given major security-based swap 
category:
    (i) Determine the dollar value of the aggregate current exposure 
arising from each of its security-based swap positions with negative 
value (subject to the netting provisions described below) in that major 
category by marking-to-market using industry standard practices; and
    (ii) Deduct from that dollar amount the aggregate value of the 
collateral the person has posted with respect to the security-based swap 
positions.
    (iii) The aggregate uncollateralized outward exposure shall be the 
sum of those uncollateralized amounts across all of the person's 
security-based swap counterparties in the applicable major category.
    (3) Relevance of netting agreements. (i) If a person has one or more 
master netting agreements with a counterparty, the person may measure 
the current exposure arising from its security-based swaps in any major 
category on a net basis, applying the terms of those agreements. 
Calculation of current exposure may take into account offsetting 
positions entered into with that particular counterparty involving 
security-based swaps (in any security-based swap category) as well as 
swaps and securities financing transactions (consisting of securities 
lending and borrowing, securities margin lending and repurchase and 
reverse repurchase agreements), and other financial instruments that are 
subject to netting offsets for purposes of applicable bankruptcy law, to 
the extent these are consistent with the offsets permitted by the master 
netting agreements.
    (ii) Such adjustments may not take into account any offset 
associated with positions that the person has with separate 
counterparties.
    (4) Allocation of uncollateralized outward exposure. If a person 
calculates current exposure with a particular

[[Page 44]]

counterparty on a net basis, as provided by paragraph (b)(3) of this 
section, the amount of current uncollateralized exposure attributable to 
each ``major'' category of security-based swaps should be calculated 
according to the following formula:
[GRAPHIC] [TIFF OMITTED] TR23MY12.001

    Note to paragraph (b)(4). Where: ESBS(MC) equals the 
amount of aggregate current exposure attributable to the entity's 
security-based swap positions in the ``major'' category at issue (either 
security-based credit derivatives or other security-based swaps); 
Enet total equals the entity's aggregate current exposure to 
the counterparty at issue, after accounting for the netting of positions 
and the posting of collateral; OTMSBS(MC) equals the current 
exposure associated with the entity's out-of-the-money positions in 
security-based swaps in the ``major'' category at issue, subject to 
those netting arrangements; and OTMSBS(O) equals the current 
exposure associated with the entity's out-of-the-money positions in the 
other ``major'' category of security-based swaps, subject to those 
netting arrangements; and OTMnon-SBS equals the current 
exposure associated with the entity's out-of-the-money positions 
associated with instruments, other than security-based swaps, that are 
subject to those netting arrangements.

    (c) Aggregate potential outward exposure--(1) General. Aggregate 
potential outward exposure means the sum of:
    (i) The aggregate potential outward exposure for each of the 
person's security-based swap positions in a major security-based swap 
category that are neither cleared by a registered or exempt clearing 
agency nor subject to daily mark-to-market margining, as calculated in 
accordance with paragraph (c)(2) of this section; and
    (ii) The aggregate potential outward exposure for each of the 
person's security-based swap positions in a major security-based swap 
category that are either cleared by a registered or exempt clearing 
agency or subject to daily mark-to-market margining, as calculated in 
accordance with paragraph (c)(3) of this section.
    (2) Calculation of potential outward exposure for security-based 
swaps that are not cleared by a registered or exempt clearing agency or 
subject to daily mark-to-market margining--(i) General--(A)(1) For 
positions in security-based swaps that are not cleared by a registered 
or exempt clearing agency or subject to daily mark-to-market margining, 
potential outward exposure equals the total notional principal amount of 
those positions, multiplied by the following factors on a position-by-
position basis reflecting the type of security-based swap. For any 
security-based swap that is not of the ``debt'' type, the ``equity and 
other'' conversion factors are to be used:

------------------------------------------------------------------------
                                                                  Equity
                   Residual maturity                      Debt     and
                                                                  other
------------------------------------------------------------------------
One year or less......................................     0.10     0.06
Over one to five years................................     0.10     0.08
Over five years.......................................     0.10     0.10
------------------------------------------------------------------------

    (2) If a security-based swap is structured such that on specified 
dates any outstanding exposure is settled and the terms are reset so 
that the market value of the security-based swap is zero, the remaining 
maturity equals the time until the next reset date.
    (B) Use of effective notional amounts. If the stated notional amount 
on a position is leveraged or enhanced by the structure of the position, 
the calculation in paragraph (c)(2)(i)(A) of this section shall be based 
on the effective notional amount of the position rather than on the 
stated notional amount.
    (C) Exclusion of certain positions. The calculation in paragraph 
(c)(2)(i)(A) of this section shall exclude:
    (1) Positions that constitute the purchase of an option, such that 
the person has no additional payment obligations under the position;
    (2) Other positions for which the person has prepaid or otherwise 
satisfied all of its payment obligations; and
    (3) Positions for which, pursuant to regulatory requirement, the 
person has assigned an amount of cash or U.S.

[[Page 45]]

Treasury securities that is sufficient to pay the person's maximum 
possible liability under the position, and the person may not use that 
cash or those Treasury securities for other purposes.
    (D) Adjustment for certain positions. Notwithstanding paragraph 
(c)(2)(i)(A) of this section, the potential outward exposure associated 
with a position by which a person buys credit protection using a credit 
default swap, or associated with a position by which a person purchases 
an option for which the person retains additional payment obligations 
under the position, is capped at the net present value of the unpaid 
premiums.
    (ii) Adjustment for netting agreements. Notwithstanding paragraph 
(c)(2)(i) of this section, for positions subject to master netting 
agreements the potential outward exposure associated with the person's 
security-based swaps with each counterparty equals a weighted average of 
the potential outward exposure for the person's security-based swaps 
with that counterparty as calculated under paragraph (c)(2)(i) of this 
section, and that amount reduced by the ratio of net current exposure to 
gross current exposure, consistent with the following equation as 
calculated on a counterparty-by-counterparty basis:

PNet = 0.4 x PGross + 0.6 x NGR x PGross

    Note to paragraph (c)(2)(ii): Where: PNet is the potential outward 
exposure, adjusted for bilateral netting, of the person's security-based 
swaps with a particular counterparty; PGross is the potential outward 
exposure without adjustment for bilateral netting, as calculated 
pursuant to paragraph (c)(2)(i) of this section; and NGR is the ratio 
of:
    1. The current exposure arising from its security-based swaps in the 
major category as calculated on a net basis according to paragraphs 
(b)(3) and (4) of this section, divided by
    2. The current exposure arising from its security-based swaps in the 
major category as calculated in the absence of those netting procedures.

    (3) Calculation of potential outward exposure for security-based 
swaps that are either cleared by a registered or exempt clearing agency 
or subject to daily mark-to-market margining. For positions in security-
based swaps that are cleared by a registered or exempt clearing agency 
or subject to daily mark-to-market margining:
    (i) Potential outward exposure equals the potential outward exposure 
that would be attributed to such positions using the procedures in 
paragraph (c)(2) of this section, multiplied by:
    (A) 0.1, in the case of positions cleared by a registered or exempt 
clearing agency; or
    (B) 0.2, in the case of positions that are subject to daily mark-to-
market margining but that are not cleared by a registered or exempt 
clearing agency.
    (ii) Solely for purposes of calculating potential outward exposure:
    (A) A security-based swap shall be considered to be subject to daily 
mark-to-market margining if, and for as long as, the counterparties 
follow the daily practice of exchanging collateral to reflect changes in 
the current exposure arising from the security-based swap (after taking 
into account any other financial positions addressed by a netting 
agreement between the counterparties).
    (B) If the person is permitted by agreement to maintain a threshold 
for which it is not required to post collateral, the position still will 
be considered to be subject to daily mark-to-market margining for 
purposes of calculating potential outward exposure, but the total amount 
of that threshold (regardless of the actual exposure at any time) less 
any initial margin posted up to the amount of that threshold, shall be 
added to the person's aggregate uncollateralized outward exposure for 
purposes of paragraph (a)(2) of this section.
    (C) If the minimum transfer amount under the agreement is in excess 
of $1 million, the position still will be considered to be subject to 
daily mark-to-market margining for purposes of calculating potential 
outward exposure, but the entirety of the minimum transfer amount shall 
be added to the person's aggregate uncollateralized outward exposure for 
purposes of paragraph (a)(2) of this section.
    (D) A person may, at its discretion, calculate the potential outward 
exposure of positions in security-based swaps that are subject to daily 
mark-to-market margining in accordance with paragraph (c)(2) of this 
section in

[[Page 46]]

lieu of calculating the potential outward exposure of such positions in 
accordance with this paragraph (c)(3).
    (d) Calculation of daily average. Measures of daily average 
aggregate uncollateralized outward exposure and daily average aggregate 
potential outward exposure shall equal the arithmetic mean of the 
applicable measure of exposure at the close of each business day, 
beginning the first business day of each calendar quarter and continuing 
through the last business day of that quarter.
    (e) Inter-affiliate activities. In calculating its aggregate 
uncollateralized outward exposure and its aggregate potential outward 
exposure, a person shall not consider its security-based swap positions 
with counterparties that are majority-owned affiliates. For these 
purposes the parties are majority-owned affiliates if one party directly 
or indirectly owns a majority interest in the other, or if a third party 
directly or indirectly owns a majority interest in both counterparties 
to the security-based swap, where ``majority interest'' is the right to 
vote or direct the vote of a majority of a class of voting securities of 
an entity, the power to sell or direct the sale of a majority of a class 
of voting securities of an entity, or the right to receive upon 
dissolution or the contribution of a majority of the capital of a 
partnership.



Sec.  240.3a67-4  Definition of ``hedging or mitigating commercial risk.''

    For purposes of section 3(a)(67) of the Act, 15 U.S.C. 78c(a)(67), 
and Sec.  240.3a67-1, a security-based swap position shall be deemed to 
be held for the purpose of hedging or mitigating commercial risk when:
    (a)(1) Such position is economically appropriate to the reduction of 
risks that are associated with the present conduct and management of a 
commercial enterprise (or of a majority owned affiliate of the 
enterprise), or are reasonably expected to arise in the future conduct 
and management of the commercial enterprise, where such risks arise 
from:
    (i) The potential change in the value of assets that a person owns, 
produces, manufactures, processes, or merchandises or reasonably 
anticipates owning, producing, manufacturing, processing, or 
merchandising in the ordinary course of business of the enterprise (or 
of an affiliate under common control with the enterprise);
    (ii) The potential change in the value of liabilities that a person 
has incurred or reasonably anticipates incurring in the ordinary course 
of business of the enterprise (or of an affiliate under common control 
with the enterprise); or
    (iii) The potential change in the value of services that a person 
provides, purchases, or reasonably anticipates providing or purchasing 
in the ordinary course of business of the enterprise (or of an affiliate 
under common control with the enterprise);
    (2) Depending on the applicable facts and circumstances, the 
security-based swap positions described in paragraph (a)(1) of this 
section may be expected to encompass, among other positions:
    (i) Positions established to manage the risk posed by a customer's, 
supplier's or counterparty's potential default in connection with: 
Financing provided to a customer in connection with the sale of real 
property or a good, product or service; a customer's lease of real 
property or a good, product or service; a customer's agreement to 
purchase real property or a good, product or service in the future; or a 
supplier's commitment to provide or sell a good, product or service in 
the future;
    (ii) Positions established to manage the default risk posed by a 
financial counterparty (different from the counterparty to the hedging 
position at issue) in connection with a separate transaction (including 
a position involving a credit derivative, equity swap, other security-
based swap, interest rate swap, commodity swap, foreign exchange swap or 
other swap, option, or future that itself is for the purpose of hedging 
or mitigating commercial risk pursuant to this section or 17 CFR 
1.3(kkk));
    (iii) Positions established to manage equity or market risk 
associated with certain employee compensation plans, including the risk 
associated with market price variations in connection with stock-based 
compensation plans, such

[[Page 47]]

as deferred compensation plans and stock appreciation rights;
    (iv) Positions established to manage equity market price risks 
connected with certain business combinations, such as a corporate merger 
or consolidation or similar plan or acquisition in which securities of a 
person are exchanged for securities of any other person (unless the sole 
purpose of the transaction is to change an issuer's domicile solely 
within the United States), or a transfer of assets of a person to 
another person in consideration of the issuance of securities of such 
other person or any of its affiliates;
    (v) Positions established by a bank to manage counterparty risks in 
connection with loans the bank has made; and
    (vi) Positions to close out or reduce any of the positions described 
in paragraphs (a)(2)(i) through (a)(2)(v) of this section; and
    (b) Such position is:
    (1) Not held for a purpose that is in the nature of speculation or 
trading; and
    (2) Not held to hedge or mitigate the risk of another security-based 
swap position or swap position, unless that other position itself is 
held for the purpose of hedging or mitigating commercial risk as defined 
by this section or 17 CFR 1.3(kkk).



Sec.  240.3a67-5  Definition of ``substantial counterparty exposure.''

    (a) General. For purposes of section 3(a)(67) of the Act, 15 U.S.C. 
78c(a)(67), and Sec.  240.3a67-1, the term substantial counterparty 
exposure that could have serious adverse effects on the financial 
stability of the United States banking system or financial markets means 
a security-based swap position that satisfies either of the following 
thresholds:
    (1) $2 billion in daily average aggregate uncollateralized outward 
exposure; or
    (2) $4 billion in:
    (i) Daily average aggregate uncollateralized outward exposure; plus
    (ii) Daily average aggregate potential outward exposure.
    (b) Calculation. For these purposes, daily average aggregate 
uncollateralized outward exposure and daily average aggregate potential 
outward exposure shall be calculated the same way as is prescribed in 
Sec.  240.3a67-3, except that these amounts shall be calculated by 
reference to all of the person's security-based swap positions, rather 
than by reference to a specific major security-based swap category.



Sec.  240.3a67-6  Definition of ``financial entity.''

    (a) General. For purposes of section 3(a)(67) of the Act, 15 U.S.C. 
78c(a)(67), and Sec.  240.3a67-1, the term financial entity means:
    (1) A swap dealer;
    (2) A major swap participant;
    (3) A commodity pool as defined in section 1a(10) of the Commodity 
Exchange Act (7 U.S.C. 1a(10));
    (4) A private fund as defined in section 202(a) of the Investment 
Advisers Act of 1940 (15 U.S.C. 80b-2(a));
    (5) An employee benefit plan as defined in paragraphs (3) and (32) 
of section 3 of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1002); and
    (6) A person predominantly engaged in activities that are in the 
business of banking or financial in nature, as defined in section 4(k) 
of the Bank Holding Company Act of 1956 (12 U.S.C. 1843k).
    (b) Exclusion for centralized hedging facilities--(1) General. 
Notwithstanding paragraph (a) of this section, for purposes of this 
section the term financial entity shall not encompass a person that 
would be a financial entity solely as a result of the person's 
activities that facilitate hedging and/or treasury functions on behalf 
of one or more majority-owned affiliates that themselves do not 
constitute a financial entity.
    (2) Meaning of majority-owned. For these purposes the counterparties 
to a security-based swap are majority-owned affiliates if one 
counterparty directly or indirectly owns a majority interest in the 
other, or if a third party directly or indirectly owns a majority 
interest in both counterparties to the security-based swap, where 
``majority interest'' includes, but is not limited to, the right to vote 
or direct the vote of a majority of a class of voting securities of an 
entity, the power to sell or direct the sale of a majority of a class of 
voting securities of an entity, or the

[[Page 48]]

right to receive upon dissolution or the contribution of a majority of 
the capital of a partnership.



Sec.  240.3a67-7  Definition of ``highly leveraged.''

    (a) General. For purposes of section 3(a)(67) of the Act, 15 U.S.C. 
78c(a)(67), and Sec.  240.3a67-1, the term highly leveraged means the 
existence of a ratio of an entity's total liabilities to equity in 
excess of 12 to 1 as measured at the close of business on the last 
business day of the applicable fiscal quarter.
    (b) Measurement of liabilities and equity. For purposes of this 
section, liabilities and equity generally should each be determined in 
accordance with U.S. generally accepted accounting principles; provided, 
however, that a person that is an employee benefit plan, as defined in 
paragraphs (3) and (32) of section 3 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1002), may, for purposes of this 
paragraph (b):
    (1) Exclude obligations to pay benefits to plan participants from 
the calculation of liabilities; and
    (2) Substitute the total value of plan assets for equity.



Sec.  240.3a67-8  Timing requirements, reevaluation period, and 
termination of status.

    (a) Timing requirements. A person that is not registered as a major 
security-based swap participant, but that meets the criteria in Sec.  
240.3a67-1 to be a major security-based swap participant as a result of 
its security-based swap activities in a fiscal quarter, will not be 
deemed to be a major security-based swap participant until the earlier 
of the date on which it submits a complete application for registration 
pursuant to section 15F of the Act (15 U.S.C. 78o-10) or two months 
after the end of that quarter.
    (b) Reevaluation period. Notwithstanding paragraph (a) of this 
section, if a person that is not registered as a major security-based 
swap participant meets the criteria in Sec.  240.3a67-1 to be a major 
security-based swap participant in a fiscal quarter, but does not exceed 
any applicable threshold by more than twenty percent in that quarter:
    (1) That person will not immediately be deemed a major security-
based swap participant pursuant to the timing requirements specified in 
paragraph (a) of this section; but
    (2) That person will be deemed a major security-based swap 
participant pursuant to the timing requirements specified in paragraph 
(a) of this section at the end of the next fiscal quarter if the person 
exceeds any of the applicable daily average thresholds in that next 
fiscal quarter.
    (c) Termination of status. A person that is deemed to be a major 
security-based swap participant shall continue to be deemed a major 
security-based swap participant until such time that its security-based 
swap activities do not exceed any of the daily average thresholds set 
forth within Sec.  240.3a67-1 for four consecutive fiscal quarters after 
the date on which the person becomes registered as a major security-
based swap participant.



Sec.  240.3a67-9  Calculation of major participant status by certain
persons.

    A person shall not be deemed to be a major security-based swap 
participant, regardless of whether the criteria in Sec.  240.3a67-1 
otherwise would cause the person to be a major security-based swap 
participant, provided the person meets the conditions set forth in 
paragraph (a) of this section.
    (a) Conditions--(1) Caps on uncollateralized exposure and notional 
positions--(i) Maximum potential uncollateralized exposure. The express 
terms of the person's agreements or arrangements relating to security-
based swaps with its counterparties at no time would permit the person 
to maintain a total uncollateralized exposure of more than $100 million 
to all such counterparties, including any exposure that may result from 
thresholds or minimum transfer amounts established by credit support 
annexes or similar arrangements; and
    (ii) Maximum notional amount of security-based swap positions. The 
person does not maintain security-based swap positions in an effective 
notional amount of more than $2 billion in any major category of 
security-based swaps, or more than $4 billion in aggregate; or

[[Page 49]]

    (2) Caps on uncollateralized exposure plus monthly calculation--(i) 
Maximum potential uncollateralized exposure. The express terms of the 
person's agreements or arrangements relating to security-based swaps 
with its counterparties at no time would permit the person to maintain a 
total uncollateralized exposure of more than $200 million to all such 
counterparties (with regard to security-based swaps and any other 
instruments by which the person may have exposure to those 
counterparties), including any exposure that may result from thresholds 
or minimum transfer amounts established by credit support annexes or 
similar arrangements; and
    (ii) Calculation of positions. (A) At the end of each month, the 
person performs the calculations prescribed by Sec. Sec.  240.3a67-3 and 
240.3a67-5 with regard to whether the aggregate uncollateralized outward 
exposure plus aggregate potential outward exposure as of that day 
constitute a substantial position in a major category of security-based 
swaps, or pose substantial counterparty exposure that could have serious 
adverse effects on the financial stability of the United States banking 
system or financial markets; these calculations shall disregard 
provisions of those rules that provide for the analyses to be determined 
based on a daily average over a calendar quarter; and
    (B) Each such analysis produces thresholds of no more than:
    (1) $1 billion in aggregate uncollateralized outward exposure plus 
aggregate potential outward exposure in any major category of security-
based swaps; if the person is subject to Sec.  240.3a67-3(a)(2)(iii), by 
virtue of being a highly leveraged financial entity that is not subject 
to capital requirements established by an appropriate Federal banking 
agency, this analysis shall account for all of the person's security-
based swap positions in that major category (without excluding hedging 
positions), otherwise this analysis shall exclude the same hedging and 
related positions that are excluded from consideration pursuant to Sec.  
240.3a67-3(a)(2)(i); or
    (2) $2 billion in aggregate uncollateralized outward exposure plus 
aggregate potential outward exposure (without any positions excluded 
from the analysis) with regard to all of the person's security-based 
swap positions.
    (3) Calculations based on certain information. (i) At the end of 
each month:
    (A)(1) The person's aggregate uncollateralized outward exposure with 
respect to its security-based swap positions is less than $500 million 
with respect to each of the major security-based swap categories; and
    (2) The sum of the amount calculated under paragraph (a)(3)(i)(A)(1) 
of this section with respect to each major security-based swap category 
and the total notional principal amount of the person's security-based 
swap positions in each such major security-based swap category, adjusted 
by the multipliers set forth in Sec.  240.3a67-3(c)(2)(i)(A) on a 
position-by-position basis reflecting the type of security-based swap, 
is less than $1 billion with respect to each of the major security-based 
swap categories; or
    (B)(1) The person's aggregate uncollateralized outward exposure with 
respect to its security-based swap positions across all major security-
based swap categories is less than $500 million; and
    (2) The sum of the amount calculated under paragraph (a)(3)(i)(B)(1) 
of this section and the product of the total effective notional 
principal amount of the person's security-based swap positions in all 
major security-based swap categories multiplied by 0.10 is less than $1 
billion.
    (ii) For purposes of the calculations set forth in paragraph 
(a)(3)(i) of this section:
    (A) The person's aggregate uncollateralized outward exposure for 
positions held with security-based swap dealers shall be equal to such 
exposure reported on the most recent reports of such exposure received 
from such security-based swap dealers; and
    (B) The person's aggregate uncollateralized outward exposure for 
positions that are not reflected in any report of exposure from a 
security-based swap dealer (including all security-based swap positions 
it holds with persons other than security-based swap dealers) shall be 
calculated in accordance with Sec.  240.3a67-3(b)(2).

[[Page 50]]

    (b) For purposes of the calculations set forth by this section, the 
person shall use the effective notional amount of a position rather than 
the stated notional amount of the position if the stated notional amount 
is leveraged or enhanced by the structure of the position.
    (c) No presumption shall arise that a person is required to perform 
the calculations needed to determine if it is a major security-based 
swap participant, solely by reason that the person does not meet the 
conditions specified in paragraph (a) of this section.



Sec.  240.3a67-10  Foreign major security-based swap participants.

    (a) Definitions. As used in this section, the following terms shall 
have the meanings indicated:
    (1) Conduit affiliate has the meaning set forth in Sec.  240.3a71-
3(a)(1).
    (2) Foreign branch has the meaning set forth in Sec.  240.3a71-
3(a)(2).
    (3) Transaction conducted through a foreign branch has the meaning 
set forth in Sec.  240.3a71-3(a)(3).
    (4) U.S. person has the meaning set forth in Sec.  240.3a71-3(a)(4).
    (5) U.S. major security-based swap participant means a major 
security-based swap participant, as defined in section 3(a)(67) of the 
Act (15 U.S.C. 78c(a)(67)), and the rules and regulations thereunder, 
that is a U.S. person.
    (6) Foreign major security-based swap participant means a major 
security-based swap participant, as defined in section 3(a)(67) of the 
Act (15 U.S.C. 78c(a)(67)), and the rules and regulations thereunder, 
that is not a U.S. person.
    (b) Application of major security-based swap participant tests in 
the cross-border context. For purposes of calculating a person's status 
as a major security-based swap participant as defined in section 
3(a)(67) of the Act (15 U.S.C. 78c(a)(67)), and the rules and 
regulations thereunder, a person shall include the following security-
based swap positions:
    (1) If such person is a U.S. person, all security-based swap 
positions that are entered into by the person, including positions 
entered into through a foreign branch;
    (2) If such person is a conduit affiliate, all security-based swap 
positions that are entered into by the person; and
    (3) If such person is a non-U.S. person other than a conduit 
affiliate, all of the following types of security-based swap positions 
that are entered into by the person:
    (i) Security-based swap positions that are entered into with a U.S. 
person; provided, however, that this paragraph (b)(3)(i) shall not apply 
to:
    (A) Positions with a U.S. person counterparty that arise from 
transactions conducted through a foreign branch of the counterparty, 
when the counterparty is a registered security-based swap dealer; and
    (B) Positions with a U.S. person counterparty that arise from 
transactions conducted through a foreign branch of the counterparty, 
when the transaction is entered into prior to 60 days following the 
earliest date on which the registration of security-based swap dealers 
is first required pursuant to the applicable final rules and 
regulations; and
    (ii) Security-based swap positions for which the non-U.S. person's 
counterparty to the security-based swap has rights of recourse against a 
U.S. person; for these purposes a counterparty has rights of recourse 
against the U.S. person if the counterparty has a conditional or 
unconditional legally enforceable right, in whole or in part, to receive 
payments from, or otherwise collect from, the U.S. person in connection 
with the security-based swap.
    (c) Attributed positions--(1) In general. For purposes of 
calculating a person's status as a major security-based swap participant 
as defined in section 3(a)(67) of the Act (15 U.S.C. 78c(a)(67)), and 
the rules and regulations thereunder, a person also shall include the 
following security-based swap positions:
    (i) If such person is a U.S. person, any security-based swap 
position of a non-U.S. person for which the non-U.S. person's 
counterparty to the security-based swap has rights of recourse against 
that U.S. person.

    Note to paragraph (c)(1)(i). This paragraph describes attribution 
requirements for

[[Page 51]]

a U.S. person solely with respect to the guarantee of the obligations of 
a non-U.S. person under a security-based swap. The Commission and the 
Commodity Futures Trading Commission previously provided an 
interpretation about attribution to a U.S. parent, other affiliate, or 
guarantor to the extent that the counterparties to those positions have 
recourse against that parent, other affiliate, or guarantor in 
connection with the position. See Intermediary Definitions Adopting 
Release, http://www.gpo.gov/fdsys/pkg/FR-2012-08-13/pdf/2012-18003.pdf. 
The Commission explained that it intended to issue separate releases 
addressing the application of the major participant definition, and 
Title VII generally, to non-U.S. persons. See id. at note 1041.

    (ii) If such person is a non-U.S. person:
    (A) Any security-based swap position of a U.S. person for which that 
person's counterparty has rights of recourse against the non-U.S. 
person; and
    (B) Any security-based swap position of another non-U.S. person 
entered into with a U.S. person counterparty who has rights of recourse 
against the first non-U.S. person, provided, however, that this 
paragraph (c)(1)(ii)(B) shall not apply to positions described in Sec.  
240.3a67-10(b)(3)(i)(A) and (B).
    (2) Exceptions. Notwithstanding paragraph (c)(1) of this section, a 
person shall not include such security-based swap positions if the 
person whose performance is guaranteed in connection with the security-
based swap is:
    (i) Subject to capital regulation by the Commission or the Commodity 
Futures Trading Commission (including, but not limited to regulation as 
a swap dealer, major swap participant, security-based swap dealer, major 
security-based swap participant, futures commission merchant, broker, or 
dealer);
    (ii) Regulated as a bank in the United States;
    (iii) Subject to capital standards, adopted by the person's home 
country supervisor, that are consistent in all respects with the Capital 
Accord of the Basel Committee on Banking Supervision; or
    (iv) Deemed not to be a major security-based swap participant 
pursuant to Sec.  240.3a67-8(a).
    (d) Application of customer protection requirements. (1) A 
registered foreign major security-based swap participant shall not be 
subject to the requirements relating to business conduct standards 
described in section 15F(h) of the Act (15 U.S.C. 78o-10(h)), and the 
rules and regulations thereunder, other than rules and regulations 
prescribed by the Commission pursuant to section 15F(h)(1)(B) of the Act 
(15 U.S.C. 78o- 10(h)(1)(B)), with respect to a security-based swap 
transaction with a counterparty that is not a U.S. person or with a 
counterparty that is a U.S. person in a transaction conducted through a 
foreign branch of the U.S. person.
    (2) A registered U.S. major security-based swap participant shall 
not be subject to the requirements relating to business conduct 
standards described in section 15F(h) of the Act (15 U.S.C. 78o-10(h)), 
and the rules and regulations thereunder, other than rules and 
regulations prescribed by the Commission pursuant to section 
15F(h)(1)(B) of the Act (15 U.S.C. 78o-10(h)(1)(B)), with respect to a 
security-based swap transaction that constitutes a transaction conducted 
through a foreign branch of the registered U.S. major security-based 
swap participant with a non-U.S. person or with a U.S.-person 
counterparty that constitutes a transaction conducted through a foreign 
branch of that U.S.-person counterparty.

[79 FR 47369, Aug. 12, 2014, as amended at 81 FR 30142, May 13, 2016]

Further Definition of Swap, Security-Based Swap, and Security-Based Swap 
   Agreement; Mixed Swaps; Security-Based Swap Agreement Recordkeeping



Sec.  240.3a68-1a  Meaning of ``issuers of securities in a narrow-based
security index'' as used in section 3(a)(68)(A)(ii)(III) of the Act.

    (a) Notwithstanding Sec.  240.3a68-3(a), and solely for purposes of 
determining whether a credit default swap is a security-based swap under 
section 3(a)(68)(A)(ii)(III) of the Act (15 U.S.C. 
78c(a)(68)(A)(ii)(III)), the term issuers of securities in a narrow-
based security index as used in section 3(a)(68)(A)(ii)(III) of the Act 
means issuers of securities included in an index (including an index 
referencing

[[Page 52]]

loan borrowers or loans of such borrowers) in which:
    (1)(i) There are nine or fewer non-affiliated issuers of securities 
that are reference entities included in the index, provided that an 
issuer of securities shall not be deemed a reference entity included in 
the index for purposes of this section unless:
    (A) A credit event with respect to such reference entity would 
result in a payment by the credit protection seller to the credit 
protection buyer under the credit default swap based on the related 
notional amount allocated to such reference entity; or
    (B) The fact of such credit event or the calculation in accordance 
with paragraph (a)(1)(i)(A) of this section of the amount owed with 
respect to such credit event is taken into account in determining 
whether to make any future payments under the credit default swap with 
respect to any future credit events;
    (ii) The effective notional amount allocated to any reference entity 
included in the index comprises more than 30 percent of the index's 
weighting;
    (iii) The effective notional amount allocated to any five non-
affiliated reference entities included in the index comprises more than 
60 percent of the index's weighting; or
    (iv) Except as provided in paragraph (b) of this section, for each 
reference entity included in the index, none of the criteria in 
paragraphs (a)(1)(iv)(A) through (a)(1)(iv)(H) of this section is 
satisfied:
    (A) The reference entity included in the index is required to file 
reports pursuant to section 13 or section 15(d) of the Act (15 U.S.C. 
78m or 78o(d));
    (B) The reference entity included in the index is eligible to rely 
on the exemption provided in Sec.  240.12g3-2(b);
    (C) The reference entity included in the index has a worldwide 
market value of its outstanding common equity held by non-affiliates of 
$700 million or more;
    (D) The reference entity included in the index (other than a 
reference entity included in the index that is an issuing entity of an 
asset-backed security as defined in section 3(a)(79) of the Act (15 
U.S.C. 78c(a)(79))) has outstanding notes, bonds, debentures, loans, or 
evidences of indebtedness (other than revolving credit facilities) 
having a total remaining principal amount of at least $1 billion;
    (E) The reference entity included in the index is the issuer of an 
exempted security as defined in section 3(a)(12) of the Act (15 U.S.C. 
78c(a)(12)) (other than any municipal security as defined in section 
3(a)(29) of the Act (15 U.S.C. 78c(a)(29)));
    (F) The reference entity included in the index is a government of a 
foreign country or a political subdivision of a foreign country;
    (G) If the reference entity included in the index is an issuing 
entity of an asset-backed security as defined in section 3(a)(79) of the 
Act (15 U.S.C. 78c(a)(79)), such asset-backed security was issued in a 
transaction registered under the Securities Act of 1933 (15 U.S.C. 77a 
et seq.) and has publicly available distribution reports; and
    (H) For a credit default swap entered into solely between eligible 
contract participants as defined in section 3(a)(65) of the Act (15 
U.S.C. 78c(a)(65)):
    (1) The reference entity included in the index (other than a 
reference entity included in the index that is an issuing entity of an 
asset-backed security as defined in section 3(a)(79) of the Act (15 
U.S.C. 78c(a)(79))) makes available to the public or otherwise makes 
available to such eligible contract participant information about the 
reference entity included in the index pursuant to Sec.  230.144A(d)(4)) 
of this chapter;
    (2) Financial information about the reference entity included in the 
index (other than a reference entity included in the index that is an 
issuing entity of an asset-backed security as defined in section 
3(a)(79) of the Act (15 U.S.C. 78c(a)(79))) is otherwise publicly 
available; or
    (3) In the case of a reference entity included in the index that is 
an issuing entity of an asset-backed security as defined in section 
3(a)(79) of the Act (15 U.S.C. 78c(a)(79)), information of the type and 
level included in publicly available distribution reports for similar 
asset-backed securities is publicly

[[Page 53]]

available about both the reference entity included in the index and such 
asset-backed security; and
    (2)(i) The index is not composed solely of reference entities that 
are issuers of exempted securities as defined in section 3(a)(12) of the 
Act (15 U.S.C. 78c(a)(12)), as in effect on the date of enactment of the 
Futures Trading Act of 1982 (other than any municipal security as 
defined in section 3(a)(29) of the Act (15 U.S.C. 78c(a)(29))), as in 
effect on the date of enactment of the Futures Trading Act of 1982); and
    (ii) Without taking into account any portion of the index composed 
of reference entities that are issuers of exempted securities as defined 
in section 3(a)(12) of the Act (15 U.S.C. 78c(a)(12)), as in effect on 
the date of enactment of the Futures Trading Act of 1982 (other than any 
municipal security as defined in section 3(a)(29) of the Act (15 U.S.C. 
78c(a)(29))), the remaining portion of the index would be within the 
term ``issuer of securities in a narrow-based security index'' under 
paragraph (a)(1) of this section.
    (b) Paragraph (a)(1)(iv) of this section will not apply with respect 
to a reference entity included in the index if:
    (1) The effective notional amounts allocated to such reference 
entity comprise less than five percent of the index's weighting; and
    (2) The effective notional amounts allocated to reference entities 
included in the index that satisfy paragraph (a)(1)(iv) of this section 
comprise at least 80 percent of the index's weighting.
    (c) For purposes of this section:
    (1) A reference entity included in the index is affiliated with 
another reference entity included in the index (for purposes of 
paragraph (c)(4) of this section) or another entity (for purposes of 
paragraph (c)(5) of this section) if it controls, is controlled by, or 
is under common control with, that other reference entity included in 
the index or other entity, as applicable; provided that each reference 
entity included in the index that is an issuing entity of an asset-
backed security as defined in section 3(a)(79) of the Act (15 U.S.C. 
78c(a)(79)) will not be considered affiliated with any other reference 
entity included in the index or any other entity that is an issuing 
entity of an asset-backed security.
    (2) Control for purposes of this section means ownership of more 
than 50 percent of the equity of a reference entity included in the 
index (for purposes of paragraph (c)(4) of this section) or another 
entity (for purposes of paragraph (c)(5) of this section), or the 
ability to direct the voting of more than 50 percent of the voting 
equity of a reference entity included in the index (for purposes of 
paragraph (c)(4) of this section) or another entity (for purposes of 
paragraph (c)(5) of this section).
    (3) In identifying a reference entity included in the index for 
purposes of this section, the term reference entity includes:
    (i) An issuer of securities;
    (ii) An issuer of securities that is an issuing entity of an asset-
backed security as defined in section 3(a)(79) of the Act (15 U.S.C. 
78c(a)(79)); and
    (iii) An issuer of securities that is a borrower with respect to any 
loan identified in an index of borrowers or loans.
    (4) For purposes of calculating the thresholds in paragraphs 
(a)(1)(i) through (a)(1)(iii) of this section, the term reference entity 
included in the index includes a single reference entity included in the 
index or a group of affiliated reference entities included in the index 
as determined in accordance with paragraph (c)(1) of this section (with 
each reference entity included in the index that is an issuing entity of 
an asset-backed security as defined in section 3(a)(79) of the Act (15 
U.S.C. 78c(a)(79)) being considered a separate reference entity included 
in the index).
    (5) For purposes of determining whether one of the criterion in 
either paragraphs (a)(1)(iv)(A) through (a)(1)(iv)(D) of this section or 
paragraphs (a)(1)(iv)(H)(1) and (a)(1)(iv)(H)(2) of this section is met, 
the term reference entity included in the index includes a single 
reference entity included in the index or a group of affiliated entities 
as determined in accordance with paragraph (c)(1) of this section (with 
each issuing entity of an asset-backed security as defined in section 
3(a)(79) of the Act (15 U.S.C.

[[Page 54]]

78c(a)(79)) being considered a separate entity).

[77 FR 48356, Aug. 13, 2012, as amended at 79 FR 57344, Sept. 24, 2014]



Sec.  240.3a68-1b  Meaning of ``narrow-based security index'' as used
in section 3(a)(68)(A)(ii)(I) of the Act.

    (a) Notwithstanding Sec.  240.3a68-3(a), and solely for purposes of 
determining whether a credit default swap is a security-based swap under 
section 3(a)(68)(A)(ii)(I) of the Act (15 U.S.C. 78c(a)(68)(A)(ii)(I)), 
the term narrow-based security index as used in section 
3(a)(68)(A)(ii)(I) of the Act means an index in which:
    (1)(i) The index is composed of nine or fewer securities or 
securities that are issued by nine or fewer non-affiliated issuers, 
provided that a security shall not be deemed a component of the index 
for purposes of this section unless:
    (A) A credit event with respect to the issuer of such security or a 
credit event with respect to such security would result in a payment by 
the credit protection seller to the credit protection buyer under the 
credit default swap based on the related notional amount allocated to 
such security; or
    (B) The fact of such credit event or the calculation in accordance 
with paragraph (a)(1)(i)(A) of this section of the amount owed with 
respect to such credit event is taken into account in determining 
whether to make any future payments under the credit default swap with 
respect to any future credit events;
    (ii) The effective notional amount allocated to the securities of 
any issuer included in the index comprises more than 30 percent of the 
index's weighting;
    (iii) The effective notional amount allocated to the securities of 
any five non-affiliated issuers included in the index comprises more 
than 60 percent of the index's weighting; or
    (iv) Except as provided in paragraph (b) of this section, for each 
security included in the index none of the criteria in paragraphs 
(a)(1)(iv)(A) through (a)(1)(iv)(H) of this section is satisfied:
    (A) The issuer of the security included in the index is required to 
file reports pursuant to section 13 or section 15(d) of the Act (15 
U.S.C. 78m or 78o(d));
    (B) The issuer of the security included in the index is eligible to 
rely on the exemption provided in Sec.  240.12g3-2(b);
    (C) The issuer of the security included in the index has a worldwide 
market value of its outstanding common equity held by non-affiliates of 
$700 million or more;
    (D) The issuer of the security included in the index (other than an 
issuer of the security that is an issuing entity of an asset-backed 
security as defined in section 3(a)(79) of the Act (15 U.S.C. 
78c(a)(79))) has outstanding notes, bonds, debentures, loans, or 
evidences of indebtedness (other than revolving credit facilities) 
having a total remaining principal amount of at least $1 billion;
    (E) The security included in the index is an exempted security as 
defined in section 3(a)(12) of the Act (15 U.S.C. 78c(a)(12)) (other 
than any municipal security as defined in section 3(a)(29) of the Act 
(15 U.S.C. 78c(a)(29)));
    (F) The issuer of the security included in the index is a government 
of a foreign country or a political subdivision of a foreign country;
    (G) If the security included in the index is an asset-backed 
security as defined in section 3(a)(79) of the Act (15 U.S.C. 
78c(a)(79)), the security was issued in a transaction registered under 
the Securities Act of 1933 (15 U.S.C. 77a et seq.) and has publicly 
available distribution reports; and
    (H) For a credit default swap entered into solely between eligible 
contract participants as defined in section 3(a)(65) of the Act (15 
U.S.C. 78c(a)(65)):
    (1) The issuer of the security included in the index (other than an 
issuer of the security that is an issuing entity of an asset-backed 
security as defined in section 3(a)(79) of the Act (15 U.S.C. 
78c(a)(79))) makes available to the public or otherwise makes available 
to such eligible contract participant information about such issuer 
pursuant to Sec.  230.144A(d)(4)) of this chapter;
    (2) Financial information about the issuer of the security included 
in the index (other than an issuer of the security that is an issuing 
entity of an

[[Page 55]]

asset-backed security as defined in section 3(a)(79) of the Act (15 
U.S.C. 78c(a)(79))) is otherwise publicly available; or
    (3) In the case of an asset-backed security as defined in section 
3(a)(79) of the Act (15 U.S.C. 78c(a)(79)), information of the type and 
level included in public distribution reports for similar asset-backed 
securities is publicly available about both the issuing entity and such 
asset-backed security; and
    (2)(i) The index is not composed solely of exempted securities as 
defined in section 3(a)(12) of the Act (15 U.S.C. 78c(a)(12)), as in 
effect on the date of enactment of the Futures Trading Act of 1982 
(other than any municipal security as defined in section 3(a)(29) of the 
Act (15 U.S.C. 78c(a)(29))), as in effect on the date of enactment of 
the Futures Trading Act of 1982); and
    (ii) Without taking into account any portion of the index composed 
of exempted securities as defined in section 3(a)(12) of the Act (15 
U.S.C. 78c(a)(12)), as in effect on the date of enactment of the Futures 
Trading Act of 1982 (other than any municipal security as defined in 
section 3(a)(29) of the Act (15 U.S.C. 78c(a)(29))), the remaining 
portion of the index would be within the term ``narrow-based security 
index'' under paragraph (a)(1) of this section.
    (b) Paragraph (a)(1)(iv) of this section will not apply with respect 
to securities of an issuer included in the index if:
    (1) The effective notional amounts allocated to all securities of 
such issuer included in the index comprise less than five percent of the 
index's weighting; and
    (2) The securities that satisfy paragraph (a)(1)(iv) of this section 
comprise at least 80 percent of the index's weighting.
    (c) For purposes of this section:
    (1) An issuer of securities included in the index is affiliated with 
another issuer of securities included in the index (for purposes of 
paragraph (c)(4) of this section) or another entity (for purposes of 
paragraph (c)(5) of this section) if it controls, is controlled by, or 
is under common control with, that other issuer or other entity, as 
applicable; provided that each issuer of securities included in the 
index that is an issuing entity of an asset-backed security as defined 
in section 3(a)(79) of the Act (15 U.S.C. 78c(a)(79)) will not be 
considered affiliated with any other issuer of securities included in 
the index or any other entity that is an issuing entity of an asset-
backed security.
    (2) Control for purposes of this section means ownership of more 
than 50 percent of the equity of an issuer of securities included in the 
index (for purposes of paragraph (c)(4) of this section) or another 
entity (for purposes of paragraph (c)(5) of this section), or the 
ability to direct the voting of more than 50 percent of the voting 
equity an issuer of securities included in the index (for purposes of 
paragraph (c)(4) of this section) or another entity (for purposes of 
paragraph (c)(5) of this section).
    (3) In identifying an issuer of securities included in the index for 
purposes of this section, the term issuer includes:
    (i) An issuer of securities; and
    (ii) An issuer of securities that is an issuing entity of an asset-
backed security as defined in section 3(a)(79) of the Act (15 U.S.C. 
78c(a)(79)).
    (4) For purposes of calculating the thresholds in paragraphs 
(a)(1)(i) through (a)(1)(iii) of this section, the term issuer of the 
security included in the index includes a single issuer of securities 
included in the index or a group of affiliated issuers of securities 
included in the index as determined in accordance with paragraph (c)(1) 
of this section (with each issuer of securities included in the index 
that is an issuing entity of an asset-backed security as defined in 
section 3(a)(79) of the Act (15 U.S.C. 78c(a)(79)) being considered a 
separate issuer of securities included in the index).
    (5) For purposes of determining whether one of the criterion in 
either paragraphs (a)(1)(iv)(A) through (a)(1))(iv)(D) of this section 
or paragraphs (a)(1)(iv)(H)(1) and (a)(1)(iv)(H)(2) of this section is 
met, the term issuer of the security included in the index includes a 
single issuer of securities included in the index or a group affiliated 
entities as determined in accordance with paragraph (c)(1) of this 
section (with each issuing entity

[[Page 56]]

of an asset-backed security as defined in section 3(a)(79) of the Act 
(15 U.S.C. 78c(a)(79)) being considered a separate entity).

[77 FR 48356, Aug. 13, 2012, as amended at 79 FR 57344, Sept. 24, 2014]



Sec.  240.3a68-2  Requests for interpretation of swaps, security-based
swaps, and mixed swaps.

    (a) In general. Any person may submit a request to the Commission 
and the Commodity Futures Trading Commission to provide a joint 
interpretation of whether a particular agreement, contract, or 
transaction (or class thereof) is:
    (1) A swap, as that term is defined in section 3(a)(69) of the Act 
(15 U.S.C. 78c(a)(69)) and the rules and regulations promulgated 
thereunder;
    (2) A security-based swap, as that term is defined in section 
3(a)(68) of the Act (15 U.S.C. 78c(a)(68)) and the rules and regulations 
promulgated thereunder; or
    (3) A mixed swap, as that term is defined in section 3(a)(68)(D) of 
the Act and the rules and regulations promulgated thereunder.
    (b) Request process. In making a request pursuant to paragraph (a) 
of this section, the requesting person must provide the Commission and 
the Commodity Futures Trading Commission with the following:
    (1) All material information regarding the terms of the agreement, 
contract, or transaction (or class thereof);
    (2) A statement of the economic characteristics and purpose of the 
agreement, contract, or transaction (or class thereof);
    (3) The requesting person's determination as to whether the 
agreement, contract, or transaction (or class thereof) should be 
characterized as a swap, a security-based swap, or both (i.e., a mixed 
swap), including the basis for such determination; and
    (4) Such other information as may be requested by the Commission or 
the Commodity Futures Trading Commission.
    (c) Request withdrawal. A person may withdraw a request made 
pursuant to paragraph (a) of this section at any time prior to the 
issuance of a joint interpretation or joint proposed rule by the 
Commission and the Commodity Futures Trading Commission in response to 
the request; provided, however, that notwithstanding such withdrawal, 
the Commission and the Commodity Futures Trading Commission may provide 
a joint interpretation of whether the agreement, contract, or 
transaction (or class thereof) is a swap, a security-based swap, or both 
(i.e., a mixed swap).
    (d) Request by the Commission or the Commodity Futures Trading 
Commission. In the absence of a request for a joint interpretation under 
paragraph (a) of this section:
    (1) If the Commission or the Commodity Futures Trading Commission 
receives a proposal to list, trade, or clear an agreement, contract, or 
transaction (or class thereof) that raises questions as to the 
appropriate characterization of such agreement, contract, or transaction 
(or class thereof) as a swap, a security-based swap, or both (i.e., a 
mixed swap), the Commission or the Commodity Futures Trading Commission, 
as applicable, promptly shall notify the other of the agreement, 
contract, or transaction (or class thereof); and
    (2) The Commission or the Commodity Futures Trading Commission, or 
their Chairmen jointly, may submit a request for a joint interpretation 
as described in paragraph (a) of this section; such submission shall be 
made pursuant to paragraph (b) of this section, and may be withdrawn 
pursuant to paragraph (c) of this section.
    (e) Timeframe for joint interpretation. (1) If the Commission and 
the Commodity Futures Trading Commission determine to issue a joint 
interpretation as described in paragraph (a) of this section, such joint 
interpretation shall be issued within 120 days after receipt of a 
complete submission requesting a joint interpretation under paragraph 
(a) or (d) of this section.
    (2) The Commission and the Commodity Futures Trading Commission 
shall consult with the Board of Governors of the Federal Reserve System 
prior to issuing any joint interpretation as described in paragraph (a) 
of this section.
    (3) If the Commission and the Commodity Futures Trading Commission

[[Page 57]]

seek public comment with respect to a joint interpretation regarding an 
agreement, contract, or transaction (or class thereof), the 120-day 
period described in paragraph (e)(1) of this section shall be stayed 
during the pendency of the comment period, but shall recommence with the 
business day after the public comment period ends.
    (4) Nothing in this section shall require the Commission and the 
Commodity Futures Trading Commission to issue any joint interpretation.
    (5) If the Commission and the Commodity Futures Trading Commission 
do not issue a joint interpretation within the time period described in 
paragraph (e)(1) or (e)(3) of this section, each of the Commission and 
the Commodity Futures Trading Commission shall publicly provide the 
reasons for not issuing such a joint interpretation within the 
applicable timeframes.
    (f) Joint proposed rule. (1) Rather than issue a joint 
interpretation pursuant to paragraph (a) of this section, the Commission 
and the Commodity Futures Trading Commission may issue a joint proposed 
rule, in consultation with the Board of Governors of the Federal Reserve 
System, to further define one or more of the terms swap, security-based 
swap, or mixed swap.
    (2) A joint proposed rule described in paragraph (f)(1) of this 
section shall be issued within the timeframe for issuing a joint 
interpretation set forth in paragraph (e) of this section.

[77 FR 48356, Aug. 13, 2012]



Sec.  240.3a68-3  Meaning of ``narrow-based security index'' as used in
the definition of ``security-based swap.''

    (a) In general. Except as otherwise provided in Sec.  240.3a68-1a 
and Sec.  240.3a68-1b, for purposes of section 3(a)(68) of the Act (15 
U.S.C. 78c(a)(68)), the term narrow-based security index has the meaning 
set forth in section 3(a)(55) of the Act (15 U.S.C. 78c(a)(55)), and the 
rules, regulations, and orders of the Commission thereunder.
    (b) Tolerance period for swaps traded on designated contract 
markets, swap execution facilities and foreign boards of trade. 
Notwithstanding paragraph (a) of this section, solely for purposes of 
swaps traded on or subject to the rules of a designated contract market, 
swap execution facility, or foreign board of trade pursuant to the 
Commodity Exchange Act (7 U.S.C. 1 et seq.), a security index underlying 
such swaps shall not be considered a narrow-based security index if:
    (1)(i) A swap on the index is traded on or subject to the rules of a 
designated contract market, swap execution facility, or foreign board of 
trade pursuant to the Commodity Exchange Act (7 U.S.C. 1 et seq.) for at 
least 30 days as a swap on an index that was not a narrow-based security 
index; or
    (ii) Such index was not a narrow-based security index during every 
trading day of the six full calendar months preceding a date no earlier 
than 30 days prior to the commencement of trading of a swap on such 
index on a market described in paragraph (b)(1)(i) of this section; and
    (2) The index has been a narrow-based security index for no more 
than 45 business days over three consecutive calendar months.
    (c) Tolerance period for security-based swaps traded on national 
securities exchanges or security-based swap execution facilities. 
Notwithstanding paragraph (a) of this section, solely for purposes of 
security-based swaps traded on a national securities exchange or 
security-based swap execution facility, a security index underlying such 
security-based swaps shall be considered a narrow-based security index 
if:
    (1)(i) A security-based swap on the index is traded on a national 
securities exchange or security-based swap execution facility for at 
least 30 days as a security-based swap on a narrow-based security index; 
or
    (ii) Such index was a narrow-based security index during every 
trading day of the six full calendar months preceding a date no earlier 
than 30 days prior to the commencement of trading of a security-based 
swap on such index on a market described in paragraph (c)(1)(i) of this 
section; and
    (2) The index has been a security index that is not a narrow-based 
security index for no more than 45 business days over three consecutive 
calendar months.
    (d) Grace period. (1) Solely with respect to a swap that is traded 
on or subject to the rules of a designated

[[Page 58]]

contract market, swap execution facility or foreign board of trade 
pursuant to the Commodity Exchange Act (7 U.S.C. 1 et seq.), an index 
that becomes a narrow-based security index under paragraph (b) of this 
section solely because it was a narrow-based security index for more 
than 45 business days over three consecutive calendar months shall not 
be a narrow-based security index for the following three calendar 
months.
    (2) Solely with respect to a security-based swap that is traded on a 
national securities exchange or security-based swap execution facility, 
an index that becomes a security index that is not a narrow-based 
security index under paragraph (c) of this section solely because it was 
not a narrow-based security index for more than 45 business days over 
three consecutive calendar months shall be a narrow-based security index 
for the following three calendar months.

[77 FR 48356, Aug. 13, 2012]



Sec.  240.3a68-4  Regulation of mixed swaps.

    (a) In general. The term mixed swap has the meaning set forth in 
section 3(a)(68)(D) of the Act (15 U.S.C. 78c(a)(68)(D)).
    (b) Regulation of bilateral uncleared mixed swaps entered into by 
dually-registered dealers or major participants. A mixed swap:
    (1) That is neither executed on nor subject to the rules of a 
designated contract market, national securities exchange, swap execution 
facility, security-based swap execution facility, or foreign board of 
trade;
    (2) That will not be submitted to a derivatives clearing 
organization or registered or exempt clearing agency to be cleared; and
    (3) Where at least one party is registered with the Commission as a 
security-based swap dealer or major security-based swap participant and 
also with the Commodity Futures Trading Commission as a swap dealer or 
major swap participant, shall be subject to:
    (i) The following provisions of the Commodity Exchange Act (7 U.S.C. 
1 et seq.), and the rules and regulations promulgated thereunder, set 
forth in the rules and regulations of the Commodity Futures Trading 
Commission:
    (A) Examinations and information sharing: 7 U.S.C. 6s(f) and 12;
    (B) Enforcement: 7 U.S.C. 2(a)(1)(B), 6(b), 6b, 6c, 6s(h)(1)(A), 
6s(h)(4)(A), 9, 13b, 13a-1, 13a-2, 13, 13c(a), 13c(b), 15 and 26;
    (C) Reporting to a swap data repository: 7 U.S.C. 6r;
    (D) Real-time reporting: 7 U.S.C. 2(a)(13);
    (E) Capital: 7 U.S.C. 6s(e); and
    (F) Position Limits: 7 U.S.C. 6a; and
    (ii) The provisions of the Federal securities laws, as defined in 
section 3(a)(47) of the Act (15 U.S.C. 78c(a)(47)), and the rules and 
regulations promulgated thereunder.
    (c) Process for determining regulatory treatment for other mixed 
swaps--(1) In general. Any person who desires or intends to list, trade, 
or clear a mixed swap (or class thereof) that is not subject to 
paragraph (b) of this section may request the Commission and the 
Commodity Futures Trading Commission to issue a joint order permitting 
the requesting person (and any other person or persons that subsequently 
lists, trades, or clears that mixed swap) to comply, as to parallel 
provisions only, with specified parallel provisions of either the Act 
(15 U.S.C. 78a et seq.) or the Commodity Exchange Act (7 U.S.C. 1 et 
seq.), and the rules and regulations thereunder (collectively, specified 
parallel provisions), instead of being required to comply with parallel 
provisions of both the Act and the Commodity Exchange Act. For purposes 
of this paragraph (c), parallel provisions means comparable provisions 
of the Act and the Commodity Exchange Act that were added or amended by 
the Wall Street Transparency and Accountability Act of 2010 with respect 
to security-based swaps and swaps, and the rules and regulations 
thereunder.
    (2) Request process. A person submitting a request pursuant to 
paragraph (c)(1) of this section must provide the Commission and the 
Commodity Futures Trading Commission with the following:
    (i) All material information regarding the terms of the specified, 
or specified class of, mixed swap;

[[Page 59]]

    (ii) The economic characteristics and purpose of the specified, or 
specified class of, mixed swap;
    (iii) The specified parallel provisions, and the reasons the person 
believes such specified parallel provisions would be appropriate for the 
mixed swap (or class thereof); and
    (iv) An analysis of:
    (A) The nature and purposes of the parallel provisions that are the 
subject of the request;
    (B) The comparability of such parallel provisions;
    (C) The extent of any conflicts or differences between such parallel 
provisions; and
    (D) Such other information as may be requested by the Commission or 
the Commodity Futures Trading Commission.
    (3) Request withdrawal. A person may withdraw a request made 
pursuant to paragraph (c)(1) of this section at any time prior to the 
issuance of a joint order under paragraph (c)(4) of this section by the 
Commission and the Commodity Futures Trading Commission in response to 
the request.
    (4) Issuance of orders. In response to a request under paragraph 
(c)(1) of this section, the Commission and the Commodity Futures Trading 
Commission, as necessary to carry out the purposes of the Wall Street 
Transparency and Accountability Act of 2010, may issue a joint order, 
after notice and opportunity for comment, permitting the requesting 
person (and any other person or persons that subsequently lists, trades, 
or clears that mixed swap) to comply, as to parallel provisions only, 
with the specified parallel provisions (or another subset of the 
parallel provisions that are the subject of the request, as the 
Commissions determine is appropriate), instead of being required to 
comply with parallel provisions of both the Act (15 U.S.C. 78a et seq.) 
and the Commodity Exchange Act (7 U.S.C. 1 et seq.). In determining the 
contents of such joint order, the Commission and the Commodity Futures 
Trading Commission may consider, among other things:
    (i) The nature and purposes of the parallel provisions that are the 
subject of the request;
    (ii) The comparability of such parallel provisions; and
    (iii) The extent of any conflicts or differences between such 
parallel provisions.
    (5) Timeframe. (i) If the Commission and the Commodity Futures 
Trading Commission determine to issue a joint order as described in 
paragraph (c)(4) of this section, such joint order shall be issued 
within 120 days after receipt of a complete request for a joint order 
under paragraph (c)(1) of this section, which time period shall be 
stayed during the pendency of the public comment period provided for in 
paragraph (c)(4) of this section and shall recommence with the business 
day after the public comment period ends.
    (ii) Nothing in this section shall require the Commission and the 
Commodity Futures Trading Commission to issue any joint order.
    (iii) If the Commission and the Commodity Futures Trading Commission 
do not issue a joint order within the time period described in paragraph 
(c)(5)(i) of this section, each of the Commission and the Commodity 
Futures Trading Commission shall publicly provide the reasons for not 
issuing such a joint order within that timeframe.

[77 FR 48356, Aug. 13, 2012]



Sec.  240.3a68-5  Regulation of certain futures contracts on foreign
sovereign debt.

    The term security-based swap as used in section 3(a)(68) of the Act 
(15 U.S.C. 78c(a)(68)) does not include an agreement, contract, or 
transaction that is based on or references a qualifying foreign futures 
contract (as defined in Sec.  240.3a12-8 on the debt securities of any 
one or more of the foreign governments enumerated in Sec.  240.3a12-8, 
provided that such agreement, contract, or transaction satisfies the 
following conditions:
    (a) The futures contract that the agreement, contract, or 
transaction references or upon which the agreement, contract, or 
transaction is based is a qualifying foreign futures contract that 
satisfies the conditions of Sec.  240.3a12-8 applicable to qualifying 
foreign futures contracts;

[[Page 60]]

    (b) The agreement, contract, or transaction is traded on or through 
a board of trade (as defined in 7 U.S.C. 2);
    (c) The debt securities upon which the qualifying foreign futures 
contract is based or referenced and any security used to determine the 
cash settlement amount pursuant to paragraph (d) of this section were 
not registered under the Securities Act of 1933 (15 U.S.C. 77 et seq.) 
or the subject of any American depositary receipt registered under the 
Securities Act of 1933;
    (d) The agreement, contract, or transaction may only be cash 
settled; and
    (e) The agreement, contract or transaction is not entered into by 
the issuer of the debt securities upon which the qualifying foreign 
futures contract is based or referenced (including any security used to 
determine the cash payment due on settlement of such agreement, contract 
or transaction), an affiliate (as defined in the Securities Act of 1933 
(15 U.S.C. 77 et seq.) and the rules and regulations thereunder) of the 
issuer, or an underwriter of such issuer's debt securities.

[77 FR 48356, Aug. 13, 2012]



Sec.  240.3a69-1  Safe Harbor Definition of ``security-based swap'' 
and ``swap'' as used in sections 3(a)(68) and 3(a)(69) of the Act-
-insurance.

    (a) This paragraph is a non-exclusive safe harbor. The terms 
security-based swap as used in section 3(a)(68) of the Act (15 U.S.C. 
78c(a)(68)) and swap as used in section 3(a)(69) of the Act (15 U.S.C. 
78c(a)(69)) do not include an agreement, contract, or transaction that:
    (1) By its terms or by law, as a condition of performance on the 
agreement, contract, or transaction:
    (i) Requires the beneficiary of the agreement, contract, or 
transaction to have an insurable interest that is the subject of the 
agreement, contract, or transaction and thereby carry the risk of loss 
with respect to that interest continuously throughout the duration of 
the agreement, contract, or transaction;
    (ii) Requires that loss to occur and to be proved, and that any 
payment or indemnification therefor be limited to the value of the 
insurable interest;
    (iii) Is not traded, separately from the insured interest, on an 
organized market or over the counter; and
    (iv) With respect to financial guaranty insurance only, in the event 
of payment default or insolvency of the obligor, any acceleration of 
payments under the policy is at the sole discretion of the insurer; and
    (2) Is provided:
    (i)(A) By a person that is subject to supervision by the insurance 
commissioner (or similar official or agency) of any State, as defined in 
section 3(a)(16) of the Act (15 U.S.C. 78c(a)(16)), or by the United 
States or an agency or instrumentality thereof; and
    (B) Such agreement, contract, or transaction is regulated as 
insurance under applicable State law or the laws of the United States;
    (ii)(A) Directly or indirectly by the United States, any State or 
any of their respective agencies or instrumentalities; or
    (B) Pursuant to a statutorily authorized program thereof; or
    (iii) In the case of reinsurance only by a person to another person 
that satisfies the conditions set forth in paragraph (a)(2) of this 
section, provided that:
    (A) Such person is not prohibited by applicable State law or the 
laws of the United States from offering such agreement, contract, or 
transaction to such person that satisfies the conditions set forth in 
paragraph (a)(2) of this section;
    (B) The agreement, contract, or transaction to be reinsured 
satisfies the conditions set forth in paragraph (a)(1) or (3) of this 
section; and
    (C) Except as otherwise permitted under applicable State law, the 
total amount reimbursable by all reinsurers for such agreement, 
contract, or transaction may not exceed the claims or losses paid by the 
person writing the risk being ceded or transferred by such person; or
    (iv) In the case of non-admitted insurance by a person who:
    (A) Is located outside of the United States and listed on the 
Quarterly Listing of Alien Insurers as maintained by the International 
Insurers Department of the National Association of Insurance 
Commissioners; or

[[Page 61]]

    (B) Meets the eligibility criteria for non-admitted insurers under 
applicable State law; or
    (3) Is provided in accordance with the conditions set forth in 
paragraph (a)(2) of this section and is one of the following types of 
products:
    (i) Surety bond;
    (ii) Fidelity bond;
    (iii) Life insurance;
    (iv) Health insurance;
    (v) Long term care insurance;
    (vi) Title insurance;
    (vii) Property and casualty insurance;
    (viii) Annuity;
    (ix) Disability insurance;
    (x) Insurance against default on individual residential mortgages; 
and
    (xi) Reinsurance of any of the foregoing products identified in 
paragraphs (i) through (x) of this section.
    (b) The terms security-based swap as used in section 3(a)(68) of the 
Act (15 U.S.C. 78c(a)(68)) and swap as used in section 3(a)(69) of the 
Act (15 U.S.C. 78c(a)(69)) do not include an agreement, contract, or 
transaction that was entered into on or before the effective date of 
this section and that, at such time that it was entered into, was 
provided in accordance with the conditions set forth in paragraph (a)(2) 
of this section.

[77 FR 48356, Aug. 13, 2012]



Sec.  240.3a69-2  Definition of ``swap'' as used in section 3(a)(69) of
the Act--additional products.

    (a) In general. The term swap has the meaning set forth in section 
3(a)(69) of the Act (15 U.S.C. 78c(a)(69)).
    (b) Inclusion of particular products. (1) The term swap includes, 
without limiting the meaning set forth in section 3(a)(69) of the Act 
(15 U.S.C. 78c(a)(69)), the following agreements, contracts, and 
transactions:
    (i) A cross-currency swap;
    (ii) A currency option, foreign currency option, foreign exchange 
option and foreign exchange rate option;
    (iii) A foreign exchange forward;
    (iv) A foreign exchange swap;
    (v) A forward rate agreement; and
    (vi) A non-deliverable forward involving foreign exchange.
    (2) The term swap does not include an agreement, contract, or 
transaction described in paragraph (b)(1) of this section that is 
otherwise excluded by section 1a(47)(B) of the Commodity Exchange Act (7 
U.S.C. 1a(47)(B)).
    (c) Foreign exchange forwards and foreign exchange swaps. 
Notwithstanding paragraph (b)(2) of this section:
    (1) A foreign exchange forward or a foreign exchange swap shall not 
be considered a swap if the Secretary of the Treasury makes a 
determination described in section 1a(47)(E)(i) of the Commodity 
Exchange Act (7 U.S.C. 1a(47)(E)(i)).
    (2) Notwithstanding paragraph (c)(1) of this section:
    (i) The reporting requirements set forth in section 4r of the 
Commodity Exchange Act (7 U.S.C. 6r) and regulations promulgated 
thereunder shall apply to a foreign exchange forward or foreign exchange 
swap; and
    (ii) The business conduct standards set forth in section 4s(h) of 
the Commodity Exchange Act (7 U.S.C. 6s) and regulations promulgated 
thereunder shall apply to a swap dealer or major swap participant that 
is a party to a foreign exchange forward or foreign exchange swap.
    (3) For purposes of section 1a(47)(E) of the Commodity Exchange Act 
(7 U.S.C. 1a(47)(E)) and this section, the term foreign exchange forward 
has the meaning set forth in section 1a(24) of the Commodity Exchange 
Act (7 U.S.C. 1a(24)).
    (4) For purposes of section 1a(47)(E) of the Commodity Exchange Act 
(7 U.S.C. 1a(47)(E)) and this section, the term foreign exchange swap 
has the meaning set forth in section 1a(25) of the Commodity Exchange 
Act (7 U.S.C. 1a(25)).
    (5) For purposes of sections 1a(24) and 1a(25) of the Commodity 
Exchange Act (7 U.S.C. 1a(24) and (25)) and this section, the following 
transactions are not foreign exchange forwards or foreign exchange 
swaps:
    (i) A currency swap or a cross-currency swap;
    (ii) A currency option, foreign currency option, foreign exchange 
option, or foreign exchange rate option; and
    (iii) A non-deliverable forward involving foreign exchange.

[77 FR 48356, Aug. 13, 2012]

[[Page 62]]



Sec.  240.3a69-3  Books and records requirements for security-based 
swap agreements.

    (a) A person registered as a swap data repository under section 21 
of the Commodity Exchange Act (7 U.S.C. 24a) and the rules and 
regulations thereunder:
    (1) Shall not be required to keep and maintain additional books and 
records regarding security-based swap agreements other than the books 
and records regarding swaps required to be kept and maintained pursuant 
to section 21 of the Commodity Exchange Act (7 U.S.C. 24a) and the rules 
and regulations thereunder; and
    (2) Shall not be required to collect and maintain additional data 
regarding security-based swap agreements other than the data regarding 
swaps required to be collected and maintained by such persons pursuant 
to section 21 of the Commodity Exchange Act (7 U.S.C. 24a) and the rules 
and regulations thereunder.
    (b) A person shall not be required to keep and maintain additional 
books and records, including daily trading records, regarding security-
based swap agreements other than the books and records regarding swaps 
required to be kept and maintained by such persons pursuant to section 
4s of the Commodity Exchange Act (7 U.S.C. 6s) and the rules and 
regulations thereunder if such person is registered as:
    (1) A swap dealer under section 4s(a)(1) of the Commodity Exchange 
Act (7 U.S.C. 6s(a)(1)) and the rules and regulations thereunder;
    (2) A major swap participant under section 4s(a)(2) of the Commodity 
Exchange Act (7 U.S.C. 6s(a)(2)) and the rules and regulations 
thereunder;
    (3) A security-based swap dealer under section 15F(a)(1) of the Act 
(15 U.S.C. 78o-10(a)(1)) and the rules and regulations thereunder; or
    (4) A major security-based swap participant under section 15F(a)(2) 
of the Act (15 U.S.C. 78o-10(a)(2)) and the rules and regulations 
thereunder.
    (c) The term security-based swap agreement has the meaning set forth 
in section 3(a)(78) of the Act (15 U.S.C. 78c(a)(78)).

[77 FR 48356, Aug. 13, 2012]



Sec.  240.3a71-1  Definition of ``security-based swap dealer.''

    (a) General. The term security-based swap dealer in general means 
any person who:
    (1) Holds itself out as a dealer in security-based swaps;
    (2) Makes a market in security-based swaps;
    (3) Regularly enters into security-based swaps with counterparties 
as an ordinary course of business for its own account; or
    (4) Engages in any activity causing it to be commonly known in the 
trade as a dealer or market maker in security-based swaps.
    (b) Exception. The term security-based swap dealer does not include 
a person that enters into security-based swaps for such person's own 
account, either individually or in a fiduciary capacity, but not as a 
part of regular business.
    (c) Scope of designation. A person that is a security-based swap 
dealer in general shall be deemed to be a security-based swap dealer 
with respect to each security-based swap it enters into, regardless of 
the type, class, or category of the security-based swap or the person's 
activities in connection with the security-based swap, unless the 
Commission limits the person's designation as a security-based swap 
dealer to specified types, classes, or categories of security-based 
swaps or specified activities of the person in connection with security-
based swaps.
    (d) Inter-affiliate activities--(1) General. In determining whether 
a person is a security-based swap dealer, that person's security-based 
swaps with majority-owned affiliates shall not be considered.
    (2) Meaning of majority-owned. For these purposes the counterparties 
to a security-based swap are majority-owned affiliates if one 
counterparty directly or indirectly owns a majority interest in the 
other, or if a third party directly or indirectly owns a majority 
interest in both counterparties to the security-based swap, where 
``majority interest'' is the right to vote or direct the vote of a 
majority of a class of voting securities of an entity, the power to sell 
or direct the sale of a majority

[[Page 63]]

of a class of voting securities of an entity, or the right to receive 
upon dissolution or the contribution of a majority of the capital of a 
partnership.

[78 FR 30751, May 23, 2013]



Sec.  240.3a71-2  De minimis exception.

    (a) Requirements. For purposes of section 3(a)(71) of the Act (15 
U.S.C. 78c(a)(71)) and Sec.  240.3a71-1, a person that is not currently 
registered as a security-based swap dealer shall be deemed not to be a 
security-based swap dealer, and, therefore, shall not be subject to 
section 15F of the Act (15 U.S.C. 78o-10) and the rules, regulations and 
interpretations issued thereunder, as a result of security-based swap 
dealing activity that meets the following conditions:
    (1) Notional thresholds. The security-based swap positions connected 
with the dealing activity in which the person--or any other entity 
controlling, controlled by or under common control with the person--
engages over the course of the immediately preceding 12 months (or 
following the effective date of final rules implementing section 
3(a)(68) of the Act (15 U.S.C. 78c(a)(68)) if that period is less than 
12 months) have:
    (i) An aggregate gross notional amount of no more than $3 billion, 
subject to a phase-in level of an aggregate gross notional amount of no 
more than $8 billion applied in accordance with paragraph (a)(2)(i) of 
this section, with regard to credit default swaps that constitute 
security-based swaps;
    (ii) An aggregate gross notional amount of no more than $150 
million, subject to a phase-in level of an aggregate gross notional 
amount of no more than $400 million applied in accordance with paragraph 
(a)(2)(i) of this section, with regard to security-based swaps not 
described in paragraph (a)(1)(i) of this section; and
    (iii) An aggregate gross notional amount of no more than $25 million 
with regard to all security-based swaps in which the counterparty is a 
special entity (as that term is defined in section 15F(h)(2)(C) of the 
Act (15 U.S.C. 78o-10(h)(2)(C)).
    (2) Phase-in procedure--(i) Phase-in period. For purposes of 
paragraphs (a)(1)(i) and (ii) of this section, a person that engages in 
security-based swap dealing activity that does not exceed either of the 
phase-in levels set forth in paragraphs (a)(1)(i) and (ii) of this 
section, as applicable, shall be deemed not to be a security-based swap 
dealer, and, therefore, shall not be subject to Section 15F of the Act 
(15 U.S.C. 78o-10) and the rules, regulations and interpretations issued 
thereunder, as a result of its security-based swap dealing activity, 
until the ``phase-in termination date'' established as provided in 
paragraph (a)(2)(ii) of this section; provided, however, that this 
phase-in period shall not be available to the extent that a person 
engages in security-based swap dealing activity with counterparties that 
are natural persons, other than natural persons who qualify as eligible 
contract participants by virtue of section 1a(18)(A)(xi)(II) of the 
Commodity Exchange Act, (7 U.S.C. 1a(18)(A)(xi)(II)). The Commission 
shall announce the phase-in termination date on the Commission Web site 
and publish such date in the Federal Register.
    (ii) Establishment of phase-in termination date. (A) Nine months 
after the publication of the staff report described in Appendix A of 
this section, and after giving due consideration to that report and any 
associated public comment, the Commission may either:
    (1) Terminate the phase-in period set forth in paragraph (a)(2)(i) 
of this section, in which case the phase-in termination date shall be 
established by the Commission by order published in the Federal 
Register; or
    (2) Determine that it is necessary or appropriate in the public 
interest to propose through rulemaking an alternative to the $3 billion 
and $150 million amounts set forth in paragraphs (a)(1)(i) and (ii) of 
this section, as applicable, that would constitute a de minimis quantity 
of security-based swap dealing in connection with transactions with or 
on behalf of customers within the meaning of section 3(a)(71)(D) of the 
Act, (15 U.S.C. 78c(a)(71)(D)), in which case the Commission shall by 
order published in the Federal Register provide notice of such 
determination to propose through rulemaking an alternative, which order 
shall also establish the phase-in termination date.

[[Page 64]]

    (B) If the phase-in termination date has not been previously 
established pursuant to paragraph (a)(2)(ii)(A) of this section, then in 
any event the phase-in termination date shall occur five years after the 
data collection initiation date defined in paragraph (a)(2)(iii) of this 
section.
    (iii) Data collection initiation date. The term ``data collection 
initiation date'' shall mean the date that is the later of: the last 
compliance date for the registration and regulatory requirements for 
security-based swap dealers and major security-based swap participants 
under Section 15F of the Act (15 U.S.C. 78o-10); or the first date on 
which compliance with the trade-by-trade reporting rules for credit-
related and equity-related security-based swaps to a registered 
security-based swap data repository is required. The Commission shall 
announce the data collection initiation date on the Commission Web site 
and publish such date in the Federal Register.
    (3) Use of effective notional amounts. For purposes of paragraph 
(a)(1) of this section, if the stated notional amount of a security-
based swap is leveraged or enhanced by the structure of the security-
based swap, the calculation shall be based on the effective notional 
amount of the security-based swap rather than on the stated notional 
amount.
    (b) Registration period for persons that no longer can take 
advantage of the exception. A person that has not registered as a 
security-based swap dealer by virtue of satisfying the requirements of 
paragraph (a) of this section, but that no longer can take advantage of 
the de minimis exception provided for in paragraph (a) of this section, 
will be deemed not to be a security-based swap dealer under section 
3(a)(71) of the Act (15 U.S.C. 78c(a)(71)) and subject to the 
requirements of section 15F of the Act (15 U.S.C. 78o-10) and the rules, 
regulations and interpretations issued thereunder until the earlier of 
the date on which it submits a complete application for registration 
pursuant to section 15F(b) (15 U.S.C. 78o-10(b)) or two months after the 
end of the month in which that person becomes no longer able to take 
advantage of the exception.
    (c) Applicability to registered security-based swap dealers. A 
person who currently is registered as a security-based swap dealer may 
apply to withdraw that registration, while continuing to engage in 
security-based swap dealing activity in reliance on this section, so 
long as that person has been registered as a security-based swap dealer 
for at least 12 months and satisfies the conditions of paragraph (a) of 
this section.
    (d) Future adjustments to scope of the de minimis exception. The 
Commission may by rule or regulation change the requirements of the de 
minimis exception described in paragraphs (a) through (c) of this 
section.
    (e) Voluntary registration. Notwithstanding paragraph (a) of this 
section, a person that chooses to register with the Commission as a 
security-based swap dealer shall be deemed to be a security-based swap 
dealer, and, therefore, shall be subject to Section 15F of the Act (15 
U.S.C 78o-10) and the rules, regulations and interpretations issued 
thereunder.

[78 FR 30751, May 23, 2013]



Sec.  240.3a71-2A  Report regarding the ``security-based swap dealer''
and ``major security-based swap participant'' definitions (Appendix A 
to 17 CFR 240.3a71-2).

    Appendix A to Sec.  240.3a71-2 sets forth guidelines applicable to a 
report that the Commission has directed its staff to make in connection 
with the rules and interpretations further defining the Act's 
definitions of the terms ``security-based swap dealer'' (including the 
de minimis exception to that definition) and ``major security-based swap 
participant.'' The Commission intends to consider this report in 
reviewing the effect and application of these rules based on the 
evolution of the security-based swap market following the implementation 
of the registration and regulatory requirements of Section 15F of the 
Act (15 U.S.C. 78o-10). The report may also be informative as to 
potential changes to the rules further defining those terms. In 
producing this report, the staff shall consider security-based swap data 
collected by the Commission pursuant to other Title VII rules, as

[[Page 65]]

well as any other applicable information as the staff may determine to 
be appropriate for its analysis.
    (a) Report topics. As appropriate, based on the availability of data 
and information, the report should address the following topics:
    (1) De minimis exception. In connection with the de minimis 
exception to the definition of ``security-based swap dealer,'' the 
report generally should assess whether any of the de minimis thresholds 
set forth in paragraph (a)(1) of Sec.  240.3a71-2 should be increased or 
decreased;
    (2) General security-based swap dealer analysis. In connection with 
the definition of ``security-based swap dealer,'' the report generally 
should consider the factors that are useful for identifying security-
based swap dealing activity, including the application of the dealer-
trader distinction for that purpose, and the potential use of more 
objective tests or safe harbors as part of the analysis;
    (3) General major security-based swap participant analysis. In 
connection with the definition of ``major security-based swap 
participant,'' the report generally should consider the tests used to 
identify the presence of a ``substantial position'' in a major category 
of security-based swaps, and the tests used to identify persons whose 
security-based swap positions create ``substantial counterparty 
exposure,'' including the potential use of alternative tests or 
thresholds;
    (4) Commercial risk hedging exclusion. In connection with the 
definition of ``major security-based swap participant,'' the report 
generally should consider the definition of ``hedging or mitigating 
commercial risk,'' including whether that latter definition 
inappropriately permits certain positions to be excluded from the 
``substantial position'' analysis, and whether the continued 
availability of the exclusion for such hedging positions should be 
conditioned on a person assessing and documenting the hedging 
effectiveness of those positions;
    (5) Highly leveraged financial entities. In connection with the 
definition of ``major security-based swap participant,'' the report 
generally should consider the definition of ``highly leveraged,'' 
including whether alternative approaches should be used to identify 
highly leveraged financial entities;
    (6) Inter-affiliate exclusions. In connection with the definitions 
of ``security-based swap dealer'' and ``major security-based swap 
participant,'' the report generally should consider the impact of rule 
provisions excluding inter-affiliate transactions from the relevant 
analyses, and should assess potential alternative approaches for such 
exclusions; and
    (7) Other topics. Any other analysis of security-based swap data and 
information the Commission or the staff deem relevant to this rule.
    (b) Timing of report. The report shall be completed no later than 
three years following the data collection initiation date, established 
pursuant to Sec.  240.3a71-2(a)(2)(iii).
    (c) Public comment on the report. Following completion of the 
report, the report shall be published in the Federal Register for public 
comment.



Sec.  240.3a71-3  Cross-border security-based swap dealing activity.

    (a) Definitions. As used in this section, the following terms shall 
have the meanings indicated:
    (1) Conduit affiliate--(i) Definition. Conduit affiliate means a 
person, other than a U.S. person, that:
    (A) Is directly or indirectly majority-owned by one or more U.S. 
persons; and
    (B) In the regular course of business enters into security-based 
swaps with one or more other non-U.S. persons, or with foreign branches 
of U.S. banks that are registered as security-based swap dealers, for 
the purpose of hedging or mitigating risks faced by, or otherwise taking 
positions on behalf of, one or more U.S. persons (other than U.S. 
persons that are registered as security-based swap dealers or major 
security-based swap participants) who are controlling, controlled by, or 
under common control with the person, and enters into offsetting 
security-based swaps or other arrangements with such U.S. persons to 
transfer risks and benefits of those security-based swaps.
    (ii) Majority-ownership standard. The majority-ownership standard in 
paragraph (a)(1)(i)(A) of this section is satisfied if one or more 
persons described

[[Page 66]]

in Sec.  240.3a71-3(a)(4)(i)(B) directly or indirectly own a majority 
interest in the non-U.S. person, where ``majority interest'' is the 
right to vote or direct the vote of a majority of a class of voting 
securities of an entity, the power to sell or direct the sale of a 
majority of a class of voting securities of an entity, or the right to 
receive upon dissolution, or the contribution of, a majority of the 
capital of a partnership.
    (2) Foreign branch means any branch of a U.S. bank if:
    (i) The branch is located outside the United States;
    (ii) The branch operates for valid business reasons; and
    (iii) The branch is engaged in the business of banking and is 
subject to substantive banking regulation in the jurisdiction where 
located.
    (3) Transaction conducted through a foreign branch--(i) Definition. 
Transaction conducted through a foreign branch means a security-based 
swap transaction that is arranged, negotiated, and executed by a U.S. 
person through a foreign branch of such U.S. person if:
    (A) The foreign branch is the counterparty to such security-based 
swap transaction; and
    (B) The security-based swap transaction is arranged, negotiated, and 
executed on behalf of the foreign branch solely by persons located 
outside the United States.
    (ii) Representations. A person shall not be required to consider its 
counterparty's activity in connection with paragraph (a)(3)(i)(B) of 
this section in determining whether a security-based swap transaction is 
a transaction conducted through a foreign branch if such person receives 
a representation from its counterparty that the security-based swap 
transaction is arranged, negotiated, and executed on behalf of the 
foreign branch solely by persons located outside the United States, 
unless such person knows or has reason to know that the representation 
is not accurate; for the purposes of this final rule a person would have 
reason to know the representation is not accurate if a reasonable person 
should know, under all of the facts of which the person is aware, that 
it is not accurate.
    (4) U.S. person. (i) Except as provided in paragraph (a)(4)(iii) of 
this section, U.S. person means any person that is:
    (A) A natural person resident in the United States;
    (B) A partnership, corporation, trust, investment vehicle, or other 
legal person organized, incorporated, or established under the laws of 
the United States or having its principal place of business in the 
United States;
    (C) An account (whether discretionary or non-discretionary) of a 
U.S. person; or
    (D) An estate of a decedent who was a resident of the United States 
at the time of death.
    (ii) For purposes of this section, principal place of business means 
the location from which the officers, partners, or managers of the legal 
person primarily direct, control, and coordinate the activities of the 
legal person. With respect to an externally managed investment vehicle, 
this location is the office from which the manager of the vehicle 
primarily directs, controls, and coordinates the investment activities 
of the vehicle.
    (iii) The term U.S. person does not include the International 
Monetary Fund, the International Bank for Reconstruction and 
Development, the Inter-American Development Bank, the Asian Development 
Bank, the African Development Bank, the United Nations, and their 
agencies and pension plans, and any other similar international 
organizations, their agencies and pension plans.
    (iv) A person shall not be required to consider its counterparty to 
a security-based swap to be a U.S. person if such person receives a 
representation from the counterparty that the counterparty does not 
satisfy the criteria set forth in paragraph (a)(4)(i) of this section, 
unless such person knows or has reason to know that the representation 
is not accurate; for the purposes of this final rule a person would have 
reason to know the representation is not accurate if a reasonable person 
should know, under all of the facts of which the person is aware, that 
it is not accurate.
    (5) United States means the United States of America, its 
territories and

[[Page 67]]

possessions, any State of the United States, and the District of 
Columbia.
    (6) U.S. security-based swap dealer means a security-based swap 
dealer, as defined in section 3(a)(71) of the Act (15 U.S.C. 
78c(a)(71)), and the rules and regulations thereunder, that is a U.S. 
person.
    (7) Foreign security-based swap dealer means a security-based swap 
dealer, as defined in section 3(a)(71) of the Act (15 U.S.C. 
78c(a)(71)), and the rules and regulations thereunder, that is not a 
U.S. person.
    (8) U.S. business means:
    (i) With respect to a foreign security-based swap dealer:
    (A) Any security-based swap transaction entered into, or offered to 
be entered into, by or on behalf of such foreign security-based swap 
dealer, with a U.S. person (other than a transaction conducted through a 
foreign branch of that person); or
    (B) Any security-based swap transaction arranged, negotiated, or 
executed by personnel of the foreign security-based swap dealer located 
in a U.S. branch or office, or by personnel of an agent of the foreign 
security-based swap dealer located in a U.S. branch or office; and
    (ii) With respect to a U.S. security-based swap dealer, any 
transaction entered into or offered to be entered into by or on behalf 
of such U.S. security-based swap dealer, other than a transaction 
conducted through a foreign branch with a non-U.S. person or with a 
U.S.-person counterparty that constitutes a transaction conducted 
through a foreign branch of the counterparty.
    (9) Foreign business means security-based swap transactions entered 
into, or offered to be entered into, by or on behalf of a security-based 
swap dealer, other than the U.S. business of such person.
    (10) An entity is a majority-owned affiliate of another entity if 
the entity directly or indirectly owns a majority interest in the other, 
or if a third party directly or indirectly owns a majority interest in 
both entities, where ``majority interest'' is the right to vote or 
direct the vote of a majority of a class of voting securities of an 
entity, the power to sell or direct the sale of a majority of a class of 
voting securities of an entity, or the right to receive upon 
dissolution, or the contribution of, a majority of the capital of a 
partnership.
    (11) Foreign associated person means a natural person domiciled 
outside the United States who--with respect to a non-U.S. person relying 
on the exception set forth in paragraph (d) of this section--is a 
partner, officer, director, or branch manager of such non-U.S. person 
(or any person occupying a similar status or performing similar 
functions), any person directly or indirectly controlling, controlled 
by, or under common control with such non-U.S. person, or any employee 
of such non-U.S. person.
    (12) Listed jurisdiction means any jurisdiction that the Commission 
by order has designated as a listed jurisdiction for purposes of the 
exception specified in paragraph (d) of this section.
    (13) Covered inter-dealer security-based swap means any security-
based swap between:
    (i) A non-U.S. person relying on the exception in paragraph (d) of 
this section; and
    (ii) A non-U.S. person that is, or is an affiliate of, a registered 
security-based swap dealer or registered broker that has filed with the 
Commission a notice pursuant to paragraph (d)(1)(vi) of this section; 
provided, however, that a covered inter-dealer security-based swap does 
not include a security-based swap with a non-U.S. person that the non-
U.S. person relying on the exception in paragraph (d) of this section 
reasonably determines at the time of execution of the security-based 
swap is neither a registered security-based swap dealer or registered 
broker that has filed with the Commission a notice pursuant to paragraph 
(d)(1)(vi) of this section nor an affiliate of such a registered 
security-based swap dealer or registered broker.
    (b) Application of de minimis exception to cross-border dealing 
activity. For purposes of calculating the amount of security-based swap 
positions connected with dealing activity under Sec.  240.3a71-2(a)(1), 
except as provided in Sec.  240.3a71-5, a person shall include the 
following security-based swap transactions:

[[Page 68]]

    (1)(i) If such person is a U.S. person, all security-based swap 
transactions connected with the dealing activity in which such person 
engages, including transactions conducted through a foreign branch;
    (ii) If such person is a conduit affiliate, all security-based swap 
transactions connected with the dealing activity in which such person 
engages; and
    (iii) If such person is a non-U.S. person other than a conduit 
affiliate, all of the following types of transactions:
    (A) Security-based swap transactions connected with the dealing 
activity in which such person engages that are entered into with a U.S. 
person; provided, however, that this paragraph (b)(1)(iii)(A) shall not 
apply to:
    (1) Transactions with a U.S. person counterparty that constitute 
transactions conducted through a foreign branch of the counterparty, 
when the counterparty is a registered security-based swap dealer; and
    (2) Transactions with a U.S. person counterparty that constitute 
transactions conducted through a foreign branch of the counterparty, 
when the transaction is entered into prior to 60 days following the 
earliest date on which the registration of security-based swap dealers 
is first required pursuant to the applicable final rules and 
regulations; and
    (B) Security-based swap transactions connected with the dealing 
activity in which such person engages for which the counterparty to the 
security-based swap has rights of recourse against a U.S. person that is 
controlling, controlled by, or under common control with the non-U.S. 
person; for these purposes a counterparty has rights of recourse against 
the U.S. person if the counterparty has a conditional or unconditional 
legally enforceable right, in whole or in part, to receive payments 
from, or otherwise collect from, the U.S. person in connection with the 
security-based swap; and
    (C) Except as provided in paragraph (d) of this section, or unless 
such person is a person described in paragraph (a)(4)(iii) of this 
section, security-based swap transactions connected with such person's 
security-based swap dealing activity that are arranged, negotiated, or 
executed by personnel of such non-U.S. person located in a U.S. branch 
or office, or by personnel of an agent of such non-U.S. person located 
in a U.S. branch or office; and
    (2) If such person engages in transactions described in paragraph 
(b)(1) of this section, except as provided in Sec.  240.3a71-4, all of 
the following types of security-based swap transactions:
    (i) Security-based swap transactions connected with the dealing 
activity in which any U.S. person controlling, controlled by, or under 
common control with such person engages, including transactions 
conducted through a foreign branch;
    (ii) Security-based swap transactions connected with the dealing 
activity in which any conduit affiliate controlling, controlled by, or 
under common control with such person engages; and
    (iii) Security-based swap transactions connected with the dealing 
activity of any non-U.S. person, other than a conduit affiliate, that is 
controlling, controlled by, or under common control with such person, 
that are described in paragraph (b)(1)(iii) of this section.
    (c) Application of customer protection requirements. A registered 
security-based swap dealer, with respect to its foreign business, shall 
not be subject to the requirements relating to business conduct 
standards described in section 15F(h) of the Act (15 U.S.C. 78o-10(h)), 
and the rules and regulations thereunder, other than the rules and 
regulations prescribed by the Commission pursuant to section 
15F(h)(1)(B) of the Act (15 U.S.C. 78o-10(h)(1)(B)).
    (d) Exception from counting certain transactions. The counting 
requirement described by paragraph (b)(1)(iii)(C) of this section will 
not apply to the security-based swap dealing transactions of a non-U.S. 
person if the conditions of paragraph (d)(1) of this section have been 
satisfied.
    (1) Conditions--(i) Entity conducting U.S. activity. All activity 
that otherwise would cause a security-based swap transaction to be 
described by paragraph (b)(1)(iii)(C) of this section--namely, all 
arranging, negotiating or executing activity that is conducted by 
personnel of the entity (or its agent) located in a branch or office in 
the

[[Page 69]]

United States--is conducted by such U.S. personnel in their capacity as 
persons associated with an entity that:
    (A) Is registered with the Commission as:
    (1) A broker registered under section 15 of the Act (15 U.S.C. 78o) 
that is subject to and complies with Sec.  240.15c3-1(a)(7);
    (2) A broker registered under section 15 of the Act (15 U.S.C. 78o), 
other than a broker that is subject to Sec.  240.15c3-1(a)(7), that 
complies with Sec.  240.15c3-1(a)(10), as if that entity were registered 
with the Commission as a security-based swap dealer, if it is not so 
registered; or
    (3) A security-based swap dealer; and
    (B) Is a majority-owned affiliate of the non-U.S. person relying on 
this exception.
    (ii) Compliance with specified security-based swap dealer 
requirements--(A) Compliance required. In connection with such 
transactions, the registered entity described in paragraph (d)(1)(i) of 
this section complies with the requirements described in paragraph 
(d)(1)(ii)(B) of this section
    (1) As if the counterparties to the non-U.S. person relying on this 
exception also were counterparties to that entity; and
    (2) As if that entity were registered with the Commission as a 
security-based swap dealer, if it is not so registered.
    (B) Applicable requirements. The compliance obligation described in 
paragraph (d)(1)(ii)(A) of this section applies to the following 
provisions of the Act and the rules and regulations thereunder:
    (1) Section 15F(h)(3)(B)(i), (ii) and Sec.  240.15Fh-3(b), including 
in connection with material incentives and conflicts of interest 
associated with the non-U.S. person relying on the exception;
    (2) Section 240.15Fh-3(f)(1); provided, however, that if the 
registered entity described in paragraph (d)(1)(i) of this section 
reasonably determines that the counterparty to whom it recommends a 
security-based swap or trading strategy involving a security-based swap 
is an ``institutional counterparty'' as defined in Sec.  240.15Fh-
3(f)(4), the registered entity instead may fulfill its obligations under 
Sec.  240.15Fh-3(f)(1)(ii) if it discloses to the counterparty that it 
is not undertaking to assess the suitability of the security-based swap 
or trading strategy involving a security-based swap for the 
counterparty;
    (3) Section 15F(h)(3)(C) of the Act and Sec.  240.15Fh-3(g); and
    (4) Sections 240.15Fi-1 and 240.15Fi-2.
    (iii) Commission access to books, records and testimony. (A) The 
non-U.S. person relying on this exception promptly provides 
representatives of the Commission (upon request of the Commission or its 
representatives or pursuant to a supervisory or enforcement memorandum 
of understanding or other arrangement or agreement reached between any 
foreign securities authority, including any foreign government, as 
specified in section 3(a)(50) of the Act, and the Commission or the U.S. 
Government) with any information or documents within the non-U.S. 
person's possession, custody, or control, promptly makes its foreign 
associated persons available for testimony, and provides any assistance 
in taking the evidence of other persons, wherever located, that the 
Commission or its representatives requests and that relates to 
transactions subject to this exception; provided, however, that if, 
after exercising its best efforts, the non-U.S. person is prohibited by 
applicable foreign law or regulations from providing such information, 
documents, testimony, or assistance, the non-U.S. person may continue to 
rely on this exception until the Commission issues an order modifying or 
withdrawing an associated ``listed jurisdiction'' determination pursuant 
to paragraph (d)(2)(iii) of this section.
    (B) The registered entity described in paragraph (d)(1)(i) of this 
section:
    (1) Creates and maintains books and records relating to the 
transactions subject to this exception that are required, as applicable, 
by Sec. Sec.  240.17a-3 and 240.17a-4, or by Sec. Sec.  240.18a-5 and 
240.18a-6, including any books and records requirements relating to the 
provisions specified in paragraph (d)(1)(ii)(B) of this section;
    (2) Obtains from the non-U.S. person relying on the exception, and 
maintains for not less than three years following the activity described 
in paragraph (d)(1)(i) of this section, the first

[[Page 70]]

two years in an easily accessible place, documentation regarding such 
non-U.S. person's compliance with the condition in paragraph (d)(1)(vii) 
of this section;
    (3) Obtains from the non-U.S. person relying on the exception, and 
maintains for not less than three years following the activity described 
in paragraph (d)(1)(i) of this section, the first two years in an easily 
accessible place, documentation encompassing all terms governing the 
trading relationship between the non-U.S. person and its counterparty 
relating to the transactions subject to this exception, including, 
without limitation, terms addressing payment obligations, netting of 
payments, events of default or other termination events, calculation and 
netting of obligations upon termination, transfer of rights and 
obligations, allocation of any applicable regulatory reporting 
obligations, governing law, valuation, and dispute resolution; and
    (4) Obtains from the non-U.S. person relying on this exception, and 
maintains for not less than three years following the activity described 
in paragraph (d)(1)(i) of this section, the first two years in an easily 
accessible place, written consent to service of process for any civil 
action brought by or proceeding before the Commission, providing that 
process may be served on the non-U.S. person by service on the 
registered entity in the manner set forth in the registered entity's 
current Form BD, SBSE, SBSE-A or SBSE-BD, as applicable.
    (iv) Counterparty notification In connection with the transaction, 
the registered entity described in paragraph (d)(1)(i) of this section 
notifies the counterparties of the non-U.S. person relying on this 
exception that the non-U.S. person is not registered with the Commission 
as a security-based swap dealer, and that certain Exchange Act 
provisions or rules addressing the regulation of security-based swaps 
would not be applicable in connection with the transaction, including 
provisions affording clearing rights to counterparties. Such notice 
shall be provided contemporaneously with, and in the same manner as, the 
arranging, negotiating, or executing activity at issue; provided, 
however, that during a period in which a counterparty is neither a 
customer (as such term is defined in Sec.  240.15c3-3) of the registered 
entity described in paragraph (d)(1)(i) of this section (if such 
registered entity is a registered broker or dealer) nor a counterparty 
to a security-based swap with the registered entity described in 
paragraph (d)(1)(i) of this section, such notice need only be provided 
contemporaneously with, and in the same manner as, the first such 
arranging, negotiating, or executing activity during such period. This 
disclosure will not be required if the identity of that counterparty is 
not known to that registered entity at a reasonably sufficient time 
prior to the execution of the transaction to permit such disclosure.
    (v) Subject to regulation of a listed jurisdiction. The non-U.S. 
person relying on this exception is subject to the margin and capital 
requirements of a listed jurisdiction when engaging in the transactions 
subject to this exception.
    (vi) Notice by registered entity. Before an associated person of the 
registered entity described in paragraph (d)(1)(i) of this section 
commences the activity described in paragraph (d)(1)(i) of this section, 
such registered entity shall file with the Commission a notice that its 
associated persons may conduct such activity. Such registered entity 
shall file this notice by submitting it to the electronic mailbox 
described on the Commission's website at www.sec.gov at the ``ANE 
Exception Notices'' section. The Commission shall publicly post such 
notice on the same section of its website.
    (vii) Limitation for covered inter-dealer security-based swaps. The 
aggregate gross notional amount of covered inter-dealer security-based 
swap positions connected with dealing activity subject to the exception 
in this paragraph (d) engaged in by persons described in paragraph 
(d)(6)(i) of this section over the course of the immediately preceding 
12 months does not exceed $50 billion.
    (2) Order for listed jurisdiction designation. The Commission by 
order, may conditionally or unconditionally determine that a foreign 
jurisdiction is a listed jurisdiction for purposes of this section. The 
Commission may make

[[Page 71]]

listed jurisdiction determinations in response to applications, or upon 
the Commission's own initiative.
    (i) Applications. Applications for an order requesting listed 
jurisdiction status may be made by a party or group of parties that 
potentially would seek to rely on the exception provided by paragraph 
(d) of this section, or by any foreign financial regulatory authority or 
authorities supervising such a party or its security-based swap 
activities. Applications must be filed pursuant to the procedures set 
forth in Sec.  240.0-13.
    (ii) Criteria considered. In considering a foreign jurisdiction's 
potential status as a listed jurisdiction, the Commission may consider 
factors relevant for purposes of assessing whether such an order would 
be in the public interest, including:
    (A) Applicable margin and capital requirements of the foreign 
financial regulatory system; and
    (B) The effectiveness of the supervisory compliance program 
administered by, and the enforcement authority exercised by, the foreign 
financial regulatory authority in connection with such requirements, 
including the application of those requirements in connection with an 
entity's cross-border business.
    (iii) Withdrawal or modification of listed jurisdiction status. The 
Commission may, on its own initiative, by order after notice and 
opportunity for comment, modify or withdraw a jurisdiction's status as a 
listed jurisdiction, if the Commission determines that continued listed 
jurisdiction status no longer would be in the public interest, based on:
    (A) The criteria set forth in paragraph (d)(2)(ii) of this section;
    (B) Any laws or regulations that have had the effect of preventing 
the Commission or its representatives, on request, to promptly access 
information or documents regarding the activities of persons relying on 
the exception provided by this paragraph (d), to obtain the testimony of 
their foreign associated persons, and to obtain the assistance of 
persons relying on this exception in taking the evidence of other 
persons, wherever located, as described in paragraph (d)(1)(iii)(A) of 
this section; and
    (C) Any other factor the Commission determines to be relevant to 
whether continued status as a listed jurisdiction would be in the public 
interest.
    (3) Exception for person that engages in arranging, negotiating, or 
executing activity as agent. The registered entity described in 
paragraph (d)(1)(i) of this section need not count, against the de 
minimis thresholds described in Sec.  240.3a71-2(a)(1), the transactions 
described by paragraph (d) of this section.
    (4) Limited exemption from registration as a broker. A registered 
security-based swap dealer and its associated persons who conduct the 
activities described in paragraph (d)(1)(i) of this section shall not be 
subject to registration as a broker pursuant to section 15(a)(1) of the 
Act solely because the registered entity or the associated person 
conducts any activity described in paragraph (d)(1)(i) of this section 
with or for a person that is an eligible contract participant, provided 
that:
    (i) The conditions of paragraph (d)(1) of this section are satisfied 
in connection with such activities; and
    (ii) If Sec.  240.10b-10 would apply to an activity subject to the 
exception in paragraph (d)(1)(i), such registered security-based swap 
dealer provides to the customer the disclosures required by Sec.  
240.10b-10(a)(2) (excluding Sec.  240.10b-10(a)(2)(i) and (ii)) and 
Sec.  240.10b-10(a)(8) in accordance with the time and form requirements 
set forth in Sec.  240.15Fi-2(b) and (c) or, alternatively, promptly 
after discovery of any defect in the registered security-based swap 
dealer's good faith effort to comply with such requirements.
    (5) Exemption from Sec.  240.10b-10. A broker or dealer that is also 
a registered security-based swap dealer or registered broker described 
in paragraph (d)(1)(i) of this section shall be exempt from the 
requirements of Sec.  240.10b-10 with respect to activity described in 
paragraph (d)(1)(i) of this section, provided that such broker or 
dealer:
    (i) Complies with paragraph (d)(1)(ii)(B)(4) of this section in 
connection with such activity; and
    (ii) Provides to the customer the disclosures required by Sec.  
240.10b-10(a)(2) (excluding Sec.  240.10b-10(a)(2)(i) and (ii)) and 
Sec.  240.10b-10(a)(8) in accordance with

[[Page 72]]

the time and form requirements set forth in Sec.  240.15Fi-2(b) and (c) 
or, alternatively, promptly after discovery of any defect in the broker 
or dealer's good faith effort to comply with such requirements.
    (6) Limitation for covered inter-dealer security-based swaps--(i) 
Scope of limitation for covered inter-dealer security-based swaps. The 
threshold described in paragraph (d)(1)(vii) of this section applies to 
covered inter-dealer security-based swap positions connected with 
dealing activity subject to the exception in this paragraph (d) engaged 
in by any of the following persons:
    (A) The non-U.S. person relying on the exception in this paragraph 
(d); and
    (B) Any affiliate of such person, except for an affiliate that is 
deemed not to be a security-based swap dealer pursuant to Rule 3a71-
2(b).
    (ii) Impact of exceeding exception threshold. If the threshold 
described in paragraph (d)(1)(vii) of this section is exceeded, then
    (A) As of the date the condition in paragraph (d)(1)(vii) of this 
section is no longer satisfied, the non-U.S. person that is no longer 
able to satisfy that condition may not rely on the exception in this 
paragraph (d) for future security-based swap transactions.
    (B) For purposes of calculating the amount of security-based swap 
positions connected with dealing activity under Sec.  240.3a71-2(a)(1), 
the non-U.S. person that is no longer able to satisfy the condition in 
paragraph (d)(1)(vii) of this section shall include all covered inter-
dealer security-based swap positions connected with dealing activity 
subject to the exception in this paragraph (d) engaged in by persons 
described in paragraph (d)(6)(i) of this section over the course of the 
immediately preceding 12 months, such positions to be included in such 
calculation as of the date that the condition in paragraph (d)(1)(vii) 
of this section is no longer satisfied.

[79 FR 47370, Aug. 12, 2014, as amended at 81 FR 8637, Feb. 19, 2016, 81 
FR 30142, May 13, 2016; 85 FR 6350, Feb. 4, 2020]



Sec.  240.3a71-4  Exception from aggregation for affiliated groups with
registered security-based swap dealers.

    Notwithstanding Sec. Sec.  240.3a71-2(a)(1) and 240.3a71-3(b)(2), a 
person shall not include the security-based swap transactions of another 
person (an ``affiliate'') controlling, controlled by, or under common 
control with such person where such affiliate either is:
    (a) Registered with the Commission as a security-based swap dealer; 
or
    (b) Deemed not to be a security-based swap dealer pursuant to Sec.  
240.3a71-2(b).

[79 FR 47370, Aug. 12, 2014]



Sec.  240.3a71-5  Exception for cleared transactions executed on a swap
execution facility.

    (a) For purposes of Sec.  240.3a71-3(b)(1), a non-U.S. person, other 
than a conduit affiliate, shall not include its security-based swap 
transactions that are entered into anonymously on an execution facility 
or national securities exchange and are cleared through a clearing 
agency; and
    (b) For purposes of Sec.  240.3a71-3(b)(2), a person shall not 
include security-based swap transactions of an affiliated non-U.S. 
person, other than a conduit affiliate, when such transactions are 
entered into anonymously on an execution facility or national securities 
exchange and are cleared through a clearing agency.
    (c) The exceptions in paragraphs (a) and (b) of this section shall 
not apply to any security-based swap transactions of a non-U.S. person 
or of an affiliated non-U.S. person connected with the person's 
security-based swap dealing activity that are arranged, negotiated, or 
executed by personnel of such non-U.S. person located in a U.S. branch 
or office, or by personnel of an agent of such non-U.S. person located 
in a U.S. branch or office.

[79 FR 47370, Aug. 12, 2014, as amended at 81 FR 8637, Feb. 19, 2016]



Sec.  240.3a71-6  Substituted compliance for security-based swap dealers
and major security-based swap participants.

    (a) Determinations--(1) In general. Subject to paragraph (a)(2) of 
this section, the Commission may, conditionally or unconditionally, by 
order,

[[Page 73]]

make a determination with respect to a foreign financial regulatory 
system that compliance with specified requirements under such foreign 
financial regulatory system by a registered security-based swap dealer 
and/or by a registered major security-based swap participant (each a 
``security-based swap entity''), or class thereof, may satisfy the 
corresponding requirements identified in paragraph (d) of this section 
that would otherwise apply to such security-based swap entity (or class 
thereof).
    (2) Standard. The Commission shall not make a substituted compliance 
determination under paragraph (a)(1) of this section unless the 
Commission:
    (i) Determines that the requirements of such foreign financial 
regulatory system applicable to such security-based swap entity (or 
class thereof) or to the activities of such security-based swap entity 
(or class thereof) are comparable to otherwise applicable requirements, 
after taking into account such factors as the Commission determines are 
appropriate, such as the scope and objectives of the relevant foreign 
regulatory requirements (taking into account the applicable criteria set 
forth in paragraph (d) of this section), as well as the effectiveness of 
the supervisory compliance program administered, and the enforcement 
authority exercised, by a foreign financial regulatory authority or 
authorities in such system to support its oversight of such security-
based swap entity (or class thereof) or of the activities of such 
security-based swap entity (or class thereof); and
    (ii) Has entered into a supervisory and enforcement memorandum of 
understanding and/or other arrangement with the relevant foreign 
financial regulatory authority or authorities under such foreign 
financial regulatory system addressing supervisory and enforcement 
cooperation and other matters arising under the substituted compliance 
determination.
    (3) Withdrawal or modification. The Commission may, on its own 
initiative, by order, modify or withdraw a substituted compliance 
determination under paragraph (a)(1) of this section, after appropriate 
notice and opportunity for comment.
    (b) Reliance by security-based swap entities. A registered security-
based swap entity may satisfy the requirements described in paragraph 
(d) of this section by complying with corresponding law, rules and 
regulations under a foreign financial regulatory system, provided:
    (1) The Commission has made a substituted compliance determination 
pursuant to paragraph (a)(1) of this section regarding such foreign 
financial regulatory system providing that compliance with specified 
requirements under such foreign financial regulatory system by such 
registered security-based swap entity (or class thereof) may satisfy the 
corresponding requirements described in paragraph (d) of this section; 
and
    (2) Such registered security-based swap entity satisfies any 
conditions set forth in a substituted compliance determination made by 
the Commission pursuant to paragraph (a)(1) of this section.
    (c) Requests for determinations. (1) A party or group of parties 
that potentially would comply with specified requirements pursuant to 
paragraph (a)(1), or any foreign financial regulatory authority or 
authorities supervising such a party or its security-based swap 
activities, may file an application, pursuant to the procedures set 
forth in Sec.  240.0-13, requesting that the Commission make a 
substituted compliance determination pursuant to paragraph (a)(1) of 
this section, with respect to one or more requirements described in 
paragraph (d) of this section.
    (2) Such a party or group of parties may make a request under 
paragraph (c)(1) of this section only if:
    (i) Each such party, or the party's activities, is directly 
supervised by the foreign financial regulatory authority or authorities 
with respect to the foreign regulatory requirements relating to the 
applicable requirements described in paragraph (d) of this section; and
    (ii) Each such party provides the certification and opinion of 
counsel as described in Sec.  240.15Fb2-4(c), as if the party were 
subject to that requirement at the time of the request.

[[Page 74]]

    (3) Such foreign financial authority or authorities may make a 
request under paragraph (c)(1) of this section only if each such 
authority provides adequate assurances that no law or policy of any 
relevant foreign jurisdiction would impede the ability of any entity 
that is directly supervised by the foreign financial regulatory 
authority and that may register with the Commission as a security-based 
swap dealer or major security-based swap participant to provide prompt 
access to the Commission to such entity's books and records or to submit 
to onsite inspection or examination by the Commission.
    (d) Eligible requirements. The Commission may make a substituted 
compliance determination under paragraph (a)(1) of this section to 
permit security-based swap entities that are not U.S. persons (as 
defined in Sec.  240.3a71-3(a)(4)), but not security-based swap entities 
that are U.S. persons, to satisfy the following requirements by 
complying with comparable foreign requirements:
    (1) Business conduct and supervision. The business conduct and 
supervision requirements of sections 15F(h) and (j) of the Act (15 
U.S.C. 78o-10(h) and (j)) and Sec. Sec.  240.15Fh-3 through 15Fh-6, 
other than the antifraud provisions of section 15F(h)(4)(A) of the Act 
and Sec.  240.15Fh-4(a), and other than the provisions of sections 
15F(j)(3) and 15F(j)(4)(B) of the Act; provided, however, that prior to 
making such a substituted compliance determination the Commission 
intends to consider whether the information that is required to be 
provided to counterparties pursuant to the requirements of the foreign 
financial regulatory system, the counterparty protections under the 
requirements of the foreign financial regulatory system, the mandates 
for supervisory systems under the requirements of the foreign financial 
regulatory system, and the duties imposed by the foreign financial 
regulatory system, are comparable to those associated with the 
applicable provisions arising under the Act and its rules and 
regulations.
    (2) Chief compliance officer. The chief compliance officer 
requirements of section 15F(k) of the Act (15 U.S.C. 78o-10(k)) and 
Sec.  240.15Fk-1; provided, however, that prior to making such a 
substituted compliance determination the Commission intends to consider 
whether the requirements of the foreign financial regulatory system 
regarding chief compliance officer obligations are comparable to those 
required pursuant to the applicable provisions arising under the Act and 
its rules and regulations.
    (3) Trade acknowledgment and verification. The trade acknowledgment 
and verification requirements of section 15F(i) of the Act (15 U.S.C. 
78o-10(i)) and Sec.  240.15Fi-2; provided, however, that prior to making 
such a substituted compliance determination the Commission intends to 
consider whether the information that is required to be provided 
pursuant to the requirements of the foreign financial regulatory system, 
and the manner and timeframe by which that information must be provided, 
are comparable to those required pursuant to the applicable provisions 
arising under the Act and its rules and regulations.
    (4) Capital--(i) Security-based swap dealers. The capital 
requirements of section 15F(e) of the Act (15 U.S.C. 78o-10(e)) and 
Sec.  240.18a-1; provided, however, that prior to making such 
substituted compliance determination, the Commission intends to consider 
(in addition to any conditions imposed) whether the capital requirements 
of the foreign financial regulatory system are designed to help ensure 
the safety and soundness of registrants in a manner that is comparable 
to the applicable provisions arising under the Act and its rules and 
regulations.
    (ii) Major security-based swap participants. The capital 
requirements of section 15F(e) of the Act (15 U.S.C. 78o-10(e)) and 
Sec.  240.18a-2; provided, however, that prior to making such 
substituted compliance determination, the Commission intends to consider 
(in addition to any conditions imposed) whether the capital requirements 
of the foreign financial regulatory system are comparable to the 
applicable provisions arising under the Act and its rules and 
regulations.
    (5) Margin--(i) Security-based swap dealers. The margin requirements 
of section 15F(e) of the Act (15 U.S.C. 78o-10(e)) and Sec.  240.18a-3; 
provided, however,

[[Page 75]]

that prior to making such substituted compliance determination, the 
Commission intends to consider (in addition to any conditions imposed) 
whether the foreign financial regulatory system requires registrants to 
adequately cover their current and potential future exposure to over-
the-counter derivatives counterparties, and ensures registrants' safety 
and soundness, in a manner comparable to the applicable provisions 
arising under the Act and its rules and regulations.
    (ii) Major security-based swap participants. The margin requirements 
of section 15F(e) of the Act (15 U.S.C. 78o-10(e)) and Sec.  240.18a-3; 
provided, however, that prior to making such substituted compliance 
determination, the Commission intends to consider (in addition to any 
conditions imposed) whether the foreign financial regulatory system 
requires registrants to adequately cover their current exposure to over-
the-counter derivatives counterparties, and ensures registrants' safety 
and soundness, in a manner comparable to the applicable provisions 
arising under the Act and its rules and regulations.
    (6) Recordkeeping and reporting. The recordkeeping and reporting 
requirements of Section 15F of the Act (15 U.S.C. 78o-10) and Sec. Sec.  
240.18a-5 through 240.18a-9; provided, however, that prior to making 
such a substituted compliance determination the Commission intends to 
consider (in addition to any conditions imposed), whether the foreign 
financial regulatory system's required records and reports, the 
timeframes for recording or reporting information, the accounting 
standards governing the records and reports, and the required format of 
the records and reports are comparable to applicable provisions arising 
under the Act and its rules and regulations and would permit the 
Commission to examine and inspect regulated firms' compliance with the 
applicable securities laws.
    (7) Portfolio reconciliation, portfolio compression, and trading 
relationship documentation requirements. The portfolio reconciliation, 
portfolio compression, and trading relationship documentation 
requirements of section 15F(i) of the Act (15 U.S.C. 78o-10(i)) and 
Sec. Sec.  240.15Fi-3 through 240.15Fi-5; provided, however, that prior 
to making such a substituted compliance determination the Commission 
intends to consider whether the requirements of the foreign financial 
regulatory system for engaging in portfolio reconciliation and portfolio 
compression and for executing trading relationship documentation with 
counterparties, the duties imposed by the foreign financial regulatory 
system, and the information that is required to be provided to 
counterparties pursuant to the requirements of the foreign financial 
regulatory system, are comparable to those required pursuant to the 
applicable provisions arising under the Act and its rules and 
regulations.

[81 FR 30143, May 13, 2016, as amended at 81 FR 39844, June 17, 2016; 84 
FR 44041, Aug. 22, 2019; 84 FR 68646, Dec. 16, 2019; 85 FR 6412, Feb. 4, 
2020]

                               Definitions



Sec.  240.3b-1  Definition of ``listed''.

    The term listed means admitted to full trading privileges upon 
application by the issuer or its fiscal agent or, in the case of the 
securities of a foreign corporation, upon application by a banker 
engaged in distributing them; and includes securities for which 
authority to add to the list on official notice of issuance has been 
granted.

(Sec. 3, 48 Stat. 884; 15 U.S.C. 78c)

[13 FR 8179, Dec. 22, 1948]



Sec.  240.3b-2  Definition of ``officer''.

    The term officer means a president, vice president, secretary, 
treasury or principal financial officer, comptroller or principal 
accounting officer, and any person routinely performing corresponding 
functions with respect to any organization whether incorporated or 
unincorporated.

[47 FR 11464, Mar. 16, 1982; 47 FR 11819, Mar. 19, 1982]



Sec.  240.3b-3  [Reserved]



Sec.  240.3b-4  Definition of ``foreign government,'' ``foreign issuer''
and ``foreign private issuer''.

    (a) The term foreign government means the government of any foreign 
country or of any political subdivision of a foreign country.

[[Page 76]]

    (b) The term foreign issuer means any issuer which is a foreign 
government, a national of any foreign country or a corporation or other 
organization incorporated or organized under the laws of any foreign 
country.
    (c) The term foreign private issuer means any foreign issuer other 
than a foreign government except for an issuer meeting the following 
conditions as of the last business day of its most recently completed 
second fiscal quarter:
    (1) More than 50 percent of the issuer's outstanding voting 
securities are directly or indirectly held of record by residents of the 
United States; and
    (2) Any of the following:
    (i) The majority of the executive officers or directors are United 
States citizens or residents;
    (ii) More than 50 percent of the assets of the issuer are located in 
the United States; or
    (iii) The business of the issuer is administered principally in the 
United States.

    Note to paragraph (c)(1): To determine the percentage of outstanding 
voting securities held by U.S. residents:
    A. Use the method of calculating record ownership in Sec.  240.12g3-
2(a), except that:
    (1) Your inquiry as to the amount of shares represented by accounts 
of customers resident in the United States may be limited to brokers, 
dealers, banks and other nominees located in:
    (i) The United States,
    (ii) Your jurisdiction of incorporation, and
    (iii) The jurisdiction that is the primary trading market for your 
voting securities, if different than your jurisdiction of incorporation; 
and
    (2) Notwithstanding Sec.  240.12g5-1(a)(8) of this chapter, you 
shall not exclude securities held by persons who received the securities 
pursuant to an employee compensation plan.
    B. If, after reasonable inquiry, you are unable to obtain 
information about the amount of shares represented by accounts of 
customers resident in the United States, you may assume, for purposes of 
this definition, that the customers are residents of the jurisdiction in 
which the nominee has its principal place of business.
    C. Count shares of voting securities beneficially owned by residents 
of the United States as reported on reports of beneficial ownership 
provided to you or filed publicly and based on information otherwise 
provided to you.

    (d) Notwithstanding paragraph (c) of this section, in the case of a 
new registrant with the Commission, the determination of whether an 
issuer is a foreign private issuer will be made as of a date within 30 
days prior to the issuer's filing of an initial registration statement 
under either the Act or the Securities Act of 1933.
    (e) Once an issuer qualifies as a foreign private issuer, it will 
immediately be able to use the forms and rules designated for foreign 
private issuers until it fails to qualify for this status at the end of 
its most recently completed second fiscal quarter. An issuer's 
determination that it fails to qualify as a foreign private issuer 
governs its eligibility to use the forms and rules designated for 
foreign private issuers beginning on the first day of the fiscal year 
following the determination date. Once an issuer fails to qualify for 
foreign private issuer status, it will remain unqualified unless it 
meets the requirements for foreign private issuer status as of the last 
business day of its second fiscal quarter.

[32 FR 7848, May 30, 1967, as amended at 48 FR 46739, Oct. 14, 1983; 64 
FR 53912, Oct. 5, 1999; 73 FR 58323, Oct. 6, 2008; 81 FR 28705, May 10, 
2016]



Sec.  240.3b-5  Non-exempt securities issued under governmental 
obligations.

    (a) Any part of an obligation evidenced by any bond, note, 
debenture, or other evidence of indebtedness issued by any governmental 
unit specified in section 3(a)(12) of the Act which is payable from 
payments to be made in respect of property or money which is or will be 
used, under a lease, sale, or loan arrangement, by or for industrial or 
commercial enterprise, shall be deemed to be a separate ``security'' 
within the meaning of section 3(a)(10) of the Act, issued by the lessee 
or obligor under the lease, sale or loan arrangement.
    (b) An obligation shall not be deemed a separate ``security'' as 
defined in paragraph (a) of this section if, (1) the obligation is 
payable from the general revenues of a governmental unit, specified in 
section 3(a)(12) of the Act, having other resources which may be used 
for the payment of the obligation, or

[[Page 77]]

(2) the obligation relates to a public project or facility owned and 
operated by or on behalf of and under the control of a governmental unit 
specified in such section, or (3) the obligation relates to a facility 
which is leased to and under the control of an industrial or commercial 
enterprise but is a part of a public project which, as a whole, is owned 
by and under the general control of a governmental unit specified in 
such section, or an instrumentality thereof.
    (c) This rule shall apply to transactions of the character described 
in paragraph (a) of this section only with respect to bonds, notes, 
debentures or other evidences of indebtedness sold after December 31, 
1968.

(Sec. 3, 48 Stat. 882; 15 U.S.C. 78c, 77s)

[33 FR 12648, Sept. 6, 1968, as amended at 35 FR 6000, Apr. 11, 1970]



Sec.  240.3b-6  Liability for certain statements by issuers.

    (a) A statement within the coverage of paragraph (b) of this section 
which is made by or on behalf of an issuer or by an outside reviewer 
retained by the issuer shall be deemed not to be a fraudulent statement 
(as defined in paragraph (d) of this section), unless it is shown that 
such statement was made or reaffirmed without a reasonable basis or was 
disclosed other than in good faith.
    (b) This rule applies to the following statements:
    (1) A forward-looking statement (as defined in paragraph (c) of this 
section) made in a document filed with the Commission, in Part I of a 
quarterly report on Form 10-Q, Sec.  249.308a of this chapter, or in an 
annual report to security holders meeting the requirements of Rules 14a-
3(b) and (c) or 14c-3(a) and (b) (Sec.  240.14a-3(b) and (c) or Sec.  
240.14c-3(a) and (b)), a statement reaffirming such forward-looking 
statement after the date the document was filed or the annual report was 
made publicly available, or a forward-looking statement made before the 
date the document was filed or the date the annual report was made 
publicly available if such statement is reaffirmed in a filed document, 
in Part I of a quarterly report on Form 10-Q, or in an annual report 
made publicly available within a reasonable time after the making of 
such forward-looking statement; Provided, that:
    (i) At the time such statements are made or reaffirmed, either the 
issuer is subject to the reporting requirements of Section 13(a) or 
15(d) of the Act and has complied with the requirements of Rule 13a-1 or 
15d-1 thereunder, if applicable, to file its most recent annual report 
on Form 10-K, Form 20-F or Form 40-F; or if the issuer is not subject to 
the reporting requirements of Section 13(a) or 15(d) of the Act, the 
statements are made in a registration statement filed under the 
Securities Act of 1933 offering statement or solicitation of interest, 
written document or broadcast script under Regulation A or pursuant to 
Section 12(b) or (g) of the Securities Exchange Act of 1934; and
    (ii) The statements are not made by or on behalf of an issuer that 
is an investment company registered under the Investment Company Act of 
1940; and
    (2) Information that is disclosed in a document filed with the 
Commission in Part I of a quarterly report on Form 10-Q (Sec.  249.308a 
of this chapter) or in an annual report to security holders meeting the 
requirements of Rules 14a-3(b) and (c) or 14c-3(a) and (b) under the Act 
(Sec.  240.14a-3(b) and (c) or Sec.  240.14c-3(a) and (b) of this 
chapter) and that relates to:
    (i) The effects of changing prices on the business enterprise, 
presented voluntarily or pursuant to Item 303 of Regulation S-K (Sec.  
229.303 of this chapter), ``Management's Discussion and Analysis of 
Financial Condition and Results of Operations,'' Item 5 of Form 20-F 
(Sec.  240.220(f) of this chapter), ``Operating and Financial Review and 
Prospects,'' Item 302 of Regulation S-K (Sec.  229.302 of this chapter) 
``Supplementary Financial Information,'' or Rule 3-20(c) of Regulation 
S-X (Sec.  210.3-20(c) of this chapter); or
    (ii) The value of proved oil and gas reserves (such as a 
standardized measure of discounted future net cash flows relating to 
proved oil and gas reserves as set forth in FASB ASC paragraphs 932-235-
50-29 through 932-235-50-36 (Extractive Activities--Oil and Gas Topic)), 
presented voluntarily or pursuant to Item 302 of Regulation S-K (Sec.  
229.302 of this chapter).

[[Page 78]]

    (c) For the purpose of this rule, the term forward-looking statement 
shall mean and shall be limited to:
    (1) A statement containing a projection of revenues, income (loss), 
earnings (loss) per share, capital expenditures, dividends, capital 
structure or other financial items;
    (2) A statement of management's plans and objectives for future 
operations;
    (3) A statement of future economic performance contained in 
management's discussion and analysis of financial condition and results 
of operations included pursuant to Item 303 of Regulation S-K (Sec.  
229.303 of this chapter) or Item 5 of Form 20-F or
    (4) Disclosed statements of the assumptions underlying or relating 
to any of the statements described in paragraphs (c) (1), (2), or (3) of 
this section.
    (d) For the purpose of this rule the term fraudulent statement shall 
mean a statement which is an untrue statement of a material fact, a 
statement false or misleading with respect to any material fact, an 
omission to state a material fact necessary to make a statement not 
misleading, or which constitutes the employment of a manipulative, 
deceptive, or fraudulent device, contrivance, scheme, transaction, act, 
practice, course of business, or an artifice to defraud, as those terms 
are used in the Securities Exchange Act of 1934 or the rules or 
regulations promulgated thereunder.

[46 FR 13990, Feb. 25, 1981, as amended at 46 FR 19457, Mar. 31, 1981; 
47 FR 11464, Mar. 16, 1982; 47 FR 54780, Dec. 6, 1982; 47 FR 57915, Dec. 
29, 1982; 48 FR 19876, May 3, 1983; 56 FR 30067, July 1, 1991; 57 FR 
36494, Aug. 13, 1992; 64 FR 53912, Oct. 5, 1999; 73 FR 973, Jan. 4, 
2008; 76 FR 50122, Aug. 12, 2011]



Sec.  240.3b-7  Definition of ``executive officer''.

    The term executive officer, when used with reference to a 
registrant, means its president, any vice president of the registrant in 
charge of a principal business unit, division or function (such as 
sales, administration or finance), any other officer who performs a 
policy making function or any other person who performs similar policy 
making functions for the registrant. Executive officers of subsidiaries 
may be deemed executive officers of the registrant if they perform such 
policy making functions for the registrant.

[47 FR 11464, Mar. 16, 1982, as amended at 56 FR 7265, Feb. 21, 1991]



Sec.  240.3b-8  Definitions of ``Qualified OTC Market Maker, Qualified
Third Market Maker'' and ``Qualified Block Positioner''.

    For the purposes of Regulation U under the Act (12 CFR part 221):
    (a) The term Qualified OTC Market Maker in an over-the-counter 
(``OTC'') margin security means a dealer in any ``OTC Margin Security'' 
(as that term is defined in section 2(j) of Regulation U (12 CFR 
221.2(j)) who (1) is a broker or dealer registered pursuant to section 
15 of the Act, (2) is subject to and is in compliance with Rule 15c3-1 
(17 CFR 240.15c3-1), (3) has and maintains minimum net capital, as 
defined in Rule 15c3-1, of the lesser of (i) $250,000 or (ii) $25,000 
plus $5,000 for each security in excess of five with regard to which the 
broker or dealer is, or is seeking to become a Qualified OTC Market 
Maker, and (4) except when such activity is unlawful, meets all of the 
following conditions with respect to such security: (i) He regularly 
publishes bona fide, competitive bid and offer quotations in a 
recognized inter-dealer quotation system, (ii) he furnishes bona fide, 
competitive bid and offer quotations to other brokers and dealers on 
request, (iii) he is ready, willing and able to effect transactions in 
reasonable amounts, and at his quoted prices, with other brokers and 
dealers, and (iv) he has a reasonable average rate of inventory turnover 
in such security.
    (b) The term Qualified Third Market Maker means a dealer in any 
stock registered on a national securities exchange (``exchange'') who 
(1) is a broker or dealer registered pursuant to section 15 of the Act, 
(2) is subject to and is in compliance with Rule 15c3-1 (17 CFR 
240.15c3-1), (3) has and maintains minimum net capital, as defined in 
Rule 15c3-1, of the lesser of (i) $500,000 or (ii) $100,000 plus $20,000 
for each security in excess of five with regard to which the broker or 
dealer is, or is seeking to become, a Qualified Third Market Maker, and 
(4) except

[[Page 79]]

when such activity is unlawful, meets all of the following conditions 
with respect to such security: (i) He furnishes bona fide, competitive 
bid and offer quotations at all times to other brokers and dealers on 
request, (ii) he is ready, willing and able to effect transactions for 
his own account in reasonable amounts, and at his quoted prices with 
other brokers and dealers, and (iii) he has a reasonable average rate of 
inventory turnover in such security.
    (c) The term Qualified Block Positioner means a dealer who (1) is a 
broker or dealer registered pursuant to section 15 of the Act, (2) is 
subject to and in compliance with Rule 15c3-1 (17 CFR 240.15c3-1), (3) 
has and maintains minimum net capital, as defined in Rule 15c3-1 of 
$1,000,000 and (4) except when such activity is unlawful, meets all of 
the following conditions: (i) He engages in the activity of purchasing 
long or selling short, from time to time, from or to a customer (other 
than a partner or a joint venture or other entity in which a partner, 
the dealer, or a person associated with such dealer, as defined in 
section 3(a) (18) of the Act, participates) a block of stock with a 
current market value of $200,000 or more in a single transaction, or in 
several transactions at approximately the same time, from a single 
source to facilitate a sale or purchase by such customer, (ii) he has 
determined in the exercise of reasonable diligence that the block could 
not be sold to or purchased from others on equivalent or better terms, 
and (iii) he sells the shares comprising the block as rapidly as 
possible commensurate with the circumstances.

(15 U.S.C. 78a et seq., as amended by Pub. L. 94-29 (June 4, 1975), 
particularly secs. 2, 3, 11, 15, 17 and 23 thereof (15 U.S.C. 78b, 78c, 
78k, 78o, 78q and 78w))

[48 FR 39606, Sept. 1, 1983]



Sec. Sec.  240.3b-9--240.3b-10  [Reserved]



Sec.  240.3b-11  Definitions relating to limited partnership roll-up
transactions for purposes of sections 6(b)(9), 14(h) and 15A(b)(12)-(13).

    For purposes of sections 6(b)(9), 14(h) and 15A(b)(12)-(13) of the 
Act (15 U.S.C. 78f(b)(9), 78n(h) and 78o-3(b)(12)-(13)):
    (a) The term limited partnership roll-up transaction does not 
include a transaction involving only entities that are not ``finite-
life'' as defined in Item 901(b)(2) of Regulation S-K (Sec.  
229.901(b)(2) of this chapter).
    (b) The term limited partnership roll-up transaction does not 
include a transaction involving only entities registered under the 
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) or any Business 
Development Company as defined in section 2(a)(48) of that Act (15 
U.S.C. 80a-2(a)(48)).
    (c) The term regularly traded shall be defined as in Item 
901(c)(2)(v)(C) of Regulation S-K (Sec.  229.901(c)(2)(v)(C) of this 
chapter).

[59 FR 63684, Dec. 8, 1994]



Sec.  240.3b-12  Definition of OTC derivatives dealer.

    The term OTC derivatives dealer means any dealer that is affiliated 
with a registered broker or dealer (other than an OTC derivatives 
dealer), and whose securities activities:
    (a) Are limited to:
    (1) Engaging in dealer activities in eligible OTC derivative 
instruments that are securities;
    (2) Issuing and reacquiring securities that are issued by the 
dealer, including warrants on securities, hybrid securities, and 
structured notes;
    (3) Engaging in cash management securities activities;
    (4) Engaging in ancillary portfolio management securities 
activities; and
    (5) Engaging in such other securities activities that the Commission 
designates by order pursuant to Sec.  240.15a-1(b)(1); and
    (b) Consist primarily of the activities described in paragraphs 
(a)(1), (a)(2), and (a)(3) of this section; and
    (c) Do not consist of any other securities activities, including 
engaging in any transaction in any security that is not an eligible OTC 
derivative instrument, except as permitted under paragraphs (a)(3), 
(a)(4), and (a)(5) of this section.
    (d) For purposes of this section, the term hybrid security means a 
security that incorporates payment features economically similar to 
options, forwards, futures, swap agreements, or collars involving 
currencies, interest or other rates, commodities, securities, indices, 
quantitative measures, or

[[Page 80]]

other financial or economic interests or property of any kind, or any 
payment or delivery that is dependent on the occurrence or nonoccurrence 
of any event associated with a potential financial, economic, or 
commercial consequence (or any combination, permutation, or derivative 
of such contract or underlying interest).

[63 FR 59394, Nov. 3, 1998]



Sec.  240.3b-13  Definition of eligible OTC derivative instrument.

    (a) Except as otherwise provided in paragraph (b) of this section, 
the term eligible OTC derivative instrument means any contract, 
agreement, or transaction that:
    (1) Provides, in whole or in part, on a firm or contingent basis, 
for the purchase or sale of, or is based on the value of, or any 
interest in, one or more commodities, securities, currencies, interest 
or other rates, indices, quantitative measures, or other financial or 
economic interests or property of any kind; or
    (2) Involves any payment or delivery that is dependent on the 
occurrence or nonoccurrence of any event associated with a potential 
financial, economic, or commercial consequence; or
    (3) Involves any combination or permutation of any contract, 
agreement, or transaction or underlying interest, property, or event 
described in paragraphs (a)(1) or (a)(2) of this section.
    (b) The term eligible OTC derivative instrument does not include any 
contract, agreement, or transaction that:
    (1) Provides for the purchase or sale of a security, on a firm 
basis, unless:
    (i) The settlement date for such purchase or sale occurs at least 
one year following the trade date or, in the case of an eligible forward 
contract, at least four months following the trade date; or
    (ii) The material economic features of the contract, agreement, or 
transaction consist primarily of features of a type described in 
paragraph (a) of this section other than the provision for the purchase 
or sale of a security on a firm basis; or
    (2) Provides, in whole or in part, on a firm or contingent basis, 
for the purchase or sale of, or is based on the value of, or any 
interest in, any security (or group or index of securities), and is:
    (i) Listed on, or traded on or through, a national securities 
exchange or registered national securities association, or facility or 
market thereof; or
    (ii) Except as otherwise determined by the Commission by order 
pursuant to Sec.  240.15a-1(b)(2), one of a class of fungible 
instruments that are standardized as to their material economic terms.
    (c) The Commission may issue an order pursuant to Sec.  240.15a-
1(b)(3) clarifying whether certain contracts, agreements, or 
transactions are within the scope of eligible OTC derivative instrument.
    (d) For purposes of this section, the term eligible forward contract 
means a forward contract that provides for the purchase or sale of a 
security other than a government security, provided that, if such 
contract provides for the purchase or sale of margin stock (as defined 
in Regulation U of the Regulations of the Board of Governors of the 
Federal Reserve System, 12 CFR Part 221), such contract either:
    (1) Provides for the purchase or sale of such stock by the issuer 
thereof (or an affiliate that is not a bank or a broker or dealer); or
    (2) Provides for the transfer of transaction collateral in an amount 
that would satisfy the requirements, if any, that would be applicable 
assuming the OTC derivatives dealer party to such transaction were not 
eligible for the exemption from Regulation T of the Regulations of the 
Board of Governors of the Federal Reserve System, 12 CFR part 220, set 
forth in Sec.  240.36a1-1.

[63 FR 59395, Nov. 3, 1998]



Sec.  240.3b-14  Definition of cash management securities activities.

    The term cash management securities activities means securities 
activities that are limited to transactions involving:
    (a) Any taking possession of, and any subsequent sale or disposition 
of, collateral provided by a counterparty, or any acquisition of, and 
any subsequent sale or disposition of, collateral to be provided to a 
counterparty, in connection with any securities activities of the dealer 
permitted under Sec.  240.15a-1

[[Page 81]]

or any non-securities activities of the dealer that involve eligible OTC 
derivative instruments or other financial instruments;
    (b) Cash management, in connection with any securities activities of 
the dealer permitted under Sec.  240.15a-1 or any non-securities 
activities of the dealer that involve eligible OTC derivative 
instruments or other financial instruments; or
    (c) Financing of positions of the dealer acquired in connection with 
any securities activities of the dealer permitted under Sec.  240.15a-1 
or any non-securities activities that involve eligible OTC derivative 
instruments or other financial instruments.

[63 FR 59395, Nov. 3, 1998]



Sec.  240.3b-15  Definition of ancillary portfolio management securities
activities.

    (a) The term ancillary portfolio management securities activities 
means securities activities that:
    (1) Are limited to transactions in connection with:
    (i) Dealer activities in eligible OTC derivative instruments;
    (ii) The issuance of securities by the dealer; or
    (iii) Such other securities activities that the Commission 
designates by order pursuant to Sec.  240.15a-1(b)(1); and
    (2) Are conducted for the purpose of reducing the market or credit 
risk of the dealer or consist of incidental trading activities for 
portfolio management purposes; and
    (3) Are limited to risk exposures within the market, credit, 
leverage, and liquidity risk parameters set forth in:
    (i) The trading authorizations granted to the associated person (or 
to the supervisor of such associated person) who executes a particular 
transaction for, or on behalf of, the dealer; and
    (ii) The written guidelines approved by the governing body of the 
dealer and included in the internal risk management control system for 
the dealer pursuant to Sec.  240.15c3-4; and
    (4) Are conducted solely by one or more associated persons of the 
dealer who perform substantial duties for, or on behalf of, the dealer 
in connection with its dealer activities in eligible OTC derivative 
instruments.
    (b) The Commission may issue an order pursuant to Sec.  240.15a-
1(b)(4) clarifying whether certain securities activities are within the 
scope of ancillary portfolio management securities activities.

[63 FR 59395, Nov. 3, 1998]



Sec.  240.3b-16  Definitions of terms used in Section 3(a)(1) of the Act.

    (a) An organization, association, or group of persons shall be 
considered to constitute, maintain, or provide ``a market place or 
facilities for bringing together purchasers and sellers of securities or 
for otherwise performing with respect to securities the functions 
commonly performed by a stock exchange,'' as those terms are used in 
section 3(a)(1) of the Act, (15 U.S.C. 78c(a)(1)), if such organization, 
association, or group of persons:
    (1) Brings together the orders for securities of multiple buyers and 
sellers; and
    (2) Uses established, non-discretionary methods (whether by 
providing a trading facility or by setting rules) under which such 
orders interact with each other, and the buyers and sellers entering 
such orders agree to the terms of a trade.
    (b) An organization, association, or group of persons shall not be 
considered to constitute, maintain, or provide ``a market place or 
facilities for bringing together purchasers and sellers of securities or 
for otherwise performing with respect to securities the functions 
commonly performed by a stock exchange,'' solely because such 
organization, association, or group of persons engages in one or more of 
the following activities:
    (1) Routes orders to a national securities exchange, a market 
operated by a national securities association, or a broker-dealer for 
execution; or
    (2) Allows persons to enter orders for execution against the bids 
and offers of a single dealer; and
    (i) As an incidental part of these activities, matches orders that 
are not displayed to any person other than the dealer and its employees; 
or

[[Page 82]]

    (ii) In the course of acting as a market maker registered with a 
self-regulatory organization, displays the limit orders of such market 
maker's, or other broker-dealer's, customers; and
    (A) Matches customer orders with such displayed limit orders; and
    (B) As an incidental part of its market making activities, crosses 
or matches orders that are not displayed to any person other than the 
market maker and its employees.
    (c) For purposes of this section the term order means any firm 
indication of a willingness to buy or sell a security, as either 
principal or agent, including any bid or offer quotation, market order, 
limit order, or other priced order.
    (d) For the purposes of this section, the terms bid and offer shall 
have the same meaning as under Sec.  242.600 of this chapter.
    (e) The Commission may conditionally or unconditionally exempt any 
organization, association, or group of persons from the definition in 
paragraph (a) of this section.

[63 FR 70918, Dec. 22, 1998, as amended at 70 FR 37617, June 29, 2005]



Sec.  240.3b-17  [Reserved]



Sec.  240.3b-18  Definitions of terms used in Section 3(a)(5) of the Act.

    For the purposes of section 3(a)(5)(C) of the Act (15 U.S.C. 
78c(a)(5)(C):
    (a) The term affiliate means any company that controls, is 
controlled by, or is under common control with another company.
    (b) The term consumer-related receivable means any obligation 
incurred by any natural person to pay money arising out of a transaction 
in which the money, property, insurance, or services (being purchased) 
are primarily for personal, family, or household purposes.
    (c) The term member as it relates to the term ``syndicate of banks'' 
means a bank that is a participant in a syndicate of banks and together 
with its affiliates, other than its broker or dealer affiliates, 
originates no less than 10% of the value of the obligations in a pool of 
obligations used to back the securities issued through a grantor trust 
or other separate entity.
    (d) The term obligation means any note, draft, acceptance, loan, 
lease, receivable, or other evidence of indebtedness that is not a 
security issued by a person other than the bank.
    (e) The term originated means:
    (1) Funding an obligation at the time that the obligation is 
created; or
    (2) Initially approving and underwriting the obligation, or 
initially agreeing to purchase the obligation, provided that:
    (i) The obligation conforms to the underwriting standards or is 
evidenced by the loan documents of the bank or its affiliates, other 
than its broker or dealer affiliates; and
    (ii) The bank or its affiliates, other than its broker or dealer 
affiliates, fund the obligation in a timely manner, not to exceed six 
months after the obligation is created.
    (f) The term pool means more than one obligation or type of 
obligation grouped together to provide collateral for a securities 
offering.
    (g) The term predominantly originated means that no less than 85% of 
the value of the obligations in any pool were originated by:
    (1) The bank or its affiliates, other than its broker or dealer 
affiliates; or
    (2) Banks that are members of a syndicate of banks and affiliates of 
such banks, other than their broker or dealer affiliates, if the 
obligations or pool of obligations consist of mortgage obligations or 
consumer-related receivables.
    (3) For this purpose, the bank and its affiliates include any 
financial institution with which the bank or its affiliates have merged 
but does not include the purchase of a pool of obligations or the 
purchase of a line of business.
    (h) The term syndicate of banks means a group of banks that acts 
jointly, on a temporary basis, to issue through a grantor trust or other 
separate entity, securities backed by obligations originated by each of 
the individual banks or their affiliates, other than their broker or 
dealer affiliates.

[68 FR 8700, Feb. 24, 2003]

[[Page 83]]



Sec.  240.3b-19  Definition of ``issuer'' in section 3(a)(8) of the
Act in relation to asset-backed securities.

    The following applies with respect to asset-backed securities under 
the Act. Terms used in this section have the same meaning as in Item 
1101 of Regulation AB (Sec.  229.1101 of this chapter).
    (a) The depositor for the asset-backed securities acting solely in 
its capacity as depositor to the issuing entity is the ``issuer'' for 
purposes of the asset-backed securities of that issuing entity.
    (b) The person acting in the capacity as the depositor specified in 
paragraph (a) of this section is a different ``issuer'' from that same 
person acting as a depositor for another issuing entity or for purposes 
of that person's own securities.

[70 FR 1620, Jan. 7, 2005]

                    Clearing of Security-Based Swaps



Sec.  240.3Ca-1  Stay of clearing requirement and review by the
Commission.

    (a) After making a determination pursuant to a clearing agency's 
security-based swap submission that a security-based swap, or any group, 
category, type or class of security-based swaps, is required to be 
cleared, the Commission, on application of a counterparty to a security-
based swap or on the Commission's own initiative, may stay the clearing 
requirement until the Commission completes a review of the terms of the 
security-based swap (or group, category, type, or class of security-
based swaps) and the clearing of the security-based swap (or group, 
category, type, or class of security-based swaps) by the clearing agency 
that has accepted it for clearing.
    (b) A counterparty to a security-based swap applying for a stay of 
the clearing requirement for a security-based swap (or group, category, 
type, or class of security-based swaps) shall submit a written statement 
to the Commission that includes:
    (1) A request for a stay of the clearing requirement;
    (2) The identity of the counterparties to the security-based swap 
and a contact at the counterparty requesting the stay;
    (3) The identity of the clearing agency clearing the security-based 
swap;
    (4) The terms of the security-based swap subject to the clearing 
requirement and a description of the clearing arrangement; and
    (5) Reasons why such stay should be granted and why the security-
based swap should not be subject to a clearing requirement, specifically 
addressing the same factors a clearing agency must address in its 
security-based-swap submission pursuant to Sec.  240.19b-4(o)(3).
    (c) A stay of the clearing requirement may be granted with respect 
to a security-based swap, or the group, category, type, or class of 
security-based swaps, as determined by the Commission.
    (d) The Commission's review shall include a quantitative and 
qualitative assessment of the factors specified in Sec.  240.19b-
4(o)(3). Any clearing agency that has accepted for clearing a security-
based swap, or any group, category, type or class of security-based 
swaps, that is subject to the stay of the clearing requirement shall 
provide information requested by the Commission as necessary to assess 
any of the factors it determines to be appropriate in the course of its 
review.
    (e) Upon completion of its review, the Commission may:
    (1) Determine, subject to any terms and conditions that the 
Commission determines to be appropriate in the public interest, that the 
security-based swap, or group, category, type, or class of security-
based swaps must be cleared; or
    (2) Determine that the clearing requirement will not apply to the 
security-based swap, or group, category, type, or class of security-
based swaps, but clearing may continue on a non-mandatory basis.

[77 FR 41647, July 13, 2012]



Sec.  240.3Ca-2  Submission of security-based swaps for clearing.

    Pursuant to section 3C(a)(1) of the Act (15 U.S.C. 78c-3(a)(1)), it 
shall be unlawful for any person to engage in a security-based swap 
unless that person submits such security-based swap for clearing to a 
clearing agency that is registered under this Act or a clearing

[[Page 84]]

agency that is exempt from registration under the Act if the security-
based swap is required to be cleared. The phrase submits such security-
based swap for clearing to a clearing agency in the clearing requirement 
of Section 3C(a)(1) of the Act shall mean that the security-based swap 
will be submitted for central clearing to a clearing agency that 
functions as a central counterparty.

[77 FR 41647, July 13, 2012]

                 Registration and Exemption of Exchanges



Sec.  240.6a-1  Application for registration as a national securities
exchange or exemption from registration based on limited volume.

    (a) An application for registration as a national securities 
exchange, or for exemption from such registration based on limited 
volume, shall be filed on Form 1 (Sec.  249.1 of this chapter), in 
accordance with the instructions contained therein.
    (b) Promptly after the discovery that any information filed on Form 
1 was inaccurate when filed, the exchange shall file with the Commission 
an amendment correcting such inaccuracy.
    (c) Promptly after the discovery that any information in the 
statement, any exhibit, or any amendment was inaccurate when filed, the 
exchange shall file with the Commission an amendment correcting such 
inaccuracy.
    (d) Whenever the number of changes to be reported in an amendment, 
or the number of amendments filed, are so great that the purpose of 
clarity will be promoted by the filing of a new complete statement and 
exhibits, an exchange may, at its election, or shall, upon request of 
the Commission, file as an amendment a complete new statement together 
with all exhibits which are prescribed to be filed in connection with 
Form 1.

(Secs. 5, 6, 17, 48 Stat. 885, 897, as amended; 15 U.S.C. 78e, 78f, 78q)

[14 FR 7759, Dec. 29, 1949, as amended at 63 FR 70918, Dec. 22, 1998]



Sec.  240.6a-2  Amendments to application.

    (a) A national securities exchange, or an exchange exempted from 
such registration based on limited volume, shall file an amendment to 
Form 1, (Sec.  249.1 of this chapter), which shall set forth the nature 
and effective date of the action taken and shall provide any new 
information and correct any information rendered inaccurate, on Form 1, 
(Sec.  249.1 of this chapter), within 10 days after any action is taken 
that renders inaccurate, or that causes to be incomplete, any of the 
following:
    (1) Information filed on the Execution Page of Form 1, or amendment 
thereto; or
    (2) Information filed as part of Exhibits C, F, G, H, J, K or M, or 
any amendments thereto.
    (b) On or before June 30 of each year, a national securities 
exchange, or an exchange exempted from such registration based on 
limited volume, shall file, as an amendment to Form 1, the following:
    (1) Exhibits D and I as of the end of the latest fiscal year of the 
exchange; and
    (2) Exhibits K, M, and N, which shall be up to date as of the latest 
date practicable within 3 months of the date the amendment is filed.
    (c) On or before June 30, 2001 and every 3 years thereafter, a 
national securities exchange, or an exchange exempted from such 
registration based on limited volume, shall file, as an amendment to 
Form 1, complete Exhibits A, B, C and J. The information filed under 
this paragraph (c) shall be current as of the latest practicable date, 
but shall, at a minimum, be up to date within 3 months as of the date 
the amendment is filed.
    (d)(1) If an exchange, on an annual or more frequent basis, 
publishes, or cooperates in the publication of, any of the information 
required to be filed by paragraphs (b)(2) and (c) of this section, in 
lieu of filing such information, an exchange may:
    (i) Identify the publication in which such information is available, 
the name, address, and telephone number of the person from whom such 
publication may be obtained, and the price of such publication; and
    (ii) Certify to the accuracy of such information as of its 
publication date.
    (2) If an exchange keeps the information required under paragraphs 
(b)(2)

[[Page 85]]

and (c) of this section up to date and makes it available to the 
Commission and the public upon request, in lieu of filing such 
information, an exchange may certify that the information is kept up to 
date and is available to the Commission and the public upon request.
    (3) If the information required to be filed under paragraphs (b)(2) 
and (c) of this section is available continuously on an Internet web 
site controlled by an exchange, in lieu of filing such information with 
the Commission, such exchange may:
    (i) Indicate the location of the Internet web site where such 
information may be found; and
    (ii) Certify that the information available at such location is 
accurate as of its date.
    (e) The Commission may exempt a national securities exchange, or an 
exchange exempted from such registration based on limited volume, from 
filing the amendment required by this section for any affiliate or 
subsidiary listed in Exhibit C of the exchange's application for 
registration, as amended, that either:
    (1) Is listed in Exhibit C of the application for registration or 
notice of registration, as amended, of one or more other national 
securities exchanges; or
    (2) Was an inactive subsidiary throughout the subsidiary's latest 
fiscal year. Any such exemption may be granted upon terms and conditions 
the Commission deems necessary or appropriate in the public interest or 
for the protection of investors, provided however, that at least one 
national securities exchange shall be required to file the amendments 
required by this section for an affiliate or subsidiary described in 
paragraph (e)(1) of this section.
    (f) A national securities exchange registered pursuant to Section 
6(g)(1) of the Act (15 U.S.C. 78f(g)(1)) shall be exempt from the 
requirements of this section.

[63 FR 70918, Dec. 22, 1998, as amended at 66 FR 43741, Aug. 20, 2001]



Sec.  240.6a-3  Supplemental material to be filed by exchanges.

    (a)(1) A national securities exchange, or an exchange exempted from 
such registration based on limited volume, shall file with the 
Commission any material (including notices, circulars, bulletins, lists, 
and periodicals) issued or made generally available to members of, or 
participants or subscribers to, the exchange. Such material shall be 
filed with the Commission within 10 days after issuing or making such 
material available to members, participants or subscribers.
    (2) If the information required to be filed under paragraph (a)(1) 
of this section is available continuously on an Internet web site 
controlled by an exchange, in lieu of filing such information with the 
Commission, such exchange may:
    (i) Indicate the location of the Internet web site where such 
information may be found; and
    (ii) Certify that the information available at such location is 
accurate as of its date.
    (b) Within 15 days after the end of each calendar month, a national 
securities exchange or an exchange exempted from such registration based 
on limited volume, shall file a report concerning the securities sold on 
such exchange during the calendar month. Such report shall set forth:
    (1) The number of shares of stock sold and the aggregate dollar 
amount of such stock sold;
    (2) The principal amount of bonds sold and the aggregate dollar 
amount of such bonds sold; and
    (3) The number of rights and warrants sold and the aggregate dollar 
amount of such rights and warrants sold.
    (c) A national securities exchange registered pursuant to Section 
6(g)(1) of the Act (15 U.S.C. 78f(g)(1)) shall be exempt from the 
requirements of this section.

[63 FR 70919, Dec. 22, 1998, as amended at 66 FR 43741, Aug. 20, 2001]



Sec.  240.6a-4  Notice of registration under Section 6(g) of the Act,
amendment to such notice, and supplemental materials to be filed by 
exchanges registered under Section 6(g) of the Act.

    (a) Notice of registration. (1) An exchange may register as a 
national securities exchange solely for the purposes

[[Page 86]]

of trading security futures products by filing Form 1-N (Sec.  249.10 of 
this chapter) (``notice of registration''), in accordance with the 
instructions contained therein, if:
    (i) The exchange is a board of trade, as that term in defined in the 
Commodity Exchange Act (7 U.S.C. 1a(2)), that:
    (A) Has been designated a contract market by the Commodity Futures 
Trading Commission and such designation is not suspended by order of the 
Commodity Futures Trading Commission; or
    (B) Is registered as a derivative transaction execution facility 
under Section 5a of the Commodity Exchange Act (7 U.S.C. 7a) and such 
registration is not suspended by the Commodity Futures Trading 
Commission; and
    (ii) Such exchange does not serve as a market place for transactions 
in securities other than:
    (A) Security futures products; or
    (B) Futures on exempted securities or on groups or indexes of 
securities or options thereon that have been authorized under Section 
2(a)(1)(C) of the Commodity Exchange Act (7 U.S.C. 2a).
    (2) Promptly after the discovery that any information filed on Form 
1-N (Sec.  249.10 of this chapter) was inaccurate when filed, the 
exchange shall file with the Commission an amendment correcting such 
inaccuracy.
    (b) Amendment to notice of registration. (1) A national securities 
exchange registered pursuant to Section 6(g)(1) of the Act (15 U.S.C. 
78f(g)(1)) (``Security Futures Product Exchange'') shall file an 
amendment to Form 1-N (Sec.  249.10 of this chapter), which shall set 
forth the nature and effective date of the action taken and shall 
provide any new information and correct any information rendered 
inaccurate, on Form 1-N (Sec.  249.10 of this chapter), within:
    (i) Ten days after any action is taken that renders inaccurate, or 
that causes to be incomplete, any information filed on the Execution 
Page of Form 1-N (Sec.  249.10 of this chapter), or amendment thereto; 
or
    (ii) 30 days after any action is taken that renders inaccurate, or 
that causes to be incomplete, any information filed as part of Exhibit F 
to Form 1-N (Sec.  249.10 of this chapter), or any amendments thereto.
    (2) A Security Futures Product Exchange shall maintain records 
relating to changes in information required in Exhibits C and E to Form 
1-N (Sec.  249.10 of this chapter) which shall be current of as of the 
latest practicable date, but shall, at a minimum, be up-to-date within 
30 days. A Security Futures Product Exchange shall make such records 
available to the Commission and the public upon request.
    (3) On or before June 30, 2002, and by June 30 every year 
thereafter, a Security Futures Product Exchange shall file, as an 
amendment to Form 1-N (Sec.  249.10 of this chapter), Exhibits F, H, and 
I, which shall be current of as of the latest practicable date, but 
shall, at a minimum, be up-to-date within three months as of the date 
the amendment is filed.
    (4) On or before June 30, 2004, and by June 30 every three years 
thereafter, a Security Futures Product Exchange shall file, as an 
amendment to Form 1-N (Sec.  249.10 of this chapter), complete Exhibits 
A, B, C, and E, which shall be current of as of the latest practicable 
date, but shall, at a minimum, be up-to-date within three months as of 
the date the amendment is filed.
    (5)(i) If a Security Futures Product Exchange, on an annual or more 
frequent basis, publishes, or cooperates in the publication of, any of 
the information required to be filed by paragraphs (b)(3) and (b)(4) of 
this section, in lieu of filing such information, a Security Futures 
Product Exchange may satisfy this filing requirement by:
    (A) Identifying the publication in which such information is 
available, the name, address, and telephone number of the person from 
whom such publication may be obtained, and the price of such 
publication; and
    (B) Certifying to the accuracy of such information as of its 
publication date.
    (ii) If a Security Futures Product Exchange keeps the information 
required under paragraphs (b)(3) and (b)(4) of this section up-to-date 
and makes it available to the Commission and the public upon request, in 
lieu of filing such information, a Security Futures Product Exchange may 
satisfy this filing requirement by certifying that the

[[Page 87]]

information is kept up-to-date and is available to the Commission and 
the public upon request.
    (iii) If the information required to be filed under paragraphs 
(b)(3) and (b)(4) of this section is available continuously on an 
Internet web site controlled by a Security Futures Product Exchange, in 
lieu of filing such information with the Commission, such Security 
Futures Product Exchange may satisfy this filing requirement by:
    (A) Indicating the location of the Internet web site where such 
information may be found; and
    (B) Certifying that the information available at such location is 
accurate as of its date.
    (6)(i) The Commission may exempt a Security Futures Product Exchange 
from filing the amendment required by this section for any affiliate or 
subsidiary listed in Exhibit C to Form 1-N (Sec.  249.10 of this 
chapter), as amended, that either:
    (A) Is listed in Exhibit C to Form 1 (Sec.  249.1 of this chapter) 
or to Form 1-N (Sec.  249.10 of this chapter), as amended, of one or 
more other national securities exchanges; or
    (B) Was an inactive affiliate or subsidiary throughout the 
affiliate's or subsidiary's latest fiscal year.
    (ii) Any such exemption may be granted upon terms and conditions the 
Commission deems necessary or appropriate in the public interest or for 
the protection of investors, provided however, that at least one 
national securities exchange shall be required to file the amendments 
required by this section for an affiliate or subsidiary described in 
paragraph (b)(6)(i) of this section.
    (7) If a Security Futures Product Exchange has filed documents with 
the Commodity Futures Trading Commission, to the extent that such 
documents contain information satisfying the Commission's informational 
requirements, copies of such documents may be filed with the Commission 
in lieu of the required written notice.
    (c) Supplemental material to be filed by Security Futures Product 
Exchanges. (1)(i) A Security Futures Product Exchange shall file with 
the Commission any material related to the trading of security futures 
products (including notices, circulars, bulletins, lists, and 
periodicals) issued or made generally available to members of, 
participants in, or subscribers to, the exchange. Such material shall be 
filed with the Commission within ten days after issuing or making such 
material available to members, participants, or subscribers.
    (ii) If the information required to be filed under paragraph 
(c)(1)(i) of this section is available continuously on an Internet web 
site controlled by an exchange, in lieu of filing such information with 
the Commission, such exchange may:
    (A) Indicate the location of the Internet web site where such 
information may be found; and
    (B) Certify that the information available at such location is 
accurate as of its date.
    (2) Within 15 days after the end of each calendar month, a Security 
Futures Product Exchange shall file a report concerning the security 
futures products traded on such exchange during the previous calendar 
month. Such a report shall:
    (i) For each contract of sale for future delivery of a single 
security, the number of contracts traded on such exchange during the 
relevant calendar month and the total number of shares underlying such 
contracts traded; and
    (ii)For each contract of sale for future delivery of a narrow-based 
security index, the number of contracts traded on such exchange during 
the relevant calendar month and the total number of shares represented 
by the index underlying such contracts traded.

[66 FR 43741, Aug. 20, 2001]



Sec.  240.6h-1  Settlement and regulatory halt requirements for security
futures products.

    (a) For the purposes of this section:
    (1) Opening price means the price at which a security opened for 
trading, or a price that fairly reflects the price at which a security 
opened for trading, during the regular trading session of the national 
securities exchange or national securities association that lists the 
security. If the security is not listed on a national securities 
exchange or a national securities association, then

[[Page 88]]

opening price shall mean the price at which a security opened for 
trading, or a price that fairly reflects the price at which a security 
opened for trading, on the primary market for the security.
    (2) Regular trading session of a security means the normal hours for 
business of a national securities exchange or national securities 
association that lists the security.
    (3) Regulatory halt means a delay, halt, or suspension in the 
trading of a security, that is instituted by the national securities 
exchange or national securities association that lists the security, as 
a result of:
    (i) A determination that there are matters relating to the security 
or issuer that have not been adequately disclosed to the public, or that 
there are regulatory problems relating to the security which should be 
clarified before trading is permitted to continue; or
    (ii) The operation of circuit breaker procedures to halt or suspend 
trading in all equity securities trading on that national securities 
exchange or national securities association.
    (b) Final settlement prices for security futures products. (1) The 
final settlement price of a cash-settled security futures product must 
fairly reflect the opening price of the underlying security or 
securities.
    (2) Notwithstanding paragraph (b)(1) of this section, if an opening 
price for one or more securities underlying a security futures product 
is not readily available, the final settlement price of the security 
futures product shall fairly reflect:
    (i) The price of the underlying security or securities during the 
most recent regular trading session for such security or securities; or
    (ii) The next available opening price of the underlying security or 
securities.
    (3) Notwithstanding paragraph (b)(1) or (b)(2) of this section, if a 
clearing agency registered under Section 17A of the Act (15 U.S.C. 78q-
1), or exempt from registration pursuant to Section 17A(b)(7) of the Act 
(15 U.S.C. 78q-1(b)(7)), to which the final settlement price of a 
security futures product is or would be reported determines, pursuant to 
its rules, that such final settlement price is not consistent with the 
protection of investors and the public interest, taking into account 
such factors as fairness to buyers and sellers of the affected security 
futures product, the maintenance of a fair and orderly market in such 
security futures product, and consistency of interpretation and 
practice, the clearing agency shall have the authority to determine, 
under its rules, a final settlement price for such security futures 
product.
    (c) Regulatory trading halts. The rules of a national securities 
exchange or national securities association registered pursuant to 
Section 15A(a) of the Act (15 U.S.C. 78o-3(a)) that lists or trades one 
or more security futures products must include the following provisions:
    (1) Trading of a security futures product based on a single security 
shall be halted at all times that a regulatory halt has been instituted 
for the underlying security; and
    (2) Trading of a security futures product based on a narrow-based 
security index shall be halted at all times that a regulatory halt has 
been instituted for one or more underlying securities that constitute 50 
percent or more of the market capitalization of the narrow-based 
security index.
    (d) The Commission may exempt from the requirements of this section, 
either unconditionally or on specified terms and conditions, any 
national securities exchange or national securities association, if the 
Commission determines that such exemption is necessary or appropriate in 
the public interest and consistent with the protection of investors. An 
exemption granted pursuant to this paragraph shall not operate as an 
exemption from any Commodity Futures Trading Commission rules. Any 
exemption that may be required from such rules must be obtained 
separately from the Commodity Futures Trading Commission.

[67 FR 36762, May 24, 2002]



Sec.  240.6h-2  Security future based on note, bond, debenture, or 
evidence of indebtedness.

    A security future may be based upon a security that is a note, bond, 
debenture, or evidence of indebtedness or a

[[Page 89]]

narrow-based security index composed of such securities.

[71 FR 39543, July 13, 2006]



Sec.  240.7c2-1  [Reserved]

                 Hypothecation of Customers' Securities



Sec.  240.8c-1  Hypothecation of customers' securities.

    (a) General provisions. No member of a national securities exchange, 
and no broker or dealer who transacts a business in securities through 
the medium of any such member shall, directly or indirectly, hypothecate 
or arrange for or permit the continued hypothecation of any securities 
carried for the account of any customer under circumstances:
    (1) That will permit the commingling of securities carried for the 
account of any such customer with securities carried for the account of 
any other customer, without first obtaining the written consent of each 
such customer to such hypothecation;
    (2) That will permit such securities to be commingled with 
securities carried for the account of any person other than a bona fide 
customer of such member, broker or dealer under a lien for a loan made 
to such member, broker or dealer; or
    (3) That will permit securities carried for the account of customers 
to be hypothecated or subjected to any lien or liens or claim or claims 
of the pledges or pledgees, for a sum which exceeds the aggregate 
indebtedness of all customers in respect of securities carried for their 
accounts; except that this clause shall not be deemed to be violated by 
reason of an excess arising on any day through the reduction of the 
aggregate indebtedness of customers on such day, provided that funds or 
securities in an amount sufficient to eliminate such excess are paid or 
placed in transfer to pledgees for the purpose of reducing the sum of 
the liens or claims to which securities carried for the account of 
customers are subjected as promptly as practicable after such reduction 
occurs, but before the lapse of one-half hour after the commencement of 
banking hours on the next banking day at the place where the largest 
principal amount of loans of such member, broker or dealer are payable 
and, in any event, before such member, broker or dealer on such day has 
obtained or increased any bank loan collateralized by securities carried 
for the account of customers.
    (b) Definitions. For the purposes of this section:
    (1) The term customer shall not include any general or special 
partner or any director or officer of such member, broker or dealer, or 
any participant, as such, in any joint, group or syndicate account with 
such member, broker or dealer or with any partner, officer or director 
thereof. The term also shall not include any counterparty who has 
delivered collateral to an OTC derivatives dealer pursuant to a 
transaction in an eligible OTC derivative instrument, or pursuant to the 
OTC derivatives dealer's cash management securities activities or 
ancillary portfolio management securities activities, and who has 
received a prominent written notice from the OTC derivatives dealer 
that:
    (i) Except as otherwise agreed in writing by the OTC derivatives 
dealer and the counterparty, the dealer may repledge or otherwise use 
the collateral in its business;
    (ii) In the event of the OTC derivatives dealer's failure, the 
counterparty will likely be considered an unsecured creditor of the 
dealer as to that collateral;
    (iii) The Securities Investor Protection Act of 1970 (15 U.S.C. 
78aaa through 78lll) does not protect the counterparty; and
    (iv) The collateral will not be subject to the requirements of Sec.  
240.8c-1, Sec.  240.15c2-1, Sec.  240.15c3-2, or Sec.  240.15c3-3;
    (2) The term securities carried for the account of any customer 
shall be deemed to mean:
    (i) Securities received by or on behalf of such member, broker or 
dealer for the account of any customer;
    (ii) Securities sold and appropriated by such member, broker or 
dealer to a customer, except that if such securities were subject to a 
lien when appropriated to a customer they shall not be deemed to be 
``securities carried for the account of any customer'' pending

[[Page 90]]

their release from such lien as promptly as practicable:
    (iii) Securities sold, but not appropriated, by such member, broker 
or dealer to a customer who has made any payment therefor, to the extent 
that such member, broker or dealer owns and has received delivery of 
securities of like kind, except that if such securities were subject to 
a lien when such payment was made they shall not be deemed to be 
``securities carried for the account of any customer'' pending their 
release from such lien as promptly as practicable:
    (3) ``Aggregate indebtedness'' shall not be deemed to be reduced by 
reason of uncollected items. In computing aggregate indebtedness, 
related guaranteed and guarantor accounts shall be treated as a single 
account and considered on a consolidated basis, and balances in accounts 
carrying both long and short positions shall be adjusted by treating the 
market value of the securities required to cover such short positions as 
though such market value were a debit; and
    (4) In computing the sum of the liens or claims to which securities 
carried for the account of customers of a member, broker or dealer are 
subject, any rehypothecation of such securities by another member, 
broker or dealer who is subject to this section or to Sec.  240.15c2-1 
shall be disregarded.
    (c) Exemption for cash accounts. The provisions of paragraph (a)(1) 
of this section shall not apply to any hypothecation of securities 
carried for the account of a customer in a special cash account within 
the meaning of 12 CFR 220.4(c): Provided, That at or before the 
completion of the transaction of purchase of such securities for, or of 
sale of such securities to, such customer, written notice is given or 
sent to such customer disclosing that such securities are or may be 
hypothecated under circumstances which will permit the commingling 
thereof with securities carried for the account of other customers. The 
term the completion of the transaction shall have the meaning given to 
such term by Sec.  240.15c1-1(b).
    (d) Exemption for clearinghouse liens. The provisions of paragraphs 
(a)(2), (a)(3), and (f) of this section shall not apply to any lien or 
claim of the clearing corporation, or similar department or association, 
of a national securities exchange or a registered national securities 
association for a loan made and to be repaid on the same calendar day, 
which is incidental to the clearing of transactions in securities or 
loans through such corporation, department, or association: Provided, 
however, That for the purpose of paragraph (a)(3) of this section, 
``aggregate indebtedness of all customers in respect of securities 
carried for their accounts'' shall not include indebtedness in respect 
of any securities subject to any lien or claim exempted by this 
paragraph.
    (e) Exemption for certain liens on securities of noncustomers. The 
provisions of paragraph (a)(2) of this section shall not be deemed to 
prevent such member, broker or dealer from permitting securities not 
carried for the account of a customer to be subjected (1) to a lien for 
a loan made against securities carried for the account of customers, or 
(2) to a lien for a loan made and to be repaid on the same calendar day. 
For the purpose of this exemption, a loan shall be deemed to be ``made 
against securities carried for the account of customers'' if only 
securities carried for the account of customers are used to obtain or to 
increase such loan or as substitutes for other securities carried for 
the account of customers.
    (f) Notice and certification requirements. No person subject to this 
section shall hypothecate any security carried for the account of a 
customer unless at or prior to the time of each such hypothecation, he 
gives written notice to the pledgee that the security pledged is carried 
for the account of a customer and that such hypothecation does not 
contravene any provision of this section, except that in the case of an 
omnibus account the members, broker or dealer for whom such account is 
carried may furnish a signed statement to the person carrying such 
account that all securities carried therein by such member, broker or 
dealer will be securities carried for the account of his customers and 
that the hypothecation thereof by such member, broker or dealer will not 
contravene any provision of this section. The provisions of this 
paragraph shall

[[Page 91]]

not apply to any hypothecation of securities under any lien or claim of 
a pledgee securing a loan made and to be repaid on the same calendar 
day.
    (g) The fact that securities carried for the accounts of customers 
and securities carried for the accounts of others are represented by one 
or more certificates in the custody of a clearing corporation or other 
subsidiary organization of either a national securities exchange or of a 
registered national securities association, or of a custodian bank, in 
accordance with a system for the central handling of securities 
established by a national securities exchange or a registered national 
securities association, pursuant to which system the hypothecation of 
such securities is effected by bookkeeping entries without physical 
delivery of such securities, shall not, in and of itself, result in a 
commingling of securities prohibited by paragraph (a)(1) or (a)(2) of 
this section, whenever a participating member, broker or dealer 
hypothecates securities in accordance with such system: Provided, 
however, That (1) any such custodian of any securities held by or for 
such system shall agree that it will not for any reason, including the 
assertion of any claim, right or lien of any kind, refuse to refrain 
from promptly delivering any such securities (other than securities then 
hypothecated in accordance with such system) to such clearing 
corporation or other subsidiary organization or as directed by it, 
except that nothing in such agreement shall be deemed to require the 
custodian to deliver any securities in contravention of any notice of 
levy, seizure or similar notice, or order or judgment, issued or 
directed by a governmental agency or court, or officer thereof, having 
jurisdiction over such custodian, which on its face affects such 
securities; (2) such systems shall have safeguards in the handling, 
transfer and delivery of securities and provisions for fidelity bond 
coverage of the employees and agents of the clearing corporation or 
other subsidiary organization and for periodic examinations by 
independent public accountants; and (3) the provisions of this paragraph 
shall not be effective with respect to any particular system unless the 
agreement required by paragraph (g)(1) of this section and the 
safeguards and provisions required by paragraph (g)(2) of this section 
shall have been deemed adequate by the Commission for the protection of 
investors, and unless any subsequent amendments to such agreement, 
safeguards or provisions shall have been deemed adequate by the 
Commission for the protection of investors.

(Secs. 3, 8, 15, 48 Stat. 882, 888, 895; 15 U.S.C. 78c, 78h, 78o)

    Cross Reference: For interpretative releases applicable to Sec.  
240.8c-1, see Nos. 2690 and 2822 in tabulation, part 241 of this 
chapter.

[13 FR 8180, Dec. 22, 1948, as amended at 31 FR 7740, June 1, 1966; 37 
FR 73, Jan. 5, 1973; 63 FR 59395, Nov. 3, 1998]



Sec.  240.9b-1  Options disclosure document.

    (a) Definitions. The following definitions shall apply for the 
purpose of this rule.
    (1) Options market means a national securities exchange, an 
automated quotation system of a registered securities association or a 
foreign securities exchange on which standardized options are traded.
    (2) Options class means all options contracts covering the same 
underlying instrument.
    (3) Options disclosure document means a document, including all 
amendments and supplements thereto, prepared by one or more options 
markets which has been filed with the Commission or distributed in 
accordance with paragraph (b) of this section. Definitive options 
disclosure document or document means an options disclosure document 
furnished to customers in accordance with paragraph (b) of this section.
    (4) Standardized options are options contracts trading on a national 
securities exchange, an automated quotation system of a registered 
securities association, or a foreign securities exchange which relate to 
options classes the terms of which are limited to specific expiration 
dates and exercise prices, or such other securities as the Commission 
may, by order, designate.
    (b)(1) Five preliminary copies of an options disclosure document 
containing the information specified in paragraph (c) of this section 
shall be

[[Page 92]]

filed with the Commission by an options market at least 60 days prior to 
the date definitive copies are furnished to customers, unless the 
commission determines otherwise having due regard to the adequacy of the 
information disclosed and the public interest and protection of 
investors. Five copies of the definitive options disclosure document 
shall be filed with the Commission not later than the date the options 
disclosure document is furnished to customers. Notwithstanding the 
above, the use of an options disclosure document shall not be permitted 
unless the options class to which such document relates is the subject 
of an effective registration statement on Form S-20 under the Securities 
Act of 1933, or is exempt from registration under the Securities Act of 
1933 (15 U.S.C. 77a et seq.).
    (2)(i) If the information contained in the options disclosure 
document becomes or will become materially inaccurate or incomplete or 
there is or will be an omission of material information necessary to 
make the options disclosure document not misleading, the options market 
shall amend or supplement its options disclosure document by filing five 
copies of an amendment or supplement to such options disclosure document 
with the Commission at least 30 days prior to the date definitive copies 
are furnished to customers, unless the Commission determines otherwise 
having due regard to the adequacy of the information disclosed and the 
public interest and protection of investors. Five copies of the 
definitive options disclosure document, as amended or supplemented, 
shall be filed with the Commission not later than the date the amendment 
or supplement, or the amended options disclosure document, is furnished 
to customers.
    (ii) Notwithstanding paragraph (b)(2)(i) of this section, an options 
market may distribute an amendment or supplement to an options 
disclosure document prior to such 30 day period if it determines, in 
good faith, that such delivery is necessary to ensure timely and 
accurate disclosure with respect to one or more of the options classes 
covered by the document. Five copies of any amendment or supplement 
distributed pursuant to this paragraph shall be filed with the 
Commission at the time of distribution. In that instance, if the 
Commission determines, having given due regard to the adequacy of the 
information disclosed and the public interest and the protection of 
investors, it may require refiling of the amendment pursuant to 
paragraph (b)(2)(i) of this section.
    (c) Information required in an options disclosure document. An 
options disclosure document shall contain the following information, 
unless otherwise provided by the Commission, with respect to the options 
classes covered by the document:
    (1) A glossary of terms;
    (2) A discussion of the mechanics of exercising the options;
    (3) A discussion of the risks of being a holder or writer of the 
options;
    (4) The identification of the market or markets in which the options 
are traded;
    (5) A brief reference to the transaction costs, margin requirements 
and tax consequences of options trading;
    (6) The identification of the issuer of the options;
    (7) A general identification of the type of instrument or 
instruments underlying the options class or classes covered by the 
document;
    (8) If the options are not exempt from registration under the 
Securities Act of 1933 (15 U.S.C. 77a et seq.), the registration of the 
options on form S-20 (17 CFR 239.20) and the availability of the 
prospectus and the information in part II of the registration statement; 
and
    (9) Such other information as the Commission may specify.
    (d) Broker-dealer obligations. (1) No broker or dealer shall accept 
an order from a customer to purchase or sell an option contract relating 
to an options class that is the subject of a definitive options 
disclosure document, or approve the customer's account for the trading 
of such option, unless the broker or dealer furnishes or has furnished 
to the customer a copy of the definitive options disclosure document.
    (2) If a definitive options disclosure document relating to an 
options class is amended or supplemented, each broker and dealer shall 
promptly send

[[Page 93]]

a copy of the definitive amendment or supplement or a copy of the 
definitive options disclosure document as amended to each customer whose 
account is approved for trading the options class or classes to which 
the amendment or supplement relates.

[47 FR 41956, Sept. 23, 1982, as amended at 51 FR 14982, Apr. 22, 1986; 
65 FR 64139, Oct. 26, 2000; 68 FR 192, Jan. 2, 2003]



Sec. Sec.  240.10a-1--240.10a-2  [Reserved]

           Manipulative and Deceptive Devices and Contrivances



Sec.  240.10b-1  Prohibition of use of manipulative or deceptive 
devices or contrivances with respect to certain securities exempted
from registration.

    The term manipulative or deceptive device or contrivance, as used in 
section 10(b) (48 Stat. 891; 15 U.S.C. 78j(b)), is hereby defined to 
include any act or omission to act with respect to any security exempted 
from the operation of section 12(a) (48 Stat. 892; 15 U.S.C. 78l(a)) 
pursuant to any section in this part which specifically provides that 
this section shall be applicable to such security if such act or 
omission to act would have been unlawful under section 9(a) (48 Stat. 
889; 15 U.S.C. 78i(a)), or any rule or regulation heretofore or 
hereafter prescribed thereunder, if done or omitted to be done with 
respect to a security registered on a national securities exchange, and 
the use of any means or instrumentality of interstate commerce or of the 
mails or of any facility of any national securities exchange to use or 
employ any such device or contrivance in connection with the purchase or 
sale of any such security is hereby prohibited.

(Secs. 10, 12, 48 Stat. 891, 892; 15 U.S.C. 78j, 78l)

    Cross References: For applicability of this section, see Sec. Sec.  
240.12a-4 and 240.12a-5. For regulations relating to employment of 
manipulative and deceptive devices, see Sec. Sec.  240.10b-3 and 
240.10b-5.

[13 FR 8183, Dec. 22, 1948]



Sec.  240.10b-2  [Reserved]



Sec.  240.10b-3  Employment of manipulative and deceptive devices by
brokers or dealers.

    (a) It shall be unlawful for any broker or dealer, directly or 
indirectly, by the use of any means or instrumentality of interstate 
commerce, or of the mails, or of any facility of any national securities 
exchange, to use or employ, in connection with the purchase or sale of 
any security otherwise than on a national securities exchange, any act, 
practice, or course of business defined by the Commission to be included 
within the term ``manipulative, deceptive, or other fraudulent device or 
contrivance'', as such term is used in section 15(c)(1) of the act.
    (b) It shall be unlawful for any municipal securities dealer 
directly or indirectly, by the use of any means or instrumentality of 
interstate commerce, or of the mails, or of any facility of any national 
securities exchange, to use or employ, in connection with the purchase 
or sale of any municipal security, any act, practice, or course of 
business defined by the Commission to be included within the term 
``manipulative, deceptive, or other fraudulent device or contrivance,'' 
as such term is used in section 15(c)(1) of the act.

(Secs. 10, 12, 48 Stat. 891, 892, as amended; 15 U.S.C. 78j, 78l)

    Cross References: See also Sec.  240.10b-5. For regulation relating 
to prohibition of manipulative or deceptive devices, see Sec.  240.10b-
1. For the term ``manipulative, deceptive, or other fraudulent device or 
contrivance'', as used in section 15(c)(1) of the act, see Sec. Sec.  
240.15c1-2 to 240.15c1-9.

[13 FR 8183, Dec. 22, 1948, as amended at 19 FR 8017, Dec. 4, 1954; 41 
FR 22824, June 7, 1976]



Sec.  240.10b-4  [Reserved]



Sec.  240.10b-5  Employment of manipulative and deceptive devices.

    It shall be unlawful for any person, directly or indirectly, by the 
use of any means or instrumentality of interstate commerce, or of the 
mails or of any facility of any national securities exchange,
    (a) To employ any device, scheme, or artifice to defraud,

[[Page 94]]

    (b) To make any untrue statement of a material fact or to omit to 
state a material fact necessary in order to make the statements made, in 
the light of the circumstances under which they were made, not 
misleading, or
    (c) To engage in any act, practice, or course of business which 
operates or would operate as a fraud or deceit upon any person,

in connection with the purchase or sale of any security.

(Sec. 10; 48 Stat. 891; 15 U.S.C. 78j)

[13 FR 8183, Dec. 22, 1948, as amended at 16 FR 7928, Aug. 11, 1951]



Sec.  240.10b5-1  Trading ``on the basis of'' material nonpublic
information in insider trading cases.

    Preliminary Note to Sec.  240.10b5-1: This provision defines when a 
purchase or sale constitutes trading ``on the basis of'' material 
nonpublic information in insider trading cases brought under Section 
10(b) of the Act and Rule 10b-5 thereunder. The law of insider trading 
is otherwise defined by judicial opinions construing Rule 10b-5, and 
Rule 10b5-1 does not modify the scope of insider trading law in any 
other respect.

    (a) General. The ``manipulative and deceptive devices'' prohibited 
by Section 10(b) of the Act (15 U.S.C. 78j) and Sec.  240.10b-5 
thereunder include, among other things, the purchase or sale of a 
security of any issuer, on the basis of material nonpublic information 
about that security or issuer, in breach of a duty of trust or 
confidence that is owed directly, indirectly, or derivatively, to the 
issuer of that security or the shareholders of that issuer, or to any 
other person who is the source of the material nonpublic information.
    (b) Definition of ``on the basis of.'' Subject to the affirmative 
defenses in paragraph (c) of this section, a purchase or sale of a 
security of an issuer is ``on the basis of'' material nonpublic 
information about that security or issuer if the person making the 
purchase or sale was aware of the material nonpublic information when 
the person made the purchase or sale.
    (c) Affirmative defenses. (1)(i) Subject to paragraph (c)(1)(ii) of 
this section, a person's purchase or sale is not ``on the basis of'' 
material nonpublic information if the person making the purchase or sale 
demonstrates that:
    (A) Before becoming aware of the information, the person had:
    (1) Entered into a binding contract to purchase or sell the 
security,
    (2) Instructed another person to purchase or sell the security for 
the instructing person's account, or
    (3) Adopted a written plan for trading securities;
    (B) The contract, instruction, or plan described in paragraph 
(c)(1)(i)(A) of this Section:
    (1) Specified the amount of securities to be purchased or sold and 
the price at which and the date on which the securities were to be 
purchased or sold;
    (2) Included a written formula or algorithm, or computer program, 
for determining the amount of securities to be purchased or sold and the 
price at which and the date on which the securities were to be purchased 
or sold; or
    (3) Did not permit the person to exercise any subsequent influence 
over how, when, or whether to effect purchases or sales; provided, in 
addition, that any other person who, pursuant to the contract, 
instruction, or plan, did exercise such influence must not have been 
aware of the material nonpublic information when doing so; and
    (C) The purchase or sale that occurred was pursuant to the contract, 
instruction, or plan. A purchase or sale is not ``pursuant to a 
contract, instruction, or plan'' if, among other things, the person who 
entered into the contract, instruction, or plan altered or deviated from 
the contract, instruction, or plan to purchase or sell securities 
(whether by changing the amount, price, or timing of the purchase or 
sale), or entered into or altered a corresponding or hedging transaction 
or position with respect to those securities.
    (ii) Paragraph (c)(1)(i) of this section is applicable only when the 
contract, instruction, or plan to purchase or sell securities was given 
or entered into in good faith and not as part of a plan or scheme to 
evade the prohibitions of this section.
    (iii) This paragraph (c)(1)(iii) defines certain terms as used in 
paragraph (c) of this Section.
    (A) Amount. ``Amount'' means either a specified number of shares or 
other

[[Page 95]]

securities or a specified dollar value of securities.
    (B) Price. ``Price'' means the market price on a particular date or 
a limit price, or a particular dollar price.
    (C) Date. ``Date'' means, in the case of a market order, the 
specific day of the year on which the order is to be executed (or as 
soon thereafter as is practicable under ordinary principles of best 
execution). ``Date'' means, in the case of a limit order, a day of the 
year on which the limit order is in force.
    (2) A person other than a natural person also may demonstrate that a 
purchase or sale of securities is not ``on the basis of'' material 
nonpublic information if the person demonstrates that:
    (i) The individual making the investment decision on behalf of the 
person to purchase or sell the securities was not aware of the 
information; and
    (ii) The person had implemented reasonable policies and procedures, 
taking into consideration the nature of the person's business, to ensure 
that individuals making investment decisions would not violate the laws 
prohibiting trading on the basis of material nonpublic information. 
These policies and procedures may include those that restrict any 
purchase, sale, and causing any purchase or sale of any security as to 
which the person has material nonpublic information, or those that 
prevent such individuals from becoming aware of such information.

[65 FR 51737, Aug. 24, 2000]



Sec.  240.10b5-2  Duties of trust or confidence in misappropriation insider
trading cases.

    Preliminary Note to Sec.  240.10b5-2: This section provides a non-
exclusive definition of circumstances in which a person has a duty of 
trust or confidence for purposes of the ``misappropriation'' theory of 
insider trading under Section 10(b) of the Act and Rule 10b-5. The law 
of insider trading is otherwise defined by judicial opinions construing 
Rule 10b-5, and Rule 10b5-2 does not modify the scope of insider
trading law in any other respect.

    (a) Scope of Rule. This section shall apply to any violation of 
Section 10(b) of the Act (15 U.S.C. 78j(b)) and Sec.  240.10b-5 
thereunder that is based on the purchase or sale of securities on the 
basis of, or the communication of, material nonpublic information 
misappropriated in breach of a duty of trust or confidence.
    (b) Enumerated ``duties of trust or confidence.'' For purposes of 
this section, a ``duty of trust or confidence'' exists in the following 
circumstances, among others:
    (1) Whenever a person agrees to maintain information in confidence;
    (2) Whenever the person communicating the material nonpublic 
information and the person to whom it is communicated have a history, 
pattern, or practice of sharing confidences, such that the recipient of 
the information knows or reasonably should know that the person 
communicating the material nonpublic information expects that the 
recipient will maintain its confidentiality; or
    (3) Whenever a person receives or obtains material nonpublic 
information from his or her spouse, parent, child, or sibling; provided, 
however, that the person receiving or obtaining the information may 
demonstrate that no duty of trust or confidence existed with respect to 
the information, by establishing that he or she neither knew nor 
reasonably should have known that the person who was the source of the 
information expected that the person would keep the information 
confidential, because of the parties' history, pattern, or practice of 
sharing and maintaining confidences, and because there was no agreement 
or understanding to maintain the confidentiality of the information.

[65 FR 51738, Aug. 24, 2000]



Sec. Sec.  240.10b-6--240.10b-8  [Reserved]



Sec.  240.10b-9  Prohibited representations in connection with certain
offerings.

    (a) It shall constitute a manipulative or deception device or 
contrivance, as used in section 10(b) of the Act, for any person, 
directly or indirectly, in connection with the offer or sale of any 
security, to make any representation:
    (1) To the effect that the security is being offered or sold on an 
``all-or-none'' basis, unless the security is part of an offering or 
distribution being made on the condition that all or a specified amount 
of the consideration

[[Page 96]]

paid for such security will be promptly refunded to the purchaser unless 
(i) all of the securities being offered are sold at a specified price 
within a specified time, and (ii) the total amount due to the seller is 
received by him by a specified date; or
    (2) To the effect that the security is being offered or sold on any 
other basis whereby all or part of the consideration paid for any such 
security will be refunded to the purchaser if all or some of the 
securities are not sold, unless the security is part of an offering or 
distribution being made on the condition that all or a specified part of 
the consideration paid for such security will be promptly refunded to 
the purchaser unless (i) a specified number of units of the security are 
sold at a specified price within a specified time, and (ii) the total 
amount due to the seller is received by him by a specified date.
    (b) This rule shall not apply to any offer or sale of securities as 
to which the seller has a firm commitment from underwriters or others 
(subject only to customary conditions precedent, including ``market 
outs'') for the purchase of all the securities being offered.

(Sec. 10, 48 Stat. 891, as amended; 15 U.S.C. 78j)

[27 FR 9943, Oct. 10, 1962]



Sec.  240.10b-10  Confirmation of transactions.

    Preliminary Note. This section requires broker-dealers to disclose 
specified information in writing to customers at or before completion of 
a transaction. The requirements under this section that particular 
information be disclosed is not determinative of a broker-dealer's 
obligation under the general antifraud provisions of the federal 
securities laws to disclose additional information to a customer at the 
time of the customer's investment decision.

    (a) Disclosure requirement. It shall be unlawful for any broker or 
dealer to effect for or with an account of a customer any transaction 
in, or to induce the purchase or sale by such customer of, any security 
(other than U.S. Savings Bonds or municipal securities) unless such 
broker or dealer, at or before completion of such transaction, gives or 
sends to such customer written notification disclosing:
    (1) The date and time of the transaction (or the fact that the time 
of the transaction will be furnished upon written request to such 
customer) and the identity, price, and number of shares or units (or 
principal amount) of such security purchased or sold by such customer; 
and
    (2) Whether the broker or dealer is acting as agent for such 
customer, as agent for some other person, as agent for both such 
customer and some other person, or as principal for its own account; and 
if the broker or dealer is acting as principal, whether it is a market 
maker in the security (other than by reason of acting as a block 
positioner); and
    (i) If the broker or dealer is acting as agent for such customer, 
for some other person, or for both such customer and some other person:
    (A) The name of the person from whom the security was purchased, or 
to whom it was sold, for such customer or the fact that the information 
will be furnished upon written request of such customer; and
    (B) The amount of any remuneration received or to be received by the 
broker from such customer in connection with the transaction unless 
remuneration paid by such customer is determined pursuant to written 
agreement with such customer, otherwise than on a transaction basis; and
    (C) For a transaction in any NMS stock as defined in Sec.  242.600 
of this chapter or a security authorized for quotation on an automated 
interdealer quotation system that has the characteristics set forth in 
section 17B of the Act (15 U.S.C. 78q-2), a statement whether payment 
for order flow is received by the broker or dealer for transactions in 
such securities and the fact that the source and nature of the 
compensation received in connection with the particular transaction will 
be furnished upon written request of the customer; provided, however, 
that brokers or dealers that do not receive payment for order flow in 
connection with any transaction have no disclosure obligations under 
this paragraph; and
    (D) The source and amount of any other remuneration received or to 
be received by the broker in connection

[[Page 97]]

with the transaction: Provided, however, that if, in the case of a 
purchase, the broker was not participating in a distribution, or in the 
case of a sale, was not participating in a tender offer, the written 
notification may state whether any other remuneration has been or will 
be received and the fact that the source and amount of such other 
remuneration will be furnished upon written request of such customer; or
    (ii) If the broker or dealer is acting as principal for its own 
account:
    (A) In the case where such broker or dealer is not a market maker in 
an equity security and, if, after having received an order to buy from a 
customer, the broker or dealer purchased the equity security from 
another person to offset a contemporaneous sale to such customer or, 
after having received an order to sell from a customer, the broker or 
dealer sold the security to another person to offset a contemporaneous 
purchase from such customer, the difference between the price to the 
customer and the dealer's contemporaneous purchase (for customer 
purchases) or sale price (for customer sales); or
    (B) In the case of any other transaction in an NMS stock as defined 
by Sec.  242.600 of this chapter, or an equity security that is traded 
on a national securities exchange and that is subject to last sale 
reporting, the reported trade price, the price to the customer in the 
transaction, and the difference, if any, between the reported trade 
price and the price to the customer.
    (3) Whether any odd-lot differential or equivalent fee has been paid 
by such customer in connection with the execution of an order for an 
odd-lot number of shares or units (or principal amount) of a security 
and the fact that the amount of any such differential or fee will be 
furnished upon oral or written request: Provided, however, that such 
disclosure need not be made if the differential or fee is included in 
the remuneration disclosure, or exempted from disclosure, pursuant to 
paragraph (a)(2)(i)(B) of this section; and
    (4) In the case of any transaction in a debt security subject to 
redemption before maturity, a statement to the effect that such debt 
security may be redeemed in whole or in part before maturity, that such 
a redemption could affect the yield represented and the fact that 
additional information is available upon request; and
    (5) In the case of a transaction in a debt security effected 
exclusively on the basis of a dollar price:
    (i) The dollar price at which the transaction was effected, and
    (ii) The yield to maturity calculated from the dollar price: 
Provided, however, that this paragraph (a)(5)(ii) shall not apply to a 
transaction in a debt security that either:
    (A) Has a maturity date that may be extended by the issuer thereof, 
with a variable interest payable thereon; or
    (B) Is an asset-backed security, that represents an interest in or 
is secured by a pool of receivables or other financial assets that are 
subject continuously to prepayment; and
    (6) In the case of a transaction in a debt security effected on the 
basis of yield:
    (i) The yield at which the transaction was effected, including the 
percentage amount and its characterization (e.g., current yield, yield 
to maturity, or yield to call) and if effected at yield to call, the 
type of call, the call date and call price; and
    (ii) The dollar price calculated from the yield at which the 
transaction was effected; and
    (iii) If effected on a basis other than yield to maturity and the 
yield to maturity is lower than the represented yield, the yield to 
maturity as well as the represented yield; Provided, however, that this 
paragraph (a)(6)(iii) shall not apply to a transaction in a debt 
security that either:
    (A) Has a maturity date that may be extended by the issuer thereof, 
with a variable interest rate payable thereon; or
    (B) Is an asset-backed security, that represents an interest in or 
is secured by a pool of receivables or other financial assets that are 
subject continuously to prepayment; and
    (7) In the case of a transaction in a debt security that is an 
asset-backed security, which represents an interest in or is secured by 
a pool of receivables or other financial assets that are subject 
continuously to prepayment, a

[[Page 98]]

statement indicating that the actual yield of such asset-backed security 
may vary according to the rate at which the underlying receivables or 
other financial assets are prepaid and a statement of the fact that 
information concerning the factors that affect yield (including at a 
minimum estimated yield, weighted average life, and the prepayment 
assumptions underlying yield) will be furnished upon written request of 
such customer; and
    (8) That the broker or dealer is not a member of the Securities 
Investor Protection Corporation (SIPC), or that the broker or dealer 
clearing or carrying the customer account is not a member of SIPC, if 
such is the case: Provided, however, that this paragraph (a)(9) shall 
not apply in the case of a transaction in shares of a registered open-
end investment company or unit investment trust if:
    (i) The customer sends funds or securities directly to, or receives 
funds or securities directly from, the registered open-end investment 
company or unit investment trust, its transfer agent, its custodian, or 
other designated agent, and such person is not an associated person of 
the broker or dealer required by paragraph (a) of this section to send 
written notification to the customer; and
    (ii) The written notification required by paragraph (a) of this 
section is sent on behalf of the broker or dealer to the customer by a 
person described in paragraph (a)(9)(i) of this section.
    (b) Alternative periodic reporting. A broker or dealer may effect 
transactions for or with the account of a customer without giving or 
sending to such customer the written notification described in paragraph 
(a) of this section if:
    (1) Such transactions are effected pursuant to a periodic plan or an 
investment company plan, or effected in shares of any open-end 
management investment company registered under the Investment Company 
Act of 1940 that holds itself out as a money market fund and attempts to 
maintain a stable net asset value per share: Provided, however, that no 
sales load is deducted upon the purchase or redemption of shares in the 
money market fund; and
    (2) Such broker or dealer gives or sends to such customer within 
five business days after the end of each quarterly period, for 
transactions involving investment company and periodic plans, and after 
the end of each monthly period, for other transactions described in 
paragraph (b)(1) of this section, a written statement disclosing each 
purchase or redemption, effected for or with, and each dividend or 
distribution credited to or reinvested for, the account of such customer 
during the month; the date of such transaction; the identity, number, 
and price of any securities purchased or redeemed by such customer in 
each such transaction; the total number of shares of such securities in 
such customer's account; any remuneration received or to be received by 
the broker or dealer in connection therewith; and that any other 
information required by paragraph (a) of this section will be furnished 
upon written request: Provided, however, that the written statement may 
be delivered to some other person designated by the customer for 
distribution to the customer; and
    (3) Such customer is provided with prior notification in writing 
disclosing the intention to send the written information referred to in 
paragraph (b)(1) of this section in lieu of an immediate confirmation.
    (c) A broker or dealer shall give or send to a customer information 
requested pursuant to this rule within 5 business days of receipt of the 
request: Provided, however, That in the case of information pertaining 
to a transaction effected more than 30 days prior to receipt of the 
request, the information shall be given or sent to the customer within 
15 business days.
    (d) Definitions. For the purposes of this section:
    (1) Customer shall not include a broker or dealer;
    (2) Completion of the transaction shall have the meaning provided in 
rule 15c1-1 under the Act;
    (3) Time of the transaction means the time of execution, to the 
extent feasible, of the customer's order;
    (4) Debt security as used in paragraphs (a)(3), (4), and (5) only, 
means any security, such as a bond, debenture, note, or any other 
similar instrument which

[[Page 99]]

evidences a liability of the issuer (including any such security that is 
convertible into stock or a similar security) and fractional or 
participation interests in one or more of any of the foregoing: 
Provided, however, That securities issued by an investment company 
registered under the Investment Company Act of 1940 shall not be 
included in this definition;
    (5) Periodic plan means any written authorization for a broker 
acting as agent to purchase or sell for a customer a specific security 
or securities (other than securities issued by an open end investment 
company or unit investment trust registered under the Investment Company 
Act of 1940), in specific amounts (calculated in security units or 
dollars), at specific time intervals and setting forth the commissions 
or charges to be paid by the customer in connection therewith (or the 
manner of calculating them); and
    (6) Investment company plan means any plan under which securities 
issued by an open-end investment company or unit investment trust 
registered under the Investment Company Act of 1940 are purchased by a 
customer (the payments being made directly to, or made payable to, the 
registered investment company, or the principal underwriter, custodian, 
trustee, or other designated agent of the registered investment 
company), or sold by a customer pursuant to:
    (i) An individual retirement or individual pension plan qualified 
under the Internal Revenue Code;
    (ii) A contractual or systematic agreement under which the customer 
purchases at the applicable public offering price, or redeems at the 
applicable redemption price, such securities in specified amounts 
(calculated in security units or dollars) at specified time intervals 
and setting forth the commissions or charges to be paid by such customer 
in connection therewith (or the manner of calculating them; or
    (iii) Any other arrangement involving a group of two or more 
customers and contemplating periodic purchases of such securities by 
each customer through a person designated by the group: Provided, That 
such arrangement requires the registered investment company or its 
agent--
    (A) To give or send to the designated person, at or before the 
completion of the transaction for the purchase of such securities, a 
written notification of the receipt of the total amount paid by the 
group;
    (B) To send to anyone in the group who was a customer in the prior 
quarter and on whose behalf payment has not been received in the current 
quarter a quarterly written statement reflecting that a payment was not 
received on his behalf; and
    (C) To advise each customer in the group if a payment is not 
received from the designated person on behalf of the group within 10 
days of a date certain specified in the arrangement for delivery of that 
payment by the designated person and thereafter to send to each such 
customer the written notification described in paragraph (a) of this 
section for the next three succeeding payments.
    (7) NMS stock shall have the meaning provided in Sec.  242.600 of 
this chapter.
    (8) Payment for order flow shall mean any monetary payment, service, 
property, or other benefit that results in remuneration, compensation, 
or consideration to a broker or dealer from any broker or dealer, 
national securities exchange, registered securities association, or 
exchange member in return for the routing of customer orders by such 
broker or dealer to any broker or dealer, national securities exchange, 
registered securities association, or exchange member for execution, 
including but not limited to: research, clearance, custody, products or 
services; reciprocal agreements for the provision of order flow; 
adjustment of a broker or dealer's unfavorable trading errors; offers to 
participate as underwriter in public offerings; stock loans or shared 
interest accrued thereon; discounts, rebates, or any other reductions of 
or credits against any fee to, or expense or other financial obligation 
of, the broker or dealer routing a customer order that exceeds that fee, 
expense or financial obligation.
    (9) Asset-backed security means a security that is primarily 
serviced by the cashflows of a discrete pool of receivables or other 
financial assets, either fixed or revolving, that by their terms convert 
into cash within a finite time

[[Page 100]]

period plus any rights or other assets designed to assure the servicing 
or timely distribution of proceeds to the security holders.
    (e) Security futures products. The provisions of paragraphs (a) and 
(b) of this section shall not apply to a broker or dealer registered 
pursuant to section 15(b)(11)(A) of the Act (15 U.S.C. 78o(b)(11)(A)) to 
the extent that it effects transactions for customers in security 
futures products in a futures account (as that term is defined in Sec.  
240.15c3-3(a)(15)) and a broker or dealer registered pursuant to section 
15(b)(1) of the Act (15 U.S.C. 78o(b)(1)) that is also a futures 
commission merchant registered pursuant to section 4f(a)(1) of the 
Commodity Exchange Act (7 U.S.C. 6f(a)(1)), to the extent that it 
effects transactions for customers in security futures products in a 
futures account (as that term is defined in Sec.  240.15c3-3(a)(15)), 
Provided that:
    (1) The broker or dealer that effects any transaction for a customer 
in security futures products in a futures account gives or sends to the 
customer no later than the next business day after execution of any 
futures securities product transaction, written notification disclosing:
    (i) The date the transaction was executed, the identity of the 
single security or narrow-based security index underlying the contract 
for the security futures product, the number of contracts of such 
security futures product purchased or sold, the price, and the delivery 
month;
    (ii) The source and amount of any remuneration received or to be 
received by the broker or dealer in connection with the transaction, 
including, but not limited to, markups, commissions, costs, fees, and 
other charges incurred in connection with the transaction, provided, 
however, that if no remuneration is to be paid for an initiating 
transaction until the occurrence of the corresponding liquidating 
transaction, that the broker or dealer may disclose the amount of 
remuneration only on the confirmation for the liquidating transaction;
    (iii) The fact that information about the time of the execution of 
the transaction, the identity of the other party to the contract, and 
whether the broker or dealer is acting as agent for such customer, as 
agent for some other person, as agent for both such customer and some 
other person, or as principal for its own account, and if the broker or 
dealer is acting as principal, whether it is engaging in a block 
transaction or an exchange of security futures products for physical 
securities, will be available upon written request of the customer; and
    (iv) Whether payment for order flow is received by the broker or 
dealer for such transactions, the amount of this payment and the fact 
that the source and nature of the compensation received in connection 
with the particular transaction will be furnished upon written request 
of the customer; provided, however, that brokers or dealers that do not 
receive payment for order flow have no disclosure obligation under this 
paragraph.
    (2) Transitional provision. (i) Broker-dealers are not required to 
comply with paragraph (e)(1)(iii) of this section until June 1, 2003, 
Provided that, if, not withstanding the absence of the disclosure 
required in that paragraph, the broker-dealer receives a written request 
from a customer for the information described in paragraph (e)(1)(iii) 
of this section, the broker-dealer must make the information available 
to the customer; and
    (ii) Broker-dealers are not required to comply with paragraph 
(e)(1)(iv) of this section until June 1, 2003.
    (f) The Commission may exempt any broker or dealer from the 
requirements of paragraphs (a) and (b) of this section with regard to 
specific transactions of specific classes of transactions for which the 
broker or dealer will provide alternative procedures to effect the 
purposes of this section; any such exemption may be granted subject to 
compliance with such alternative procedures and upon such other stated 
terms and conditions as the Commission may impose.

[43 FR 47503, Oct. 16, 1978, as amended at 48 FR 17585, Apr. 25, 1983; 
50 FR 37654, Sept. 17, 1985; 53 FR 40721, Oct. 18, 1988; 59 FR 55012, 
Nov. 2, 1994; 59 FR 59620, Nov. 17, 1994; 59 FR 60555, Nov. 25, 1994; 67 
FR 58312, Sept. 13, 2002; 70 FR 37618, June 29, 2005; 79 FR 1549, Jan. 
8, 2014]

[[Page 101]]



Sec.  240.10b-13  [Reserved]



Sec.  240.10b-16  Disclosure of credit terms in margin transactions.

    (a) It shall be unlawful for any broker or dealer to extend credit, 
directly or indirectly, to any customer in connection with any 
securities transaction unless such broker or dealer has established 
procedures to assure that each customer:
    (1) Is given or sent at the time of opening the account, a written 
statement or statements disclosing (i) the conditions under which an 
interest charge will be imposed; (ii) the annual rate or rates of 
interest that can be imposed; (iii) the method of computing interest; 
(iv) if rates of interest are subject to change without prior notice, 
the specific conditions under which they can be changed; (v) the method 
of determining the debit balance or balances on which interest is to be 
charged and whether credit is to be given for credit balances in cash 
accounts; (vi) what other charges resulting from the extension of 
credit, if any, will be made and under what conditions; and (vii) the 
nature of any interest or lien retained by the broker or dealer in the 
security or other property held as collateral and the conditions under 
which additional collateral can be required: Provided, however, That the 
requirements of this subparagraph will be met in any case where the 
account is opened by telephone if the information required to be 
disclosed is orally communicated to the customer at that time and the 
required written statement or statements are sent to the customer 
immediately thereafter: And provided, further, That in the case of 
customers to whom credit is already being extended on the effective date 
of this section, the written statement or statements required hereunder 
must be given or sent to said customers within 90 days after the 
effective date of this section; and
    (2) Is given or sent a written statement or statements, at least 
quarterly, for each account in which credit was extended, disclosing (i) 
the balance at the beginning of the period; the date, amount and a brief 
description of each debit and credit entered during such period; the 
closing balance; and, if interest is charged for a period different from 
the period covered by the statement, the balance as of the last day of 
the interest period; (ii) the total interest charge for the period 
during which interest is charged (or, if interest is charged separately 
for separate accounts, the total interest charge for each such account), 
itemized to show the dates on which the interest period began and ended; 
the annual rate or rates of interest charged and the interest charge for 
each such different annual rate of interest; and either each different 
debit balance on which an interest calculation was based or the average 
debit balance for the interest period, except that if an average debit 
balance is used, a separate average debit balance must be disclosed for 
each interest rate applied; and (iii) all other charges resulting from 
the extension of credit in that account: Provided, however, That if the 
interest charge disclosed on a statement is for a period different from 
the period covered by the statement, there must be printed on the 
statement appropriate language to the effect that it should be retained 
for use in conjunction with the next statement containing the remainder 
of the required information: And provided further, That in the case of 
``equity funding programs'' registered under the Securities Act of 1933, 
the requirements of this paragraph will be met if the broker or dealer 
furnishes to the customer, within 1 month after each extension of 
credit, a written statement or statements containing the information 
required to be disclosed under this paragraph.
    (b) It shall be unlawful for any broker or dealer to make any 
changes in the terms and conditions under which credit charges will be 
made (as described in the initial statement made under paragraph (a) of 
this section), unless the customer shall have been given not less than 
thirty (30) days written notice of such changes, except that no such 
prior notice shall be necessary where such changes are required by law: 
Provided, however, That if any change for which prior notice would 
otherwise be required under this paragraph results in a lower interest 
charge to the customer than would have been imposed before the change, 
notice of

[[Page 102]]

such change may be given within a reasonable time after the effective 
date of the change.

(15 U.S.C. 78j)

[34 FR 19718, Dec. 16, 1969]



Sec.  240.10b-17  Untimely announcements of record dates.

    (a) It shall constitute a ``manipulative or deceptive device or 
contrivance'' as used in section 10(b) of the Act for any issuer of a 
class of securities publicly traded by the use of any means or 
instrumentality of interstate commerce or of the mails or of any 
facility of any national securities exchange to fail to give notice in 
accordance with paragraph (b) of this section of the following actions 
relating to such class of securities:
    (1) A dividend or other distribution in cash or in kind, except an 
ordinary interest payment on a debt security, but including a dividend 
or distribution of any security of the same or another issuer;
    (2) A stock split or reverse split; or
    (3) A rights or other subscription offering.
    (b) Notice shall be deemed to have been given in accordance with 
this section only if:
    (1) Given to the National Association of Securities Dealers, Inc., 
no later than 10 days prior to the record date involved or, in case of a 
rights subscription or other offering if such 10 days advance notice is 
not practical, on or before the record date and in no event later than 
the effective date of the registration statement to which the offering 
relates, and such notice includes:
    (i) Title of the security to which the declaration relates;
    (ii) Date of declaration;
    (iii) Date of record for determining holders entitled to receive the 
dividend or other distribution or to participate in the stock or reverse 
split;
    (iv) Date of payment or distribution or, in the case of a stock or 
reverse split or rights or other subscription offering, the date of 
delivery;
    (v) For a dividend or other distribution including a stock or 
reverse split or rights or other subscription offering:
    (a) In cash, the amount of cash to be paid or distributed per share, 
except if exact per share cash distributions cannot be given because of 
existing conversion rights which may be exercised during the notice 
period and which may affect the per share cash distribution, then a 
reasonable approximation of the per share distribution may be provided 
so long as the actual per share distribution is subsequently provided on 
the record date,
    (b) In the same security, the amount of the security outstanding 
immediately prior to and immediately following the dividend or 
distribution and the rate of the dividend or distribution,
    (c) In any other security of the same issuer, the amount to be paid 
or distributed and the rate of the dividend or distribution,
    (d) In any security of another issuer, the name of the issuer and 
title of that security, the amount to be paid or distributed, and the 
rate of the dividend or distribution and if that security is a right or 
a warrant, the subscription price,
    (e) In any other property (including securities not covered under 
paragraphs (b)(1)(v) (b) through (d) of this section) the identity of 
the property and its value and basis for assigning that value;
    (vi) Method of settlement of fractional interests;
    (vii) Details of any condition which must be satisfied or Government 
approval which must be secured to enable payment of distribution; and in
    (viii) The case of stock or reverse split in addition to the 
aforementioned information;
    (a) The name and address of the transfer or exchange agent; or
    (2) The Commission, upon written request or upon its own motion, 
exempts the issuer from compliance with paragraph (b)(1) of this section 
either unconditionally or on specified terms or conditions, as not 
constituting a manipulative or deceptive device or contrivance 
comprehended within the purpose of this section; or
    (3) Given in accordance with procedures of the national securities 
exchange or exchanges upon which a security of such issuer is registered 
pursuant to section 12 of the Act which contain requirements 
substantially

[[Page 103]]

comparable to those set forth in paragraph (b)(1) of this section.
    (c) The provisions of this rule shall not apply, however, to 
redeemable securities issued by open-end investment companies and unit 
investment trusts registered with the Commission under the Investment 
Company Act of 1940.

(Secs. 10(b), 23(a), 48 Stat. 891, as amended, 49 Stat. 1379, 15 U.S.C. 
78j)

[36 FR 11514, June 15, 1971, as amended at 37 FR 4330, Mar. 2, 1972]



Sec.  240.10b-18  Purchases of certain equity securities by the issuer
and others.

    Preliminary Notes to Sec.  240.10b-18
    1. Section 240.10b-18 provides an issuer (and its affiliated 
purchasers) with a ``safe harbor'' from liability for manipulation under 
sections 9(a)(2) of the Act and Sec.  240.10b-5 under the Act solely by 
reason of the manner, timing, price, and volume of their repurchases 
when they repurchase the issuer's common stock in the market in 
accordance with the section's manner, timing, price, and volume 
conditions. As a safe harbor, compliance with Sec.  240.10b-18 is 
voluntary. To come within the safe harbor, however, an issuer's 
repurchases must satisfy (on a daily basis) each of the section's four 
conditions. Failure to meet any one of the four conditions will remove 
all of the issuer's repurchases from the safe harbor for that day. The 
safe harbor, moreover, is not available for repurchases that, although 
made in technical compliance with the section, are part of a plan or 
scheme to evade the federal securities laws.
    2. Regardless of whether the repurchases are effected in accordance 
with Sec.  240.10b-18, reporting issuers must report their repurchasing 
activity as required by Item 703 of Regulations S-K and S-B (17 CFR 
229.703 and 228.703) and Item 15(e) of Form 20-F (17 CFR 249.220f) 
(regarding foreign private issuers), and closed-end management 
investment companies that are registered under the Investment Company 
Act of 1940 must report their repurchasing activity as required by Item 
8 of Form N-CSR (17 CFR 249.331; 17 CFR 274.128).

    (a) Definitions. Unless otherwise provided, all terms used in this 
section shall have the same meaning as in the Act. In addition, the 
following definitions shall apply:
    (1) ADTV means the average daily trading volume reported for the 
security during the four calendar weeks preceding the week in which the 
Rule 10b-18 purchase is to be effected.
    (2) Affiliate means any person that directly or indirectly controls, 
is controlled by, or is under common control with, the issuer.
    (3) Affiliated purchaser means:
    (i) A person acting, directly or indirectly, in concert with the 
issuer for the purpose of acquiring the issuer's securities; or
    (ii) An affiliate who, directly or indirectly, controls the issuer's 
purchases of such securities, whose purchases are controlled by the 
issuer, or whose purchases are under common control with those of the 
issuer; Provided, however, that ``affiliated purchaser'' shall not 
include a broker, dealer, or other person solely by reason of such 
broker, dealer, or other person effecting Rule 10b-18 purchases on 
behalf of the issuer or for its account, and shall not include an 
officer or director of the issuer solely by reason of that officer or 
director's participation in the decision to authorize Rule 10b-18 
purchases by or on behalf of the issuer.
    (4) Agent independent of the issuer has the meaning contained in 
Sec.  242.100 of this chapter.
    (5) Block means a quantity of stock that either:
    (i) Has a purchase price of $200,000 or more; or
    (ii) Is at least 5,000 shares and has a purchase price of at least 
$50,000; or
    (iii) Is at least 20 round lots of the security and totals 150 
percent or more of the trading volume for that security or, in the event 
that trading volume data are unavailable, is at least 20 round lots of 
the security and totals at least one-tenth of one percent (.001) of the 
outstanding shares of the security, exclusive of any shares owned by any 
affiliate; Provided, however, That a block under paragraph (a)(5)(i), 
(ii), and (iii) shall not include any amount a broker or dealer, acting 
as principal, has accumulated for the purpose of sale or resale to the 
issuer or to any affiliated purchaser of the issuer if the issuer or 
such affiliated purchaser knows or has reason to know that such amount 
was accumulated for such purpose, nor shall it include any amount that a 
broker or dealer has sold short to the issuer or to any affiliated 
purchaser of the issuer if the issuer or such affiliated purchaser knows 
or has

[[Page 104]]

reason to know that the sale was a short sale.
    (6) Consolidated system means a consolidated transaction or 
quotation reporting system that collects and publicly disseminates on a 
current and continuous basis transaction or quotation information in 
common equity securities pursuant to an effective transaction reporting 
plan or an effective national market system plan (as those terms are 
defined in Sec.  242.600 of this chapter).
    (7) Market-wide trading suspension means a market-wide trading halt 
of 30 minutes or more that is:
    (i) Imposed pursuant to the rules of a national securities exchange 
or a national securities association in response to a market-wide 
decline during a single trading session; or
    (ii) Declared by the Commission pursuant to its authority under 
section 12(k) of the Act (15 U.S.C. 78l (k)).
    (8) Plan has the meaning contained in Sec.  242.100 of this chapter.
    (9) Principal market for a security means the single securities 
market with the largest reported trading volume for the security during 
the six full calendar months preceding the week in which the Rule 10b-18 
purchase is to be effected.
    (10) Public float value has the meaning contained in Sec.  242.100 
of this chapter.
    (11) Purchase price means the price paid per share as reported, 
exclusive of any commission paid to a broker acting as agent, or 
commission equivalent, mark-up, or differential paid to a dealer.
    (12) Riskless principal transaction means a transaction in which a 
broker or dealer after having received an order from an issuer to buy 
its security, buys the security as principal in the market at the same 
price to satisfy the issuer's buy order. The issuer's buy order must be 
effected at the same price per-share at which the broker or dealer 
bought the shares to satisfy the issuer's buy order, exclusive of any 
explicitly disclosed markup or markdown, commission equivalent, or other 
fee. In addition, only the first leg of the transaction, when the broker 
or dealer buys the security in the market as principal, is reported 
under the rules of a self-regulatory organization or under the Act. For 
purposes of this section, the broker or dealer must have written 
policies and procedures in place to assure that, at a minimum, the 
issuer's buy order was received prior to the offsetting transaction; the 
offsetting transaction is allocated to a riskless principal account or 
the issuer's account within 60 seconds of the execution; and the broker 
or dealer has supervisory systems in place to produce records that 
enable the broker or dealer to accurately and readily reconstruct, in a 
time-sequenced manner, all orders effected on a riskless principal 
basis.
    (13) Rule 10b-18 purchase means a purchase (or any bid or limit 
order that would effect such purchase) of an issuer's common stock (or 
an equivalent interest, including a unit of beneficial interest in a 
trust or limited partnership or a depository share) by or for the issuer 
or any affiliated purchaser (including riskless principal transactions). 
However, it does not include any purchase of such security:
    (i) Effected during the applicable restricted period of a 
distribution that is subject to Sec.  242.102 of this chapter;
    (ii) Effected by or for an issuer plan by an agent independent of 
the issuer;
    (iii) Effected as a fractional share purchase (a fractional interest 
in a security) evidenced by a script certificate, order form, or similar 
document;
    (iv) Effected during the period from the time of public announcement 
(as defined in Sec.  230.165(f)) of a merger, acquisition, or similar 
transaction involving a recapitalization, until the earlier of the 
completion of such transaction or the completion of the vote by target 
shareholders. This exclusion does not apply to Rule 10b-18 purchases:
    (A) Effected during such transaction in which the consideration is 
solely cash and there is no valuation period; or
    (B) Where:
    (1) The total volume of Rule 10b-18 purchases effected on any single 
day does not exceed the lesser of 25% of the security's four-week ADTV 
or the issuer's average daily Rule 10b-18 purchases during the three 
full calendar months preceding the date of the announcement of such 
transaction;

[[Page 105]]

    (2) The issuer's block purchases effected pursuant to paragraph 
(b)(4) of this section do not exceed the average size and frequency of 
the issuer's block purchases effected pursuant to paragraph (b)(4) of 
this section during the three full calendar months preceding the date of 
the announcement of such transaction; and
    (3) Such purchases are not otherwise restricted or prohibited;
    (v) Effected pursuant to Sec.  240.13e-1;
    (vi) Effected pursuant to a tender offer that is subject to Sec.  
240.13e-4 or specifically excepted from Sec.  240.13e-4; or
    (vii) Effected pursuant to a tender offer that is subject to section 
14(d) of the Act (15 U.S.C. 78n(d)) and the rules and regulations 
thereunder.
    (b) Conditions to be met. Rule 10b-18 purchases shall not be deemed 
to have violated the anti-manipulation provisions of sections 9(a)(2) or 
10(b) of the Act (15 U.S.C. 78i(a)(2) or 78j(b)), or Sec.  240.10b-5 
under the Act, solely by reason of the time, price, or amount of the 
Rule 10b-18 purchases, or the number of brokers or dealers used in 
connection with such purchases, if the issuer or affiliated purchaser of 
the issuer effects the Rule 10b-18 purchases according to each of the 
following conditions:
    (1) One broker or dealer. Rule 10b-18 purchases must be effected 
from or through only one broker or dealer on any single day; Provided, 
however, that:
    (i) The ``one broker or dealer'' condition shall not apply to Rule 
10b-18 purchases that are not solicited by or on behalf of the issuer or 
its affiliated purchaser(s);
    (ii) Where Rule 10b-18 purchases are effected by or on behalf of 
more than one affiliated purchaser of the issuer (or the issuer and one 
or more of its affiliated purchasers) on a single day, the issuer and 
all affiliated purchasers must use the same broker or dealer; and
    (iii) Where Rule 10b-18 purchases are effected on behalf of the 
issuer by a broker-dealer that is not an electronic communication 
network (ECN) or other alternative trading system (ATS), that broker-
dealer can access ECN or other ATS liquidity in order to execute 
repurchases on behalf of the issuer (or any affiliated purchaser of the 
issuer) on that day.
    (2) Time of purchases. Rule 10b-18 purchases must not be:
    (i) The opening (regular way) purchase reported in the consolidated 
system;
    (ii) Effected during the 10 minutes before the scheduled close of 
the primary trading session in the principal market for the security, 
and the 10 minutes before the scheduled close of the primary trading 
session in the market where the purchase is effected, for a security 
that has an ADTV value of $1 million or more and a public float value of 
$150 million or more; and
    (iii) Effected during the 30 minutes before the scheduled close of 
the primary trading session in the principal market for the security, 
and the 30 minutes before the scheduled close of the primary trading 
session in the market where the purchase is effected, for all other 
securities;
    (iv) However, for purposes of this section, Rule 10b-18 purchases 
may be effected following the close of the primary trading session until 
the termination of the period in which last sale prices are reported in 
the consolidated system so long as such purchases are effected at prices 
that do not exceed the lower of the closing price of the primary trading 
session in the principal market for the security and any lower bids or 
sale prices subsequently reported in the consolidated system, and all of 
this section's conditions are met. However, for purposes of this 
section, the issuer may use one broker or dealer to effect Rule 10b-18 
purchases during this period that may be different from the broker or 
dealer that it used during the primary trading session. However, the 
issuer's Rule 10b-18 purchase may not be the opening transaction of the 
session following the close of the primary trading session.
    (3) Price of purchases. Rule 10b-18 purchases must be effected at a 
purchase price that:
    (i) Does not exceed the highest independent bid or the last 
independent transaction price, whichever is higher, quoted or reported 
in the consolidated system at the time the Rule 10b-18 purchase is 
effected;
    (ii) For securities for which bids and transaction prices are not 
quoted or reported in the consolidated system,

[[Page 106]]

Rule 10b-18 purchases must be effected at a purchase price that does not 
exceed the highest independent bid or the last independent transaction 
price, whichever is higher, displayed and disseminated on any national 
securities exchange or on any inter-dealer quotation system (as defined 
in Sec.  240.15c2-11) that displays at least two priced quotations for 
the security, at the time the Rule 10b-18 purchase is effected; and
    (iii) For all other securities, Rule 10b-18 purchases must be 
effected at a price no higher than the highest independent bid obtained 
from three independent dealers.
    (4) Volume of purchases. The total volume of Rule 10b-18 purchases 
effected by or for the issuer and any affiliated purchasers effected on 
any single day must not exceed 25 percent of the ADTV for that security; 
However, once each week, in lieu of purchasing under the 25 percent of 
ADTV limit for that day, the issuer or an affiliated purchaser of the 
issuer may effect one block purchase if:
    (i) No other Rule 10b-18 purchases are effected that day, and
    (ii) The block purchase is not included when calculating a 
security's four week ADTV under this section.
    (c) Alternative conditions. The conditions of paragraph (b) of this 
section shall apply in connection with Rule 10b-18 purchases effected 
during a trading session following the imposition of a market-wide 
trading suspension, except:
    (1) That the time of purchases condition in paragraph (b)(2) of this 
section shall not apply, either:
    (i) From the reopening of trading until the scheduled close of 
trading on the day that the market-wide trading suspension is imposed; 
or
    (ii) At the opening of trading on the next trading day until the 
scheduled close of trading that day, if a market-wide trading suspension 
was in effect at the close of trading on the preceding day; and
    (2) The volume of purchases condition in paragraph (b)(4) of this 
section is modified so that the amount of Rule 10b-18 purchases must not 
exceed 100 percent of the ADTV for that security.
    (d) Other purchases. No presumption shall arise that an issuer or an 
affiliated purchaser has violated the anti-manipulation provisions of 
sections 9(a)(2) or 10(b) of the Act (15 U.S.C. 78i(a)(2) or 78j(b)), or 
Sec.  240.10b-5 under the Act, if the Rule 10b-18 purchases of such 
issuer or affiliated purchaser do not meet the conditions specified in 
paragraph (b) or (c) of this section.

[68 FR 64970, Nov. 17, 2003, as amended at 70 FR 37618, June 29, 2005]



Sec.  240.10b-21  Deception in connection with a seller's ability or
intent to deliver securities on the date delivery is due.

    Preliminary Note to Sec.  240.10b-21: This rule is not intended to 
limit, or restrict, the applicability of the general antifraud 
provisions of the federal securities laws, such as section 10(b) of the 
Act and rule 10b-5 thereunder.

    (a) It shall also constitute a ``manipulative or deceptive device or 
contrivance'' as used in section 10(b) of this Act for any person to 
submit an order to sell an equity security if such person deceives a 
broker or dealer, a participant of a registered clearing agency, or a 
purchaser about its intention or ability to deliver the security on or 
before the settlement date, and such person fails to deliver the 
security on or before the settlement date.
    (b) For purposes of this rule, the term settlement date shall mean 
the business day on which delivery of a security and payment of money is 
to be made through the facilities of a registered clearing agency in 
connection with the sale of a security.

[73 FR 61677, Oct. 17, 2008]

                        Reports Under Section 10A



Sec.  240.10A-1  Notice to the Commission Pursuant to Section 10A of the Act.

    (a)(1) If any issuer with a reporting obligation under the Act 
receives a report requiring a notice to the Commission in accordance 
with section 10A(b)(3) of the Act, 15 U.S.C. 78j-1(b)(3), the issuer 
shall submit such notice to the Commission's Office of the Chief 
Accountant within the time period prescribed in that section. The notice 
may be provided by facsimile, telegraph, personal delivery, or any other

[[Page 107]]

means, provided it is received by the Office of the Chief Accountant 
within the required time period.
    (2) The notice specified in paragraph (a)(1) of this section shall 
be in writing and:
    (i) Shall identify the issuer (including the issuer's name, address, 
phone number, and file number assigned to the issuer's filings by the 
Commission) and the independent accountant (including the independent 
accountant's name and phone number, and the address of the independent 
accountant's principal office);
    (ii) Shall state the date that the issuer received from the 
independent accountant the report specified in section 10A(b)(2) of the 
Act, 15 U.S.C. 78j-1(b)(2);
    (iii) Shall provide, at the election of the issuer, either:
    (A) A summary of the independent accountant's report, including a 
description of the act that the independent accountant has identified as 
a likely illegal act and the possible effect of that act on all affected 
financial statements of the issuer or those related to the most current 
three-year period, whichever is shorter; or
    (B) A copy of the independent accountant's report; and
    (iv) May provide additional information regarding the issuer's views 
of and response to the independent accountant's report.
    (3) Reports of the independent accountant submitted by the issuer to 
the Commission's Office of the Chief Accountant in accordance with 
paragraph (a)(2)(iii)(B) of this section shall be deemed to have been 
made pursuant to section 10A(b)(3) or section 10A(b)(4) of the Act, 15 
U.S.C. 78j-1(b)(3) or 78j-1(b)(4), for purposes of the safe harbor 
provided by section 10A(c) of the Act, 15 U.S.C. 78j-1(c).
    (4) Submission of the notice in paragraphs (a)(1) and (a)(2) of this 
section shall not relieve the issuer from its obligations to comply 
fully with all other reporting requirements, including, without 
limitation:
    (i) The filing requirements of Form 8-K, Sec.  249.308 of this 
chapter, and Form N-CSR, Sec.  274.128 of this chapter, regarding a 
change in the issuer's certifying accountant and
    (ii) The disclosure requirements of Item 304 of Regulation S-K, 
Sec.  229.304 of this chapter.
    (b)(1) Any independent accountant furnishing to the Commission a 
copy of a report (or the documentation of any oral report) in accordance 
with section 10A(b)(3) or section 10A(b)(4) of the Act, 15 U.S.C. 78j-
1(b)(3) or 78j-1(b)(4), shall submit that report (or documentation) to 
the Commission's Office of the Chief Accountant within the time period 
prescribed by the appropriate section of the Act. The report (or 
documentation) may be submitted to the Commission's Office of the Chief 
Accountant by facsimile, telegraph, personal delivery, or any other 
means, provided it is received by the Office of the Chief Accountant 
within the time period set forth in section 10A(b)(3) or 10A(b)(4) of 
the Act, 15 U.S.C. 78j-1(b)(3) or 78j-(b)(4), whichever is applicable in 
the circumstances.
    (2) If the report (or documentation) submitted to the Office of the 
Chief Accountant in accordance with paragraph (b)(1) of this section 
does not clearly identify both the issuer (including the issuer's name, 
address, phone number, and file number assigned to the issuer's filings 
with the Commission) and the independent accountant (including the 
independent accountant's name and phone number, and the address of the 
independent accountant's principal office), then the independent 
accountant shall place that information in a prominent attachment to the 
report (or documentation) and shall submit that attachment to the Office 
of the Chief Accountant at the same time and in the same manner as the 
report (or documentation) is submitted to that Office.
    (3) Submission of the report (or documentation) by the independent 
accountant as described in paragraphs (b)(1) and (2) of this section 
shall not replace, or otherwise satisfy the need for, the newly engaged 
and former accountants' letters under Sec. Sec.  229.304(a)(2)(D) and 
229.304(a)(3) of this chapter (Items 304(a)(2)(D) and 304(a)(3) of 
Regulation S-K, respectively) and shall not limit, reduce, or affect in 
any way the independent accountant's obligations to comply fully

[[Page 108]]

with all other legal and professional responsibilities, including, 
without limitation, those under the standards of the Public Company 
Accounting Oversight Board (United States) (``PCAOB'') and the rules or 
interpretations of the Commission that modify or supplement those 
auditing standards.
    (c) A notice or report submitted to the Office of the Chief 
Accountant in accordance with paragraphs (a) and (b) of this section 
shall be deemed to be an investigative record and shall be nonpublic and 
exempt from disclosure pursuant to the Freedom of Information Act to the 
same extent and for the same periods of time that the Commission's 
investigative records are nonpublic and exempt from disclosure under, 
among other applicable provisions, 5 U.S.C. 552(b)(7). Nothing in this 
paragraph, however, shall relieve, limit, delay, or affect in any way, 
the obligation of any issuer or any independent accountant to make all 
public disclosures required by law, by any Commission disclosure item, 
rule, report, or form, or by any applicable accounting, auditing, or 
professional standard.

    Instruction to paragraph (c): Issuers and independent accountants 
may apply for additional bases for confidential treatment for a notice, 
report, or part thereof, in accordance with Sec.  200.83 of this 
chapter. That section indicates, in part, that any person who, pursuant 
to any requirement of law, submits any information or causes or permits 
any information to be submitted to the Commission, may request that the 
Commission afford it confidential treatment by reason of personal 
privacy or business confidentiality, or for any other reason permitted 
by Federal law.

[62 FR 12749, Mar. 18, 1997, as amended at 73 FR 973, Jan. 4, 2008; 81 
FR 82020, Nov. 18, 2016; 83 FR 50221, Oct. 4, 2018; 84 FR 50739, Sept. 
26, 2019]



Sec.  240.10A-2  Auditor independence.

    It shall be unlawful for an auditor not to be independent under 
Sec.  210.2-01(c)(2)(iii)(B), (c)(4), (c)(6), (c)(7), and Sec.  210.2-
07.

[68 FR 6048, Feb. 5, 2003]



Sec.  240.10A-3  Listing standards relating to audit committees.

    (a) Pursuant to section 10A(m) of the Act (15 U.S.C. 78j-1(m)) and 
section 3 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7202):
    (1) National securities exchanges. The rules of each national 
securities exchange registered pursuant to section 6 of the Act (15 
U.S.C. 78f) must, in accordance with the provisions of this section, 
prohibit the initial or continued listing of any security of an issuer 
that is not in compliance with the requirements of any portion of 
paragraph (b) or (c) of this section.
    (2) National securities associations. The rules of each national 
securities association registered pursuant to section 15A of the Act (15 
U.S.C. 78o-3) must, in accordance with the provisions of this section, 
prohibit the initial or continued listing in an automated inter-dealer 
quotation system of any security of an issuer that is not in compliance 
with the requirements of any portion of paragraph (b) or (c) of this 
section.
    (3) Opportunity to cure defects. The rules required by paragraphs 
(a)(1) and (a)(2) of this section must provide for appropriate 
procedures for a listed issuer to have an opportunity to cure any 
defects that would be the basis for a prohibition under paragraph (a) of 
this section, before the imposition of such prohibition. Such rules also 
may provide that if a member of an audit committee ceases to be 
independent in accordance with the requirements of this section for 
reasons outside the member's reasonable control, that person, with 
notice by the issuer to the applicable national securities exchange or 
national securities association, may remain an audit committee member of 
the listed issuer until the earlier of the next annual shareholders 
meeting of the listed issuer or one year from the occurrence of the 
event that caused the member to be no longer independent.
    (4) Notification of noncompliance. The rules required by paragraphs 
(a)(1) and (a)(2) of this section must include a requirement that a 
listed issuer must notify the applicable national securities exchange or 
national securities association promptly after an executive officer of 
the listed issuer becomes aware of any material noncompliance by the 
listed issuer with the requirements of this section.
    (5) Implementation. (i) The rules of each national securities 
exchange or

[[Page 109]]

national securities association meeting the requirements of this section 
must be operative, and listed issuers must be in compliance with those 
rules, by the following dates:
    (A) July 31, 2005 for foreign private issuers and smaller reporting 
companies (as defined in Sec.  240.12b-2); and
    (B) For all other listed issuers, the earlier of the listed issuer's 
first annual shareholders meeting after January 15, 2004, or October 31, 
2004.
    (ii) Each national securities exchange and national securities 
association must provide to the Commission, no later than July 15, 2003, 
proposed rules or rule amendments that comply with this section.
    (iii) Each national securities exchange and national securities 
association must have final rules or rule amendments that comply with 
this section approved by the Commission no later than December 1, 2003.
    (b) Required standards--(1) Independence. (i) Each member of the 
audit committee must be a member of the board of directors of the listed 
issuer, and must otherwise be independent; provided that, where a listed 
issuer is one of two dual holding companies, those companies may 
designate one audit committee for both companies so long as each member 
of the audit committee is a member of the board of directors of at least 
one of such dual holding companies.
    (ii) Independence requirements for non-investment company issuers. 
In order to be considered to be independent for purposes of this 
paragraph (b)(1), a member of an audit committee of a listed issuer that 
is not an investment company may not, other than in his or her capacity 
as a member of the audit committee, the board of directors, or any other 
board committee:
    (A) Accept directly or indirectly any consulting, advisory, or other 
compensatory fee from the issuer or any subsidiary thereof, provided 
that, unless the rules of the national securities exchange or national 
securities association provide otherwise, compensatory fees do not 
include the receipt of fixed amounts of compensation under a retirement 
plan (including deferred compensation) for prior service with the listed 
issuer (provided that such compensation is not contingent in any way on 
continued service); or
    (B) Be an affiliated person of the issuer or any subsidiary thereof.
    (iii) Independence requirements for investment company issuers. In 
order to be considered to be independent for purposes of this paragraph 
(b)(1), a member of an audit committee of a listed issuer that is an 
investment company may not, other than in his or her capacity as a 
member of the audit committee, the board of directors, or any other 
board committee:
    (A) Accept directly or indirectly any consulting, advisory, or other 
compensatory fee from the issuer or any subsidiary thereof, provided 
that, unless the rules of the national securities exchange or national 
securities association provide otherwise, compensatory fees do not 
include the receipt of fixed amounts of compensation under a retirement 
plan (including deferred compensation) for prior service with the listed 
issuer (provided that such compensation is not contingent in any way on 
continued service); or
    (B) Be an ``interested person'' of the issuer as defined in section 
2(a)(19) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(19)).
    (iv) Exemptions from the independence requirements. (A) For an 
issuer listing securities pursuant to a registration statement under 
section 12 of the Act (15 U.S.C. 78l), or for an issuer that has a 
registration statement under the Securities Act of 1933 (15 U.S.C. 77a 
et seq.) covering an initial public offering of securities to be listed 
by the issuer, where in each case the listed issuer was not, immediately 
prior to the effective date of such registration statement, required to 
file reports with the Commission pursuant to section 13(a) or 15(d) of 
the Act (15 U.S.C. 78m(a) or 78o(d)):
    (1) All but one of the members of the listed issuer's audit 
committee may be exempt from the independence requirements of paragraph 
(b)(1)(ii) of this section for 90 days from the date of effectiveness of 
such registration statement; and
    (2) A minority of the members of the listed issuer's audit committee 
may be

[[Page 110]]

exempt from the independence requirements of paragraph (b)(1)(ii) of 
this section for one year from the date of effectiveness of such 
registration statement.
    (B) An audit committee member that sits on the board of directors of 
a listed issuer and an affiliate of the listed issuer is exempt from the 
requirements of paragraph (b)(1)(ii)(B) of this section if the member, 
except for being a director on each such board of directors, otherwise 
meets the independence requirements of paragraph (b)(1)(ii) of this 
section for each such entity, including the receipt of only ordinary-
course compensation for serving as a member of the board of directors, 
audit committee or any other board committee of each such entity.
    (C) An employee of a foreign private issuer who is not an executive 
officer of the foreign private issuer is exempt from the requirements of 
paragraph (b)(1)(ii) of this section if the employee is elected or named 
to the board of directors or audit committee of the foreign private 
issuer pursuant to the issuer's governing law or documents, an employee 
collective bargaining or similar agreement or other home country legal 
or listing requirements.
    (D) An audit committee member of a foreign private issuer may be 
exempt from the requirements of paragraph (b)(1)(ii)(B) of this section 
if that member meets the following requirements:
    (1) The member is an affiliate of the foreign private issuer or a 
representative of such an affiliate;
    (2) The member has only observer status on, and is not a voting 
member or the chair of, the audit committee; and
    (3) Neither the member nor the affiliate is an executive officer of 
the foreign private issuer.
    (E) An audit committee member of a foreign private issuer may be 
exempt from the requirements of paragraph (b)(1)(ii)(B) of this section 
if that member meets the following requirements:
    (1) The member is a representative or designee of a foreign 
government or foreign governmental entity that is an affiliate of the 
foreign private issuer; and
    (2) The member is not an executive officer of the foreign private 
issuer.
    (F) In addition to paragraphs (b)(1)(iv)(A) through (E) of this 
section, the Commission may exempt from the requirements of paragraphs 
(b)(1)(ii) or (b)(1)(iii) of this section a particular relationship with 
respect to audit committee members, as the Commission determines 
appropriate in light of the circumstances.
    (2) Responsibilities relating to registered public accounting firms. 
The audit committee of each listed issuer, in its capacity as a 
committee of the board of directors, must be directly responsible for 
the appointment, compensation, retention and oversight of the work of 
any registered public accounting firm engaged (including resolution of 
disagreements between management and the auditor regarding financial 
reporting) for the purpose of preparing or issuing an audit report or 
performing other audit, review or attest services for the listed issuer, 
and each such registered public accounting firm must report directly to 
the audit committee.
    (3) Complaints. Each audit committee must establish procedures for:
    (i) The receipt, retention, and treatment of complaints received by 
the listed issuer regarding accounting, internal accounting controls, or 
auditing matters; and
    (ii) The confidential, anonymous submission by employees of the 
listed issuer of concerns regarding questionable accounting or auditing 
matters.
    (4) Authority to engage advisers. Each audit committee must have the 
authority to engage independent counsel and other advisers, as it 
determines necessary to carry out its duties.
    (5) Funding. Each listed issuer must provide for appropriate 
funding, as determined by the audit committee, in its capacity as a 
committee of the board of directors, for payment of:
    (i) Compensation to any registered public accounting firm engaged 
for the purpose of preparing or issuing an audit report or performing 
other audit, review or attest services for the listed issuer;
    (ii) Compensation to any advisers employed by the audit committee 
under paragraph (b)(4) of this section; and
    (iii) Ordinary administrative expenses of the audit committee that 
are

[[Page 111]]

necessary or appropriate in carrying out its duties.
    (c) General exemptions. (1) At any time when an issuer has a class 
of securities that is listed on a national securities exchange or 
national securities association subject to the requirements of this 
section, the listing of other classes of securities of the listed issuer 
on a national securities exchange or national securities association is 
not subject to the requirements of this section.
    (2) At any time when an issuer has a class of common equity 
securities (or similar securities) that is listed on a national 
securities exchange or national securities association subject to the 
requirements of this section, the listing of classes of securities of a 
direct or indirect consolidated subsidiary or an at least 50% 
beneficially owned subsidiary of the issuer (except classes of equity 
securities, other than non-convertible, non-participating preferred 
securities, of such subsidiary) is not subject to the requirements of 
this section.
    (3) The listing of securities of a foreign private issuer is not 
subject to the requirements of paragraphs (b)(1) through (b)(5) of this 
section if the foreign private issuer meets the following requirements:
    (i) The foreign private issuer has a board of auditors (or similar 
body), or has statutory auditors, established and selected pursuant to 
home country legal or listing provisions expressly requiring or 
permitting such a board or similar body;
    (ii) The board or body, or statutory auditors is required under home 
country legal or listing requirements to be either:
    (A) Separate from the board of directors; or
    (B) Composed of one or more members of the board of directors and 
one or more members that are not also members of the board of directors;
    (iii) The board or body, or statutory auditors, are not elected by 
management of such issuer and no executive officer of the foreign 
private issuer is a member of such board or body, or statutory auditors;
    (iv) Home country legal or listing provisions set forth or provide 
for standards for the independence of such board or body, or statutory 
auditors, from the foreign private issuer or the management of such 
issuer;
    (v) Such board or body, or statutory auditors, in accordance with 
any applicable home country legal or listing requirements or the 
issuer's governing documents, are responsible, to the extent permitted 
by law, for the appointment, retention and oversight of the work of any 
registered public accounting firm engaged (including, to the extent 
permitted by law, the resolution of disagreements between management and 
the auditor regarding financial reporting) for the purpose of preparing 
or issuing an audit report or performing other audit, review or attest 
services for the issuer; and
    (vi) The audit committee requirements of paragraphs (b)(3), (b)(4) 
and (b)(5) of this section apply to such board or body, or statutory 
auditors, to the extent permitted by law.
    (4) The listing of a security futures product cleared by a clearing 
agency that is registered pursuant to section 17A of the Act (15 U.S.C. 
78q-1) or that is exempt from the registration requirements of section 
17A pursuant to paragraph (b)(7)(A) of such section is not subject to 
the requirements of this section.
    (5) The listing of a standardized option, as defined in Sec.  
240.9b-1(a)(4), issued by a clearing agency that is registered pursuant 
to section 17A of the Act (15 U.S.C. 78q-1) is not subject to the 
requirements of this section.
    (6) The listing of securities of the following listed issuers are 
not subject to the requirements of this section:
    (i) Asset-Backed Issuers (as defined in Sec.  229.1101 of this 
chapter);
    (ii) Unit investment trusts (as defined in 15 U.S.C. 80a-4(2)); and
    (iii)Foreign governments (as defined in Sec.  240.3b-4(a)).
    (7) The listing of securities of a listed issuer is not subject to 
the requirements of this section if:
    (i) The listed issuer, as reflected in the applicable listing 
application, is organized as a trust or other unincorporated association 
that does not have a board of directors or persons acting in a similar 
capacity; and

[[Page 112]]

    (ii) The activities of the listed issuer that is described in 
paragraph (c)(7)(i) of this section are limited to passively owning or 
holding (as well as administering and distributing amounts in respect 
of) securities, rights, collateral or other assets on behalf of or for 
the benefit of the holders of the listed securities.
    (d) Disclosure. Any listed issuer availing itself of an exemption 
from the independence standards contained in paragraph (b)(1)(iv) of 
this section (except paragraph (b)(1)(iv)(B) of this section), the 
general exemption contained in paragraph (c)(3) of this section or the 
last sentence of paragraph (a)(3) of this section, must:
    (1) Disclose its reliance on the exemption and its assessment of 
whether, and if so, how, such reliance would materially adversely affect 
the ability of the audit committee to act independently and to satisfy 
the other requirements of this section in any proxy or information 
statement for a meeting of shareholders at which directors are elected 
that is filed with the Commission pursuant to the requirements of 
section 14 of the Act (15 U.S.C. 78n); and
    (2) Disclose the information specified in paragraph (d)(1) of this 
section in, or incorporate such information by reference from such proxy 
or information statement filed with the Commission into, its annual 
report filed with the Commission pursuant to the requirements of section 
13(a) or 15(d) of the Act (15 U.S.C. 78m(a) or 78o(d)).
    (e) Definitions. Unless the context otherwise requires, all terms 
used in this section have the same meaning as in the Act. In addition, 
unless the context otherwise requires, the following definitions apply 
for purposes of this section:
    (1)(i) The term affiliate of, or a person affiliated with, a 
specified person, means a person that directly, or indirectly through 
one or more intermediaries, controls, or is controlled by, or is under 
common control with, the person specified.
    (ii)(A) A person will be deemed not to be in control of a specified 
person for purposes of this section if the person:
    (1) Is not the beneficial owner, directly or indirectly, of more 
than 10% of any class of voting equity securities of the specified 
person; and
    (2) Is not an executive officer of the specified person.
    (B) Paragraph (e)(1)(ii)(A) of this section only creates a safe 
harbor position that a person does not control a specified person. The 
existence of the safe harbor does not create a presumption in any way 
that a person exceeding the ownership requirement in paragraph 
(e)(1)(ii)(A)(1) of this section controls or is otherwise an affiliate 
of a specified person.
    (iii) The following will be deemed to be affiliates:
    (A) An executive officer of an affiliate;
    (B) A director who also is an employee of an affiliate;
    (C) A general partner of an affiliate; and
    (D) A managing member of an affiliate.
    (iv) For purposes of paragraph (e)(1)(i) of this section, dual 
holding companies will not be deemed to be affiliates of or persons 
affiliated with each other by virtue of their dual holding company 
arrangements with each other, including where directors of one dual 
holding company are also directors of the other dual holding company, or 
where directors of one or both dual holding companies are also directors 
of the businesses jointly controlled, directly or indirectly, by the 
dual holding companies (and, in each case, receive only ordinary-course 
compensation for serving as a member of the board of directors, audit 
committee or any other board committee of the dual holding companies or 
any entity that is jointly controlled, directly or indirectly, by the 
dual holding companies).
    (2) In the case of foreign private issuers with a two-tier board 
system, the term board of directors means the supervisory or non-
management board.
    (3) In the case of a listed issuer that is a limited partnership or 
limited liability company where such entity does not have a board of 
directors or equivalent body, the term board of directors means the 
board of directors of the managing general partner, managing member or 
equivalent body.

[[Page 113]]

    (4) The term control (including the terms controlling, controlled by 
and under common control with) means the possession, direct or indirect, 
of the power to direct or cause the direction of the management and 
policies of a person, whether through the ownership of voting 
securities, by contract, or otherwise.
    (5) The term dual holding companies means two foreign private 
issuers that:
    (i) Are organized in different national jurisdictions;
    (ii) Collectively own and supervise the management of one or more 
businesses which are conducted as a single economic enterprise; and
    (iii) Do not conduct any business other than collectively owning and 
supervising such businesses and activities reasonably incidental 
thereto.
    (6) The term executive officer has the meaning set forth in Sec.  
240.3b-7.
    (7) The term foreign private issuer has the meaning set forth in 
Sec.  240.3b-4(c).
    (8) The term indirect acceptance by a member of an audit committee 
of any consulting, advisory or other compensatory fee includes 
acceptance of such a fee by a spouse, a minor child or stepchild or a 
child or stepchild sharing a home with the member or by an entity in 
which such member is a partner, member, an officer such as a managing 
director occupying a comparable position or executive officer, or 
occupies a similar position (except limited partners, non-managing 
members and those occupying similar positions who, in each case, have no 
active role in providing services to the entity) and which provides 
accounting, consulting, legal, investment banking or financial advisory 
services to the issuer or any subsidiary of the issuer.
    (9) The terms listed and listing refer to securities listed on a 
national securities exchange or listed in an automated inter-dealer 
quotation system of a national securities association or to issuers of 
such securities.

    Instructions to Sec.  240.10A-3: 1. The requirements in paragraphs 
(b)(2) through (b)(5), (c)(3)(v) and (c)(3)(vi) of this section do not 
conflict with, and do not affect the application of, any requirement or 
ability under a listed issuer's governing law or documents or other home 
country legal or listing provisions that requires or permits 
shareholders to ultimately vote on, approve or ratify such requirements. 
The requirements instead relate to the assignment of responsibility as 
between the audit committee and management. In such an instance, 
however, if the listed issuer provides a recommendation or nomination 
regarding such responsibilities to shareholders, the audit committee of 
the listed issuer, or body performing similar functions, must be 
responsible for making the recommendation or nomination.
    2. The requirements in paragraphs (b)(2) through (b)(5), (c)(3)(v), 
(c)(3)(vi) and Instruction 1 of this section do not conflict with any 
legal or listing requirement in a listed issuer's home jurisdiction that 
prohibits the full board of directors from delegating such 
responsibilities to the listed issuer's audit committee or limits the 
degree of such delegation. In that case, the audit committee, or body 
performing similar functions, must be granted such responsibilities, 
which can include advisory powers, with respect to such matters to the 
extent permitted by law, including submitting nominations or 
recommendations to the full board.
    3. The requirements in paragraphs (b)(2) through (b)(5), (c)(3)(v) 
and (c)(3)(vi) of this section do not conflict with any legal or listing 
requirement in a listed issuer's home jurisdiction that vests such 
responsibilities with a government entity or tribunal. In that case, the 
audit committee, or body performing similar functions, must be granted 
such responsibilities, which can include advisory powers, with respect 
to such matters to the extent permitted by law.
    4. For purposes of this section, the determination of a person's 
beneficial ownership must be made in accordance with Sec.  240.13d-3.

[68 FR 18818, Apr. 16, 2003, as amended at 70 FR 1620, Jan. 7, 2005; 73 
FR 973, Jan. 4, 2008]

                     Requirements Under Section 10C



Sec.  240.10C-1  Listing standards relating to compensation committees.

    (a) Pursuant to section 10C(a) of the Act (15 U.S.C. 78j-3(a)) and 
section 952 of the Dodd-Frank Wall Street Reform and Consumer Protection 
Act of 2010 (Pub. L. 111-203, 124 Stat. 1900):
    (1) National securities exchanges. The rules of each national 
securities exchange registered pursuant to section 6 of the Act (15 
U.S.C. 78f), to the extent such national securities exchange lists 
equity securities, must, in accordance with the provisions of this 
section, prohibit the initial or continued listing of any equity 
security of an issuer that is not in compliance with the requirements of 
any portion of paragraph (b) or (c) of this section.

[[Page 114]]

    (2) National securities associations. The rules of each national 
securities association registered pursuant to section 15A of the Act (15 
U.S.C. 78o-3), to the extent such national securities association lists 
equity securities in an automated inter-dealer quotation system, must, 
in accordance with the provisions of this section, prohibit the initial 
or continued listing in an automated inter-dealer quotation system of 
any equity security of an issuer that is not in compliance with the 
requirements of any portion of paragraph (b) or (c) of this section.
    (3) Opportunity to cure defects. The rules required by paragraphs 
(a)(1) and (a)(2) of this section must provide for appropriate 
procedures for a listed issuer to have a reasonable opportunity to cure 
any defects that would be the basis for a prohibition under paragraph 
(a) of this section, before the imposition of such prohibition. Such 
rules may provide that if a member of a compensation committee ceases to 
be independent in accordance with the requirements of this section for 
reasons outside the member's reasonable control, that person, with 
notice by the issuer to the applicable national securities exchange or 
national securities association, may remain a compensation committee 
member of the listed issuer until the earlier of the next annual 
shareholders meeting of the listed issuer or one year from the 
occurrence of the event that caused the member to be no longer 
independent.
    (4) Implementation. (i) Each national securities exchange and 
national securities association that lists equity securities must 
provide to the Commission, no later than 90 days after publication of 
this section in the Federal Register, proposed rules or rule amendments 
that comply with this section. Each submission must include, in addition 
to any other information required under section 19(b) of the Act (15 
U.S.C. 78s(b)) and the rules thereunder, a review of whether and how 
existing or proposed listing standards satisfy the requirements of this 
rule, a discussion of the consideration of factors relevant to 
compensation committee independence conducted by the national securities 
exchange or national securities association, and the definition of 
independence applicable to compensation committee members that the 
national securities exchange or national securities association proposes 
to adopt or retain in light of such review.
    (ii) Each national securities exchange and national securities 
association that lists equity securities must have rules or rule 
amendments that comply with this section approved by the Commission no 
later than one year after publication of this section in the Federal 
Register.
    (b) Required standards. The requirements of this section apply to 
the compensation committees of listed issuers.
    (1) Independence. (i) Each member of the compensation committee must 
be a member of the board of directors of the listed issuer, and must 
otherwise be independent.
    (ii) Independence requirements. In determining independence 
requirements for members of compensation committees, the national 
securities exchanges and national securities associations shall consider 
relevant factors, including, but not limited to:
    (A) The source of compensation of a member of the board of directors 
of an issuer, including any consulting, advisory or other compensatory 
fee paid by the issuer to such member of the board of directors; and
    (B) Whether a member of the board of directors of an issuer is 
affiliated with the issuer, a subsidiary of the issuer or an affiliate 
of a subsidiary of the issuer.
    (iii) Exemptions from the independence requirements. (A) The listing 
of equity securities of the following categories of listed issuers is 
not subject to the requirements of paragraph (b)(1) of this section:
    (1) Limited partnerships;
    (2) Companies in bankruptcy proceedings;
    (3) Open-end management investment companies registered under the 
Investment Company Act of 1940; and
    (4) Any foreign private issuer that discloses in its annual report 
the reasons that the foreign private issuer does not have an independent 
compensation committee.
    (B) In addition to the issuer exemptions set forth in paragraph

[[Page 115]]

(b)(1)(iii)(A) of this section, a national securities exchange or a 
national securities association, pursuant to section 19(b) of the Act 
(15 U.S.C. 78s(b)) and the rules thereunder, may exempt from the 
requirements of paragraph (b)(1) of this section a particular 
relationship with respect to members of the compensation committee, as 
each national securities exchange or national securities association 
determines is appropriate, taking into consideration the size of an 
issuer and any other relevant factors.
    (2) Authority to retain compensation consultants, independent legal 
counsel and other compensation advisers. (i) The compensation committee 
of a listed issuer, in its capacity as a committee of the board of 
directors, may, in its sole discretion, retain or obtain the advice of a 
compensation consultant, independent legal counsel or other adviser.
    (ii) The compensation committee shall be directly responsible for 
the appointment, compensation and oversight of the work of any 
compensation consultant, independent legal counsel and other adviser 
retained by the compensation committee.
    (iii) Nothing in this paragraph (b)(2) shall be construed:
    (A) To require the compensation committee to implement or act 
consistently with the advice or recommendations of the compensation 
consultant, independent legal counsel or other adviser to the 
compensation committee; or
    (B) To affect the ability or obligation of a compensation committee 
to exercise its own judgment in fulfillment of the duties of the 
compensation committee.
    (3) Funding. Each listed issuer must provide for appropriate 
funding, as determined by the compensation committee, in its capacity as 
a committee of the board of directors, for payment of reasonable 
compensation to a compensation consultant, independent legal counsel or 
any other adviser retained by the compensation committee.
    (4) Independence of compensation consultants and other advisers. The 
compensation committee of a listed issuer may select a compensation 
consultant, legal counsel or other adviser to the compensation committee 
only after taking into consideration the following factors, as well as 
any other factors identified by the relevant national securities 
exchange or national securities association in its listing standards:
    (i) The provision of other services to the issuer by the person that 
employs the compensation consultant, legal counsel or other adviser;
    (ii) The amount of fees received from the issuer by the person that 
employs the compensation consultant, legal counsel or other adviser, as 
a percentage of the total revenue of the person that employs the 
compensation consultant, legal counsel or other adviser;
    (iii) The policies and procedures of the person that employs the 
compensation consultant, legal counsel or other adviser that are 
designed to prevent conflicts of interest;
    (iv) Any business or personal relationship of the compensation 
consultant, legal counsel or other adviser with a member of the 
compensation committee;
    (v) Any stock of the issuer owned by the compensation consultant, 
legal counsel or other adviser; and
    (vi) Any business or personal relationship of the compensation 
consultant, legal counsel, other adviser or the person employing the 
adviser with an executive officer of the issuer.

    Instruction to paragraph (b)(4) of this section: A listed issuer's 
compensation committee is required to conduct the independence 
assessment outlined in paragraph (b)(4) of this section with respect to 
any compensation consultant, legal counsel or other adviser that 
provides advice to the compensation committee, other than in-house legal 
counsel.

    (5) General exemptions. (i) The national securities exchanges and 
national securities associations, pursuant to section 19(b) of the Act 
(15 U.S.C. 78s(b)) and the rules thereunder, may exempt from the 
requirements of this section certain categories of issuers, as the 
national securities exchange or national securities association 
determines is appropriate, taking into consideration, among other 
relevant factors, the potential impact of such requirements on smaller 
reporting issuers.

[[Page 116]]

    (ii) The requirements of this section shall not apply to any 
controlled company or to any smaller reporting company.
    (iii) The listing of a security futures product cleared by a 
clearing agency that is registered pursuant to section 17A of the Act 
(15 U.S.C. 78q-1) or that is exempt from the registration requirements 
of section 17A(b)(7)(A) (15 U.S.C. 78q-1(b)(7)(A)) is not subject to the 
requirements of this section.
    (iv) The listing of a standardized option, as defined in Sec.  
240.9b-1(a)(4), issued by a clearing agency that is registered pursuant 
to section 17A of the Act (15 U.S.C. 78q-1) is not subject to the 
requirements of this section.
    (c) Definitions. Unless the context otherwise requires, all terms 
used in this section have the same meaning as in the Act and the rules 
and regulations thereunder. In addition, unless the context otherwise 
requires, the following definitions apply for purposes of this section:
    (1) In the case of foreign private issuers with a two-tier board 
system, the term board of directors means the supervisory or non-
management board.
    (2) The term compensation committee means:
    (i) A committee of the board of directors that is designated as the 
compensation committee; or
    (ii) In the absence of a committee of the board of directors that is 
designated as the compensation committee, a committee of the board of 
directors performing functions typically performed by a compensation 
committee, including oversight of executive compensation, even if it is 
not designated as the compensation committee or also performs other 
functions; or
    (iii) For purposes of this section other than paragraphs (b)(2)(i) 
and (b)(3), in the absence of a committee as described in paragraphs 
(c)(2)(i) or (ii) of this section, the members of the board of directors 
who oversee executive compensation matters on behalf of the board of 
directors.
    (3) The term controlled company means an issuer:
    (i) That is listed on a national securities exchange or by a 
national securities association; and
    (ii) Of which more than 50 percent of the voting power for the 
election of directors is held by an individual, a group or another 
company.
    (4) The terms listed and listing refer to equity securities listed 
on a national securities exchange or listed in an automated inter-dealer 
quotation system of a national securities association or to issuers of 
such securities.
    (5) The term open-end management investment company means an open-
end company, as defined by Section 5(a)(1) of the Investment Company Act 
of 1940 (15 U.S.C. 80a-5(a)(1)), that is registered under that Act.

[77 FR 38454, June 27, 2012]

            Adoption of Floor Trading Regulation (Rule 11a-1)



Sec.  240.11a-1  Regulation of floor trading.

    (a) No member of a national securities exchange, while on the floor 
of such exchange, shall initiate, directly or indirectly, any 
transaction in any security admitted to trading on such exchange, for 
any account in which such member has an interest, or for any such 
account with respect to which such member has discretion as to the time 
of execution, the choice of security to be bought or sold, the total 
amount of any security to be bought or sold, or whether any such 
transaction shall be one of purchase or sale.
    (b) The provisions of paragraph (a) of this section shall not apply 
to:
    (1) Any transaction by a registered specialist in a security in 
which he is so registered on such exchange;
    (2) Any transaction for the account of an odd-lot dealer in a 
security in which he is so registered on such exchange;
    (3) Any stabilizing transaction effected in compliance with Sec.  
242.104 of this chapter to facilitate a distribution of such security in 
which such member is participating;
    (4) Any bona fide arbitrage transaction;
    (5) Any transaction made with the prior approval of a floor official 
of such exchange to permit such member to contribute to the maintenance 
of a fair and orderly market in such security, or any purchase or sale 
to reverse any such transaction;

[[Page 117]]

    (6) Any transaction to offset a transaction made in error; or
    (7) Any transaction effected in conformity with a plan designed to 
eliminate floor trading activities which are not beneficial to the 
market and which plan has been adopted by an exchange and declared 
effective by the Commission. For the purpose of this rule, a plan filed 
with the Commission by a national securities exchange shall not become 
effective unless the Commission, having due regard for the maintenance 
of fair and orderly markets, for the public interest, and for the 
protection of investors, declares the plan to be effective.
    (c) For the purpose of this rule the term ``on the floor of such 
exchange'' shall include the trading floor; the rooms, lobbies, and 
other premises immediately adjacent thereto for use of members 
generally; other rooms, lobbies and premises made available primarily 
for use by members generally; and the telephone and other facilities in 
any such place.
    (d) Any national securities exchange may apply for an exemption from 
the provisions of this rule in compliance with the provisions of section 
11(c) of the Act.

(Sec. 11, 48 Stat. 891; 15 U.S.C. 78k)

[29 FR 7381, June 6, 1964, as amended at 62 FR 544, Jan. 3, 1997]
    Note 1: The Commission finding that the floor trading plan of the 
New York Stock Exchange filed on May 25, 1964 is designed to eliminate 
floor trading activities not beneficial to the market hereby declares 
such plan effective August 3, 1964 subject to suspension or termination 
on sixty days written notice from the Commission, 29 FR 7381, June 6, 
1964.
    Note 2: The text of the Commission's action declaring effective the 
amendments to the Floor Trading Plan of the American Stock Exchange (33 
FR 1073, Jan. 27, 1968) is as follows:
    The Securities and Exchange Commission acting pursuant to the 
Securities Exchange Act of 1934, particularly sections 11(a) and 23(a) 
thereof, and Rule 11a-1 (17 CFR 240.11a-1) under the Act, deeming it 
necessary for the exercise of the functions vested in it, and having due 
regard for the maintenance of fair and orderly markets, for the public 
interest, and for the protection of investors, hereby declares the Floor 
Trading Plan of the American Stock Exchange, as amended by amendments 
filed on May 11, 1967, effective January 31, 1968. If at any time it 
appears to the Commission to be necessary or appropriate in the public 
interest, for the protection of investors, or for the maintenance of 
fair and orderly markets, or that floor trading activities which are not 
beneficial to the market have not been eliminated by the Floor Trading 
Plan of the American Stock Exchange, the Commission may suspend or 
terminate the effectiveness of the plan by sending at least 60 days 
written notice to the American Stock Exchange. The American Stock 
Exchange shall have the opportunity to submit any written data, facts, 
arguments, or modifications in its plan within such 60-day period in 
such form as the Commission deems appropriate under the circumstances. 
The Commission has been informed that all persons subject to the Floor 
Trading Plan of the American Stock Exchange, as amended, have had actual 
notice thereof, and the Commission finds that notice and procedure 
pursuant to section 4 of the Administrative Procedure Act (5 U.S.C. 
section 553) are impracticable and unnecessary and that such Plan, as 
amended, may be, and is hereby, declared effective on January 31, 1968.



Sec.  240.11a1-1(T)  Transactions yielding priority, parity, and precedence.

    (a) A transaction effected on a national securities exchange for the 
account of a member which meets the requirements of section 
11(a)(1)(G)(i) of the Act shall be deemed, in accordance with the 
requirements of section 11(a)(1)(G)(ii), to be not inconsistent with the 
maintenance of fair and orderly markets and to yield priority, parity, 
and precedence in execution to orders for the account of persons who are 
not members or associated with members of the exchange if such 
transaction is effected in compliance with each of the following 
requirements:
    (1) A member shall disclose that a bid or offer for its account is 
for its account to any member with whom such bid or offer is placed or 
to whom it is communicated, and any such member through whom that bid or 
offer is communicated shall disclose to others participating in 
effecting the order that it is for the account of a member.
    (2) Immediately before executing the order, a member (other than the 
specialist in such security) presenting any order for the account of a 
member on the exchange shall clearly announce or otherwise indicate to 
the specialist and to other members then present for the

[[Page 118]]

trading in such security on the exchange that he is presenting an order 
for the account of a member.
    (3) Notwithstanding rules of priority, parity, and precedence 
otherwise applicable, any member presenting for execution a bid or offer 
for its own account or for the account of another member shall grant 
priority to any bid or offer at the same price for the account of a 
person who is not, or is not associated with, a member, irrespective of 
the size of any such bid or offer or the time when entered.
    (b) A member shall be deemed to meet the requirements of section 
11(a)(1)(G)(i) of the Act if during its preceding fiscal year more than 
50 percent of its gross revenues was derived from one or more of the 
sources specified in that section. In addition to any revenue which 
independently meets the requirements of section 11(a)(1)(G)(i), revenue 
derived from any transaction specified in paragraph (A), (B), or (D) of 
section 11(a)(1) of the Act or specified in 17 CFR 240.11a1-4(T) shall 
be deemed to be revenue derived from one or more of the sources 
specified in section 11(a)(1)(G)(i). A member may rely on a list of 
members which are stated to meet the requirements of section 
11(a)(1)(G)(i) if such list is prepared, and updated at least annually, 
by the exchange. In preparing any such list, an exchange may rely on a 
report which sets forth a statement of gross revenues of a member if 
covered by a report of independent accountants for such member to the 
effect that such report has been prepared in accordance with generally 
accepted accounting principles.

(Secs. 2, 3, 6, 11, 11A, and 23, 89 Stat. 97, 104, 110, 111, 156 (15 
U.S.C. 78b, 78c, 78f, 78k, 78k-1, 78w); secs. 2, 3, 11, 23, 48 Stat. 
881, 882, 885, 891, 901, as amended)

[43 FR 11553, Mar. 17, 1978, as amended at 43 FR 18562, May 1, 1978; 44 
FR 6093, Jan. 31, 1979]



Sec.  240.11a1-2  Transactions for certain accounts of associated persons
of members.

    A transaction effected by a member of a national securities exchange 
for the account of an associated person thereof shall be deemed to be of 
a kind which is consistent with the purposes of section 11(a)(1) of the 
Act, the protection of investors, and the maintenance of fair and 
orderly markets if the transaction is effected:
    (a) For the account of and for the benefit of an associated person, 
if, assuming such transaction were for the account of a member, or
    (b) For the account of an associated person but for the benefit of 
an account carried by such associated person, if, assuming such account 
were carried on the same basis by a member.

The member would have been permitted, under section 11(a) of the Act and 
the other rules thereunder, to effect the transaction: Provided, 
however, That a transaction may not be effected by a member for the 
account of and for the benefit of an associated person under section 
11(a)(1)(G) of the Act and Rule 11a1-1(T) thereunder unless the 
associated person derived, during its preceding fiscal year, more than 
50 percent of its gross revenues from one or more of the sources 
specified in section 11(a)(1)(G)(i) of the Act.

(Secs. 2, 3, 4, 6, 7, 11, 18, 89 Stat. 97, 104, 110, 111, 121, 155 (15 
U.S.C. 78b, 78c, 78f, 78k, 78k-1, 78o, 78w); secs. 2, 3, 10, 23, 48 
Stat. 881, 882, 891, 901, as amended (15 U.S.C. 78j))

[43 FR 11553, Mar. 17, 1978; 43 FR 14451, Apr. 6, 1978]



Sec.  240.11a1-3(T)  Bona fide hedge transactions in certain securities.

    A bona fide hedge transaction effected on a national securities 
exchange by a member for its own account or an account of an associated 
person thereof and involving a long or short position in a security 
entitling the holder to acquire or sell an equity security, and a long 
or short position in one or more other securities entitling the holder 
to acquire or sell such equity security, shall be deemed to be of a kind 
which is consistent with the purposes of section 11(a)(1) of the Act, 
the protection of investors, and the maintenance of fair and orderly 
markets.

(Secs. 2, 3, 6, 11, 11A, and 23, 89 Stat. 97, 104, 110, 111, 156 (15 
U.S.C. 78b, 78c, 78f, 78k, 78k-1, 78w); secs. 2, 3, 11, 23, 48 Stat. 
881, 882, 885, 891, 901, as amended)

[44 FR 6093, Jan. 31, 1979]

[[Page 119]]



Sec.  240.11a1-4(T)  Bond transactions on national securities exchanges.

    A transaction in a bond, note, debenture, or other form of 
indebtedness effected on a national securities exchange by a member for 
its own account or the account of an associated person thereof shall be 
deemed to be of a kind which is consistent with the purposes of section 
11(a)(1) of the Act, the protection of investors, and the maintenance of 
fair and orderly markets.

(Secs. 2, 3, 6, 10, 11, 11A, 15 and 23 of the Securities Exchange Act of 
1934 (15 U.S.C. 78b, 78c, 78f, 78j, 78k, 78k-1, 78o, and 78w))

[43 FR 18562, May 1, 1978]



Sec.  240.11a1-5  Transactions by registered competitive market makers
and registered equity market makers.

    Any transaction by a New York Stock Exchange registered competitive 
market maker or an American Stock Exchange registered equity market 
maker effected in compliance with their respective governing rules shall 
be deemed to be of a kind which is consistent with the purposes of 
section 11(a)(1) of the Act, the protection of investors, and the 
maintenance of fair and orderly markets.

[46 FR 14889, Mar. 3, 1981]



Sec.  240.11a1-6  Transactions for certain accounts of OTC derivatives
dealers.

    A transaction effected by a member of a national securities exchange 
for the account of an OTC derivatives dealer that is an associated 
person of that member shall be deemed to be of a kind that is consistent 
with the purposes of section 11(a)(1) of the Act (15 U.S.C. 78k(a)(1)), 
the protection of investors, and the maintenance of fair and orderly 
markets if, assuming such transaction were for the account of a member, 
the member would have been permitted, under section 11(a) of the Act and 
the other rules thereunder (with the exception of Sec.  240.11a1-2), to 
effect the transaction.

[63 FR 59396, Nov. 3, 1998]



Sec.  240.11a2-2(T)  Transactions effected by exchange members through
other members.

    (a) A member of a national securities exchange (the ``initiating 
member'') may not effect a transaction on that exchange for its own 
account, the account of an associated person, or an account with respect 
to which it or an associated person thereof exercises investment 
discretion unless:
    (1) The transaction is of a kind described in paragraphs A through H 
of section 11(a)(1) of the Act and is effected in accordance with 
applicable rules and regulations thereunder; or
    (2) The transaction is effected in compliance with each of the 
following conditions:
    (i) The transaction is executed on the floor, or through use of the 
facilities, of the exchange by a member (the ``executing member'') which 
is not an associated person of the initiating member;
    (ii) The order for the transaction is transmitted from off the 
exchange floor;
    (iii) Neither the initiating member nor an associated person of the 
initiating member participates in the execution of the transaction at 
any time after the order for the transaction has been so transmitted; 
and
    (iv) In the case of a transaction effected for an account with 
respect to which the initiating member or an associated person thereof 
exercises investment discretion, neither the initiating member nor any 
associated person thereof retains any compensation in connection with 
effecting the transaction: Provided, however, That this condition shall 
not apply to the extent that the person or persons authorized to 
transact business for the account have expressly provided otherwise by 
written contract referring to section 11(a) of the Act and this section 
executed on or after March 15, 1978, by each of them and by such 
exchange member or associated person exercising investment discretion.
    (b) For purposes of this section, a member ``effects'' a securities 
transaction when it performs any function in connection with the 
processing of that transaction, including, but not limited to, (1) 
transmission of an order

[[Page 120]]

for execution, (2) execution of the order, (3) clearance and settlement 
of the transaction, and (4) arranging for the performance of any such 
function.
    (c) For purposes of this section, the term ``compensation in 
connection with effecting the transaction'' refers to compensation 
directly or indirectly received or calculated on a transaction-related 
basis for the performance of any function involved in effecting a 
securities transaction.
    (d) A member, or an associated person of a member, authorized by 
written contract to retain compensation in connection with effecting 
transactions pursuant to paragraph (a)(2)(iv) of this section shall 
furnish at least annually to the person or persons authorized to 
transact business for the account a statement setting forth the total 
amount of all compensation retained by the member or any associated 
person thereof in connection with effecting transactions for that 
account during the period covered by the statement, which amount shall 
be exclusive of all amounts paid to others during that period for 
services rendered in effecting such transactions.
    (e) A transaction effected in compliance with the requirements of 
this section shall be deemed to be of a kind which is consistent with 
the purposes of section 11(a)(1) of the Act, the protection of 
investors, and the maintenance of fair and orderly markets.
    (f) The provisions of this section shall not apply to transactions 
by exchange members to which, by operation of section 11(a)(3) of the 
Act, section 11(a)(1) of the Act is not effective.

(Secs. 2, 3, 4, 6, 7, 11, 18, 89 Stat. 97, 104, 110, 111, 121, 155 (15 
U.S.C. 78b, 78c, 78f, 78k, 78k-1, 78o, 78w); secs. 2, 3, 10, 23, 48 
Stat. 881, 882, 891, 901, as amended (15 U.S.C. 78j))

[43 FR 11554, Mar. 17, 1978, as amended at 43 FR 18562, May 1, 1978]

            Adoption of Regulation on Conduct of Specialists



Sec.  240.11b-1  Regulation of specialists.

    (a)(1) The rules of a national securities exchange may permit a 
member of such exchange to register as a specialist and to act as a 
dealer.
    (2) The rules of a national securities exchange permitting a member 
of such exchange to register as a specialist and to act as a dealer 
shall include:
    (i) Adequate minimum capital requirements in view of the markets for 
securities on such exchange;
    (ii) Requirements, as a condition of a specialist's registration, 
that a specialist engage in a course of dealings for his own account to 
assist in the maintenance, so far as practicable, of a fair and orderly 
market, and that a finding by the exchange of any substantial or 
continued failure by a specialist to engage in such a course of dealings 
will result in the suspension or cancellation of such specialist's 
registration in one or more of the securities in which such specialist 
is registered;
    (iii) Provisions restricting his dealings so far as practicable to 
those reasonably necessary to permit him to maintain a fair and orderly 
market or necessary to permit him to act as an odd-lot dealer;
    (iv) Provisions stating the responsibilities of a specialist acting 
as a broker in securities in which he is registered; and
    (v) Procedures to provide for the effective and systematic 
surveillance of the activities of specialists.
    (b) If after appropriate notice and opportunity for hearing the 
Commission finds that a member of a national securities exchange 
registered with such exchange as a specialist in specified securities 
has, for any account in which he, his member organization, or any 
participant therein has any beneficial interest, direct or indirect, 
effected transactions in such securities which were not part of a course 
of dealings reasonably necessary to permit such specialist to maintain a 
fair and orderly market, or to act as an odd-lot dealer, in the 
securities in which he is registered and were not effected in a manner 
consistent with the rules adopted by such exchange pursuant to paragraph 
(a)(2)(iii) of this section, the Commission may by order direct such 
exchange to cancel, or to suspend for such period as the Commission may 
determine, such specialist's registration in one or more of the 
securities in which such specialist is registered: Provided, however, If 
such exchange has

[[Page 121]]

itself suspended or cancelled such specialist's registration in one or 
more of the securities in which such specialist is registered, no 
further sanction shall be imposed pursuant to this paragraph (b) except 
in a case where the Commission finds substantial or continued misconduct 
by a specialist: And provided, further, That the provisions of this 
paragraph (b) shall not apply to a member of a national securities 
exchange exempted pursuant to the provisions of paragraph (d) of this 
section.
    (c) For the purposes of this section, the term rules of an exchange 
shall mean its constitution, articles of incorporation, by-laws, or 
rules or instruments corresponding thereto, whatever the name, and its 
stated policies.
    (d) Any national securities exchange may apply for an exemption from 
the provisions of this section in compliance with the provisions of 
section 11(c) of the Act.

(Sec. 11, 48 Stat. 891, 892; 15 U.S.C. 78k)

[29 FR 15863, Nov. 26, 1964, as amended at 46 FR 15135, Mar. 4, 1981]

          Exemption of Certain Securities From Section 11(d)(1)



Sec.  240.11d1-1  Exemption of certain securities from section 11(d)(1).

    A security shall be exempt from the provisions of section 11(d)(1) 
with respect to any transaction by a broker and dealer who, directly or 
indirectly extends or maintains or arranges for the extension or 
maintenance of credit on the security to or for a customer if:
    (a) The broker and dealer has not sold the security to the customer 
or bought the security for the customer's account; or
    (b) The security is acquired by the customer in exchange with the 
issuer thereof for an outstanding security of the same issuer on which 
credit was lawfully maintained for the customer at the time of the 
exchange; or
    (c) The customer is a broker or dealer or bank; or
    (d) The security is acquired by the customer through the exercise of 
a right evidenced by a warrant or certificate expiring within 90 days 
after issuance, provided such right was originally issued to the 
customer as a stockholder of the corporation issuing the security upon 
which credit is to be extended. The right shall be deemed to be issued 
to the customer as a stockholder if he actually owned the stock giving 
rise to the right when such right accrued, even though such stock was 
not registered in his name; and in determining such fact the broker and 
dealer may rely upon a signed statement of the customer which the broker 
and dealer accepts in good faith; or
    (e) Such broker and dealer would otherwise be subject to the 
prohibition of section 11(d)(1) with respect to 50 percent or less of 
all the securities of the same class which are outstanding or currently 
being distributed, and such broker and dealer sold the security to the 
customer or bought the security for the customer's account on a day when 
he was not participating in the distribution of any new issue of such 
security. A brokerdealer shall be deemed to be participating in a 
distribution of a new issue if (1) he owns, directly or indirectly, any 
undistributed security of such issue, or (2) he is engaged in any 
stabilizing activities to facilitate a distribution of such issue, or 
(3) he is a party to any syndicate agreement under which such 
stabilizing activities are being or may be undertaken, or (4) he is a 
party to an executory agreement to purchase or distribute such issue.

[13 FR 8184, Dec. 22, 1948, as amended at 76 FR 71876, Nov. 21, 2011]



Sec.  240.11d1-2  Exemption from section 11(d)(1) for certain investment
company securities held by broker-dealers as collateral in margin
accounts.

    Any securities issued by a registered open-end investment company or 
unit investment trust as defined in the Investment Company Act of 1940 
shall be exempted from the provisions of section 11(d)(1) with respect 
to any transaction by a person who is a broker and a dealer who, 
directly or indirectly, extends or maintains or arranges for the 
extension or maintenance of credit on such security, provided such 
security has been owned by the person to whom credit would be provided 
for more than 30 days, or purchased by such person pursuant to a plan 
for the automatic

[[Page 122]]

reinvestment of the dividends of such company or trust.

(Secs. 2, 3, 11, and 23, Exchange Act, 15 U.S.C. 78b, 78c, 78k and 78w)

[49 FR 50174, Dec. 27, 1984]



Sec.  240.11d2-1  Exemption from Section 11(d)(2) for certain 
broker-dealers effecting transactions for customers security futures
products in futures accounts.

    A broker or dealer registered pursuant to section 15(b)(1) of the 
Act (15 U.S.C. 78o(b)(1)) that is also a futures commission merchant 
registered pursuant to section 4f(a)(1) of the Commodity Exchange Act (7 
U.S.C. 6f(a)(1)), to the extent that it effects transactions for 
customers in security futures products in a futures account (as that 
term is defined in Sec.  240.15c3-3(a)(15)), is exempt from section 
11(d)(2) of the Act (15 U.S.C. 78k(d)(2)).

[67 FR 58313, Sept. 13, 2002]

                  Securities Exempted From Registration



Sec.  240.12a-4  Exemption of certain warrants from section 12(a).

    (a) When used in this section, the following terms shall have the 
meaning indicated unless the context otherwise requires:
    (1) The term warrant means any warrant or certificate evidencing a 
right to subscribe to or otherwise acquire another security, issued or 
unissued.
    (2) The term beneficiary security means a security to the holders of 
which a warrant or right to subscribe to or otherwise acquire another 
security is granted.
    (3) The term subject security means a security which is the subject 
of a warrant or right to subscribe to or otherwise acquire such 
security.
    (4) The term in the process of admission to dealing, in respect of a 
specified security means that (i) an application has been filed pursuant 
to section 12 (b) and (c) of the Act for the registration of such 
security on a national securities exchange; or (ii) the Commission has 
granted an application made pursuant to section 12(f) of the Act to 
continue or extend unlisted trading privileges to such security on a 
national securities exchange; or (iii) written notice has been filed 
with the Commission by a national securities exchange to the effect that 
such security has been approved for admission to dealing as a security 
exempted from the operation of section 12(a) of the Act.
    (b) Any issued or unissued warrant granted to the holders of a 
security admitted to dealing on a national securities exchange, shall be 
exempt from the operation of section 12(a) of the Act to the extent 
necessary to render lawful the effecting of transactions therein on any 
national securities exchange (i) on which the beneficiary security is 
admitted to dealing or (ii) on which the subject security is admitted to 
dealing or is in the process of admission to dealing, subject to the 
following terms and conditions:
    (1) Such warrant by its terms expires within 90 days after the 
issuance thereof;
    (2) A registration statement under the Securities Act of 1933 is in 
effect as to such warrant and as to each subject security, or the 
applicable terms of any exemption from such registration have been met 
in respect to such warrant and each subject security; and
    (3) Within five days after the exchange has taken official action to 
admit such warrant to dealing, it shall notify the Commission of such 
action.
    (c) Notwithstanding paragraph (b) of this section, no exemption 
pursuant to this section shall be available for transactions in any such 
warrant on any exchange on which the beneficiary security is admitted to 
dealing unless:
    (1) Each subject security is admitted to dealing or is in process of 
admission to dealing on a national securities exchange; or
    (2) There is available from a registration statement and periodic 
reports or other data filed by the issuer of the subject security, 
pursuant to any act administered by the Commission, information 
substantially equivalent to that available with respect to a security 
listed and registered on a national securities exchange.
    (d) Notwithstanding the foregoing, an unissued warrant shall not be 
exempt pursuant to this section unless:
    (1) Formal or official announcement has been made by the issuer 
specifying (i) the terms upon which such warrant

[[Page 123]]

and each subject security is to be issued, (ii) the date, if any, as of 
which the security holders entitled to receive such warrant will be 
determined, (iii) the approximate date of the issuance of such warrant, 
and (iv) the approximate date of the issuance of each subject security; 
and,
    (2) The members of the exchange are subject to rules which provide 
that the performance of the contract to purchase and sell an unissued 
warrant shall be conditioned upon the issuance of such warrant.
    (e) The Commission may by order deny or revoke the exemption of a 
warrant under this section, if, after appropriate notice and opportunity 
for hearing to the issuer of such warrant and to the exchange or 
exchanges on which such warrant is admitted to dealing as an exempted 
security, it finds that:
    (1) Any of the terms or conditions of this section have not been met 
with respect to such exemption, or
    (2) At any time during the period of such exemption transactions 
have been effected on any such exchanges in such warrant which (i) 
create or induce a false, misleading or artificial appearance of 
activity, (ii) unduly or improperly influence the market price, or (iii) 
make a price which does not reflect the true state of the market; or
    (3) Any other facts exist which make such denial or revocation 
necessary or appropriate in the public interest or for the protection of 
investors.
    (f) If it appears necessary or appropriate in the public interest or 
for the protection of investors, the Commission may summarily suspend 
the exemption of such warrant pending the determination by the 
Commission whether such exemption shall be denied or revoked.
    (g) Section 240.10b-1 shall be applicable to any warrant exempted by 
this section.

(Secs. 3, 12, 48 Stat. 882, as amended, 892; 15 U.S.C. 78c, 78l)

[15 FR 3450, June 2, 1950, as amended at 18 FR 128, Jan. 7, 1953]



Sec.  240.12a-5  Temporary exemption of substituted or additional 
securities.

    (a)(1) Subject to the conditions of paragraph (a)(2) of this 
section, whenever the holders of a security admitted to trading on a 
national securities exchange (hereinafter called the original security) 
obtain the right, by operation of law or otherwise, to acquire all or 
any part of a class of another or substitute security of the same or 
another issuer, or an additional amount of the original security, then:
    (i) All or any part of the class of such other or substituted 
security shall be temporarily exempted from the operation of section 
12(a) to the extent necessary to render lawful transactions therein on 
an issued or ``when-issued'' basis on any national securities exchange 
on which the original, the other or the substituted security is lawfully 
admitted to trading; and
    (ii) The additional amount of the original security shall be 
temporarily exempted from the operation of section 12(a) to the extent 
necessary to render lawful transactions therein on a ``when-issued'' 
basis on any national securities exchange on which the original security 
is lawfully admitted to trading.
    (2) The exemptions provided by paragraph (a)(1) of this section 
shall be available only if the following conditions are met:
    (i) A registration statement is in effect under the Securities Act 
of 1933 to the extent required as to the security which is the subject 
of such exemption, or the terms of any applicable exemption from 
registration under such act have been complied with, if required;
    (ii) Any stockholder approval necessary to the issuance of the 
security which is the subject of the exemption, has been obtained; and
    (iii) All other necessary official action, other than the filing or 
recording of charter amendments or other documents with the appropriate 
State authorities, has been taken to authorize and assure the issuance 
of the security which is the subject of such exemption.
    (b) The exemption provided by this section shall terminate on the 
earliest of the following dates:
    (1) When registration of the exempt security on the exchange become 
effective;
    (2) When the exempt security is granted unlisted trading privileges 
on the exchange;

[[Page 124]]

    (3) The close of business on the tenth day after (i) withdrawal of 
an application for registration of the exempt security on the exchange; 
(ii) withdrawal by the exchange of its certification of approval of the 
exempt security for listing and registration; (iii) withdrawal of an 
application for admission of the exempt security to unlisted trading 
privileges on the exchange; or (iv) the sending to the exchange of 
notice of the entry of an order by the Commission denying any 
application for admission of the exempt security to unlisted trading 
privileges on the exchange;
    (4) The close of business on the one hundred and twentieth day after 
the date on which the exempt security was admitted by action of the 
exchange to trading thereon as a security exempted from the operation of 
section 12 (a) by this section, unless prior thereto an application for 
registration of the exempt security or for admission of the exempt 
security to unlisted trading privileges on the exchange has been filed.
    (c) Notwithstanding paragraph (b) of this section, the Commission, 
having due regard for the public interest and the protection of 
investors, may at any time extend the period of exemption of any 
security by this rule or may sooner terminate the exemption upon notice 
to the exchange and to the issuer of the extension or termination 
thereof.
    (d) The Exchange shall file with the Commission a notification on 
Form 26 \1\ promptly after taking action to admit any security to 
trading under this section: Provided, however, That no notification need 
be filed under this section concerning the admission or proposed 
admission to trading of additional amounts of a class of security 
admitted to trading on such exchange.
---------------------------------------------------------------------------

    \1\ Copy filed with the Federal Register Division.
---------------------------------------------------------------------------

    (e) Section 240.10b-1 shall be applicable to all securities exempted 
from the operation of section 12(a) of the act by this section.

(Secs. 3, 12, 48 Stat. 882, 892; 15 U.S.C. 78c (12), 78l)

[13 FR 8185, Dec. 22, 1948, as amended at 19 FR 669, Feb. 5, 1954; 20 FR 
2081, Apr. 2, 1955; 53 FR 41206, Oct. 20, 1988]



Sec.  240.12a-6  Exemption of securities underlying certain options from
section 12(a).

    (a) When used in this rule, the following terms shall have the 
meanings indicated unless the context otherwise requires:
    (1) The term option shall include any put, call, spread, straddle, 
or other option or privilege of buying a security from or selling a 
security to another without being bound to do so, but such term shall 
not include any such option where the writer is: The issuer of the 
security which may be purchased or sold upon exercise of the option, or 
is a person that directly, or indirectly, through one or more 
intermediaries, controls, or is controlled by, or is under common 
control with such issuer;
    (2) The term underlying security means a security which relates to 
or is the subject of an option.
    (b) Any underlying security shall be exempt from the operation of 
section 12(a) of the Act if all of the following terms and conditions 
are met:
    (1) The related option is duly listed and registered on a national 
securities exchange;
    (2) The only transactions on such exchange with respect to such 
underlying securities consist of the delivery of and payment for such 
underlying securities pursuant to the terms of such options relating to 
the exercise thereof; and
    (3) Such underlying security is (i) duly listed and registered on 
another national securities exchange at the time the option is issued; 
or (ii) duly quoted on the National Association of Securities Dealers 
Automated Quotation System (``NASDAQ'') at the time the option is 
issued.

(Secs. 3(a)(12); 48 Stat. 882, 84 Stat. 718, 1435, 1499 (15 U.S.C. 
78(c)))

[38 FR 11449, May 8, 1973, as amended at 50 FR 20203, May 15, 1985]



Sec.  240.12a-7  Exemption of stock contained in standardized market
baskets from section 12(a) of the Act.

    (a) Any component stock of a standardized market basket shall be 
exempt from the registration requirement of section 12(a) of the Act, 
solely for the purpose of inclusion in a standardized market basket, 
provided that all of the

[[Page 125]]

following terms and conditions are met:
    (1) The standardized market basket has been duly approved by the 
Commission for listing on a national securities exchange pursuant to the 
requirements of section 19(b) of the Act; and
    (2) The stock is an NMS stock as defined in Sec.  242.600 of this 
chapter and is either:
    (i) Listed and registered for trading on a national securities 
exchange by the issuer or
    (ii) Quoted on the National Association of Securities Dealers 
Automated Quotation System;
    (b) When used in this rule, the term standardized market basket 
means a group of at least 100 stocks purchased or sold in a single 
execution and at a single trading location with physical delivery and 
transfer of ownership of each component stock resulting from such 
execution.

[56 FR 28322, June 20, 1991, as amended at 70 FR 37618, June 29, 2005]



Sec.  240.12a-8  Exemption of depositary shares.

    Depositary shares (as that term is defined in Sec.  240.12b-2) 
registered on Form F-6 (Sec.  239.36 of this chapter), but not the 
underlying deposited securities, shall be exempt from the operation of 
section 12(a) of the Act (15 U.S.C. 78l(a)).

[62 FR 39766, July 24, 1997]



Sec.  240.12a-9  Exemption of standardized options from section 12(a)
of the Act.

    The provisions of section 12(a) of the Act (15 U.S.C. 78l(a)) do not 
apply in respect of any standardized option, as defined by section 
240.9b-1(a)(4), issued by a clearing agency registered under section 17A 
of the Act (15 U.S.C. 78q-1) and traded on a national securities 
exchange registered pursuant to section 6(a) of the Act (15 U.S.C. 
78f(a)).

[68 FR 192, Jan. 2, 2003]

               Regulation 12B: Registration and Reporting

    Source: Sections 240.12b-1 through 240.12b-36 appear at 13 FR 9321, 
Dec. 31, 1948, unless otherwise noted.



ATTENTION ELECTRONIC FILERS--Table of Contents



THIS REGULATION SHOULD BE READ IN CONJUNCTION WITH REGULATION S-T (PART 
232 OF THIS CHAPTER), WHICH GOVERNS THE PREPARATION AND SUBMISSION OF 
DOCUMENTS IN ELECTRONIC FORMAT. MANY PROVISIONS RELATING TO THE 
PREPARATION AND SUBMISSION OF DOCUMENTS IN PAPER FORMAT CONTAINED IN 
THIS REGULATION ARE SUPERSEDED BY THE PROVISIONS OF REGULATION S-T FOR 
DOCUMENTS REQUIRED TO BE FILED IN ELECTRONIC FORMAT.



Sec.  240.12a-10  Exemption of security-based swaps from section 12(a)
of the Act.

    The provisions of Section 12(a) of the Act (15 U.S.C. 78l(a)) do not 
apply to any security-based swap that:
    (a) Is issued or will be issued by a clearing agency registered as a 
clearing agency under Section 17A of the Act (15 U.S.C. 78q-1) or exempt 
from registration under Section 17A of the Act pursuant to a rule, 
regulation, or order of the Commission, in its function as a central 
counterparty with respect to the security-based swap;
    (b) The Commission has determined is required to be cleared or that 
is permitted to be cleared pursuant to the clearing agency's rules;
    (c) Is sold to an eligible contract participant (as defined in 
Section 1a(18) of the Commodity Exchange Act (7 U.S.C. 1a(18))) in 
reliance on Rule 239 under the Securities Act of 1933 (17 CFR 230.239); 
and
    (d) Is traded on a national securities exchange registered pursuant 
to Section 6(a) of the Act (15 U.S.C. 78f(a)).

[77 FR 20549, Apr. 5, 2012]



Sec.  240.12a-11  Exemption of security-based swaps sold in reliance on
Securities Act of 1933 Rule 240 (Sec.  230.240) from section 12(a) of
the Act.

    (a) The provisions of Section 12(a) of the Act (15 U.S.C. 78l(a)) do 
not apply to any security-based swap offered and sold in reliance on 
Sec.  230.240 of this chapter.

[[Page 126]]

    (b) This section will expire on February 11, 2018.

[82 FR 10707, Feb. 15, 2017]

                                 General



Sec.  240.12b-1  Scope of regulation.

    The rules contained in this regulation shall govern all registration 
statements pursuant to sections 12(b) and 12(g) of the Act and all 
reports filed pursuant to sections 13 and 15(d) of the Act, including 
all amendments to such statements and reports, except that any provision 
in a form covering the same subject matter as any such rule shall be 
controlling.

[47 FR 11464, Mar. 16, 1982]



Sec.  240.12b-2  Definitions.

    Unless the context otherwise requires, the following terms, when 
used in the rules contained in this regulation or in Regulation 13A or 
15D or in the forms for statements and reports filed pursuant to 
sections 12, 13 or 15(d) of the act, shall have the respective meanings 
indicated in this rule:
    Accelerated filer and large accelerated filer--(1) Accelerated 
filer. The term accelerated filer means an issuer after it first meets 
the following conditions as of the end of its fiscal year:
    (i) The issuer had an aggregate worldwide market value of the voting 
and non-voting common equity held by its non-affiliates of $75 million 
or more, but less than $700 million, as of the last business day of the 
issuer's most recently completed second fiscal quarter;
    (ii) The issuer has been subject to the requirements of section 
13(a) or 15(d) of the Act (15 U.S.C. 78m or 78o(d)) for a period of at 
least twelve calendar months; and
    (iii) The issuer has filed at least one annual report pursuant to 
section 13(a) or 15(d) of the Act; and
    (iv) The issuer is not eligible to use the requirements for smaller 
reporting companies under the revenue test in paragraph (2) or 
(3)(iii)(B) of the ``smaller reporting company'' definition in this 
section, as applicable.
    (2) Large accelerated filer. The term large accelerated filer means 
an issuer after it first meets the following conditions as of the end of 
its fiscal year:
    (i) The issuer had an aggregate worldwide market value of the voting 
and non-voting common equity held by its non-affiliates of $700 million 
or more, as of the last business day of the issuer's most recently 
completed second fiscal quarter;
    (ii) The issuer has been subject to the requirements of section 
13(a) or 15(d) of the Act for a period of at least twelve calendar 
months; and
    (iii) The issuer has filed at least one annual report pursuant to 
section 13(a) or 15(d) of the Act; and
    (iv) The issuer is not eligible to use the requirements for smaller 
reporting companies under the revenue test in paragraph (2) or 
(3)(iii)(B) of the ``smaller reporting company'' definition in this 
section, as applicable.
    (3) Entering and exiting accelerated filer and large accelerated 
filer status.
    (i) The determination at the end of the issuer's fiscal year for 
whether a non-accelerated filer becomes an accelerated filer, or whether 
a non-accelerated filer or accelerated filer becomes a large accelerated 
filer, governs the deadlines for the annual report to be filed for that 
fiscal year, the quarterly and annual reports to be filed for the 
subsequent fiscal year and all annual and quarterly reports to be filed 
thereafter while the issuer remains an accelerated filer or large 
accelerated filer.
    (ii) Once an issuer becomes an accelerated filer, it will remain an 
accelerated filer unless: The issuer determines, at the end of a fiscal 
year, that the aggregate worldwide market value of the voting and non-
voting common equity held by its non-affiliates was less than $60 
million, as of the last business day of the issuer's most recently 
completed second fiscal quarter; or it determines that it is eligible to 
use the requirements for smaller reporting companies under the revenue 
test in paragraph (2) or (3)(iii)(B) of the ``smaller reporting 
company'' definition in this section, as applicable. An issuer that 
makes either of these determinations becomes a non-accelerated filer. 
The issuer will not become an accelerated filer again unless it 
subsequently meets the conditions in paragraph (1) of this definition.

[[Page 127]]

    (iii) Once an issuer becomes a large accelerated filer, it will 
remain a large accelerated filer unless: It determines, at the end of a 
fiscal year, that the aggregate worldwide market value of the voting and 
non-voting common equity held by its non-affiliates (``aggregate 
worldwide market value'') was less than $560 million, as of the last 
business day of the issuer's most recently completed second fiscal 
quarter or it determines that it is eligible to use the requirements for 
smaller reporting companies under the revenue test in paragraph (2) or 
(3)(iii)(B) of the ``smaller reporting company'' definition in this 
section, as applicable. If the issuer's aggregate worldwide market value 
was $60 million or more, but less than $560 million, as of the last 
business day of the issuer's most recently completed second fiscal 
quarter, and it is not eligible to use the requirements for smaller 
reporting companies under the revenue test in paragraph (2) or 
(3)(iii)(B) of the ``smaller reporting company'' definition in this 
section, as applicable, it becomes an accelerated filer. If the issuer's 
aggregate worldwide market value was less than $60 million, as of the 
last business day of the issuer's most recently completed second fiscal 
quarter, or it is eligible to use the requirements for smaller reporting 
companies under the revenue test in paragraph (2) or (3)(iii)(B) of the 
``smaller reporting company'' definition in this section, it becomes a 
non-accelerated filer. An issuer will not become a large accelerated 
filer again unless it subsequently meets the conditions in paragraph (2) 
of this definition.
    (iv) The determination at the end of the issuer's fiscal year for 
whether an accelerated filer becomes a non-accelerated filer, or a large 
accelerated filer becomes an accelerated filer or a non-accelerated 
filer, governs the deadlines for the annual report to be filed for that 
fiscal year, the quarterly and annual reports to be filed for the 
subsequent fiscal year and all annual and quarterly reports to be filed 
thereafter while the issuer remains an accelerated filer or non-
accelerated filer.

    Note to paragraphs (1), (2) and (3): The aggregate worldwide market 
value of the issuer's outstanding voting and non-voting common equity 
shall be computed by use of the price at which the common equity was 
last sold, or the average of the bid and asked prices of such common 
equity, in the principal market for such common equity.

    (4) For purposes of paragraphs (1), (2), and (3) of this definition 
only, a business development company is considered to be eligible to use 
the requirements for smaller reporting companies under the revenue test 
in paragraph (2) or (3)(iii)(B) of the ``smaller reporting company'' 
definition in this section, provided that the business development 
company meets the requirements of the test using annual investment 
income under Rule 6-07.1 of Regulation S-X (17 CFR 210.6-07.1) as the 
measure of its ``annual revenues'' for purposes of the test.
    Affiliate. An ``affiliate'' of, or a person ``affiliated'' with, a 
specified person, is a person that directly, or indirectly through one 
or more intermediaries, controls, or is controlled by, or is under 
common control with, the person specified.
    Amount. The term ``amount,'' when used in regard to securities, 
means the principal amount if relating to evidences of indebtedness, the 
number of shares if relating to shares, and the number of units if 
relating to any other kind of security.
    Associate. The term ``associate'' used to indicate a relationship 
with any person, means (1) any corporation or organization (other than 
the registrant or a majority-owned subsidiary of the registrant) of 
which such person is an officer or partner or is, directly or 
indirectly, the beneficial owner of 10 percent or more of any class of 
equity securities, (2) any trust or other estate in which such person 
has a substantial beneficial interest or as to which such person serves 
as trustee or in a similar fiduciary capacity, and (3) any relative or 
spouse of such person, or any relative of such spouse, who has the same 
home as such person or who is a director or officer of the registrant or 
any of its parents or subsidiaries.
    Business combination related shell company: The term business 
combination related shell company means a shell company (as defined in 
Sec.  240.12b-2) that is:
    (1) Formed by an entity that is not a shell company solely for the 
purpose of changing the corporate domicile of

[[Page 128]]

that entity solely within the United States; or
    (2) Formed by an entity that is not a shell company solely for the 
purpose of completing a business combination transaction (as defined in 
Sec.  230.165(f) of this chapter) among one or more entities other than 
the shell company, none of which is a shell company.
    Certified. The term ``certified,'' when used in regard to financial 
statements, means examined and reported upon with an opinion expressed 
by an independent public or certified public accountant.
    Charter. The term ``charter'' includes articles of incorporation, 
declarations of trust, articles of association or partnership, or any 
similar instrument, as amended, effecting (either with or without filing 
with any governmental agency) the organization or creation of an 
incorporated or unincorporated person.
    Common equity. The term ``common equity'' means any class of common 
stock or an equivalent interest, including but not limited to a unit of 
beneficial interest in a trust or a limited partnership interest.
    Control. The term ``control'' (including the terms ``controlling,'' 
``controlled by'' and ``under common control with'') means the 
possession, direct or indirect, of the power to direct or cause the 
direction of the management and policies of a person, whether through 
the ownership of voting securities, by contract, or otherwise.
    Depositary share. The term ``depositary share'' means a security, 
evidenced by an American Depositary Receipt, that represents a foreign 
security or a multiple of or fraction thereof deposited with a 
depositary.
    Emerging growth company. (1) The term emerging growth company means 
an issuer that had total annual gross revenues of less than 
$1,070,000,000 during its most recently completed fiscal year.
    (2) An issuer that is an emerging growth company as of the first day 
of that fiscal year shall continue to be deemed an emerging growth 
company until the earliest of:
    (i) The last day of the fiscal year of the issuer during which it 
had total annual gross revenues of $1,070,000,000 or more;
    (ii) The last day of the fiscal year of the issuer following the 
fifth anniversary of the date of the first sale of common equity 
securities of the issuer pursuant to an effective registration statement 
under the Securities Act of 1933;
    (iii) The date on which such issuer has, during the previous three 
year period, issued more than $1,000,000,000 in non-convertible debt; or
    (iv) The date on which such issuer is deemed to be a large 
accelerated filer, as defined in Rule 12b-2 (Sec.  240.12b-2 of this 
chapter).
    Employee. The term ``employee'' does not include a director, 
trustee, or officer.
    Fiscal year. The term ``fiscal year'' means the annual accounting 
period or, if no closing date has been adopted, the calendar year ending 
on December 31.
    Majority-owned subsidiary. The term ``majority-owned subsidiary'' 
means a subsidiary more than 50 percent of whose outstanding securities 
representing the right, other than as affected by events of default, to 
vote for the election of directors, is owned by the subsidiary's parent 
and/or one or more of the parent's other majority-owned subsidiaries.
    Managing underwriter. The term ``managing underwriter'' includes an 
underwriter (or underwriters) who, by contract or otherwise, deals with 
the registrant; organizes the selling effort; receives some benefit 
directly or indirectly in which all other underwriters similarly 
situated do not share in proportion to their respective interests in the 
underwriting; or represents any other underwriters in such matters as 
maintaining the records of the distribution, arranging the allotments of 
securities offered or arranging for appropriate stabilization 
activities, if any.
    Material. The term ``material,'' when used to qualify a requirement 
for the furnishing of information as to any subject, limits the 
information required to those matters to which there is a substantial 
likelihood that a reasonable investor would attach importance in 
determining whether to buy or sell the securities registered.

[[Page 129]]

    Material weakness. The term material weakness is a deficiency, or a 
combination of deficiencies, in internal control over financial 
reporting such that there is a reasonable possibility that a material 
misstatement of the registrant's annual or interim financial statements 
will not be prevented or detected on a timely basis.
    Parent. A ``parent'' of a specified person is an affiliate 
controlling such person directly, or indirectly through one or more 
intermediaries.
    Predecessor. The term ``predecessor'' means a person the major 
portion of the business and assets of which another person acquired in a 
single succession or in a series of related successions in each of which 
the acquiring person acquired the major portion of the business and 
assets of the acquired person.
    Previously filed or reported. The terms ``previously filed'' and 
``previously reported'' mean previously filed with, or reported in, a 
statement under section 12, a report under section 13 or 15(d), a 
definitive proxy statement or information statement under section 14 of 
the act, or a registration statement under the Securities Act of 1933: 
Provided, That information contained in any such document shall be 
deemed to have been previously filed with, or reported to, an exchange 
only if such document is filed with such exchange.
    Principal underwriter. The term ``principal underwriter'' means an 
underwriter in privity of contract with the issuer of the securities as 
to which he is underwriter.
    Promoter. (1) The term ``promoter'' includes:
    (i) Any person who, acting alone or in conjunction with one or more 
other persons, directly or indirectly takes initiative in founding and 
organizing the business or enterprise of an issuer; or
    (ii) Any person who, in connection with the founding and organizing 
of the business or enterprise of an issuer, directly or indirectly 
receives in consideration of services or property, or both services and 
property, 10 percent or more of any class of securities of the issuer or 
10 percent or more of the proceeds from the sale of any class of such 
securities. However, a person who receives such securities or proceeds 
either solely as underwriting commissions or solely in consideration of 
property shall not be deemed a promoter within the meaning of this 
paragraph if such person does not otherwise take part in founding and 
organizing the enterprise.
    (2) All persons coming within the definition of ``promoter'' in 
paragraph (1) of this definition may be referred to as ``founders'' or 
``organizers'' or by another term provided that such term is reasonably 
descriptive of those persons' activities with respect to the issuer.
    Prospectus. Unless otherwise specified or the context otherwise 
requires, the term ``prospectus'' means a prospectus meeting the 
requirements of section 10(a) of the Securities Act of 1933 as amended.
    Registrant. The term ``registrant'' means an issuer of securities 
with respect to which a registration statement or report is to be filed.
    Registration statement. The term ``registration statement'' or 
``statement'', when used with reference to registration pursuant to 
section 12 of the act, includes both an application for registration of 
securities on a national securities exchange pursuant to section 12(b) 
of the act and a registration statement filed pursuant to section 12(g) 
of the act.
    Share. The term ``share'' means a share of stock in a corporation or 
unit of interest in an unincorporated person.
    Shell company: The term shell company means a registrant, other than 
an asset-backed issuer as defined in Item 1101(b) of Regulation AB 
(Sec.  229.1101(b) of this chapter), that has:
    (1) No or nominal operations; and
    (2) Either:
    (i) No or nominal assets;
    (ii) Assets consisting solely of cash and cash equivalents; or
    (iii) Assets consisting of any amount of cash and cash equivalents 
and nominal other assets.

    Note: For purposes of this definition, the determination of a 
registrant's assets (including cash and cash equivalents) is based 
solely on the amount of assets that would be reflected on the 
registrant's balance sheet

[[Page 130]]

prepared in accordance with generally accepted accounting principles on 
the date of that determination.

    Significant deficiency. The term significant deficiency is a 
deficiency, or a combination of deficiencies, in internal control over 
financial reporting that is less severe than a material weakness, yet 
important enough to merit attention by those responsible for oversight 
of the registrant's financial reporting.
    Significant subsidiary. The term significant subsidiary means a 
subsidiary, including its subsidiaries, which meets any of the 
conditions in paragraph (1), (2), or (3) of this definition; however, if 
the registrant is a registered investment company or a business 
development company, the tested subsidiary meets any of the conditions 
in paragraph (4) of this definition instead of any of the conditions in 
paragraph (1), (2), or (3) of this definition. A registrant that files 
its financial statements in accordance with or provides a reconciliation 
to U.S. Generally Accepted Accounting Principles (U.S. GAAP) must use 
amounts determined under U.S. GAAP. A foreign private issuer that files 
its financial statements in accordance with International Financial 
Reporting Standards as issued by the International Accounting Standards 
Board (IFRS-IASB) must use amounts determined under IFRS-IASB.
    (1) Investment test. (i) For acquisitions, other than those 
described in paragraph (1)(ii) of this definition, and dispositions this 
test is met when the registrant's and its other subsidiaries' 
investments in and advances to the tested subsidiary exceed 10 percent 
of the aggregate worldwide market value of the registrant's voting and 
non-voting common equity, or if the registrant has no such aggregate 
worldwide market value, the total assets of the registrant and its 
subsidiaries consolidated as of the end of the most recently completed 
fiscal year.
    (A) For acquisitions, the ``investments in'' the tested subsidiary 
is the consideration transferred, adjusted to exclude the registrant's 
and its subsidiaries' proportionate interest in the carrying value of 
assets transferred by the registrant and its subsidiaries consolidated 
to the tested subsidiary that will remain with the combined entity after 
the acquisition. It must include the fair value of contingent 
consideration if required to be recognized at fair value by the 
registrant at the acquisition date under U.S. GAAP or IFRS-IASB, as 
applicable; however if recognition at fair value is not required, it 
must include all contingent consideration, except contingent 
consideration for which the likelihood of payment is remote.
    (B) For dispositions, the ``investments in'' the tested subsidiary 
is the fair value of the consideration, including contingent 
consideration, for the disposed subsidiary when comparing to the 
aggregate worldwide market value of the registrant's voting and non-
voting common equity, or, when the registrant has no such aggregate 
worldwide market value, the carrying value of the disposed subsidiary 
when comparing to total assets of the registrant.
    (C) When determining the aggregate worldwide market value of the 
registrant's voting and non-voting common equity, use the average of 
such aggregate worldwide market value calculated daily for the last five 
trading days of the registrant's most recently completed month ending 
prior to the earlier of the registrant's announcement date or agreement 
date of the acquisition or disposition.
    (ii) For a combination between entities or businesses under common 
control, this test is met when either the net book value of the tested 
subsidiary exceeds 10 percent of the registrant's and its subsidiaries' 
consolidated total assets or the number of common shares exchanged or to 
be exchanged by the registrant exceeds 10 percent of its total common 
shares outstanding at the date the combination is initiated.
    (iii) In all other cases, this test is met when the registrant's and 
its other subsidiaries' investments in and advances to the tested 
subsidiary exceed 10 percent of the total assets of the registrant and 
its subsidiaries consolidated as of the end of the most recently 
completed fiscal year.
    (2) Asset test. This test is met when the registrant's and its other 
subsidiaries' proportionate share of the tested subsidiary's 
consolidated total assets

[[Page 131]]

(after intercompany eliminations) exceeds 10 percent of such total 
assets of the registrant and its subsidiaries consolidated as of the end 
of the most recently completed fiscal year.
    (3) Income test. (i) This test is met when:
    (A) The absolute value of the registrant's and its other 
subsidiaries' equity in the tested subsidiary's consolidated income or 
loss from continuing operations before income taxes (after intercompany 
eliminations) attributable to the controlling interests exceeds 10 
percent of the absolute value of such income or loss of the registrant 
and its subsidiaries consolidated for the most recently completed fiscal 
year; and
    (B) The registrant's and its other subsidiaries' proportionate share 
of the tested subsidiary's consolidated total revenue from continuing 
operations (after intercompany eliminations) exceeds 10 percent of such 
total revenue of the registrant and its subsidiaries consolidated for 
the most recently completed fiscal year. This paragraph (3)(i)(B) does 
not apply if either the registrant and its subsidiaries consolidated or 
the tested subsidiary did not have material revenue in each of the two 
most recently completed fiscal years.
    (ii) When determining the income component in paragraph (3)(i)(A) of 
this definition:
    (A) If a net loss from continuing operations before income taxes 
(after intercompany eliminations) attributable to the controlling 
interest has been incurred by either the registrant and its subsidiaries 
consolidated or the tested subsidiary, but not both, exclude the equity 
in the income or loss from continuing operations before income taxes 
(after intercompany eliminations) of the tested subsidiary attributable 
to the controlling interest from such income or loss of the registrant 
and its subsidiaries consolidated for purposes of the computation;
    (B) Compute the test using the average described in this paragraph 
(3)(ii)(B) if the revenue component in paragraph (3)(i)(B) in this 
definition does not apply and the absolute value of the registrant's and 
its subsidiaries' consolidated income or loss from continuing operations 
before income taxes (after intercompany eliminations) attributable to 
the controlling interests for the most recent fiscal year is at least 10 
percent lower than the average of the absolute value of such amounts for 
each of its last five fiscal years; and
    (C) Entities reporting losses must not be aggregated with entities 
reporting income where the test involves combined entities, as in the 
case of determining whether summarized financial data must be presented 
or whether the aggregate impact specified in Sec. Sec.  210.3-
05(b)(2)(iv) and 210.3-14(b)(2)(i)(C) of this chapter is met, except 
when determining whether related businesses meet this test for purposes 
of Sec. Sec.  210.3-05 and 210.8-04 of this chapter.
    (4) Registered investment company or business development company. 
For a registrant that is a registered investment company or a business 
development company, the term significant subsidiary means a subsidiary, 
including its subsidiaries, which meets any of the following conditions 
using amounts determined under U.S. GAAP and, if applicable, section 
2(a)(41) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(41)):
    (i) Investment test. The value of the registrant's and its other 
subsidiaries' investments in and advances to the tested subsidiary 
exceed 10 percent of the value of the total investments of the 
registrant and its subsidiaries consolidated as of the end of the most 
recently completed fiscal year; or
    (ii) Income test. The absolute value of the sum of combined 
investment income from dividends, interest, and other income, the net 
realized gains and losses on investments, and the net change in 
unrealized gains and losses on investments from the tested subsidiary 
(except, for purposes of Sec.  210.6-11 of this chapter, the absolute 
value of the change in net assets resulting from operations of the 
tested subsidiary), for the most recently completed fiscal year exceeds:
    (A) 80 percent of the absolute value of the change in net assets 
resulting from operations of the registrant and its subsidiaries 
consolidated for the most recently completed fiscal year; or
    (B) 10 percent of the absolute value of the change in net assets 
resulting from

[[Page 132]]

operations of the registrant and its subsidiaries consolidated for the 
most recently completed fiscal year and the investment test (paragraph 
(4)(i) of this definition) condition exceeds 5 percent. However, if the 
absolute value of the change in net assets resulting from operations of 
the registrant and its subsidiaries consolidated is at least 10 percent 
lower than the average of the absolute value of such amounts for each of 
its last five fiscal years, then the registrant may compute both 
conditions of the income test using the average of the absolute value of 
such amounts for the registrant and its subsidiaries consolidated for 
each of its last five fiscal years.
    Smaller reporting company. As used in this part, the term smaller 
reporting company means an issuer that is not an investment company, an 
asset-backed issuer (as defined in Sec.  229.1101 of this chapter), or a 
majority-owned subsidiary of a parent that is not a smaller reporting 
company and that:
    (1) Had a public float of less than $250 million; or
    (2) Had annual revenues of less than $100 million and either:
    (i) No public float; or
    (ii) A public float of less than $700 million.
    (3) Whether an issuer is a smaller reporting company is determined 
on an annual basis.
    (i) For issuers that are required to file reports under section 
13(a) or 15(d) of the Exchange Act:
    (A) Public float is measured as of the last business day of the 
issuer's most recently completed second fiscal quarter and computed by 
multiplying the aggregate worldwide number of shares of its voting and 
non-voting common equity held by non-affiliates by the price at which 
the common equity was last sold, or the average of the bid and asked 
prices of common equity, in the principal market for the common equity;
    (B) Annual revenues are as of the most recently completed fiscal 
year for which audited financial statements are available; and
    (C) An issuer must reflect the determination of whether it came 
within the definition of smaller reporting company in its quarterly 
report on Form 10-Q for the first fiscal quarter of the next year, 
indicating on the cover page of that filing, and in subsequent filings 
for that fiscal year, whether it is a smaller reporting company, except 
that, if a determination based on public float indicates that the issuer 
is newly eligible to be a smaller reporting company, the issuer may 
choose to reflect this determination beginning with its first quarterly 
report on Form 10-Q following the determination, rather than waiting 
until the first fiscal quarter of the next year.
    (ii) For determinations based on an initial registration statement 
under the Securities Act or Exchange Act for shares of its common 
equity:
    (A) Public float is measured as of a date within 30 days of the date 
of the filing of the registration statement and computed by multiplying 
the aggregate worldwide number of shares of its voting and non-voting 
common equity held by non-affiliates before the registration plus, in 
the case of a Securities Act registration statement, the number of 
shares of its voting and non-voting common equity included in the 
registration statement by the estimated public offering price of the 
shares;
    (B) Annual revenues are as of the most recently completed fiscal 
year for which audited financial statements are available; and
    (C) The issuer must reflect the determination of whether it came 
within the definition of smaller reporting company in the registration 
statement and must appropriately indicate on the cover page of the 
filing, and subsequent filings for the fiscal year in which the filing 
is made, whether it is a smaller reporting company. The issuer must re-
determine its status at the end of its second fiscal quarter and then 
reflect any change in status as provided in paragraph (3)(i)(C) of this 
definition. In the case of a determination based on an initial 
Securities Act registration statement, an issuer that was not determined 
to be a smaller reporting company has the option to re-determine its 
status at the conclusion of the offering covered by the registration 
statement based on the actual offering price and number of shares sold.

[[Page 133]]

    (iii) Once an issuer determines that it does not qualify for smaller 
reporting company status because it exceeded one or more of the current 
thresholds, it will remain unqualified unless when making its annual 
determination either:
    (A) It determines that its public float was less than $200 million; 
or
    (B) It determines that its public float and its annual revenues meet 
the requirements for subsequent qualification included in the following 
chart:

------------------------------------------------------------------------
                                          Prior public float
                             -------------------------------------------
    Prior annual revenues       None or less than
                                  $700 million      $700 million or more
------------------------------------------------------------------------
Less than $100 million......  Neither threshold     Public float--Less
                               exceeded.             than $560 million;
                                                     and
                                                    Revenues--Less than
                                                     $100 million.
$100 million or more........  Public float--None    Public float--Less
                               or less than $700     than $560 million;
                               million; and.         and
                              Revenues--Less than   Revenues--Less than
                               $80 million.          $80 million.
------------------------------------------------------------------------


    Instruction 1 to definition of ``smaller reporting company'': A 
registrant that qualifies as a smaller reporting company under the 
public float thresholds identified in paragraphs (1) and (3)(iii)(A) of 
this definition will qualify as a smaller reporting company regardless 
of its revenues.
    Instruction 2 to definition of ``smaller reporting company'': A 
foreign private issuer is not eligible to use the requirements for 
smaller reporting companies unless it uses the forms and rules 
designated for domestic issuers and provides financial statements 
prepared in accordance with U.S. Generally Accepted Accounting 
Principles.
    Succession: The term succession means the direct acquisition of the 
assets comprising a going business, whether by merger, consolidation, 
purchase, or other direct transfer; or the acquisition of control of a 
shell company in a transaction required to be reported on Form 8-K 
(Sec.  249.308 of this chapter) in compliance with Item 5.01 of that 
Form or on Form 20-F (Sec.  249.220f of this chapter) in compliance with 
Rule 13a-19 (Sec.  240.13a-19) or Rule 15d-19 (Sec.  240.15d-19). Except 
for an acquisition of control of a shell company, the term does not 
include the acquisition of control of a business unless followed by the 
direct acquisition of its assets. The terms succeed and successor have 
meanings correlative to the foregoing.
    Totally held subsidiary. The term ``totally held subsidiary'' means 
a subsidiary (1) substantially all of whose outstanding securities are 
owned by its parent and/or the parent's other totally held subsidiaries, 
and (2) which is not indebted to any person other than its parent and/or 
the parent's other totally held subsidiaries in an amount which is 
material in relation to the particular subsidiary, excepting 
indebtedness incurred in the ordinary course of business which is not 
overdue and which matures within one year from the date of its creation, 
whether evidenced by securities or not.
    Voting securities. The term ``voting securities'' means securities 
the holders of which are presently entitled to vote for the election of 
directors.
    Wholly-owned subsidiary. The term ``wholly-owned subsidiary'' means 
a subsidiary substantially all of whose outstanding voting securities 
are owned by its parent and/or the parent's other wholly-owned 
subsidiaries.

[13 FR 9321, Dec. 31, 1948]

    Editorial Note: For Federal Register citations affecting Sec.  
240.12b-2, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.govinfo.gov.



Sec.  240.12b-3  Title of securities.

    Wherever the title of securities is required to be stated there 
shall be given such information as will indicate the type and general 
character of the securities, including the following:
    (a) In the case of shares, the par or stated value, if any; the rate 
of dividends, if fixed, and whether cumulative or noncumulative; a brief 
indication of the preference, if any; and if convertible, a statement to 
that effect.
    (b) In the case of funded debt, the rate of interest; the date of 
maturity, or if the issue matures serially, a brief indication of the 
serial maturities, such as ``maturing serially from 1950 to

[[Page 134]]

1960''; if the payment of principal or interest is contingent, an 
appropriate indication of such contingency; a brief indication of the 
priority of the issue; and if convertible, a statement to that effect.
    (c) In the case of any other kind of security, appropriate 
information of comparable character.



Sec.  240.12b-4  Supplemental information.

    The Commission or its staff may, where it is deemed appropriate, 
request supplemental information concerning the registrant, a 
registration statement or a periodic or other report under the Act. This 
information shall not be required to be filed with or deemed part of the 
registration statement or report. The information shall be returned to 
the registrant upon request, provided that:
    (a) Such request is made at the time such information is furnished 
to the staff;
    (b) The return of such information is consistent with the protection 
of investors; and
    (c) The return of such information is consistent with the provisions 
of the Freedom of Information Act (5 U.S.C. 552).

[47 FR 11465, Mar. 16, 1982]



Sec.  240.12b-5  Determination of affiliates of banks.

    In determining whether a person is an ``affiliate'' or ``parent'' of 
a bank or whether a bank is a ``subsidiary'' or ``majority-owner 
subsidiary'' of a person within the meaning of those terms as defined in 
Sec.  240.12b-2, voting securities of the bank held by a corporation all 
of the stock of which is directly owned by the United States Government 
shall not be taken into consideration.



Sec.  240.12b-6  When securities are deemed to be registered.

    A class of securities with respect to which a registration statement 
has been filed pursuant to section 12 of the act shall be deemed to be 
registered for the purposes of sections 13, 14, 15(d) and 16 of the act 
and the rules and regulations thereunder only when such statement has 
become effective as provided in section 12, and securities of said class 
shall not be subject to sections 13, 14 and 16 of the act until such 
statement has become effective as provided in section 12.

(Secs. 3, 14, 16, 48 Stat. 882, 895, 896, sec. 3(d), 78 Stat. 568; 15 
U.S.C. 78c, 78n, 78p, 78l)

[30 FR 482, Jan. 14, 1965]



Sec.  240.12b-7  [Reserved]

                           Formal Requirements



Sec.  240.12b-10  Requirements as to proper form.

    Every statement or report shall be on the form prescribed therefor 
by the Commission, as in effect on the date of filing. Any statement or 
report shall be deemed to be filed on the proper form unless objection 
to the form is made by the Commission within thirty days after the date 
of filing.

(Secs. 4, 16, 19, 24, 48 Stat. 77, 896, 85, as amended, 901; 15 U.S.C. 
77d, 78p, 77s, 78x)

[30 FR 2022, Feb. 13, 1965]



Sec.  240.12b-11  Number of copies; signatures; binding.

    (a) Except as provided in a particular form, three complete copies 
of each statement or report, including exhibits and all other papers and 
documents filed as a part thereof, shall be filed with the Commission. 
At least one complete copy of each statement shall be filed with each 
exchange on which the securities covered thereby are to be registered. 
At least one complete copy of each report under section 13 of the Act 
shall be filed with each exchange on which the registrant has securities 
registered.
    (b) At least one copy of each statement or report filed with the 
Commission and one copy thereof filed with each exchange shall be signed 
in the manner prescribed by the appropriate form.
    (c) Each copy of a statement or report filed with the Commission or 
with an exchange shall be bound in one or more parts. Copies filed with 
the Commission shall be bound without stiff covers. The statement or 
report shall be bound on the left side in such a manner as to leave the 
reading matter legible.

[[Page 135]]

    (d) Signatures. Where the Act or the rules, forms, reports or 
schedules thereunder, including paragraph (b) of this section, require a 
document filed with or furnished to the Commission to be signed, such 
document shall be manually signed, or signed using either typed 
signatures or duplicated or facsimile versions of manual signatures. 
Where typed, duplicated, or facsimile signatures are used, each 
signatory to the filing shall manually or electronically sign a 
signature page or other document authenticating, acknowledging, or 
otherwise adopting his or her signature that appears in the filing 
(``authentication document''). Such authentication document shall be 
executed before or at the time the filing is made and shall be retained 
by the filer for a period of five years. The requirements set forth in 
Sec.  232.302(b) must be met with regards to the use of an 
electronically signed authentication document pursuant to this paragraph 
(d). Upon request, the filer shall furnish to the Commission or its 
staff a copy of any or all documents retained pursuant to this section.

[47 FR 11465, Mar. 16, 1982, as amended at 60 FR 26622, May 17, 1995; 61 
FR 30403, June 14, 1996; 85 FR 78229, Dec. 4, 2020]



Sec.  240.12b-12  Requirements as to paper, printing and language.

    (a) Statements and reports shall be filed on good quality, unglazed 
white paper, no larger than 8\1/2\ x 11 inches in size, insofar as 
practicable. To the extent that the reduction of larger documents would 
render them illegible, such documents may be filed on paper larger than 
8\1/2\ x 11 inches in size.
    (b) The statement or report and, insofar as practicable, all papers 
and documents filed as a part thereof, shall be printed, lithographed, 
mimeographed, or typewritten. However, the statement or report or any 
portion thereof may be prepared by any similar process which, in the 
opinion of the Commission, produces copies suitable for a permanent 
record and microfilming. Irrespective of the process used, all copies of 
any such material shall be clear, easily readable and suitable for 
repeated photocopying. Debits in credit categories and credits in debit 
categories shall be designated so as to be clearly distinguishable as 
such on photocopies.
    (c) The body of all printed statements and reports and all notes to 
financial statements and other tabular data included therein shall be in 
roman type at least as large and as legible as 10-point modern type. 
However, to the extent necessary for convenient presentation, financial 
statements and other tabular data, including tabular data in notes, may 
be in roman type at least as large and as legible as 8-point modern 
type. All such type shall be leaded at least 2 points.
    (d)(1) All Exchange Act filings and submissions must be in the 
English language, except as otherwise provided by this section. If a 
filing or submission requires the inclusion of a document that is in a 
foreign language, a party must submit instead a fair and accurate 
English translation of the entire foreign language document, except as 
provided by paragraph (d)(3) of this section.
    (2) If a filing or submission subject to review by the Division of 
Corporation Finance requires the inclusion of a foreign language 
document as an exhibit or attachment, a party must submit a fair and 
accurate English translation of the foreign language document if 
consisting of any of the following, or an amendment of any of the 
following:
    (i) Articles of incorporation, memoranda of association, bylaws, and 
other comparable documents, whether original or restated;
    (ii) Instruments defining the rights of security holders, including 
indentures qualified or to be qualified under the Trust Indenture Act of 
1939;
    (iii) Voting agreements, including voting trust agreements;
    (iv) Contracts to which directors, officers, promoters, voting 
trustees or security holders named in a registration statement, report 
or other document are parties;
    (v) Contracts upon which a filer's business is substantially 
dependent;
    (vi) Audited annual and interim consolidated financial information; 
and
    (vii) Any document that is or will be the subject of a confidential 
treatment request under Sec.  240.24b-2 or Sec.  230.406 of this 
chapter.

[[Page 136]]

    (3)(i) A party may submit an English summary instead of an English 
translation of a foreign language document as an exhibit or attachment 
to a filing or submission subject to review by the Division of 
Corporation Finance, as long as:
    (A) The foreign language document does not consist of any of the 
subject matter enumerated in paragraph (d)(2) of this section; or
    (B) The applicable form permits the use of an English summary.
    (ii) Any English summary submitted under paragraph (d)(3) of this 
section must:
    (A) Fairly and accurately summarize the terms of each material 
provision of the foreign language document; and
    (B) Fairly and accurately describe the terms that have been omitted 
or abridged.
    (4) When submitting an English summary or English translation of a 
foreign language document under this section, a party must identify the 
submission as either an English summary or English translation. A party 
may submit a copy of the unabridged foreign language document when 
including an English summary or English translation of a foreign 
language document in a filing or submission. A party must provide a copy 
of any foreign language document upon the request of Commission staff.
    (5) A foreign government or its political subdivision must provide a 
fair and accurate English translation of its latest annual budget 
submitted as Exhibit B to Form 18 (Sec.  249.218 of this chapter) or 
Exhibit (c) to Form 18-K (Sec.  249.318 of this chapter) only if one is 
available. If no English translation is available, a filer must provide 
a copy of the foreign language version of its latest annual budget as an 
exhibit.
    (6) A Canadian issuer may file an exhibit, attachment or other part 
of a Form 40-F registration statement or annual report (Sec.  249.240f 
of this chapter), Schedule 13E-4F (Sec.  240.13e-102), Schedule 14D-1F 
(Sec.  240.14d-102), or Schedule 14D-9F (Sec.  240.14d-103), that 
contains text in both French and English if the issuer included the 
French text to comply with the requirements of the Canadian securities 
administrator or other Canadian authority and, for an electronic filing, 
if the filing is an HTML document, as defined in Regulation S-T Rule 11 
(17 CFR 232.11).
    (e) Where a statement or report is distributed to investors through 
an electronic medium, issuers may satisfy legibility requirements 
applicable to printed documents, such as paper size and type size and 
font, by presenting all required information in a format readily 
communicated to investors.

[47 FR 11466, Mar. 16, 1982, as amended at 47 FR 58238, Dec. 30, 1982; 
61 FR 24656, May 15, 1996; 67 FR 36704, May 24, 2002]



Sec.  240.12b-13  Preparation of statement or report.

    The statement or report shall contain the numbers and captions of 
all items of the appropriate form, but the text of the items may be 
omitted provided the answers thereto are so prepared as to indicate to 
the reader the coverage of the items without the necessity of his 
referring to the text of the items or instructions thereto. However, 
where any item requires information to be given in tabular form, it 
shall be given in substantially the tabular form specified in the item. 
All instructions, whether appearing under the items of the form or 
elsewhere therein, are to be omitted. Unless expressly provided 
otherwise, if any item is inapplicable or the answer thereto is in the 
negative, an appropriate statement to that effect shall be made.

(Secs. 4, 16, 19, 24, 48 Stat. 77, 896, 85, as amended, 901; 15 U.S.C. 
77d, 78p, 77s, 78x)

[30 FR 2023, Feb. 13, 1965]



Sec.  240.12b-14  Riders; inserts.

    Riders shall not be used. If the statement or report is typed on a 
printed form, and the space provided for the answer to any given item is 
insufficient, reference shall be made in such space to a full insert 
page or pages on which the item number and caption and the complete 
answer are given.

(Secs. 4, 16, 19, 24, 48 Stat. 77, 896, 85, as amended, 901; 15 U.S.C. 
77d, 78p, 77s, 78x)

[30 FR 2023, Feb. 13, 1965]

[[Page 137]]



Sec.  240.12b-15  Amendments.

    All amendments must be filed under cover of the form amended, marked 
with the letter ``A'' to designate the document as an amendment, e.g., 
``10-K/A,'' and in compliance with pertinent requirements applicable to 
statements and reports. Amendments filed pursuant to this section must 
set forth the complete text of each item as amended. Amendments must be 
numbered sequentially and be filed separately for each statement or 
report amended. Amendments to a statement may be filed either before or 
after registration becomes effective. Amendments must be signed on 
behalf of the registrant by a duly authorized representative of the 
registrant. An amendment to any report required to include the 
certifications as specified in Sec.  240.13a-14(a) or Sec.  240.15d-
14(a) must include new certifications by each principal executive and 
principal financial officer of the registrant, and an amendment to any 
report required to be accompanied by the certifications as specified in 
Sec.  240.13a-14(b) or Sec.  240.15d-14(b) must be accompanied by new 
certifications by each principal executive and principal financial 
officer of the registrant. An amendment to any report required to 
include the certifications as specified in Sec.  240.13a-14(d) or Sec.  
240.15d-14(d) must include a new certification by an individual 
specified in Sec.  240.13a-14(e) or Sec.  240.15d-14(e), as applicable. 
The requirements of the form being amended will govern the number of 
copies to be filed in connection with a paper format amendment. 
Electronic filers satisfy the provisions dictating the number of copies 
by filing one copy of the amendment in electronic format. See Sec.  
232.309 of this chapter (Rule 309 of Regulation S-T).

[68 FR 36665, June 18, 2003, as amended at 70 FR 1620, Jan. 7, 2005]

                   General Requirements as to Contents



Sec.  240.12b-20  Additional information.

    In addition to the information expressly required to be included in 
a statement or report, there shall be added such further material 
information, if any, as may be necessary to make the required 
statements, in the light of the circumstances under which they are made 
not misleading.

(Secs. 4, 16, 19, 24, 48 Stat. 77, 896, 85, as amended, 901; 15 U.S.C. 
77d, 78p, 77s, 78x)

[30 FR 2023, Feb. 13, 1965]



Sec.  240.12b-21  Information unknown or not available.

    Information required need be given only insofar as it is known or 
reasonably available to the registrant. If any required information is 
unknown and not reasonably available to the registrant, either because 
the obtaining thereof would involve unreasonable effort or expense, or 
because it rests peculiarly within the knowledge of another person not 
affiliated with the registrant, the information may be omitted, subject 
to the following conditions.
    (a) The registrant shall give such information on the subject as it 
possesses or can acquire without unreasonable effort or expense, 
together with the sources thereof.
    (b) The registrant shall include a statement either showing that 
unreasonable effort or expense would be involved or indicating the 
absence of any affiliation with the person within whose knowledge the 
information rests and stating the result of a request made to such 
person for the information.



Sec.  240.12b-22  Disclaimer of control.

    If the existence of control is open to reasonable doubt in any 
instance, the registrant may disclaim the existence of control and any 
admission thereof; in such case, however, the registrant shall state the 
material facts pertinent to the possible existence of control.



Sec.  240.12b-23  Incorporation by reference.

    (a) Registration statement or report. Except as provided by this 
section or in the appropriate form, information may be incorporated by 
reference in answer, or partial answer, to any item of a registration 
statement or report.
    (b) Financial information. Except as provided in the Commission's 
rules, financial information required to be given in comparative form 
for two or more fiscal years or periods must not

[[Page 138]]

be incorporated by reference unless the information incorporated by 
reference includes the entire period for which the comparative data is 
given. In the financial statements, incorporating by reference, or 
cross-referencing to, information outside of the financial statements is 
not permitted unless otherwise specifically permitted or required by the 
Commission's rules or by U.S. Generally Accepted Accounting Principles 
or International Financial Reporting Standards as issued by the 
International Accounting Standards Board, whichever is applicable.
    (c) Exhibits. Any document or part thereof filed with the Commission 
pursuant to any Act administered by the Commission may be incorporated 
by reference as an exhibit to any statement or report filed with the 
Commission by the same or any other person. Any document or part thereof 
filed with an exchange pursuant to the Act may be incorporated by 
reference as an exhibit to any statement or report filed with the 
exchange by the same or any other person. If any modification has 
occurred in the text of any document incorporated by reference since the 
filing thereof, the registrant must file with the reference a statement 
containing the text of any such modification and the date thereof.
    (d) Hyperlinks. You must include an active hyperlink to information 
incorporated into a registration statement or report by reference if 
such information is publicly available on the Commission's Electronic 
Data Gathering, Analysis and Retrieval System (``EDGAR'') at the time 
the registration statement or form is filed. For hyperlinking to 
exhibits, please refer to Item 601 of Regulation S-K (Sec.  229.601 of 
this chapter) or the appropriate form.
    (e) General. Include an express statement clearly describing the 
specific location of the information you are incorporating by reference. 
The statement must identify the document where the information was 
originally filed or submitted and the location of the information within 
that document. The statement must be made at the particular place where 
the information is required, if applicable. Information must not be 
incorporated by reference in any case where such incorporation would 
render the disclosure incomplete, unclear, or confusing. For example, 
unless expressly permitted or required, disclosure must not be 
incorporated by reference from a second document if that second document 
incorporates information pertinent to such disclosure by reference to a 
third document.

[84 FR 12727, Apr. 2, 2019]



Sec.  240.12b-24  [Reserved]



Sec.  240.12b-25  Notification of inability to timely file all or any
required portion of a Form 10-K, 20-F, 11-K, N-CEN , N-CSR, 10-Q,
or 10-D.

    (a) If all or any required portion of an annual or transition report 
on Form 10-K, 20-F or 11-K (17 CFR 249.310, 249.220f or 249.311), a 
quarterly or transition report on Form 10-Q (17 CFR 249.308a), or a 
distribution report on Form 10-D (17 CFR 249.312) required to be filed 
pursuant to Section 13 or 15(d) of the Act (15 U.S.C. 78m or 78o(d)) and 
rules thereunder, or if all or any required portion of a semi-annual, 
annual or transition report on Form N-CSR (17 CFR 249.331; 17 CFR 
274.128) or Form N-CEN (17 CFR 249.330; 17 CFR 274.101) required to be 
filed pursuant to Section 13 or 15(d) of the Act or section 30 of the 
Investment Company Act of 1940 (15 U.S.C. 80a-29) and the rules 
thereunder, is not filed within the time period prescribed for such 
report, the registrant, no later than one business day after the due 
date for such report, shall file a Form 12b-25 (17 CFR 249.322) with the 
Commission which shall contain disclosure of its inability to file the 
report timely and the reasons therefore in reasonable detail.
    (b) With respect to any report or portion of any report described in 
paragraph (a) of this section which is not timely filed because the 
registrant is unable to do so without unreasonable effort or expense, 
such report shall be deemed to be filed on the prescribed due date for 
such report if:
    (1) The registrant files the Form 12b-25 in compliance with 
paragraph (a) of this section and, when applicable, furnishes the 
exhibit required by paragraph (c) of this section;

[[Page 139]]

    (2) The registrant represents in the Form 12b-25 that:
    (i) The reason(s) causing the inability to file timely could not be 
eliminated by the registrant without unreasonable effort or expense; and
    (ii) The subject annual report, semi-annual report or transition 
report on Form 10-K, 20-F, 11-K, N-CEN , or N-CSR, or portion thereof, 
will be filed no later than the fifteenth calendar day following the 
prescribed due date; or the subject quarterly report or transition 
report on Form 10-Q or distribution report on Form 10-D, or portion 
thereof, will be filed no later than the fifth calendar day following 
the prescribed due date; and
    (3) The report/portion thereof is actually filed within the period 
specified by paragraph (b)(2)(ii) of this section.
    (c) If paragraph (b) of this section is applicable and the reason 
the subject report/portion thereof cannot be filed timely without 
unreasonable effort or expense relates to the inability of any person, 
other than the registrant, to furnish any required opinion, report or 
certification, the Form 12b-25 shall have attached as an exhibit a 
statement signed by such person stating the specific reasons why such 
person is unable to furnish the required opinion, report or 
certification on or before the date such report must be filed.
    (d) Notwithstanding paragraph (b) of this section, a registrant will 
not be eligible to use any registration statement form under the 
Securities Act of 1933 the use of which is predicated on timely filed 
reports until the subject report is actually filed pursuant to paragraph 
(b)(3) of this section.
    (e) If a Form 12b-25 filed pursuant to paragraph (a) of this sectin 
relates only to a portion of a subject report, the registrant shall:
    (1) File the balance of such report and indicate on the cover page 
thereof which disclosure items are omitted; and
    (2) Include, on the upper right corner of the amendment to the 
report which includes the previously omitted information, the following 
statement:

    The following items were the subject of a Form 12b-25 and are 
included herein: (List Item Numbers)

    (f) The provisions of this section shall not apply to financial 
statements to be filed by amendment to a form 10-K as provided for by 
paragraph (a) of Sec.  210.3-09 or schedules to be filed by amendment in 
accordance with General Instruction A to form 10-K.
    (g) Electronic filings. The provisions of this section shall not 
apply to reports required to be filed in electronic format if the sole 
reason the report is not filed within the time period prescribed is that 
the filer is unable to file the report in electronic format. Filers 
unable to submit a report in electronic format within the time period 
prescribed solely due to difficulties with electronic filing should 
comply with either Rule 201 or 202 of Regulation S-T (Sec. Sec.  232.201 
and 232.202 of this chapter), or apply for an adjustment of filing date 
pursuant to Rule 13(b) of Regulation S-T (Sec.  232.13(c) of this 
chapter).
    (h) Interactive data submissions. The provisions of this section 
shall not apply to the submission or posting of an Interactive Data File 
(Sec.  232.11 of this chapter). Filers unable to submit or post an 
Interactive Data File within the time period prescribed should comply 
with either Rule 201 or 202 of Regulation S-T (Sec. Sec.  232.201 and 
232.202 of this chapter).

[45 FR 23652, Apr. 8, 1980, as amended at 50 FR 1449, Jan. 11, 1985; 50 
FR 2957, Jan. 23, 1985; 54 FR 10316, Mar. 13, 1989; 58 FR 14683, Mar. 
18, 1993; 58 FR 21349, Apr. 21, 1993; 59 FR 67764, Dec. 30, 1994; 68 FR 
5364, Feb. 3, 2003; 70 FR 1620, Jan. 7, 2005; 73 FR 974, Jan. 4, 2008; 
74 FR 6818, Feb. 10, 2009; 81 82020, Nov. 18, 2016]

                                Exhibits



Sec.  240.12b-30  Additional exhibits.

    The registrant may file such exhibits as it may desire, in addition 
to those required by the appropriate form. Such exhibits shall be so 
marked as to indicate clearly the subject matters to which they refer.



Sec.  240.12b-31  Omission of substantially identical documents.

    In any case where two or more indentures, contracts, franchises, or 
other documents required to be filed as exhibits are substantially 
identical in all material respects except as to the parties thereto, the 
dates of execution, or

[[Page 140]]

other details, the registrant need file a copy of only one of such 
documents, with a schedule identifying the other documents omitted and 
setting forth the material details in which such documents differ from 
the document of which a copy is filed. The Commission may at any time in 
its discretion require the filing of copies of any documents so omitted.



Sec.  240.12b-32  [Reserved]



Sec.  240.12b-33  Annual reports to other Federal agencies.

    Notwithstanding any rule or other requirement to the contrary, 
whenever copies of an annual report by a registrant to any other Federal 
agency are required or permitted to be filed as an exhibit to an 
application or report filed by such registrant with the Commission or 
with a securities exchange, only one copy of such annual report need be 
filed with the Commission and one copy thereof with each such exchange, 
provided appropriate reference to such copy is made in each copy of the 
application or report filed with the Commission or with such exchange.

[18 FR 1441, Mar. 13, 1953]

                           Special Provisions



Sec.  240.12b-35  [Reserved]



Sec.  240.12b-36  Use of financial statements filed under other acts.

    Where copies of certified financial statements filed under other 
acts administered by the Commission are filed with a statement or 
report, the accountant's certificate shall be manually signed or 
manually signed copies of the certificate shall be filed with the 
financial statements. Where such financial statements are incorporated 
by reference in a statement or report, the written consent of the 
accountant to such incorporation by reference shall be filed with the 
statement or report. Such consent shall be dated and signed manually.

(Secs. 4, 16, 19, 24, 48 Stat. 77, 896, 85, as amended, 901; 15 U.S.C. 
77d, 78p, 77s, 78x)

[30 FR 2023, Feb. 13, 1965]



Sec.  240.12b-37  Satisfaction of filing requirements.

    With regard to issuers eligible to rely on Release No. 34-45589 
(March 18, 2002) or Release No. IC-25463 (March 18, 2002) (each of which 
may be viewed on the Commission's website at www.sec.gov), filings made 
in accordance with the provisions of those Releases shall satisfy the 
issuer's requirement to make such a filing under Section 13(a), 14 or 
15(d) of the Act (15 U.S.C. 77m(a), 78n or 78o(d)), as applicable, and 
the Commission's rules and regulations thereunder.

[67 FR 13537, Mar. 22, 2002]

      Certification by Exchanges and Effectiveness of Registration

    Source: Sections 240.12d1-1 through 240.12d-6 appear at 19 FR 670, 
Feb. 5, 1954, unless otherwise noted.



Sec.  240.12d1-1  Registration effective as to class or series.

    (a) An application filed pursuant to section 12 (b) and (c) of the 
act for registration of a security on a national securities exchange 
shall be deemed to apply for registration of the entire class of such 
security. Registration shall become effective, as provided in section 
12(d) of the act, (1) as to the shares or amounts of such class then 
issued, and (2), without further application for registration, upon 
issuance as to additional shares or amounts of such class then or 
thereafter authorized.
    (b) This section shall apply to classes of securities of which a 
specified number of shares or amounts was registered or registered upon 
notice of issuance, and to applications for registration filed, prior to 
the close of business on January 28, 1954, as well as to classes 
registered, or applications filed, thereafter.
    (c) This section shall not affect the right of a national securities 
exchange to require the issuer of a registered security to file 
documents with or pay fees to the exchange in connection with the 
modification of such security or the issuance of additional shares or 
amounts.
    (d) If a class of security is issuable in two or more series with 
different terms, each such series shall be deemed

[[Page 141]]

a separate class for the purposes of this section.

(Sec. 12, 48 Stat. 892, as amended; 15 U.S.C. 78l)



Sec.  240.12d1-2  Effectiveness of registration.

    (a) A request for acceleration of the effective date of registration 
pursuant to section 12(d) of the act and Sec.  240.12d1-1 shall be made 
in writing by either the registrant, the exchange, or both and shall 
briefly describe the reasons therefor.
    (b) A registration statement on Form 8-A (17 CFR 249.208a) for the 
registration of a class of securities under Section 12(b) of the Act (15 
U.S.C. 78l(b)) shall become effective:
    (1) If a class of securities is not concurrently being registered 
under the Securities Act of 1933 (``Securities Act''), upon the later of 
receipt by the Commission of certification from the national securities 
exchange or the filing of the Form 8-A with the Commission; or
    (2) If a class of securities is concurrently being registered under 
the Securities Act, upon the later of the filing of the Form 8-A with 
the Commission, receipt by the Commission of certification from the 
national securities exchange listed on the Form 8-A or effectiveness of 
the Securities Act registration statement relating to the class of 
securities.
    (c) A registration statement on Form 8-A (17 CFR 249.208a) for the 
registration of a class of securities under Section 12(g) of the Act (15 
U.S.C. 78l(g)) shall become effective:
    (1) If a class of securities is not concurrently being registered 
under the Securities Act, upon the filing of the Form 8-A with the 
Commission; or
    (2) If class of securities is concurrently being registered under 
the Securities Act, upon the later of the filing of the Form 8-A with 
the Commission or the effectiveness of the Securities Act registration 
statement relating to the class of securities.

(Sec. 12, 48 Stat. 892, as amended; 15 U.S.C. 78l)

[19 FR 670, Feb. 5, 1954, as amended at 59 FR 55347, Nov. 7, 1994; 62 FR 
39766, July 24, 1997]



Sec.  240.12d1-3  Requirements as to certification.

    (a) Certification that a security has been approved by an exchange 
for listing and registration pursuant to section 12(d) of the act and 
Sec.  240.12d1-1 shall be made by the governing committee or other 
corresponding authority of the exchange.
    (b) The certification shall specify (1) the approval of the exchange 
for listing and registration; (2) the title of the security so approved; 
(3) the date of filing with the exchange of the application for 
registration and of any amendments thereto; and (4) any conditions 
imposed on such certification. The exchange shall promptly notify the 
Commission of the partial or complete satisfaction of any such 
conditions.
    (c) The certification may be made by telegram but in such case shall 
be confirmed in writing. All certifications in writing and all 
amendments thereto shall be filed with the Commission in duplicate and 
at least one copy shall be manually signed by the appropriate exchange 
authority.

(Sec. 12, 48 Stat. 892, as amended; 15 U.S.C. 78l)



Sec.  240.12d1-4  Date of receipt of certification by Commission.

    The date of receipt by the Commission of the certification approving 
a security for listing and registration shall be the date on which the 
certification is actually received by the Commission or the date on 
which the application for registration to which the certification 
relates is actually received by the Commission, whichever date is later.

(Sec. 12, 48 Stat. 892, as amended; 15 U.S.C. 78l)



Sec.  240.12d1-5  Operation of certification on subsequent amendments.

    If an amendment to the application for registration of a security is 
filed with the exchange and with the Commission after the receipt by the 
Commission of the certification of the exchange approving the security 
for listing and registration, the certification, unless withdrawn, shall 
be deemed

[[Page 142]]

made with reference to the application as amended.

(Sec. 12, 48 Stat. 892, as amended; 15 U.S.C. 78l)



Sec.  240.12d1-6  Withdrawal of certification.

    An exchange may, by notice to the Commission, withdraw its 
certification prior to the time that the registration to which it 
relates first becomes effective pursuant to Sec.  240.12d1-1.

(Sec. 12, 48 Stat. 892, as amended; 15 U.S.C. 78l)

    Suspension of Trading, Withdrawal, and Striking From Listing and 
                              Registration



Sec.  240.12d2-1  Suspension of trading.

    (a) A national securities exchange may suspend from trading a 
security listed and registered thereon in accordance with its rules. 
Such exchange shall promptly notify the Commission of any such 
suspension, the effective date thereof, and the reasons therefor.
    (b) Any such suspension may be continued until such time as it shall 
appear to the Commission that such suspension is designed to evade the 
provisions of section 12(d) and the rules and regulations thereunder 
relating to the withdrawal and striking of a security from listing and 
registration. During the continuance of such suspension the exchange 
shall notify the Commission promptly of any change in the reasons for 
the suspension. Upon the restoration to trading of any security 
suspended under this rule, the exchange shall notify the Commission 
promptly of the effective date thereof.
    (c) Suspension of trading shall not terminate the registration of 
any security.

(Sec. 12, 48 Stat. 892, as amended; 15 U.S.C. 78l)

[28 FR 1506, Feb. 16, 1963]



Sec.  240.12d2-2  Removal from listing and registration.

    Preliminary Notes: 1. The filing of the Form 25 (Sec. 249.25 of this 
chapter) by an issuer relates solely to the withdrawal of a class of 
securities from listing on a national securities exchange and/or from 
registration under section 12(b) of the Act (15 U.S.C. 78l(b)), and 
shall not affect its obligation to be registered under section 12(g) of 
the Act and/or reporting obligations under section 15(d) of the Act (15 
U.S.C. 78o(d)).
    2. Implementation. The rules of each national securities exchange 
must be designed to meet the requirements of this section and must be 
operative no later than April 24, 2006. Each national securities 
exchange must submit to the Commission a proposed rule change that 
complies with section 19(b) of the Act (15 U.S.C. 78s) and Rule 19b-4 
(17 CFR 240.19b-4) thereunder, and this section no later than October 
24, 2005.

    (a) A national securities exchange must file with the Commission an 
application on Form 25 (17 CFR 249.25) to strike a class of securities 
from listing on a national securities exchange and/or registration under 
section 12(b) of the Act within a reasonable time after the national 
securities exchange is reliably informed that any of the following 
conditions exist with respect to such a security:
    (1) The entire class of the security has been called for redemption, 
maturity or retirement; appropriate notice thereof has been given; funds 
sufficient for the payment of all such securities have been deposited 
with an agency authorized to make such payments; and such funds have 
been made available to security holders.
    (2) The entire class of the security has been redeemed or paid at 
maturity or retirement.
    (3) The instruments representing the securities comprising the 
entire class have come to evidence, by operation of law or otherwise, 
other securities in substitution therefor and represent no other right, 
except, if such be the fact, the right to receive an immediate cash 
payment (the right of dissenters to receive the appraised or fair value 
of their holdings shall not prevent the application of this provision).
    (4) All rights pertaining to the entire class of the security have 
been extinguished; provided, however, that where such an event occurs as 
a result of an order of a court or other governmental authority, the 
order shall be final, all applicable appeal periods shall have expired, 
and no appeals shall be pending.

    Effective Date: Such an application shall be deemed to be granted 
and shall become effective at the opening of business on such date as 
the exchange shall specify in said application, but not less than 10 
days following

[[Page 143]]

the date on which said application is filed with the Commission; 
Provided, however, That in the event removal is being effected under 
paragraph (a)(3) of this section and the exchange has admitted or 
intends to admit a successor security to trading under the temporary 
exemption provided for by Sec.  240.12a-5, such date shall not be 
earlier than the date on which the successor security is removed from 
its exempt status.

    (b)(1) In cases not provided for in paragraph (a) of this section, a 
national securities exchange may file an application on Form 25 to 
strike a class of securities from listing and/or withdraw the 
registration of such securities, in accordance with its rules, if the 
rules of such exchange, at a minimum, provide for:
    (i) Notice to the issuer of the exchange's decision to delist its 
securities;
    (ii) An opportunity for appeal to the national securities exchange's 
board of directors, or to a committee designated by the board; and
    (iii) Public notice of the national securities exchange's final 
determination to remove the security from listing and/or registration, 
by issuing a press release and posting notice on its Web site. Public 
notice under this paragraph shall be disseminated no fewer than 10 days 
before the delisting becomes effective pursuant to paragraph (d)(1) of 
this section, and must remain posted on its Web site until the delisting 
is effective.
    (2) A national securities exchange must promptly deliver a copy of 
the application on Form 25 to the issuer.
    (c)(1) The issuer of a class of securities listed on a national 
securities exchange and/or registered under section 12(b) of the Act may 
file an application on Form 25 to notify the Commission of its 
withdrawal of such securities from listing on such national securities 
exchange and its intention to withdraw the securities from registration 
under section 12(b) of the Act.
    (2) An issuer filing Form 25 under this paragraph must satisfy the 
requirements in paragraph (c)(2) of this section and represent on the 
Form 25 that such requirements have been met:
    (i) The issuer must comply with all applicable laws in effect in the 
state in which it is incorporated and with the national securities 
exchange's rules governing an issuer's voluntary withdrawal of a class 
of securities from listing and/or registration.
    (ii) No fewer than 10 days before the issuer files an application on 
Form 25 with the Commission, the issuer must provide written notice to 
the national securities exchange of its determination to withdraw the 
class of securities from listing and/or registration on such exchange. 
Such written notice must set forth a description of the security 
involved, together with a statement of all material facts relating to 
the reasons for withdrawal from listing and/or registration.
    (iii) Contemporaneous with providing written notice to the exchange 
of its intent to withdraw a class of securities from listing and/or 
registration, the issuer must publish notice of such intention, along 
with its reasons for such withdrawal, via a press release and, if it has 
a publicly accessible Web site, posting such notice on that Web site. 
Any notice provided on an issuer's Web site under this paragraph shall 
remain available until the delisting on Form 25 has become effective 
pursuant to paragraph (d)(1) of this section. If the issuer has not 
arranged for listing and/or registration on another national securities 
exchange or for quotation of its security in a quotation medium (as 
defined in Sec.  240.15c2-11), then the press release and posting on the 
Web site must contain this information.
    (3) A national securities exchange, that receives, pursuant to 
paragraph (c)(2)(ii) of this section, written notice from an issuer that 
such issuer has determined to withdraw a class of securities from 
listing and/or registration on such exchange, must provide notice on its 
Web site of the issuer's intent to delist and/or withdraw from 
registration its securities by the next business day. Such notice must 
remain posted on the exchange's Web site until the delisting on Form 25 
is effective pursuant to paragraph (d)(1) of this section.
    (d)(1) An application on Form 25 to strike a class of securities 
from listing on a national securities exchange will be effective 10 days 
after Form 25 is filed with the Commission.
    (2) An application on Form 25 to withdraw the registration of a 
class of securities under section 12(b) of the Act

[[Page 144]]

will be effective 90 days, or such shorter period as the Commission may 
determine, after filing with the Commission.
    (3) Notwithstanding paragraphs (d)(1) and (d)(2) of this section, 
the Commission may, by written notice to the exchange and issuer, 
postpone the effectiveness of an application to delist and/or to 
deregister to determine whether the application on Form 25 to strike the 
security from registration under section 12(b) of the Act has been made 
in accordance with the rules of the exchange, or what terms should be 
imposed by the Commission for the protection of investors.
    (4) Notwithstanding paragraph (d)(2) of this section, whenever the 
Commission commences a proceeding against an issuer under section 12 of 
the Act prior to the withdrawal of the registration of a class of 
securities, such security will remain registered under section 12(b) of 
the Act until the final decision of such proceeding or until the 
Commission otherwise determines to suspend the effective date of, or 
revoke, the registration of a class of securities.
    (5) An issuer's duty to file any reports under section 13(a) of the 
Act (15 U.S.C. 78m(a)) and the rules and regulations thereunder solely 
because of such security's registration under section 12(b) of the Act 
will be suspended upon the effective date for the delisting pursuant to 
paragraph (d)(1) of this section. If, following the effective date of 
delisting on Form 25, the Commission, an exchange, or an issuer delays 
the withdrawal of a security's registration under section 12(b) of the 
Act, an issuer shall, within 60 days of such delay, file any reports 
that would have been required under section 13(a) of the Act and the 
rules and regulations thereunder, had the Form 25 not been filed. The 
issuer also shall timely file any subsequent reports required under 
section 13(a) of the Act for the duration of the delay.
    (6) An issuer whose reporting responsibilities under section 13(a) 
of the Act are suspended for a class of securities under paragraph 
(d)(5) of this section is, nevertheless, required to file any reports 
that an issuer with such a class of securities registered under section 
12 of the Act would be required to file under section 13(a) of the Act 
if such class of securities:
    (i) Is registered under section 12(g) of the Act; or
    (ii) Would be registered, or would be required to be registered, 
under section 12(g) of the Act but for the exemption from registration 
under section 12(g) of the Act provided by section 12(g)(2)(A) of the 
Act.
    (7)(i) An issuer whose reporting responsibilities under section 
13(a) of the Act are suspended under paragraph (d)(5) of this section 
is, nevertheless, required to file any reports that would be required 
under section 15(d) of the Act but for the fact that the reporting 
obligations are:
    (A) Suspended for a class of securities under paragraph (d)(5) of 
this section; and
    (B) Suspended, terminated, or otherwise absent under section 12(g) 
of the Act.
    (ii) The reporting responsibilities of an issuer under section 15(d) 
of the Act shall continue until the issuer is required to file reports 
under section 13(a) of the Act or the issuer's reporting 
responsibilities under section 15(d) of the Act are otherwise suspended.
    (8) In the event removal is being effected under paragraph (a)(3) of 
this section and the national securities exchange has admitted or 
intends to admit a successor security to trading under the temporary 
exemption provided for by Sec.  240.12a-5, the effective date of the 
Form 25, as set forth in paragraph (d)(1) of this section, shall not be 
earlier than the date the successor security is removed from its exempt 
status.
    (e) The following are exempt from section 12(d) of the Act and the 
provisions of this section:
    (1) Any standardized option, as defined in Sec.  240.9b-1, that is:
    (i) Issued by a clearing agency registered under section 17A of the 
Act (15 U.S.C. 78q-1); and
    (ii) Traded on a national securities exchange registered pursuant to 
section 6(a) of the Act (15 U.S.C. 78f(a)); and
    (2) Any security futures product that is:

[[Page 145]]

    (i) Traded on a national securities exchange registered under 
section 6(a) of the Act or on a national securities association 
registered pursuant to section 15A(a) of the Act (15 U.S.C. 78o-3(a)); 
and
    (ii) Cleared by a clearing agency registered as a clearing agency 
pursuant to section 17A of the Act or is exempt from registration under 
section 17A(b)(7) of the Act.

[28 FR 1506, Feb. 16, 1963, as amended at 70 FR 42468, July 22, 2005]

                            Unlisted Trading



Sec.  240.12f-1  Applications for permission to reinstate unlisted
trading privileges.

    (a) An application to reinstate unlisted trading privileges may be 
made to the Commission by any national securities exchange for the 
extension of unlisted trading privileges to any security for which such 
unlisted trading privileges have been suspended by the Commission, 
pursuant to section 12(f)(2)(A) of the Act (15 U.S.C. 78l(2)(A)). One 
copy of such application, executed by a duly authorized officer of the 
exchange, shall be filed and shall set forth:
    (1) Name of issuer;
    (2) Title of security;
    (3) The name of each national securities exchange, if any, on which 
such security is listed or admitted to unlisted trading privileges;
    (4) Whether transaction information concerning such security is 
reported pursuant to an effective transaction reporting plan 
contemplated by Sec.  242.601 of this chapter;
    (5) The date of the Commission's suspension of unlisted trading 
privileges in the security on the exchange;
    (6) Any other information which is deemed pertinent to the question 
of whether the reinstatement of unlisted trading privileges in such 
security is consistent with the maintenance of fair and orderly markets 
and the protection of investors; and
    (7) That a copy of the instant application has been mailed, or 
otherwise personally provided, to the issuer of the securities for which 
unlisted trading privileges are sought and to each exchange listed in 
item (3) of this section.

[44 FR 75134, Dec. 19, 1979, as amended at 45 FR 12390, Feb. 26, 1980; 
45 FR 36076, May 29, 1980; 60 FR 20896, Apr. 28, 1995; 70 FR 37618, June 
29, 2005]



Sec.  240.12f-2  Extending unlisted trading privileges to a security that
is the subject of an initial public offering.

    (a) General provision. A national securities exchange may extend 
unlisted trading privileges to a subject security when at least one 
transaction in the subject security has been effected on the national 
securities exchange upon which the security is listed and the 
transaction has been reported pursuant to an effective transaction 
reporting plan, as defined in Sec.  242.600 of this chapter.
    (b) The extension of unlisted trading privileges pursuant to this 
section shall be subject to all the provisions set forth in Section 
12(f) of the Act (15 U.S.C. 78l(f)), as amended, and any rule or 
regulation promulgated thereunder, or which may be promulgated 
thereunder while the extension is in effect.
    (c) Definitions. For the purposes of this section:
    (1) The term subject security shall mean a security that is the 
subject of an initial public offering, as that term is defined in 
section 12(f)(1)(G)(i) of the Act (15 U.S.C. 78l(f)(1)(G)(i)), and
    (2) An initial public offering commences at such time as is 
described in section 12(f)(1)(G)(ii) of the Act (15 U.S.C. 
78l(f)(1)(G)(ii)).

[60 FR 20896, Apr. 28, 1995, as amended at 65 FR 53565, Sept. 5, 2000; 
70 FR 37618, June 29, 2005]



Sec.  240.12f-3  Termination or suspension of unlisted trading privileges.

    (a) The issuer of any security for which unlisted trading privileges 
on any exchange have been continued or extended, or any broker or dealer 
who makes or creates a market for such security, or any other person 
having a bona fide interest in the question of termination or suspension 
of such unlisted trading privileges, may make application to the 
Commission for the termination or suspension of such unlisted trading 
privileges. One duly executed copy of such application shall be

[[Page 146]]

filed, and it shall contain the following information:
    (1) Name and address of applicant;
    (2) A brief statement of the applicant's interest in the question of 
termination or suspension of such unlisted trading privileges;
    (3) Title of security;
    (4) Names of issuer;
    (5) Amount of such security issued and outstanding (number of shares 
of stock or principal amount of bonds), stating source of information;
    (6) Annual volume of public trading in such security (number of 
shares of stock or principal amount of bonds) on such exchange for each 
of the three calendar years immediately preceding the date of such 
application, and monthly volume of trading in such security for each of 
the twelve calendar months immediately preceding the date of such 
application;
    (7) Price range on such exchange for each of the twelve calendar 
months immediately preceding the date of such application; and
    (8) A brief statement of the information in the applicant's 
possession, and the source thereof, with respect to (i) the extent of 
public trading in such security on such exchange, and (ii) the character 
of trading in such security on such exchange; and
    (9) A brief statement that a copy of the instant application has 
been mailed, or otherwise personally provided, to the exchange from 
which the suspension or termination of unlisted trading privileges is 
sought, and to any other exchange on which such security is listed or 
traded pursuant to unlisted trading privileges.
    (b) Unlisted trading privileges in any security on any national 
securities exchange may be suspended or terminated by such exchange in 
accordance with its rules.

(Secs. 12(f) and 23, 15 U.S.C. 78l and 78w)

[20 FR 6702, Sept. 13, 1955, as amended at 44 FR 75135, Dec. 19, 1979; 
45 FR 36076, May 29, 1980; 60 FR 20896, Apr. 28, 1995]



Sec.  240.12f-4  Exemption of securities admitted to unlisted trading
privileges from sections 13, 14 and 16.

    (a) Any security for which unlisted trading privileges on any 
national securities exchange have been continued or extended pursuant to 
section 12(f) of the Act shall be exempt from section 13 of the Act 
unless (1) such security or another security of the same issuer is 
listed and registered on a national securities exchange or registered 
pursuant to section 12(g) of the Act, or (2) such issuer would be 
required to file information, documents and reports pursuant to section 
15(d) of the Act but for the fact that securities of the issuer are 
deemed to be ``registered on a national securities exchange'' within the 
meaning of section 12(f)(6) of the Act.
    (b) Any security for which unlisted trading privileges on any 
national securities exchange have been continued or extended pursuant to 
section 12(f) of the Act shall be exempt from section 14 of the Act 
unless such security is also listed and registered on a national 
securities exchange or registered pursuant to section 12(g) of the Act.
    (c)(1) Any equity security for which unlisted trading privileges on 
any national securities exchange have been continued or extended 
pursuant to section 12(f) of the Act shall be exempt from section 16 of 
the act unless such security or another equity security of the same 
issuer is listed and registered on a national securities exchange or 
registered pursuant to section 12(g) of the Act.
    (2) Any equity security for which unlisted trading privileges on any 
national securities exchange have been continued or extended pursuant to 
section 12(f) of the Act and which is not listed and registered on any 
other such exchange or registered pursuant to section 12(g) of the Act 
shall be exempt from section 16 of the Act insofar as that section would 
otherwise apply to any person who is directly or indirectly the 
beneficial owner of more than 10 percent of such security, unless 
another equity security of the issuer of such unlisted security is so 
listed or registered and such beneficial owner is a director or officer 
of such issuer or directly or indirectly the beneficial owner of more 
than 10 percent of any such listed security.
    (d) Any reference in this section to a security registered pursuant 
to section 12(g) of the Act shall include, and any reference to a 
security not so registered shall exclude, any security as

[[Page 147]]

to which a registration statement pursuant to such section is at the 
time required to be effective.

(Sec. 3, 78 Stat. 565, 15 U.S.C. 78l)

[30 FR 482, Jan. 14, 1965]



Sec.  240.12f-5  Exchange rules for securities to which unlisted 
trading privileges are extended.

    A national securities exchange shall not extend unlisted trading 
privileges to any security unless the national securities exchange has 
in effect a rule or rules providing for transactions in the class or 
type of security to which the exchange extends unlisted trading 
privileges.

[60 FR 20896, Apr. 28, 1995]



Sec.  240.12f-6  [Reserved]

            Extensions and Temporary Exemptions; Definitions



Sec.  240.12g-1  Registration of securities; exemption from section 12(g).

    An issuer is not required to register a class of equity securities 
pursuant to section 12(g)(1) of the Act (15 U.S.C. 78l(g)(1)) if on the 
last day of its most recent fiscal year:
    (a) The issuer had total assets not exceeding $10 million; or
    (b)(1) The class of equity securities was held of record by fewer 
than 2,000 persons and fewer than 500 of those persons were not 
accredited investors (as such term is defined in Sec.  230.501(a) of 
this chapter, determined as of such day rather than at the time of the 
sale of the securities); or
    (2) The class of equity securities was held of record by fewer than 
2,000 persons in the case of a bank; a savings and loan holding company, 
as such term is defined in section 10 of the Home Owners' Loan Act (12 
U.S.C. 1461); or a bank holding company, as such term is defined in 
section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841).

81 FR 28705, May 10, 2016, as amended at 81 FR 95458, Dec. 28, 2016]



Sec.  240.12g-2  Securities deemed to be registered pursuant to 
section 12(g)(1) upon termination of exemption pursuant to 
section 12(g)(2)(A) or (B).

    Any class of securities that would have been required to be 
registered pursuant to section 12(g)(1) of the Act (15 U.S.C. 78l(g)(1)) 
except for the fact that it was exempt from such registration by section 
12(g)(2)(A) of the Act (15 U.S.C. 78l(g)(2)(A)) because it was listed 
and registered on a national securities exchange, or by section 
12(g)(2)(B) of the Act (15 U.S.C. 78l(g)(2)(B)) because it was issued by 
an investment company registered pursuant to section 8 of the Investment 
Company Act of 1940 (15 U.S.C. 80a-8), shall upon the termination of the 
listing and registration of such class or the termination of the 
registration of such company and without the filing of an additional 
registration statement be deemed to be registered pursuant to section 
12(g)(1) of the Act if at the time of such termination:
    (a) The issuer of such class of securities has elected to be 
regulated as a business development company pursuant to sections 55 
through 65 of the Investment Company Act of 1940 (15 U.S.C. 80a-54 
through 64) and such election has not been withdrawn; or
    (b) Securities of the class are not exempt from such registration 
pursuant to section 12 of the Act (15 U.S.C. 78l) or rules thereunder 
and all securities of such class are held of record by 300 or more 
persons, or 1,200 or more persons in the case of a bank; a savings and 
loan holding company, as such term is defined in section 10 of the Home 
Owners' Loan Act (12 U.S.C. 1461); or a bank holding company, as such 
term is defined in section 2 of the Bank Holding Company Act of 1956 (12 
U.S.C. 1841).

[81 FR 28705, May 10, 2016]



Sec.  240.12g-3  Registration of securities of successor issuers under
section 12(b) or 12(g).

    (a) Where in connection with a succession by merger, consolidation, 
exchange of securities, acquisition of assets or otherwise, securities 
of an issuer that are not already registered pursuant to section 12 of 
the Act (15 U.S.C. 78l) are issued to the holders of

[[Page 148]]

any class of securities of another issuer that is registered pursuant to 
either section 12 (b) or (g) of the Act (15 U.S.C. 78l (b) or (g)), the 
class of securities so issued shall be deemed to be registered under the 
same paragraph of section 12 of the Act unless upon consummation of the 
succession:
    (1) Such class is exempt from such registration other than by Sec.  
240.12g3-2;
    (2) All securities of such class are held of record by fewer than 
300 persons, or 1,200 persons in the case of a bank; a savings and loan 
holding company, as such term is defined in section 10 of the Home 
Owners' Loan Act (12 U.S.C. 1461); or a bank holding company, as such 
term is defined in section 2 of the Bank Holding Company Act of 1956 (12 
U.S.C. 1841); or
    (3) The securities issued in connection with the succession were 
registered on Form F-8 or Form F-80 (Sec.  239.38 or Sec.  239.41 of 
this chapter) and following succession the successor would not be 
required to register such class of securities under section 12 of the 
Act (15 U.S.C. 78l) but for this section.
    (b) Where in connection with a succession by merger, consolidation, 
exchange of securities, acquisition of assets or otherwise, securities 
of an issuer that are not already registered pursuant to section 12 of 
the Act (15 U.S.C. 78l) are issued to the holders of any class of 
securities of another issuer that is required to file a registration 
statement pursuant to either section 12(b) or (g) of the Act (15 U.S.C. 
78l(b) or (g)) but has not yet done so, the duty to file such statement 
shall be deemed to have been assumed by the issuer of the class of 
securities so issued. The successor issuer shall file a registration 
statement pursuant to the same paragraph of section 12 of the Act with 
respect to such class within the period of time the predecessor issuer 
would have been required to file such a statement unless upon 
consummation of the succession:
    (1) Such class is exempt from such registration other than by Sec.  
240.12g3-2;
    (2) All securities of such class are held of record by fewer than 
300 persons, or 1,200 persons in the case of a bank; a savings and loan 
holding company, as such term is defined in section 10 of the Home 
Owners' Loan Act (12 U.S.C. 1461); or a bank holding company, as such 
term is defined in section 2 of the Bank Holding Company Act of 1956 (12 
U.S.C. 1841); or
    (3) The securities issued in connection with the succession were 
registered on Form F-8 or Form F-80 (Sec.  239.38 or Sec.  239.41 of 
this chapter) and following the succession the successor would not be 
required to register such class of securities under section 12 of the 
Act (15 U.S.C. 78l) but for this section.
    (c) Where in connection with a succession by merger, consolidation, 
exchange of securities, acquisition of assets or otherwise, securities 
of an issuer that are not already registered pursuant to section 12 of 
the Act (15 U.S.C. 78l) are issued to the holders of classes of 
securities of two or more other issuers that are each registered 
pursuant to section 12 of the Act, the class of securities so issued 
shall be deemed to be registered under section 12 of the Act unless upon 
consummation of the succession:
    (1) Such class is exempt from such registration other than by Sec.  
240.12g3-2;
    (2) All securities of such class are held of record by fewer than 
300 persons, or 1,200 persons in the case of a bank; a savings and loan 
holding company, as such term is defined in section 10 of the Home 
Owners' Loan Act (12 U.S.C. 1461); or a bank holding company, as such 
term is defined in section 2 of the Bank Holding Company Act of 1956 (12 
U.S.C. 1841); or
    (3) The securities issued in connection with the succession were 
registered on Form F-8 or Form F-80 (Sec.  239.38 or Sec.  239.41 of 
this chapter) and following succession the successor would not be 
required to register such class of securities under section 12 of the 
Act (15 U.S.C. 78l) but for this section.
    (d) If the classes of securities issued by two or more predecessor 
issuers (as described in paragraph (c) of this section) are registered 
under the same paragraph of section 12 of the Act (15 U.S.C. 78l), the 
class of securities issued by the successor issuer shall be deemed 
registered under the same paragraph of section 12 of the Act. If the 
classes of securities issued by the

[[Page 149]]

predecessor issuers are not registered under the same paragraph of 
section 12 of the Act, the class of securities issued by the successor 
issuer shall be deemed registered under section 12(g) of the Act (15 
U.S.C. 78l(g)).
    (e) An issuer that is deemed to have a class of securities 
registered pursuant to section 12 of the Act (15 U.S.C. 78l) according 
to paragraph (a), (b), (c) or (d) of this section shall file reports on 
the same forms and such class of securities shall be subject to the 
provisions of sections 14 and 16 of the Act (15 U.S.C. 78n and 78p) to 
the same extent as the predecessor issuers, except as follows:
    (1) An issuer that is not a foreign issuer shall not be eligible to 
file on Form 20-F (Sec.  249.220f of this chapter) or to use the 
exemption in Sec.  240.3a12-3.
    (2) A foreign private issuer shall be eligible to file on Form 20-F 
(Sec.  249.220f of this chapter) and to use the exemption in Sec.  
240.3a12-3.
    (f) An issuer that is deemed to have a class of securities 
registered pursuant to section 12 of the Act (15 U.S.C. 78l) according 
to paragraphs (a), (b), (c) or (d) of this section shall indicate in the 
Form 8-K (Sec.  249.308 of this chapter) report filed with the 
Commission in connection with the succession, pursuant to the 
requirements of Form 8-K, the paragraph of section 12 of the Act under 
which the class of securities issued by the successor issuer is deemed 
registered by operation of paragraphs (a), (b), (c) or (d) of this 
section. If a successor issuer that is deemed registered under section 
12(g) of the Act (15 U.S.C. 78l(g)) by paragraph (d) of this section 
intends to list a class of securities on a national securities exchange, 
it must file a registration statement pursuant to section 12(b) of the 
Act (15 U.S.C. 78l(b)) with respect to that class of securities.
    (g) An issuer that is deemed to have a class of securities 
registered pursuant to section 12 of the Act (15 U.S.C. 78l) according 
to paragraph (a), (b), (c) or (d) of this section shall file an annual 
report for each fiscal year beginning on or after the date as of which 
the succession occurred. Annual reports shall be filed within the period 
specified in the appropriate form. Each such issuer shall file an annual 
report for each of its predecessors that had securities registered 
pursuant to section 12 of the Act (15 U.S.C. 78l) covering the last full 
fiscal year of the predecessor before the registrant's succession, 
unless such report has been filed by the predecessor. Such annual report 
shall contain information that would be required if filed by the 
predecessor.

[62 FR 39767, July 24, 1997, as amended at 81 FR 28706, May 10, 2016; 83 
FR 50221, Oct. 4, 2018]



Sec.  240.12g-4  Certifications of termination of registration under 
section 12(g).

    (a) Termination of registration of a class of securities under 
section 12(g) of the Act (15 U.S.C. 78l(g)) shall take effect 90 days, 
or such shorter period as the Commission may determine, after the issuer 
certifies to the Commission on Form 15 (Sec.  249.323 of this chapter) 
that the class of securities is held of record by:
    (1) Fewer than 300 persons, or in the case of a bank; a savings and 
loan holding company, as such term is defined in section 10 of the Home 
Owners' Loan Act (12 U.S.C. 1461); or a bank holding company, as such 
term is defined in section 2 of the Bank Holding Company Act of 1956 (12 
U.S.C. 1841), 1,200 persons; or
    (2) Fewer than 500 persons, where the total assets of the issuer 
have not exceeded $10 million on the last day of each of the issuer's 
most recent three fiscal years.
    (b) The issuer's duty to file any reports required under section 
13(a) shall be suspended immediately upon filing a certification on Form 
15; Provided, however, That if the certification on Form 15 is 
subsequently withdrawn or denied, the issuer shall, within 60 days after 
the date of such withdrawal or denial, file with the Commission all 
reports which would have been required had the certification on Form 15 
not been filed. If the suspension resulted from the issuer's merger 
into, or consolidation with, another issuer or issuers, the 
certification shall be filed by the successor issuer.

[49 FR 12689, Mar. 30, 1984, as amended at 51 FR 25362, July 14, 1986; 
61 FR 21356, May 9, 1996; 72 FR 16956, Apr. 5, 2007; 81 FR 28706, May 
10, 2016]

[[Page 150]]



Sec.  240.12g-6  Exemption for securities issued pursuant to
section 4(a)(6) of the Securities Act of 1933 or Regulation 
Crowdfunding.

    (a) For purposes of determining whether an issuer is required to 
register a security with the Commission pursuant to section 12(g)(1) of 
the Act (15 U.S.C. 78l(g)(1)), the definition of held of record shall 
not include securities issued pursuant to the offering exemption under 
section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) or 
Sec. Sec.  227.100 through 227.504 (Regulation Crowdfunding) by an 
issuer that:
    (1) Is current in filing its ongoing annual reports required 
pursuant to Sec.  227.202 of this chapter;
    (2) Has total assets not in excess of $25 million as of the end of 
its most recently completed fiscal year; and
    (3) Has engaged a transfer agent registered pursuant to Section 
17A(c) of the Act to perform the function of a transfer agent with 
respect to such securities.
    (b) An issuer that would be required to register a class of 
securities under Section 12(g) of the Act as a result of exceeding the 
asset threshold in paragraph (a)(2) of this section may continue to 
exclude the relevant securities from the definition of ``held of 
record'' for a transition period ending on the penultimate day of the 
fiscal year two years after the date it became ineligible. The 
transition period terminates immediately upon the failure of an issuer 
to timely file any periodic report due pursuant to Sec.  227.202 at 
which time the issuer must file a registration statement that registers 
that class of securities under the Act within 120 days.

[80 FR 71750, Nov. 16, 2015, as amended at 86 FR 3601, Jan. 14, 2021]



Sec.  240.12g3-2  Exemptions for American depositary receipts and certain
foreign securities.

    (a) Securities of any class issued by any foreign private issuer 
shall be exempt from section 12(g) (15 U.S.C. 78l(g)) of the Act if the 
class has fewer than 300 holders resident in the United States. This 
exemption shall continue until the next fiscal year end at which the 
issuer has a class of equity securities held by 300 or more persons 
resident in the United States. For the purpose of determining whether a 
security is exempt pursuant to this paragraph:
    (1) Securities held of record by persons resident in the United 
States shall be determined as provided in Sec.  240.12g5-1 except that 
securities held of record by a broker, dealer, bank or nominee for any 
of them for the accounts of customers resident in the United States 
shall be counted as held in the United States by the number of separate 
accounts for which the securities are held. The issuer may rely in good 
faith on information as to the number of such separate accounts supplied 
by all owners of the class of its securities which are brokers, dealers, 
or banks or a nominee for any of them.
    (2) Persons in the United States who hold the security only through 
a Canadian Retirement Account (as that term is defined in rule 237(a)(2) 
under the Securities Act of 1933 (Sec.  230.237(a)(2) of this chapter)), 
shall not be counted as holders resident in the United States.
    (b)(1) A foreign private issuer shall be exempt from the requirement 
to register a class of equity securities under section 12(g) of the Act 
(15 U.S.C. 78l(g)) if:
    (i) The issuer is not required to file or furnish reports under 
section 13(a) of the Act (15 U.S.C. 78m(a)) or section 15(d) of the Act 
(15 U.S.C. 78o(d));
    (ii) The issuer currently maintains a listing of the subject class 
of securities on one or more exchanges in a foreign jurisdiction that, 
either singly or together with the trading of the same class of the 
issuer's securities in another foreign jurisdiction, constitutes the 
primary trading market for those securities; and
    (iii) The issuer has published in English, on its Internet Web site 
or through an electronic information delivery system generally available 
to the public in its primary trading market, information that, since the 
first day of its most recently completed fiscal year, it:
    (A) Has made public or been required to make public pursuant to the 
laws of the country of its incorporation, organization or domicile;
    (B) Has filed or been required to file with the principal stock 
exchange in its primary trading market on which

[[Page 151]]

its securities are traded and which has been made public by that 
exchange; and
    (C) Has distributed or been required to distribute to its security 
holders.

    Note 1 to paragraph (b)(1): For the purpose of paragraph (b) of this 
section, primary trading market means that at least 55 percent of the 
trading in the subject class of securities on a worldwide basis took 
place in, on or through the facilities of a securities market or markets 
in a single foreign jurisdiction or in no more than two foreign 
jurisdictions during the issuer's most recently completed fiscal year. 
If a foreign private issuer aggregates the trading of its subject class 
of securities in two foreign jurisdictions for the purpose of this 
paragraph, the trading for the issuer's securities in at least one of 
the two foreign jurisdictions must be larger than the trading in the 
United States for the same class of the issuer's securities. When 
determining an issuer's primary trading market under this paragraph, 
calculate average daily trading volume in the United States and on a 
worldwide basis as under Rule 12h-6 under the Act (Sec.  240.12h-6).
    Note 2 to paragraph (b)(1): Paragraph (b)(1)(iii) of this section 
does not apply to an issuer when claiming the exemption under paragraph 
(b) of this section upon the effectiveness of the termination of its 
registration of a class of securities under section 12(g) of the Act, or 
the termination of its obligation to file or furnish reports under 
section 15(d) of the Act.
    Note 3 to paragraph (b)(1): Compensatory stock options for which the 
underlying securities are in a class exempt under paragraph (b) of this 
section are also exempt under that paragraph.

    (2)(i) In order to maintain the exemption under paragraph (b) of 
this section, a foreign private issuer shall publish, on an ongoing 
basis and for each subsequent fiscal year, in English, on its Internet 
Web site or through an electronic information delivery system generally 
available to the public in its primary trading market, the information 
specified in paragraph (b)(1)(iii) of this section.
    (ii) An issuer must electronically publish the information required 
by paragraph (b)(2) of this section promptly after the information has 
been made public.
    (3)(i) The information required to be published electronically under 
paragraph (b) of this section is information that is material to an 
investment decision regarding the subject securities, such as 
information concerning:
    (A) Results of operations or financial condition;
    (B) Changes in business;
    (C) Acquisitions or dispositions of assets;
    (D) The issuance, redemption or acquisition of securities;
    (E) Changes in management or control;
    (F) The granting of options or the payment of other remuneration to 
directors or officers; and
    (G) Transactions with directors, officers or principal security 
holders.
    (ii) At a minimum, a foreign private issuer shall electronically 
publish English translations of the following documents required to be 
published under paragraph (b) of this section if in a foreign language:
    (A) Its annual report, including or accompanied by annual financial 
statements;
    (B) Interim reports that include financial statements;
    (C) Press releases; and
    (D) All other communications and documents distributed directly to 
security holders of each class of securities to which the exemption 
relates.
    (c) The exemption under paragraph (b) of this section shall remain 
in effect until:
    (1) The issuer no longer satisfies the electronic publication 
condition of paragraph (b)(2) of this section;
    (2) The issuer no longer maintains a listing of the subject class of 
securities on one or more exchanges in a primary trading market, as 
defined under paragraph (b)(1) of this section; or
    (3) The issuer registers a class of securities under section 12 of 
the Act or incurs reporting obligations under section 15(d) of the Act.
    (d) Depositary shares registered on Form F-6 (Sec.  239.36 of this 
chapter), but not the underlying deposited securities, are exempt from 
section 12(g) of the Act under this paragraph.

[48 FR 46739, Oct. 14, 1983, as amended at 49 FR 12689, Mar. 30, 1984; 
56 FR 30068, July 1, 1991; 65 FR 37676, June 15, 2000; 72 FR 16955, Apr. 
5, 2007; 73 FR 52768, Sept. 10, 2008]

[[Page 152]]



Sec.  240.12g5-1  Definition of securities ``held of record''.

    (a) For the purpose of determining whether an issuer is subject to 
the provisions of sections 12(g) and 15(d) of the Act, securities shall 
be deemed to be ``held of record'' by each person who is identified as 
the owner of such securities on records of security holders maintained 
by or on behalf of the issuer, subject to the following:
    (1) In any case where the records of security holders have not been 
maintained in accordance with accepted practice, any additional person 
who would be identified as such an owner on such records if they had 
been maintained in accordance with accepted practice shall be included 
as a holder of record.
    (2) Except as specified in paragraph (a)(9) of this section, 
securities identified as held of record by a corporation, a partnership, 
a trust whether or not the trustees are named, or other organization 
shall be included as so held by one person.
    (3) Securities identified as held of record by one or more persons 
as trustees, executors, guardians, custodians or in other fiduciary 
capacities with respect to a single trust, estate or account shall be 
included as held of record by one person.
    (4) Securities held by two or more persons as coowners shall be 
included as held by one person.
    (5) Each outstanding unregistered or bearer certificate shall be 
included as held of record by a separate person, except to the extent 
that the issuer can establish that, if such securities were registered, 
they would be held of record, under the provisions of this rule, by a 
lesser number of persons.
    (6) Securities registered in substantially similar names where the 
issuer has reason to believe because of the address or other indications 
that such names represent the same person, may be included as held of 
record by one person.
    (7) Other than when determining compliance with Rule 257(d)(2) of 
Regulation A (Sec.  230.257(d)(2) of this chapter), the definition of 
``held of record'' shall not include securities issued in a Tier 2 
offering pursuant to Regulation A by an issuer that:
    (i) Is required to file reports pursuant to Rule 257(b) of 
Regulation A (Sec.  230.257(b) of this chapter);
    (ii) Is current in filing annual, semiannual and special financial 
reports pursuant to such rule as of its most recently completed fiscal 
year end;
    (iii) Has engaged a transfer agent registered pursuant to Section 
17A(c) of the Act to perform the function of a transfer agent with 
respect to such securities; and
    (iv) Had a public float of less than $75 million as of the last 
business day of its most recently completed semiannual period, computed 
by multiplying the aggregate worldwide number of shares of its common 
equity securities held by non-affiliates by the price at which such 
securities were last sold (or the average bid and asked prices of such 
securities) in the principal market for such securities or, in the event 
the result of such public float calculation was zero, had annual 
revenues of less than $50 million as of its most recently completed 
fiscal year. An issuer that would be required to register a class of 
securities under Section 12(g) of the Act as a result of exceeding the 
applicable threshold in this paragraph (a)(7)(iv), may continue to 
exclude the relevant securities from the definition of ``held of 
record'' for a transition period ending on the penultimate day of the 
fiscal year two years after the date it became ineligible. The 
transition period terminates immediately upon the failure of an issuer 
to timely file any periodic report due pursuant to Rule 257 (Sec.  
230.257 of this chapter) at which time the issuer must file a 
registration statement that registers that class of securities under the 
Act within 120 days.
    (8)(i) For purposes of determining whether an issuer is required to 
register a class of equity securities with the Commission pursuant to 
section 12(g)(1) of the Act (15 U.S.C. 78l(g)(1)), an issuer may exclude 
securities:
    (A) Held by persons who received the securities pursuant to an 
employee compensation plan in transactions exempt from, or not subject 
to, the registration requirements of section 5 of the Securities Act of 
1933 (15 U.S.C. 77e); and

[[Page 153]]

    (B) Held by persons who received the securities in a transaction 
exempt from, or not subject to, the registration requirements of section 
5 of the Securities Act (15 U.S.C. 77e) from the issuer, a predecessor 
of the issuer or an acquired company in substitution or exchange for 
excludable securities under paragraph (a)(8)(i)(A) of this section, as 
long as the persons were eligible to receive securities pursuant to 
Sec.  230.701(c) of this chapter at the time the excludable securities 
were originally issued to them.
    (ii) As a non-exclusive safe harbor under this paragraph (a)(8):
    (A) An issuer may deem a person to have received the securities 
pursuant to an employee compensation plan if such plan and the person 
who received the securities pursuant to the plan met the plan and 
participant conditions of Sec.  230.701(c) of this chapter; and
    (B) An issuer may, solely for the purposes of Section 12(g) of the 
Act (15 U.S.C. 78l(g)(1)), deem the securities to have been issued in a 
transaction exempt from, or not subject to, the registration 
requirements of Section 5 of the Securities Act (15 U.S.C. 77e) if the 
issuer had a reasonable belief at the time of the issuance that the 
securities were issued in such a transaction.
    (9) For purposes of determining whether a crowdfunding issuer, as 
defined in Sec.  270.3a-9(b)(1) of this chapter, or a crowdfunding 
vehicle, as defined in Sec.  270.3a-9(b)(2) of this chapter, is required 
to register a class of equity securities with the Commission pursuant to 
section 12(g)(1) of the Act, both the crowdfunding issuer and the 
crowdfunding vehicle:
    (i) May exclude securities issued by a crowdfunding vehicle, as 
defined in Sec.  270.3a-9(b)(2) of this chapter, in an offering under 
Sec. Sec.  227.100 through 227.504 (Regulation Crowdfunding) in which 
the crowdfunding vehicle and the crowdfunding issuer are deemed to be 
co-issuers under the Securities Act (15 U.S.C. 77a et seq.) and that are 
held by natural persons; and
    (ii) Shall include securities issued by a crowdfunding vehicle, as 
defined in Sec.  270.3a-9(b)(2) of this chapter, in an offering under 
Regulation Crowdfunding in which the crowdfunding vehicle and the 
crowdfunding issuer are deemed to be co-issuers under the Securities Act 
and that are held by investors that are not natural persons.
    (b) Notwithstanding paragraph (a) of this section:
    (1) Securities held, to the knowledge of the issuer, subject to a 
voting trust, deposit agreement or similar arrangement shall be included 
as held of record by the record holders of the voting trust 
certificates, certificates of deposit, receipts or similar evidences of 
interest in such securities: Provided, however, That the issuer may rely 
in good faith on such information as is received in response to its 
request from a non-affiliated issuer of the certificates or evidences of 
interest.
    (2) Whole or fractional securities issued by a savings and loan 
association, building and loan association, cooperative bank, homestead 
association, or similar institution for the sole purpose of qualifying a 
borrower for membership in the issuer, and which are to be redeemed or 
repurchased by the issuer when the borrower's loan is terminated, shall 
not be included as held of record by any person.
    (3) If the issuer knows or has reason to know that the form of 
holding securities of record is used primarily to circumvent the 
provisions of section 12(g) or 15(d) of the Act, the beneficial owners 
of such securities shall be deemed to be the record owners thereof.

(Sec. 3, 48 Stat. 882, as amended, sec. 3, 78 Stat. 566; 15 U.S.C. 78c, 
78l)

[30 FR 484, Jan. 14, 1965, as amended at 80 FR 21922, Apr. 20, 2015; 81 
FR 28706, May 10, 2016; 86 FR 3601, Jan. 14, 2021]



Sec.  240.12g5-2  Definition of ``total assets''.

    For the purpose of section 12(g)(1) of the Act, the term total 
assets shall mean the total assets as shown on the issuer's balance 
sheet or the balance sheet of the issuer and its subsidiaries 
consolidated, whichever is larger, as required to be filed on the form 
prescribed for registration under this section and prepared in 
accordance with the pertinent provisions of Regulation S-X (17 CFR part 
210). Where the security is a certificate of deposit, voting trust 
certificate, or certificate or other evidence of interest in a similar 
trust or agreement, the ``total assets'' of the

[[Page 154]]

issuer of the security held under the trust or agreement shall be deemed 
to be the ``total assets'' of the issuer of such certificate or evidence 
of interest.

(Sec. 3, 48 Stat. 882, as amended, sec. 3, 78 Stat. 566; 15 U.S.C. 78c, 
78l)

[30 FR 484, Jan. 14, 1965]



Sec.  240.12h-1  Exemptions from registration under section 12(g) of
the Act.

    Issuers shall be exempt from the provisions of section 12(g) of the 
Act with respect to the following securities:
    (a) Any interest or participation in an employee stock bonus, stock 
purchase, profit sharing, pension, retirement, incentive, thrift, 
savings or similar plan which is not transferable by the holder except 
in the event of death or mental incompetency, or any security issued 
solely to fund such plans;
    (b) Any interest or participation in any common trust fund or 
similar fund maintained by a bank exclusively for the collective 
investment and reinvestment of monies contributed thereto by the bank in 
its capacity as a trustee, executor, administrator, or guardian. For 
purposes of this paragraph (b), the term ``common trust fund'' shall 
include a common trust fund which is maintained by a bank which is a 
member of an affiliated group, as defined in section 1504(a) of the 
Internal Revenue Code of 1954 (26 U.S.C. 1504(a)), and which is 
maintained exclusively for the investment and reinvestment of monies 
contributed thereto by one or more bank members of such affilated group 
in the capacity of trustee, executor, administrator, or guardian; 
Provided, That:
    (1) The common trust fund is operated in compliance with the same 
state and Federal regulatory requirements as would apply if the bank 
maintaining such fund as any other contributing banks were the same 
entity; and
    (2) The rights of persons for whose benefit a contributiong bank 
acts as trustee, executor, administrator or guardian would not be 
diminished by reason of the maintenance of such common trust fund by 
another bank member of the affiliated group;
    (c) Any class of equity security which would not be outstanding 60 
days after a registration statement would be required to be filed with 
respect thereto;
    (d) Any standardized option, as that term is defined in section 
240.9b-1(a)(4), that is issued by a clearing agency registered under 
section 17A of the Act (15 U.S.C. 78q-1) and traded on a national 
securities exchange registered pursuant to section 6(a) of the Act (15 
U.S.C. 78f(a)) or on a national securities association registered 
pursuant to section 15A(a) of the Act (15 U.S.C. 780-3(a));
    (e) Any security futures product that is traded on a national 
securities exchange registered pursuant to section 6 of the Act (15 
U.S.C. 78f) or on a national securities association registered pursuant 
to section 15A(a) of the Act (15 U.S.C. 780-3(a)) and cleared by a 
clearing agency that is registered pursuant to section 17A of the Act 
(15 U.S.C. 78q-1) or is exempt from registration under section 17A(b)(7) 
of the Act (15 U.S.C. 78q-1(b)(7)).
    (f)(1) Stock options issued under written compensatory stock option 
plans under the following conditions:
    (i) The issuer of the equity security underlying the stock options 
does not have a class of security registered under section 12 of the Act 
and is not required to file reports pursuant to section 15(d) of the 
Act;
    (ii) The stock options have been issued pursuant to one or more 
written compensatory stock option plans established by the issuer, its 
parents, its majority-owned subsidiaries or majority-owned subsidiaries 
of the issuer's parents;

    Note to paragraph (f)(1)(ii): All stock options issued under all 
written compensatory stock option plans on the same class of equity 
security of the issuer will be considered part of the same class of 
equity security for purposes of the provisions of paragraph (f) of this 
section.

    (iii) The stock options are held only by those persons described in 
Rule 701(c) under the Securities Act (17 CFR 230.701(c)) or their 
permitted transferees as provided in paragraph (f)(1)(iv) of this 
section;
    (iv) The stock options and, prior to exercise, the shares to be 
issued on exercise of the stock options are restricted as to transfer by 
the optionholder other than to persons who are family members (as 
defined in Rule 701(c)(3) under the Securities Act (17

[[Page 155]]

CFR 230.701(c)(3)) through gifts or domestic relations orders, or to an 
executor or guardian of the optionholder upon the death or disability of 
the optionholder until the issuer becomes subject to the reporting 
requirements of section 13 or 15(d) of the Act or is no longer relying 
on the exemption pursuant to this section; provided that the 
optionholder may transfer the stock options to the issuer, or in 
connection with a change of control or other acquisition transaction 
involving the issuer, if after such transaction the stock options no 
longer will be outstanding and the issuer no longer will be relying on 
the exemption pursuant to this section;

    Note to paragraph (f)(1)(iv): For purposes of this section, 
optionholders may include any permitted transferee under paragraph 
(f)(1)(iv) of this section; provided that such permitted transferees may 
not further transfer the stock options.

    (v) The stock options and the shares issuable upon exercise of such 
stock options are restricted as to any pledge, hypothecation, or other 
transfer, including any short position, any ``put equivalent position'' 
(as defined in Sec.  240.16a-1(h) of this chapter), or any ``call 
equivalent position'' (as defined in Sec.  240.16a-1(b) of this chapter) 
by the optionholder prior to exercise of an option, except in the 
circumstances permitted in paragraph (f)(1)(iv) of this section, until 
the issuer becomes subject to the reporting requirements of section 13 
or 15(d) of the Act or is no longer relying on the exemption pursuant 
paragraph (f)(1) of this section; and

    Note to paragraphs (f)(1)(iv) and (f)(1)(v): The transferability 
restrictions in paragraphs (f)(1)(iv) and (f)(1)(v) of this section must 
be contained in a written compensatory stock option plan, individual 
written compensatory stock option agreement, other stock purchase or 
stockholder agreement to which the issuer and the optionholder are a 
signatory or party, other enforceable agreement by or against the issuer 
and the optionholder, or in the issuer's by-laws or certificate or 
articles of incorporation.

    (vi) The issuer has agreed in the written compensatory stock option 
plan, the individual written compensatory stock option agreement, or 
another agreement enforceable against the issuer to provide the 
following information to optionholders once the issuer is relying on the 
exemption pursuant to paragraph (f)(1) of this section until the issuer 
becomes subject to the reporting requirements of section 13 or 15(d) of 
the Act or is no longer relying on the exemption pursuant paragraph 
(f)(1) of this section:
    The information described in Rules 701(e)(3), (4), and (5) under the 
Securities Act (17 CFR 230.701(e)(3), (4), and (5)), every six months 
with the financial statements being not more than 180 days old and with 
such information provided either by physical or electronic delivery to 
the optionholders or by written notice to the optionholders of the 
availability of the information on an Internet site that may be 
password-protected and of any password needed to access the information.

    Note to paragraph (f)(1)(vi): The issuer may request that the 
optionholder agree to keep the information to be provided pursuant to 
this section confidential. If an optionholder does not agree to keep the 
information to be provided pursuant to this section confidential, then 
the issuer is not required to provide the information.

    (2) If the exemption provided by paragraph (f)(1) of this section 
ceases to be available, the issuer of the stock options that is relying 
on the exemption provided by this section must file a registration 
statement to register the class of stock options under section 12 of the 
Act within 120 calendar days after the exemption provided by paragraph 
(f)(1) of this section ceases to be available; and
    (g)(1) Stock options issued under written compensatory stock option 
plans under the following conditions:
    (i) The issuer of the equity security underlying the stock options 
has registered a class of security under section 12 of the Act or is 
required to file periodic reports pursuant to section 15(d) of the Act;
    (ii) The stock options have been issued pursuant to one or more 
written compensatory stock option plans established by the issuer, its 
parents, its majority-owned subsidiaries or majority-owned subsidiaries 
of the issuer's parents;

    Note to paragraph (g)(1)(ii): All stock options issued under all of 
the written compensatory stock option plans on the same class

[[Page 156]]

of equity security of the issuer will be considered part of the same 
class of equity security of the issuer for purposes of the provisions of 
paragraph (g) of this section.

    (iii) The stock options are held only by those persons described in 
Rule 701(c) under the Securities Act (17 CFR 230.701(c)) or those 
persons specified in General Instruction A.1(a) of Form S-8 (17 CFR 
239.16b); provided that an issuer can still rely on this exemption if 
there is an insignificant deviation from satisfaction of the condition 
in this paragraph (g)(1)(iii) and after December 7, 2007 the issuer has 
made a good faith and reasonable attempt to comply with the conditions 
of this paragraph (g)(1)(iii). For purposes of this paragraph 
(g)(1)(iii), an insignificant deviation exists if the number of 
optionholders that do not meet the condition in this paragraph 
(g)(1)(iii) are insignificant both as to the aggregate number of 
optionholders and number of outstanding stock options.
    (2) If the exemption provided by paragraph (g)(1) of this section 
ceases to be available, the issuer of the stock options that is relying 
on the exemption provided by this section must file a registration 
statement to register the class of stock options or a class of security 
under section 12 of the Act within 60 calendar days after the exemption 
provided in paragraph (g)(1) of this section ceases to be available.
    (h) Any security-based swap that is issued by a clearing agency 
registered as a clearing agency under Section 17A of the Act (15 U.S.C. 
78q-1) or exempt from registration under Section 17A of the Act pursuant 
to a rule, regulation, or order of the Commission in its function as a 
central counterparty that the Commission has determined must be cleared 
or that is permitted to be cleared pursuant to the clearing agency's 
rules, and that was sold to an eligible contract participant (as defined 
in Section 1a(18) of the Commodity Exchange Act (7 U.S.C. 1a(18))) in 
reliance on Rule 239 under the Securities Act of 1933 (17 CFR 230.239).
    (i) Any security-based swap offered and sold in reliance on Sec.  
230.240 of this chapter. This section will expire on February 11, 2018.

[30 FR 6114, Apr. 30, 1965, as amended at 43 FR 2392, Jan. 17, 1978. 
Redesignated at 47 FR 17052, Apr. 21, 1982; 68 FR 192, Jan. 2, 2003; 72 
FR 69566, Dec. 7, 2007; 76 FR 40612, July 11, 2011; 77 FR 20549, Apr. 5, 
2012; 78 FR 7659, Feb. 4, 2013; 79 FR 7576, Feb. 10, 2014; 82 FR 10707, 
Feb. 15, 2017]



Sec.  240.12h-2  [Reserved]



Sec.  240.12h-3  Suspension of duty to file reports under section 15(d).

    (a) Subject to paragraphs (c) and (d) of this section, the duty 
under section 15(d) to file reports required by section 13(a) of the Act 
with respect to a class of securities specified in paragraph (b) of this 
section shall be suspended for such class of securities immediately upon 
filing with the Commission a certification on Form 15 (17 CFR 249.323) 
if the issuer of such class has filed all reports required by section 
13(a), without regard to Rule 12b-25 (17 CFR 249.322), for the shorter 
of its most recent three fiscal years and the portion of the current 
year preceding the date of filing Form 15, or the period since the 
issuer became subject to such reporting obligation. If the certification 
on Form 15 is subsequently withdrawn or denied, the issuer shall, within 
60 days, file with the Commission all reports which would have been 
required if such certification had not been filed.
    (b) The classes of securities eligible for the suspension provided 
in paragraph (a) of this section are:
    (1) Any class of securities, other than any class of asset-backed 
securities, held of record by:
    (i) Fewer than 300 persons, or in the case of a bank; a savings and 
loan holding company, as such term is defined in section 10 of the Home 
Owners' Loan Act (12 U.S.C. 1461); or a bank holding company, as such 
term is defined in section 2 of the Bank Holding Company Act of 1956 (12 
U.S.C. 1841), 1,200 persons; or
    (ii) Fewer than 500 persons, where the total assets of the issuer 
have not exceeded $10 million on the last day of each of the issuer's 
three most recent fiscal years; and
    (2) Any class or securities deregistered pursuant to section 12(d) 
of the Act if such class would not

[[Page 157]]

thereupon be deemed registered under section 12(g) of the Act or the 
rules thereunder.

    Note to paragraph (b): The suspension of classes of asset-backed 
securities is addressed in Sec.  240.15d-22.

    (c) This section shall not be available for any class of securities 
for a fiscal year in which a registration statement relating to that 
class becomes effective under the Securities Act of 1933, or is required 
to be updated pursuant to section 10(a)(3) of the Act, and, in the case 
of paragraph (b)(1)(ii), the two succeeding fiscal years; Provided, 
however, That this paragraph shall not apply to the duty to file reports 
which arises solely from a registration statement filed by an issuer 
with no significant assets, for the reorganization of a non-reporting 
issuer into a one subsidiary holding company in which equity security 
holders receive the same proportional interest in the holding company as 
they held in the non-reporting issuer, except for changes resulting from 
the exercise of dissenting shareholder rights under state law.
    (d) The suspension provided by this rule relates only to the 
reporting obligation under section 15(d) with respect to a class of 
securities, does not affect any other duties imposed on that class of 
securities, and shall continue as long as either criteria (i) or (ii) of 
paragraph (b)(1) is met on the first day of any subsequent fiscal year; 
Provided, however, That such criteria need not be met if the duty to 
file reports arises solely from a registration statement filed by an 
issuer with no significant assets in a reorganization of a non-reporting 
company into a one subsidiary holding company in which equity security 
holders receive the same proportional interest in the holding company as 
they held in the non-reporting issuer except for changes resulting from 
the exercise of dissenting shareholder rights under state law.
    (e) If the suspension provided by this section is discontinued 
because a class of securities does not meet the eligibility criteria of 
paragraph (b) of this section on the first day of an issuer's fiscal 
year, then the issuer shall resume periodic reporting pursuant to 
section 15(d) of the Act by filing an annual report on Form 10-K for its 
preceding fiscal year, not later than 120 days after the end of such 
fiscal year.

[49 FR 12689, Mar. 30, 1984, as amended at 51 FR 25362, July 14, 1986; 
61 FR 21356, May 9, 1996; 72 FR 16956, Apr. 5, 2007; 73 FR 975, Jan. 4, 
2008; 76 FR 52555, Aug. 23, 2011; 81 FR 28706, May 10, 2016]



Sec.  240.12h-4  Exemption from duty to file reports under section 15(d).

    An issuer shall be exempt from the duty under section 15(d) of the 
Act to file reports required by section 13(a) of the Act with respect to 
securities registered under the Securities Act of 1933 on Form F-7, Form 
F-8 or Form F-80, provided that the issuer is exempt from the 
obligations of Section 12(g) of the Act pursuant to Rule 12g3-2(b).

[56 FR 30068, July 1, 1991]



Sec.  240.12h-5  Exemption for subsidiary issuers of guaranteed
securities and subsidiary guarantors.

    Any issuer of a guaranteed security, or guarantor of a security, 
that is permitted to omit financial statements by Sec.  210.3-10 (Rule 
3-10 of Regulation S-X) of this chapter is exempt from the requirements 
of 15 U.S.C. 78m(a) (Section 13(a) of the Act) or 78o(d) (Section 15(d) 
of the Act).

[85 FR 22006, Apr. 20, 2020]



Sec.  240.12h-6  Certification by a foreign private issuer regarding the
termination of registration of a class of securities under section 12(g)
or the duty to file reports under section 13(a) or section 15(d).

    (a) A foreign private issuer may terminate the registration of a 
class of securities under section 12(g) of the Act (15 U.S.C. 78l(g)), 
or terminate the obligation under section 15(d) of the Act (15 U.S.C. 
78o(d)) to file or furnish reports required by section 13(a) of the Act 
(15 U.S.C. 78m(a)) with respect to a class of equity securities, or 
both, after certifying to the Commission on Form 15F (17 CFR 249.324) 
that:
    (1) The foreign private issuer has had reporting obligations under 
section 13(a) or section 15(d) of the Act for at least the 12 months 
preceding the filing of the Form 15F, has filed or furnished all reports 
required for this period, and has filed at least one annual report 
pursuant to section 13(a) of the Act;

[[Page 158]]

    (2) The foreign private issuer's securities have not been sold in 
the United States in a registered offering under the Securities Act of 
1933 (15 U.S.C. 77a et seq.) during the 12 months preceding the filing 
of the Form 15F, other than securities issued:
    (i) To the issuer's employees;
    (ii) By selling security holders in non-underwritten offerings;
    (iii) Upon the exercise of outstanding rights granted by the issuer 
if the rights are granted pro rata to all existing security holders of 
the class of the issuer's securities to which the rights attach;
    (iv) Pursuant to a dividend or interest reinvestment plan; or
    (v) Upon the conversion of outstanding convertible securities or 
upon the exercise of outstanding transferable warrants issued by the 
issuer;

    Note to paragraph (a)(2): The exceptions in paragraphs (a)(2)(iii) 
through (v) do not apply to securities issued pursuant to a standby 
underwritten offering or other similar arrangement in the United States.

    (3) The foreign private issuer has maintained a listing of the 
subject class of securities for at least the 12 months preceding the 
filing of the Form 15F on one or more exchanges in a foreign 
jurisdiction that, either singly or together with the trading of the 
same class of the issuer' s securities in another foreign jurisdiction, 
constitutes the primary trading market for those securities; and
    (4)(i) The average daily trading volume of the subject class of 
securities in the United States for a recent 12-month period has been no 
greater than 5 percent of the average daily trading volume of that class 
of securities on a worldwide basis for the same period; or
    (ii) On a date within 120 days before the filing date of the Form 
15F, a foreign private issuer's subject class of equity securities is 
either held of record by:
    (A) Less than 300 persons on a worldwide basis; or
    (B) Less than 300 persons resident in the United States.

    Note to paragraph (a)(4): If an issuer's equity securities trade in 
the form of American Depositary Receipts in the United States, for 
purposes of paragraph (a)(4)(i), it must calculate the trading volume of 
its American Depositary Receipts in terms of the number of securities 
represented by those American Depositary Receipts.

    (b) A foreign private issuer must wait at least 12 months before it 
may file a Form 15F to terminate its section 13(a) or 15(d) reporting 
obligations in reliance on paragraph (a)(4)(i) of this section if:
    (1) The issuer has delisted a class of equity securities from a 
national securities exchange or inter-dealer quotation system in the 
United States, and at the time of delisting, the average daily trading 
volume of that class of securities in the United States exceeded 5 
percent of the average daily trading volume of that class of securities 
on a worldwide basis for the preceding 12 months; or
    (2) The issuer has terminated a sponsored American Depositary 
Receipts facility, and at the time of termination the average daily 
trading volume in the United States of the American Depositary Receipts 
exceeded 5 percent of the average daily trading volume of the underlying 
class of securities on a worldwide basis for the preceding 12 months.
    (c) A foreign private issuer may terminate its duty to file or 
furnish reports pursuant to section 13(a) or section 15(d) of the Act 
with respect to a class of debt securities after certifying to the 
Commission on Form 15F that:
    (1) The foreign private issuer has filed or furnished all reports 
required by section 13(a) or section 15(d) of the Act, including at 
least one annual report pursuant to section 13(a) of the Act; and
    (2) On a date within 120 days before the filing date of the Form 
15F, the class of debt securities is either held of record by:
    (i) Less than 300 persons on a worldwide basis; or
    (ii) Less than 300 persons resident in the United States.
    (d)(1) Following a merger, consolidation, exchange of securities, 
acquisition of assets or otherwise, a foreign private issuer that has 
succeeded to the registration of a class of securities under section 
12(g) of the Act of another issuer pursuant to Sec.  240.12g-3, or to 
the reporting obligations of another issuer under section 15(d) of the 
Act

[[Page 159]]

pursuant to Sec.  240.15d-5, may file a Form 15F to terminate that 
registration or those reporting obligations if:
    (i) Regarding a class of equity securities, the successor issuer 
meets the conditions under paragraph (a) of this section; or
    (ii) Regarding a class of debt securities, the successor issuer 
meets the conditions under paragraph (c) of this section.
    (2) When determining whether it meets the prior reporting 
requirement under paragraph (a)(1) or paragraph (c)(1) of this section, 
a successor issuer may take into account the reporting history of the 
issuer whose reporting obligations it has assumed pursuant to Sec.  
240.12g-3 or Sec.  240.15d-5.
    (e) Counting method. When determining under this section the number 
of United States residents holding a foreign private issuer's equity or 
debt securities:
    (1)(i) Use the method for calculating record ownership Sec.  
240.12g3-2(a), except that you may limit your inquiry regarding the 
amount of securities represented by accounts of customers resident in 
the United States to brokers, dealers, banks and other nominees located 
in:
    (A) The United States;
    (B) The foreign private issuer's jurisdiction of incorporation, 
legal organization or establishment; and
    (C) The foreign private issuer's primary trading market, if 
different from the issuer's jurisdiction of incorporation, legal 
organization or establishment.
    (ii) If you aggregate the trading volume of the issuer's securities 
in two foreign jurisdictions for the purpose of complying with paragraph 
(a)(3) of this section, you must include both of those foreign 
jurisdictions when conducting your inquiry under paragraph (e)(1)(i) of 
this section.
    (2) If, after reasonable inquiry, you are unable without 
unreasonable effort to obtain information about the amount of securities 
represented by accounts of customers resident in the United States, for 
purposes of this section, you may assume that the customers are the 
residents of the jurisdiction in which the nominee has its principal 
place of business.
    (3) You must count securities as owned by United States holders when 
publicly filed reports of beneficial ownership or other reliable 
information that is provided to you indicates that the securities are 
held by United States residents.
    (4) When calculating under this section the number of your United 
States resident security holders, you may rely in good faith on the 
assistance of an independent information services provider that in the 
regular course of its business assists issuers in determining the number 
of, and collecting other information concerning, their security holders.
    (f) Definitions. For the purpose of this section:
    (1) Debt security means any security other than an equity security 
as defined under Sec.  240.3a11-1, including:
    (i) Non-participatory preferred stock, which is defined as non-
convertible capital stock, the holders of which are entitled to a 
preference in payment of dividends and in distribution of assets on 
liquidation, dissolution, or winding up of the issuer, but are not 
entitled to participate in residual earnings or assets of the issuer; 
and
    (ii) Notwithstanding Sec.  240.3a11-1, any debt security described 
in paragraph (f)(3)(i) and (ii) of this section;
    (2) Employee has the same meaning as the definition of employee 
provided in Form S-8 (Sec.  239.16b of this chapter).
    (3) Equity security means the same as under Sec.  240.3a11-1, but, 
for purposes of paragraphs (a)(3) and (a)(4)(i) of this section, does 
not include:
    (i) Any debt security that is convertible into an equity security, 
with or without consideration;
    (ii) Any debt security that includes a warrant or right to subscribe 
to or purchase an equity security;
    (iii) Any such warrant or right; or
    (iv) Any put, call, straddle, or other option or privilege that 
gives the holder the option of buying or selling a security but does not 
require the holder to do so.
    (4) Foreign private issuer has the same meaning as under Sec.  
240.3b-4.
    (5) Primary trading market means that:
    (i) At least 55 percent of the trading in a foreign private issuer's 
class of securities that is the subject of Form 15F

[[Page 160]]

took place in, on or through the facilities of a securities market or 
markets in a single foreign jurisdiction or in no more than two foreign 
jurisdictions during a recent 12-month period; and
    (ii) If a foreign private issuer aggregates the trading of its 
subject class of securities in two foreign jurisdictions for the purpose 
of paragraph (a)(3) of this section, the trading for the issuer's 
securities in at least one of the two foreign jurisdictions must be 
larger than the trading in the United States for the same class of the 
issuer's securities.
    (6) Recent 12-month period means a 12-calendar-month period that 
ended no more than 60 days before the filing date of the Form 15F.
    (g)(1) Suspension of a foreign private issuer's duty to file reports 
under section 13(a) or section 15(d) of the Act shall occur immediately 
upon filing the Form 15F with the Commission if filing pursuant to 
paragraph (a), (c) or (d) of this section. If there are no objections 
from the Commission, 90 days, or such shorter period as the Commission 
may determine, after the issuer has filed its Form 15F, the 
effectiveness of any of the following shall occur:
    (i) The termination of registration of a class of securities under 
section 12(g); and
    (ii) The termination of a foreign private issuer's duty to file 
reports under section 13(a) or section 15(d) of the Act.
    (2) If the Form 15F is subsequently withdrawn or denied, the issuer 
shall, within 60 days after the date of the withdrawal or denial, file 
with or submit to the Commission all reports that would have been 
required had the issuer not filed the Form 15F.
    (h) As a condition to termination of registration or reporting under 
paragraph (a), (c) or (d) of this section, a foreign private issuer 
must, either before or on the date that it files its Form 15F, publish a 
notice in the United States that discloses its intent to terminate its 
registration of a class of securities under section 12(g) of the Act, or 
its reporting obligations under section 13(a) or section 15(d) of the 
Act, or both. The issuer must publish the notice through a means 
reasonably designed to provide broad dissemination of the information to 
the public in the United States. The issuer must also submit a copy of 
the notice to the Commission, either under cover of a Form 6-K (17 CFR 
249.306) before or at the time of filing of the Form 15F, or as an 
exhibit to the Form 15F.
    (i)(1) A foreign private issuer that, before the effective date of 
this section, terminated the registration of a class of securities under 
section 12(g) of the Act or suspended its reporting obligations 
regarding a class of equity or debt securities under section 15(d) of 
the Act may file a Form 15F in order to:
    (i) Terminate under this section the registration of a class of 
equity securities that was the subject of a Form 15 (Sec.  249.323 of 
this chapter) filed by the issuer pursuant to Sec.  240.12g-4; or
    (ii) Terminate its reporting obligations under section 15(d) of the 
Act, which had been suspended by the terms of that section or by the 
issuer's filing of a Form 15 pursuant to Sec.  240.12h-3, regarding a 
class of equity or debt securities.
    (2) In order to be eligible to file a Form 15F under this paragraph:
    (i) If a foreign private issuer terminated the registration of a 
class of securities pursuant to Sec.  240.12g-4 or suspended its 
reporting obligations pursuant to Sec.  240.12h-3 or section 15(d) of 
the Act regarding a class of equity securities, the issuer must meet the 
requirements under paragraph (a)(3) and paragraph (a)(4)(i) or 
(a)(4)(ii) of this section; or
    (ii) If a foreign private issuer suspended its reporting obligations 
pursuant to Sec.  240.12h-3 or section 15(d) of the Act regarding a 
class of debt securities, the issuer must meet the requirements under 
paragraph (c)(2) of this section.
    (3)(i) If the Commission does not object, 90 days after the filing 
of a Form 15F under this paragraph, or such shorter period as the 
Commission may determine, the effectiveness of any of the following 
shall occur:
    (A) The termination under this section of the registration of a 
class of equity securities, which was the subject of a Form 15 filed 
pursuant to Sec.  240.12g-4, and the duty to file reports required by 
section 13(a) of the Act regarding that class of securities; or

[[Page 161]]

    (B) The termination of a foreign private issuer's reporting 
obligations under section 15(d) of the Act, which had previously been 
suspended by the terms of that section or by the issuer's filing of a 
Form 15 pursuant to Sec.  240.12h-3, regarding a class of equity or debt 
securities.
    (ii) If the Form 15F is subsequently withdrawn or denied, the 
foreign private issuer shall, within 60 days after the date of the 
withdrawal or denial, file with or submit to the Commission all reports 
that would have been required had the issuer not filed the Form 15F.

    Note to Sec.  240.12h-6: The suspension of classes of asset-backed 
securities is addressed in Sec.  240.15d-22.

[72 FR 16956, Apr. 5, 2007, as amended at 76 FR 52555, Aug. 23, 2011]



Sec.  240.12h-7  Exemption for issuers of securities that are subject
to insurance regulation.

    An issuer shall be exempt from the duty under section 15(d) of the 
Act (15 U.S.C. 78o(d)) to file reports required by section 13(a) of the 
Act (15 U.S.C. 78m(a)) with respect to securities registered under the 
Securities Act of 1933 (15 U.S.C. 77a et seq.), provided that:
    (a) The issuer is a corporation subject to the supervision of the 
insurance commissioner, bank commissioner, or any agency or officer 
performing like functions, of any State;
    (b) The securities do not constitute an equity interest in the 
issuer and are either subject to regulation under the insurance laws of 
the domiciliary State of the issuer or are guarantees of securities that 
are subject to regulation under the insurance laws of that jurisdiction;
    (c) The issuer files an annual statement of its financial condition 
with, and is supervised and its financial condition examined 
periodically by, the insurance commissioner, bank commissioner, or any 
agency or officer performing like functions, of the issuer's domiciliary 
State;
    (d) The securities are not listed, traded, or quoted on an exchange, 
alternative trading system (as defined in Sec.  242.300(a) of this 
chapter), inter-dealer quotation system (as defined in Sec.  240.15c2-
11(e)(2)), electronic communications network, or any other similar 
system, network, or publication for trading or quoting;
    (e) The issuer takes steps reasonably designed to ensure that a 
trading market for the securities does not develop, including, except to 
the extent prohibited by the law of any State or by action of the 
insurance commissioner, bank commissioner, or any agency or officer 
performing like functions of any State, requiring written notice to, and 
acceptance by, the issuer prior to any assignment or other transfer of 
the securities and reserving the right to refuse assignments or other 
transfers at any time on a non-discriminatory basis; and
    (f) The prospectus for the securities contains a statement 
indicating that the issuer is relying on the exemption provided by this 
rule.

[74 FR 3175, Jan. 16, 2009]

Regulation 13A: Reports of Issuers of Securities Registered Pursuant to 
                               Section 12



Annual Reports--Table of Contents





Sec.  240.13a-1  Requirements of annual reports.

    Every issuer having securities registered pursuant to section 12 of 
the Act (15 U.S.C. 78l) shall file an annual report on the appropriate 
form authorized or prescribed therefor for each fiscal year after the 
last full fiscal year for which financial statements were filed in its 
registration statement. Annual reports shall be filed within the period 
specified in the appropriate form.

[62 FR 39767, July 24, 1997]



Sec.  240.13a-2  [Reserved]



Sec.  240.13a-3  Reporting by Form 40-F registrant.

    A registrant that is eligible to use Forms 40-F and 6-K and files 
reports in accordance therewith shall be deemed to satisfy the 
requirements of Regulation 13A (Sec. Sec.  240.13a-1 through 240.13a-17 
of this chapter).

[56 FR 30068, July 1, 1991]

[[Page 162]]

                              Other Reports



Sec.  240.13a-10  Transition reports.

    (a) Every issuer that changes its fiscal closing date shall file a 
report covering the resulting transition period between the closing date 
of its most recent fiscal year and the opening date of its new fiscal 
year; Provided, however, that an issuer shall file an annual report for 
any fiscal year that ended before the date on which the issuer 
determined to change its fiscal year end. In no event shall the 
transition report cover a period of 12 or more months.
    (b) The report pursuant to this section shall be filed for the 
transition period not more than the number of days specified in 
paragraph (j) of this section after either the close of the transition 
period or the date of the determination to change the fiscal closing 
date, whichever is later. The report shall be filed on the form 
appropriate for annual reports of the issuer, shall cover the period 
from the close of the last fiscal year end and shall indicate clearly 
the period covered. The financial statements for the transition period 
filed therewith shall be audited. Financial statements, which may be 
unaudited, shall be filed for the comparable period of the prior year, 
or a footnote, which may be unaudited, shall state for the comparable 
period of the prior year, revenues, gross profits, income taxes, income 
or loss from continuing operations and net income or loss. The effects 
of any discontinued operations as classified under the provisions of 
generally accepted accounting principles also shall be shown, if 
applicable. Per share data based upon such income or loss and net income 
or loss shall be presented in conformity with applicable accounting 
standards. Where called for by the time span to be covered, the 
comparable period financial statements or footnote shall be included in 
subsequent filings.
    (c) If the transition period covers a period of less than six 
months, in lieu of the report required by paragraph (b) of this section, 
a report may be filed for the transition period on Form 10-Q (Sec.  
249.308a of this chapter) not more than the number of days specified in 
paragraph (j) of this section after either the close of the transition 
period or the date of the determination to change the fiscal closing 
date, whichever is later. The report on Form 10-Q shall cover the period 
from the close of the last fiscal year end and shall indicate clearly 
the period covered. The financial statements filed therewith need not be 
audited but, if they are not audited, the issuer shall file with the 
first annual report for the newly adopted fiscal year separate audited 
statements of income and cash flows covering the transition period. The 
notes to financial statements for the transition period included in such 
first annual report may be integrated with the notes to financial 
statements for the full fiscal period. A separate audited balance sheet 
as of the end of the transition period shall be filed in the annual 
report only if the audited balance sheet as of the end of the fiscal 
year prior to the transition period is not filed. Schedules need not be 
filed in transition reports on Form 10-Q.
    (d) Notwithstanding the foregoing in paragraphs (a), (b), and (c) of 
this section, if the transition period covers a period of one month or 
less, the issuer need not file a separate transition report if either:
    (1) The first report required to be filed by the issuer for the 
newly adopted fiscal year after the date of the determination to change 
the fiscal year end is an annual report, and that report covers the 
transition period as well as the fiscal year; or
    (2)(i) The issuer files with the first annual report for the newly 
adopted fiscal year separate audited statements of income and cash flows 
covering the transition period; and
    (ii) The first report required to be filed by the issuer for the 
newly adopted fiscal year after the date of the determination to change 
the fiscal year end is a quarterly report on Form 10-Q; and
    (iii) Information on the transition period is included in the 
issuer's quarterly report on Form 10-Q for the first quarterly period 
(except the fourth quarter) of the newly adopted fiscal year that ends 
after the date of the determination to change the fiscal year. The 
information covering the transition period required by Part II and Item 
2 of Part I may be combined with

[[Page 163]]

the information regarding the quarter. However, the financial statements 
required by Part I, which may be unaudited, shall be furnished 
separately for the transition period.
    (e) Every issuer required to file quarterly reports on Form 10-Q 
pursuant to Sec.  240.13a-13 of this chapter that changes its fiscal 
year end shall:
    (1) File a quarterly report on Form 10-Q within the time period 
specified in General Instruction A.1. to that form for any quarterly 
period (except the fourth quarter) of the old fiscal year that ends 
before the date on which the issuer determined to change its fiscal year 
end, except that the issuer need not file such quarterly report if the 
date on which the quarterly period ends also is the date on which the 
transition period ends;
    (2) File a quarterly report on Form 10-Q within the time specified 
in General Instruction A.1. to that form for each quarterly period of 
the old fiscal year within the transition period. In lieu of a quarterly 
report for any quarter of the old fiscal year within the transition 
period, the issuer may file a quarterly report on Form 10-Q for any 
period of three months within the transition period that coincides with 
a quarter of the newly adopted fiscal year if the quarterly report is 
filed within the number of days specified in paragraph (j) of this 
section after the end of such three month period, provided the issuer 
thereafter continues filing quarterly reports on the basis of the 
quarters of the newly adopted fiscal year;
    (3) Commence filing quarterly reports for the quarters of the new 
fiscal year no later than the quarterly report for the first quarter of 
the new fiscal year that ends after the date on which the issuer 
determined to change the fiscal year end; and
    (4) Unless such information is or will be included in the transition 
report, or the first annual report on Form 10-K for the newly adopted 
fiscal year, include in the initial quarterly report on Form 10-Q for 
the newly adopted fiscal year information on any period beginning on the 
first day subsequent to the period covered by the issuer's final 
quarterly report on Form 10-Q or annual report on Form 10-K for the old 
fiscal year. The information covering such period required by Part II 
and Item 2 of Part I may be combined with the information regarding the 
quarter. However, the financial statements required by Part I, which may 
be unaudited, shall be furnished separately for such period.

    Note to paragraphs (c) and (e): If it is not practicable or cannot 
be cost-justified to furnish in a transition report on Form 10-Q or a 
quarterly report for the newly adopted fiscal year financial statements 
for corresponding periods of the prior year where required, financial 
statements may be furnished for the quarters of the preceding fiscal 
year that most nearly are comparable if the issuer furnishes an adequate 
discussion of seasonal and other factors that could affect the 
comparability of information or trends reflected, an assessment of the 
comparability of the data, and a representation as to the reason 
recasting has not been undertaken.

    (f) Every successor issuer with securities registered under Section 
12 of this Act that has a different fiscal year from that of its 
predecessor(s) shall file a transition report pursuant to this section, 
containing the required information about each predecessor, for the 
transition period, if any, between the close of the fiscal year covered 
by the last annual report of each predecessor and the date of 
succession. The report shall be filed for the transition period on the 
form appropriate for annual reports of the issuer not more than the 
number of days specified in paragraph (j) of this section after the date 
of the succession, with financial statements in conformity with the 
requirements set forth in paragraph (b) of this section. If the 
transition period covers a period of less than six months, in lieu of a 
transition report on the form appropriate for the issuer's annual 
reports, the report may be filed for the transition period on Form 10-Q 
and Form 10-QSB not more than the number of days specified in paragraph 
(j) of this section after the date of the succession, with financial 
statements in conformity with the requirements set forth in paragraph 
(c) of this section. Notwithstanding the foregoing, if the transition 
period covers a period of one month or less, the successor issuer need 
not file a separate transition report if the information is reported by

[[Page 164]]

the successor issuer in conformity with the requirements set forth in 
paragraph (d) of this section.
    (g)(1) Paragraphs (a) through (f) of this section shall not apply to 
foreign private issuers.
    (2) Every foreign private issuer that changes its fiscal closing 
date shall file a report covering the resulting transition period 
between the closing date of its most recent fiscal year and the opening 
date of its new fiscal year. In no event shall a transition report cover 
a period longer than 12 months.
    (3) The report for the transition period shall be filed on Form 20-F 
(Sec.  249.220f of this chapter) responding to all items to which such 
issuer is required to respond when Form 20-F is used as an annual 
report. The financial statements for the transition period filed 
therewith shall be audited. The report shall be filed within four months 
after either the close of the transition period or the date on which the 
issuer made the determination to change the fiscal closing date, 
whichever is later.
    (4) If the transition period covers a period of six or fewer months, 
in lieu of the report required by paragraph (g)(3) of this section, a 
report for the transition period may be filed on Form 20-F responding to 
Items 5, 8.A.7., 13, 14, and 17 or 18 within three months after either 
the close of the transition period or the date on which the issuer made 
the determination to change the fiscal closing date, whichever is later. 
The financial statements required by either Item 17 or Item 18 shall be 
furnished for the transition period. Such financial statements may be 
unaudited and condensed as permitted in Article 10 of Regulation S-X 
(Sec.  210.10-01 of this chapter), but if the financial statements are 
unaudited and condensed, the issuer shall file with the first annual 
report for the newly adopted fiscal year separate audited statements of 
income and cash flows covering the transition period.
    (5) Notwithstanding the foregoing in paragraphs (g)(2), (g)(3), and 
(g)(4) of this section, if the transition period covers a period of one 
month or less, a foreign private issuer need not file a separate 
transition report if the first annual report for the newly adopted 
fiscal year covers the transition period as well as the fiscal year.
    (h) The provisions of this rule shall not apply to investment 
companies required to file reports pursuant to Rule 30a-1 (Sec.  
270.30a-1 of this chapter) under the Investment Company Act of 1940 (15 
U.S.C. 80a-1 et seq.).
    (i) No filing fee shall be required for a transition report filed 
pursuant to this section.
    (j)(1) For transition reports to be filed on the form appropriate 
for annual reports of the issuer, the number of days shall be:
    (i) 60 days (75 days for fiscal years ending before December 15, 
2006) for large accelerated filers (as defined in Sec.  240.12b-2);
    (ii) 75 days for accelerated filers (as defined in Sec.  240.12b-2); 
and
    (iii) 90 days for all other issuers; and
    (2) For transition reports to be filed on Form 10-Q (Sec.  249.308a 
of this chapter) the number of days shall be:
    (i) 40 days for large accelerated filers and accelerated filers (as 
defined in Sec.  240.12b-2); and
    (ii) 45 days for all other issuers.
    (k)(1) Paragraphs (a) through (g) of this section shall not apply to 
asset-backed issuers.
    (2) Every asset-backed issuer that changes its fiscal closing date 
shall file a report covering the resulting transition period between the 
closing date of its most recent fiscal year and the opening date of its 
new fiscal year. In no event shall a transition report cover a period 
longer than 12 months.
    (3) The report for the transition period shall be filed on Form 10-K 
(Sec.  249.310 of this chapter) responding to all items to which such 
asset-backed issuer is required to respond pursuant to General 
Instruction J. of Form 10-K. Such report shall be filed within 90 days 
after the later of either the close of the transition period or the date 
on which the issuer made the determination to change the fiscal closing 
date.
    (4) Notwithstanding the foregoing in paragraphs (k)(2) and (k)(3) of 
this section, if the transition period covers a period of one month or 
less, an asset-backed issuer need not file a separate transition report 
if the first annual report for the newly adopted fiscal year

[[Page 165]]

covers the transition period as well as the fiscal year.
    (5) Any obligation of the asset-backed issuer to file distribution 
reports pursuant to Sec.  240.13a-17 will continue to apply regardless 
of a change in the asset-backed issuer's fiscal closing date.

    Note 1: In addition to the report or reports required to be filed 
pursuant to this section, every issuer, except a foreign private issuer 
or an investment company required to file reports pursuant to Sec.  
270.30a-1 of this chapter, that changes its fiscal closing date is 
required to file a Form 8-K (Sec.  249.308 of this chapter) report that 
includes the information required by Item 5.03 of Form 8-K within the 
period specified in General Instruction B.1. to that form.
    Note 2: The report or reports to be filed pursuant to this section 
must include the certification required by Sec.  240.13a-14.

[54 FR 10316, Mar. 13, 1989, as amended at 56 FR 30068, July 1, 1991; 64 
FR 53912, Oct. 5, 1999; 67 FR 57288, Sept. 9, 2002; 67 FR 58505, Sept. 
16, 2002; 69 FR 15618, Mar. 25, 2004; 69 FR 68325, Nov. 23, 2004; 70 FR 
1621, Jan. 7, 2005; 70 FR 76641, Dec. 27, 2005; 73 FR 975, Jan. 4, 2008; 
73 FR 58323, Oct. 6, 2008; 81 FR 82020, Nov. 18, 2016; 83 FR 50221, Oct. 
4, 2018]



Sec.  240.13a-11  Current reports on Form 8-K (Sec.  249.308 of this
chapter).

    (a) Except as provided in paragraph (b) of this section, every 
registrant subject to Sec.  240.13a-1 shall file a current report on 
Form 8-K within the period specified in that form unless substantially 
the same information as that required by Form 8-K has been previously 
reported by the registrant.
    (b) This section shall not apply to foreign governments, foreign 
private issuers required to make reports on Form 6-K (17 CFR 249.306) 
pursuant to Sec.  240.13a-16, issuers of American Depositary Receipts 
for securities of any foreign issuer, or investment companies required 
to file reports pursuant to Sec.  270.30a-1 of this chapter under the 
Investment Company Act of 1940, except where such an investment company 
is required to file:
    (1) Notice of a blackout period pursuant to Sec.  245.104 of this 
chapter;
    (2) Disclosure pursuant to Instruction 2 to Sec.  240.14a-11(b)(1) 
of information concerning outstanding shares and voting; or
    (3) Disclosure pursuant to Instruction 2 to Sec.  240.14a-11(b)(10) 
of the date by which a nominating shareholder or nominating shareholder 
group must submit the notice required pursuant to Sec.  240.14a-
11(b)(10).
    (c) No failure to file a report on Form 8-K that is required solely 
pursuant to Item 1.01, 1.02, 2.03, 2.04, 2.05, 2.06, 4.02(a), 5.02(e) or 
6.03 of Form 8-K shall be deemed to be a violation of 15 U.S.C. 78j(b) 
and Sec.  240.10b-5.

[42 FR 4428, Jan. 25, 1977, as amended at 50 FR 27939, July 9, 1985; 68 
FR 4355, Jan. 28, 2003; 69 FR 15618, Mar. 25, 2004; 70 FR 1621, Jan. 7, 
2005; 71 FR 53260, Sept. 8, 2006; 75 FR 56780, Sept. 16, 2010; 81 FR 
82020, Nov. 18, 2016]



Sec.  240.13a-13  Quarterly reports on Form 10-Q (Sec.  249.308a of this 
chapter).

    (a) Except as provided in paragraphs (b) and (c) of this section, 
every issuer that has securities registered pursuant to section 12 of 
the Act and is required to file annual reports pursuant to section 13 of 
the Act, and has filed or intends to file such reports on Form 10-K 
(Sec.  249.310 of this chapter), shall file a quarterly report on Form 
10-Q (Sec.  249.308a of this chapter) within the period specified in 
General Instruction A.1. to that form for each of the first three 
quarters of each fiscal year of the issuer, commencing with the first 
fiscal quarter following the most recent fiscal year for which full 
financial statements were included in the registration statement, or, if 
the registration statement included financial statements for an interim 
period subsequent to the most recent fiscal year end meeting the 
requirements of Article 10 of Regulation S-X and Rule 8-03 of Regulation 
S-X for smaller reporting companies, for the first fiscal quarter 
subsequent to the quarter reported upon in the registration statement. 
The first quarterly report of the issuer shall be filed either within 45 
days after the effective date of the registration statement or on or 
before the date on which such report would have been required to be 
filed if the issuer has been required to file reports on Form 10-Q as of 
its last fiscal quarter, whichever is later.
    (b) The provisions of this rule shall not apply to the following 
issuers:
    (1) Investment companies required to file reports pursuant to Sec.  
270.30a-1;

[[Page 166]]

    (2) Foreign private issuers required to file reports pursuant to 
Sec.  240.13a-16; and
    (3) Asset-backed issuers required to file reports pursuant to Sec.  
240.13a-17.
    (c) Part I of the quarterly reports on Form 10-Q need not be filed 
by:
    (1) Mutual life insurance companies; or
    (2) Mining companies not in the production stage but engaged 
primarily in the exploration for the development of mineral deposits 
other than oil, gas or coal, if all of the following conditions are met:
    (i) The registrant has not been in production during the current 
fiscal year or the two years immediately prior thereto; except that 
being in production for an aggregate period of not more than eight 
months over the three-year period shall not be a violation of this 
condition.
    (ii) Receipts from the sale of mineral products or from the 
operations of mineral producing properties by the registrant and its 
subsidiaries combined have not exceeded $500,000 in any of the most 
recent six years and have not aggregated more than $1,500,000 in the 
most recent six fiscal years.
    (d) Notwithstanding the foregoing provisions of this section, the 
financial information required by Part I of Form 10-Q shall not be 
deemed to be ``filed'' for the purpose of Section 18 of the Act or 
otherwise subject to the liabilities of that section of the Act, but 
shall be subject to all other provisions of the Act.

[42 FR 24064, May 12, 1977, as amended at 48 FR 19877, May 3, 1983; 50 
FR 27939, July 9, 1985; 54 FR 10317, Mar. 13, 1989; 57 FR 10615, Mar. 
27, 1992; 61 FR 30403, June 14, 1996; 70 FR 1621, Jan. 7, 2005; 73 FR 
975, Jan. 4, 2008; 81 FR 82020, Nov. 18, 2016]



Sec.  240.13a-14  Certification of disclosure in annual and quarterly
reports.

    (a) Each report, including transition reports, filed on Form 10-Q, 
Form 10-K, Form 20-F or Form 40-F (Sec.  249.308a, Sec.  249.310, Sec.  
249.220f or Sec.  249.240f of this chapter) under Section 13(a) of the 
Act (15 U.S.C. 78m(a)), other than a report filed by an Asset-Backed 
Issuer (as defined in Sec.  229.1101 of this chapter) or a report on 
Form 20-F filed under Sec.  240.13a-19, must include certifications in 
the form specified in the applicable exhibit filing requirements of such 
report and such certifications must be filed as an exhibit to such 
report. Each principal executive and principal financial officer of the 
issuer, or persons performing similar functions, at the time of filing 
of the report must sign a certification. The principal executive and 
principal financial officers of an issuer may omit the portion of the 
introductory language in paragraph 4 as well as language in paragraph 
4(b) of the certification that refers to the certifying officers' 
responsibility for designing, establishing and maintaining internal 
control over financial reporting for the issuer until the issuer becomes 
subject to the internal control over financial reporting requirements in 
Sec.  240.13a-15 or Sec.  240.15d-15.
    (b) Each periodic report containing financial statements filed by an 
issuer pursuant to section 13(a) of the Act (15 U.S.C. 78m(a)) must be 
accompanied by the certifications required by Section 1350 of Chapter 63 
of Title 18 of the United States Code (18 U.S.C. 1350) and such 
certifications must be furnished as an exhibit to such report as 
specified in the applicable exhibit requirements for such report. Each 
principal executive and principal financial officer of the issuer (or 
equivalent thereof) must sign a certification. This requirement may be 
satisfied by a single certification signed by an issuer's principal 
executive and principal financial officers.
    (c) A person required to provide a certification specified in 
paragraph (a), (b) or (d) of this section may not have the certification 
signed on his or her behalf pursuant to a power of attorney or other 
form of confirming authority.
    (d) Each annual report and transition report filed on Form 10-K 
(Sec.  249.310 of this chapter) by an asset-backed issuer under section 
13(a) of the Act (15 U.S.C. 78m(a)) must include a certification in the 
form specified in the applicable exhibit filing requirements of such 
report and such certification must be filed as an exhibit to such 
report. Terms used in paragraphs (d) and (e) of this section have the 
same meaning as in Item 1101 of Regulation AB (Sec.  229.1101 of this 
chapter).

[[Page 167]]

    (e) With respect to asset-backed issuers, the certification required 
by paragraph (d) of this section must be signed by either:
    (1) The senior officer in charge of securitization of the depositor 
if the depositor is signing the report; or
    (2) The senior officer in charge of the servicing function of the 
servicer if the servicer is signing the report on behalf of the issuing 
entity. If multiple servicers are involved in servicing the pool assets, 
the senior officer in charge of the servicing function of the master 
servicer (or entity performing the equivalent function) must sign if a 
representative of the servicer is to sign the report on behalf of the 
issuing entity.
    (f) The certification requirements of this section do not apply to 
an Interactive Data File, as defined in Sec.  232.11 of this chapter 
(Rule 11 of Regulation S-T).

[67 FR 57288, Sept. 9, 2002, as amended at 68 FR 36665, June 18, 2003; 
70 FR 1621, Jan. 7, 2005; 70 FR 6572, Feb. 8, 2005; 70 FR 42247, July 
21, 2005; 71 FR 76596, Dec. 21, 2006; 73 FR 976, Jan. 4, 2008; 74 FR 
6818, Feb. 10, 2009; 83 FR 40878, Aug. 16, 2018]



Sec.  240.13a-15  Controls and procedures.

    (a) Every issuer that has a class of securities registered pursuant 
to section 12 of the Act (15 U.S.C. 781), other than an Asset-Backed 
Issuer (as defined in Sec.  229.1101 of this chapter), a small business 
investment company registered on Form N-5 (Sec. Sec.  239.24 and 274.5 
of this chapter), or a unit investment trust as defined in section 4(2) 
of the Investment Company Act of 1940 (15 U.S.C. 80a-4(2)), must 
maintain disclosure controls and procedures (as defined in paragraph (e) 
of this section) and, if the issuer either had been required to file an 
annual report pursuant to section 13(a) or 15(d) of the Act (15 U.S.C. 
78m(a) or 78o(d)) for the prior fiscal year or had filed an annual 
report with the Commission for the prior fiscal year, internal control 
over financial reporting (as defined in paragraph (f) of this section).
    (b) Each such issuer's management must evaluate, with the 
participation of the issuer's principal executive and principal 
financial officers, or persons performing similar functions, the 
effectiveness of the issuer's disclosure controls and procedures, as of 
the end of each fiscal quarter, except that management must perform this 
evaluation:
    (1) In the case of a foreign private issuer (as defined in Sec.  
240.3b-4) as of the end of each fiscal year; and
    (2) In the case of an investment company registered under section 8 
of the Investment Company Act of 1940 (15 U.S.C. 80a-8), within the 90-
day period prior to the filing date of each report requiring 
certification under Sec.  270.30a-2 of this chapter.
    (c) The management of each such issuer, that either had been 
required to file an annual report pursuant to section 13(a) or 15(d) of 
the Act (15 U.S.C. 78m(a) or 78o(d)) for the prior fiscal year or 
previously had filed an annual report with the Commission for the prior 
fiscal year, other than an investment company registered under section 8 
of the Investment Company Act of 1940, must evaluate, with the 
participation of the issuer's principal executive and principal 
financial officers, or persons performing similar functions, the 
effectiveness, as of the end of each fiscal year, of the issuer's 
internal control over financial reporting. The framework on which 
management's evaluation of the issuer's internal control over financial 
reporting is based must be a suitable, recognized control framework that 
is established by a body or group that has followed due-process 
procedures, including the broad distribution of the framework for public 
comment. Although there are many different ways to conduct an evaluation 
of the effectiveness of internal control over financial reporting to 
meet the requirements of this paragraph, an evaluation that is conducted 
in accordance with the interpretive guidance issued by the Commission in 
Release No. 34-55929 will satisfy the evaluation required by this 
paragraph.
    (d) The management of each such issuer that either had been required 
to file an annual report pursuant to section 13(a) or 15(d) of the Act 
(15 U.S.C. 78m(a) or 78o(d) for the prior fiscal year or had filed an 
annual report with the Commission for the prior fiscal year, other than 
an investment company registered under section 8 of the Investment 
Company Act of 1940 (15

[[Page 168]]

U.S.C. 80a-8), must evaluate, with the participation of the issuer's 
principal executive and principal financial officers, or persons 
performing similar functions, any change in the issuer's internal 
control over financial reporting, that occurred during each of the 
issuer's fiscal quarters, or fiscal year in the case of a foreign 
private issuer, that has materially affected, or is reasonably likely to 
materially affect, the issuer's internal control over financial 
reporting.
    (e) For purposes of this section, the term disclosure controls and 
procedures means controls and other procedures of an issuer that are 
designed to ensure that information required to be disclosed by the 
issuer in the reports that it files or submits under the Act (15 U.S.C. 
78a et seq.) is recorded, processed, summarized and reported, within the 
time periods specified in the Commission's rules and forms. Disclosure 
controls and procedures include, without limitation, controls and 
procedures designed to ensure that information required to be disclosed 
by an issuer in the reports that it files or submits under the Act is 
accumulated and communicated to the issuer's management, including its 
principal executive and principal financial officers, or persons 
performing similar functions, as appropriate to allow timely decisions 
regarding required disclosure.
    (f) The term internal control over financial reporting is defined as 
a process designed by, or under the supervision of, the issuer's 
principal executive and principal financial officers, or persons 
performing similar functions, and effected by the issuer's board of 
directors, management and other personnel, to provide reasonable 
assurance regarding the reliability of financial reporting and the 
preparation of financial statements for external purposes in accordance 
with generally accepted accounting principles and includes those 
policies and procedures that:
    (1) Pertain to the maintenance of records that in reasonable detail 
accurately and fairly reflect the transactions and dispositions of the 
assets of the issuer;
    (2) Provide reasonable assurance that transactions are recorded as 
necessary to permit preparation of financial statements in accordance 
with generally accepted accounting principles, and that receipts and 
expenditures of the issuer are being made only in accordance with 
authorizations of management and directors of the issuer; and
    (3) Provide reasonable assurance regarding prevention or timely 
detection of unauthorized acquisition, use or disposition of the 
issuer's assets that could have a material effect on the financial 
statements.

[68 FR 36666, June 18, 2003, as amended at 70 FR 1621, Jan. 7, 2005; 71 
FR 76596, Dec. 21, 2006; 72 FR 35321, June 27, 2007]



Sec.  240.13a-16  Reports of foreign private issuers on
Form 6-K (17 CFR 249.306).

    (a) Every foreign private issuer which is subject to Rule 13a-1 (17 
CFR 240.13a-1) shall make reports on Form 6-K, except that this rule 
shall not apply to:
    (1) Investment companies required to file reports pursuant to Sec.  
270.30a-1 of this chapter ;
    (2) Issuers of American depositary receipts for securities of any 
foreign issuer;
    (3) Issuers filing periodic reports on Form 10-K, Form 10-Q, and 
Form 8-K; or
    (4) Asset-backed issuers, as defined in Sec.  229.1101 of this 
chapter.
    (b) Such reports shall be transmitted promptly after the information 
required by Form 6-K is made public by the issuer, by the country of its 
domicile or under the laws of which it was incorporated or organized, or 
by a foreign securities exchange with which the issuer has filed the 
information.
    (c) Reports furnished pursuant to this rule shall not be deemed to 
be ``filed'' for the purpose of section 18 of the Act or otherwise 
subject to the liabilities of that section.

[32 FR 7849, May 30, 1967, as amended at 44 FR 70137, Dec. 6, 1979; 47 
FR 54781, Dec. 6, 1982; 50 FR 27939, July 9, 1985; 57 FR 10615, Mar. 27, 
1991; 70 FR 1621, Jan. 7, 2005; 73 FR 976, Jan. 4, 2008; 81 FR 82020, 
Nov. 18, 2016]



Sec.  240.13a-17  Reports of asset-backed issuers on Form 10-D
(Sec.  249.312 of this chapter).

    Every asset-backed issuer subject to Sec.  240.13a-1 shall make 
reports on Form

[[Page 169]]

10-D (Sec.  249.312 of this chapter). Such reports shall be filed within 
the period specified in Form 10-D.

[70 FR 1621, Jan. 7, 2005]



Sec.  240.13a-18  Compliance with servicing criteria for asset-backed 
securities.

    (a) This section applies to every class of asset-backed securities 
subject to the reporting requirements of section 13(a) of the Act (15 
U.S.C. 78m(a)). Terms used in this section have the same meaning as in 
Item 1101 of Regulation AB (Sec.  229.1101 of this chapter).
    (b) Reports on assessments of compliance with servicing criteria for 
asset-backed securities required. With regard to a class of asset-backed 
securities subject to the reporting requirements of section 13(a) of the 
Act, the annual report on Form 10-K (Sec.  249.308 of this chapter) for 
such class must include from each party participating in the servicing 
function a report regarding its assessment of compliance with the 
servicing criteria specified in paragraph (d) of Item 1122 of Regulation 
AB (Sec.  229.1122(d) of this chapter), as of and for the period ending 
the end of each fiscal year, with respect to asset-backed securities 
transactions taken as a whole involving the party participating in the 
servicing function and that are backed by the same asset type backing 
the class of asset-backed securities (including the asset-backed 
securities transaction that is to be the subject of the report on Form 
10-K for that fiscal year).
    (c) Attestation reports on assessments of compliance with servicing 
criteria for asset-backed securities required. With respect to each 
report included pursuant to paragraph (b) of this section, the annual 
report on Form 10-K must also include a report by a registered public 
accounting firm that attests to, and reports on, the assessment made by 
the asserting party. The attestation report on assessment of compliance 
with servicing criteria for asset-backed securities must be made in 
accordance with standards for attestation engagements issued or adopted 
by the Public Company Accounting Oversight Board.

    Note to Sec.  240.13a-18. If multiple parties are participating in 
the servicing function, a separate assessment report and attestation 
report must be included for each party participating in the servicing 
function. A party participating in the servicing function means any 
entity (e.g., master servicer, primary servicers, trustees) that is 
performing activities that address the criteria in paragraph (d) of Item 
1122 of Regulation AB (Sec.  229.1122(d) of this chapter), unless such 
entity's activities relate only to 5% or less of the pool assets.

[70 FR 1621, Jan. 7, 2005]



Sec.  240.13a-19  Reports by shell companies on Form 20-F.

    Every foreign private issuer that was a shell company, other than a 
business combination related shell company, immediately before a 
transaction that causes it to cease to be a shell company shall, within 
four business days of completion of that transaction, file a report on 
Form 20-F (Sec.  249.220f of this chapter) containing the information 
that would be required if the issuer were filing a form for registration 
of securities on Form 20-F to register under the Act all classes of the 
issuer's securities subject to the reporting requirements of section 13 
(15 U.S.C. 78m) or section 15(d) (15 U.S.C. 78o(d)) of the Act upon 
consummation of the transaction, with such information reflecting the 
registrant and its securities upon consummation of the transaction.

[70 FR 42247, July 21, 2005]



Sec.  240.13a-20  Plain English presentation of specified information.

    (a) Any information included or incorporated by reference in a 
report filed under section 13(a) of the Act (15 U.S.C. 78m(a)) that is 
required to be disclosed pursuant to Item 402, 403, 404 or 407 of 
Regulation S-K (Sec.  229.402, Sec.  229.403, Sec.  229.404 or Sec.  
229.407 of this chapter) must be presented in a clear, concise and 
understandable manner. You must prepare the disclosure using the 
following standards:
    (1) Present information in clear, concise sections, paragraphs and 
sentences;
    (2) Use short sentences;
    (3) Use definite, concrete, everyday words;
    (4) Use the active voice;
    (5) Avoid multiple negatives;
    (6) Use descriptive headings and subheadings;

[[Page 170]]

    (7) Use a tabular presentation or bullet lists for complex material, 
wherever possible;
    (8) Avoid legal jargon and highly technical business and other 
terminology;
    (9) Avoid frequent reliance on glossaries or defined terms as the 
primary means of explaining information. Define terms in a glossary or 
other section of the document only if the meaning is unclear from the 
context. Use a glossary only if it facilitates understanding of the 
disclosure; and
    (10) In designing the presentation of the information you may 
include pictures, logos, charts, graphs and other design elements so 
long as the design is not misleading and the required information is 
clear. You are encouraged to use tables, schedules, charts and graphic 
illustrations that present relevant data in an understandable manner, so 
long as such presentations are consistent with applicable disclosure 
requirements and consistent with other information in the document. You 
must draw graphs and charts to scale. Any information you provide must 
not be misleading.
    (b) [Reserved]

    Note to Sec.  240.13a-20: In drafting the disclosure to comply with 
this section, you should avoid the following:
    1. Legalistic or overly complex presentations that make the 
substance of the disclosure difficult to understand;
    2. Vague ``boilerplate'' explanations that are imprecise and readily 
subject to different interpretations;
    3. Complex information copied directly from legal documents without 
any clear and concise explanation of the provision(s); and
    4. Disclosure repeated in different sections of the document that 
increases the size of the document but does not enhance the quality of 
the information.

[71 FR 53261, Sept. 8, 2006, as amended at 73 FR 976, Jan. 4, 2008]

  Regulation 13b-2: Maintenance of Records and Preparation of Required 
                                 Reports



Sec.  240.13b2-1  Falsification of accounting records.

    No person shall directly or indirectly, falsify or cause to be 
falsified, any book, record or account subject to section 13(b)(2)(A) of 
the Securities Exchange Act.

(15 U.S.C. 78m(b)(2); 15 U.S.C. 78m(a), 78m(b)(1), 78o(d), 78j(b), 
78n(a), 78t(b), 78t(c))

[44 FR 10970, Feb. 23, 1979]



Sec.  240.13b2-2  Representations and conduct in connection with the 
preparation of required reports and documents.

    (a) No director or officer of an issuer shall, directly or 
indirectly:
    (1) Make or cause to be made a materially false or misleading 
statement to an accountant in connection with; or
    (2) Omit to state, or cause another person to omit to state, any 
material fact necessary in order to make statements made, in light of 
the circumstances under which such statements were made, not misleading, 
to an accountant in connection with:
    (i) Any audit, review or examination of the financial statements of 
the issuer required to be made pursuant to this subpart; or
    (ii) The preparation or filing of any document or report required to 
be filed with the Commission pursuant to this subpart or otherwise.
    (b)(1) No officer or director of an issuer, or any other person 
acting under the direction thereof, shall directly or indirectly take 
any action to coerce, manipulate, mislead, or fraudulently influence any 
independent public or certified public accountant engaged in the 
performance of an audit or review of the financial statements of that 
issuer that are required to be filed with the Commission pursuant to 
this subpart or otherwise if that person knew or should have known that 
such action, if successful, could result in rendering the issuer's 
financial statements materially misleading.
    (2) For purposes of paragraphs (b)(1) and (c)(2) of this section, 
actions that, ``if successful, could result in rendering the issuer's 
financial statements materially misleading'' include, but are not 
limited to, actions taken at any time with respect to the professional 
engagement period to coerce, manipulate, mislead, or fraudulently 
influence an auditor:
    (i) To issue or reissue a report on an issuer's financial statements 
that is not warranted in the circumstances

[[Page 171]]

(due to material violations of generally accepted accounting principles, 
the standards of the PCAOB, or other professional or regulatory 
standards);
    (ii) Not to perform audit, review or other procedures required by 
the standards of the PCAOB or other professional standards;
    (iii) Not to withdraw an issued report; or
    (iv) Not to communicate matters to an issuer's audit committee.
    (c) In addition, in the case of an investment company registered 
under section 8 of the Investment Company Act of 1940 (15 U.S.C. 80a-8), 
or a business development company as defined in section 2(a)(48) of the 
Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(48)), no officer or 
director of the company's investment adviser, sponsor, depositor, 
trustee, or administrator (or, in the case of paragraph (c)(2) of this 
section, any other person acting under the direction thereof) shall, 
directly or indirectly:
    (1)(i) Make or cause to be made a materially false or misleading 
statement to an accountant in connection with; or
    (ii) Omit to state, or cause another person to omit to state, any 
material fact necessary in order to make statements made, in light of 
the circumstances under which such statements were made, not misleading 
to an accountant in connection with:
    (A) Any audit, review, or examination of the financial statements of 
the investment company required to be made pursuant to this subpart; or
    (B) The preparation or filing of any document or report required to 
be filed with the Commission pursuant to this subpart or otherwise; or
    (2) Take any action to coerce, manipulate, mislead, or fraudulently 
influence any independent public or certified public accountant engaged 
in the performance of an audit or review of the financial statements of 
that investment company that are required to be filed with the 
Commission pursuant to this subpart or otherwise if that person knew or 
should have known that such action, if successful, could result in 
rendering the investment company's financial statements materially 
misleading.

[68 FR 31830, May 28, 2003, as amended at 83 FR 50222, Oct. 4, 2018]

                            Regulation 13D-G

    Source: Sections 240.13d-1 through 240.13f-1 appear at 43 FR 18495, 
Apr. 28, 1978, unless otherwise noted.

                       ATTENTION ELECTRONIC FILERS

THIS REGULATION SHOULD BE READ IN CONJUNCTION WITH REGULATION S-T (PART 
232 OF THIS CHAPTER), WHICH GOVERNS THE PREPARATION AND SUBMISSION OF 
DOCUMENTS IN ELECTRONIC FORMAT. MANY PROVISIONS RELATING TO THE 
PREPARATION AND SUBMISSION OF DOCUMENTS IN PAPER FORMAT CONTAINED IN 
THIS REGULATION ARE SUPERSEDED BY THE PROVISIONS OF REGULATION S-T FOR 
DOCUMENTS REQUIRED TO BE FILED IN ELECTRONIC FORMAT.



Sec.  240.13d-1  Filing of Schedules 13D and 13G.

    (a) Any person who, after acquiring directly or indirectly the 
beneficial ownership of any equity security of a class which is 
specified in paragraph (i) of this section, is directly or indirectly 
the beneficial owner of more than five percent of the class shall, 
within 10 days after the acquisition, file with the Commission, a 
statement containing the information required by Schedule 13D (Sec.  
240.13d-101).
    (b)(1) A person who would otherwise be obligated under paragraph (a) 
of this section to file a statement on Schedule 13D (Sec.  240.13d-101) 
may, in lieu thereof, file with the Commission, a short-form statement 
on Schedule 13G (Sec.  240.13d-102), Provided, That:
    (i) Such person has acquired such securities in the ordinary course 
of his business and not with the purpose nor with the effect of changing 
or influencing the control of the issuer, nor in connection with or as a 
participant in any transaction having such purpose or effect, including 
any transaction subject to Sec.  240.13d-3(b), other than activities 
solely in connection with a nomination under Sec.  240.14a-11; and
    (ii) Such person is:
    (A) A broker or dealer registered under section 15 of the Act (15 
U.S.C. 78o);

[[Page 172]]

    (B) A bank as defined in section 3(a)(6) of the Act (15 U.S.C. 78c);
    (C) An insurance company as defined in section 3(a)(19) of the Act 
(15 U.S.C. 78c);
    (D) An investment company registered under section 8 of the 
Investment Company Act of 1940 (15 U.S.C. 80a-8);
    (E) Any person registered as an investment adviser under Section 203 
of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3) or under the 
laws of any state;
    (F) An employee benefit plan as defined in Section 3(3) of the 
Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. 
1001 et seq. (``ERISA'') that is subject to the provisions of ERISA, or 
any such plan that is not subject to ERISA that is maintained primarily 
for the benefit of the employees of a state or local government or 
instrumentality, or an endowment fund;
    (G) A parent holding company or control person, provided the 
aggregate amount held directly by the parent or control person, and 
directly and indirectly by their subsidiaries or affiliates that are not 
persons specified in Sec.  240.13d-1(b)(1)(ii)(A) through (J), does not 
exceed one percent of the securities of the subject class;
    (H) A savings association as defined in Section 3(b) of the Federal 
Deposit Insurance Act (12 U.S.C. 1813);
    (I) A church plan that is excluded from the definition of an 
investment company under section 3(c)(14) of the Investment Company Act 
of 1940 (15 U.S.C. 80a-3);
    (J) A non-U.S. institution that is the functional equivalent of any 
of the institutions listed in Sec.  240.13d-1 (b)(1)(ii)(A) through (I), 
so long as the non-U.S. institution is subject to a regulatory scheme 
that is substantially comparable to the regulatory scheme applicable to 
the equivalent U.S. institution; and
    (K) A group, provided that all the members are persons specified in 
Sec.  240.13d-1(b)(1)(ii)(A) through (J).
    (iii) Such person has promptly notified any other person (or group 
within the meaning of section 13(d)(3) of the Act) on whose behalf it 
holds, on a discretionary basis, securities exceeding five percent of 
the class, of any acquisition or transaction on behalf of such other 
person which might be reportable by that person under section 13(d) of 
the Act. This paragraph only requires notice to the account owner of 
information which the filing person reasonably should be expected to 
know and which would advise the account owner of an obligation he may 
have to file a statement pursuant to section 13(d) of the Act or an 
amendment thereto.

    Instruction 1 to paragraph (b)(1). For purposes of paragraph 
(b)(1)(i) of this section, the exception for activities solely in 
connection with a nomination under Sec.  240.14a-11 will not be 
available after the election of directors.

    (2) The Schedule 13G filed pursuant to paragraph (b)(1) of this 
section shall be filed within 45 days after the end of the calendar year 
in which the person became obligated under paragraph (b)(1) of this 
section to report the person's beneficial ownership as of the last day 
of the calendar year, Provided, That it shall not be necessary to file a 
Schedule 13G unless the percentage of the class of equity security 
specified in paragraph (i) of this section beneficially owned as of the 
end of the calendar year is more than five percent; However, if the 
person's direct or indirect beneficial ownership exceeds 10 percent of 
the class of equity securities prior to the end of the calendar year, 
the initial Schedule 13G shall be filed within 10 days after the end of 
the first month in which the person's direct or indirect beneficial 
ownership exceeds 10 percent of the class of equity securities, computed 
as of the last day of the month.
    (c) A person who would otherwise be obligated under paragraph (a) of 
this section to file a statement on Schedule 13D (Sec.  240.13d-101) 
may, in lieu thereof, file with the Commission, within 10 days after an 
acquisition described in paragraph (a) of this section, a short-form 
statement on Schedule 13G (Sec.  240.13d-102). Provided, That the 
person:
    (1) Has not acquired the securities with any purpose, or with the 
effect, of changing or influencing the control of the issuer, or in 
connection with or as a participant in any transaction having that 
purpose or effect, including any

[[Page 173]]

transaction subject to Sec.  240.13d-3(b), other than activities solely 
in connection with a nomination under Sec.  240.14a-11;

    Instruction 1 to paragraph (c)(1). For purposes of paragraph (c)(1) 
of this section, the exception for activities solely in connection with 
a nomination under Sec.  240.14a-11 will not be available after the 
election of directors.
    (2) Is not a person reporting pursuant to paragraph (b)(1) of this 
section; and
    (3) Is not directly or indirectly the beneficial owner of 20 percent 
or more of the class.

    (d) Any person who, as of the end of any calendar year, is or 
becomes directly or indirectly the beneficial owner of more than five 
percent of any equity security of a class specified in paragraph (i) of 
this section and who is not required to file a statement under paragraph 
(a) of this section by virtue of the exemption provided by Section 
13(d)(6)(A) or (B) of the Act (15 U.S.C. 78m(d)(6)(A) or 78m(d)(6)(B)), 
or because the beneficial ownership was acquired prior to December 22, 
1970, or because the person otherwise (except for the exemption provided 
by Section 13(d)(6)(C) of the Act (15 U.S.C. 78m(d)(6)(C))) is not 
required to file a statement, shall file with the Commission, within 45 
days after the end of the calendar year in which the person became 
obligated to report under this paragraph (d), a statement containing the 
information required by Schedule 13G (Sec.  240.13d-102).
    (e)(1) Notwithstanding paragraphs (b) and (c) of this section and 
Sec.  240.13d-2(b), a person that has reported that it is the beneficial 
owner of more than five percent of a class of equity securities in a 
statement on Schedule 13G (Sec.  240.13d-102) pursuant to paragraph (b) 
or (c) of this section, or is required to report the acquisition but has 
not yet filed the schedule, shall immediately become subject to 
Sec. Sec.  240.13d-1(a) and 240.13d-2(a) and shall file a statement on 
Schedule 13D (Sec.  240.13d-101) within 10 days if, and shall remain 
subject to those requirements for so long as, the person:
    (i) Has acquired or holds the securities with a purpose or effect of 
changing or influencing control of the issuer, or in connection with or 
as a participant in any transaction having that purpose or effect, 
including any transaction subject to Sec.  240.13d-3(b); and
    (ii) Is at that time the beneficial owner of more than five percent 
of a class of equity securities described in Sec.  240.13d-1(i).
    (2) From the time the person has acquired or holds the securities 
with a purpose or effect of changing or influencing control of the 
issuer, or in connection with or as a participant in any transaction 
having that purpose or effect until the expiration of the tenth day from 
the date of the filing of the Schedule 13D (Sec.  240.13d-101) pursuant 
to this section, that person shall not:
    (i) Vote or direct the voting of the securities described therein; 
or
    (ii) Acquire an additional beneficial ownership interest in any 
equity securities of the issuer of the securities, nor of any person 
controlling the issuer.
    (f)(1) Notwithstanding paragraph (c) of this section and Sec.  
240.13d-2(b), persons reporting on Schedule 13G (Sec.  240.13d-102) 
pursuant to paragraph (c) of this section shall immediately become 
subject to Sec. Sec.  240.13d-1(a) and 240.13d-2(a) and shall remain 
subject to those requirements for so long as, and shall file a statement 
on Schedule 13D (Sec.  240.13d-101) within 10 days of the date on which, 
the person's beneficial ownership equals or exceeds 20 percent of the 
class of equity securities.
    (2) From the time of the acquisition of 20 percent or more of the 
class of equity securities until the expiration of the tenth day from 
the date of the filing of the Schedule 13D (Sec.  240.13d-101) pursuant 
to this section, the person shall not:
    (i) Vote or direct the voting of the securities described therein, 
or
    (ii) Acquire an additional beneficial ownership interest in any 
equity securities of the issuer of the securities, nor of any person 
controlling the issuer.
    (g) Any person who has reported an acquisition of securities in a 
statement on Schedule 13G (Sec.  240.13d-102) pursuant to paragraph (b) 
of this section, or has become obligated to report on the Schedule 13G 
(Sec.  240.13d-102) but has not yet filed the Schedule, and thereafter

[[Page 174]]

ceases to be a person specified in paragraph (b)(1)(ii) of this section 
or determines that it no longer has acquired or holds the securities in 
the ordinary course of business shall immediately become subject to 
Sec.  240.13d-1(a) or Sec.  240.13d-1(c) (if the person satisfies the 
requirements specified in Sec.  240.13d-1(c)), and Sec. Sec.  240.13d-2 
(a), (b) or (d), and shall file, within 10 days thereafter, a statement 
on Schedule 13D (Sec.  240.13d-101) or amendment to Schedule 13G, as 
applicable, if the person is a beneficial owner at that time of more 
than five percent of the class of equity securities.
    (h) Any person who has filed a Schedule 13D (Sec.  240.13d-101) 
pursuant to paragraph (e), (f) or (g) of this section may again report 
its beneficial ownership on Schedule 13G (Sec.  240.13d-102) pursuant to 
paragraphs (b) or (c) of this section provided the person qualifies 
thereunder, as applicable, by filing a Schedule 13G (Sec.  240.13d-102) 
once the person determines that the provisions of paragraph (e), (f) or 
(g) of this section no longer apply.
    (i) For the purpose of this regulation, the term ``equity security'' 
means any equity security of a class which is registered pursuant to 
section 12 of that Act, or any equity security of any insurance company 
which would have been required to be so registered except for the 
exemption contained in section 12(g)(2)(G) of the Act, or any equity 
security issued by a closed-end investment company registered under the 
Investment Company Act of 1940; Provided, Such term shall not include 
securities of a class of non-voting securities.
    (j) For the purpose of sections 13(d) and 13(g), any person, in 
determining the amount of outstanding securities of a class of equity 
securities, may rely upon information set forth in the issuer's most 
recent quarterly or annual report, and any current report subsequent 
thereto, filed with the Commission pursuant to this Act, unless he knows 
or has reason to believe that the information contained therein is 
inaccurate.
    (k)(1) Whenever two or more persons are required to file a statement 
containing the information required by Schedule 13D or Schedule 13G with 
respect to the same securities, only one statement need be filed: 
Provided, That:
    (i) Each person on whose behalf the statement is filed is 
individually eligible to use the Schedule on which the information is 
filed;
    (ii) Each person on whose behalf the statement is filed is 
responsible for the timely filing of such statement and any amendments 
thereto, and for the completeness and accuracy of the information 
concerning such person contained therein; such person is not responsible 
for the completeness or accuracy of the information concerning the other 
persons making the filing, unless such person knows or has reason to 
believe that such information is inaccurate; and
    (iii) Such statement identifies all such persons, contains the 
required information with regard to each such person, indicates that 
such statement is filed on behalf of all such persons, and includes, as 
an exhibit, their agreement in writing that such a statement is filed on 
behalf of each of them.
    (2) A group's filing obligation may be satisfied either by a single 
joint filing or by each of the group's members making an individual 
filing. If the group's members elect to make their own filings, each 
such filing should identify all members of the group but the information 
provided concerning the other persons making the filing need only 
reflect information which the filing person knows or has reason to know.

[43 FR 18495, Apr. 28, 1978, as amended at 43 FR 29768, July 11, 1978; 
43 FR 55755, Nov. 29, 1978; 44 FR 10703, Feb. 23, 1979; 63 FR 2865, Jan. 
16, 1998; 63 FR 15287, Mar. 31, 1998; 73 FR 60089, Oct. 9, 2008; 75 FR 
56780, Sept. 16, 2010]



Sec.  240.13d-2  Filing of amendments to Schedules 13D or 13G.

    (a) If any material change occurs in the facts set forth in the 
Schedule 13D (Sec.  240.13d-101) required by Sec.  240.13d-1(a), 
including, but not limited to, any material increase or decrease in the 
percentage of the class beneficially owned, the person or persons who 
were required to file the statement shall promptly file or cause to be 
filed with the Commission an amendment disclosing that change. An 
acquisition or disposition of beneficial ownership of

[[Page 175]]

securities in an amount equal to one percent or more of the class of 
securities shall be deemed ``material'' for purposes of this section; 
acquisitions or dispositions of less than those amounts may be material, 
depending upon the facts and circumstances.
    (b) Notwithstanding paragraph (a) of this section, and provided that 
the person filing a Schedule 13G (Sec.  240.13d-102) pursuant to Sec.  
240.13d-1(b) or Sec.  240.13d-1(c) continues to meet the requirements 
set forth therein, any person who has filed a Schedule 13G (Sec.  
240.13d-102) pursuant to Sec.  240.13d-1(b), Sec.  240.13d-1(c) or Sec.  
240.13d-1(d) shall amend the statement within forty-five days after the 
end of each calendar year if, as of the end of the calendar year, there 
are any changes in the information reported in the previous filing on 
that Schedule: Provided, however, That an amendment need not be filed 
with respect to a change in the percent of class outstanding previously 
reported if the change results solely from a change in the aggregate 
number of securities outstanding. Once an amendment has been filed 
reflecting beneficial ownership of five percent or less of the class of 
securities, no additional filings are required unless the person 
thereafter becomes the beneficial owner of more than five percent of the 
class and is required to file pursuant to Sec.  240.13d-1.
    (c) Any person relying on Sec.  240.13d-1(b) that has filed its 
initial Schedule 13G (Sec.  240.13d-102) pursuant to that paragraph 
shall, in addition to filing any amendments pursuant to Sec.  240.13d-
2(b), file an amendment on Schedule 13G (Sec.  240.13d-102) within 10 
days after the end of the first month in which the person's direct or 
indirect beneficial ownership, computed as of the last day of the month, 
exceeds 10 percent of the class of equity securities. Thereafter, that 
person shall, in addition to filing any amendments pursuant to Sec.  
240.13d-2(b), file an amendment on Schedule 13G (Sec.  240.13d-102) 
within 10 days after the end of the first month in which the person's 
direct or indirect beneficial ownership, computed as of the last day of 
the month, increases or decreases by more than five percent of the class 
of equity securities. Once an amendment has been filed reflecting 
beneficial ownership of five percent or less of the class of securities, 
no additional filings are required by this paragraph (c).
    (d) Any person relying on Sec.  240.13d-1(c) and has filed its 
initial Schedule 13G (Sec.  240.13d-102) pursuant to that paragraph 
shall, in addition to filing any amendments pursuant to Sec.  240.13d-
2(b), file an amendment on Schedule 13G (Sec.  240.13d-102) promptly 
upon acquiring, directly or indirectly, greater than 10 percent of a 
class of equity securities specified in Sec.  240.13d-1(d), and 
thereafter promptly upon increasing or decreasing its beneficial 
ownership by more than five percent of the class of equity securities. 
Once an amendment has been filed reflecting beneficial ownership of five 
percent or less of the class of securities, no additional filings are 
required by this paragraph (d).
    (e) The first electronic amendment to a paper format Schedule 13D 
(Sec.  240.13d-101 of this chapter) or Schedule 13G (Sec.  240.13d-102 
of this chapter) shall restate the entire text of the Schedule 13D or 
13G, but previously filed paper exhibits to such Schedules are not 
required to be restated electronically. See Rule 102 of Regulation S-T 
(Sec.  232.102 of this chapter) regarding amendments to exhibits 
previously filed in paper format. Notwithstanding the foregoing, if the 
sole purpose of filing the first electronic Schedule 13D or 13G 
amendment is to report a change in beneficial ownership that would 
terminate the filer's obligation to report, the amendment need not 
include a restatement of the entire text of the Schedule being amended.

    Note to Sec.  240.13d-2: For persons filing a short-form statement 
pursuant to Rule 13d-1(b) or (c), see also Rules 13d-1(e), (f), and (g).

(Secs. 3(b), 13(d)(1), 13(d)(2), 13(d)(5), 13(d)(6), 14(d)(1), 23; 48 
Stat. 882, 894, 895, 901; sec. 203(a), 49 Stat. 704, sec. 8, 49 Stat. 
1379; sec. 10, 78 Stat. 88a; secs. 2, 3, 82 Stat. 454, 455; secs. 1, 2, 
3-5, 84 Stat. 1497; secs. 3, 18, 89 Stat. 97, 155 (15 U.S.C. 78c(b), 
78m(d)(1), 89m(d)(2), 78m(d)(5), 78m(d)(6), 78n(d)(1), 78w); sec. 23, 48 
Stat. 901; sec. 203(a), 49 Stat. 704; sec. 8, 49 Stat. 1379; sec. 10, 78 
Stat. 580; sec. 18, 89 Stat. 155; secs. 102, 202, 203, 91 Stat. 1494, 
1498, 1499; 15 U.S.C. 78m(g), 78w(a))

[43 FR 18495, Apr. 28, 1978, as amended at 45 FR 81558, Dec. 11, 1980; 
47 FR 49964, Nov. 4, 1982; 58 FR 14683, Mar. 18, 1993; 59 FR 67764, Dec. 
30, 1994; 62 FR 36459, July 8, 1997; 63 FR 2866, Jan. 16, 1998]

[[Page 176]]



Sec.  240.13d-3  Determination of beneficial owner.

    (a) For the purposes of sections 13(d) and 13(g) of the Act a 
beneficial owner of a security includes any person who, directly or 
indirectly, through any contract, arrangement, understanding, 
relationship, or otherwise has or shares:
    (1) Voting power which includes the power to vote, or to direct the 
voting of, such security; and/or,
    (2) Investment power which includes the power to dispose, or to 
direct the disposition of, such security.
    (b) Any person who, directly or indirectly, creates or uses a trust, 
proxy, power of attorney, pooling arrangement or any other contract, 
arrangement, or device with the purpose of effect of divesting such 
person of beneficial ownership of a security or preventing the vesting 
of such beneficial ownership as part of a plan or scheme to evade the 
reporting requirements of section 13(d) or (g) of the Act shall be 
deemed for purposes of such sections to be the beneficial owner of such 
security.
    (c) All securities of the same class beneficially owned by a person, 
regardless of the form which such beneficial ownership takes, shall be 
aggregated in calculating the number of shares beneficially owned by 
such person.
    (d) Notwithstanding the provisions of paragraphs (a) and (c) of this 
rule:
    (1)(i) A person shall be deemed to be the beneficial owner of a 
security, subject to the provisions of paragraph (b) of this rule, if 
that person has the right to acquire beneficial ownership of such 
security, as defined in Rule 13d-3(a) (Sec.  240.13d-3(a)) within sixty 
days, including but not limited to any right to acquire: (A) Through the 
exercise of any option, warrant or right; (B) through the conversion of 
a security; (C) pursuant to the power to revoke a trust, discretionary 
account, or similar arrangement; or (D) pursuant to the automatic 
termination of a trust, discretionary account or similar arrangement; 
provided, however, any person who acquires a security or power specified 
in paragraphs (d)(1)(i)(A), (B) or (C), of this section, with the 
purpose or effect of changing or influencing the control of the issuer, 
or in connection with or as a participant in any transaction having such 
purpose or effect, immediately upon such acquisition shall be deemed to 
be the beneficial owner of the securities which may be acquired through 
the exercise or conversion of such security or power. Any securities not 
outstanding which are subject to such options, warrants, rights or 
conversion privileges shall be deemed to be outstanding for the purpose 
of computing the percentage of outstanding securities of the class owned 
by such person but shall not be deemed to be outstanding for the purpose 
of computing the percentage of the class by any other person.
    (ii) Paragraph (d)(1)(i) of this section remains applicable for the 
purpose of determining the obligation to file with respect to the 
underlying security even though the option, warrant, right or 
convertible security is of a class of equity security, as defined in 
Sec.  240.13d-1(i), and may therefore give rise to a separate obligation 
to file.
    (2) A member of a national securities exchange shall not be deemed 
to be a beneficial owner of securities held directly or indirectly by it 
on behalf of another person solely because such member is the record 
holder of such securities and, pursuant to the rules of such exchange, 
may direct the vote of such securities, without instruction, on other 
than contested matters or matters that may affect substantially the 
rights or privileges of the holders of the securities to be voted, but 
is otherwise precluded by the rules of such exchange from voting without 
instruction.
    (3) A person who in the ordinary course of his business is a pledgee 
of securities under a written pledge agreement shall not be deemed to be 
the beneficial owner of such pledged securities until the pledgee has 
taken all formal steps necessary which are required to declare a default 
and determines that the power to vote or to direct the vote or to 
dispose or to direct the disposition of such pledged securities will be 
exercised, provided, that:
    (i) The pledgee agreement is bona fide and was not entered into with 
the purpose nor with the effect of changing or influencing the control 
of the issuer, nor in connection with any transaction

[[Page 177]]

having such purpose or effect, including any transaction subject to Rule 
13d-3(b);
    (ii) The pledgee is a person specified in Rule 13d-1(b)(ii), 
including persons meeting the conditions set forth in paragraph (G) 
thereof; and
    (iii) The pledgee agreement, prior to default, does not grant to the 
pledgee;
    (A) The power to vote or to direct the vote of the pledged 
securities; or
    (B) The power to dispose or direct the disposition of the pledged 
securities, other than the grant of such power(s) pursuant to a pledge 
agreement under which credit is extended subject to regulation T (12 CFR 
220.1 to 220.8) and in which the pledgee is a broker or dealer 
registered under section 15 of the act.
    (4) A person engaged in business as an underwriter of securities who 
acquires securities through his participation in good faith in a firm 
commitment underwriting registered under the Securities Act of 1933 
shall not be deemed to be the beneficial owner of such securities until 
the expiration of forty days after the date of such acquisition.

(Secs. 3(b), 13(d)(1), 13(d)(2), 13(d)(5), 13(d)(6), 14(d)(1), 23; 48 
Stat. 882, 894, 895, 901; sec. 203(a), 49 Stat. 704, sec. 8, 49 Stat. 
1379; sec. 10, 78 Stat. 88a; secs. 2, 3, 82 Stat. 454, 455; secs. 1, 2, 
3-5, 84 Stat. 1497; secs. 3, 18, 89 Stat. 97, 155 (15 U.S.C. 78c(b), 
78m(d)(1), 89m(d)(2), 78m(d)(5), 78m(d)(6), 78n(d)(1), 78w)

[43 FR 18495, Apr. 28, 1978, as amended at 43 FR 29768, July 11, 1978; 
63 FR 2867, Jan. 16, 1998]



Sec.  240.13d-4  Disclaimer of beneficial ownership.

    Any person may expressly declare in any statement filed that the 
filing of such statement shall not be construed as an admission that 
such person is, for the purposes of sections 13(d) or 13(g) of the Act, 
the beneficial owner of any securities covered by the statement.

(Secs. 3(b), 13(d)(1), 13(d)(2), 13(d)(5), 13(d)(6), 14(d)(1), 23; 48 
Stat. 882, 894, 895, 901; sec. 203(a), 49 Stat. 704, sec. 8, 49 Stat. 
1379; sec. 10, 78 Stat. 88a; secs. 2, 3, 82 Stat. 454, 455; secs. 1, 2, 
3-5, 84 Stat. 1497; secs. 3, 18, 89 Stat. 97, 155 (15 U.S.C. 78c(b), 
78m(d)(1), 89m(d)(2), 78m(d)(5), 78m(d)(6), 78n(d)(1), 78w)



Sec.  240.13d-5  Acquisition of securities.

    (a) A person who becomes a beneficial owner of securities shall be 
deemed to have acquired such securities for purposes of section 13(d)(1) 
of the Act, whether such acquisition was through purchase or otherwise. 
However, executors or administrators of a decedent's estate generally 
will be presumed not to have acquired beneficial ownership of the 
securities in the decedent's estate until such time as such executors or 
administrators are qualified under local law to perform their duties.
    (b)(1) When two or more persons agree to act together for the 
purpose of acquiring, holding, voting or disposing of equity securities 
of an issuer, the group formed thereby shall be deemed to have acquired 
beneficial ownership, for purposes of sections 13(d) and (g) of the Act, 
as of the date of such agreement, of all equity securities of that 
issuer beneficially owned by any such persons.
    (2) Notwithstanding the previous paragraph, a group shall be deemed 
not to have acquired any equity securities beneficially owned by the 
other members of the group solely by virtue of their concerted actions 
relating to the purchase of equity securities directly from an issuer in 
a transaction not involving a public offering: Provided, That:
    (i) All the members of the group are persons specified in Rule 13d-
1(b)(1)(ii);
    (ii) The purchase is in the ordinary course of each member's 
business and not with the purpose nor with the effect of changing or 
influencing control of the issuer, nor in connection with or as a 
participant in any transaction having such purpose or effect, including 
any transaction subject to Rule 13d-3(b);
    (iii) There is no agreement among, or between any members of the 
group to act together with respect to the issuer or its securities 
except for the purpose of facilitating the specific purchase involved; 
and
    (iv) The only actions among or between any members of the group with 
respect to the issuer or its securities subsequent to the closing date 
of the non-public offering are those which are

[[Page 178]]

necessary to conclude ministerial matters directly related to the 
completion of the offer or sale of the securities.

(Secs. 3(b), 13(d)(1), 13(d)(2), 13(d)(5), 13(d)(6), 14(d)(1), 23; 48 
Stat. 882, 894, 895, 901; sec. 203(a), 49 Stat. 704, sec. 8, 49 Stat. 
1379; sec. 10, 78 Stat. 88a; secs. 2, 3, 82 Stat. 454, 455; secs. 1, 2, 
3-5, 84 Stat. 1497; secs. 3, 18, 89 Stat. 97, 155 (15 U.S.C. 78c(b), 
78m(d)(1), 89m(d)(2), 78m(d)(5), 78m(d)(6), 78n(d)(1), 78w))



Sec.  240.13d-6  Exemption of certain acquisitions.

    The acquisition of securities of an issuer by a person who, prior to 
such acquisition, was a beneficial owner of more than five percent of 
the outstanding securities of the same class as those acquired shall be 
exempt from section 13(d) of the Act: Provided, That:
    (a) The acquisition is made pursuant to preemptive subscription 
rights in an offering made to all holders of securities of the class to 
which the preemptive subscription rights pertain;
    (b) Such person does not acquire additional securities except 
through the exercise of his pro rata share of the preemptive 
subscription rights; and
    (c) The acquisition is duly reported, if required, pursuant to 
section 16(a) of the Act and the rules and regulations thereunder.

(Secs. 3(b), 13(d)(1), 13(d)(2), 13(d)(5), 13(d)(6), 14(d)(1), 23; 48 
Stat. 882, 894, 895, 901; sec. 203(a), 49 Stat. 704, sec. 8, 49 Stat. 
1379; sec. 10, 78 Stat. 88a; secs. 2, 3, 82 Stat. 454, 455; secs. 1, 2, 
3-5, 84 Stat. 1497; secs. 3, 18, 89 Stat. 97, 155 (15 U.S.C. 78c(b), 
78m(d)(1), 89m(d)(2), 78m(d)(5), 78m(d)(6), 78n(d)(1), 78w))



Sec.  240.13d-7  Dissemination.

    One copy of the Schedule filed pursuant to Sec. Sec.  240.13d-1 and 
240.13d-2 shall be sent to the issuer of the security at its principal 
executive office by registered or certified mail. A copy of Schedules 
filed pursuant to Sec. Sec.  240.13d-1(a) and 240.13d-2(a) shall also be 
sent to each national securities exchange where the security is traded.

[63 FR 2867, Jan. 16, 1998]



Sec.  240.13d-101  Schedule 13D--Information to be included in
statements filed pursuant to Sec.  240.13d-1(a) and amendments thereto
filed pursuant to Sec.  240.13d-2(a).

Securities and Exchange Commission, Washington, D.C. 20549

Schedule 13D

Under the Securities Exchange Act of 1934

(Amendment No._)*
________________________________________________________________________
(Name of Issuer)
________________________________________________________________________
(Title of Class of Securities)
________________________________________________________________________
(CUSIP Number)
________________________________________________________________________
(Name, Address and Telephone Number of Person Authorized to Receive 
          Notices and Communications)
________________________________________________________________________
(Date of Event Which Requires Filing of This Statement)

    If the filing person has previously filed a statement on Schedule 
13G to report the acquisition that is the subject of this Schedule 13D, 
and is filing this schedule because of Sec. Sec.  240.13d-1(e), 240.13d-
1(f) or 240.13d-1(g), check the following box. [squ]

    Note: Schedules filed in paper format shall include a signed 
original and five copies of the schedule, including all exhibits. See 
Rule 13d-7 for other parties to whom copies are to be sent.

    * The remainder of this cover page shall be filled out for a 
reporting person's initial filing on this form with respect to the 
subject class of securities, and for any subsequent amendment containing 
information which would alter disclosures provided in a prior cover 
page.
    The information required on the remainder of this cover page shall 
not be deemed to be ``filed'' for the purpose of section 18 of the 
Securities Exchange Act of 1934 (``Act'') or otherwise subject to the 
liabilities of that section of the Act but shall be subject to all other 
provisions of the Act (however, see the Notes).

------------------------------------------------------------------------
 
------------------------------------------------------------------------
                              CUSIP No.___
------------------------------------------------------------------------
(1) Names of reporting persons.........
(2) Check the appropriate box if a       (a)
 member of a group
                                        --------------------------------
           (see instructions)            (b)
------------------------------------------------------------------------
(3) SEC use only.......................
------------------------------------------------------------------------
(4) Source of funds (see instructions).
------------------------------------------------------------------------

[[Page 179]]

 
(5) Check if disclosure of legal
 proceedings is required pursuant to
 Items 2(d) or 2(e).
------------------------------------------------------------------------
(6) Citizenship or place of
 organization.
------------------------------------------------------------------------
Number of shares beneficially owned by
 each reporting person with:
  (7) Sole voting power................
                                        --------------------------------
  (8) Shared voting power..............
                                        --------------------------------
  (9) Sole dispositive power...........
                                        --------------------------------
  (10) Shared dispositive power........
------------------------------------------------------------------------
(11) Aggregate amount beneficially
 owned by each reporting person.
------------------------------------------------------------------------
(12) Check if the aggregate amount in
 Row (11) excludes certain shares (see
 instructions).
------------------------------------------------------------------------
(13) Percent of class represented by
 amount in Row (11).
------------------------------------------------------------------------
(14) Type of reporting person (see
 instructions).
------------------------------------------------------------------------

                            Page _ of _ Pages

Instructions for Cover Page

    (1) Names of Reporting Persons--Furnish the full legal name of each 
person for whom the report is filed--i.e., each person required to sign 
the schedule itself--including each member of a group. Do not include 
the name of a person required to be identified in the report but who is 
not a reporting person.
    (2) If any of the shares beneficially owned by a reporting person 
are held as a member of the group and the membership is expressly 
affirmed, please check row 2(a). If the reporting person disclaims 
membership in a group or describes a relationship with other person but 
does not affirm the existence of a group, please check row 2(b) (unless 
it is a joint filing pursuant to Rule 13d-1(k)(1) in which case it may 
not be necessary to check row 2(b)).
    (3) The 3rd row is for SEC internal use; please leave blank.
    (4) Classify the source of funds or other consideration used or to 
be used in making the purchases as required to be disclosed pursuant to 
Item 3 of Schedule 13D and insert the appropriate symbol (or symbols if 
more than one is necessary) in row (4):

------------------------------------------------------------------------
              Category of Source                         Symbol
------------------------------------------------------------------------
Subject Company (Company whose securities are  SC
 being acquired).
Bank.........................................  BK
Affiliate (of reporting person)..............  AF
Working Capital (of reporting person)........  WC
Personal Funds (of reporting person).........  PF
Other........................................  OO
------------------------------------------------------------------------

    (5) If disclosure of legal proceedings or actions is required 
pursuant to either Items 2(d) or 2(e) of Schedule 13D, row 5 should be 
checked.
    (6) Citizenship or Place of Organization--Furnish citizenship if the 
named reporting person is a natural person. Otherwise, Furnish place of 
organization. (See Item 2 of Schedule 13D).
    (7)-(11) [Reserved]
    (12) Check if the aggregate amount reported as beneficially owned in 
row (11) does not include shares which the reporting person discloses in 
the report but as to which beneficial ownership is disclaimed pursuant 
to Rule 13d-4 [17 CFR 240.13d-4] under the Securities Exchange Act of 
1934.
    (13) Aggregate Amount Beneficially Owned by Each Reporting Person, 
Etc.--Rows (7) through (11), inclusive, and (13) are to be completed in 
accordance with the provisions of Item 5 of Schedule 13D. All 
percentages are to be rounded off to nearest tenth (one place after 
decimal point).
    (14) Type of Reporting Person--Please classify each ``reporting 
person'' according to the following breakdown and place the appropriate 
symbol (or symbols, i.e., if more than one is applicable, insert all 
applicable symbols) on the form:

------------------------------------------------------------------------
                  Category                              Symbol
------------------------------------------------------------------------
Broker Dealer...............................  BD
Bank........................................  BK
Insurance Company...........................  IC
Investment Company..........................  IV
Investment Adviser..........................  IA
Employee Benefit Plan or Endowment Fund.....  EP
Parent Holding Company/Control Person.......  HC
Savings Association.........................  SA
Church Plan.................................  CP
Corporation.................................  CO
Partnership.................................  PN
Individual..................................  IN
Other.......................................  OO
------------------------------------------------------------------------


[[Page 180]]

    Notes: Attach as many copies of the second part of the cover page as 
are needed, one reporting person per page.
    Filing persons may, in order to avoid unnecessary duplication, 
answer items on the schedules (Schedule 13D, 13G or TO) by appropriate 
cross references to an item or items on the cover page(s). This approach 
may only be used where the cover page item or items provide all the 
disclosure required by the schedule item. Moreover, such a use of a 
cover page item will result in the item becoming a part of the schedule 
and accordingly being considered as ``filed'' for purposes of section 18 
of the Securities Exchange Act or otherwise subject to the liabilities 
of that section of the Act.
    Reporting persons may comply with their cover page filing 
requirements by filing either completed copies of the blank forms 
available from the Commission, printed or typed facsimiles, or computer 
printed facsimiles, provided the documents filed have identical formats 
to the forms prescribed in the Commission's regulations and meet 
existing Securities Exchange Act rules as to such matters as clarity and 
size (Securities Exchange Act Rule 12b-12).

          Special Instructions for Complying With Schedule 13D

    Under sections 13(d) and 23 of the Securities Exchange Act of 1934 
and the rules and regulations thereunder, the Commission is authorized 
to solicit the information required to be supplied by this schedule by 
certain security holders of certain issuers.
    Disclosure of the information specified in this schedule is 
mandatory. The information will be used for the primary purpose of 
determining and disclosing the holdings of certain beneficial owners of 
certain equity securities. This statement will be made a matter of 
public record. Therefore, any information given will be available for 
inspection by any member of the public.
    Because of the public nature of the information, the Commission can 
use it for a variety of purposes, including referral to other 
governmental authorities or securities self-regulatory organizations for 
investigatory purposes or in connection with litigation involving the 
federal securities laws or other civil, criminal or regulatory statutes 
or provisions.
    Failure to disclose the information requested by this schedule may 
result in civil or criminal action against the persons involved for 
violation of the federal securities laws and rules promulgated 
thereunder.

    Instructions. A. The item numbers and captions of the items shall be 
included but the text of the items is to be omitted. The answers to the 
items shall be so prepared as to indicate clearly the coverage of the 
items without referring to the text of the items. Answer every item. If 
an item is inapplicable or the answer is in the negative, so state.
    B. Information contained in exhibits to the statement may be 
incorporated by reference in answer or partial answer to any item or 
sub-item of the statement unless it would render such answer misleading, 
incomplete, unclear or confusing. Material incorporated by reference 
shall be clearly identified in the reference by page, paragraph, caption 
or otherwise. An express statement that the specified matter is 
incorporated by reference shall be made at the particular place in the 
statement where the information is required. A copy of any information 
or a copy of the pertinent pages of a document containing such 
information which is incorporated by reference shall be submitted with 
this statement as an exhibit and shall be deemed to be filed with the 
Commission for all purposes of the Act.
    C. If the statement is filed by a general or limited partnership, 
syndicate, or other group, the information called for by Items 2-6, 
inclusive, shall be given with respect to (i) each partner of such 
general partnership; (ii) each partner who is denominated as a general 
partner or who functions as a general partner of such limited 
partnership; (iii) each member of such syndicate or group; and (iv) each 
person controlling such partner or member. If the statement is filed by 
a corporation or if a person referred to in (i), (ii), (iii) or (iv) of 
this Instruction is a corporation, the information called for by the 
above mentioned items shall be given with respect to (a) each executive 
officer and director of such corporation; (b) each person controlling 
such corporation; and (c) each executive officer and director of any 
corporation or other person ultimately in control of such corporation.
    Item 1. Security and Issuer. State the title of the class of equity 
securities to which this statement relates and the name and address of 
the principal executive offices of the issuer of such securities.
    Item 2. Identity and Background. If the person filing this statement 
or any person enumerated in Instruction C of this statement is a 
corporation, general partnership, limited partnership, syndicate or 
other group of persons, state its name, the state or other place of its 
organization, its principal business, the address of its principal 
office and the information required by (d) and (e) of this Item. If the 
person filing this statement or any person enumerated in Instruction C 
is a natural person, provide the information specified in (a) through 
(f) of this Item with respect to such person(s).
    (a) Name;
    (b) Residence or business address;
    (c) Present principal occupation or employment and the name, 
principal business

[[Page 181]]

and address of any corporation or other organization in which such 
employment is conducted;
    (d) Whether or not, during the last five years, such person has been 
convicted in a criminal proceeding (excluding traffic violations or 
similar misdemeanors) and, if so, give the dates, nature of conviction, 
name and location of court, any penalty imposed, or other disposition of 
the case;
    (e) Whether or not, during the last five years, such person was a 
party to a civil proceeding of a judicial or administrative body of 
competent jurisdiction and as a result of such proceeding was or is 
subject to a judgment, decree or final order enjoining future violations 
of, or prohibiting or mandating activities subject to, federal or state 
securities laws or finding any violation with respect to such laws; and, 
if so, identify and describe such proceedings and summarize the terms of 
such judgment, decree or final order; and
    (f) Citizenship.
    Item 3. Source and Amount of Funds or Other Consideration. State the 
source and the amount of funds or other consideration used or to be used 
in making the purchases, and if any part of the purchase price is or 
will be represented by funds or other consideration borrowed or 
otherwise obtained for the purpose of acquiring, holding, trading or 
voting the securities, a description of the transaction and the names of 
the parties thereto. Where material, such information should also be 
provided with respect to prior acquisitions not previously reported 
pursuant to this regulation. If the source of all or any part of the 
funds is a loan made in the ordinary course of business by a bank, as 
defined in section 3(a)(6) of the Act, the name of the bank shall not be 
made available to the public if the person at the time of filing the 
statement so requests in writing and files such request, naming such 
bank, with the Secretary of the Commission. If the securities were 
acquired other than by purchase, describe the method of acquisition.
    Item 4. Purpose of Transaction. State the purpose or purposes of the 
acquisition of securities of the issuer. Describe any plans or proposals 
which the reporting persons may have which relate to or would result in:
    (a) The acquisition by any person of additional securities of the 
issuer, or the disposition of securities of the issuer;
    (b) An extraordinary corporate transaction, such as a merger, 
reorganization or liquidation, involving the issuer or any of its 
subsidiaries;
    (c) A sale or transfer of a material amount of assets of the issuer 
or any of its subsidiaries;
    (d) Any change in the present board of directors or management of 
the issuer, including any plans or proposals to change the number or 
term of directors or to fill any existing vacancies on the board;
    (e) Any material change in the present capitalization or dividend 
policy of the issuer;
    (f) Any other material change in the issuer's business or corporate 
structure, including but not limited to, if the issuer is a registered 
closed-end investment company, any plans or proposals to make any 
changes in its investment policy for which a vote is required by section 
13 of the Investment Company Act of 1940;
    (g) Changes in the issuer's charter, bylaws or instruments 
corresponding thereto or other actions which may impede the acquisition 
of control of the issuer by any person;
    (h) Causing a class of securities of the issuer to be delisted from 
a national securities exchange or to cease to be authorized to be quoted 
in an inter-dealer quotation system of a registered national securities 
association;
    (i) A class of equity securities of the issuer becoming eligible for 
termination of registration pursuant to section 12(g)(4) of the Act; or
    (j) Any action similar to any of those enumerated above.
    Item 5. Interest in Securities of the Issuer. (a) State the 
aggregate number and percentage of the class of securities identified 
pursuant to Item 1 (which may be based on the number of securities 
outstanding as contained in the most recently available filing with the 
Commission by the issuer unless the filing person has reason to believe 
such information is not current) beneficially owned (identifying those 
shares which there is a right to acquire) by each person named in Item 
2. The above mentioned information should also be furnished with respect 
to persons who, together with any of the persons named in Item 2, 
comprise a group within the meaning of section 13(d)(3) of the Act;
    (b) For each person named in response to paragraph (a), indicate the 
number of shares as to which there is sole power to vote or to direct 
the vote, sole power to dispose or to direct the disposition, or shared 
power to dispose or to direct the disposition. Provide the applicable 
information required by Item 2 with respect to each person with whom the 
power to vote or to direct the vote or to dispose or direct the 
disposition is shared;
    (c) Describe any transactions in the class of securities reported on 
that were effected during the past sixty days or since the most recent 
filing of Schedule 13D (Sec.  240.13d-101), whichever is less, by the 
persons named in response to paragraph (a).
    Instruction. The description of a transaction required by Item 5(c) 
shall include, but not necessarily be limited to: (1) The identity of 
the person covered by Item 5(c) who effected the transaction; (2) the 
date of

[[Page 182]]

transaction; (3) the amount of securities involved; (4) the price per 
share or unit; and (5) where and how the transaction was effected.
    (d) If any other person is known to have the right to receive or the 
power to direct the receipt of dividends from, or the proceeds from the 
sale of, such securities, a statement to that effect should be included 
in response to this item and, if such interest relates to more than five 
percent of the class, such person should be identified. A listing of the 
shareholders of an investment company registered under the Investment 
Company Act of 1940 or the beneficiaries of an employee benefit plan, 
pension fund or endowment fund is not required.
    (e) If applicable, state the date on which the reporting person 
ceased to be the beneficial owner of more than five percent of the class 
of securities.
    Instruction. For computations regarding securities which represent a 
right to acquire an underlying security, see Rule 13d-3(d)(1) and the 
note thereto.
    Item 6. Contracts, Arrangements, Understandings or Relationships 
With Respect to Securities of the Issuer. Describe any contracts, 
arrangements, understandings or relationships (legal or otherwise) among 
the persons named in Item 2 and between such persons and any person with 
respect to any securities of the issuer, including but not limited to 
transfer or voting of any of the securities, finder's fees, joint 
ventures, loan or option arrangements, puts or calls, guarantees of 
profits, division of profits or loss, or the giving or withholding of 
proxies, naming the persons with whom such contracts, arrangements, 
understandings or relationships have been entered into. Include such 
information for any of the securities that are pledged or otherwise 
subject to a contingency the occurrence of which would give another 
person voting power or investment power over such securities except that 
disclosure of standard default and similar provisions contained in loan 
agreements need not be included.
    Item 7. Material to be Filed as Exhibits. The following shall be 
filed as exhibits: Copies of written agreements relating to the filing 
of joint acquisition statements as required by Rule 13d-1(k) and copies 
of all written agreements, contracts, arrangements, understanding, plans 
or proposals relating to: (1) The borrowing of funds to finance the 
acquisition as disclosed in Item 3; (2) the acquisition of issuer 
control, liquidation, sale of assets, merger, or change in business or 
corporate structure, or any other matter as disclosed in Item 4; and (3) 
the transfer or voting of the securities, finder's fees, joint ventures, 
options, puts, calls, guarantees of loans, guarantees against loss or of 
profit, or the giving or withholding of any proxy as disclosed in Item 
6.
    Signature. After reasonable inquiry and to the best of my knowledge 
and belief, I certify that the information set forth in this statement 
is true, complete and correct.
Date____________________________________________________________________
Signature_______________________________________________________________
Name/Title______________________________________________________________
    The original statement shall be signed by each person on whose 
behalf the statement is filed or his authorized representative. If the 
statement is signed on behalf of a person by his authorized 
representative (other than an executive officer or general partner of 
the filing person), evidence of the representative's authority to sign 
on behalf of such person shall be filed with the statement: Provided, 
however, That a power of attorney for this purpose which is already on 
file with the Commission may be incorporated by reference. The name and 
any title of each person who signs the statement shall be typed or 
printed beneath his signature.
    Attention--Intentional misstatements or omissions of fact constitute 
Federal criminal violations (See 18 U.S.C. 1001).

[44 FR 2145, Jan. 9, 1979; 44 FR 11751, Mar. 2, 1979; 44 FR 70340, Dec. 
6, 1979; 47 FR 11466, Mar. 16, 1982; 61 FR 49959, Sept. 24, 1996; 62 FR 
35340, July 1, 1997; 63 FR 2867, Jan. 16, 1998; 63 FR 15287, Mar. 31, 
1998; 72 FR 45111, Aug. 10, 2007; 73 FR 17813, Apr. 1, 2008]



Sec.  240.13d-102  Schedule 13G--Information to be included in statements
filed pursuant to Sec.  240.13d-1(b), (c), and (d) and amendments thereto
filed pursuant to Sec.  240.13d-2.

Securities and Exchange Commission, Washington, D.C. 20549

Schedule 13G

Under the Securities Exchange Act of 1934

(Amendment No._)*
________________________________________________________________________
(Name of Issuer)
________________________________________________________________________
(Title of Class of Securities)
________________________________________________________________________
(CUSIP Number)
________________________________________________________________________
(Date of Event Which Requires Filing of this Statement)

    Check the appropriate box to designate the rule pursuant to which 
this Schedule is filed:

[ ] Rule 13d-1(b)
[ ] Rule 13d-1(c)
[ ] Rule 13d-1(d)

    * The remainder of this cover page shall be filled out for a 
reporting person's initial filing on this form with respect to the 
subject class of securities, and for any subsequent amendment containing 
information which would alter the disclosures provided in a prior cover 
page.
    The information required in the remainder of this cover page shall 
not be deemed to be ``filed'' for the purpose of Section 18 of the

[[Page 183]]

Securities Exchange Act of 1934 (``Act'') or otherwise subject to the 
liabilities of that section of the Act but shall be subject to all other 
provisions of the Act (however, see the Notes).

------------------------------------------------------------------------
 
------------------------------------------------------------------------
                              CUSIP No.___
------------------------------------------------------------------------
(1) Names of reporting persons.........
(2) Check the appropriate box if a       (a)
 member of a group
                                        --------------------------------
           (see instructions)            (b)
------------------------------------------------------------------------
(3) SEC use only.......................
------------------------------------------------------------------------
(4) Citizenship or place of
 organization.
------------------------------------------------------------------------
Number of shares beneficially owned by
 each reporting person with:
  (5) Sole voting power................
                                        --------------------------------
  (6) Shared voting power..............
                                        --------------------------------
  (7) Sole dispositive power...........
                                        --------------------------------
  (8) Shared dispositive power.........
------------------------------------------------------------------------
(9) Aggregate amount beneficially owned
 by each reporting person.
------------------------------------------------------------------------
(10) Check if the aggregate amount in
 Row (9) excludes certain shares (see
 instructions).
------------------------------------------------------------------------
(11) Percent of class represented by
 amount in Row (9).
------------------------------------------------------------------------
(12) Type of reporting person (see
 instructions).
------------------------------------------------------------------------

                            Page _ of _ Pages

Instructions for Cover Page:

    (1) Names of Reporting Persons--Furnish the full legal name of each 
person for whom the report is filed--i.e., each person required to sign 
the schedule itself--including each member of a group. Do not include 
the name of a person required to be identified in the report but who is 
not a reporting person.
    (2) If any of the shares beneficially owned by a reporting person 
are held as a member of a group and that membership is expressly 
affirmed, please check row 2(a). If the reporting person disclaims 
membership in a group or describes a relationship with other person but 
does not affirm the existence of a group, please check row 2(b) [unless 
it is a joint filing pursuant to Rule 13d-1(k)(1) in which case it may 
not be necessary to check row 2(b)].
    (3) The third row is for SEC internal use; please leave blank.
    (4) Citizenship or Place of Organization--Furnish citizenship if the 
named reporting person is a natural person. Otherwise, furnish place of 
organization.
    (5)-(9), (11) Aggregated Amount Beneficially Owned By Each Reporting 
Person, etc.--Rows (5) through (9) inclusive, and (11) are to be 
completed in accordance with the provisions of Item 4 of Schedule 13G. 
All percentages are to be rounded off to the nearest tenth (one place 
after decimal point).
    (10) Check if the aggregate amount reported as beneficially owned in 
row (9) does not include shares as to which beneficial ownership is 
disclaimed pursuant to Rule 13d-4 [17 CFR 240.13d-4] under the 
Securities Exchange Act of 1934.
    (12) Type of Reporting Person--Please classify each ``reporting 
person'' according to the following breakdown (see Item 3 of Schedule 
13G) and place the appropriate Symbol on the form:

------------------------------------------------------------------------
                           Category                              Symbol
------------------------------------------------------------------------
Broker Dealer................................................         BD
Bank.........................................................         BK
Insurance Company............................................         IC
Investment Company...........................................         IV
Investment Adviser...........................................         IA
Employee Benefit Plan or Endowment Fund......................         EP
Parent Holding Company/Control Person........................         HC
Savings Association..........................................         SA
Church Plan..................................................         CP
Corporation..................................................         CO
Partnership..................................................         PN
Individual...................................................         IN
Non-U.S. Institution.........................................         FI
Other........................................................         OO
------------------------------------------------------------------------

    Notes: Attach as many copies of the second part of the cover page as 
are needed, one reporting person per page.
    Filing persons may, in order to avoid unnecessary duplication, 
answer items on the

[[Page 184]]

schedules (Schedule 13D, 13G or TO) by appropriate cross references to 
an item or items on the cover page(s). This approach may only be used 
where the cover page item or items provide all the disclosure required 
by the schedule item. Moreover, such a use of a cover page item will 
result in the item becoming a part of the schedule and accordingly being 
considered as ``filed'' for purposes of section 18 of the Securities 
Exchange Act or otherwise subject to the liabilities of that section of 
the Act.
    Reporting persons may comply with their cover page filing 
requirements by filing either completed copies of the blank forms 
available from the Commission, printed or typed facsimiles, or computer 
printed facsimiles, provided the documents filed have identical formats 
to the forms prescribed in the Commission's regulations and meet 
existing Securities Exchange Act rules as to such matters as clarity and 
size (Securities Exchange Act Rule 12b-12).

          Special Instructions for Complying With Schedule 13G

    Under Sections 13(d), 13(g) and 23 of the Securities Exchange Act of 
1934 and the rules and regulations thereunder, the Commission is 
authorized to solicit the information required to be supplied by this 
schedule by certain security holders of certain issuers.
    Disclosure of the information specified in this schedule is 
mandatory. The information will be used for the primary purpose of 
determining and disclosing the holdings of certain beneficial owners of 
certain equity securities. This statement will be made a matter of 
public record. Therefore, any information given will be available for 
inspection by any member of the public.
    Because of the public nature of the information, the Commission can 
use it for a variety of purposes, including referral to other 
governmental authorities or securities self-regulatory organizations for 
investigatory purposes or in connection with litigation involving the 
Federal securities laws or other civil, criminal or regulatory statutes 
or provisions.
    Failure to disclose the information requested by this schedule may 
result in civil or criminal action against the persons involved for 
violation of the Federal securities laws and rules promulgated 
thereunder.
    Instructions. A. Statements filed pursuant to Rule 13d-1(b) 
containing the information required by this schedule shall be filed not 
later than February 14 following the calendar year covered by the 
statement or within the time specified in Rules 13d-1(b)(2) and 13d-
2(c). Statements filed pursuant to Rule 13d-1(d) shall be filed within 
the time specified in Rules 13d-1(c), 13d-2(b) and 13d-2(d). Statements 
filed pursuant to Rule 13d-1(c) shall be filed not later than February 
14 following the calendar year covered by the statement pursuant to 
Rules 13d-1(d) and 13d-2(b).
    B. Information contained in a form which is required to be filed by 
rules under section 13(f) (15 U.S.C. 78m(f)) for the same calendar year 
as that covered by a statement on this schedule may be incorporated by 
reference in response to any of the items of this schedule. If such 
information is incorporated by reference in this schedule, copies of the 
relevant pages of such form shall be filed as an exhibit to this 
schedule.
    C. The item numbers and captions of the items shall be included but 
the text of the items is to be omitted. The answers to the items shall 
be so prepared as to indicate clearly the coverage of the items without 
referring to the text of the items. Answer every item. If an item is 
inapplicable or the answer is in the negative, so state.
    Item 1(a) Name of issuer:___
    Item 1(b) Address of issuer's principal executive offices:____
    2(a) Name of person filing:
________________________________________________________________________
    2(b) Address or principal business office or, if none, residence:
________________________________________________________________________
    2(c) Citizenship:
________________________________________________________________________
    2(d) Title of class of securities:
________________________________________________________________________
    2(e) CUSIP No.:
________________________________________________________________________
    Item 3. If this statement is filed pursuant to Sec. Sec.  240.13d-
1(b) or 240.13d-2(b) or (c), check whether the person filing is a:
    (a) [ ] Broker or dealer registered under section 15 of the Act (15 
U.S.C. 78o);
    (b) [ ] Bank as defined in section 3(a)(6) of the Act (15 U.S.C. 
78c);
    (c) [ ] Insurance company as defined in section 3(a)(19) of the Act 
(15 U.S.C. 78c);
    (d) [ ] Investment company registered under section 8 of the 
Investment Company Act of 1940 (15 U.S.C 80a-8);
    (e) [ ] An investment adviser in accordance with Sec.  240.13d-
1(b)(1)(ii)(E);
    (f) [ ] An employee benefit plan or endowment fund in accordance 
with Sec.  240.13d-1(b)(1)(ii)(F);
    (g) [ ] A parent holding company or control person in accordance 
with Sec.  240.13d-1(b)(1)(ii)(G);
    (h) [ ] A savings associations as defined in Section 3(b) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813);
    (i) [ ] A church plan that is excluded from the definition of an 
investment company under section 3(c)(14) of the Investment Company Act 
of 1940 (15 U.S.C. 80a-3);
    (j) [ ] A non-U.S. institution in accordance with Sec.  240.13d-
1(b)(1)(ii)(J);
    (k) [ ] Group, in accordance with Sec.  240.13d-1(b)(1)(ii)(K). If 
filing as a non-U.S. institution in accordance with Sec.  240.13d-
1(b)(1)(ii)(J),

[[Page 185]]

please specify the type of institution: ____

                            Item 4. Ownership

    Provide the following information regarding the aggregate number and 
percentage of the class of securities of the issuer identified in Item 
1.
    (a) Amount beneficially owned: _____.
    (b) Percent of class: _____.
    (c) Number of shares as to which the person has:
    (i) Sole power to vote or to direct the vote _____.
    (ii) Shared power to vote or to direct the vote _____.
    (iii) Sole power to dispose or to direct the disposition of _____.
    (iv) Shared power to dispose or to direct the disposition of _____.
    Instruction. For computations regarding securities which represent a 
right to acquire an underlying security see Sec.  240.13d-3(d)(1).
    Item 5. Ownership of 5 Percent or Less of a Class. If this statement 
is being filed to report the fact that as of the date hereof the 
reporting person has ceased to be the beneficial owner of more than 5 
percent of the class of securities, check the following [ ].
    Instruction. Dissolution of a group requires a response to this 
item.
    Item 6. Ownership of More than 5 Percent on Behalf of Another 
Person. If any other person is known to have the right to receive or the 
power to direct the receipt of dividends from, or the proceeds from the 
sale of, such securities, a statement to that effect should be included 
in response to this item and, if such interest relates to more than 5 
percent of the class, such person should be identified. A listing of the 
shareholders of an investment company registered under the Investment 
Company Act of 1940 or the beneficiaries of employee benefit plan, 
pension fund or endowment fund is not required.
    Item 7. Identification and Classification of the Subsidiary Which 
Acquired the Security Being Reported on by the Parent Holding Company or 
Control Person. If a parent holding company or control person has filed 
this schedule pursuant to Rule 13d-1(b)(1)(ii)(G), so indicate under 
Item 3(g) and attach an exhibit stating the identity and the Item 3 
classification of the relevant subsidiary. If a parent holding company 
or control person has filed this schedule pursuant to Rule 13d-1(c) or 
Rule 13d-1(d), attach an exhibit stating the identification of the 
relevant subsidiary.

    Item 8. Identification and Classification of Members of the Group

    If a group has filed this schedule pursuant to Sec.  240.13d-
1(b)(1)(ii)(J), so indicate under Item 3(j) and attach an exhibit 
stating the identity and Item 3 classification of each member of the 
group. If a group has filed this schedule pursuant to Rule 13d-1(c) or 
Rule 13d-1(d), attach an exhibit stating the identity of each member of 
the group.
    Item 9. Notice of Dissolution of Group. Notice of dissolution of a 
group may be furnished as an exhibit stating the date of the dissolution 
and that all further filings with respect to transactions in the 
security reported on will be filed, if required, by members of the 
group, in their individual capacity. See Item 5.

                         Item 10. Certifications

    (a) The following certification shall be included if the statement 
is filed pursuant to Sec.  240.13d-1(b):
    By signing below I certify that, to the best of my knowledge and 
belief, the securities referred to above were acquired and are held in 
the ordinary course of business and were not acquired and are not held 
for the purpose of or with the effect of changing or influencing the 
control of the issuer of the securities and were not acquired and are 
not held in connection with or as a participant in any transaction 
having that purpose or effect, other than activities solely in 
connection with a nomination under Sec.  240.14a-11.
    (b) The following certification shall be included if the statement 
is filed pursuant to Sec.  240.13d-1(b)(1)(ii)(J), or if the statement 
is filed pursuant to Sec.  240.13d-1(b)(1)(ii)(K) and a member of the 
group is a non-U.S. institution eligible to file pursuant to Sec.  
240.13d-1(b)(1)(ii)(J):
    By signing below I certify that, to the best of my knowledge and 
belief, the foreign regulatory scheme applicable to [insert particular 
category of institutional investor] is substantially comparable to the 
regulatory scheme applicable to the functionally equivalent U.S. 
institution(s). I also undertake to furnish to the Commission staff, 
upon request, information that would otherwise be disclosed in a 
Schedule 13D.
    (c) The following certification shall be included if the statement 
is filed pursuant to Sec.  240.13d-1(c):
    By signing below I certify that, to the best of my knowledge and 
belief, the securities referred to above were not acquired and are not 
held for the purpose of or with the effect of changing or influencing 
the control of the issuer of the securities and were not acquired and 
are not held in connection with or as a participant in any transaction 
having that purpose or effect, other than activities solely in 
connection with a nomination under Sec.  240.14a-11.
    Signature. After reasonable inquiry and to the best of my knowledge 
and belief, I certify that the information set forth in this statement 
is true, complete and correct.

[[Page 186]]

    Dated:__
                                                                  _____.
                                                              Signature.
                                                                  _____.
                                                             Name/Title.

    The original statement shall be signed by each person on whose 
behalf the statement is filed or his authorized representative. If the 
statement is signed on behalf of a person by his authorized 
representative other than an executive officer or general partner of the 
filing person, evidence of the representative's authority to sign on 
behalf of such person shall be filed with the statement, Provided, 
however, That a power of attorney for this purpose which is already on 
file with the Commission may be incorporated by reference. The name and 
any title of each person who signs the statement shall be typed or 
printed beneath his signature.

    Note: Schedules filed in paper format shall include a signed 
original and five copies of the schedule, including all exhibits. See 
Rule 13d-7 for other parties for whom copies are to be sent.

    Attention: Intentional misstatements or omissions of fact constitute 
Federal criminal violations (see 18 U.S.C. 1001).

[43 FR 18499, Apr. 28, 1978, as amended at 43 FR 55756, Nov. 29, 1978; 
44 FR 2148, Jan. 9, 1979; 44 FR 11751, Mar. 2, 1979; 61 FR 49959, Sept. 
24, 1996; 62 FR 35340, July 1, 1997; 63 FR 2867, Jan. 16, 1998; 63 FR 
15287, Mar. 31, 1998; 72 FR 45112, Aug. 10, 2007; 73 FR 17813, Apr. 1, 
2008; 73 FR 60089, Oct. 9, 2008; 75 FR 56780, Sept. 16, 2010]



Sec.  240.13e-1  Purchase of securities by the issuer during a 
third-party tender offer.

    An issuer that has received notice that it is the subject of a 
tender offer made under Section 14(d)(1) of the Act (15 U.S.C. 78n), 
that has commenced under Sec.  240.14d-2 must not purchase any of its 
equity securities during the tender offer unless the issuer first:
    (a) Files a statement with the Commission containing the following 
information:
    (1) The title and number of securities to be purchased;
    (2) The names of the persons or classes of persons from whom the 
issuer will purchase the securities;
    (3) The name of any exchange, inter-dealer quotation system or any 
other market on or through which the securities will be purchased;
    (4) The purpose of the purchase;
    (5) Whether the issuer will retire the securities, hold the 
securities in its treasury, or dispose of the securities. If the issuer 
intends to dispose of the securities, describe how it intends to do so; 
and
    (6) The source and amount of funds or other consideration to be used 
to make the purchase. If the issuer borrows any funds or other 
consideration to make the purchase or enters any agreement for the 
purpose of acquiring, holding, or trading the securities, describe the 
transaction and agreement and identify the parties; and
    (b) Pays the fee required by Sec.  240.0-11 when it files the 
initial statement.
    (c) This section does not apply to periodic repurchases in 
connection with an employee benefit plan or other similar plan of the 
issuer so long as the purchases are made in the ordinary course and not 
in response to the tender offer.

    Instruction to Sec.  240.13e-1: File eight copies if paper filing is 
permitted.

[64 FR 61452, Nov. 10, 1999]



Sec.  240.13e-2  [Reserved]



Sec.  240.13e-3  Going private transactions by certain issuers or their
affiliates.

    (a) Definitions. Unless indicated otherwise or the context otherwise 
requires, all terms used in this section and in Schedule 13E-3 [Sec.  
240.13e-100] shall have the same meaning as in the Act or elsewhere in 
the General Rules and Regulations thereunder. In addition, the following 
definitions apply:
    (1) An affiliate of an issuer is a person that directly or 
indirectly through one or more intermediaries controls, is controlled 
by, or is under common control with such issuer. For the purposes of 
this section only, a person who is not an affiliate of an issuer at the 
commencement of such person's tender offer for a class of equity 
securities of such issuer will not be deemed an affiliate of such issuer 
prior to the stated termination of such tender offer and any extensions 
thereof;
    (2) The term purchase means any acquisition for value including, but 
not limited to, (i) any acquisition pursuant to the dissolution of an 
issuer subsequent to the sale or other disposition of substantially all 
the assets of such

[[Page 187]]

issuer to its affiliate, (ii) any acquisition pursuant to a merger, 
(iii) any acquisition of fractional interests in connection with a 
reverse stock split, and (iv) any acquisition subject to the control of 
an issuer or an affiliate of such issuer;
    (3) A Rule 13e-3 transaction is any transaction or series of 
transactions involving one or more of the transactions described in 
paragraph (a)(3)(i) of this section which has either a reasonable 
likelihood or a purpose of producing, either directly or indirectly, any 
of the effects described in paragraph (a)(3)(ii) of this section;
    (i) The transactions referred to in paragraph (a)(3) of this section 
are:
    (A) A purchase of any equity security by the issuer of such security 
or by an affiliate of such issuer;
    (B) A tender offer for or request or invitation for tenders of any 
equity security made by the issuer of such class of securities or by an 
affiliate of such issuer; or
    (C) A solicitation subject to Regulation 14A [Sec. Sec.  240.14a-1 
to 240.14b-1] of any proxy, consent or authorization of, or a 
distribution subject to Regulation 14C [Sec. Sec.  240.14c-1 to 14c-101] 
of information statements to, any equity security holder by the issuer 
of the class of securities or by an affiliate of such issuer, in 
connection with: a merger, consolidation, reclassification, 
recapitalization, reorganization or similar corporate transaction of an 
issuer or between an issuer (or its subsidiaries) and its affiliate; a 
sale of substantially all the assets of an issuer to its affiliate or 
group of affiliates; or a reverse stock split of any class of equity 
securities of the issuer involving the purchase of fractional interests.
    (ii) The effects referred to in paragraph (a)(3) of this section 
are:
    (A) Causing any class of equity securities of the issuer which is 
subject to section 12(g) or section 15(d) of the Act to become eligible 
for termination of registration under Rule 12g-4 (Sec.  240.12g-4) or 
Rule 12h-6 (Sec.  240.12h-6), or causing the reporting obligations with 
respect to such class to become eligible for termination under Rule 12h-
6 (Sec.  240.12h-6); or suspension under Rule 12h-3 (Sec.  240.12h-3) or 
section 15(d); or
    (B) Causing any class of equity securities of the issuer which is 
either listed on a national securities exchange or authorized to be 
quoted in an inter-dealer quotation system of a registered national 
securities association to be neither listed on any national securities 
exchange nor authorized to be quoted on an inter-dealer quotation system 
of any registered national securities association.
    (4) An unaffiliated security holder is any security holder of an 
equity security subject to a Rule 13e-3 transaction who is not an 
affiliate of the issuer of such security.
    (b) Application of section to an issuer (or an affiliate of such 
issuer) subject to section 12 of the Act. (1) It shall be a fraudulent, 
deceptive or manipulative act or practice, in connection with a Rule 
13e-3 transaction, for an issuer which has a class of equity securities 
registered pursuant to section 12 of the Act or which is a closed-end 
investment company registered under the Investment Company Act of 1940, 
or an affiliate of such issuer, directly or indirectly
    (i) To employ any device, scheme or artifice to defraud any person;
    (ii) To make any untrue statement of a material fact or to omit to 
state a material fact necessary in order to make the statements made, in 
light of the circumstances under which they were made, not misleading; 
or
    (iii) To engage in any act, practice or course of business which 
operates or would operate as a fraud or deceit upon any person.
    (2) As a means reasonably designed to prevent fraudulent, deceptive 
or manipulative acts or practices in connection with any Rule 13e-3 
transaction, it shall be unlawful for an issuer which has a class of 
equity securities registered pursuant to section 12 of the Act, or an 
affiliate of such issuer, to engage, directly or indirectly, in a Rule 
13e-3 transaction unless:
    (i) Such issuer or affiliate complies with the requirements of 
paragraphs (d), (e) and (f) of this section; and
    (ii) The Rule 13e-3 transaction is not in violation of paragraph 
(b)(1) of this section.
    (c) Application of section to an issuer (or an affiliate of such 
issuer) subject to

[[Page 188]]

section 15(d) of the Act. (1) It shall be unlawful as a fraudulent, 
deceptive or manipulative act or practice for an issuer which is 
required to file periodic reports pursuant to Section 15(d) of the Act, 
or an affiliate of such issuer, to engage, directly or indirectly, in a 
Rule 13e-3 transaction unless such issuer or affiliate complies with the 
requirements of paragraphs (d), (e) and (f) of this section.
    (2) An issuer or affiliate which is subject to paragraph (c)(1) of 
this section and which is soliciting proxies or distributing information 
statements in connection with a transaction described in paragraph 
(a)(3)(i)(A) of this section may elect to use the timing procedures for 
conducting a solicitation subject to Regulation 14A (Sec. Sec.  240.14a-
1 to 240.14b-1) or a distribution subject to Regulation 14C (Sec. Sec.  
240.14c-1 to 240.14c-101) in complying with paragraphs (d), (e) and (f) 
of this section, provided that if an election is made, such solicitation 
or distribution is conducted in accordance with the requirements of the 
respective regulations, including the filing of preliminary copies of 
soliciting materials or an information statement at the time specified 
in Regulation 14A or 14C, respectively.
    (d) Material required to be filed. The issuer or affiliate engaging 
in a Rule 13e-3 transaction must file with the Commission:
    (1) A Schedule 13E-3 (Sec.  240.13e-100), including all exhibits;
    (2) An amendment to Schedule 13E-3 reporting promptly any material 
changes in the information set forth in the schedule previously filed; 
and
    (3) A final amendment to Schedule 13E-3 reporting promptly the 
results of the Rule 13e-3 transaction.
    (e) Disclosure of information to security holders. (1) In addition 
to disclosing the information required by any other applicable rule or 
regulation under the federal securities laws, the issuer or affiliate 
engaging in a Sec.  240.13e-3 transaction must disclose to security 
holders of the class that is the subject of the transaction, as 
specified in paragraph (f) of this section, the following:
    (i) The information required by Item 1 of Schedule 13E-3 (Sec.  
240.13e-100) (Summary Term Sheet);
    (ii) The information required by Items 7, 8 and 9 of Schedule 13E-3, 
which must be prominently disclosed in a ``Special Factors'' section in 
the front of the disclosure document;
    (iii) A prominent legend on the outside front cover page that 
indicates that neither the Securities and Exchange Commission nor any 
state securities commission has: approved or disapproved of the 
transaction; passed upon the merits or fairness of the transaction; or 
passed upon the adequacy or accuracy of the disclosure in the document. 
The legend also must make it clear that any representation to the 
contrary is a criminal offense;
    (iv) The information concerning appraisal rights required by Sec.  
229.1016(f) of this chapter; and
    (v) The information required by the remaining items of Schedule 13E-
3, except for Sec.  229.1016 of this chapter (exhibits), or a fair and 
adequate summary of the information.

    Instructions to paragraph (e)(1): 1. If the Rule 13e-3 transaction 
also is subject to Regulation 14A (Sec. Sec.  240.14a-1 through 240.14b-
2) or 14C (Sec. Sec.  240.14c-1 through 240.14c-101), the registration 
provisions and rules of the Securities Act of 1933, Regulation 14D or 
Sec.  240.13e-4, the information required by paragraph (e)(1) of this 
section must be combined with the proxy statement, information 
statement, prospectus or tender offer material sent or given to security 
holders.
    2. If the Rule 13e-3 transaction involves a registered securities 
offering, the legend required by Sec.  229.501(b)(7) of this chapter 
must be combined with the legend required by paragraph (e)(1)(iii) of 
this section.
    3. The required legend must be written in clear, plain language.

    (2) If there is any material change in the information previously 
disclosed to security holders, the issuer or affiliate must disclose the 
change promptly to security holders as specified in paragraph 
(f)(1)(iii) of this section.
    (f) Dissemination of information to security holders. (1) If the 
Rule 13e-3 transaction involves a purchase as described in paragraph 
(a)(3)(i)(A) of this section or a vote, consent, authorization, or 
distribution of information statements as described in paragraph 
(a)(3)(i)(C) of this section, the issuer or affiliate engaging in the 
Rule 13e-3 transaction shall:

[[Page 189]]

    (i) Provide the information required by paragraph (e) of this 
section: (A) In accordance with the provisions of any applicable Federal 
or State law, but in no event later than 20 days prior to: any such 
purchase; any such vote, consent or authorization; or with respect to 
the distribution of information statements, the meeting date, or if 
corporate action is to be taken by means of the written authorization or 
consent of security holders, the earliest date on which corporate action 
may be taken: Provided, however, That if the purchase subject to this 
section is pursuant to a tender offer excepted from Rule 13e-4 by 
paragraph (g)(5) of Rule 13e-4, the information required by paragraph 
(e) of this section shall be disseminated in accordance with paragraph 
(e) of Rule 13e-4 no later than 10 business days prior to any purchase 
pursuant to such tender offer, (B) to each person who is a record holder 
of a class of equity securities subject to the Rule 13e-3 transaction as 
of a date not more than 20 days prior to the date of dissemination of 
such information.
    (ii) If the issuer or affiliate knows that securities of the class 
of securities subject to the Rule 13e-3 transaction are held of record 
by a broker, dealer, bank or voting trustee or their nominees, such 
issuer or affiliate shall (unless Rule 14a-13(a) [Sec.  240.14a-13(a)] 
or 14c-7 [Sec.  240.14c-7] is applicable) furnish the number of copies 
of the information required by paragraph (e) of this section that are 
requested by such persons (pursuant to inquiries by or on behalf of the 
issuer or affiliate), instruct such persons to forward such information 
to the beneficial owners of such securities in a timely manner and 
undertake to pay the reasonable expenses incurred by such persons in 
forwarding such information; and
    (iii) Promptly disseminate disclosure of material changes to the 
information required by paragraph (d) of this section in a manner 
reasonably calculated to inform security holders.
    (2) If the Rule 13e-3 transaction is a tender offer or a request or 
invitation for tenders of equity securities which is subject to 
Regulation 14D [Sec. Sec.  240.14d-1 to 240.14d-101] or Rule 13e-4 
[Sec.  240.13e-4], the tender offer containing the information required 
by paragraph (e) of this section, and any material change with respect 
thereto, shall be published, sent or given in accordance with Regulation 
14D or Rule 13e-4, respectively, to security holders of the class of 
securities being sought by the issuer or affiliate.
    (g) Exceptions. This section shall not apply to:
    (1) Any Rule 13e-3 transaction by or on behalf of a person which 
occurs within one year of the date of termination of a tender offer in 
which such person was the bidder and became an affiliate of the issuer 
as a result of such tender offer: Provided, That the consideration 
offered to unaffiliated security holders in such Rule 13e-3 transaction 
is at least equal to the highest consideration offered during such 
tender offer and Provided further, That:
    (i) If such tender offer was made for any or all securities of a 
class of the issuer;
    (A) Such tender offer fully disclosed such person's intention to 
engage in a Rule 13e-3 transaction, the form and effect of such 
transaction and, to the extent known, the proposed terms thereof; and
    (B) Such Rule 13e-3 transaction is substantially similar to that 
described in such tender offer; or
    (ii) If such tender offer was made for less than all the securities 
of a class of the issuer:
    (A) Such tender offer fully disclosed a plan of merger, a plan of 
liquidation or a similar binding agreement between such person and the 
issuer with respect to a Rule 13e-3 transaction; and
    (B) Such Rule 13e-3 transaction occurs pursuant to the plan of 
merger, plan of liquidation or similar binding agreement disclosed in 
the bidder's tender offer.
    (2) Any Rule 13e-3 transaction in which the security holders are 
offered or receive only an equity security Provided, That:
    (i) Such equity security has substantially the same rights as the 
equity security which is the subject of the Rule 13e-3 transaction 
including, but not limited to, voting, dividends, redemption and 
liquidation rights except that this requirement shall be deemed to be 
satisfied if unaffiliated security holders are offered common stock;

[[Page 190]]

    (ii) Such equity security is registered pursuant to section 12 of 
the Act or reports are required to be filed by the issuer thereof 
pursuant to section 15(d) of the Act; and
    (iii) If the security which is the subject of the Rule 13e-3 
transaction was either listed on a national securities exchange or 
authorized to be quoted in an interdealer quotation system of a 
registered national securities association, such equity security is 
either listed on a national securities exchange or authorized to be 
quoted in an inter-dealer quotation system of a registered national 
securities association.
    (3) [Reserved]
    (4) Redemptions, calls or similar purchases of an equity security by 
an issuer pursuant to specific provisions set forth in the instrument(s) 
creating or governing that class of equity securities; or
    (5) Any solicitation by an issuer with respect to a plan of 
reorganization under Chapter XI of the Bankruptcy Act, as amended, if 
made after the entry of an order approving such plan pursuant to section 
1125(b) of that Act and after, or concurrently with, the transmittal of 
information concerning such plan as required by section 1125(b) of that 
Act.
    (6) Any tender offer or business combination made in compliance with 
Sec.  230.802 of this chapter, Sec.  240.13e-4(h)(8) or Sec.  240.14d-
1(c) or any other kind of transaction that otherwise meets the 
conditions for reliance on the cross-border exemptions set forth in 
Sec.  240.13e-4(h)(8), Sec.  240.14d-1(c) or Sec.  230.802 of this 
chapter except for the fact that it is not technically subject to those 
rules.

    Instruction to Sec.  240.13e-3(g)(6): To the extent applicable, the 
acquiror must comply with the conditions set forth in Sec.  230.802 of 
this chapter, and Sec. Sec.  240.13e-4(h)(8) and 14d-1(c). If the 
acquiror publishes or otherwise disseminates an informational document 
to the holders of the subject securities in connection with the 
transaction, the acquiror must furnish an English translation of that 
informational document, including any amendments thereto, to the 
Commission under cover of Form CB (Sec.  239.800 of this chapter) by the 
first business day after publication or dissemination. If the acquiror 
is a foreign entity, it must also file a Form F-X (Sec.  239.42 of this 
chapter) with the Commission at the same time as the submission of the 
Form CB to appoint an agent for service in the United States.

[44 FR 46741, Aug. 8, 1979, as amended at 47 FR 11466, Mar. 16, 1982; 48 
FR 19877, May 3, 1983; 48 FR 34253, July 28, 1983; 51 FR 42059, Nov. 20, 
1986; 61 FR 24656, May 15, 1996; 64 FR 61403, 64 FR 61452, Nov. 10, 
1999; 73 FR 17813, Apr. 1, 2008; 73 FR 58323, Oct. 6, 2008; 73 FR 60090, 
Oct. 9, 2008]



Sec.  240.13e-4  Tender offers by issuers.

    (a) Definitions. Unless the context otherwise requires, all terms 
used in this section and in Schedule TO (Sec.  240.14d-100) shall have 
the same meaning as in the Act or elsewhere in the General Rules and 
Regulations thereunder. In addition, the following definitions shall 
apply:
    (1) The term issuer means any issuer which has a class of equity 
security registered pursuant to section 12 of the Act, or which is 
required to file periodic reports pursuant to section 15(d) of the Act, 
or which is a closed-end investment company registered under the 
Investment Company Act of 1940.
    (2) The term issuer tender offer refers to a tender offer for, or a 
request or invitation for tenders of, any class of equity security, made 
by the issuer of such class of equity security or by an affiliate of 
such issuer.
    (3) As used in this section and in Schedule TO (Sec.  240.14d-100), 
the term business day means any day, other than Saturday, Sunday, or a 
Federal holiday, and shall consist of the time period from 12:01 a.m. 
through 12:00 midnight Eastern Time. In computing any time period under 
this Rule or Schedule TO, the date of the event that begins the running 
of such time period shall be included except that if such event occurs 
on other than a business day such period shall begin to run on and shall 
include the first business day thereafter.
    (4) The term commencement means 12:01 a.m. on the date that the 
issuer or affiliate has first published, sent or given the means to 
tender to security holders. For purposes of this section, the means to 
tender includes the transmittal form or a statement regarding how the 
transmittal form may be obtained.
    (5) The term termination means the date after which securities may 
not be

[[Page 191]]

tendered pursuant to an issuer tender offer.
    (6) The term security holders means holders of record and beneficial 
owners of securities of the class of equity security which is the 
subject of an issuer tender offer.
    (7) The term security position listing means, with respect to the 
securities of any issuer held by a registered clearing agency in the 
name of the clearing agency or its nominee, a list of those participants 
in the clearing agency on whose behalf the clearing agency holds the 
issuer's securities and of the participants' respective positions in 
such securities as of a specified date.
    (b) Filing, disclosure and dissemination. As soon as practicable on 
the date of commencement of the issuer tender offer, the issuer or 
affiliate making the issuer tender offer must comply with:
    (1) The filing requirements of paragraph (c)(2) of this section;
    (2) The disclosure requirements of paragraph (d)(1) of this section; 
and
    (3) The dissemination requirements of paragraph (e) of this section.
    (c) Material required to be filed. The issuer or affiliate making 
the issuer tender offer must file with the Commission:
    (1) All written communications made by the issuer or affiliate 
relating to the issuer tender offer, from and including the first public 
announcement, as soon as practicable on the date of the communication;
    (2) A Schedule TO (Sec.  240.14d-100), including all exhibits;
    (3) An amendment to Schedule TO (Sec.  240.14d-100) reporting 
promptly any material changes in the information set forth in the 
schedule previously filed; and
    (4) A final amendment to Schedule TO (Sec.  240.14d-100) reporting 
promptly the results of the issuer tender offer.

    Instructions to Sec.  240.13e-4(c): 1. Pre-commencement 
communications must be filed under cover of Schedule TO (Sec.  240.14d-
100) and the box on the cover page of the schedule must be marked.
    2. Any communications made in connection with an exchange offer 
registered under the Securities Act of 1933 need only be filed under 
Sec.  230.425 of this chapter and will be deemed filed under this 
section.
    3. Each pre-commencement written communication must include a 
prominent legend in clear, plain language advising security holders to 
read the tender offer statement when it is available because it contains 
important information. The legend also must advise investors that they 
can get the tender offer statement and other filed documents for free at 
the Commission's web site and explain which documents are free from the 
issuer.
    4. See Sec. Sec.  230.135, 230.165 and 230.166 of this chapter for 
pre-commencement communications made in connection with registered 
exchange offers.
    5. ``Public announcement'' is any oral or written communication by 
the issuer, affiliate or any person authorized to act on their behalf 
that is reasonably designed to, or has the effect of, informing the 
public or security holders in general about the issuer tender offer.

    (d) Disclosure of tender offer information to security holders. (1) 
The issuer or affiliate making the issuer tender offer must disclose, in 
a manner prescribed by paragraph (e)(1) of this section, the following:
    (i) The information required by Item 1 of Schedule TO (Sec.  
240.14d-100) (summary term sheet); and
    (ii) The information required by the remaining items of Schedule TO 
for issuer tender offers, except for Item 12 (exhibits), or a fair and 
adequate summary of the information.
    (2) If there are any material changes in the information previously 
disclosed to security holders, the issuer or affiliate must disclose the 
changes promptly to security holders in a manner specified in paragraph 
(e)(3) of this section.
    (3) If the issuer or affiliate disseminates the issuer tender offer 
by means of summary publication as described in paragraph (e)(1)(iii) of 
this section, the summary advertisement must not include a transmittal 
letter that would permit security holders to tender securities sought in 
the offer and must disclose at least the following information:
    (i) The identity of the issuer or affiliate making the issuer tender 
offer;
    (ii) The information required by Sec.  229.1004(a)(1) and Sec.  
229.1006(a) of this chapter;
    (iii) Instructions on how security holders can obtain promptly a 
copy of the statement required by paragraph (d)(1) of this section, at 
the issuer or affiliate's expense; and

[[Page 192]]

    (iv) A statement that the information contained in the statement 
required by paragraph (d)(1) of this section is incorporated by 
reference.
    (e) Dissemination of tender offers to security holders. An issuer 
tender offer will be deemed to be published, sent or given to security 
holders if the issuer or affiliate making the issuer tender offer 
complies fully with one or more of the methods described in this 
section.
    (1) For issuer tender offers in which the consideration offered 
consists solely of cash and/or securities exempt from registration under 
section 3 of the Securities Act of 1933 (15 U.S.C. 77c):
    (i) Dissemination of cash issuer tender offers by long-form 
publication: By making adequate publication of the information required 
by paragraph (d)(1) of this section in a newspaper or newspapers, on the 
date of commencement of the issuer tender offer.
    (ii) Dissemination of any issuer tender offer by use of stockholder 
and other lists:
    (A) By mailing or otherwise furnishing promptly a statement 
containing the information required by paragraph (d)(1) of this section 
to each security holder whose name appears on the most recent 
stockholder list of the issuer;
    (B) By contacting each participant on the most recent security 
position listing of any clearing agency within the possession or access 
of the issuer or affiliate making the issuer tender offer, and making 
inquiry of each participant as to the approximate number of beneficial 
owners of the securities sought in the offer that are held by the 
participant;
    (C) By furnishing to each participant a sufficient number of copies 
of the statement required by paragraph (d)(1) of this section for 
transmittal to the beneficial owners; and
    (D) By agreeing to reimburse each participant promptly for its 
reasonable expenses incurred in forwarding the statement to beneficial 
owners.
    (iii) Dissemination of certain cash issuer tender offers by summary 
publication:
    (A) If the issuer tender offer is not subject to Sec.  240.13e-3, by 
making adequate publication of a summary advertisement containing the 
information required by paragraph (d)(3) of this section in a newspaper 
or newspapers, on the date of commencement of the issuer tender offer; 
and
    (B) By mailing or otherwise furnishing promptly the statement 
required by paragraph (d)(1) of this section and a transmittal letter to 
any security holder who requests a copy of the statement or transmittal 
letter.

    Instruction to paragraph (e)(1): For purposes of paragraphs 
(e)(1)(i) and (e)(1)(iii) of this section, adequate publication of the 
issuer tender offer may require publication in a newspaper with a 
national circulation, a newspaper with metropolitan or regional 
circulation, or a combination of the two, depending upon the facts and 
circumstances involved.

    (2) For tender offers in which the consideration consists solely or 
partially of securities registered under the Securities Act of 1933, a 
registration statement containing all of the required information, 
including pricing information, has been filed and a preliminary 
prospectus or a prospectus that meets the requirements of Section 10(a) 
of the Securities Act (15 U.S.C. 77j(a)), including a letter of 
transmittal, is delivered to security holders. However, for going-
private transactions (as defined by Sec.  240.13e-3) and roll-up 
transactions (as described by Item 901 of Regulation S-K (Sec.  229.901 
of this chapter)), a registration statement registering the securities 
to be offered must have become effective and only a prospectus that 
meets the requirements of Section 10(a) of the Securities Act may be 
delivered to security holders on the date of commencement.

    Instructions to paragraph (e)(2): 1. If the prospectus is being 
delivered by mail, mailing on the date of commencement is sufficient.
    2. A preliminary prospectus used under this section may not omit 
information under Sec.  230.430 or Sec.  230.430A of this chapter.
    3. If a preliminary prospectus is used under this section and the 
issuer must disseminate material changes, the tender offer must remain 
open for the period specified in paragraph (e)(3) of this section.
    4. If a preliminary prospectus is used under this section, tenders 
may be requested in accordance with Sec.  230.162(a) of this chapter.

    (3) If a material change occurs in the information published, sent 
or given to

[[Page 193]]

security holders, the issuer or affiliate must disseminate promptly 
disclosure of the change in a manner reasonably calculated to inform 
security holders of the change. In a registered securities offer where 
the issuer or affiliate disseminates the preliminary prospectus as 
permitted by paragraph (e)(2) of this section, the offer must remain 
open from the date that material changes to the tender offer materials 
are disseminated to security holders, as follows:
    (i) Five business days for a prospectus supplement containing a 
material change other than price or share levels;
    (ii) Ten business days for a prospectus supplement containing a 
change in price, the amount of securities sought, the dealer's 
soliciting fee, or other similarly significant change;
    (iii) Ten business days for a prospectus supplement included as part 
of a post-effective amendment; and
    (iv) Twenty business days for a revised prospectus when the initial 
prospectus was materially deficient.
    (f) Manner of making tender offer. (1) The issuer tender offer, 
unless withdrawn, shall remain open until the expiration of:
    (i) At least twenty business days from its commencement; and
    (ii) At least ten business days from the date that notice of an 
increase or decrease in the percentage of the class of securities being 
sought or the consideration offered or the dealer's soliciting fee to be 
given is first published, sent or given to security holders.

Provided, however, That, for purposes of this paragraph, the acceptance 
for payment by the issuer or affiliate of an additional amount of 
securities not to exceed two percent of the class of securities that is 
the subject of the tender offer shall not be deemed to be an increase. 
For purposes of this paragraph, the percentage of a class of securities 
shall be calculated in accordance with section 14(d)(3) of the Act.
    (2) The issuer or affiliate making the issuer tender offer shall 
permit securities tendered pursuant to the issuer tender offer to be 
withdrawn:
    (i) At any time during the period such issuer tender offer remains 
open; and
    (ii) If not yet accepted for payment, after the expiration of forty 
business days from the commencement of the issuer tender offer.
    (3) If the issuer or affiliate makes a tender offer for less than 
all of the outstanding equity securities of a class, and if a greater 
number of securities is tendered pursuant thereto than the issuer or 
affiliate is bound or willing to take up and pay for, the securities 
taken up and paid for shall be taken up and paid for as nearly as may be 
pro rata, disregarding fractions, according to the number of securities 
tendered by each security holder during the period such offer remains 
open; Provided, however, That this provision shall not prohibit the 
issuer or affiliate making the issuer tender offer from:
    (i) Accepting all securities tendered by persons who own, 
beneficially or of record, an aggregate of not more than a specified 
number which is less than one hundred shares of such security and who 
tender all their securities, before prorating securities tendered by 
others; or
    (ii) Accepting by lot securities tendered by security holders who 
tender all securities held by them and who, when tendering their 
securities, elect to have either all or none or at least a minimum 
amount or none accepted, if the issuer or affiliate first accepts all 
securities tendered by security holders who do not so elect;
    (4) In the event the issuer or affiliate making the issuer tender 
increases the consideration offered after the issuer tender offer has 
commenced, such issuer or affiliate shall pay such increased 
consideration to all security holders whose tendered securities are 
accepted for payment by such issuer or affiliate.
    (5) The issuer or affiliate making the tender offer shall either pay 
the consideration offered, or return the tendered securities, promptly 
after the termination or withdrawal of the tender offer.
    (6) Until the expiration of at least ten business days after the 
date of termination of the issuer tender offer, neither the issuer nor 
any affiliate shall make any purchases, otherwise than pursuant to the 
tender offer, of:

[[Page 194]]

    (i) Any security which is the subject of the issuer tender offer, or 
any security of the same class and series, or any right to purchase any 
such securities; and
    (ii) In the case of an issuer tender offer which is an exchange 
offer, any security being offered pursuant to such exchange offer, or 
any security of the same class and series, or any right to purchase any 
such security.
    (7) The time periods for the minimum offering periods pursuant to 
this section shall be computed on a concurrent as opposed to a 
consecutive basis.
    (8) No issuer or affiliate shall make a tender offer unless:
    (i) The tender offer is open to all security holders of the class of 
securities subject to the tender offer; and
    (ii) The consideration paid to any security holder for securities 
tendered in the tender offer is the highest consideration paid to any 
other security holder for securities tendered in the tender offer.
    (9) Paragraph (f)(8)(i) of this section shall not:
    (i) Affect dissemination under paragraph (e) of this section; or
    (ii) Prohibit an issuer or affiliate from making a tender offer 
excluding all security holders in a state where the issuer or affiliate 
is prohibited from making the tender offer by administrative or judicial 
action pursuant to a state statute after a good faith effort by the 
issuer or affiliate to comply with such statute.
    (10) Paragraph (f)(8)(ii) of this section shall not prohibit the 
offer of more than one type of consideration in a tender offer, provided 
that:
    (i) Security holders are afforded equal right to elect among each of 
the types of consideration offered; and
    (ii) The highest consideration of each type paid to any security 
holder is paid to any other security holder receiving that type of 
consideration.
    (11) If the offer and sale of securities constituting consideration 
offered in an issuer tender offer is prohibited by the appropriate 
authority of a state after a good faith effort by the issuer or 
affiliate to register or qualify the offer and sale of such securities 
in such state:
    (i) The issuer or affiliate may offer security holders in such state 
an alternative form of consideration; and
    (ii) Paragraph (f)(10) of this section shall not operate to require 
the issuer or affiliate to offer or pay the alternative form of 
consideration to security holders in any other state.
    (12)(i) Paragraph (f)(8)(ii) of this section shall not prohibit the 
negotiation, execution or amendment of an employment compensation, 
severance or other employee benefit arrangement, or payments made or to 
be made or benefits granted or to be granted according to such an 
arrangement, with respect to any security holder of the issuer, where 
the amount payable under the arrangement:
    (A) Is being paid or granted as compensation for past services 
performed, future services to be performed, or future services to be 
refrained from performing, by the security holder (and matters 
incidental thereto); and
    (B) Is not calculated based on the number of securities tendered or 
to be tendered in the tender offer by the security holder.
    (ii) The provisions of paragraph (f)(12)(i) of this section shall be 
satisfied and, therefore, pursuant to this non-exclusive safe harbor, 
the negotiation, execution or amendment of an arrangement and any 
payments made or to be made or benefits granted or to be granted 
according to that arrangement shall not be prohibited by paragraph 
(f)(8)(ii) of this section, if the arrangement is approved as an 
employment compensation, severance or other employee benefit arrangement 
solely by independent directors as follows:
    (A) The compensation committee or a committee of the board of 
directors that performs functions similar to a compensation committee of 
the issuer approves the arrangement, regardless of whether the issuer is 
a party to the arrangement, or, if an affiliate is a party to the 
arrangement, the compensation committee or a committee of the board of 
directors that performs functions similar to a compensation committee of 
the affiliate approves the arrangement; or
    (B) If the issuer's or affiliate's board of directors, as 
applicable, does not have a compensation committee or a

[[Page 195]]

committee of the board of directors that performs functions similar to a 
compensation committee or if none of the members of the issuer's or 
affiliate's compensation committee or committee that performs functions 
similar to a compensation committee is independent, a special committee 
of the board of directors formed to consider and approve the arrangement 
approves the arrangement; or
    (C) If the issuer or affiliate, as applicable, is a foreign private 
issuer, any or all members of the board of directors or any committee of 
the board of directors authorized to approve employment compensation, 
severance or other employee benefit arrangements under the laws or 
regulations of the home country approves the arrangement.

    Instructions to paragraph (f)(12)(ii): For purposes of determining 
whether the members of the committee approving an arrangement in 
accordance with the provisions of paragraph (f)(12)(ii) of this section 
are independent, the following provisions shall apply:
    1. If the issuer or affiliate, as applicable, is a listed issuer (as 
defined in Sec.  240.10A-3 of this chapter) whose securities are listed 
either on a national securities exchange registered pursuant to section 
6(a) of the Exchange Act (15 U.S.C. 78f(a)) or in an inter-dealer 
quotation system of a national securities association registered 
pursuant to section 15A(a) of the Exchange Act (15 U.S.C. 78o-3(a)) that 
has independence requirements for compensation committee members that 
have been approved by the Commission (as those requirements may be 
modified or supplemented), apply the issuer's or affiliate's definition 
of independence that it uses for determining that the members of the 
compensation committee are independent in compliance with the listing 
standards applicable to compensation committee members of the listed 
issuer.
    2. If the issuer or affiliate, as applicable, is not a listed issuer 
(as defined in Sec.  240.10A-3 of this chapter), apply the independence 
requirements for compensation committee members of a national securities 
exchange registered pursuant to section 6(a) of the Exchange Act (15 
U.S.C. 78f(a)) or an inter-dealer quotation system of a national 
securities association registered pursuant to section 15A(a) of the 
Exchange Act (15 U.S.C. 78o-3(a)) that have been approved by the 
Commission (as those requirements may be modified or supplemented). 
Whatever definition the issuer or affiliate, as applicable, chooses, it 
must apply that definition consistently to all members of the committee 
approving the arrangement.
    3. Notwithstanding Instructions 1 and 2 to paragraph (f)(12)(ii), if 
the issuer or affiliate, as applicable, is a closed-end investment 
company registered under the Investment Company Act of 1940, a director 
is considered to be independent if the director is not, other than in 
his or her capacity as a member of the board of directors or any board 
committee, an ``interested person'' of the investment company, as 
defined in section 2(a)(19) of the Investment Company Act of 1940 (15 
U.S.C. 80a-2(a)(19)).
    4. If the issuer or affiliate, as applicable, is a foreign private 
issuer, apply either the independence standards set forth in 
Instructions 1 and 2 to paragraph (f)(12)(ii) or the independence 
requirements of the laws, regulations, codes or standards of the home 
country of the issuer or affiliate, as applicable, for members of the 
board of directors or the committee of the board of directors approving 
the arrangement.
    5. A determination by the issuer's or affiliate's board of 
directors, as applicable, that the members of the board of directors or 
the committee of the board of directors, as applicable, approving an 
arrangement in accordance with the provisions of paragraph (f)(12)(ii) 
are independent in accordance with the provisions of this instruction to 
paragraph (f)(12)(ii) shall satisfy the independence requirements of 
paragraph (f)(12)(ii).

    Instruction to paragraph (f)(12): The fact that the provisions of 
paragraph (f)(12) of this section extend only to employment 
compensation, severance and other employee benefit arrangements and not 
to other arrangements, such as commercial arrangements, does not raise 
any inference that a payment under any such other arrangement 
constitutes consideration paid for securities in a tender offer.

    (13) Electronic filings. If the issuer or affiliate is an electronic 
filer, the minimum offering periods set forth in paragraph (f)(1) of 
this section shall be tolled for any period during which it fails to 
file in electronic format, absent a hardship exemption (Sec. Sec.  
232.201 and 232.202 of this chapter), the Schedule TO (Sec.  240.14d-
100), the tender offer material specified in Item 1016(a)(1) of 
Regulation M-A (Sec.  229.1016(a)(1) of this chapter), and any 
amendments thereto. If such documents were filed in paper pursuant to a 
hardship exemption (see Sec.  232.201 and Sec.  232.202 of this 
chapter), the minimum offering periods shall be tolled for any period 
during which a required confirming electronic copy of such Schedule and 
tender offer material is delinquent.

[[Page 196]]

    (g) The requirements of section 13(e) (1) of the Act and Rule 13e-4 
and Schedule TO (Sec.  240.14d-100) thereunder shall be deemed satisfied 
with respect to any issuer tender offer, including any exchange offer, 
where the issuer is incorporated or organized under the laws of Canada 
or any Canadian province or territory, is a foreign private issuer, and 
is not an investment company registered or required to be registered 
under the Investment Company Act of 1940, if less than 40 percent of the 
class of securities that is the subject of the tender offer is held by 
U. S. holders, and the tender offer is subject to, and the issuer 
complies with, the laws, regulations and policies of Canada and/or any 
of its provinces or territories governing the conduct of the offer 
(unless the issuer has received an exemption(s) from, and the issuer 
tender offer does not comply with, requirements that otherwise would be 
prescribed by this section), provided that:
    (1) Where the consideration for an issuer tender offer subject to 
this paragraph consists solely of cash, the entire disclosure document 
or documents required to be furnished to holders of the class of 
securities to be acquired shall be filed with the Commission on Schedule 
13E-4F (Sec.  240.13e-102) and disseminated to shareholders residing in 
the United States in accordance with such Canadian laws, regulations and 
policies; or
    (2) Where the consideration for an issuer tender offer subject to 
this paragraph includes securities to be issued pursuant to the offer, 
any registration statement and/or prospectus relating thereto shall be 
filed with the Commission along with the Schedule 13E-4F referred to in 
paragraph (g)(1) of this section, and shall be disseminated, together 
with the home jurisdiction document(s) accompanying such Schedule, to 
shareholders of the issuer residing in the United States in accordance 
with such Canadian laws, regulations and policies.

    Note: Notwithstanding the grant of an exemption from one or more of 
the applicable Canadian regulatory provisions imposing requirements that 
otherwise would be prescribed by this section, the issuer tender offer 
will be eligible to proceed in accordance with the requirements of this 
section if the Commission by order determines that the applicable 
Canadian regulatory provisions are adequate to protect the interest of 
investors.

    (h) This section shall not apply to:
    (1) Calls or redemptions of any security in accordance with the 
terms and conditions of its governing instruments;
    (2) Offers to purchase securities evidenced by a scrip certificate, 
order form or similar document which represents a fractional interest in 
a share of stock or similar security;
    (3) Offers to purchase securities pursuant to a statutory procedure 
for the purchase of dissenting security holders' securities;
    (4) Any tender offer which is subject to section 14(d) of the Act;
    (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 a plan as that term is defined in Sec.  242.100 
of this chapter, 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 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;
    (6) An issuer tender offer made solely to effect a rescission offer: 
Provided, however, That the offer is registered under the Securities Act 
of 1933 (15 U.S.C. 77a et seq.), and the consideration is equal to the 
price paid by each security holder, plus legal interest if the issuer 
elects to or is required to pay legal interest;
    (7) Offers by closed-end management investment companies to 
repurchase equity securities pursuant to Sec.  270.23c-3 of this 
chapter;
    (8) Cross-border tender offers (Tier I). Any issuer tender offer 
(including any exchange offer) where the issuer is a foreign private 
issuer as defined in Sec.  240.3b-4 if the following conditions are 
satisfied.

[[Page 197]]

    (i) Except in the case of an issuer tender offer that is commenced 
during the pendency of a tender offer made by a third party in reliance 
on Sec.  240.14d-1(c), U.S. holders do not hold more than 10 percent of 
the subject class sought in the offer (as determined under Instructions 
2 or 3 to paragraph (h)(8) and paragraph (i) of this section);
    (ii) The issuer or affiliate must permit U.S. holders to participate 
in the offer on terms at least as favorable as those offered any other 
holder of the same class of securities that is the subject of the offer; 
however:
    (A) Registered exchange offers. If the issuer or affiliate offers 
securities registered under the Securities Act of 1933 (15 U.S.C. 77a et 
seq.), the issuer or affiliate need not extend the offer to security 
holders in those states or jurisdictions that prohibit the offer or sale 
of the securities after the issuer or affiliate has made a good faith 
effort to register or qualify the offer and sale of securities in that 
state or jurisdiction, except that the issuer or affiliate must offer 
the same cash alternative to security holders in any such state or 
jurisdiction that it has offered to security holders in any other state 
or jurisdiction.
    (B) Exempt exchange offers. If the issuer or affiliate offers 
securities exempt from registration under Sec.  230.802 of this chapter, 
the issuer or affiliate need not extend the offer to security holders in 
those states or jurisdictions that require registration or 
qualification, except that the issuer or affiliate must offer the same 
cash alternative to security holders in any such state or jurisdiction 
that it has offered to security holders in any other state or 
jurisdiction.
    (C) Cash only consideration. The issuer or affiliate may offer U.S. 
holders cash only consideration for the tender of the subject 
securities, notwithstanding the fact that the issuer or affiliate is 
offering security holders outside the United States a consideration that 
consists in whole or in part of securities of the issuer or affiliate, 
if the issuer or affiliate has a reasonable basis for believing that the 
amount of cash is substantially equivalent to the value of the 
consideration offered to non-U.S. holders, and either of the following 
conditions are satisfied:
    (1) The offered security is a ``margin security'' within the meaning 
of Regulation T (12 CFR 220.2) and the issuer or affiliate undertakes to 
provide, upon the request of any U.S. holder or the Commission staff, 
the closing price and daily trading volume of the security on the 
principal trading market for the security as of the last trading day of 
each of the six months preceding the announcement of the offer and each 
of the trading days thereafter; or
    (2) If the offered security is not a ``margin security'' within the 
meaning of Regulation T (12 CFR 220.2), the issuer or affiliate 
undertakes to provide, upon the request of any U.S. holder or the 
Commission staff, an opinion of an independent expert stating that the 
cash consideration offered to U.S. holders is substantially equivalent 
to the value of the consideration offered security holders outside the 
United States.
    (D) Disparate tax treatment. If the issuer or affiliate offers 
``loan notes'' solely to offer sellers tax advantages not available in 
the United States and these notes are neither listed on any organized 
securities market nor registered under the Securities Act of 1933 (15 
U.S.C. 77a et seq.), the loan notes need not be offered to U.S. holders.
    (iii) Informational documents. (A) If the issuer or affiliate 
publishes or otherwise disseminates an informational document to the 
holders of the securities in connection with the issuer tender offer 
(including any exchange offer), the issuer or affiliate must furnish 
that informational document, including any amendments thereto, in 
English, to the Commission on Form CB (Sec.  249.480 of this chapter) by 
the first business day after publication or dissemination. If the issuer 
or affiliate is a foreign company, it must also file a Form F-X (Sec.  
239.42 of this chapter) with the Commission at the same time as the 
submission of Form CB to appoint an agent for service in the United 
States.
    (B) The issuer or affiliate must disseminate any informational 
document

[[Page 198]]

to U.S. holders, including any amendments thereto, in English, on a 
comparable basis to that provided to security holders in the home 
jurisdiction.
    (C) If the issuer or affiliate disseminates by publication in its 
home jurisdiction, the issuer or affiliate must publish the information 
in the United States in a manner reasonably calculated to inform U.S. 
holders of the offer.
    (iv) An investment company registered or required to be registered 
under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), 
other than a registered closed-end investment company, may not use this 
paragraph (h)(8); or
    (9) Any other transaction or transactions, if the Commission, upon 
written request or upon its own motion, exempts such transaction or 
transactions, either unconditionally, or on specified terms and 
conditions, as not constituting a fraudulent, deceptive or manipulative 
act or practice comprehended within the purpose of this section.
    (i) Cross-border tender offers (Tier II). Any issuer tender offer 
(including any exchange offer) that meets the conditions in paragraph 
(i)(1) of this section shall be entitled to the exemptive relief 
specified in paragraph (i)(2) of this section, provided that such issuer 
tender offer complies with all the requirements of this section other 
than those for which an exemption has been specifically provided in 
paragraph (i)(2) of this section. In addition, any issuer tender offer 
(including any exchange offer) subject only to the requirements of 
section 14(e) of the Act and Regulation 14E (Sec. Sec.  240.14e-1 
through 240.14e-8) thereunder that meets the conditions in paragraph 
(i)(1) of this section also shall be entitled to the exemptive relief 
specified in paragraph (i)(2) of this section, to the extent needed 
under the requirements of Regulation 14E, so long as the tender offer 
complies with all requirements of Regulation 14E other than those for 
which an exemption has been specifically provided in paragraph (i)(2) of 
this section:
    (1) Conditions. (i) The issuer is a foreign private issuer as 
defined in Sec.  240.3b-4 and is not an investment company registered or 
required to be registered under the Investment Company Act of 1940 (15 
U.S.C. 80a-1 et seq.), other than a registered closed-end investment 
company; and
    (ii) Except in the case of an issuer tender offer commenced during 
the pendency of a tender offer made by a third party in reliance on 
Sec.  240.14d-1(d), U.S. holders do not hold more than 40 percent of the 
class of securities sought in the offer (as determined in accordance 
with Instructions 2 or 3 to paragraphs (h)(8) and (i) of this section).
    (2) Exemptions. The issuer tender offer shall comply with all 
requirements of this section other than the following:
    (i) Equal treatment--loan notes. If the issuer or affiliate offers 
loan notes solely to offer sellers tax advantages not available in the 
United States and these notes are neither listed on any organized 
securities market nor registered under the Securities Act (15 U.S.C. 77a 
et seq.), the loan notes need not be offered to U.S. holders, 
notwithstanding paragraph (f)(8) and (h)(9) of this section.
    (ii) Equal treatment--separate U.S. and foreign offers. 
Notwithstanding the provisions of paragraph (f)(8) of this section, an 
issuer or affiliate conducting an issuer tender offer meeting the 
conditions of paragraph (i)(1) of this section may separate the offer 
into multiple offers: one offer made to U.S. holders, which also may 
include all holders of American Depositary Shares representing interests 
in the subject securities, and one or more offers made to non-U.S. 
holders. The U.S. offer must be made on terms at least as favorable as 
those offered any other holder of the same class of securities that is 
the subject of the tender offers. U.S. holders may be included in the 
foreign offer(s) only where the laws of the jurisdiction governing such 
foreign offer(s) expressly preclude the exclusion of U.S. holders from 
the foreign offer(s) and where the offer materials distributed to U.S. 
holders fully and adequately disclose the risks of participating in the 
foreign offer(s).
    (iii) Notice of extensions. Notice of extensions made in accordance 
with the requirements of the home jurisdiction law or practice will 
satisfy the requirements of Sec.  240.14e-1(d).

[[Page 199]]

    (iv) Prompt payment. Payment made in accordance with the 
requirements of the home jurisdiction law or practice will satisfy the 
requirements of Sec.  240.14e-1(c).
    (v) Suspension of withdrawal rights during counting of tendered 
securities. The issuer or affiliate may suspend withdrawal rights 
required under paragraph (f)(2) of this section at the end of the offer 
and during the period that securities tendered into the offer are being 
counted, provided that:
    (A) The issuer or affiliate has provided an offer period, including 
withdrawal rights, for a period of at least 20 U.S. business days;
    (B) At the time withdrawal rights are suspended, all offer 
conditions have been satisfied or waived, except to the extent that the 
issuer or affiliate is in the process of determining whether a minimum 
acceptance condition included in the terms of the offer has been 
satisfied by counting tendered securities; and
    (C) Withdrawal rights are suspended only during the counting process 
and are reinstated immediately thereafter, except to the extent that 
they are terminated through the acceptance of tendered securities.
    (vi) Early termination of an initial offering period. An issuer or 
affiliate conducting an issuer tender offer may terminate an initial 
offering period, including a voluntary extension of that period, if at 
the time the initial offering period and withdrawal rights terminate, 
the following conditions are met:
    (A) The initial offering period has been open for at least 20 U.S. 
business days;
    (B) The issuer or affiliate has adequately discussed the possibility 
of and the impact of the early termination in the original offer 
materials;
    (C) The issuer or affiliate provides a subsequent offering period 
after the termination of the initial offering period;
    (D) All offer conditions are satisfied as of the time when the 
initial offering period ends; and
    (E) The issuer or affiliate does not terminate the initial offering 
period or any extension of that period during any mandatory extension 
required under U.S. tender offer rules.

    Instructions to paragraph (h)(8) and (i) of this section: 1. Home 
jurisdiction means both the jurisdiction of the issuer's incorporation, 
organization or chartering and the principal foreign market where the 
issuer's securities are listed or quoted.
    2. U.S. holder means any security holder resident in the United 
States. To determine the percentage of outstanding securities held by 
U.S. holders:
    i. Calculate the U.S. ownership as of a date no more than 60 days 
before and no more than 30 days after the public announcement of the 
tender offer. If you are unable to calculate as of a date within these 
time frames, the calculation may be made as of the most recent 
practicable date before public announcement, but in no event earlier 
than 120 days before announcement;
    ii. Include securities underlying American Depositary Shares 
convertible or exchangeable into the securities that are the subject of 
the tender offer when calculating the number of subject securities 
outstanding, as well as the number held by U.S. holders. Exclude from 
the calculations other types of securities that are convertible or 
exchangeable into the securities that are the subject of the tender 
offer, such as warrants, options and convertible securities;
    iii. Use the method of calculating record ownership in Sec.  
240.12g3-2(a), except that your inquiry as to the amount of securities 
represented by accounts of customers resident in the United States may 
be limited to brokers, dealers, banks and other nominees located in the 
United States, your jurisdiction of incorporation, and the jurisdiction 
that is the primary trading market for the subject securities, if 
different than your jurisdiction of incorporation;
    iv. If, after reasonable inquiry, you are unable to obtain 
information about the amount of securities represented by accounts of 
customers resident in the United States, you may assume, for purposes of 
this definition, that the customers are residents of the jurisdiction in 
which the nominee has its principal place of business; and
    v. Count securities as beneficially owned by residents of the United 
States as reported on reports of beneficial ownership that are provided 
to you or publicly filed and based on information otherwise provided to 
you.
    3. If you are unable to conduct the analysis of U.S. ownership set 
forth in Instruction 2 above, U.S. holders will be presumed to hold 10 
percent or less of the outstanding subject securities (40 percent for 
Tier II) so long as there is a primary trading market outside the United 
States, as defined in Sec.  240.12h-6(f)(5) of this chapter, unless:

[[Page 200]]

    i. Average daily trading volume of the subject securities in the 
United States for a recent twelve-month period ending on a date no more 
than 60 days before the public announcement of the tender offer exceeds 
10 percent (or 40 percent) of the average daily trading volume of that 
class of securities on a worldwide basis for the same period; or
    ii. The most recent annual report or annual information filed or 
submitted by the issuer with securities regulators of the home 
jurisdiction or with the Commission or any jurisdiction in which the 
subject securities trade before the public announcement of the offer 
indicates that U.S. holders hold more than 10 percent (or 40 percent) of 
the outstanding subject class of securities; or
    iii. You know or have reason to know, before the public announcement 
of the offer, that the level of U.S. ownership of the subject securities 
exceeds 10 percent (or 40 percent) of such securities. As an example, 
you are deemed to know information about U.S. ownership of the subject 
class of securities that is publicly available and that appears in any 
filing with the Commission or any regulatory body in the home 
jurisdiction and, if different, the non-U.S. jurisdiction in which the 
primary trading market for the subject class of securities is located. 
You are also deemed to know information obtained or readily available 
from any other source that is reasonably reliable, including from 
persons you have retained to advise you about the transaction, as well 
as from third-party information providers. These examples are not 
intended to be exclusive.
    4. United States means the United States of America, its territories 
and possessions, any State of the United States, and the District of 
Columbia.
    5. The exemptions provided by paragraphs (h)(8) and (i) of this 
section are not available for any securities transaction or series of 
transactions that technically complies with paragraph (h)(8) and (i) of 
this section but are part of a plan or scheme to evade the provisions of 
this section.

    (j)(1) It shall be a fraudulent, deceptive or manipulative act or 
practice, in connection with an issuer tender offer, for an issuer or an 
affiliate of such issuer, in connection with an issuer tender offer:
    (i) To employ any device, scheme or artifice to defraud any person;
    (ii) To make any untrue statement of a material fact or to omit to 
state a material fact necessary in order to make the statements made, in 
the light of the circumstances under which they were made, not 
misleading; or
    (iii) To engage in any act, practice or course of business which 
operates or would operate as a fraud or deceit upon any person.
    (2) As a means reasonably designed to prevent fraudulent, deceptive 
or manipulative acts or practices in connection with any issuer tender 
offer, it shall be unlawful for an issuer or an affiliate of such issuer 
to make an issuer tender offer unless:
    (i) Such issuer or affiliate complies with the requirements of 
paragraphs (b), (c), (d), (e) and (f) of this section; and
    (ii) The issuer tender offer is not in violation of paragraph (j)(1) 
of this section.

[44 FR 49410, Aug. 22, 1979]

    Editorial Note: For Federal Register citations affecting Sec.  
240.13e-4, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.govinfo.gov.



Sec.  240.13e-100  Schedule 13E-3, Transaction statement under
section 13(e) of the Securities Exchange Act of 1934 and Rule 13e-3 
(Sec.  240.13e-3) thereunder.

Securities and Exchange Commission,
Washington, D.C. 20549

Rule 13e-3 Transaction Statement under Section 13(e) of the Securities 
Exchange Act of 1934 (Amendment No. _)
________________________________________________________________________

(Name of the Issuer)

________________________________________________________________________

(Names of Persons Filing Statement)

________________________________________________________________________

(Title of Class of Securities)

________________________________________________________________________

(CUSIP Number of Class of Securities)

________________________________________________________________________

(Name, Address, and Telephone Numbers of Person Authorized to Receive 
Notices and Communications on Behalf of the Persons Filing Statement)

    This statement is filed in connection with (check the appropriate 
box):
    a. [ ] The filing of solicitation materials or an information 
statement subject to Regulation 14A (Sec. Sec.  240.14a-1 through 
240.14b-2), Regulation 14C (Sec. Sec.  240.14c-1 through 240.14c-101) or 
Rule 13e-3(c) (Sec.  240.13e-3(c)) under the Securities Exchange Act of 
1934 (``the Act'').
    b. [ ] The filing of a registration statement under the Securities 
Act of 1933.
    c. [ ] A tender offer.
    d. [ ] None of the above.
    Check the following box if the soliciting materials or information 
statement referred

[[Page 201]]

to in checking box (a) are preliminary copies: [ ]
    Check the following box if the filing is a final amendment reporting 
the results of the transaction [ ]

                        Calculation of Filing Fee
------------------------------------------------------------------------
          Transaction valuation *               Amount of filing fee
------------------------------------------------------------------------
 
------------------------------------------------------------------------
 * Set forth the amount on which the filing fee is calculated and state
  how it was determined.

    [ ] Check the box if any part of the fee is offset as provided by 
Sec.  240.0-11(a)(2) and identify the filing with which the offsetting 
fee was previously paid. Identify the previous filing by registration 
statement number, or the Form or Schedule and the date of its filing.
Amount Previously Paid:_________________________________________________
Form or Registration No.:_______________________________________________
Filing Party:___________________________________________________________
Date Filed:_____________________________________________________________
    General Instructions:
    A. File eight copies of the statement, including all exhibits, with 
the Commission if paper filing is permitted.
    B. This filing must be accompanied by a fee payable to the 
Commission as required by Sec.  240.0-11(b).
    C. If the statement is filed by a general or limited partnership, 
syndicate or other group, the information called for by Items 3, 5, 6, 
10 and 11 must be given with respect to: (i) Each partner of the general 
partnership; (ii) each partner who is, or functions as, a general 
partner of the limited partnership; (iii) each member of the syndicate 
or group; and (iv) each person controlling the partner or member. If the 
statement is filed by a corporation or if a person referred to in (i), 
(ii), (iii) or (iv) of this Instruction is a corporation, the 
information called for by the items specified above must be given with 
respect to: (a) Each executive officer and director of the corporation; 
(b) each person controlling the corporation; and (c) each executive 
officer and director of any corporation or other person ultimately in 
control of the corporation.
    D. Depending on the type of Rule 13e-3 transaction (Sec.  240.13e-
3(a)(3)), this statement must be filed with the Commission:
    1. At the same time as filing preliminary or definitive soliciting 
materials or an information statement under Regulations 14A or 14C of 
the Act;
    2. At the same time as filing a registration statement under the 
Securities Act of 1933;
    3. As soon as practicable on the date a tender offer is first 
published, sent or given to security holders; or
    4. At least 30 days before any purchase of securities of the class 
of securities subject to the Rule 13e-3 transaction, if the transaction 
does not involve a solicitation, an information statement, the 
registration of securities or a tender offer, as described in paragraphs 
1, 2 or 3 of this Instruction; and
    5. If the Rule 13e-3 transaction involves a series of transactions, 
the issuer or affiliate must file this statement at the time indicated 
in paragraphs 1 through 4 of this Instruction for the first transaction 
and must amend the schedule promptly with respect to each subsequent 
transaction.
    E. If an item is inapplicable or the answer is in the negative, so 
state. The statement published, sent or given to security holders may 
omit negative and not applicable responses, except that responses to 
Items 7, 8 and 9 of this schedule must be provided in full. If the 
schedule includes any information that is not published, sent or given 
to security holders, provide that information or specifically 
incorporate it by reference under the appropriate item number and 
heading in the schedule. Do not recite the text of disclosure 
requirements in the schedule or any document published, sent or given to 
security holders. Indicate clearly the coverage of the requirements 
without referring to the text of the items.
    F. Information contained in exhibits to the statement may be 
incorporated by reference in answer or partial answer to any item unless 
it would render the answer misleading, incomplete, unclear or confusing. 
A copy of any information that is incorporated by reference or a copy of 
the pertinent pages of a document containing the information must be 
submitted with this statement as an exhibit, unless it was previously 
filed with the Commission electronically on EDGAR. If an exhibit 
contains information responding to more than one item in the schedule, 
all information in that exhibit may be incorporated by reference once in 
response to the several items in the schedule for which it provides an 
answer. Information incorporated by reference is deemed filed with the 
Commission for all purposes of the Act.
    G. If the Rule 13e-3 transaction also involves a transaction subject 
to Regulation 14A (Sec. Sec.  240.14a-1 through 240.14b-2) or 14C 
(Sec. Sec.  240.14c-1 through 240.14c-101) of the Act, the registration 
of securities under the Securities Act of 1933 and the General Rules and 
Regulations of that Act, or a tender offer subject to Regulation 14D 
(Sec. Sec.  240.14d-1 through 240.14d-101) or Sec.  240.13e-4, this 
statement must incorporate by reference the information contained in the 
proxy, information, registration or tender offer statement in answer to 
the items of this statement.
    H. The information required by the items of this statement is 
intended to be in addition to any disclosure requirements of any other 
form or schedule that may be filed with the Commission in connection 
with the Rule 13e-3 transaction. If those forms or schedules require 
less information on any

[[Page 202]]

topic than this statement, the requirements of this statement control.
    I. If the Rule 13e-3 transaction involves a tender offer, then a 
combined statement on Schedules 13E-3 and TO may be filed with the 
Commission under cover of Schedule TO (Sec.  240.14d-100). See 
Instruction J of Schedule TO (Sec.  240.14d-100).
    J. Amendments disclosing a material change in the information set 
forth in this statement may omit any information previously disclosed in 
this statement.

                       Item 1. Summary Term Sheet

    Furnish the information required by Item 1001 of Regulation M-A 
(Sec.  229.1001 of this chapter) unless information is disclosed to 
security holders in a prospectus that meets the requirements of Sec.  
230.421(d) of this chapter.

                   Item 2. Subject Company Information

    Furnish the information required by Item 1002 of Regulation M-A 
(Sec.  229.1002 of this chapter).

            Item 3. Identity and Background of Filing Person

    Furnish the information required by Item 1003(a) through (c) of 
Regulation M-A (Sec.  229.1003 of this chapter).

                    Item 4. Terms of the Transaction

    Furnish the information required by Item 1004(a) and (c) through (f) 
of Regulation M-A (Sec.  229.1004 of this chapter).

    Item 5. Past Contacts, Transactions, Negotiations and Agreements

    Furnish the information required by Item 1005(a) through (c) and (e) 
of Regulation M-A (Sec.  229.1005 of this chapter).

       Item 6. Purposes of the Transaction and Plans or Proposals

    Furnish the information required by Item 1006(b) and (c)(1) through 
(8) of Regulation M-A (Sec.  229.1006 of this chapter).
    Instruction to Item 6: In providing the information specified in 
Item 1006(c) for this item, discuss any activities or transactions that 
would occur after the Rule 13e-3 transaction.

           Item 7. Purposes, Alternatives, Reasons and Effects

    Furnish the information required by Item 1013 of Regulation M-A 
(Sec.  229.1013 of this chapter).

                   Item 8. Fairness of the Transaction

    Furnish the information required by Item 1014 of Regulation M-A 
(Sec.  229.1014 of this chapter).

         Item 9. Reports, Opinions, Appraisals and Negotiations

    Furnish the information required by Item 1015 of Regulation M-A 
(Sec.  229.1015 of this chapter).

       Item 10. Source and Amounts of Funds or Other Consideration

    Furnish the information required by Item 1007 of Regulation M-A 
(Sec.  229.1007 of this chapter).

         Item 11. Interest in Securities of the Subject Company

    Furnish the information required by Item 1008 of Regulation M-A 
(Sec.  229.1008 of this chapter).

               Item 12. The Solicitation or Recommendation

    Furnish the information required by Item 1012(d) and (e) of 
Regulation M-A (Sec.  229.1012 of this chapter).

                      Item 13. Financial Statements

    Furnish the information required by Item 1010(a) through (b) of 
Regulation M-A (Sec.  229.1010 of this chapter) for the issuer of the 
subject class of securities.
    Instructions to Item 13: 1. The disclosure materials disseminated to 
security holders may contain the summarized financial information 
required by Item 1010(c) of Regulation M-A (Sec.  229.1010 of this 
chapter) instead of the financial information required by Item 1010(a) 
and (b). In that case, the financial information required by Item 
1010(a) and (b) of Regulation M-A must be disclosed directly or 
incorporated by reference in the statement. If summarized financial 
information is disseminated to security holders, include appropriate 
instructions on how more complete financial information can be obtained. 
If the summarized financial information is prepared on the basis of a 
comprehensive body of accounting principles other than U.S. GAAP, the 
summarized financial information must be accompanied by a reconciliation 
as described in Instruction 2.
    2. If the financial statements required by this Item are prepared on 
the basis of a comprehensive body of accounting principles other than 
U.S. GAAP, provide a reconciliation to U.S. GAAP in accordance with Item 
17 of Form 20-F (Sec.  249.220f of this chapter).
    3. The filing person may incorporate by reference financial 
statements contained in any document filed with the Commission, solely 
for the purposes of this schedule, if: (a) The financial statements 
substantially meet the requirements of this Item; (b) an express 
statement is made that the financial statements are incorporated by 
reference; (c) the matter incorporated by reference is

[[Page 203]]

clearly identified by page, paragraph, caption or otherwise; and (d) if 
the matter incorporated by reference is not filed with this Schedule, an 
indication is made where the information may be inspected and copies 
obtained. Financial statements that are required to be presented in 
comparative form for two or more fiscal years or periods may not be 
incorporated by reference unless the material incorporated by reference 
includes the entire period for which the comparative data is required to 
be given. See General Instruction F to this Schedule.

    Item 14. Persons/Assets, Retained, Employed, Compensated or Used

    Furnish the information required by Item 1009 of Regulation M-A 
(Sec.  229.1009 of this chapter).

                     Item 15. Additional Information

    Furnish the information required by Item 1011(b) and (c) of 
Regulation M-A (Sec.  229.1011(b) and (c) of this chapter).

                            Item 16. Exhibits

    File as an exhibit to the Schedule all documents specified in Item 
1016(a) through (d), (f) and (g) of Regulation M-A (Sec.  229.1016 of 
this chapter).

Signature. After due inquiry and to the best of my knowledge and belief, 
I certify that the information set forth in this statement is true, 
complete and correct.

________________________________________________________________________
(Signature)

________________________________________________________________________
(Name and title)

________________________________________________________________________
(Date)

    Instruction to Signature: The statement must be signed by the filing 
person or that person's authorized representative. If the statement is 
signed on behalf of a person by an authorized representative (other than 
an executive officer of a corporation or general partner of a 
partnership), evidence of the representative's authority to sign on 
behalf of the person must be filed with the statement. The name and any 
title of each person who signs the statement must be typed or printed 
beneath the signature. See Sec.  240.12b-11 with respect to signature 
requirements.

[64 FR 61454, Nov. 10, 1999, as amended at 76 FR 6045, Feb. 2, 2011]



Sec.  240.13e-101  [Reserved]



Sec.  240.13e-102  Schedule 13E-4F. Tender offer statement pursuant to 
section 13(e) (1) of the Securities Exchange Act of 1934 and 
Sec. 240.13e-4 thereunder.

Securities and Exchange Commission
Washington, DC 20549
Schedule 13E-4F
Issuer Tender Offer Statement Pursuant to Section 13(e)(1) of the 
Securities Exchange Act of 1934
[Amendment No. __]
________________________________________________________________________
    (Exact name of Issuer as specified in its charter)
________________________________________________________________________
    (Translation of Issuer's Name into English (if applicable))
________________________________________________________________________
    (Jurisdiction of Issuer's Incorporation or Organization)
________________________________________________________________________
    (Name(s) of Person(s) Filing Statement)
________________________________________________________________________
    (Title of Class of Securities)
________________________________________________________________________
    (CUSIP Number of Class of Securities) (if applicable)
________________________________________________________________________
    (Name, address (including zip code) and telephone number (including 
area code) of person authorized to receive notices and communications on 
behalf of the person(s) filing statement)
________________________________________________________________________
    (Date tender offer first published, sent or given to 
securityholders)

Calculation of Filing Fee *
    Transaction Valuation
    Amount of Filing Fee

    * Set forth the amount on which the filing fee is calculated and 
state how it was determined. See General Instruction II. C. for rules 
governing the calculation of the filing fee.

[ ] Check box if any part of the fee is offset as provided by Rule 0-
          11(a)(2) and identify the filing with which the offsetting fee 
          was previously paid. Identify the previous filing by 
          registration statement number, or the Form or Schedule and the 
          date of its filing.

    Amount Previously Paid: ____
    Registration No.: ____
    Filing Party:
________________________________________________________________________
    Form: ____ Date Filed: ____

[[Page 204]]

                          General Instructions

         I. Eligibility Requirements for Use of Schedule 13E-4F

    A. Schedule 13E-4F may be used by any foreign private issuer if: (1) 
The issuer is incorporated or organized under the laws of Canada or any 
Canadian province or territory; (2) the issuer is making a cash tender 
or exchange offer for the issuer's own securities; and (3) less than 40 
percent of the class of such issuer's securities outstanding that is the 
subject of the tender offer is held by U.S. holders. The calculation of 
securities held by U.S. holders shall be made as of the end of the 
issuer's last quarter or, if such quarter terminated within 60 days of 
the filing date, as of the end of the issuer's preceding quarter.

                              Instructions

    1. For purposes of this Schedule, ``foreign private issuer'' shall 
be construed in accordance with Rule 405 under the Securities Act.
    2. For purposes of this Schedule, the term ``U.S. holder'' shall 
mean any person whose address appears on the records of the issuer, any 
voting trustee, any depositary, any share transfer agent or any person 
acting in a similar capacity on behalf of the issuer as being located in 
the United States.
    3. If this Schedule is filed during the pendency of one or more 
ongoing cash tender or exchange offers for securities of the class 
subject to this offer that was commenced or was eligible to be commenced 
on Schedule 14D-1F and/or Form F-8 or Form F-80, the date for 
calculation of U.S. ownership for purposes of this Schedule shall be the 
same as that date used by the initial bidder or issuer.
    4. For purposes of this Schedule, the class of subject securities 
shall not include any securities that may be converted into or are 
exchangeable for the subject securities.
    B. Any issuer using this Schedule must extend the cash tender or 
exchange offer to U.S. holders of the class of securities subject to the 
offer upon terms and conditions not less favorable than those extended 
to any other holder of the same class of such securities, and must 
comply with the requirements of any Canadian federal, provincial and/or 
territorial law, regulation or policy relating to the terms and 
conditions of the offer.
    C. This Schedule shall not be used if the issuer is an investment 
company registered or required to be registered under the Investment 
Company Act of 1940.

                    II. Filing Instructions and Fees

    A.(1) The issuer must file this Schedule and any amendment to the 
Schedule (see Part I, Item 1.(b)), including all exhibits and other 
documents filed as part of the Schedule or amendment, in electronic 
format via the Commission's Electronic Data Gathering, Analysis, and 
Retrieval (EDGAR) system in accordance with the EDGAR rules set forth in 
Regulation S-T (17 CFR Part 232). For assistance with technical 
questions about EDGAR or to request an access code, call the EDGAR Filer 
Support Office at (202) 551-8900. For assistance with the EDGAR rules, 
call the Office of EDGAR and Information Analysis at (202) 551-3610.
    (2) If filing the Schedule in paper under a hardship exemption in 17 
CFR 232.201 or 232.202 of Regulation S-T, or as otherwise permitted, the 
issuer must file with the Commission at its principal office five copies 
of the complete Schedule and any amendment, including exhibits and all 
other documents filed as a part of the Schedule or amendment. The issuer 
must bind, staple or otherwise compile each copy in one or more parts 
without stiff covers. The issuer must further bind the Schedule or 
amendment on the side or stitching margin in a manner that leaves the 
reading matter legible. The issuer must provide three additional copies 
of the Schedule or amendment without exhibits to the Commission.
    B. An electronic filer must provide the signatures required for the 
Schedule or amendment in accordance with 17 CFR 232.302 of Regulation S-
T. An issuer filing in paper must have the original and at least one 
copy of the Schedule and any amendment signed in accordance with 
Exchange Act Rule 12b-11(d) (17 CFR 12b-11(d)) by the persons whose 
signatures are required for this Schedule or amendment. The issuer must 
also conform the unsigned copies.
    C. At the time of filing this Schedule with the Commission, the 
issuer shall pay to the Commission in accordance with Rule 0-11 of the 
Exchange Act, a fee in U.S. dollars in the amount prescribed by section 
13(e)(3) of the Exchange Act. See also Rule 0-9 of the Exchange Act.
    (1) The value of the securities to be acquired solely for cash shall 
be the amount of cash to be paid for them, calculated into U.S. dollars.
    (2) The value of the securities to be acquired with securities or 
other non-cash consideration, whether or not in combination with a cash 
payment for the same securities, shall be based on the market value of 
the securities to be acquired by the issuer as established in accordance 
with paragraph (3) of this section.
    (3) When the fee is based upon the market value of the securities, 
such market value shall be established by either the average of the high 
and low prices reported on the consolidated reporting system (for 
exchange-traded securities and last sale reported for over-the-counter 
securities) or the average of the bid and asked price (for other over-
the-counter securities) as of a specified date within 5 business days 
prior to the date of

[[Page 205]]

filing the Schedule. If there is no market for the securities to be 
acquired by the issuer, the value shall be based upon the book value of 
such securities computed as of the latest practicable date prior to the 
date of filing of the Schedule, unless the issuer of the securities is 
in bankruptcy or receivership or has an accumulated capital deficit, in 
which case one-third of the principal amount, par value or stated value 
of such securities shall be used.
    D. If at any time after the initial payment of the fee the aggregate 
consideration offered is increased, an additional filing fee based upon 
such increase shall be paid with the required amended filing.
    E. The issuer must file the Schedule or amendment in electronic 
format in the English language in accordance with 17 CFR 232.306 of 
Regulation S-T. The issuer may file part of the Schedule or amendment, 
or exhibit or other attachment to the Schedule or amendment, in both 
French and English if the issuer included the French text to comply with 
the requirements of the Canadian securities administrator or other 
Canadian authority and, for an electronic filing, if the filing is an 
HTML document, as defined in 17 CFR 232.11 of Regulation S-T. For both 
an electronic filing and a paper filing, the issuer may provide an 
English translation or English summary of a foreign language document as 
an exhibit or other attachment to the Schedule or amendment as permitted 
by the rules of the applicable Canadian securities administrator.
    F. A paper filer must number sequentially the signed original of the 
Schedule or amendment (in addition to any internal numbering that 
otherwise may be present) by handwritten, typed, printed or other 
legible form of notation from the first page through the last page of 
the Schedule or amendment, including any exhibits or attachments. A 
paper filer must disclose the total number of pages on the first page of 
the sequentially numbered Schedule or amendment.

                  III. Compliance with the Exchange Act

    A. Pursuant to Rule 13e-4(g) under the Exchange Act, the issuer 
shall be deemed to comply with the requirements of section 13(e)(1) of 
the Exchange Act and Rule 13e-4 and Schedule TO thereunder in connection 
with a cash tender or exchange offer for securities that may be made 
pursuant to this Schedule, provided that, if an exemption has been 
granted from the requirements of Canadian federal, provincial and/or 
territorial laws, regulations or policies, and the tender offer does not 
comply with requirements that otherwise would be prescribed by Rule 13e-
4, the issuer (absent an order from the Commission) shall comply with 
the provisions of section 13(e)(1) of the Exchange Act and Rule 13e-4 
and Schedule TO thereunder.
    B. Any cash tender or exchange offer made pursuant to this Schedule 
is not exempt from the antifraud provisions of section 10(b) of the 
Exchange Act and Rule 10b-5 thereunder, section 13(e)(1) of the Exchange 
Act and Rule 13e-4(b)(1) thereunder, and section 14(e) of the Exchange 
Act and Rule 14e-3 thereunder, and this Schedule shall be deemed 
``filed'' for purposes of section 18 of the Exchange Act.
    C. The issuer's attention is directed to Regulation M (Sec. Sec.  
242.100 through 242.105 of this chapter), in the case of an issuer 
exchange offer, and to Rule 14e-5 under the Exchange Act (Sec.  240.14e-
5), in the case of an issuer cash tender offer or issuer exchange offer. 
[See Exchange Act Release No. 29355 (June 21, 1991) containing an 
exemption from Rule 10b-13, the predecessor to Rule 14e-5.]

         Part I--Information Required To Be Sent to Shareholders

                   Item 1. Home Jurisdiction Documents

    (a) This Schedule shall be accompanied by the entire disclosure 
document or documents required to be delivered to holders of securities 
to be acquired by the issuer in the proposed transaction pursuant to the 
laws, regulations or policies of the Canadian jurisdiction in which the 
issuer is incorporated or organized, and any other Canadian federal, 
provincial and/or territorial law, regulation or policy relating to the 
terms and conditions of the offer. The Schedule need not include any 
documents incorporated by reference into such disclosure document(s) and 
not distributed to offerees pursuant to any such law, regulation or 
policy.
    (b) Any amendment made by the issuer to a home jurisdiction document 
or documents shall be filed with the Commission under cover of this 
Schedule, which must indicate on the cover page the number of the 
amendment.
    (c) In an exchange offer where securities of the issuer have been or 
are to be offered or cancelled in the transaction, such securities shall 
be registered on forms promulgated by the Commission under the 
Securities Act of 1933 including, where available, the Commission's Form 
F-8 or F-80 providing for inclusion in that registration statement of 
the home jurisdiction prospectus.

                      Item 2. Informational Legends

    The following legends, to the extent applicable, shall appear on the 
outside front cover page of the home jurisdiction document(s) in bold-
face roman type at least as high as ten-point modern type and at least 
two-points leaded:
    ``This tender offer is made by a foreign issuer for its own 
securities, and while the offer is subject to disclosure requirements of 
the country in which the issuer is incorporated or organized, investors 
should be

[[Page 206]]

aware that these requirements are different from those of the United 
States. Financial statements included herein, if any, have been prepared 
in accordance with foreign generally accepted accounting principles and 
thus may not be comparable to financial statements of United States 
companies.
    ``The enforcement by investors of civil liabilities under the 
federal securities laws may be affected adversely by the fact that the 
issuer is located in a foreign country, and that some or all of its 
officers and directors are residents of a foreign country.
    ``Investors should be aware that the issuer or its affiliates, 
directly or indirectly, may bid for or make purchases of the securities 
of the issuer subject to the offer, or of its related securities, during 
the period of the issuer tender offer, as permitted by applicable 
Canadian laws or provincial laws or regulations.''

    Note to Item 2. If the home jurisdiction document(s) are delivered 
through an electronic medium, the issuer may satisfy the legibility 
requirements for the required legends relating to type size and fonts by 
presenting the legend in any manner reasonably calculated to draw 
security holder attention to it.

      Part II--Information Not Required To Be Sent to Shareholders

    The exhibits specified below shall be filed as part of the Schedule, 
but are not required to be sent to shareholders unless so required 
pursuant to the laws, regulations or policies of Canada and/or any of 
its provinces or territories. Exhibits shall be lettered or numbered 
appropriately for convenient reference.
    (1) File any reports or information that, in accordance with the 
requirements of the home jurisdiction(s), must be made publicly 
available by the issuer in connection with the transaction, but need not 
be disseminated to shareholders.
    (2) File copies of any documents incorporated by reference into the 
home jurisdiction document(s) .
    (3) If any name is signed to the Schedule pursuant to power of 
attorney, manually signed copies of any such power of attorney shall be 
filed. If the name of any officer signing on behalf of the issuer is 
signed pursuant to a power of attorney, certified copies of a resolution 
of the issuer's board of directors authorizing such signature also shall 
be filed.

        Part III--Undertakings and Consent to Service of Process

                             1. Undertakings

    The Schedule shall set forth the following undertakings of the 
issuer:
    (a) The issuer undertakes to make available, in person or by 
telephone, representatives to respond to inquiries made by the 
Commission staff, and to furnish promptly, when requested to do so by 
the Commission staff, information relating to this Schedule or to 
transactions in said securities.
    (b) The issuer also undertakes to disclose in the United States, on 
the same basis as it is required to make such disclosure pursuant to 
applicable Canadian federal and/or provincial or territorial laws, 
regulations or policies, or otherwise discloses, information regarding 
purchases of the issuer's securities in connection with the cash tender 
or exchange offer covered by this Schedule. Such information shall be 
set forth in amendments to this Schedule.

                    2. Consent to Service of Process

    (a) At the time of filing this Schedule, the issuer shall file with 
the Commission a written irrevocable consent and power of attorney on 
Form F-X.
    (b) Any change to the name or address of a registrant's agent for 
service shall be communicated promptly to the Commission by amendment to 
Form F-X referencing the file number of the registrant.

                           Part IV--Signatures

    A. The Schedule shall be signed by each person on whose behalf the 
Schedule is filed or its authorized representative. If the Schedule is 
signed on behalf of a person by his authorized representative (other 
than an executive officer or general partner of the company), evidence 
of the representative's authority shall be filed with the Schedule.
    B. The name of each person who signs the Schedule shall be typed or 
printed beneath his signature.
    C. By signing this Schedule, the person(s) filing the Schedule 
consents without power of revocation that any administrative subpoena 
may be served, or any administrative proceeding, civil suit or civil 
action where the cause of action arises out of or relates to or concerns 
any offering made or purported to be made in connection with the filing 
on Schedule 13E-4F or any purchases or sales of any security in 
connection therewith, may be commenced against it in any administrative 
tribunal or in any appropriate court in any place subject to the 
jurisdiction of any state or of the United States by service of said 
subpoena or process upon the registrant's designated agent.
    After due inquiry and to the best of my knowledge and belief, I 
certify that the information set forth in this statement is true, 
complete and correct.
________________________________________________________________________
    (Signature)
________________________________________________________________________
    (Name and Title)
________________________________________________________________________

[[Page 207]]

    (Date)

[56 FR 30069, July 1, 1991, as amended at 61 FR 24656, May 15, 1996; 62 
FR 544, Jan. 3, 1997; 67 FR 36705, May 24, 2002; 73 FR 17814, Apr. 1, 
2008]



Sec.  240.13f-1  Reporting by institutional investment managers of
information with respect to accounts over which they exercise investment
discretion.

    (a)(1) Every institutional investment manager which exercises 
investment discretion with respect to accounts holding section 13(f) 
securities, as defined in paragraph (c) of this section, having an 
aggregate fair market value on the last trading day of any month of any 
calendar year of at least $100,000,000 shall file a report on Form 13F 
(Sec.  249.325 of this chapter) with the Commission within 45 days after 
the last day of such calendar year and within 45 days after the last day 
of each of the first three calendar quarters of the subsequent calendar 
year.
    (2) An amendment to a Form 13F (Sec.  249.325 of this chapter) 
report, other than one reporting only holdings that were not previously 
reported in a public filing for the same period, must set forth the 
complete text of the Form 13F. Amendments must be numbered sequentially.
    (b) For the purposes of this rule, ``investment descretion'' has the 
meaning set forth in section 3(a)(35) of the Act (15 U.S.C. 78c(a)(35)). 
An institutional investment manager shall also be deemed to exercise 
``investment discretion'' with respect to all accounts over which any 
person under its control exercises investment discretion.
    (c) For purposes of this rule ``section 13(f) securities'' shall 
mean equity securities of a class described in section 13(d)(1) of the 
Act that are admitted to trading on a national securities exchange or 
quoted on the automated quotation system of a registered securities 
association. In determining what classes of securities are section 13(f) 
securities, an institutional investment manager may rely on the most 
recent list of such securities published by the Commission pursuant to 
section 13(f)(4) of the Act (15 U.S.C. 78m(f)(4)). Only securities of a 
class on such list shall be counted in determining whether an 
institutional investment manager must file a report under this rule 
(Sec.  240.13f-1(a)) and only those securities shall be reported in such 
report. Where a person controls the issuer of a class of equity 
securities which are ``section 13(f) securities'' as defined in this 
rule, those securities shall not be deemed to be ``section 13(f) 
securities'' with respect to the controlling person, provided that such 
person does not otherwise exercise investment descretion with respect to 
accounts with fair market value of at least $100,000,000 within the 
meaning of paragraph (a) of this section.

(Secs. 3(b), 13(f) and 23 of the Exchange Act (15 U.S.C. 78c(b), 78m(f) 
and 78w))

[43 FR 26705, June 22, 1978, as amended at 44 FR 3034, Jan. 15, 1979; 64 
FR 2849, Jan. 19, 1999; 76 FR 71876, Nov. 21, 2011]



Sec.  240.13h-l  Large trader reporting.

    (a) Definitions. For purposes of this section:
    (1) The term large trader means any person that:
    (i) Directly or indirectly, including through other persons 
controlled by such person, exercises investment discretion over one or 
more accounts and effects transactions for the purchase or sale of any 
NMS security for or on behalf of such accounts, by or through one or 
more registered broker-dealers, in an aggregate amount equal to or 
greater than the identifying activity level; or
    (ii) Voluntarily registers as a large trader by filing 
electronically with the Commission Form 13H (Sec.  249.327 of this 
chapter).
    (2) The term person has the same meaning as in Section 13(h)(8)(E) 
of the Securities Exchange Act of 1934 (15 U.S.C. 78m(h)(8)(E)).
    (3) The term control (including the terms controlling, controlled by 
and under common control with) means the possession, direct or indirect, 
of the power to direct or cause the direction of the management and 
policies of a person, whether through the ownership of securities, by 
contract, or otherwise. For purposes of this section only, any person 
that directly or indirectly has the right to vote or direct the vote of 
25% or more of a class of voting securities of an entity or has the 
power to sell or direct the sale of 25% or more of

[[Page 208]]

a class of voting securities of such entity, or in the case of a 
partnership, has the right to receive, upon dissolution, or has 
contributed, 25% or more of the capital, is presumed to control that 
entity.
    (4) The term investment discretion has the same meaning as in 
Section 3(a)(35) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(3)(a)(35)). A person's employees who exercise investment discretion 
within the scope of their employment are deemed to do so on behalf of 
such person.
    (5) The term NMS security has the meaning provided for in Section 
242.600(b)(47) of this chapter.
    (6) The term transaction or transactions means all transactions in 
NMS securities, excluding the purchase or sale of such securities 
pursuant to exercises or assignments of option contracts. For the sole 
purpose of determining whether a person is a large trader, the following 
transactions are excluded from this definition:
    (i) Any journal or bookkeeping entry made to an account in order to 
record or memorialize the receipt or delivery of funds or securities 
pursuant to the settlement of a transaction;
    (ii) Any transaction that is part of an offering of securities by or 
on behalf of an issuer, or by an underwriter on behalf of an issuer, or 
an agent for an issuer, whether or not such offering is subject to 
registration under the Securities Act of 1933 (15 U.S.C. 77a), provided, 
however, that this exemption shall not include an offering of securities 
effected through the facilities of a national securities exchange;
    (iii) Any transaction that constitutes a gift;
    (iv) Any transaction effected by a court appointed executor, 
administrator, or fiduciary pursuant to the distribution of a decedent's 
estate;
    (v) Any transaction effected pursuant to a court order or judgment;
    (vi) Any transaction effected pursuant to a rollover of qualified 
plan or trust assets subject to Section 402(a)(5) of the Internal 
Revenue Code (26 U.S.C. 1 et seq.);
    (vii) Any transaction between an employer and its employees effected 
pursuant to the award, allocation, sale, grant, or exercise of a NMS 
security, option or other right to acquire securities at a pre-
established price pursuant to a plan which is primarily for the purpose 
of an issuer benefit plan or compensatory arrangement; or
    (viii) Any transaction to effect a business combination, including a 
reclassification, merger, consolidation, or tender offer subject to 
Section 14(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78n(d)); 
an issuer tender offer or other stock buyback by an issuer; or a stock 
loan or equity repurchase agreement.
    (7) The term identifying activity level means: aggregate 
transactions in NMS securities that are equal to or greater than:
    (i) During a calendar day, either two million shares or shares with 
a fair market value of $20 million; or
    (ii) During a calendar month, either twenty million shares or shares 
with a fair market value of $200 million.
    (8) The term reporting activity level means:
    (i) Each transaction in NMS securities, effected in a single account 
during a calendar day, that is equal to or greater than 100 shares;
    (ii) Any transaction in NMS securities for fewer than 100 shares, 
effected in a single account during a calendar day, that a registered 
broker-dealer may deem appropriate; or
    (iii) Such other amount that may be established by order of the 
Commission from time to time.
    (9) The term Unidentified Large Trader means each person who has not 
complied with the identification requirements of paragraphs (b)(1) and 
(b)(2) of this section that a registered broker-dealer knows or has 
reason to know is a large trader. For purposes of determining under this 
section whether a registered broker-dealer has reason to know that a 
person is large trader, a registered broker-dealer need take into 
account only transactions in NMS securities effected by or through such 
broker-dealer.
    (b) Identification requirements for large traders--(1) Form 13H. 
Except as provided in paragraph (b)(3) of this section, each large 
trader shall file electronically Form 13H (17 CFR 249.327) with the 
Commission, in accordance

[[Page 209]]

with the instructions contained therein:
    (i) Promptly after first effecting aggregate transactions, or after 
effecting aggregate transactions subsequent to becoming inactive 
pursuant to paragraph (b)(3) of this section, equal to or greater than 
the identifying activity level;
    (ii) Within 45 days after the end of each full calendar year; and
    (iii) Promptly following the end of a calendar quarter in the event 
that any of the information contained in a Form 13H filing becomes 
inaccurate for any reason.
    (2) Disclosure of large trader status. Each large trader shall 
disclose to the registered broker-dealers effecting transactions on its 
behalf its large trader identification number and each account to which 
it applies. A large trader on Inactive Status pursuant to paragraph 
(b)(3) of this section must notify broker-dealers promptly after filing 
for reactivated status with the Commission.
    (3) Filing requirement--(i) Compliance by controlling person. A 
large trader shall not be required to separately comply with the 
requirements of this paragraph (b) if a person who controls the large 
trader complies with all of the requirements under paragraphs (b)(1), 
(b)(2), and (b)(4) of this section applicable to such large trader with 
respect to all of its accounts.
    (ii) Compliance by controlled person. A large trader shall not be 
required to separately comply with the requirements of this paragraph 
(b) if one or more persons controlled by such large trader collectively 
comply with all of the requirements under paragraphs (b)(1), (b)(2), and 
(b)(4) of this section applicable to such large trader with respect to 
all of its accounts.
    (iii) Inactive status. A large trader that has not effected 
aggregate transactions at any time during the previous full calendar 
year in an amount equal to or greater than the identifying activity 
level shall become inactive upon filing a Form 13H (17 CFR 249.327) and 
thereafter shall not be required to file Form 13H or disclose its large 
trader status unless and until its transactions again are equal to or 
greater than the identifying activity level. A large trader that has 
ceased operations may elect to become inactive by filing an amended Form 
13H to indicate its terminated status.
    (4) Other information. Upon request, a large trader must promptly 
provide additional descriptive or clarifying information that would 
allow the Commission to further identify the large trader and all 
accounts through which the large trader effects transactions.
    (c) Aggregation--(1) Transactions. For the purpose of determining 
whether a person is a large trader, the following shall apply:
    (i) The volume or fair market value of transactions in equity 
securities and the volume or fair market value of the equity securities 
underlying transactions in options on equity securities, purchased and 
sold, shall be aggregated;
    (ii) The fair market value of transactions in options on a group or 
index of equity securities (or based on the value thereof), purchased 
and sold, shall be aggregated; and
    (iii) Under no circumstances shall a person subtract, offset, or net 
purchase and sale transactions, in equity securities or option 
contracts, and among or within accounts, when aggregating the volume or 
fair market value of transactions for purposes of this section.
    (2) Accounts. Under no circumstances shall a person disaggregate 
accounts to avoid the identification requirements of this section.
    (d) Recordkeeping requirements for broker and dealers--(1) 
Generally. Every registered broker-dealer shall maintain records of all 
information required under paragraphs (d)(2) and (d)(3) of this section 
for all transactions effected directly or indirectly by or through:
    (i) An account such broker-dealer carries for a large trader or an 
Unidentified Large Trader, or
    (ii) If the broker-dealer is a large trader, any proprietary or 
other account over which such broker-dealer exercises investment 
discretion.
    (iii) Additionally, where a non-broker-dealer carries an account for 
a large trader or an Unidentified Large Trader, the broker-dealer 
effecting transactions directly or indirectly for such large trader or 
Unidentified Large

[[Page 210]]

Trader shall maintain records of all of the information required under 
paragraphs (d)(2) and (d)(3) of this section for those transactions.
    (2) Information. The information required to be maintained for all 
transactions shall include:
    (i) The clearing house number or alpha symbol of the broker or 
dealer submitting the information and the clearing house numbers or 
alpha symbols of the entities on the opposite side of the transaction;
    (ii) Identifying symbol assigned to the security;
    (iii) Date transaction was executed;
    (iv) The number of shares or option contracts traded in each 
specific transaction; whether each transaction was a purchase, sale, or 
short sale; and, if an option contract, whether the transaction was a 
call or put option, an opening purchase or sale, a closing purchase or 
sale, or an exercise or assignment;
    (v) Transaction price;
    (vi) Account number;
    (vii) Identity of the exchange or other market center where the 
transaction was executed.
    (viii) A designation of whether the transaction was effected or 
caused to be effected for the account of a customer of such registered 
broker-dealer, or was a proprietary transaction effected or caused to be 
effected for the account of such broker-dealer;
    (ix) If part or all of an account's transactions at the registered 
broker-dealer have been transferred or otherwise forwarded to one or 
more accounts at another registered broker-dealer, an identifier for 
this type of transaction; and if part or all of an account's 
transactions at the reporting broker-dealer have been transferred or 
otherwise received from one or more other registered broker-dealers, an 
identifier for this type of transaction;
    (x) If part or all of an account's transactions at the reporting 
broker-dealer have been transferred or otherwise received from another 
account at the reporting broker-dealer, an identifier for this type of 
transaction; and if part or all of an account's transactions at the 
reporting broker-dealer have been transferred or otherwise forwarded to 
one or more other accounts at the reporting broker-dealer, an identifier 
for this type of transaction;
    (xi) If a transaction was processed by a depository institution, the 
identifier assigned to the account by the depository institution;
    (xii) The time that the transaction was executed; and
    (xiii) The large trader identification number(s) associated with the 
account, unless the account is for an Unidentified Large Trader.
    (3) Information relating to Unidentified Large Traders. With respect 
to transactions effected directly or indirectly by or through the 
account of an Unidentified Large Trader, the information required to be 
maintained for all transactions also shall include such Unidentified 
Large Trader's name, address, date the account was opened, and tax 
identification number(s).
    (4) Retention. The records and information required to be made and 
kept pursuant to the provisions of this section shall be kept for such 
periods of time as provided in Sec.  240.17a-4(b).
    (5) Availability of information. The records and information 
required to be made and kept pursuant to the provisions of this rule 
shall be available on the morning after the day the transactions were 
effected (including Saturdays and holidays).
    (e) Reporting requirements for brokers and dealers. Upon the request 
of the Commission, every registered broker-dealer who is itself a large 
trader or carries an account for a large trader or an Unidentified Large 
Trader shall electronically report to the Commission, using the 
infrastructure supporting Sec.  240.17a-25, in machine-readable form and 
in accordance with instructions issued by the Commission, all 
information required under paragraphs (d)(2) and (d)(3) of this section 
for all transactions effected directly or indirectly by or through 
accounts carried by such broker-dealer for large traders and 
Unidentified Large Traders, equal to or greater than the reporting 
activity level. Additionally, where a non-broker-dealer carries an 
account for a large trader or an Unidentified Large Trader, the broker-
dealer effecting such transactions directly or indirectly for a large 
trader

[[Page 211]]

shall electronically report using the infrastructure supporting Sec.  
240.17a-25, in machine-readable form and in accordance with instructions 
issued by the Commission, all information required under paragraphs 
(d)(2) and (d)(3) of this section for such transactions equal to or 
greater than the reporting activity level. Such reports shall be 
submitted to the Commission no later than the day and time specified in 
the request for transaction information, which shall be no earlier than 
the opening of business of the day following such request, unless in 
unusual circumstances the same-day submission of information is 
requested.
    (f) Monitoring safe harbor. For the purposes of this rule, a 
registered broker-dealer shall be deemed not to know or have reason to 
know that a person is a large trader if it does not have actual 
knowledge that a person is a large trader and it establishes policies 
and procedures reasonably designed to:
    (1) Identify persons who have not complied with the identification 
requirements of paragraphs (b)(1) and (b)(2) of this section but whose 
transactions effected through an account or a group of accounts carried 
by such broker-dealer or through which such broker-dealer executes 
transactions, as applicable (and considering account name, tax 
identification number, or other identifying information available on the 
books and records of such broker-dealer) equal or exceed the identifying 
activity level;
    (2) Treat any persons identified in paragraph (f)(1) of this section 
as an Unidentified Large Trader for purposes of this section; and
    (3) Inform any person identified in paragraph (f)(1) of this section 
of its potential obligations under this section.
    (g) Exemptions. Upon written application or upon its own motion, the 
Commission may by order exempt, upon specified terms and conditions or 
for stated periods, any person or class of persons or any transaction or 
class of transactions from the provisions of this section to the extent 
that such exemption is consistent with the purposes of the Securities 
Exchange Act of 1934 (15 U.S.C. 78a).

[76 FR 47002, Aug. 3, 2011, as amended at 83 FR 58427, Nov. 19, 2018]



Sec.  240.13k-1  Foreign bank exemption from the insider lending 
prohibition under section 13(k).

    (a) For the purpose of this section:
    (1) Foreign bank means an institution:
    (i) The home jurisdiction of which is other than the United States;
    (ii) That is regulated as a bank in its home jurisdiction; and
    (iii) That engages directly in the business of banking.
    (2) Home jurisdiction means the country, political subdivision or 
other place in which a foreign bank is incorporated or organized.
    (3) Engages directly in the business of banking means that an 
institution engages directly in banking activities that are usual for 
the business of banking in its home jurisdiction.
    (4) Affiliate, parent and subsidiary have the same meaning as under 
17 CFR 240.12b-2.
    (b) An issuer that is a foreign bank or the parent or other 
affiliate of a foreign bank is exempt from the prohibition of extending, 
maintaining, arranging for, or renewing credit in the form of a personal 
loan to or for any of its directors or executive officers under section 
13(k) of the Act (15 U.S.C. 78m(k)) with respect to any such loan made 
by the foreign bank as long as:
    (1) Either:
    (i) The laws or regulations of the foreign bank's home jurisdiction 
require the bank to insure its deposits or be subject to a deposit 
guarantee or protection scheme; or
    (ii) The Board of Governors of the Federal Reserve System has 
determined that the foreign bank or another bank organized in the 
foreign bank's home jurisdiction is subject to comprehensive supervision 
or regulation on a consolidated basis by the bank supervisor in its home 
jurisdiction under 12 CFR 211.24(c); and
    (2) The loan by the foreign bank to any of its directors or 
executive officers or those of its parent or other affiliate:
    (i) Is on substantially the same terms as those prevailing at the 
time for

[[Page 212]]

comparable transactions by the foreign bank with other persons who are 
not executive officers, directors or employees of the foreign bank, its 
parent or other affiliate; or
    (ii) Is pursuant to a benefit or compensation program that is widely 
available to the employees of the foreign bank, its parent or other 
affiliate and does not give preference to any of the executive officers 
or directors of the foreign bank, its parent or other affiliate over any 
other employees of the foreign bank, its parent or other affiliate; or
    (iii) Has received express approval by the bank supervisor in the 
foreign bank's home jurisdiction.

    Notes to paragraph (b): 1. The exemption provided in paragraph (b) 
of this section applies to a loan by the subsidiary of a foreign bank to 
a director or executive officer of the foreign bank, its parent or other 
affiliate as long as the subsidiary is under the supervision or 
regulation of the bank supervisor in the foreign bank's home 
jurisdiction, the subsidiary's loan meets the requirements of paragraph 
(b)(2) of this section, and the foreign bank meets the requirements of 
paragraph (b)(1) of this section.
    2. For the purpose of paragraph (b)(1)(ii) of this section, a 
foreign bank may rely on a determination by the Board of Governors of 
the Federal Reserve System that another bank in the foreign bank's home 
jurisdiction is subject to comprehensive supervision or regulation on a 
consolidated basis by the bank supervisor under 12 CFR 211.24(c) as long 
as the foreign bank is under substantially the same banking supervision 
or regulation as the other bank in their home jurisdiction.

    (c) As used in paragraph (1) of section 13(k) of the Act (15 U.S.C. 
78m(k)(1)), issuer does not include a foreign government, as defined 
under 17 CFR 230.405, that files a registration statement under the 
Securities Act of 1933 (15 U.S.C. 77a et seq.) on Schedule B.

[69 FR 24024, Apr. 30, 2004]



Sec.  240.13n-1  Registration of security-based swap data repository.

    (a) Definitions. For purposes of this section --
    (1) Non-resident security-based swap data repository means:
    (i) In the case of an individual, one who resides in or has his 
principal place of business in any place not in the United States;
    (ii) In the case of a corporation, one incorporated in or having its 
principal place of business in any place not in the United States; or
    (iii) In the case of a partnership or other unincorporated 
organization or association, one having its principal place of business 
in any place not in the United States.
    (2) Tag (including the term tagged) has the same meaning as set 
forth in Rule 11 of Regulation S-T (17 CFR 232.11).
    (b) An application for the registration of a security-based swap 
data repository and all amendments thereto shall be filed electronically 
in a tagged data format on Form SDR (17 CFR 249.1500) with the 
Commission in accordance with the instructions contained therein. As 
part of the application process, each security-based swap data 
repository shall provide additional information to any representative of 
the Commission upon request.
    (c) Within 90 days of the date of the publication of notice of the 
filing of such application (or within such longer period as to which the 
applicant consents), the Commission shall -
    (1) By order grant registration; or
    (2) Institute proceedings to determine whether registration should 
be granted or denied. Such proceedings shall include notice of the 
issues under consideration and opportunity for hearing on the record and 
shall be concluded within 180 days of the date of the publication of 
notice of the filing of the application for registration under paragraph 
(b) of this section. At the conclusion of such proceedings, the 
Commission, by order, shall grant or deny such registration. The 
Commission may extend the time for conclusion of such proceedings for up 
to 90 days if it finds good cause for such extension and publishes its 
reasons for so finding or for such longer period as to which the 
applicant consents.
    (3) The Commission shall grant the registration of a security-based 
swap data repository if the Commission finds that such security-based 
swap data repository is so organized, and has the capacity, to be able 
to assure the

[[Page 213]]

prompt, accurate, and reliable performance of its functions as a 
security-based swap data repository, comply with any applicable 
provision of the federal securities laws and the rules and regulations 
thereunder, and carry out its functions in a manner consistent with the 
purposes of section 13(n) of the Act (15 U.S.C. 78m(n)) and the rules 
and regulations thereunder. The Commission shall deny the registration 
of a security-based swap data repository if it does not make any such 
finding.
    (d) If any information reported in items 1 through 17, 26, and 48 of 
Form SDR (17 CFR 249.1500) or in any amendment thereto is or becomes 
inaccurate for any reason, whether before or after the registration has 
been granted, the security-based swap data repository shall promptly 
file an amendment on Form SDR updating such information. In addition, 
the security-based swap data repository shall annually file an amendment 
on Form SDR within 60 days after the end of each fiscal year of such 
security-based swap data repository.
    (e) Each security-based swap data repository shall designate and 
authorize on Form SDR an agent in the United States, other than a 
Commission member, official, or employee, who shall accept any notice or 
service of process, pleadings, or other documents in any action or 
proceedings brought against the security-based swap data repository to 
enforce the federal securities laws and the rules and regulations 
thereunder.
    (f) Any non-resident security-based swap data repository applying 
for registration pursuant to this section shall:
    (1) Certify on Form SDR that the security-based swap data repository 
can, as a matter of law, and will provide the Commission with prompt 
access to the books and records of such security-based swap data 
repository and can, as a matter of law, and will submit to onsite 
inspection and examination by the Commission, and
    (2) Provide an opinion of counsel that the security-based swap data 
repository can, as a matter of law, provide the Commission with prompt 
access to the books and records of such security-based swap data 
repository and can, as a matter of law, submit to onsite inspection and 
examination by the Commission.
    (g) An application for registration or any amendment thereto that is 
filed pursuant to this section shall be considered a ``report'' filed 
with the Commission for purposes of sections 18(a) and 32(a) of the Act 
(15 U.S.C. 78r(a) and 78ff(a)) and the rules and regulations thereunder 
and other applicable provisions of the United States Code and the rules 
and regulations thereunder.

[80 FR 14550, Mar. 19, 2015]



Sec.  240.13n-2  Withdrawal from registration; revocation and 
cancellation.

    (a) Definition. For purposes of this section, tag (including the 
term tagged) has the same meaning as set forth in Rule 11 of Regulation 
S-T (17 CFR 232.11).
    (b) A registered security-based swap data repository may withdraw 
from registration by filing a withdrawal from registration on Form SDR 
(17 CFR 249.1500) electronically in a tagged data format. The security-
based swap data repository shall designate on Form SDR a person to serve 
as the custodian of the security-based swap data repository's books and 
records. When filing a withdrawal from registration on Form SDR, a 
security-based swap data repository shall update any inaccurate 
information.
    (c) A withdrawal from registration filed by a security-based swap 
data repository shall become effective for all matters (except as 
provided in this paragraph (c)) on the 60th day after the filing thereof 
with the Commission, within such longer period of time as to which such 
security-based swap data repository consents or which the Commission, by 
order, may determine as necessary or appropriate in the public interest 
or for the protection of investors, or within such shorter period of 
time as the Commission may determine.
    (d) A withdrawal from registration that is filed pursuant to this 
section shall be considered a ``report'' filed with the Commission for 
purposes of sections 18(a) and 32(a) of the Act (15 U.S.C. 78r(a) and 
78ff(a)) and the rules and regulations thereunder and other

[[Page 214]]

applicable provisions of the United States Code and the rules and 
regulations thereunder.
    (e) If the Commission finds, on the record after notice and 
opportunity for hearing, that any registered security-based swap data 
repository has obtained its registration by making any false and 
misleading statements with respect to any material fact or has violated 
or failed to comply with any provision of the federal securities laws 
and the rules and regulations thereunder, the Commission, by order, may 
revoke the registration. Pending final determination of whether any 
registration shall be revoked, the Commission, by order, may suspend 
such registration, if such suspension appears to the Commission, after 
notice and opportunity for hearing on the record, to be necessary or 
appropriate in the public interest or for the protection of investors.
    (f) If the Commission finds that a registered security-based swap 
data repository is no longer in existence or has ceased to do business 
in the capacity specified in its application for registration, the 
Commission, by order, may cancel the registration.

[80 FR 14550, Mar. 19, 2015]



Sec.  240.13n-3  Registration of successor to registered security-based
swap data repository.

    (a) In the event that a security-based swap data repository succeeds 
to and continues the business of a security-based swap data repository 
registered pursuant to section 13(n) of the Act (15 U.S.C. 78m(n)), the 
registration of the predecessor shall be deemed to remain effective as 
the registration of the successor if, within 30 days after such 
succession, the successor files an application for registration on Form 
SDR (17 CFR 249.1500), and the predecessor files a withdrawal from 
registration on Form SDR; provided, however, that the registration of 
the predecessor security-based swap data repository shall cease to be 
effective 90 days after the publication of notice of the filing of the 
application for registration on Form SDR filed by the successor 
security-based swap data repository.
    (b) Notwithstanding paragraph (a) of this section, if a security-
based swap data repository succeeds to and continues the business of a 
registered predecessor security-based swap data repository, and the 
succession is based solely on a change in the predecessor's date or 
state of incorporation, form of organization, or composition of a 
partnership, the successor may, within 30 days after the succession, 
amend the registration of the predecessor security-based swap data 
repository on Form SDR (17 CFR 249.1500) to reflect these changes. This 
amendment shall be deemed an application for registration filed by the 
predecessor and adopted by the successor.

[80 FR 14550, Mar. 19, 2015]



Sec.  240.13n-4  Duties and core principles of security-based swap data
repository.

    (a) Definitions. For purposes of this section--
    (1) Affiliate of a security-based swap data repository means a 
person that, directly or indirectly, controls, is controlled by, or is 
under common control with the security-based swap data repository.
    (2) Board means the board of directors of the security-based swap 
data repository or a body performing a function similar to the board of 
directors of the security-based swap data repository.
    (3) Control (including the terms controlled by and under common 
control with) means the possession, direct or indirect, of the power to 
direct or cause the direction of the management and policies of a 
person, whether through the ownership of voting securities, by contract, 
or otherwise. A person is presumed to control another person if the 
person:
    (i) Is a director, general partner, or officer exercising executive 
responsibility (or having similar status or functions);
    (ii) Directly or indirectly has the right to vote 25 percent or more 
of a class of voting securities or has the power to sell or direct the 
sale of 25 percent or more of a class of voting securities; or
    (iii) In the case of a partnership, has the right to receive, upon 
dissolution, or has contributed, 25 percent or more of the capital.

[[Page 215]]

    (4) Director means any member of the board.
    (5) Direct electronic access means access, which shall be in a form 
and manner acceptable to the Commission, to data stored by a security-
based swap data repository in an electronic format and updated at the 
same time as the security-based swap data repository's data is updated 
so as to provide the Commission or any of its designees with the ability 
to query or analyze the data in the same manner that the security-based 
swap data repository can query or analyze the data.
    (6) Market participant means any person participating in the 
security-based swap market, including, but not limited to, security-
based swap dealers, major security-based swap participants, and any 
other counterparties to a security-based swap transaction.
    (7) Nonaffiliated third party of a security-based swap data 
repository means any person except:
    (i) The security-based swap data repository;
    (ii) Any affiliate of the security-based swap data repository; or
    (iii) A person employed by a security-based swap data repository and 
any entity that is not the security-based swap data repository's 
affiliate (and ``nonaffiliated third party'' includes such entity that 
jointly employs the person).
    (8) Person associated with a security-based swap data repository 
means:
    (i) Any partner, officer, or director of such security-based swap 
data repository (or any person occupying a similar status or performing 
similar functions);
    (ii) Any person directly or indirectly controlling, controlled by, 
or under common control with such security-based swap data repository; 
or
    (iii) Any employee of such security-based swap data repository.
    (b) Duties. To be registered, and maintain registration, as a 
security-based swap data repository, a security-based swap data 
repository shall:
    (1) Subject itself to inspection and examination by any 
representative of the Commission;
    (2) Accept data as prescribed in Regulation SBSR (17 CFR 242.900 
through 242.909) for each security-based swap;
    (3) Confirm, as prescribed in Rule 13n-5 (Sec.  240.13n-5), with 
both counterparties to the security-based swap the accuracy of the data 
that was submitted;
    (4) Maintain, as prescribed in Rule 13n-5, the data described in 
Regulation SBSR in such form, in such manner, and for such period as 
provided therein and in the Act and the rules and regulations 
thereunder;
    (5) Provide direct electronic access to the Commission (or any 
designee of the Commission, including another registered entity);
    (6) Provide the information described in Regulation SBSR in such 
form and at such frequency as prescribed in Regulation SBSR to comply 
with the public reporting requirements set forth in section 13(m) of the 
Act (15 U.S.C. 78m(m)) and the rules and regulations thereunder;
    (7) At such time and in such manner as may be directed by the 
Commission, establish automated systems for monitoring, screening, and 
analyzing security-based swap data;
    (8) Maintain the privacy of any and all security-based swap 
transaction information that the security-based swap data repository 
receives from a security-based swap dealer, counterparty, or any 
registered entity as prescribed in Rule 13n-9 (Sec.  240.13n-9);
    (9) On a confidential basis, pursuant to section 24 of the Act (15 
U.S.C. 78x), upon request, and after notifying the Commission of the 
request in a manner consistent with paragraph (d) of this section, make 
available security-based swap data obtained by the security-based swap 
data repository, including individual counterparty trade and position 
data, to the following:
    (i) The Board of Governors of the Federal Reserve System and any 
Federal Reserve Bank;
    (ii) The Office of the Comptroller of the Currency;
    (iii) The Federal Deposit Insurance Corporation;
    (iv) The Farm Credit Administration;
    (v) The Federal Housing Finance Agency;
    (vi) The Financial Stability Oversight Council;
    (vii) The Commodity Futures Trading Commission;

[[Page 216]]

    (viii) The Department of Justice;
    (ix) The Office of Financial Research; and
    (x) Any other person that the Commission determines to be 
appropriate, conditionally or unconditionally, by order, including, but 
not limited to--
    (A) Foreign financial supervisors (including foreign futures 
authorities);
    (B) Foreign central banks;
    (C) Foreign ministries; and
    (D) Other foreign authorities;
    (10) Before sharing information with any entity described in 
paragraph (b)(9) of this section, there shall be in effect an 
arrangement between the Commission and the entity (in the form of a 
memorandum of understanding or otherwise) to address the confidentiality 
of the security-based swap information made available to the entity; 
this arrangement shall be deemed to satisfy the requirement, set forth 
in section 13(n)(5)(H) of the Act (15 U.S.C. 78m(n)(5)(H)), that the 
security-based swap data repository receive a written agreement from the 
entity stating that the entity shall abide by the confidentiality 
requirements described in section 24 of the Act (15 U.S.C. 78x) relating 
to the information on security-based swap transactions that is provided; 
and
    (11) Designate an individual to serve as a chief compliance officer.
    (c) Compliance with core principles. A security-based swap data 
repository shall comply with the core principles as described in this 
paragraph.
    (1) Market access to services and data. Unless necessary or 
appropriate to achieve the purposes of the Act and the rules and 
regulations thereunder, the security-based swap data repository shall 
not adopt any policies or procedures or take any action that results in 
an unreasonable restraint of trade or impose any material 
anticompetitive burden on the trading, clearing, or reporting of 
transactions. To comply with this core principle, each security-based 
swap data repository shall:
    (i) Ensure that any dues, fees, or other charges imposed by, and any 
discounts or rebates offered by, a security-based swap data repository 
are fair and reasonable and not unreasonably discriminatory. Such dues, 
fees, other charges, discounts, or rebates shall be applied consistently 
across all similarly-situated users of such security-based swap data 
repository's services, including, but not limited to, market 
participants, market infrastructures (including central counterparties), 
venues from which data can be submitted to the security-based swap data 
repository (including exchanges, security-based swap execution 
facilities, electronic trading venues, and matching and confirmation 
platforms), and third party service providers;
    (ii) Permit market participants to access specific services offered 
by the security-based swap data repository separately;
    (iii) Establish, monitor on an ongoing basis, and enforce clearly 
stated objective criteria that would permit fair, open, and not 
unreasonably discriminatory access to services offered and data 
maintained by the security-based swap data repository as well as fair, 
open, and not unreasonably discriminatory participation by market 
participants, market infrastructures, venues from which data can be 
submitted to the security-based swap data repository, and third party 
service providers that seek to connect to or link with the security-
based swap data repository; and
    (iv) Establish, maintain, and enforce written policies and 
procedures reasonably designed to review any prohibition or limitation 
of any person with respect to access to services offered, directly or 
indirectly, or data maintained by the security-based swap data 
repository and to grant such person access to such services or data if 
such person has been discriminated against unfairly.
    (2) Governance arrangements. Each security-based swap data 
repository shall establish governance arrangements that are transparent 
to fulfill public interest requirements under the Act and the rules and 
regulations thereunder; to carry out functions consistent with the Act, 
the rules and regulations thereunder, and the purposes of the Act; and 
to support the objectives of the Federal Government, owners, and 
participants. To comply with this core principle, each security-based 
swap data repository shall:
    (i) Establish governance arrangements that are well defined and 
include

[[Page 217]]

a clear organizational structure with effective internal controls;
    (ii) Establish governance arrangements that provide for fair 
representation of market participants;
    (iii) Provide representatives of market participants, including end-
users, with the opportunity to participate in the process for nominating 
directors and with the right to petition for alternative candidates; and
    (iv) Establish, maintain, and enforce written policies and 
procedures reasonably designed to ensure that the security-based swap 
data repository's senior management and each member of the board or 
committee that has the authority to act on behalf of the board possess 
requisite skills and expertise to fulfill their responsibilities in the 
management and governance of the security-based swap data repository, 
have a clear understanding of their responsibilities, and exercise sound 
judgment about the security-based swap data repository's affairs.
    (3) Conflicts of interest. Each security-based swap data repository 
shall establish and enforce written policies and procedures reasonably 
designed to minimize conflicts of interest in the decision-making 
process of the security-based swap data repository and establish a 
process for resolving any such conflicts of interest. Such conflicts of 
interest include, but are not limited to: conflicts between the 
commercial interests of a security-based swap data repository and its 
statutory and regulatory responsibilities; conflicts in connection with 
the commercial interests of certain market participants or linked market 
infrastructures, third party service providers, and others; conflicts 
between, among, or with persons associated with the security-based swap 
data repository, market participants, affiliates of the security-based 
swap data repository, and nonaffiliated third parties; and misuse of 
confidential information, material, nonpublic information, and/or 
intellectual property. To comply with this core principle, each 
security-based swap data repository shall:
    (i) Establish, maintain, and enforce written policies and procedures 
reasonably designed to identify and mitigate potential and existing 
conflicts of interest in the security-based swap data repository's 
decision-making process on an ongoing basis;
    (ii) With respect to the decision-making process for resolving any 
conflicts of interest, require the recusal of any person involved in 
such conflict from such decision-making; and
    (iii) Establish, maintain, and enforce reasonable written policies 
and procedures regarding the security-based swap data repository's non-
commercial and/or commercial use of the security-based swap transaction 
information that it receives from a market participant, any registered 
entity, or any other person.
    (d) Notification requirement compliance. To satisfy the notification 
requirement of the data access provisions of paragraph (b)(9) of this 
section, a security-based swap data repository shall inform the 
Commission upon its receipt of the first request for security-based swap 
data from a particular entity (which may include any request to be 
provided ongoing online or electronic access to the data), and the 
repository shall maintain records of all information related to the 
initial and all subsequent requests for data access from that entity, 
including records of all instances of online or electronic access, and 
records of all data provided in connection with such requests or access.

    Note to Sec.  240.13n-4: This rule is not intended to limit, or 
restrict, the applicability of other provisions of the federal 
securities laws, including, but not limited to, section 13(m) of the Act 
(15 U.S.C. 78m(m)) and the rules and regulations thereunder.

[80 FR 14550, Mar. 19, 2015, as amended at 81 FR 60607, Nov. 1, 2016]



Sec.  240.13n-5  Data collection and maintenance.

    (a) Definitions. For purposes of this section--
    (1) Asset class means those security-based swaps in a particular 
broad category, including, but not limited to, credit derivatives and 
equity derivatives.
    (2) Position means the gross and net notional amounts of open 
security-based swap transactions aggregated by one or more attributes, 
including, but not limited to, the:

[[Page 218]]

    (i) Underlying instrument, index, or reference entity;
    (ii) Counterparty;
    (iii) Asset class;
    (iv) Long risk of the underlying instrument, index, or reference 
entity; and
    (v) Short risk of the underlying instrument, index, or reference 
entity.
    (3) Transaction data means all information reported to a security-
based swap data repository pursuant to the Act and the rules and 
regulations thereunder, except for information provided pursuant to Rule 
906(b) of Regulation SBSR (17 CFR 242.906(b)).
    (b) Requirements. Every security-based swap data repository 
registered with the Commission shall comply with the following data 
collection and data maintenance standards:
    (1) Transaction data. (i) Every security-based swap data repository 
shall establish, maintain, and enforce written policies and procedures 
reasonably designed for the reporting of complete and accurate 
transaction data to the security-based swap data repository and shall 
accept all transaction data that is reported in accordance with such 
policies and procedures.
    (ii) If a security-based swap data repository accepts any security-
based swap in a particular asset class, the security-based swap data 
repository shall accept all security-based swaps in that asset class 
that are reported to it in accordance with its policies and procedures 
required by paragraph (b)(1)(i) of this section.
    (iii) Every security-based swap data repository shall establish, 
maintain, and enforce written policies and procedures reasonably 
designed to satisfy itself that the transaction data that has been 
submitted to the security-based swap data repository is complete and 
accurate, and clearly identifies the source for each trade side and the 
pairing method (if any) for each transaction in order to identify the 
level of quality of the transaction data.
    (iv) Every security-based swap data repository shall promptly record 
the transaction data it receives.
    (2) Positions. Every security-based swap data repository shall 
establish, maintain, and enforce written policies and procedures 
reasonably designed to calculate positions for all persons with open 
security-based swaps for which the security-based swap data repository 
maintains records.
    (3) Every security-based swap data repository shall establish, 
maintain, and enforce written policies and procedures reasonably 
designed to ensure that the transaction data and positions that it 
maintains are complete and accurate.
    (4) Every security-based swap data repository shall maintain 
transaction data and related identifying information for not less than 
five years after the applicable security-based swap expires and 
historical positions for not less than five years:
    (i) In a place and format that is readily accessible and usable to 
the Commission and other persons with authority to access or view such 
information; and
    (ii) In an electronic format that is non-rewriteable and non-
erasable.
    (5) Every security-based swap data repository shall establish, 
maintain, and enforce written policies and procedures reasonably 
designed to prevent any provision in a valid security-based swap from 
being invalidated or modified through the procedures or operations of 
the security-based swap data repository.
    (6) Every security-based swap data repository shall establish 
procedures and provide facilities reasonably designed to effectively 
resolve disputes over the accuracy of the transaction data and positions 
that are recorded in the security-based swap data repository.
    (7) If a security-based swap data repository ceases doing business, 
or ceases to be registered pursuant to section 13(n) of the Act (15 
U.S.C. 78m(n)) and the rules and regulations thereunder, it must 
continue to preserve, maintain, and make accessible the transaction data 
and historical positions required to be collected, maintained, and 
preserved by this section in the manner required by the Act and the 
rules and regulations thereunder and for the remainder of the period 
required by this section.
    (8) Every security-based swap data repository shall make and keep 
current a plan to ensure that the transaction

[[Page 219]]

data and positions that are recorded in the security-based swap data 
repository continue to be maintained in accordance with Rule 13n-5(b)(7) 
(Sec.  240.13n-5(b)(7)), which shall include procedures for transferring 
the transaction data and positions to the Commission or its designee 
(including another registered security-based swap data repository).

[80 FR 14550, Mar. 19, 2015]



Sec.  240.13n-6  Automated systems.

    Every security-based swap data repository, with respect to those 
systems that support or are integrally related to the performance of its 
activities, shall establish, maintain, and enforce written policies and 
procedures reasonably designed to ensure that its systems provide 
adequate levels of capacity, integrity, resiliency, availability, and 
security.

[80 FR 14550, Mar. 19, 2015]



Sec.  240.13n-7  Recordkeeping of security-based swap data repository.

    (a) Every security-based swap data repository shall make and keep 
current the following books and records relating to its business:
    (1) A record for each office listing, by name or title, each person 
at that office who, without delay, can explain the types of records the 
security-based swap data repository maintains at that office and the 
information contained in those records; and
    (2) A record listing each officer, manager, or person performing 
similar functions of the security-based swap data repository responsible 
for establishing policies and procedures that are reasonably designed to 
ensure compliance with the Act and the rules and regulations thereunder.
    (b) Recordkeeping rule for security-based swap data repositories. 
(1) Every security-based swap data repository shall keep and preserve at 
least one copy of all documents, including all documents and policies 
and procedures required by the Act and the rules and regulations 
thereunder, correspondence, memoranda, papers, books, notices, accounts, 
and other such records as shall be made or received by it in the course 
of its business as such.
    (2) Every security-based swap data repository shall keep all such 
documents for a period of not less than five years, the first two years 
in a place that is immediately available to representatives of the 
Commission for inspection and examination.
    (3) Every security-based swap data repository shall, upon request of 
any representative of the Commission, promptly furnish to the possession 
of such representative copies of any documents required to be kept and 
preserved by it pursuant to paragraphs (a) and (b) of this section.
    (c) If a security-based swap data repository ceases doing business, 
or ceases to be registered pursuant to section 13(n) of the Act (15 
U.S.C. 78m(n)) and the rules and regulations thereunder, it must 
continue to preserve, maintain, and make accessible the records and data 
required to be collected, maintained and preserved by this section in 
the manner required by this section and for the remainder of the period 
required by this section.
    (d) This section does not apply to transaction data and positions 
collected and maintained pursuant to Rule 13n-5 (Sec.  240.13n-5).

[80 FR 14550, Mar. 19, 2015]



Sec.  240.13n-8  Reports to be provided to the Commission.

    Every security-based swap data repository shall promptly report to 
the Commission, in a form and manner acceptable to the Commission, such 
information as the Commission determines to be necessary or appropriate 
for the Commission to perform the duties of the Commission under the Act 
and the rules and regulations thereunder.

[80 FR 14550, Mar. 19, 2015]



Sec.  240.13n-9  Privacy requirements of security-based swap data
repository.

    (a) Definitions. For purposes of this section--
    (1) Affiliate of a security-based swap data repository means a 
person that, directly or indirectly, controls, is controlled by, or is 
under common control with the security-based swap data repository.

[[Page 220]]

    (2) Control (including the terms controlled by and under common 
control with) means the possession, direct or indirect, of the power to 
direct or cause the direction of the management and policies of a 
person, whether through the ownership of voting securities, by contract, 
or otherwise. A person is presumed to control another person if the 
person:
    (i) Is a director, general partner, or officer exercising executive 
responsibility (or having similar status or functions);
    (ii) Directly or indirectly has the right to vote 25 percent or more 
of a class of voting securities or has the power to sell or direct the 
sale of 25 percent or more of a class of voting securities; or
    (iii) In the case of a partnership, has the right to receive, upon 
dissolution, or has contributed, 25 percent or more of the capital.
    (3) Market participant means any person participating in the 
security-based swap market, including, but not limited to, security-
based swap dealers, major security-based swap participants, and any 
other counterparties to a security-based swap transaction.
    (4) Nonaffiliated third party of a security-based swap data 
repository means any person except:
    (i) The security-based swap data repository;
    (ii) The security-based swap data repository's affiliate; or
    (iii) A person employed by a security-based swap data repository and 
any entity that is not the security-based swap data repository's 
affiliate (and nonaffiliated third party includes such entity that 
jointly employs the person).
    (5) Nonpublic personal information means:
    (i) Personally identifiable information that is not publicly 
available information; and
    (ii) Any list, description, or other grouping of market participants 
(and publicly available information pertaining to them) that is derived 
using personally identifiable information that is not publicly available 
information.
    (6) Personally identifiable information means any information:
    (i) A market participant provides to a security-based swap data 
repository to obtain service from the security-based swap data 
repository;
    (ii) About a market participant resulting from any transaction 
involving a service between the security-based swap data repository and 
the market participant; or
    (iii) The security-based swap data repository obtains about a market 
participant in connection with providing a service to that market 
participant.
    (7) Person associated with a security-based swap data repository 
means:
    (i) Any partner, officer, or director of such security-based swap 
data repository (or any person occupying a similar status or performing 
similar functions);
    (ii) Any person directly or indirectly controlling, controlled by, 
or under common control with such security-based swap data repository; 
or
    (iii) Any employee of such security-based swap data repository.
    (b) Each security-based swap data repository shall:
    (1) Establish, maintain, and enforce written policies and procedures 
reasonably designed to protect the privacy of any and all security-based 
swap transaction information that the security-based swap data 
repository receives from a security-based swap dealer, counterparty, or 
any registered entity. Such policies and procedures shall include, but 
are not limited to, policies and procedures to protect the privacy of 
any and all security-based swap transaction information that the 
security-based swap data repository shares with affiliates and 
nonaffiliated third parties; and
    (2) Establish and maintain safeguards, policies, and procedures 
reasonably designed to prevent the misappropriation or misuse, directly 
or indirectly, of:
    (i) Any confidential information received by the security-based swap 
data repository, including, but not limited to, trade data, position 
data, and any nonpublic personal information about a market participant 
or any of its customers;
    (ii) Material, nonpublic information; and/or

[[Page 221]]

    (iii) Intellectual property, such as trading strategies or portfolio 
positions, by the security-based swap data repository or any person 
associated with the security-based swap data repository for their 
personal benefit or the benefit of others. Such safeguards, policies, 
and procedures shall address, without limitation:
    (A) Limiting access to such confidential information, material, 
nonpublic information, and intellectual property;
    (B) Standards pertaining to the trading by persons associated with 
the security-based swap data repository for their personal benefit or 
the benefit of others; and
    (C) Adequate oversight to ensure compliance with this subparagraph.

[80 FR 14550, Mar. 19, 2015]



Sec.  240.13n-10  Disclosure requirements of security-based swap data 
repository.

    (a) Definition. For purposes of this section, market participant 
means any person participating in the over-the-counter derivatives 
market, including, but not limited to, security-based swap dealers, 
major security-based swap participants, and any other counterparties to 
a security-based swap transaction.
    (b) Before accepting any security-based swap data from a market 
participant or upon a market participant's request, a security-based 
swap data repository shall furnish to the market participant a 
disclosure document that contains the following written information, 
which must reasonably enable the market participant to identify and 
evaluate accurately the risks and costs associated with using the 
services of the security-based swap data repository:
    (1) The security-based swap data repository's criteria for providing 
others with access to services offered and data maintained by the 
security-based swap data repository;
    (2) The security-based swap data repository's criteria for those 
seeking to connect to or link with the security-based swap data 
repository;
    (3) A description of the security-based swap data repository's 
policies and procedures regarding its safeguarding of data and 
operational reliability, as described in Rule 13n-6 (Sec.  240.13n-6);
    (4) A description of the security-based swap data repository's 
policies and procedures reasonably designed to protect the privacy of 
any and all security-based swap transaction information that the 
security-based swap data repository receives from a security-based swap 
dealer, counterparty, or any registered entity, as described in Rule 
13n-9(b)(1) (Sec.  240.13n-9(b)(1));
    (5) A description of the security-based swap data repository's 
policies and procedures regarding its non-commercial and/or commercial 
use of the security-based swap transaction information that it receives 
from a market participant, any registered entity, or any other person;
    (6) A description of the security-based swap data repository's 
dispute resolution procedures involving market participants, as 
described in Rule 13n-5(b)(6) (Sec.  240.13n-5(b)(6));
    (7) A description of all the security-based swap data repository's 
services, including any ancillary services;
    (8) The security-based swap data repository's updated schedule of 
any dues; unbundled prices, rates, or other fees for all of its 
services, including any ancillary services; any discounts or rebates 
offered; and the criteria to benefit from such discounts or rebates; and
    (9) A description of the security-based swap data repository's 
governance arrangements.

[80 FR 14550, Mar. 19, 2015]



Sec.  240.13n-11  Chief compliance officer of security-based swap data
repository; compliance reports and financial reports.

    (a) In general. Each security-based swap data repository shall 
identify on Form SDR (17 CFR 249.1500) a person who has been designated 
by the board to serve as a chief compliance officer of the security-
based swap data repository. The compensation, appointment, and removal 
of the chief compliance officer shall require the approval of a majority 
of the security-based swap data repository's board.
    (b) Definitions. For purposes of this section--

[[Page 222]]

    (1) Board means the board of directors of the security-based swap 
data repository or a body performing a function similar to the board of 
directors of the security-based swap data repository.
    (2) Director means any member of the board.
    (3) EDGAR Filer Manual has the same meaning as set forth in Rule 11 
of Regulation S-T (17 CFR 232.11).
    (4) Interactive Data Financial Report has the same meaning as set 
forth in Rule 11 of Regulation S-T (17 CFR 232.11).
    (5) Material change means a change that a chief compliance officer 
would reasonably need to know in order to oversee compliance of the 
security-based swap data repository.
    (6) Material compliance matter means any compliance matter that the 
board would reasonably need to know to oversee the compliance of the 
security-based swap data repository and that involves, without 
limitation:
    (i) A violation of the federal securities laws by the security-based 
swap data repository, its officers, directors, employees, or agents;
    (ii) A violation of the policies and procedures of the security-
based swap data repository by the security-based swap data repository, 
its officers, directors, employees, or agents; or
    (iii) A weakness in the design or implementation of the policies and 
procedures of the security-based swap data repository.
    (7) Official filing has the same meaning as set forth in Rule 11 of 
Regulation S-T (17 CFR 232.11).
    (8) Senior officer means the chief executive officer or other 
equivalent officer.
    (9) Tag (including the term tagged) has the same meaning as set 
forth in Rule 11 of Regulation S-T (17 CFR 232.11).
    (c) Duties. Each chief compliance officer of a security-based swap 
data repository shall:
    (1) Report directly to the board or to the senior officer of the 
security-based swap data repository;
    (2) Review the compliance of the security-based swap data repository 
with respect to the requirements and core principles described in 
section 13(n) of the Act (15 U.S.C. 78m(n)) and the rules and 
regulations thereunder;
    (3) In consultation with the board or the senior officer of the 
security-based swap data repository, take reasonable steps to resolve 
any material conflicts of interest that may arise;
    (4) Be responsible for administering each policy and procedure that 
is required to be established pursuant to section 13 of the Act (15 
U.S.C. 78m) and the rules and regulations thereunder;
    (5) Take reasonable steps to ensure compliance with the Act and the 
rules and regulations thereunder relating to security-based swaps, 
including each rule prescribed by the Commission under section 13 of the 
Act (15 U.S.C. 78m);
    (6) Establish procedures for the remediation of noncompliance issues 
identified by the chief compliance officer through any--
    (i) Compliance office review;
    (ii) Look-back;
    (iii) Internal or external audit finding;
    (iv) Self-reported error; or
    (v) Validated complaint; and
    (7) Establish and follow appropriate procedures for the handling, 
management response, remediation, retesting, and closing of 
noncompliance issues.
    (d) Compliance reports--(1) In general. The chief compliance officer 
shall annually prepare and sign a report that contains a description of 
the compliance of the security-based swap data repository with respect 
to the Act and the rules and regulations thereunder and each policy and 
procedure of the security-based swap data repository (including the code 
of ethics and conflicts of interest policies of the security-based swap 
data repository). Each compliance report shall also contain, at a 
minimum, a description of:
    (i) The security-based swap data repository's enforcement of its 
policies and procedures;
    (ii) Any material changes to the policies and procedures since the 
date of the preceding compliance report;
    (iii) Any recommendation for material changes to the policies and 
procedures as a result of the annual review, the rationale for such 
recommendation, and whether such policies and

[[Page 223]]

procedures were or will be modified by the security-based swap data 
repository to incorporate such recommendation; and
    (iv) Any material compliance matters identified since the date of 
the preceding compliance report.
    (2) Requirements. A financial report of the security-based swap data 
repository shall be filed with the Commission as described in paragraph 
(g) of this section and shall accompany a compliance report as described 
in paragraph (d)(1) of this section. The compliance report shall include 
a certification by the chief compliance officer that, to the best of his 
or her knowledge and reasonable belief, and under penalty of law, the 
compliance report is accurate and complete. The compliance report shall 
also be filed in a tagged data format in accordance with the 
instructions contained in the EDGAR Filer Manual, as described in Rule 
301 of Regulation S-T (17 CFR 232.301).
    (e) The chief compliance officer shall submit the annual compliance 
report to the board for its review prior to the filing of the report 
with the Commission.
    (f) Financial reports. Each financial report filed with a compliance 
report shall:
    (1) Be a complete set of financial statements of the security-based 
swap data repository that are prepared in accordance with U.S. generally 
accepted accounting principles for the most recent two fiscal years of 
the security-based swap data repository;
    (2) Be audited in accordance with the standards of the Public 
Company Accounting Oversight Board by a registered public accounting 
firm that is qualified and independent in accordance with Rule 2-01 of 
Regulation S-X (17 CFR 210.2-01);
    (3) Include a report of the registered public accounting firm that 
complies with paragraphs (a) through (d) of Rule 2-02 of Regulation S-X 
(17 CFR 210.2-02);
    (4) If the security-based swap data repository's financial 
statements contain consolidated information of a subsidiary of the 
security-based swap data repository, provide condensed financial 
information, in a financial statement footnote, as to the financial 
position, changes in financial position and results of operations of the 
security-based swap data repository, as of the same dates and for the 
same periods for which audited consolidated financial statements are 
required. Such financial information need not be presented in greater 
detail than is required for condensed statements by Rules 10-01(a)(2), 
(3), and (4) of Regulation S-X (17 CFR 210.10-01). Detailed footnote 
disclosure that would normally be included with complete financial 
statements may be omitted with the exception of disclosures regarding 
material contingencies, long-term obligations, and guarantees. 
Descriptions of significant provisions of the security-based swap data 
repository's long-term obligations, mandatory dividend or redemption 
requirements of redeemable stocks, and guarantees of the security-based 
swap data repository shall be provided along with a five-year schedule 
of maturities of debt. If the material contingencies, long-term 
obligations, redeemable stock requirements, and guarantees of the 
security-based swap data repository have been separately disclosed in 
the consolidated statements, then they need not be repeated in this 
schedule; and
    (5) Be provided as an official filing in accordance with the EDGAR 
Filer Manual and include, as part of the official filing, an Interactive 
Data Financial Report filed in accordance with Rule 407 of Regulation S-
T (17 CFR 232.407).
    (g) Reports filed pursuant to paragraphs (d) and (f) of this section 
shall be filed within 60 days after the end of the fiscal year covered 
by such reports.
    (h) No officer, director, or employee of a security-based swap data 
repository may directly or indirectly take any action to coerce, 
manipulate, mislead, or fraudulently influence the security-based swap 
data repository's chief compliance officer in the performance of his or 
her duties under this section.

[80 FR 14550, Mar. 19, 2015]

[[Page 224]]



Sec.  240.13n-12  Exemption from requirements governing security-based 
swap data repositories for certain non-U.S. persons.

    (a) Definitions. For purposes of this section--
    (1) Non-U.S. person means a person that is not a U.S. person.
    (2) U.S. person shall have the same meaning as set forth in Rule 
3a71-3(a)(4)(i) (Sec.  240.3a71-3(a)(4)(i)).
    (b) A non-U.S. person that performs the functions of a security-
based swap data repository within the United States shall be exempt from 
the registration and other requirements set forth in section 13(n) of 
the Act (15 U.S.C. 78m(n)), and the rules and regulations thereunder, 
provided that each regulator with supervisory authority over such non-
U.S. person has entered into a memorandum of understanding or other 
arrangement with the Commission that addresses the confidentiality of 
data collected and maintained by such non-U.S. person, access by the 
Commission to such data, and any other matters determined by the 
Commission.

[80 FR 14550, Mar. 19, 2015]



Sec.  240.13p-1  Requirement of report regarding disclosure of registrant's
supply chain information regarding conflict minerals.

    Every registrant that files reports with the Commission under 
Sections 13(a) (15 U.S.C. 78m(a)) or 15(d) (15 U.S.C. 78o(d)) of the 
Exchange Act, having conflict minerals that are necessary to the 
functionality or production of a product manufactured or contracted by 
that registrant to be manufactured, shall file a report on Form SD 
within the period specified in that Form disclosing the information 
required by the applicable items of Form SD as specified in that Form 
(17 CFR 249b.400).

[77 FR 56362, Sept. 12, 2012]



Sec.  240.13q-1  Disclosure of payments made by resource extraction
issuers.

    (a) Resource extraction issuers. Every issuer that is required to 
file an annual report with the Commission on Form 10-K (17 CFR 249.310), 
Form 20-F (17 CFR 249.220f), or Form 40-F (17 CFR 249.240f) pursuant to 
Section 13 or 15(d) of the Exchange Act (15 U.S.C. 78m or 78o(d)) and 
engages in the commercial development of oil, natural gas, or minerals 
must furnish a report on Form SD (17 CFR 249b.400) within the period 
specified in that Form disclosing the information required by the 
applicable items of Form SD as specified in that Form.
    (b) Anti-evasion. Disclosure is required under this section in 
circumstances in which an activity related to the commercial development 
of oil, natural gas, or minerals, or a payment or series of payments 
made by a resource extraction issuer to a foreign government or the 
Federal Government for the purpose of commercial development of oil, 
natural gas, or minerals, is not, in form or characterization, within 
one of the categories of activities or payments specified in Form SD, 
but is part of a plan or scheme to evade the disclosure required under 
this section.
    (c) Alternative reporting. An application for recognition by the 
Commission that an alternative reporting regime requires disclosure that 
satisfies the transparency objectives of Section 13(q) (15 U.S.C. 
78m(q)), for purposes of alternative reporting pursuant to Item 2.01(c) 
of Form SD, must be filed in accordance with the procedures set forth in 
Sec.  240.0-13, except that, for purposes of this paragraph (c), 
applications may be submitted by resource extraction issuers, 
governments, industry groups, or trade associations.
    (d) Exemptions--(1) Conflicts of law. A resource extraction issuer 
that is prohibited by the law of the jurisdiction where the project is 
located from providing the payment information required by Form SD may 
exclude such disclosure, subject to the following conditions:
    (i) The issuer has taken all reasonable steps to seek and use any 
exemptions or other relief under the applicable law of the foreign 
jurisdiction, and has been unable to obtain or use such an exemption or 
other relief;
    (ii) The issuer must disclose on Form SD:
    (A) The foreign jurisdiction for which it is omitting the disclosure 
pursuant to this paragraph (d)(1);

[[Page 225]]

    (B) The particular law of that jurisdiction that prevents the issuer 
from providing such disclosure; and
    (C) The efforts the issuer has undertaken to seek and use exemptions 
or other relief under the applicable law of that jurisdiction, and the 
results of those efforts; and
    (iii) The issuer must furnish as an exhibit to Form SD a legal 
opinion from counsel that opines on the issuer's inability to provide 
such disclosure without violating the foreign jurisdiction's law.
    (2) Conflicts with pre-existing contracts. A resource extraction 
issuer that is unable to provide the payment information required by 
Form SD without violating one or more contract terms that were in effect 
prior to the effective date of this section may exclude such disclosure, 
subject to the following conditions:
    (i) The issuer has taken all reasonable steps to obtain the consent 
of the relevant contractual parties, or to seek and use another 
contractual exception or other relief, to disclose the payment 
information, and has been unable to obtain such consent or other 
contractual exception or relief;
    (ii) The issuer must disclose on Form SD:
    (A) The jurisdiction for which it is omitting the disclosure 
pursuant to this paragraph (d)(2);
    (B) The particular contract terms that prohibit the issuer from 
providing such disclosure; and
    (C) The efforts the issuer has undertaken to obtain the consent of 
the contracting parties, or to seek and use another contractual 
exception or relief, to disclose the payment information, and the 
results of those efforts; and
    (iii) The issuer must furnish as an exhibit to Form SD a legal 
opinion from counsel that opines on the issuer's inability to provide 
such disclosure without violating the contractual terms.
    (3) Exemption for emerging growth companies and smaller reporting 
companies. An issuer that is an emerging growth company or a smaller 
reporting company, each as defined under Sec.  240.12b-2, is exempt 
from, and need not comply with, the requirements of this section, unless 
it is subject to the resource extraction payment disclosure requirements 
of an alternative reporting regime, which has been deemed by the 
Commission to require disclosure that satisfies the transparency 
objectives of Section 13(q) (15 U.S.C. 78m(q)), pursuant to Sec.  
240.13q-1(c).
    (4) Case-by-case exemption. A resource extraction issuer may file an 
application for exemptive relief under this section in accordance with 
the procedures set forth in Sec.  240.0-12.
    (e) Compilation. To the extent practicable, the staff will 
periodically make a compilation of the information required to be 
submitted under this section publicly available online. The staff may 
determine the form, manner and timing of the compilation, except that no 
information included therein may be anonymized (whether by redacting the 
names of the resource extraction issuers or otherwise).

[86 FR 4714, Jan. 15, 2021]

                 Regulation 14A: Solicitation of Proxies

                       ATTENTION ELECTRONIC FILERS

THIS REGULATION SHOULD BE READ IN CONJUNCTION WITH REGULATION S-T (PART 
232 OF THIS CHAPTER), WHICH GOVERNS THE PREPARATION AND SUBMISSION OF 
DOCUMENTS IN ELECTRONIC FORMAT. MANY PROVISIONS RELATING TO THE 
PREPARATION AND SUBMISSION OF DOCUMENTS IN PAPER FORMAT CONTAINED IN 
THIS REGULATION ARE SUPERSEDED BY THE PROVISIONS OF REGULATION S-T FOR 
DOCUMENTS REQUIRED TO BE FILED IN ELECTRONIC FORMAT.



Sec.  240.14a-1  Definitions.

    Unless the context otherwise requires, all terms used in this 
regulation have the same meanings as in the Act or elsewhere in the 
general rules and regulations thereunder. In addition, the following 
definitions apply unless the context otherwise requires:
    (a) Associate. The term ``associate,'' used to indicate a 
relationship with any person, means:
    (1) Any corporation or organization (other than the registrant or a 
majority owned subsidiary of the registrant) of which such person is an 
officer or partner or is, directly or indirectly, the beneficial owner 
of 10 percent or more of any class of equity securities;

[[Page 226]]

    (2) Any trust or other estate in which such person has a substantial 
beneficial interest or as to which such person serves as trustee or in a 
similar fiduciary capacity; and
    (3) Any relative or spouse of such person, or any relative of such 
spouse, who has the same home as such person or who is a director or 
officer of the registrant or any of its parents or subsidiaries.
    (b) Employee benefit plan. For purposes of Sec. Sec.  240.14a-13, 
240.14b-1 and 240.14b-2, the term ``employee benefit plan'' means any 
purchase, savings, option, bonus, appreciation, profit sharing, thrift, 
incentive, pension or similar plan primarily for employees, directors, 
trustees or officers.
    (c) Entity that exercises fiduciary powers. The term ``entity that 
exercises fiduciary powers'' means any entity that holds securities in 
nominee name or otherwise on behalf of a beneficial owner but does not 
include a clearing agency registered pursuant to section 17A of the Act 
or a broker or a dealer.
    (d) Exempt employee benefit plan securities. For purposes of 
Sec. Sec.  240.14a-13, 240.14b-1 and 240.14b-2, the term ``exempt 
employee benefit plan securities'' means:
    (1) Securities of the registrant held by an employee benefit plan, 
as defined in paragraph (b) of this section, where such plan is 
established by the registrant; or
    (2) If notice regarding the current solicitation has been given 
pursuant to Sec.  240.14a-13(a)(1)(ii)(C) or if notice regarding the 
current request for a list of names, addresses and securities positions 
of beneficial owners has been given pursuant to Sec.  240.14a-13(b)(3), 
securities of the registrant held by an employee benefit plan, as 
defined in paragraph (b) of this section, where such plan is established 
by an affiliate of the registrant.
    (e) Last fiscal year. The term ``last fiscal year'' of the 
registrant means the last fiscal year of the registrant ending prior to 
the date of the meeting for which proxies are to be solicited or if the 
solicitation involves written authorizations or consents in lieu of a 
meeting, the earliest date they may be used to effect corporate action.
    (f) Proxy. The term ``proxy'' includes every proxy, consent or 
authorization within the meaning of section 14(a) of the Act. The 
consent or authorization may take the form of failure to object or to 
dissent.
    (g) Proxy statement. The term ``proxy statement'' means the 
statement required by Sec.  240.14a-3(a) whether or not contained in a 
single document.
    (h) Record date. The term ``record date'' means the date as of which 
the record holders of securities entitled to vote at a meeting or by 
written consent or authorization shall be determined.
    (i) Record holder. For purposes of Sec. Sec.  240.14a-13, 240.14b-1 
and 240.14b-2, the term ``record holder'' means any broker, dealer, 
voting trustee, bank, association or other entity that exercises 
fiduciary powers which holds securities of record in nominee name or 
otherwise or as a participant in a clearing agency registered pursuant 
to section 17A of the Act.
    (j) Registrant. The term ``registrant'' means the issuer of the 
securities in respect of which proxies are to be solicited.
    (k) Respondent bank. For purposes of Sec. Sec.  240.14a-13, 240.14b-
1 and 240.14b-2, the term ``respondent bank'' means any bank, 
association or other entity that exercises fiduciary powers which holds 
securities on behalf of beneficial owners and deposits such securities 
for safekeeping with another bank, association or other entity that 
exercises fiduciary powers.
    (l) Solicitation. (1) The terms ``solicit'' and ``solicitation'' 
include:
    (i) Any request for a proxy whether or not accompanied by or 
included in a form of proxy:
    (ii) Any request to execute or not to execute, or to revoke, a 
proxy; or
    (iii) The furnishing of a form of proxy or other communication to 
security holders under circumstances reasonably calculated to result in 
the procurement, withholding or revocation of a proxy, including:
    (A) Any proxy voting advice that makes a recommendation to a 
security holder as to its vote, consent, or authorization on a specific 
matter for which security holder approval is solicited, and that is 
furnished by a person

[[Page 227]]

that markets its expertise as a provider of such proxy voting advice, 
separately from other forms of investment advice, and sells such proxy 
voting advice for a fee.
    (B) [Reserved]
    (2) The terms do not apply, however, to:
    (i) The furnishing of a form of proxy to a security holder upon the 
unsolicited request of such security holder;
    (ii) The performance by the registrant of acts required by Sec.  
240.14a-7;
    (iii) The performance by any person of ministerial acts on behalf of 
a person soliciting a proxy;
    (iv) A communication by a security holder who does not otherwise 
engage in a proxy solicitation (other than a solicitation exempt under 
Sec.  240.14a-2) stating how the security holder intends to vote and the 
reasons therefor, provided that the communication:
    (A) Is made by means of speeches in public forums, press releases, 
published or broadcast opinions, statements, or advertisements appearing 
in a broadcast media, or newspaper, magazine or other bona fide 
publication disseminated on a regular basis,
    (B) Is directed to persons to whom the security holder owes a 
fiduciary duty in connection with the voting of securities of a 
registrant held by the security holder, or
    (C) Is made in response to unsolicited requests for additional 
information with respect to a prior communication by the security holder 
made pursuant to this paragraph (l)(2)(iv); or
    (v) The furnishing of any proxy voting advice by a person who 
furnishes such advice only in response to an unprompted request.

[51 FR 44275, Dec. 9, 1986, as amended at 52 FR 23648, June 24, 1987; 53 
FR 16405, May 9, 1988; 57 FR 48290, Oct. 22, 1992; 85 FR 55154, Sept. 3, 
2020]



Sec.  240.14a-2  Solicitations to which Sec.  240.14a-3 to
Sec.  240.14a-15 apply.

    Sections 240.14a-3 to 240.14a-15, except as specified, apply to 
every solicitation of a proxy with respect to securities registered 
pursuant to section 12 of the Act (15 U.S.C. 78l), whether or not 
trading in such securities has been suspended. To the extent specified 
below, certain of these sections also apply to roll-up transactions that 
do not involve an entity with securities registered pursuant to section 
12 of the Act.
    (a) Sections 240.14a-3 to 240.14a-15 do not apply to the following:
    (1) Any solicitation by a person in respect to securities carried in 
his name or in the name of his nominee (otherwise than as voting 
trustee) or held in his custody, if such person--
    (i) Receives no commission or remuneration for such solicitation, 
directly or indirectly, other than reimbursement of reasonable expenses,
    (ii) Furnishes promptly to the person solicited (or such person's 
household in accordance with Sec.  240.14a-3(e)(1)) a copy of all 
soliciting material with respect to the same subject matter or meeting 
received from all persons who shall furnish copies thereof for such 
purpose and who shall, if requested, defray the reasonable expenses to 
be incurred in forwarding such material, and
    (iii) In addition, does no more than impartially instruct the person 
solicited to forward a proxy to the person, if any, to whom the person 
solicited desires to give a proxy, or impartially request from the 
person solicited instructions as to the authority to be conferred by the 
proxy and state that a proxy will be given if no instructions are 
received by a certain date.
    (2) Any solicitation by a person in respect of securities of which 
he is the beneficial owner;
    (3) Any solicitation involved in the offer and sale of securities 
registered under the Securities Act of 1933: Provided, That this 
paragraph shall not apply to securities to be issued in any transaction 
of the character specified in paragraph (a) of Rule 145 under that Act;
    (4) Any solicitation with respect to a plan of reorganization under 
Chapter 11 of the Bankruptcy Reform Act of 1978, as amended, if made 
after the entry of an order approving the written disclosure statement 
concerning a plan of reorganization pursuant to section 1125 of said Act 
and after, or concurrently with, the transmittal of such disclosure 
statement as required by section 1125 of said Act;
    (5) [Reserved]

[[Page 228]]

    (6) Any solicitation through the medium of a newspaper advertisement 
which informs security holders of a source from which they may obtain 
copies of a proxy statement, form of proxy and any other soliciting 
material and does no more than:
    (i) Name the registrant,
    (ii) State the reason for the advertisement, and
    (iii) Identify the proposal or proposals to be acted upon by 
security holders.
    (b) Sections 240.14a-3 to 240.14a-6 (other than paragraphs 14a-6(g) 
and 14a-6(p)), Sec.  240.14a-8, Sec.  240.14a-10, and Sec. Sec.  
240.14a-12 to 240.14a-15 do not apply to the following:
    (1) Any solicitation by or on behalf of any person who does not, at 
any time during such solicitation, seek directly or indirectly, either 
on its own or another's behalf, the power to act as proxy for a security 
holder and does not furnish or otherwise request, or act on behalf of a 
person who furnishes or requests, a form of revocation, abstention, 
consent or authorization. Provided, however, That the exemption set 
forth in this paragraph shall not apply to:
    (i) The registrant or an affiliate or associate of the registrant 
(other than an officer or director or any person serving in a similar 
capacity);
    (ii) An officer or director of the registrant or any person serving 
in a similar capacity engaging in a solicitation financed directly or 
indirectly by the registrant;
    (iii) An officer, director, affiliate or associate of a person that 
is ineligible to rely on the exemption set forth in this paragraph 
(other than persons specified in paragraph (b)(1)(i) of this section), 
or any person serving in a similar capacity;
    (iv) Any nominee for whose election as a director proxies are 
solicited;
    (v) Any person soliciting in opposition to a merger, 
recapitalization, reorganization, sale of assets or other extraordinary 
transaction recommended or approved by the board of directors of the 
registrant who is proposing or intends to propose an alternative 
transaction to which such person or one of its affiliates is a party;
    (vi) Any person who is required to report beneficial ownership of 
the registrant's equity securities on a Schedule 13D (Sec.  240.13d-
101), unless such person has filed a Schedule 13D and has not disclosed 
pursuant to Item 4 thereto an intent, or reserved the right, to engage 
in a control transaction, or any contested solicitation for the election 
of directors;
    (vii) Any person who receives compensation from an ineligible person 
directly related to the solicitation of proxies, other than pursuant to 
Sec.  240.14a-13;
    (viii) Where the registrant is an investment company registered 
under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), an 
``interested person'' of that investment company, as that term is 
defined in section 2(a)(19) of the Investment Company Act (15 U.S.C. 
80a-2);
    (ix) Any person who, because of a substantial interest in the 
subject matter of the solicitation, is likely to receive a benefit from 
a successful solicitation that would not be shared pro rata by all other 
holders of the same class of securities, other than a benefit arising 
from the person's employment with the registrant; and
    (x) Any person acting on behalf of any of the foregoing.
    (2) Any solicitation made otherwise than on behalf of the registrant 
where the total number of persons solicited is not more than ten;
    (3) The furnishing of proxy voting advice by any person (the 
``advisor'') to any other person with whom the advisor has a business 
relationship, if:
    (i) The advisor renders financial advice in the ordinary course of 
his business;
    (ii) The advisor discloses to the recipient of the advice any 
significant relationship with the registrant or any of its affiliates, 
or a security holder proponent of the matter on which advice is given, 
as well as any material interests of the advisor in such matter;
    (iii) The advisor receives no special commission or remuneration for 
furnishing the proxy voting advice from any person other than a 
recipient of the advice and other persons who receive similar advice 
under this subsection; and

[[Page 229]]

    (iv) The proxy voting advice is not furnished on behalf of any 
person soliciting proxies or on behalf of a participant in an election 
subject to the provisions of Sec.  240.14a-12(c); and
    (4) Any solicitation in connection with a roll-up transaction as 
defined in Item 901(c) of Regulation S-K (Sec.  229.901 of this chapter) 
in which the holder of a security that is the subject of a proposed 
roll-up transaction engages in preliminary communications with other 
holders of securities that are the subject of the same limited 
partnership roll-up transaction for the purpose of determining whether 
to solicit proxies, consents, or authorizations in opposition to the 
proposed limited partnership roll-up transaction; provided, however, 
that:
    (i) This exemption shall not apply to a security holder who is an 
affiliate of the registrant or general partner or sponsor; and
    (ii) This exemption shall not apply to a holder of five percent (5%) 
or more of the outstanding securities of a class that is the subject of 
the proposed roll-up transaction who engages in the business of buying 
and selling limited partnership interests in the secondary market unless 
that holder discloses to the persons to whom the communications are made 
such ownership interest and any relations of the holder to the parties 
of the transaction or to the transaction itself, as required by Sec.  
240.14a-6(n)(1) and specified in the Notice of Exempt Preliminary Roll-
up Communication (Sec.  240.14a-104). If the communication is oral, this 
disclosure may be provided to the security holder orally. Whether the 
communication is written or oral, the notice required by Sec.  240.14a-
6(n) and Sec.  240.14a-104 shall be furnished to the Commission.
    (5) Publication or distribution by a broker or a dealer of a 
research report in accordance with Rule 138 (Sec.  230.138 of this 
chapter) or Rule 139 (Sec.  230.139 of this chapter) during a 
transaction in which the broker or dealer or its affiliate participates 
or acts in a an advisory role.
    (6) Any solicitation by or on behalf of any person who does not seek 
directly or indirectly, either on its own or another's behalf, the power 
to act as proxy for a shareholder and does not furnish or otherwise 
request, or act on behalf of a person who furnishes or requests, a form 
of revocation, abstention, consent, or authorization in an electronic 
shareholder forum that is established, maintained or operated pursuant 
to the provisions of Sec.  240.14a-17, provided that the solicitation is 
made more than 60 days prior to the date announced by a registrant for 
its next annual or special meeting of shareholders. If the registrant 
announces the date of its next annual or special meeting of shareholders 
less than 60 days before the meeting date, then the solicitation may not 
be made more than two days following the date of the registrant's 
announcement of the meeting date. Participation in an electronic 
shareholder forum does not eliminate a person's eligibility to solicit 
proxies after the date that this exemption is no longer available, or is 
no longer being relied upon, provided that any such solicitation is 
conducted in accordance with this regulation.
    (7) Any solicitation by or on behalf of any shareholder in 
connection with the formation of a nominating shareholder group pursuant 
to Sec.  240.14a-11, provided that:
    (i) The soliciting shareholder is not holding the registrant's 
securities with the purpose, or with the effect, of changing control of 
the registrant or to gain a number of seats on the board of directors 
that exceeds the maximum number of nominees that the registrant could be 
required to include under Sec.  240.14a-11(d);
    (ii) Each written communication includes no more than:
    (A) A statement of each soliciting shareholder's intent to form a 
nominating shareholder group in order to nominate one or more directors 
under Sec.  240.14a-11;
    (B) Identification of, and a brief statement regarding, the 
potential nominee or nominees or, where no nominee or nominees have been 
identified, the characteristics of the nominee or nominees that the 
shareholder intends to nominate, if any;
    (C) The percentage of voting power of the registrant's securities 
that are entitled to be voted on the election of directors that each 
soliciting shareholder holds or the aggregate percentage held

[[Page 230]]

by any group to which the shareholder belongs; and
    (D) The means by which shareholders may contact the soliciting 
party.
    (iii) Any written soliciting material published, sent or given to 
shareholders in accordance with this paragraph must be filed by the 
shareholder with the Commission, under the registrant's Exchange Act 
file number, or, in the case of a registrant that is an investment 
company registered under the Investment Company Act of 1940 (15 U.S.C. 
80a-1 et seq.), under the registrant's Investment Company Act file 
number, no later than the date the material is first published, sent or 
given to shareholders. Three copies of the material must at the same 
time be filed with, or mailed for filing to, each national securities 
exchange upon which any class of securities of the registrant is listed 
and registered. The soliciting material must include a cover page in the 
form set forth in Schedule 14N (Sec.  240.14n-101) and the appropriate 
box on the cover page must be marked.
    (iv) In the case of an oral solicitation made in accordance with the 
terms of this section, the nominating shareholder must file a cover page 
in the form set forth in Schedule 14N (Sec.  240.14n-101), with the 
appropriate box on the cover page marked, under the registrant's 
Exchange Act file number (or in the case of an investment company 
registered under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et 
seq.), under the registrant's Investment Company Act file number), no 
later than the date of the first such communication.

    Instruction to paragraph (b)(7). The exemption provided in paragraph 
(b)(7) of this section shall not apply to a shareholder that 
subsequently engages in soliciting or other nominating activities 
outside the scope of Sec.  240.14a-2(b)(8) and Sec.  240.14a-11 in 
connection with the subject election of directors or is or becomes a 
member of any other group, as determined under section 13(d)(3) of the 
Act (15 U.S.C. 78m(d)(3) and Sec.  240.13d-5(b)), or otherwise, with 
persons engaged in soliciting or other nominating activities in 
connection with the subject election of directors.

    (8) Any solicitation by or on behalf of a nominating shareholder or 
nominating shareholder group in support of its nominee that is included 
or that will be included on the registrant's form of proxy in accordance 
with Sec.  240.14a-11 or for or against the registrant's nominee or 
nominees, provided that:
    (i) The soliciting party does not, at any time during such 
solicitation, seek directly or indirectly, either on its own or 
another's behalf, the power to act as proxy for a shareholder and does 
not furnish or otherwise request, or act on behalf of a person who 
furnishes or requests, a form of revocation, abstention, consent or 
authorization;
    (ii) Any written communication includes:
    (A) The identity of each nominating shareholder and a description of 
his or her direct or indirect interests, by security holdings or 
otherwise;
    (B) A prominent legend in clear, plain language advising 
shareholders that a shareholder nominee is or will be included in the 
registrant's proxy statement and that they should read the registrant's 
proxy statement when available because it includes important information 
(or, if the registrant's proxy statement is publicly available, advising 
shareholders of that fact and encouraging shareholders to read the 
registrant's proxy statement because it includes important information). 
The legend also must explain to shareholders that they can find the 
registrant's proxy statement, other soliciting material, and any other 
relevant documents at no charge on the Commission's Web site; and
    (iii) Any written soliciting material published, sent or given to 
shareholders in accordance with this paragraph must be filed by the 
nominating shareholder or nominating shareholder group with the 
Commission, under the registrant's Exchange Act file number, or, in the 
case of a registrant that is an investment company registered under the 
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), under the 
registrant's Investment Company Act file number, no later than the date 
the material is first published, sent or given to shareholders. Three 
copies of the material must at the same time be filed with, or mailed 
for filing to, each national securities exchange upon which any class of 
securities of the registrant is listed and registered. The soliciting 
material must include a cover

[[Page 231]]

page in the form set forth in Schedule 14N (Sec.  240.14n-101) and the 
appropriate box on the cover page must be marked.

    Instruction 1 to paragraph (b)(8). A nominating shareholder or 
nominating shareholder group may rely on the exemption provided in 
paragraph (b)(8) of this section only after receiving notice from the 
registrant in accordance with Sec.  240.14a-11(g)(1) or Sec.  240.14a-
11(g)(3)(iv) that the registrant will include the nominating 
shareholder's or nominating shareholder group's nominee or nominees in 
its form of proxy.
    Instruction 2 to paragraph (b)(8). Any solicitation by or on behalf 
of a nominating shareholder or nominating shareholder group in support 
of its nominee included or to be included on the registrant's form of 
proxy in accordance with Sec.  240.14a-11 or for or against the 
registrant's nominee or nominees must be made in reliance on the 
exemption provided in paragraph (b)(8) of this section and not on any 
other exemption.
    Instruction 3 to paragraph (b)(8). The exemption provided in 
paragraph (b)(8) of this section shall not apply to a person that 
subsequently engages in soliciting or other nominating activities 
outside the scope of Sec.  240.14a-11 in connection with the subject 
election of directors or is or becomes a member of any other group, as 
determined under section 13(d)(3) of the Act (15 U.S.C. 78m(d)(3) and 
Sec.  240.13d-5(b)), or otherwise, with persons engaged in soliciting or 
other nominating activities in connection with the subject election of 
directors.
    (9) Paragraphs (b)(1) and (b)(3) of this section shall not be 
available to a person furnishing proxy voting advice covered by Sec.  
240.14a-1(l)(1)(iii)(A) (``proxy voting advice business'') unless both 
of the conditions in (b)(9)(i) and (ii) of this section are satisfied:
    (i) The proxy voting advice business includes in its proxy voting 
advice or in an electronic medium used to deliver the proxy voting 
advice prominent disclosure of:
    (A) Any information regarding an interest, transaction, or 
relationship of the proxy voting advice business (or its affiliates) 
that is material to assessing the objectivity of the proxy voting advice 
in light of the circumstances of the particular interest, transaction, 
or relationship; and
    (B) Any policies and procedures used to identify, as well as the 
steps taken to address, any such material conflicts of interest arising 
from such interest, transaction, or relationship; and
    (ii) The proxy voting advice business has adopted and publicly 
disclosed written policies and procedures reasonably designed to ensure 
that:
    (A) Registrants that are the subject of the proxy voting advice have 
such advice made available to them at or prior to the time when such 
advice is disseminated to the proxy voting advice business's clients; 
and
    (B) The proxy voting advice business provides its clients with a 
mechanism by which they can reasonably be expected to become aware of 
any written statements regarding its proxy voting advice by registrants 
who are the subject of such advice, in a timely manner before the 
security holder meeting (or, if no meeting, before the votes, consents, 
or authorizations may be used to effect the proposed action).

    Note 1 to paragraph (b)(9)(ii): For purposes of satisfying the 
requirement in paragraph (b)(9)(ii)(A) of this section, the proxy voting 
advice business's written policies and procedures need not 
require it to make available to the registrant additional 
versions of its proxy voting advice with respect to the same meeting, 
vote, consent or authorization, as applicable, if the advice is 
subsequently revised.

    (iii) A proxy voting advice business will be deemed to satisfy the 
requirement in paragraph (b)(9)(ii)(A) of this section if it has written 
policies and procedures that are reasonably designed to provide a 
registrant with a copy of its proxy voting advice, at no charge, no 
later than the time such advice is disseminated to the proxy voting 
advice business's clients. Such policies and procedures may include 
conditions requiring that:
    (A) The registrant has filed its definitive proxy statement at least 
40 calendar days before the security holder meeting date (or if no 
meeting is held, at least 40 calendar days before the date the votes, 
consents, or authorizations may be used to effect the proposed action); 
and
    (B) The registrant has acknowledged that it will only use the copy 
of the proxy voting advice for its internal purposes and/or in 
connection with the solicitation and such copy will not be published or 
otherwise shared except with the registrant's employees or advisers.

[[Page 232]]

    (iv) A proxy voting advice business will be deemed to satisfy the 
requirement in paragraph (b)(9)(ii)(B) of this section if it has written 
policies and procedures that are reasonably designed to inform clients 
who receive proxy voting advice when a registrant that is the subject of 
such advice notifies the proxy voting advice business that it intends to 
file or has filed additional soliciting materials with the Commission 
pursuant to Sec.  240.14a-6 setting forth the registrant's statement 
regarding the advice, by:
    (A) The proxy voting advice business providing notice to its clients 
on its electronic platform that the registrant intends to file or has 
filed such additional soliciting materials and including an active 
hyperlink to those materials on EDGAR when available; or
    (B) The proxy voting advice business providing notice to its clients 
through email or other electronic means that the registrant intends to 
file or has filed such additional soliciting materials and including an 
active hyperlink to those materials on EDGAR when available.
    (v) Paragraph (b)(9)(ii) of this section does not apply to proxy 
voting advice to the extent such advice is based on custom voting 
policies that are proprietary to a proxy voting advice business's 
client.
    (vi) Paragraph (b)(9)(ii) of this section does not apply to any 
portion of the proxy voting advice that makes a recommendation to a 
security holder as to its vote, consent, or authorization in a 
solicitation subject to Sec.  240.14a-3(a):
    (A) To approve any transaction specified in Sec.  230.145(a); or
    (B) By any person or group of persons for the purpose of opposing a 
solicitation subject to this regulation by any other person or group of 
persons.

[44 FR 68769, Nov. 29, 1979, as amended at 51 FR 42059, Nov. 20, 1986; 
52 FR 21936, June 10, 1987; 57 FR 48290, Oct. 22, 1992; 59 FR 63684, 
Dec. 8, 1994; 65 FR 65749, Nov. 2, 2000; 70 FR 44829, Aug. 3, 2005; 72 
FR 4166, Jan. 29, 2007; 73 FR 4458, Jan. 25, 2008; 73 FR 17814, Apr. 1, 
2008; 75 FR 56780, Sept. 16, 2010; 85 FR 55154, Sept. 3, 2020]



Sec.  240.14a-3  Information to be furnished to security holders.

    (a) No solicitation subject to this regulation shall be made unless 
each person solicited is concurrently furnished or has previously been 
furnished with:
    (1) A publicly-filed preliminary or definitive proxy statement, in 
the form and manner described in Sec.  240.14a-16, containing the 
information specified in Schedule 14A (Sec.  240.14a-101);
    (2) A preliminary or definitive written proxy statement included in 
a registration statement filed under the Securities Act of 1933 on Form 
S-4 or F-4 (Sec.  239.25 or Sec.  239.34 of this chapter) or Form N-14 
(Sec.  239.23 of this chapter) and containing the information specified 
in such Form; or
    (3) A publicly-filed preliminary or definitive proxy statement, not 
in the form and manner described in Sec.  240.14a-16, containing the 
information specified in Schedule 14A (Sec.  240.14a-101), if:
    (i) The solicitation relates to a business combination transaction 
as defined in Sec.  230.165 of this chapter, as well as transactions for 
cash consideration requiring disclosure under Item 14 of Sec.  240.14a-
101.
    (ii) The solicitation may not follow the form and manner described 
in Sec.  240.14a-16 pursuant to the laws of the state of incorporation 
of the registrant;
    (b) If the solicitation is made on behalf of the registrant, other 
than an investment company registered under the Investment Company Act 
of 1940, and relates to an annual (or special meeting in lieu of the 
annual) meeting of security holders, or written consent in lieu of such 
meeting, at which directors are to be elected, each proxy statement 
furnished pursuant to paragraph (a) of this section shall be accompanied 
or preceded by an annual report to security holders as follows:
    (1) The report shall include, for the registrant and its 
subsidiaries, consolidated and audited balance sheets as of the end of 
the two most recent fiscal years and audited statements of income and 
cash flows for each of the three most recent fiscal years prepared in 
accordance with Regulation S-X (part 210 of this chapter), except that 
the provisions of Article 3 (other than

[[Page 233]]

Sec. Sec.  210.3-03(e), 210.3-04 and 210.3-20) and Article 11 shall not 
apply. Any financial statement schedules or exhibits or separate 
financial statements which may otherwise be required in filings with the 
Commission may be omitted. If the financial statements of the registrant 
and its subsidiaries consolidated in the annual report filed or to be 
filed with the Commission are not required to be audited, the financial 
statements required by this paragraph may be unaudited. A smaller 
reporting company may provide the information in Article 8 of Regulation 
S-X (Sec.  210.8 of this chapter) in lieu of the financial information 
required by this paragraph 9(b)(1).

    Note 1 to paragraph (b)(1): If the financial statements for a period 
prior to the most recently completed fiscal year have been examined by a 
predecessor accountant, the separate report of the predecessor 
accountant may be omitted in the report to security holders, provided 
the registrant has obtained from the predecessor accountant a reissued 
report covering the prior period presented and the successor accountant 
clearly indicates in the scope paragraph of his or her report (a) that 
the financial statements of the prior period were examined by other 
accountants, (b) the date of their report, (c) the type of opinion 
expressed by the predecessor accountant and (d) the substantive reasons 
therefore, if it was other than unqualified. It should be noted, 
however, that the separate report of any predecessor accountant is 
required in filings with the Commission. If, for instance, the financial 
statements in the annual report to security holders are incorporated by 
reference in a Form 10-K, the separate report of a predecessor 
accountant shall be filed in Part II or in Part IV as a financial 
statement schedule.
    Note 2 to paragraph (b)(1): For purposes of complying with Sec.  
240.14a-3, if the registrant has changed its fiscal closing date, 
financial statements covering two years and one period of 9 to 12 months 
shall be deemed to satisfy the requirements for statements of income and 
cash flows for the three most recent fiscal years.

    (2)(i) Financial statements and notes thereto shall be presented in 
roman type at least as large and as legible as 10-point modern type. If 
necessary for convenient presentation, the financial statements may be 
in roman type as large and as legible as 8-point modern type. All type 
shall be leaded at least 2 points.
    (ii) Where the annual report to security holders is delivered 
through an electronic medium, issuers may satisfy legibility 
requirements applicable to printed documents, such as type size and 
font, by presenting all required information in a format readily 
communicated to investors.
    (3) The report shall contain the supplementary financial information 
required by item 302 of Regulation S-K (Sec.  229.302 of this chapter).
    (4) The report shall contain information concerning changes in and 
disagreements with accountants on accounting and financial disclosure 
required by Item 304 of Regulation S-K (Sec.  229.304 of this chapter).
    (5)(i) [Reserved]
    (ii) The report shall contain management's discussion and analysis 
of financial condition and results of operations required by Item 303 of 
Regulation S-K (Sec.  229.303 of this chapter).
    (iii) The report shall contain the quantitative and qualitative 
disclosures about market risk required by Item 305 of Regulation S-K 
(Sec.  229.305 of this chapter).
    (6) The report shall contain a brief description of the business 
done by the registrant and its subsidiaries during the most recent 
fiscal year which will, in the opinion of management, indicate the 
general nature and scope of the business of the registrant and its 
subsidiaries.
    (7) The report shall contain information relating to the 
registrant's industry segments, classes of similar products or services, 
foreign and domestic operations and exports sales required by paragraphs 
(b), (c)(1)(i) and (d) of Item 101 of Regulation S-K (Sec.  229.101 of 
this chapter).
    (8) The report shall identify each of the registrant's directors and 
executive officers, and shall indicate the principal occupation or 
employment of each such person and the name and principal business of 
any organization by which such person is employed.
    (9) The report shall contain the market price of and dividends on 
the registrant's common equity and related security holder matters 
required by Items 201(a), (b) and (c) of Regulation S-K (Sec.  
229.201(a), (b) and (c) of this

[[Page 234]]

chapter). If the report precedes or accompanies a proxy statement or 
information statement relating to an annual meeting of security holders 
at which directors are to be elected (or special meeting or written 
consents in lieu of such meeting), furnish the performance graph 
required by Item 201(e) (Sec.  229.201(e) of this chapter).
    (10) The registrant's proxy statement, or the report, shall contain 
an undertaking in bold face or otherwise reasonably prominent type to 
provide without charge to each person solicited upon the written request 
of any such person, a copy of the registrant's annual report on Form 10-
K, including the financial statements and the financial statement 
schedules, required to be filed with the Commission pursuant to Rule 
13a-1 (Sec.  240.13a-1 of this chapter) under the Act for the 
registrant's most recent fiscal year, and shall indicate the name and 
address (including title or department) of the person to whom such a 
written request is to be directed. In the discretion of management, a 
registrant need not undertake to furnish without charge copies of all 
exhibits to its Form 10-K, provided that the copy of the annual report 
on Form 10-K furnished without charge to requesting security holders is 
accompanied by a list briefly describing all the exhibits not contained 
therein and indicating that the registrant will furnish any exhibit upon 
the payment of a specified reasonable fee, which fee shall be limited to 
the registrant's reasonable expenses in furnishing such exhibit. If the 
registrant's annual report to security holders complies with all of the 
disclosure requirements of Form 10-K and is filed with the Commission in 
satisfaction of its Form 10-K filing requirements, such registrant need 
not furnish a separate Form 10-K to security holders who receive a copy 
of such annual report.

    Note to paragraph (b)(10): Pursuant to the undertaking required by 
paragraph (b)(10) of this section, a registrant shall furnish a copy of 
its annual report on Form 10-K (Sec.  249.310 of this chapter) to a 
beneficial owner of its securities upon receipt of a written request 
from such person. Each request must set forth a good faith 
representation that, as of the record date for the solicitation 
requiring the furnishing of the annual report to security holders 
pursuant to paragraph (b) of this section, the person making the request 
was a beneficial owner of securities entitled to vote.

    (11) Subject to the foregoing requirements, the report may be in any 
form deemed suitable by management and the information required by 
paragraphs (b)(5) to (10) of this section may be presented in an 
appendix or other separate section of the report, provided that the 
attention of security holders is called to such presentation.

    Note: Registrants are encouraged to utilize tables, schedules, 
charts and graphic illustrations of present financial information in an 
understandable manner. Any presentation of financial information must be 
consistent with the data in the financial statements contained in the 
report and, if appropriate, should refer to relevant portions of the 
financial statements and notes thereto.

    (12) [Reserved]
    (13) Paragraph (b) of this section shall not apply, however, to 
solicitations made on behalf of the registrant before the financial 
statements are available if a solicitation is being made at the same 
time in opposition to the registrant and if the registrant's proxy 
statement includes an undertaking in bold face type to furnish such 
annual report to security holders to all persons being solicited at 
least 20 calendar days before the date of the meeting or, if the 
solicitation refers to a written consent or authorization in lieu of a 
meeting, at least 20 calendar days prior to the earliest date on which 
it may be used to effect corporate action.
    (c) Seven copies of the report sent to security holders pursuant to 
this rule shall be mailed to the Commission, solely for its information, 
not later than the date on which such report is first sent or given to 
security holders or the date on which preliminary copies, or definitive 
copies, if preliminary filing was not required, of solicitation material 
are filed with the Commission pursuant to Rule 14a-6, whichever date is 
later. The report is not deemed to be ``soliciting material'' or to be 
``filed'' with the Commission or subject to this regulation otherwise 
than as provided in this Rule, or to the liabilities of section 18 of 
the Act, except to the extent that the registrant specifically requests 
that it be treated as a part of

[[Page 235]]

the proxy soliciting material or incorporates it in the proxy statement 
or other filed report by reference.
    (d) An annual report to security holders prepared on an integrated 
basis pursuant to General Instruction H to Form 10-K (Sec.  249.310 of 
this chapter) may also be submitted in satisfaction of this section. 
When filed as the annual report on Form 10-K, responses to the Items of 
that form are subject to section 18 of the Act notwithstanding paragraph 
(c) of this section.
    (e)(1)(i) A registrant will be considered to have delivered an 
annual report to security holders, proxy statement or Notice of Internet 
Availability of Proxy Materials, as described in Sec.  240.14a-16, to 
all security holders of record who share an address if:
    (A) The registrant delivers one annual report to security holders, 
proxy statement or Notice of Internet Availability of Proxy Materials, 
as applicable, to the shared address;
    (B) The registrant addresses the annual report to security holders, 
proxy statement or Notice of Internet Availability of Proxy Materials, 
as applicable, to the security holders as a group (for example, ``ABC 
Fund [or Corporation] Security Holders,'' ``Jane Doe and Household,'' 
``The Smith Family''), to each of the security holders individually (for 
example, ``John Doe and Richard Jones'') or to the security holders in a 
form to which each of the security holders has consented in writing;

    Note to paragraph (e)(1)(i)(B): Unless the registrant addresses the 
annual report to security holders, proxy statement or Notice of Internet 
Availability of Proxy Materials to the security holders as a group or to 
each of the security holders individually, it must obtain, from each 
security holder to be included in the household group, a separate 
affirmative written consent to the specific form of address the 
registrant will use.

    (C) The security holders consent, in accordance with paragraph 
(e)(1)(ii) of this section, to delivery of one annual report to security 
holders or proxy statement, as applicable;
    (D) With respect to delivery of the proxy statement or Notice of 
Internet Availability of Proxy Materials, the registrant delivers, 
together with or subsequent to delivery of the proxy statement, a 
separate proxy card for each security holder at the shared address; and
    (E) The registrant includes an undertaking in the proxy statement to 
deliver promptly upon written or oral request a separate copy of the 
annual report to security holders, proxy statement or Notice of Internet 
Availability of Proxy Materials, as applicable, to a security holder at 
a shared address to which a single copy of the document was delivered.
    (ii) Consent--(A) Affirmative written consent. Each security holder 
must affirmatively consent, in writing, to delivery of one annual report 
to security holders or proxy statement, as applicable. A security 
holder's affirmative written consent will be considered valid only if 
the security holder has been informed of:
    (1) The duration of the consent;
    (2) The specific types of documents to which the consent will apply;
    (3) The procedures the security holder must follow to revoke 
consent; and
    (4) The registrant's obligation to begin sending individual copies 
to a security holder within thirty days after the security holder 
revokes consent.
    (B) Implied consent. The registrant need not obtain affirmative 
written consent from a security holder for purposes of paragraph 
(e)(1)(ii)(A) of this section if all of the following conditions are 
met:
    (1) The security holder has the same last name as the other security 
holders at the shared address or the registrant reasonably believes that 
the security holders are members of the same family;
    (2) The registrant has sent the security holder a notice at least 60 
days before the registrant begins to rely on this section concerning 
delivery of annual reports to security holders, proxy statements or 
Notices of Internet Availability of Proxy Materials to that security 
holder. The notice must:
    (i) Be a separate written document;
    (ii) State that only one annual report to security holders, proxy 
statement or Notice of Internet Availability of Proxy Materials, as 
applicable, will be delivered to the shared address unless the 
registrant receives contrary instructions;

[[Page 236]]

    (iii) Include a toll-free telephone number, or be accompanied by a 
reply form that is pre-addressed with postage provided, that the 
security holder can use to notify the registrant that the security 
holder wishes to receive a separate annual report to security holders, 
proxy statement or Notice of Internet Availability of Proxy Materials;
    (iv) State the duration of the consent;
    (v) Explain how a security holder can revoke consent;
    (vi) State that the registrant will begin sending individual copies 
to a security holder within thirty days after the security holder 
revokes consent; and
    (vii) Contain the following prominent statement, or similar clear 
and understandable statement, in bold-face type: ``Important Notice 
Regarding Delivery of Security Holder Documents.'' This statement also 
must appear on the envelope in which the notice is delivered. 
Alternatively, if the notice is delivered separately from other 
communications to security holders, this statement may appear either on 
the notice or on the envelope in which the notice is delivered.

    Note to paragraph (e)(1)(ii)(B)(2): The notice should be written in 
plain English. See Sec.  230.421(d)(2) of this chapter for a discussion 
of plain English principles.

    (3) The registrant has not received the reply form or other 
notification indicating that the security holder wishes to continue to 
receive an individual copy of the annual report to security holders, 
proxy statement or Notice of Internet Availability of Proxy Materials, 
as applicable, within 60 days after the registrant sent the notice 
required by paragraph (e)(1)(ii)(B)(2) of this section; and
    (4) The registrant delivers the document to a post office box or 
residential street address.

    Note to paragraph (e)(1)(ii)(B)(4): The registrant can assume that a 
street address is residential unless the registrant has information that 
indicates the street address is a business.

    (iii) Revocation of consent. If a security holder, orally or in 
writing, revokes consent to delivery of one annual report to security 
holders, proxy statement or Notice of Internet Availability of Proxy 
Materials to a shared address, the registrant must begin sending 
individual copies to that security holder within 30 days after the 
registrant receives revocation of the security holder's consent.
    (iv) Definition of address. Unless otherwise indicated, for purposes 
of this section, address means a street address, a post office box 
number, an electronic mail address, a facsimile telephone number or 
other similar destination to which paper or electronic documents are 
delivered, unless otherwise provided in this section. If the registrant 
has reason to believe that the address is a street address of a multi-
unit building, the address must include the unit number.

    Note to paragraph (e)(1): A person other than the registrant making 
a proxy solicitation may deliver a single proxy statement to security 
holders of record or beneficial owners who have separate accounts and 
share an address if: (a) the registrant or intermediary has followed the 
procedures in this section; and (b) the registrant or intermediary makes 
available the shared address information to the person in accordance 
with Sec.  240.14a-7(a)(2)(i) and (ii).

    (2) Notwithstanding paragraphs (a) and (b) of this section, unless 
state law requires otherwise, a registrant is not required to send an 
annual report to security holders, proxy statement or Notice of Internet 
Availability of Proxy Materials to a security holder if:
    (i) An annual report to security holders and a proxy statement, or a 
Notice of Internet Availability of Proxy Materials, for two consecutive 
annual meetings; or
    (ii) All, and at least two, payments (if sent by first class mail) 
of dividends or interest on securities, or dividend reinvestment 
confirmations, during a twelve month period, have been mailed to such 
security holder's address and have been returned as undeliverable. If 
any such security holder delivers or causes to be delivered to the 
registrant written notice setting forth his then current address for 
security holder communications purposes, the registrant's obligation to 
deliver an annual report to security holders, a proxy statement or a 
Notice of Internet

[[Page 237]]

Availability of Proxy Materials under this section is reinstated.
    (f) The provisions of paragraph (a) of this section shall not apply 
to a communication made by means of speeches in public forums, press 
releases, published or broadcast opinions, statements, or advertisements 
appearing in a broadcast media, newspaper, magazine or other bona fide 
publication disseminated on a regular basis, provided that:
    (1) No form of proxy, consent or authorization or means to execute 
the same is provided to a security holder in connection with the 
communication; and
    (2) At the time the communication is made, a definitive proxy 
statement is on file with the Commission pursuant to Sec.  240.14a-6(b).

[39 FR 40768, Nov. 20, 1974]

    Editorial Note: For Federal Register citations affecting Sec.  
240.14a-3, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.govinfo.gov.



Sec.  240.14a-4  Requirements as to proxy.

    (a) The form of proxy (1) shall indicate in bold-face type whether 
or not the proxy is solicited on behalf of the registrant's board of 
directors or, if provided other than by a majority of the board of 
directors, shall indicate in bold-face type on whose behalf the 
solicitation is made;
    (2) Shall provide a specifically designated blank space for dating 
the proxy card; and
    (3) Shall identify clearly and impartially each separate matter 
intended to be acted upon, whether or not related to or conditioned on 
the approval of other matters, and whether proposed by the registrant or 
by security holders. No reference need be made, however, to proposals as 
to which discretionary authority is conferred pursuant to paragraph (c) 
of this section.

    Note to paragraph (a)(3) (Electronic filers): Electronic filers 
shall satisfy the filing requirements of Rule 14a-6(a) or (b) (Sec.  
240.14a-6(a) or (b)) with respect to the form of proxy by filing the 
form of proxy as an appendix at the end of the proxy statement. Forms of 
proxy shall not be filed as exhibits or separate documents within an 
electronic submission.

    (b)(1) Means shall be provided in the form of proxy whereby the 
person solicited is afforded an opportunity to specify by boxes a choice 
between approval or disapproval of, or abstention with respect to each 
separate matter referred to therein as intended to be acted upon, other 
than elections to office and votes to determine the frequency of 
shareholder votes on executive compensation pursuant to Sec.  240.14a-
21(b) of this chapter. A proxy may confer discretionary authority with 
respect to matters as to which a choice is not specified by the security 
holder provided that the form of proxy states in bold-face type how it 
is intended to vote the shares represented by the proxy in each such 
case.
    (2) A form of proxy that provides for the election of directors 
shall set forth the names of persons nominated for election as 
directors, including any person whose nomination by a shareholder or 
shareholder group satisfies the requirements of Sec.  240.14a-11, an 
applicable state or foreign law provision, or a registrant's governing 
documents as they relate to the inclusion of shareholder director 
nominees in the registrant's proxy materials. Such form of proxy shall 
clearly provide any of the following means for security holders to 
withhold authority to vote for each nominee:
    (i) A box opposite the name of each nominee which may be marked to 
indicate that authority to vote for such nominee is withheld; or
    (ii) An instruction in bold-face type which indicates that the 
security holder may withhold authority to vote for any nominee by lining 
through or otherwise striking out the name of any nominee; or
    (iii) Designated blank spaces in which the security holder may enter 
the names of nominees with respect to whom the security holder chooses 
to withhold authority to vote; or
    (iv) Any other similar means, provided that clear instructions are 
furnished indicating how the security holder may withhold authority to 
vote for any nominee.

Such form of proxy also may provide a means for the security holder to 
grant authority to vote for the nominees set forth, as a group, provided 
that there is

[[Page 238]]

a similar means for the security holder to withhold authority to vote 
for such group of nominees. Any such form of proxy which is executed by 
the security holder in such manner as not to withhold authority to vote 
for the election of any nominee shall be deemed to grant such authority, 
provided that the form of proxy so states in bold-face type. Means to 
grant authority to vote for any nominees as a group or to withhold 
authority for any nominees as a group may not be provided if the form of 
proxy includes one or more shareholder nominees in accordance with Sec.  
240.14a-11, an applicable state or foreign law provision, or a 
registrant's governing documents as they relate to the inclusion of 
shareholder director nominees in the registrant's proxy materials.
    Instructions. 1. Paragraph (2) does not apply in the case of a 
merger, consolidation or other plan if the election of directors is an 
integral part of the plan.
    2. If applicable state law gives legal effect to votes cast against 
a nominee, then in lieu of, or in addition to, providing a means for 
security holders to withhold authority to vote, the registrant should 
provide a similar means for security holders to vote against each 
nominee.
    (3) A form of proxy which provides for a shareholder vote on the 
frequency of shareholder votes to approve the compensation of executives 
required by section 14A(a)(2) of the Securities Exchange Act of 1934 (15 
U.S.C. 78n-1(a)(2)) shall provide means whereby the person solicited is 
afforded an opportunity to specify by boxes a choice among 1, 2 or 3 
years, or abstain.
    (c) A proxy may confer discretionary authority to vote on any of the 
following matters:
    (1) For an annual meeting of shareholders, if the registrant did not 
have notice of the matter at least 45 days before the date on which the 
registrant first sent its proxy materials for the prior year's annual 
meeting of shareholders (or date specified by an advance notice 
provision), and a specific statement to that effect is made in the proxy 
statement or form of proxy. If during the prior year the registrant did 
not hold an annual meeting, or if the date of the meeting has changed 
more than 30 days from the prior year, then notice must not have been 
received a reasonable time before the registrant sends its proxy 
materials for the current year.
    (2) In the case in which the registrant has received timely notice 
in connection with an annual meeting of shareholders (as determined 
under paragraph (c)(1) of this section), if the registrant includes, in 
the proxy statement, advice on the nature of the matter and how the 
registrant intends to exercise its discretion to vote on each matter. 
However, even if the registrant includes this information in its proxy 
statement, it may not exercise discretionary voting authority on a 
particular proposal if the proponent:
    (i) Provides the registrant with a written statement, within the 
time-frame determined under paragraph (c)(1) of this section, that the 
proponent intends to deliver a proxy statement and form of proxy to 
holders of at least the percentage of the company's voting shares 
required under applicable law to carry the proposal;
    (ii) Includes the same statement in its proxy materials filed under 
Sec.  240.14a-6; and
    (iii) Immediately after soliciting the percentage of shareholders 
required to carry the proposal, provides the registrant with a statement 
from any solicitor or other person with knowledge that the necessary 
steps have been taken to deliver a proxy statement and form of proxy to 
holders of at least the percentage of the company's voting shares 
required under applicable law to carry the proposal.
    (3) For solicitations other than for annual meetings or for 
solicitations by persons other than the registrant, matters which the 
persons making the solicitation do not know, a reasonable time before 
the solicitation, are to be presented at the meeting, if a specific 
statement to that effect is made in the proxy statement or form of 
proxy.
    (4) Approval of the minutes of the prior meeting if such approval 
does not amount to ratification of the action taken at that meeting;
    (5) The election of any person to any office for which a bona fide 
nominee is named in the proxy statement and such

[[Page 239]]

nominee is unable to serve or for good cause will not serve.
    (6) Any proposal omitted from the proxy statement and form of proxy 
pursuant to Sec.  240.14a-8 or Sec.  240.14a-9 of this chapter.
    (7) Matters incident to the conduct of the meeting.
    (d) No proxy shall confer authority:
    (1) To vote for the election of any person to any office for which a 
bona fide nominee is not named in the proxy statement,
    (2) To vote at any annual meeting other than the next annual meeting 
(or any adjournment thereof) to be held after the date on which the 
proxy statement and form of proxy are first sent or given to security 
holders,
    (3) To vote with respect to more than one meeting (and any 
adjournment thereof) or more than one consent solicitation or
    (4) To consent to or authorize any action other than the action 
proposed to be taken in the proxy statement, or matters referred to in 
paragraph (c) of this rule. A person shall not be deemed to be a bona 
fide nominee and he shall not be named as such unless he has consented 
to being named in the proxy statement and to serve if elected. Provided, 
however, That nothing in this section 240.14a-4 shall prevent any person 
soliciting in support of nominees who, if elected, would constitute a 
minority of the board of directors, from seeking authority to vote for 
nominees named in the registrant's proxy statement, so long as the 
soliciting party:
    (i) Seeks authority to vote in the aggregate for the number of 
director positions then subject to election;
    (ii) Represents that it will vote for all the registrant nominees, 
other than those registrant nominees specified by the soliciting party;
    (iii) Provides the security holder an opportunity to withhold 
authority with respect to any other registrant nominee by writing the 
name of that nominee on the form of proxy; and
    (iv) States on the form of proxy and in the proxy statement that 
there is no assurance that the registrant's nominees will serve if 
elected with any of the soliciting party's nominees.
    (e) The proxy statement or form of proxy shall provide, subject to 
reasonable specified conditions, that the shares represented by the 
proxy will be voted and that where the person solicited specifies by 
means of a ballot provided pursuant to paragraph (b) of this section a 
choice with respect to any matter to be acted upon, the shares will be 
voted in accordance with the specifications so made.
    (f) No person conducting a solicitation subject to this regulation 
shall deliver a form of proxy, consent or authorization to any security 
holder unless the security holder concurrently receives, or has 
previously received, a definitive proxy statement that has been filed 
with the Commission pursuant to Sec.  240.14a-6(b).

[17 FR 11432, Dec. 18, 1952, as amended at 31 FR 212, Jan. 7, 1966; 32 
FR 20963, Dec. 29, 1967; 44 FR 68770, Nov. 29, 1979; 45 FR 76979, Nov. 
21, 1980; 51 FR 42060, Nov. 20, 1986; 57 FR 48291, Oct. 22, 1992; 59 FR 
67764, Dec. 30, 1994; 63 FR 29118, May 28, 1998; 63 FR 50622, Sept. 22, 
1998; 64 FR 61456, Nov. 10, 1999; 72 FR 4167, Jan. 29, 2007; 76 FR 6045, 
Feb. 2, 2011; 75 FR 56781, Sept. 16, 2010]



Sec.  240.14a-5  Presentation of information in proxy statement.

    (a) The information included in the proxy statement shall be clearly 
presented and the statements made shall be divided into groups according 
to subject matter and the various groups of statements shall be preceded 
by appropriate headings. The order of items and sub-items in the 
schedule need not be followed. Where practicable and appropriate, the 
information shall be presented in tabular form. All amounts shall be 
stated in figures. Information required by more than one applicable item 
need not be repeated. No statement need be made in response to any item 
or sub-item which is inapplicable.
    (b) Any information required to be included in the proxy statement 
as to terms of securities or other subject matter which from a 
standpoint of practical necessity must be determined in the future may 
be stated in terms of present knowledge and intention. To the extent 
practicable, the authority to be conferred concerning each such matter 
shall be confined within limits reasonably related to the need for 
discretionary authority. Subject to the foregoing, information which is 
not known to the persons on whose behalf

[[Page 240]]

the solicitation is to be made and which it is not reasonably within the 
power of such persons to ascertain or procure may be omitted, if a brief 
statement of the circumstances rendering such information unavailable is 
made.
    (c) Any information contained in any other proxy soliciting material 
which has been furnished to each person solicited in connection with the 
same meeting or subject matter may be omitted from the proxy statement, 
if a clear reference is made to the particular document containing such 
information.
    (d)(1) All printed proxy statements shall be in roman type at least 
as large and as legible as 10-point modern type, except that to the 
extent necessary for convenient presentation financial statements and 
other tabular data, but not the notes thereto, may be in roman type at 
least as large and as legible as 8-point modern type. All such type 
shall be leaded at least 2 points.
    (2) Where a proxy statement is delivered through an electronic 
medium, issuers may satisfy legibility requirements applicable to 
printed documents, such as type size and font, by presenting all 
required information in a format readily communicated to investors.
    (e) All proxy statements shall disclose, under an appropriate 
caption, the following dates:
    (1) The deadline for submitting shareholder proposals for inclusion 
in the registrant's proxy statement and form of proxy for the 
registrant's next annual meeting, calculated in the manner provided in 
Sec.  240.14a-8(e)(Question 5);
    (2) The date after which notice of a shareholder proposal submitted 
outside the processes of Sec.  240.14a-8 is considered untimely, either 
calculated in the manner provided by Sec.  240.14a-4(c)(1) or as 
established by the registrant's advance notice provision, if any, 
authorized by applicable state law; and
    (3) The deadline for submitting nominees for inclusion in the 
registrant's proxy statement and form of proxy pursuant to Sec.  
240.14a-11, an applicable state or foreign law provision, or a 
registrant's governing documents as they relate to the inclusion of 
shareholder director nominees in the registrant's proxy materials for 
the registrant's next annual meeting of shareholders.
    (f) If the date of the next annual meeting is subsequently advanced 
or delayed by more than 30 calendar days from the date of the annual 
meeting to which the proxy statement relates, the registrant shall, in a 
timely manner, inform shareholders of such change, and the new dates 
referred to in paragraphs (e)(1) and (e)(2) of this section, by 
including a notice, under Item 5, in its earliest possible quarterly 
report on Form 10-Q (Sec.  249.308a of this chapter), or, in the case of 
investment companies, in a shareholder report under Sec.  270.30d-1 of 
this chapter under the Investment Company Act of 1940, or, if 
impracticable, any means reasonably calculated to inform shareholders.

[17 FR 11432, Dec. 18, 1952, as amended at 36 FR 8935, May 15, 1971; 37 
FR 23179, Oct. 31, 1972; 44 FR 68770, Nov. 29, 1979; 51 FR 42061, Nov. 
20, 1986; 61 FR 24656, May 15, 1996; 63 FR 29118, May 28, 1998; 63 FR 
46881, Sept. 3, 1998; 73 FR 977, Jan. 4, 2008; 75 FR 56782, Sept. 16, 
2010]



Sec.  240.14a-6  Filing requirements.

    (a) Preliminary proxy statement. Five preliminary copies of the 
proxy statement and form of proxy shall be filed with the Commission at 
least 10 calendar days prior to the date definitive copies of such 
material are first sent or given to security holders, or such shorter 
period prior to that date as the Commission may authorize upon a showing 
of good cause thereunder. A registrant, however, shall not file with the 
Commission a preliminary proxy statement, form of proxy or other 
soliciting material to be furnished to security holders concurrently 
therewith if the solicitation relates to an annual (or special meeting 
in lieu of the annual) meeting, or for an investment company registered 
under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) or a 
business development company, if the solicitation relates to any meeting 
of security holders at which the only matters to be acted upon are:
    (1) The election of directors;
    (2) The election, approval or ratification of accountant(s);

[[Page 241]]

    (3) A security holder proposal included pursuant to Rule 14a-8 
(Sec.  240.14a-8 of this chapter);
    (4) A shareholder nominee for director included pursuant to Sec.  
240.14a-11, an applicable state or foreign law provision, or a 
registrant's governing documents as they relate to the inclusion of 
shareholder director nominees in the registrant's proxy materials.
    (5) The approval or ratification of a plan as defined in paragraph 
(a)(6)(ii) of Item 402 of Regulation S-K (Sec.  229.402(a)(6)(ii) of 
this chapter) or amendments to such a plan;
    (6) With respect to an investment company registered under the 
Investment Company Act of 1940 or a business development company, a 
proposal to continue, without change, any advisory or other contract or 
agreement that previously has been the subject of a proxy solicitation 
for which proxy material was filed with the Commission pursuant to this 
section;
    (7) With respect to an open-end investment company registered under 
the Investment Company Act of 1940, a proposal to increase the number of 
shares authorized to be issued; and/or
    (8) A vote to approve the compensation of executives as required 
pursuant to section 14A(a)(1) of the Securities Exchange Act of 1934 (15 
U.S.C. 78n-1(a)(1)) and Sec.  240.14a-21(a) of this chapter, or pursuant 
to section 111(e)(1) of the Emergency Economic Stabilization Act of 2008 
(12 U.S.C. 5221(e)(1)) and Sec.  240.14a-20 of this chapter, a vote to 
determine the frequency of shareholder votes to approve the compensation 
of executives as required pursuant to Section 14A(a)(2) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78n-1(a)(2)) and Sec.  
240.14a-21(b) of this chapter, or any other shareholder advisory vote on 
executive compensation.

This exclusion from filing preliminary proxy material does not apply if 
the registrant comments upon or refers to a solicitation in opposition 
in connection with the meeting in its proxy material.

    Note 1 to paragraph (a): The filing of revised material does not 
recommence the ten day time period unless the revised material contains 
material revisions or material new proposal(s) that constitute a 
fundamental change in the proxy material.
    Note 2 to paragraph (a): The official responsible for the 
preparation of the proxy material should make every effort to verify the 
accuracy and completeness of the information required by the applicable 
rules. The preliminary material should be filed with the Commission at 
the earliest practicable date.
    Note 3 to paragraph (a): Solicitation in Opposition. For purposes of 
the exclusion from filing preliminary proxy material, a ``solicitation 
in opposition'' includes: (a) Any solicitation opposing a proposal 
supported by the registrant; and (b) any solicitation supporting a 
proposal that the registrant does not expressly support, other than a 
security holder proposal included in the registrant's proxy material 
pursuant to Rule 14a-8 (Sec.  240.14a-8 of this chapter). The inclusion 
of a security holder proposal in the registrant's proxy material 
pursuant to Rule 14a-8 does not constitute a ``solicitation in 
opposition,'' even if the registrant opposes the proposal and/or 
includes a statement in opposition to the proposal. The inclusion of a 
shareholder nominee in the registrant's proxy materials pursuant to 
Sec.  240.14a-11, an applicable state or foreign law provision, or a 
registrant's governing documents as they relate to the inclusion of 
shareholder director nominees in the registrant's proxy materials does 
not constitute a ``solicitation in opposition'' for purposes of Rule 
14a-6(a) (Sec.  240.14a-6(a)), even if the registrant opposes the 
shareholder nominee and solicits against the shareholder nominee and in 
favor of a registrant nominee.
    Note 4 to paragraph (a): A registrant that is filing proxy material 
in preliminary form only because the registrant has commented on or 
referred to a solicitation in opposition should indicate that fact in a 
transmittal letter when filing the preliminary material with the 
Commission.

    (b) Definitive proxy statement and other soliciting material. Eight 
definitive copies of the proxy statement, form of proxy and all other 
soliciting materials, in the same form as the materials sent to security 
holders, must be filed with the Commission no later than the date they 
are first sent or given to security holders. Three copies of these 
materials also must be filed with, or mailed for filing to, each 
national securities exchange on which the registrant has a class of 
securities listed and registered.
    (c) Personal solicitation materials. If part or all of the 
solicitation involves personal solicitation, then eight copies of all 
written instructions or other materials that discuss, review or comment 
on the merits of any matter to be acted

[[Page 242]]

on, that are furnished to persons making the actual solicitation for 
their use directly or indirectly in connection with the solicitation, 
must be filed with the Commission no later than the date the materials 
are first sent or given to these persons.
    (d) Release dates. All preliminary proxy statements and forms of 
proxy filed pursuant to paragraph (a) of this section shall be 
accompanied by a statement of the date on which definitive copies 
thereof filed pursuant to paragraph (b) of this section are intended to 
be released to security holders. All definitive material filed pursuant 
to paragraph (b) of this section shall be accompanied by a statement of 
the date on which copies of such material were released to security 
holders, or, if not released, the date on which copies thereof are 
intended to be released. All material filed pursuant to paragraph (c) of 
this section shall be accompanied by a statement of the date on which 
copies thereof were released to the individual who will make the actual 
solicitation or if not released, the date on which copies thereof are 
intended to be released.
    (e)(1) Public availability of information. All copies of preliminary 
proxy statements and forms of proxy filed pursuant to paragraph (a) of 
this section shall be clearly marked ``Preliminary Copies,'' and shall 
be deemed immediately available for public inspection unless 
confidential treatment is obtained pursuant to paragraph (e)(2) of this 
section.
    (2) Confidential treatment. If action will be taken on any matter 
specified in Item 14 of Schedule 14A (Sec.  240.14a-101), all copies of 
the preliminary proxy statement and form of proxy filed under paragraph 
(a) of this section will be for the information of the Commission only 
and will not be deemed available for public inspection until filed with 
the Commission in definitive form so long as:
    (i) The proxy statement does not relate to a matter or proposal 
subject to Sec.  240.13e-3 or a roll-up transaction as defined in Item 
901(c) of Regulation S-K (Sec.  229.901(c) of this chapter);
    (ii) Neither the parties to the transaction nor any persons 
authorized to act on their behalf have made any public communications 
relating to the transaction except for statements where the content is 
limited to the information specified in Sec.  230.135 of this chapter; 
and
    (iii) The materials are filed in paper and marked ``Confidential, 
For Use of the Commission Only.'' In all cases, the materials may be 
disclosed to any department or agency of the United States Government 
and to the Congress, and the Commission may make any inquiries or 
investigation into the materials as may be necessary to conduct an 
adequate review by the Commission.

    Instruction to paragraph (e)(2): If communications are made publicly 
that go beyond the information specified in Sec.  230.135 of this 
chapter, the preliminary proxy materials must be re-filed promptly with 
the Commission as public materials.

    (f) Communications not required to be filed. Copies of replies to 
inquiries from security holders requesting further information and 
copies of communications which do no more than request that forms of 
proxy theretofore solicited be signed and returned need not be filed 
pursuant to this section.
    (g) Solicitations subject to Sec.  240.14a-2(b)(1). (1) Any person 
who:
    (i) Engages in a solicitation pursuant to Sec.  240.14a-2(b)(1), and
    (ii) At the commencement of that solicitation owns beneficially 
securities of the class which is the subject of the solicitation with a 
market value of over $5 million,


shall furnish or mail to the Commission, not later than three days after 
the date the written solicitation is first sent or given to any security 
holder, five copies of a statement containing the information specified 
in the Notice of Exempt Solicitation (Sec.  240.14a-103) which statement 
shall attach as an exhibit all written soliciting materials. Five copies 
of an amendment to such statement shall be furnished or mailed to the 
Commission, in connection with dissemination of any additional 
communications, not later than three days after the date the additional 
material is first sent or given to any security holder. Three copies of 
the Notice of Exempt Solicitation and amendments thereto shall, at the 
same

[[Page 243]]

time the materials are furnished or mailed to the Commission, be 
furnished or mailed to each national securities exchange upon which any 
class of securities of the registrant is listed and registered.
    (2) Notwithstanding paragraph (g)(1) of this section, no such 
submission need be made with respect to oral solicitations (other than 
with respect to scripts used in connection with such oral 
solicitations), speeches delivered in a public forum, press releases, 
published or broadcast opinions, statements, and advertisements 
appearing in a broadcast media, or a newspaper, magazine or other bona 
fide publication disseminated on a regular basis.
    (h) Revised material. Where any proxy statement, form of proxy or 
other material filed pursuant to this section is amended or revised, two 
of the copies of such amended or revised material filed pursuant to this 
section (or in the case of investment companies registered under the 
Investment Company Act of 1940, three of such copies) shall be marked to 
indicate clearly and precisely the changes effected therein. If the 
amendment or revision alters the text of the material the changes in 
such text shall be indicated by means of underscoring or in some other 
appropriate manner.
    (i) Fees. At the time of filing the proxy solicitation material, the 
persons upon whose behalf the solicitation is made, other than 
investment companies registered under the Investment Company Act of 
1940, shall pay to the Commission the following applicable fee:
    (1) For preliminary proxy material involving acquisitions, mergers, 
spinoffs, consolidations or proposed sales or other dispositions of 
substantially all the assets of the company, a fee established in 
accordance with Rule 0-11 (Sec.  240.0-11 of this chapter) shall be 
paid. No refund shall be given.
    (2) For all other proxy submissions and submissions made pursuant to 
Sec.  240.14a-6(g), no fee shall be required.
    (j) Merger proxy materials. (1) Any proxy statement, form of proxy 
or other soliciting material required to be filed by this section that 
also is either
    (i) Included in a registration statement filed under the Securities 
Act of 1933 on Forms S-4 (Sec.  239.25 of this chapter), F-4 (Sec.  
239.34 of this chapter) or N-14 (Sec.  239.23 of this chapter); or
    (ii) Filed under Sec.  230.424, Sec.  230.425 or Sec.  230.497 of 
this chapter is required to be filed only under the Securities Act, and 
is deemed filed under this section.
    (2) Under paragraph (j)(1) of this section, the fee required by 
paragraph (i) of this section need not be paid.
    (k) Computing time periods. In computing time periods beginning with 
the filing date specified in Regulation 14A (Sec. Sec.  240.14a-1 to 
240.14b-1 of this chapter), the filing date shall be counted as the 
first day of the time period and midnight of the last day shall 
constitute the end of the specified time period.
    (l) Roll-up transactions. If a transaction is a roll-up transaction 
as defined in Item 901(c) of Regulation S-K (17 CFR 229.901(c)) and is 
registered (or authorized to be registered) on Form S-4 (17 CFR 229.25) 
or Form F-4 (17 CFR 229.34), the proxy statement of the sponsor or the 
general partner as defined in Item 901(d) and Item 901(a), respectively, 
of Regulation S-K (17 CFR 229.901) must be distributed to security 
holders no later than the lesser of 60 calendar days prior to the date 
on which the meeting of security holders is held or action is taken, or 
the maximum number of days permitted for giving notice under applicable 
state law.
    (m) Cover page. Proxy materials filed with the Commission shall 
include a cover page in the form set forth in Schedule 14A (Sec.  
240.14a-101 of this chapter). The cover page required by this paragraph 
need not be distributed to security holders.
    (n) Solicitations subject to Sec.  240.14a-2(b)(4). Any person who:
    (1) Engages in a solicitation pursuant to Sec.  240.14a-2(b)(4); and
    (2) At the commencement of that solicitation both owns five percent 
(5%) or more of the outstanding securities of a class that is the 
subject of the proposed roll-up transaction, and engages in the business 
of buying and selling limited partnership interests in the secondary 
market, shall furnish or mail to the Commission, not later than three 
days after the date an oral or written solicitation by that person is

[[Page 244]]

first made, sent or provided to any security holder, five copies of a 
statement containing the information specified in the Notice of Exempt 
Preliminary Roll-up Communication (Sec.  240.14a-104). Five copies of 
any amendment to such statement shall be furnished or mailed to the 
Commission not later than three days after a communication containing 
revised material is first made, sent or provided to any security holder.
    (o) Solicitations before furnishing a definitive proxy statement. 
Solicitations that are published, sent or given to security holders 
before they have been furnished a definitive proxy statement must be 
made in accordance with Sec.  240.14a-12 unless there is an exemption 
available under Sec.  240.14a-2.
    (p) Solicitations subject to Sec.  240.14a-11. Any soliciting 
material that is published, sent or given to shareholders in connection 
with Sec.  240.14a-2(b)(7) or (b)(8) must be filed with the Commission 
as specified in that section.

[17 FR 11432, Dec. 18, 1952]

    Editorial Note: For Federal Register citations affecting Sec.  
240.14a-6, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.govinfo.gov.



Sec.  240.14a-7  Obligations of registrants to provide a list of, or
mail soliciting material to, security holders.

    (a) If the registrant has made or intends to make a proxy 
solicitation in connection with a security holder meeting or action by 
consent or authorization, upon the written request by any record or 
beneficial holder of securities of the class entitled to vote at the 
meeting or to execute a consent or authorization to provide a list of 
security holders or to mail the requesting security holder's materials, 
regardless of whether the request references this section, the 
registrant shall:
    (1) Deliver to the requesting security holder within five business 
days after receipt of the request:
    (i) Notification as to whether the registrant has elected to mail 
the security holder's soliciting materials or provide a security holder 
list if the election under paragraph (b) of this section is to be made 
by the registrant;
    (ii) A statement of the approximate number of record holders and 
beneficial holders, separated by type of holder and class, owning 
securities in the same class or classes as holders which have been or 
are to be solicited on management's behalf, or any more limited group of 
such holders designated by the security holder if available or 
retrievable under the registrant's or its transfer agent's security 
holder data systems; and
    (iii) The estimated cost of mailing a proxy statement, form of proxy 
or other communication to such holders, including to the extent known or 
reasonably available, the estimated costs of any bank, broker, and 
similar person through whom the registrant has solicited or intends to 
solicit beneficial owners in connection with the security holder meeting 
or action;
    (2) Perform the acts set forth in either paragraphs (a)(2)(i) or 
(a)(2)(ii) of this section, at the registrant's or requesting security 
holder's option, as specified in paragraph (b) of this section:
    (i) Send copies of any proxy statement, form of proxy, or other 
soliciting material, including a Notice of Internet Availability of 
Proxy Materials (as described in Sec.  240.14a-16), furnished by the 
security holder to the record holders, including banks, brokers, and 
similar entities, designated by the security holder. A sufficient number 
of copies must be sent to the banks, brokers, and similar entities for 
distribution to all beneficial owners designated by the security holder. 
The security holder may designate only record holders and/or beneficial 
owners who have not requested paper and/ or e-mail copies of the proxy 
statement. If the registrant has received affirmative written or implied 
consent to deliver a single proxy statement to security holders at a 
shared address in accordance with the procedures in Sec.  240.14a-
3(e)(1), a single copy of the proxy statement or Notice of Internet 
Availability of Proxy Materials furnished by the security holder shall 
be sent to that address, provided that if multiple copies of the Notice 
of Internet Availability of Proxy Materials are furnished by the 
security holder for that address, the registrant shall deliver those 
copies in a single

[[Page 245]]

envelope to that address. The registrant shall send the security holder 
material with reasonable promptness after tender of the material to be 
sent, envelopes or other containers therefore, postage or payment for 
postage and other reasonable expenses of effecting such distribution. 
The registrant shall not be responsible for the content of the material; 
or
    (ii) Deliver the following information to the requesting security 
holder within five business days of receipt of the request:
    (A) A reasonably current list of the names, addresses and security 
positions of the record holders, including banks, brokers and similar 
entities holding securities in the same class or classes as holders 
which have been or are to be solicited on management's behalf, or any 
more limited group of such holders designated by the security holder if 
available or retrievable under the registrant's or its transfer agent's 
security holder data systems;
    (B) The most recent list of names, addresses and security positions 
of beneficial owners as specified in Sec.  240.14a-13(b), in the 
possession, or which subsequently comes into the possession, of the 
registrant;
    (C) The names of security holders at a shared address that have 
consented to delivery of a single copy of proxy materials to a shared 
address, if the registrant has received written or implied consent in 
accordance with Sec.  240.14a-3(e)(1); and
    (D) If the registrant has relied on Sec.  240.14a-16, the names of 
security holders who have requested paper copies of the proxy materials 
for all meetings and the names of security holders who, as of the date 
that the registrant receives the request, have requested paper copies of 
the proxy materials only for the meeting to which the solicitation 
relates.
    (iii) All security holder list information shall be in the form 
requested by the security holder to the extent that such form is 
available to the registrant without undue burden or expense. The 
registrant shall furnish the security holder with updated record holder 
information on a daily basis or, if not available on a daily basis, at 
the shortest reasonable intervals; provided, however, the registrant 
need not provide beneficial or record holder information more current 
than the record date for the meeting or action.
    (b)(1) The requesting security holder shall have the options set 
forth in paragraph (a)(2) of this section, and the registrant shall have 
corresponding obligations, if the registrant or general partner or 
sponsor is soliciting or intends to solicit with respect to:
    (i) A proposal that is subject to Sec.  240.13e-3;
    (ii) A roll-up transaction as defined in Item 901(c) of Regulation 
S-K (Sec.  229.901(c) of this chapter) that involves an entity with 
securities registered pursuant to Section 12 of the Act (15 U.S.C. 78l); 
or
    (iii) A roll-up transaction as defined in Item 901(c) of Regulation 
S-K (Sec.  229.901(c) of this chapter) that involves a limited 
partnership, unless the transaction involves only:
    (A) Partnerships whose investors will receive new securities or 
securities in another entity that are not reported under a transaction 
reporting plan declared effective before December 17, 1993 by the 
Commission under Section 11A of the Act (15 U.S.C. 78k-1); or
    (B) Partnerships whose investors' securities are reported under a 
transaction reporting plan declared effective before December 17, 1993 
by the Commission under Section 11A of the Act (15 U.S.C. 78k-1).
    (2) With respect to all other requests pursuant to this section, the 
registrant shall have the option to either mail the security holder's 
material or furnish the security holder list as set forth in this 
section.
    (c) At the time of a list request, the security holder making the 
request shall:
    (1) If holding the registrant's securities through a nominee, 
provide the registrant with a statement by the nominee or other 
independent third party, or a copy of a current filing made with the 
Commission and furnished to the registrant, confirming such holder's 
beneficial ownership; and
    (2) Provide the registrant with an affidavit, declaration, 
affirmation or other similar document provided for under applicable 
state law identifying the proposal or other corporate action

[[Page 246]]

that will be the subject of the security holder's solicitation or 
communication and attesting that:
    (i) The security holder will not use the list information for any 
purpose other than to solicit security holders with respect to the same 
meeting or action by consent or authorization for which the registrant 
is soliciting or intends to solicit or to communicate with security 
holders with respect to a solicitation commenced by the registrant; and
    (ii) The security holder will not disclose such information to any 
person other than a beneficial owner for whom the request was made and 
an employee or agent to the extent necessary to effectuate the 
communication or solicitation.
    (d) The security holder shall not use the information furnished by 
the registrant pursuant to paragraph (a)(2)(ii) of this section for any 
purpose other than to solicit security holders with respect to the same 
meeting or action by consent or authorization for which the registrant 
is soliciting or intends to solicit or to communicate with security 
holders with respect to a solicitation commenced by the registrant; or 
disclose such information to any person other than an employee, agent, 
or beneficial owner for whom a request was made to the extent necessary 
to effectuate the communication or solicitation. The security holder 
shall return the information provided pursuant to paragraph (a)(2)(ii) 
of this section and shall not retain any copies thereof or of any 
information derived from such information after the termination of the 
solicitation.
    (e) The security holder shall reimburse the reasonable expenses 
incurred by the registrant in performing the acts requested pursuant to 
paragraph (a) of this section.

    Note 1 to Sec.  240.14a-7. Reasonably prompt methods of distribution 
to security holders may be used instead of mailing. If an alternative 
distribution method is chosen, the costs of that method should be 
considered where necessary rather than the costs of mailing.
    Note 2 to Sec.  240.14a-7 When providing the information required by 
Sec.  240.14a-7(a)(1)(ii), if the registrant has received affirmative 
written or implied consent to delivery of a single copy of proxy 
materials to a shared address in accordance with Sec.  240.14a-3(e)(1), 
it shall exclude from the number of record holders those to whom it does 
not have to deliver a separate proxy statement.

[57 FR 48292, Oct. 22, 1992, as amended at 59 FR 63684, Dec. 8, 1994; 61 
FR 24657, May 15, 1996; 65 FR 65750, Nov. 2, 2000; 72 FR 4167, Jan. 29, 
2007; 72 FR 42238, Aug. 1, 2007]



Sec.  240.14a-8  Shareholder proposals.

    This section addresses when a company must include a shareholder's 
proposal in its proxy statement and identify the proposal in its form of 
proxy when the company holds an annual or special meeting of 
shareholders. In summary, in order to have your shareholder proposal 
included on a company's proxy card, and included along with any 
supporting statement in its proxy statement, you must be eligible and 
follow certain procedures. Under a few specific circumstances, the 
company is permitted to exclude your proposal, but only after submitting 
its reasons to the Commission. We structured this section in a question-
and-answer format so that it is easier to understand. The references to 
``you'' are to a shareholder seeking to submit the proposal.
    (a) Question 1: What is a proposal? A shareholder proposal is your 
recommendation or requirement that the company and/or its board of 
directors take action, which you intend to present at a meeting of the 
company's shareholders. Your proposal should state as clearly as 
possible the course of action that you believe the company should 
follow. If your proposal is placed on the company's proxy card, the 
company must also provide in the form of proxy means for shareholders to 
specify by boxes a choice between approval or disapproval, or 
abstention. Unless otherwise indicated, the word ``proposal'' as used in 
this section refers both to your proposal, and to your corresponding 
statement in support of your proposal (if any).
    (b) Question 2: Who is eligible to submit a proposal, and how do I 
demonstrate to the company that I am eligible? (1) To be eligible to 
submit a proposal, you must satisfy the following requirements:
    (i) You must have continuously held:
    (A) At least $2,000 in market value of the company's securities 
entitled to

[[Page 247]]

vote on the proposal for at least three years; or
    (B) At least $15,000 in market value of the company's securities 
entitled to vote on the proposal for at least two years; or
    (C) At least $25,000 in market value of the company's securities 
entitled to vote on the proposal for at least one year; or
    (D) The amounts specified in paragraph (b)(3) of this section. This 
paragraph (b)(1)(i)(D) will expire on the same date that Sec.  240.14a-
8(b)(3) expires; and
    (ii) You must provide the company with a written statement that you 
intend to continue to hold the requisite amount of securities, 
determined in accordance with paragraph (b)(1)(i)(A) through (C) of this 
section, through the date of the shareholders' meeting for which the 
proposal is submitted; and
    (iii) You must provide the company with a written statement that you 
are able to meet with the company in person or via teleconference no 
less than 10 calendar days, nor more than 30 calendar days, after 
submission of the shareholder proposal. You must include your contact 
information as well as business days and specific times that you are 
available to discuss the proposal with the company. You must identify 
times that are within the regular business hours of the company's 
principal executive offices. If these hours are not disclosed in the 
company's proxy statement for the prior year's annual meeting, you must 
identify times that are between 9 a.m. and 5:30 p.m. in the time zone of 
the company's principal executive offices. If you elect to co-file a 
proposal, all co-filers must either:
    (A) Agree to the same dates and times of availability, or
    (B) Identify a single lead filer who will provide dates and times of 
the lead filer's availability to engage on behalf of all co-filers; and
    (iv) If you use a representative to submit a shareholder proposal on 
your behalf, you must provide the company with written documentation 
that:
    (A) Identifies the company to which the proposal is directed;
    (B) Identifies the annual or special meeting for which the proposal 
is submitted;
    (C) Identifies you as the proponent and identifies the person acting 
on your behalf as your representative;
    (D) Includes your statement authorizing the designated 
representative to submit the proposal and otherwise act on your behalf;
    (E) Identifies the specific topic of the proposal to be submitted;
    (F) Includes your statement supporting the proposal; and
    (G) Is signed and dated by you.
    (v) The requirements of paragraph (b)(1)(iv) of this section shall 
not apply to shareholders that are entities so long as the 
representative's authority to act on the shareholder's behalf is 
apparent and self-evident such that a reasonable person would understand 
that the agent has authority to submit the proposal and otherwise act on 
the shareholder's behalf.
    (vi) For purposes of paragraph (b)(1)(i) of this section, you may 
not aggregate your holdings with those of another shareholder or group 
of shareholders to meet the requisite amount of securities necessary to 
be eligible to submit a proposal.
    (2) One of the following methods must be used to demonstrate your 
eligibility to submit a proposal:
    (i) If you are the registered holder of your securities, which means 
that your name appears in the company's records as a shareholder, the 
company can verify your eligibility on its own, although you will still 
have to provide the company with a written statement that you intend to 
continue to hold the requisite amount of securities, determined in 
accordance with paragraph (b)(1)(i)(A) through (C) of this section, 
through the date of the meeting of shareholders.
    (ii) If, like many shareholders, you are not a registered holder, 
the company likely does not know that you are a shareholder, or how many 
shares you own. In this case, at the time you submit your proposal, you 
must prove your eligibility to the company in one of two ways:
    (A) The first way is to submit to the company a written statement 
from the

[[Page 248]]

``record'' holder of your securities (usually a broker or bank) 
verifying that, at the time you submitted your proposal, you 
continuously held at least $2,000, $15,000, or $25,000 in market value 
of the company's securities entitled to vote on the proposal for at 
least three years, two years, or one year, respectively. You must also 
include your own written statement that you intend to continue to hold 
the requisite amount of securities, determined in accordance with 
paragraph (b)(1)(i)(A) through (C) of this section, through the date of 
the shareholders' meeting for which the proposal is submitted; or
    (B) The second way to prove ownership applies only if you were 
required to file, and filed, a Schedule 13D (Sec.  240.13d-101), 
Schedule 13G (Sec.  240.13d-102), Form 3 (Sec.  249.103 of this 
chapter), Form 4 (Sec.  249.104 of this chapter), and/or Form 5 (Sec.  
249.105 of this chapter), or amendments to those documents or updated 
forms, demonstrating that you meet at least one of the share ownership 
requirements under paragraph (b)(1)(i)(A) through (C) of this section. 
If you have filed one or more of these documents with the SEC, you may 
demonstrate your eligibility to submit a proposal by submitting to the 
company:
    (1) A copy of the schedule(s) and/or form(s), and any subsequent 
amendments reporting a change in your ownership level;
    (2) Your written statement that you continuously held at least 
$2,000, $15,000, or $25,000 in market value of the company's securities 
entitled to vote on the proposal for at least three years, two years, or 
one year, respectively; and
    (3) Your written statement that you intend to continue to hold the 
requisite amount of securities, determined in accordance with paragraph 
(b)(1)(i)(A) through (C) of this section, through the date of the 
company's annual or special meeting.
    (3) If you continuously held at least $2,000 of a company's 
securities entitled to vote on the proposal for at least one year as of 
January 4, 2021, and you have continuously maintained a minimum 
investment of at least $2,000 of such securities from January 4, 2021 
through the date the proposal is submitted to the company, you will be 
eligible to submit a proposal to such company for an annual or special 
meeting to be held prior to January 1, 2023. If you rely on this 
provision, you must provide the company with your written statement that 
you intend to continue to hold at least $2,000 of such securities 
through the date of the shareholders' meeting for which the proposal is 
submitted. You must also follow the procedures set forth in paragraph 
(b)(2) of this section to demonstrate that:
    (i) You continuously held at least $2,000 of the company's 
securities entitled to vote on the proposal for at least one year as of 
January 4, 2021; and
    (ii) You have continuously maintained a minimum investment of at 
least $2,000 of such securities from January 4, 2021 through the date 
the proposal is submitted to the company.
    (iii) This paragraph (b)(3) will expire on January 1, 2023.
    (c) Question 3: How many proposals may I submit? Each person may 
submit no more than one proposal, directly or indirectly, to a company 
for a particular shareholders' meeting. A person may not rely on the 
securities holdings of another person for the purpose of meeting the 
eligibility requirements and submitting multiple proposals for a 
particular shareholders' meeting.
    (d) Question 4: How long can my proposal be? The proposal, including 
any accompanying supporting statement, may not exceed 500 words.
    (e) Question 5: What is the deadline for submitting a proposal? (1) 
If you are submitting your proposal for the company's annual meeting, 
you can in most cases find the deadline in last year's proxy statement. 
However, if the company did not hold an annual meeting last year, or has 
changed the date of its meeting for this year more than 30 days from 
last year's meeting, you can usually find the deadline in one of the 
company's quarterly reports on Form 10-Q (Sec.  249.308a of this 
chapter), or in shareholder reports of investment companies under Sec.  
270.30d-1 of this chapter of the Investment Company Act of 1940. In 
order to avoid controversy, shareholders should submit their proposals 
by means, including electronic means, that permit them to prove the date 
of delivery.

[[Page 249]]

    (2) The deadline is calculated in the following manner if the 
proposal is submitted for a regularly scheduled annual meeting. The 
proposal must be received at the company's principal executive offices 
not less than 120 calendar days before the date of the company's proxy 
statement released to shareholders in connection with the previous 
year's annual meeting. However, if the company did not hold an annual 
meeting the previous year, or if the date of this year's annual meeting 
has been changed by more than 30 days from the date of the previous 
year's meeting, then the deadline is a reasonable time before the 
company begins to print and send its proxy materials.
    (3) If you are submitting your proposal for a meeting of 
shareholders other than a regularly scheduled annual meeting, the 
deadline is a reasonable time before the company begins to print and 
send its proxy materials.
    (f) Question 6: What if I fail to follow one of the eligibility or 
procedural requirements explained in answers to Questions 1 through 4 of 
this section? (1) The company may exclude your proposal, but only after 
it has notified you of the problem, and you have failed adequately to 
correct it. Within 14 calendar days of receiving your proposal, the 
company must notify you in writing of any procedural or eligibility 
deficiencies, as well as of the time frame for your response. Your 
response must be postmarked, or transmitted electronically, no later 
than 14 days from the date you received the company's notification. A 
company need not provide you such notice of a deficiency if the 
deficiency cannot be remedied, such as if you fail to submit a proposal 
by the company's properly determined deadline. If the company intends to 
exclude the proposal, it will later have to make a submission under 
Sec.  240.14a-8 and provide you with a copy under Question 10 below, 
Sec.  240.14a-8(j).
    (2) If you fail in your promise to hold the required number of 
securities through the date of the meeting of shareholders, then the 
company will be permitted to exclude all of your proposals from its 
proxy materials for any meeting held in the following two calendar 
years.
    (g) Question 7: Who has the burden of persuading the Commission or 
its staff that my proposal can be excluded? Except as otherwise noted, 
the burden is on the company to demonstrate that it is entitled to 
exclude a proposal.
    (h) Question 8: Must I appear personally at the shareholders' 
meeting to present the proposal? (1) Either you, or your representative 
who is qualified under state law to present the proposal on your behalf, 
must attend the meeting to present the proposal. Whether you attend the 
meeting yourself or send a qualified representative to the meeting in 
your place, you should make sure that you, or your representative, 
follow the proper state law procedures for attending the meeting and/or 
presenting your proposal.
    (2) If the company holds its shareholder meeting in whole or in part 
via electronic media, and the company permits you or your representative 
to present your proposal via such media, then you may appear through 
electronic media rather than traveling to the meeting to appear in 
person.
    (3) If you or your qualified representative fail to appear and 
present the proposal, without good cause, the company will be permitted 
to exclude all of your proposals from its proxy materials for any 
meetings held in the following two calendar years.
    (i) Question 9: If I have complied with the procedural requirements, 
on what other bases may a company rely to exclude my proposal? (1) 
Improper under state law: If the proposal is not a proper subject for 
action by shareholders under the laws of the jurisdiction of the 
company's organization;

    Note to paragraph (i)(1): Depending on the subject matter, some 
proposals are not considered proper under state law if they would be 
binding on the company if approved by shareholders. In our experience, 
most proposals that are cast as recommendations or requests that the 
board of directors take specified action are proper under state law. 
Accordingly, we will assume that a proposal drafted as a recommendation 
or suggestion is proper unless the company demonstrates otherwise.

    (2) Violation of law: If the proposal would, if implemented, cause 
the company to violate any state, federal, or foreign law to which it is 
subject;


[[Page 250]]


    Note to paragraph (i)(2): We will not apply this basis for exclusion 
to permit exclusion of a proposal on grounds that it would violate 
foreign law if compliance with the foreign law would result in a 
violation of any state or federal law.

    (3) Violation of proxy rules: If the proposal or supporting 
statement is contrary to any of the Commission's proxy rules, including 
Sec.  240.14a-9, which prohibits materially false or misleading 
statements in proxy soliciting materials;
    (4) Personal grievance; special interest: If the proposal relates to 
the redress of a personal claim or grievance against the company or any 
other person, or if it is designed to result in a benefit to you, or to 
further a personal interest, which is not shared by the other 
shareholders at large;
    (5) Relevance: If the proposal relates to operations which account 
for less than 5 percent of the company's total assets at the end of its 
most recent fiscal year, and for less than 5 percent of its net earnings 
and gross sales for its most recent fiscal year, and is not otherwise 
significantly related to the company's business;
    (6) Absence of power/authority: If the company would lack the power 
or authority to implement the proposal;
    (7) Management functions: If the proposal deals with a matter 
relating to the company's ordinary business operations;
    (8) Director elections: If the proposal:
    (i) Would disqualify a nominee who is standing for election;
    (ii) Would remove a director from office before his or her term 
expired;
    (iii) Questions the competence, business judgment, or character of 
one or more nominees or directors;
    (iv) Seeks to include a specific individual in the company's proxy 
materials for election to the board of directors; or
    (v) Otherwise could affect the outcome of the upcoming election of 
directors.
    (9) Conflicts with company's proposal: If the proposal directly 
conflicts with one of the company's own proposals to be submitted to 
shareholders at the same meeting;

    Note to paragraph (i)(9): A company's submission to the Commission 
under this section should specify the points of conflict with the 
company's proposal.

    (10) Substantially implemented: If the company has already 
substantially implemented the proposal;

    Note to paragraph (i)(10): A company may exclude a shareholder 
proposal that would provide an advisory vote or seek future advisory 
votes to approve the compensation of executives as disclosed pursuant to 
Item 402 of Regulation S-K (Sec.  229.402 of this chapter) or any 
successor to Item 402 (a ``say-on-pay vote'') or that relates to the 
frequency of say-on-pay votes, provided that in the most recent 
shareholder vote required by Sec.  240.14a-21(b) of this chapter a 
single year (i.e., one, two, or three years) received approval of a 
majority of votes cast on the matter and the company has adopted a 
policy on the frequency of say-on-pay votes that is consistent with the 
choice of the majority of votes cast in the most recent shareholder vote 
required by Sec.  240.14a-21(b) of this chapter.

    (11) Duplication: If the proposal substantially duplicates another 
proposal previously submitted to the company by another proponent that 
will be included in the company's proxy materials for the same meeting;
    (12) Resubmissions. If the proposal addresses substantially the same 
subject matter as a proposal, or proposals, previously included in the 
company's proxy materials within the preceding five calendar years if 
the most recent vote occurred within the preceding three calendar years 
and the most recent vote was:
    (i) Less than 5 percent of the votes cast if previously voted on 
once;
    (ii) Less than 15 percent of the votes cast if previously voted on 
twice; or
    (iii) Less than 25 percent of the votes cast if previously voted on 
three or more times.
    (13) Specific amount of dividends: If the proposal relates to 
specific amounts of cash or stock dividends.
    (j) Question 10: What procedures must the company follow if it 
intends to exclude my proposal? (1) If the company intends to exclude a 
proposal from its proxy materials, it must file its reasons with the 
Commission no later than 80 calendar days before it files its definitive 
proxy statement and form of proxy with the Commission. The company must 
simultaneously provide you with a copy of its submission. The

[[Page 251]]

Commission staff may permit the company to make its submission later 
than 80 days before the company files its definitive proxy statement and 
form of proxy, if the company demonstrates good cause for missing the 
deadline.
    (2) The company must file six paper copies of the following:
    (i) The proposal;
    (ii) An explanation of why the company believes that it may exclude 
the proposal, which should, if possible, refer to the most recent 
applicable authority, such as prior Division letters issued under the 
rule; and
    (iii) A supporting opinion of counsel when such reasons are based on 
matters of state or foreign law.
    (k) Question 11: May I submit my own statement to the Commission 
responding to the company's arguments?
    Yes, you may submit a response, but it is not required. You should 
try to submit any response to us, with a copy to the company, as soon as 
possible after the company makes its submission. This way, the 
Commission staff will have time to consider fully your submission before 
it issues its response. You should submit six paper copies of your 
response.
    (l) Question 12: If the company includes my shareholder proposal in 
its proxy materials, what information about me must it include along 
with the proposal itself?
    (1) The company's proxy statement must include your name and 
address, as well as the number of the company's voting securities that 
you hold. However, instead of providing that information, the company 
may instead include a statement that it will provide the information to 
shareholders promptly upon receiving an oral or written request.
    (2) The company is not responsible for the contents of your proposal 
or supporting statement.
    (m) Question 13: What can I do if the company includes in its proxy 
statement reasons why it believes shareholders should not vote in favor 
of my proposal, and I disagree with some of its statements?
    (1) The company may elect to include in its proxy statement reasons 
why it believes shareholders should vote against your proposal. The 
company is allowed to make arguments reflecting its own point of view, 
just as you may express your own point of view in your proposal's 
supporting statement.
    (2) However, if you believe that the company's opposition to your 
proposal contains materially false or misleading statements that may 
violate our anti-fraud rule, Sec.  240.14a-9, you should promptly send 
to the Commission staff and the company a letter explaining the reasons 
for your view, along with a copy of the company's statements opposing 
your proposal. To the extent possible, your letter should include 
specific factual information demonstrating the inaccuracy of the 
company's claims. Time permitting, you may wish to try to work out your 
differences with the company by yourself before contacting the 
Commission staff.
    (3) We require the company to send you a copy of its statements 
opposing your proposal before it sends its proxy materials, so that you 
may bring to our attention any materially false or misleading 
statements, under the following timeframes:
    (i) If our no-action response requires that you make revisions to 
your proposal or supporting statement as a condition to requiring the 
company to include it in its proxy materials, then the company must 
provide you with a copy of its opposition statements no later than 5 
calendar days after the company receives a copy of your revised 
proposal; or
    (ii) In all other cases, the company must provide you with a copy of 
its opposition statements no later than 30 calendar days before its 
files definitive copies of its proxy statement and form of proxy under 
Sec.  240.14a-6.

[63 FR 29119, May 28, 1998; 63 FR 50622, 50623, Sept. 22, 1998, as 
amended at 72 FR 4168, Jan. 29, 2007; 72 FR 70456, Dec. 11, 2007; 73 FR 
977, Jan. 4, 2008; 76 FR 6045, Feb. 2, 2011; 75 FR 56782, Sept. 16, 
2010; 85 FR 70294, Nov. 4, 2020]

    Effective Date Note: At 85 FR 70294, Nov. 4, 2020, Sec.  240.14a-8 
was amended by adding paragraph (b)(3), effective Jan. 4, 2021 through 
Jan. 1, 2023.



Sec.  240.14a-9  False or misleading statements.

    (a) No solicitation subject to this regulation shall be made by 
means of

[[Page 252]]

any proxy statement, form of proxy, notice of meeting or other 
communication, written or oral, containing any statement which, at the 
time and in the light of the circumstances under which it is made, is 
false or misleading with respect to any material fact, or which omits to 
state any material fact necessary in order to make the statements 
therein not false or misleading or necessary to correct any statement in 
any earlier communication with respect to the solicitation of a proxy 
for the same meeting or subject matter which has become false or 
misleading.
    (b) The fact that a proxy statement, form of proxy or other 
soliciting material has been filed with or examined by the Commission 
shall not be deemed a finding by the Commission that such material is 
accurate or complete or not false or misleading, or that the Commission 
has passed upon the merits of or approved any statement contained 
therein or any matter to be acted upon by security holders. No 
representation contrary to the foregoing shall be made.
    (c) No nominee, nominating shareholder or nominating shareholder 
group, or any member thereof, shall cause to be included in a 
registrant's proxy materials, either pursuant to the Federal proxy 
rules, an applicable state or foreign law provision, or a registrant's 
governing documents as they relate to including shareholder nominees for 
director in a registrant's proxy materials, include in a notice on 
Schedule 14N (Sec.  240.14n-101), or include in any other related 
communication, any statement which, at the time and in the light of the 
circumstances under which it is made, is false or misleading with 
respect to any material fact, or which omits to state any material fact 
necessary in order to make the statements therein not false or 
misleading or necessary to correct any statement in any earlier 
communication with respect to a solicitation for the same meeting or 
subject matter which has become false or misleading.

    Note: The following are some examples of what, depending upon 
particular facts and circumstances, may be misleading within the meaning 
of this section.
    a. Predictions as to specific future market values.
    b. Material which directly or indirectly impugns character, 
integrity or personal reputation, or directly or indirectly makes 
charges concerning improper, illegal or immoral conduct or associations, 
without factual foundation.
    c. Failure to so identify a proxy statement, form of proxy and other 
soliciting material as to clearly distinguish it from the soliciting 
material of any other person or persons soliciting for the same meeting 
or subject matter.
    d. Claims made prior to a meeting regarding the results of a 
solicitation.
    e. Failure to disclose material information regarding proxy voting 
advice covered by Sec.  240.14a-1(l)(1)(iii)(A), such as the proxy 
voting advice business's methodology, sources of information, or 
conflicts of interest.

[31 FR 212, Jan. 7, 1966, as amended at 41 FR 19933, May 14, 1976; 44 FR 
38815, July 2, 1979; 44 FR 68456, Nov. 29, 1979; 75 FR 56782, Sept. 16, 
2010; 85 FR 55155, Sept. 3, 2020]



Sec.  240.14a-10  Prohibition of certain solicitations.

    No person making a solicitation which is subject to Sec. Sec.  
240.14a-1 to 240.14a-10 shall solicit:
    (a) Any undated or postdated proxy; or
    (b) Any proxy which provides that it shall be deemed to be dated as 
of any date subsequent to the date on which it is signed by the security 
holder.

[17 FR 11434, Dec. 18, 1952]



Sec.  240.14a-12  Solicitation before furnishing a proxy statement.

    (a) Notwithstanding the provisions of Sec.  240.14a-3(a), a 
solicitation may be made before furnishing security holders with a proxy 
statement meeting the requirements of Sec.  240.14a-3(a) if:
    (1) Each written communication includes:
    (i) The identity of the participants in the solicitation (as defined 
in Instruction 3 to Item 4 of Schedule 14A (Sec.  240.14a-101)) and a 
description of their direct or indirect interests, by security holdings 
or otherwise, or a prominent legend in clear, plain language advising 
security holders where they can obtain that information; and
    (ii) A prominent legend in clear, plain language advising security 
holders to read the proxy statement when it is available because it 
contains important information. The legend also must explain to 
investors that they

[[Page 253]]

can get the proxy statement, and any other relevant documents, for free 
at the Commission's web site and describe which documents are available 
free from the participants; and
    (2) A definitive proxy statement meeting the requirements of Sec.  
240.14a-3(a) is sent or given to security holders solicited in reliance 
on this section before or at the same time as the forms of proxy, 
consent or authorization are furnished to or requested from security 
holders.
    (b) Any soliciting material published, sent or given to security 
holders in accordance with paragraph (a) of this section must be filed 
with the Commission no later than the date the material is first 
published, sent or given to security holders. Three copies of the 
material must at the same time be filed with, or mailed for filing to, 
each national securities exchange upon which any class of securities of 
the registrant is listed and registered. The soliciting material must 
include a cover page in the form set forth in Schedule 14A (Sec.  
240.14a-101) and the appropriate box on the cover page must be marked. 
Soliciting material in connection with a registered offering is required 
to be filed only under Sec.  230.424 or Sec.  230.425 of this chapter, 
and will be deemed filed under this section.
    (c) Solicitations by any person or group of persons for the purpose 
of opposing a solicitation subject to this regulation by any other 
person or group of persons with respect to the election or removal of 
directors at any annual or special meeting of security holders also are 
subject to the following provisions:
    (1) Application of this rule to annual report to security holders. 
Notwithstanding the provisions of Sec.  240.14a-3 (b) and (c), any 
portion of the annual report to security holders referred to in Sec.  
240.14a-3(b) that comments upon or refers to any solicitation subject to 
this rule, or to any participant in the solicitation, other than the 
solicitation by the management, must be filed with the Commission as 
proxy material subject to this regulation. This must be filed in 
electronic format unless an exemption is available under Rules 201 or 
202 of Regulation S-T (Sec.  232.201 or Sec.  232.202 of this chapter).
    (2) Use of reprints or reproductions. In any solicitation subject to 
this Sec.  240.14a-12(c), soliciting material that includes, in whole or 
part, any reprints or reproductions of any previously published material 
must:
    (i) State the name of the author and publication, the date of prior 
publication, and identify any person who is quoted without being named 
in the previously published material.
    (ii) Except in the case of a public or official document or 
statement, state whether or not the consent of the author and 
publication has been obtained to the use of the previously published 
material as proxy soliciting material.
    (iii) If any participant using the previously published material, or 
anyone on his or her behalf, paid, directly or indirectly, for the 
preparation or prior publication of the previously published material, 
or has made or proposes to make any payments or give any other 
consideration in connection with the publication or republication of the 
material, state the circumstances.

    Instruction 1 to Sec.  240.14a-12. If paper filing is permitted, 
file eight copies of the soliciting material with the Commission, except 
that only three copies of the material specified by Sec.  240.14a-
12(c)(1) need be filed.
    Instruction 2 to Sec.  240.14a-12. Any communications made under 
this section after the definitive proxy statement is on file but before 
it is disseminated also must specify that the proxy statement is 
publicly available and the anticipated date of dissemination.
    Instruction 3 to Sec.  240.14a-12. Inclusion of a nominee pursuant 
to Sec.  240.14a-11, an applicable state or foreign law provision, or a 
registrant's governing documents as they relate to the inclusion of 
shareholder director nominees in the registrant's proxy materials, or 
solicitations by a nominating shareholder or nominating shareholder 
group that are made in connection with that nomination constitute 
solicitations in opposition subject to Sec.  240.14a-12(c), except for 
purposes of Sec.  240.14a-6(a).

[64 FR 61456, Nov. 10, 1999, as amended at 72 FR 4168, Jan. 29, 2007; 75 
FR 56787, Sept. 16, 2010]



Sec.  240.14a-13  Obligation of registrants in communicating with 
beneficial owners.

    (a) If the registrant knows that securities of any class entitled to 
vote at a meeting (or by written consents or authorizations if no 
meeting is held) with

[[Page 254]]

respect to which the registrant intends to solicit proxies, consents or 
authorizations are held of record by a broker, dealer, voting trustee, 
bank, association, or other entity that exercises fiduciary powers in 
nominee name or otherwise, the registrant shall:
    (1) By first class mail or other equally prompt means:
    (i) Inquire of each such record holder:
    (A) Whether other persons are the beneficial owners of such 
securities and if so, the number of copies of the proxy and other 
soliciting material necessary to supply such material to such beneficial 
owners;
    (B) In the case of an annual (or special meeting in lieu of the 
annual) meeting, or written consents in lieu of such meeting, at which 
directors are to be elected, the number of copies of the annual report 
to security holders necessary to supply such report to beneficial owners 
to whom such reports are to be distributed by such record holder or its 
nominee and not by the registrant;
    (C) If the record holder has an obligation under Sec.  240.14b-
1(b)(3) or Sec.  240.14b-2(b)(4)(ii) and (iii), whether an agent has 
been designated to act on its behalf in fulfilling such obligation and, 
if so, the name and address of such agent; and
    (D) Whether it holds the registrant's securities on behalf of any 
respondent bank and, if so, the name and address of each such respondent 
bank; and
    (ii) Indicate to each such record holder:
    (A) Whether the registrant, pursuant to paragraph (c) of this 
section, intends to distribute the annual report to security holders to 
beneficial owners of its securities whose names, addresses and 
securities positions are disclosed pursuant to Sec.  240.14b-1(b)(3) or 
Sec.  240.14b-2(b)(4)(ii) and (iii);
    (B) The record date; and
    (C) At the option of the registrant, any employee benefit plan 
established by an affiliate of the registrant that holds securities of 
the registrant that the registrant elects to treat as exempt employee 
benefit plan securities;
    (2) Upon receipt of a record holder's or respondent bank's response 
indicating, pursuant to Sec.  240.14b-2(b)(1)(i), the names and 
addresses of its respondent banks, within one business day after the 
date such response is received, make an inquiry of and give notification 
to each such respondent bank in the same manner required by paragraph 
(a)(1) of this section; Provided, however, the inquiry required by 
paragraphs (a)(1) and (a)(2) of this section shall not cover beneficial 
owners of exempt employee benefit plan securities;
    (3) Make the inquiry required by paragraph (a)(1) of this section at 
least 20 business days prior to the record date of the meeting of 
security holders, or
    (i) If such inquiry is impracticable 20 business days prior to the 
record date of a special meeting, as many days before the record date of 
such meeting as is practicable or,
    (ii) If consents or authorizations are solicited, and such inquiry 
is impracticable 20 business days before the earliest date on which they 
may be used to effect corporate action, as many days before that date as 
is practicable, or
    (iii) At such later time as the rules of a national securities 
exchange on which the class of securities in question is listed may 
permit for good cause shown; Provided, however, That if a record holder 
or respondent bank has informed the registrant that a designated 
office(s) or department(s) is to receive such inquiries, the inquiry 
shall be made to such designated office(s) or department(s); and
    (4) Supply, in a timely manner, each record holder and respondent 
bank of whom the inquiries required by paragraphs (a)(1) and (a)(2) of 
this section are made with copies of the proxy, other proxy soliciting 
material, and/or the annual report to security holders, in such 
quantities, assembled in such form and at such place(s), as the record 
holder or respondent bank may reasonably request in order to send such 
material to each beneficial owner of securities who is to be furnished 
with such material by the record holder or respondent bank; and
    (5) Upon the request of any record holder or respondent bank that is 
supplied with proxy soliciting material and/or annual reports to 
security holders pursuant to paragraph (a)(4) of this

[[Page 255]]

section, pay its reasonable expenses for completing the sending of such 
material to beneficial owners.

    Note 1: If the registrant's list of security holders indicates that 
some of its securities are registered in the name of a clearing agency 
registered pursuant to Section 17A of the Act (e.g., ``Cede & Co.,'' 
nominee for the Depository Trust Company), the registrant shall make 
appropriate inquiry of the clearing agency and thereafter of the 
participants in such clearing agency who may hold on behalf of a 
beneficial owner or respondent bank, and shall comply with the above 
paragraph with respect to any such participant (see Sec.  240.14a-1(i)).
    Note 2: The attention of registrants is called to the fact that each 
broker, dealer, bank, association, and other entity that exercises 
fiduciary powers has an obligation pursuant to Sec.  240.14b-1 and Sec.  
240.14b-2 (except as provided therein with respect to exempt employee 
benefit plan securities held in nominee name) and, with respect to 
brokers and dealers, applicable self-regulatory organization 
requirements to obtain and forward, within the time periods prescribed 
therein, (a) proxies (or in lieu thereof requests for voting 
instructions) and proxy soliciting materials to beneficial owners on 
whose behalf it holds securities, and (b) annual reports to security 
holders to beneficial owners on whose behalf it holds securities, unless 
the registrant has notified the record holder or respondent bank that it 
has assumed responsibility to send such material to beneficial owners 
whose names, addresses, and securities positions are disclosed pursuant 
to Sec.  240.14b-1(b)(3) and Sec.  240.14b-2(b)(4)(ii) and (iii).
    Note 3: The attention of registrants is called to the fact that 
registrants have an obligation, pursuant to paragraph (d) of this 
section, to cause proxies (or in lieu thereof requests for voting 
instructions), proxy soliciting material and annual reports to security 
holders to be furnished, in a timely manner, to beneficial owners of 
exempt employee benefit plan securities.

    (b) Any registrant requesting pursuant to Sec.  240.14b-1(b)(3) or 
Sec.  240.14b-2(b)(4)(ii) and (iii) a list of names, addresses and 
securities positions of beneficial owners of its securities who either 
have consented or have not objected to disclosure of such information 
shall:
    (1) By first class mail or other equally prompt means, inquire of 
each record holder and each respondent bank identified to the registrant 
pursuant to Sec.  240.14b-2(b)(4)(i) whether such record holder or 
respondent bank holds the registrant's securities on behalf of any 
respondent banks and, if so, the name and address of each such 
respondent bank;
    (2) Request such list to be compiled as of a date no earlier than 
five business days after the date the registrant's request is received 
by the record holder or respondent bank; Provided, however, That if the 
record holder or respondent bank has informed the registrant that a 
designated office(s) or department(s) is to receive such requests, the 
request shall be made to such designated office(s) or department(s);
    (3) Make such request to the following persons that hold the 
registrant's securities on behalf of beneficial owners: all brokers, 
dealers, banks, associations and other entities that exercises fiduciary 
powers; Provided however, such request shall not cover beneficial owners 
of exempt employee benefit plan securities as defined in Sec.  240.14a-
1(d)(1); and, at the option of the registrant, such request may give 
notice of any employee benefit plan established by an affiliate of the 
registrant that holds securities of the registrant that the registrant 
elects to treat as exempt employee benefit plan securities;
    (4) Use the information furnished in response to such request 
exclusively for purposes of corporate communications; and
    (5) Upon the request of any record holder or respondent bank to whom 
such request is made, pay the reasonable expenses, both direct and 
indirect, of providing beneficial owner information.

    Note: A registrant will be deemed to have satisfied its obligations 
under paragraph (b) of this section by requesting consenting and non-
objecting beneficial owner lists from a designated agent acting on 
behalf of the record holder or respondent bank and paying to that 
designated agent the reasonable expenses of providing the beneficial 
owner information.

    (c) A registrant, at its option, may send its annual report to 
security holders to the beneficial owners whose identifying information 
is provided by record holders and respondent banks, pursuant to Sec.  
240.14b-1(b)(3) or Sec.  240.14b-2(b)(4)(ii) and (iii), provided that 
such

[[Page 256]]

registrant notifies the record holders and respondent banks, at the time 
it makes the inquiry required by paragraph (a) of this section, that the 
registrant will send the annual report to security holders to the 
beneficial owners so identified.
    (d) If a registrant solicits proxies, consents or authorizations 
from record holders and respondent banks who hold securities on behalf 
of beneficial owners, the registrant shall cause proxies (or in lieu 
thereof requests or voting instructions), proxy soliciting material and 
annual reports to security holders to be furnished, in a timely manner, 
to beneficial owners of exempt employee benefit plan securities.

[51 FR 44276, Dec. 9, 1986; 52 FR 2220, Jan. 21, 1987, as amended at 52 
FR 23648, June 24, 1987; 53 FR 16405, May 9, 1988; 57 FR 1099, Jan. 10, 
1992; 72 FR 4168, Jan. 29, 2007]



Sec.  240.14a-14  Modified or superseded documents.

    (a) Any statement contained in a document incorporated or deemed to 
be incorporated by reference shall be deemed to be modified or 
superseded, for purposes of the proxy statement, to the extent that a 
statement contained in the proxy statement or in any other subsequently 
filed document that also is or is deemed to be incorporated by reference 
modifies or replaces such statement.
    (b) The modifying or superseding statement may, but need not, state 
it has modified or superseded a prior statement or include any other 
information set forth in the document that is not so modified or 
superseded. The making of a modifying or superseding statement shall not 
be deemed an admission that the modified or superseded statement, when 
made, constituted an untrue statement of a material fact, an omission to 
state a material fact necessary to make a statement not misleading, or 
the employment of a manipulative, deceptive, or fraudulent device, 
contrivance, scheme, transaction, act, practice, course of business or 
artifice to defraud, as those terms are used in the Securities Act of 
1933, the Securities Exchange Act of 1934 (``the Act''), the Investment 
Company Act of 1940, or the rules and regulations thereunder.
    (c) Any statement so modified shall not be deemed in its unmodified 
form to constitute part of the proxy statement for purposes of the Act. 
Any statement so superseded shall not be deemed to constitute a part of 
the proxy statement for purposes of the Act.

[52 FR 21936, June 10, 1987, as amended at 73 FR 17814, Apr. 1, 2008]



Sec.  240.14a-15  Differential and contingent compensation in connection
with roll-up transactions.

    (a) It shall be unlawful for any person to receive compensation for 
soliciting proxies, consents, or authorizations directly from security 
holders in connection with a roll-up transaction as provided in 
paragraph (b) of this section, if the compensation is:
    (1) Based on whether the solicited proxy, consent, or authorization 
either approves or disapproves the proposed roll-up transaction; or
    (2) Contingent on the approval, disapproval, or completion of the 
roll-up transaction.
    (b) This section is applicable to a roll-up transaction as defined 
in Item 901(c) of Regulation S-K (Sec.  229.901(c) of this chapter), 
except for a transaction involving only:
    (1) Finite-life entities that are not limited partnerships;
    (2) Partnerships whose investors will receive new securities or 
securities in another entity that are not reported under a transaction 
reporting plan declared effective before December 17, 1993 by the 
Commission under section 11A of the Act (15 U.S.C. 78k-1); or
    (3) Partnerships whose investors' securities are reported under a 
transaction reporting plan declared effective before December 17, 1993 
by the Commission under section 11A of the Act (15 U.S.C. 78k-1).

[59 FR 63684, Dec. 8, 1994]



Sec.  240.14a-16  Internet availability of proxy materials.

    (a)(1) A registrant shall furnish a proxy statement pursuant to 
Sec.  240.14a-3(a), or an annual report to security holders pursuant to 
Sec.  240.14a-3(b), to a security holder by sending the security holder 
a Notice of Internet Availability of Proxy Materials, as described in 
this

[[Page 257]]

section, 40 calendar days or more prior to the security holder meeting 
date, or if no meeting is to be held, 40 calendar days or more prior to 
the date the votes, consents or authorizations may be used to effect the 
corporate action, and complying with all other requirements of this 
section.
    (2) Unless the registrant chooses to follow the full set delivery 
option set forth in paragraph (n) of this section, it must provide the 
record holder or respondent bank with all information listed in 
paragraph (d) of this section in sufficient time for the record holder 
or respondent bank to prepare, print and send a Notice of Internet 
Availability of Proxy Materials to beneficial owners at least 40 
calendar days before the meeting date.
    (b)(1) All materials identified in the Notice of Internet 
Availability of Proxy Materials must be publicly accessible, free of 
charge, at the Web site address specified in the notice on or before the 
time that the notice is sent to the security holder and such materials 
must remain available on that Web site through the conclusion of the 
meeting of security holders.
    (2) All additional soliciting materials sent to security holders or 
made public after the Notice of Internet Availability of Proxy Materials 
has been sent must be made publicly accessible at the specified Web site 
address no later than the day on which such materials are first sent to 
security holders or made public.
    (3) The Web site address relied upon for compliance under this 
section may not be the address of the Commission's electronic filing 
system.
    (4) The registrant must provide security holders with a means to 
execute a proxy as of the time the Notice of Internet Availability of 
Proxy Materials is first sent to security holders.
    (c) The materials must be presented on the Web site in a format, or 
formats, convenient for both reading online and printing on paper.
    (d) The Notice of Internet Availability of Proxy Materials must 
contain the following:
    (1) A prominent legend in bold-face type that states ``Important 
Notice Regarding the Availability of Proxy Materials for the Shareholder 
Meeting To Be Held on [insert meeting date]'';
    (2) An indication that the communication is not a form for voting 
and presents only an overview of the more complete proxy materials, 
which contain important information and are available on the Internet or 
by mail, and encouraging a security holder to access and review the 
proxy materials before voting;
    (3) The Internet Web site address where the proxy materials are 
available;
    (4) Instructions regarding how a security holder may request a paper 
or e-mail copy of the proxy materials at no charge, including the date 
by which they should make the request to facilitate timely delivery, and 
an indication that they will not otherwise receive a paper or e-mail 
copy;
    (5) The date, time, and location of the meeting, or if corporate 
action is to be taken by written consent, the earliest date on which the 
corporate action may be effected;
    (6) A clear and impartial identification of each separate matter 
intended to be acted on and the soliciting person's recommendations, if 
any, regarding those matters, but no supporting statements;
    (7) A list of the materials being made available at the specified 
Web site;
    (8) A toll-free telephone number, an e-mail address, and an Internet 
Web site where the security holder can request a copy of the proxy 
statement, annual report to security holders, and form of proxy, 
relating to all of the registrant's future security holder meetings and 
for the particular meeting to which the proxy materials being furnished 
relate;
    (9) Any control/identification numbers that the security holder 
needs to access his or her form of proxy;
    (10) Instructions on how to access the form of proxy, provided that 
such instructions do not enable a security holder to execute a proxy 
without having access to the proxy statement and, if required by Sec.  
240.14a-3(b), the annual report to security holders; and
    (11) Information on how to obtain directions to be able to attend 
the meeting and vote in person.

[[Page 258]]

    (e)(1) The Notice of Internet Availability of Proxy Materials may 
not be incorporated into, or combined with, another document, except 
that it may be incorporated into, or combined with, a notice of security 
holder meeting required under state law, unless state law prohibits such 
incorporation or combination.
    (2) The Notice of Internet Availability of Proxy Materials may 
contain only the information required by paragraph (d) of this section 
and any additional information required to be included in a notice of 
security holders meeting under state law; provided that:
    (i) The registrant must revise the information on the Notice of 
Internet Availability of Proxy Materials, including any title to the 
document, to reflect the fact that:
    (A) The registrant is conducting a consent solicitation rather than 
a proxy solicitation; or
    (B) The registrant is not soliciting proxy or consent authority, but 
is furnishing an information statement pursuant to Sec.  240.14c-2; and
    (ii) The registrant may include a statement on the Notice to educate 
security holders that no personal information other than the 
identification or control number is necessary to execute a proxy.
    (f)(1) Except as provided in paragraph (h) of this section, the 
Notice of Internet Availability of Proxy Materials must be sent 
separately from other types of security holder communications and may 
not accompany any other document or materials, including the form of 
proxy.
    (2) Notwithstanding paragraph (f)(1) of this section, the registrant 
may accompany the Notice of Internet Availability of Proxy Materials 
with:
    (i) A pre-addressed, postage-paid reply card for requesting a copy 
of the proxy materials;
    (ii) A copy of any notice of security holder meeting required under 
state law if that notice is not combined with the Notice of Internet 
Availability of Proxy Materials;
    (iii) In the case of an investment company registered under the 
Investment Company Act of 1940, the company's prospectus, a summary 
prospectus that satisfies the requirements of Sec.  230.498(b) or Sec.  
230.498A(b) or (c) of this chapter, a Notice under Sec.  270.30e-3 of 
this chapter, or a report that is required to be transmitted to 
stockholders by section 30(e) of the Investment Company Act (15 U.S.C. 
80a-29(e)) and its implementing regulations (e.g., Sec. Sec.  270.30e-1 
and 270.30e-2 of this chapter); and
    (iv) An explanation of the reasons for a registrant's use of the 
rules detailed in this section and the process of receiving and 
reviewing the proxy materials and voting as detailed in this section.
    (g) Plain English. (1) To enhance the readability of the Notice of 
Internet Availability of Proxy Materials, the registrant must use plain 
English principles in the organization, language, and design of the 
notice.
    (2) The registrant must draft the language in the Notice of Internet 
Availability of Proxy Materials so that, at a minimum, it substantially 
complies with each of the following plain English writing principles:
    (i) Short sentences;
    (ii) Definite, concrete, everyday words;
    (iii) Active voice;
    (iv) Tabular presentation or bullet lists for complex material, 
whenever possible;
    (v) No legal jargon or highly technical business terms; and
    (vi) No multiple negatives.
    (3) In designing the Notice of Internet Availability of Proxy 
Materials, the registrant may include pictures, logos, or similar design 
elements so long as the design is not misleading and the required 
information is clear.
    (h) The registrant may send a form of proxy to security holders if:
    (1) At least 10 calendar days or more have passed since the date it 
first sent the Notice of Internet Availability of Proxy Materials to 
security holders and the form of proxy is accompanied by a copy of the 
Notice of Internet Availability of Proxy Materials; or
    (2) The form of proxy is accompanied or preceded by a copy, via the 
same medium, of the proxy statement and any annual report to security 
holders that is required by Sec.  240.14a-3(b).
    (i) The registrant must file a form of the Notice of Internet 
Availability of

[[Page 259]]

Proxy Materials with the Commission pursuant to Sec.  240.14a-6(b) no 
later than the date that the registrant first sends the notice to 
security holders.
    (j) Obligation to provide copies. (1) The registrant must send, at 
no cost to the record holder or respondent bank and by U.S. first class 
mail or other reasonably prompt means, a paper copy of the proxy 
statement, information statement, annual report to security holders, and 
form of proxy (to the extent each of those documents is applicable) to 
any record holder or respondent bank requesting such a copy within three 
business days after receiving a request for a paper copy.
    (2) The registrant must send, at no cost to the record holder or 
respondent bank and via e-mail, an electronic copy of the proxy 
statement, information statement, annual report to security holders, and 
form of proxy (to the extent each of those documents is applicable) to 
any record holder or respondent bank requesting such a copy within three 
business days after receiving a request for an electronic copy via e-
mail.
    (3) The registrant must provide copies of the proxy materials for 
one year after the conclusion of the meeting or corporate action to 
which the proxy materials relate, provided that, if the registrant 
receives the request after the conclusion of the meeting or corporate 
action to which the proxy materials relate, the registrant need not send 
copies via First Class mail and need not respond to such request within 
three business days.
    (4) The registrant must maintain records of security holder requests 
to receive materials in paper or via e-mail for future solicitations and 
must continue to provide copies of the materials to a security holder 
who has made such a request until the security holder revokes such 
request.
    (k) Security holder information. (1) A registrant or its agent shall 
maintain the Internet Web site on which it posts its proxy materials in 
a manner that does not infringe on the anonymity of a person accessing 
such Web site.
    (2) The registrant and its agents shall not use any e-mail address 
obtained from a security holder solely for the purpose of requesting a 
copy of proxy materials pursuant to paragraph (j) of this section for 
any purpose other than to send a copy of those materials to that 
security holder. The registrant shall not disclose such information to 
any person other than an employee or agent to the extent necessary to 
send a copy of the proxy materials pursuant to paragraph (j) of this 
section.
    (l) A person other than the registrant may solicit proxies pursuant 
to the conditions imposed on registrants by this section, provided that:
    (1) A soliciting person other than the registrant is required to 
provide copies of its proxy materials only to security holders to whom 
it has sent a Notice of Internet Availability of Proxy Materials; and
    (2) A soliciting person other than the registrant must send its 
Notice of Internet Availability of Proxy Materials by the later of:
    (i) 40 Calendar days prior to the security holder meeting date or, 
if no meeting is to be held, 40 calendar days prior to the date the 
votes, consents, or authorizations may be used to effect the corporate 
action; or
    (ii) The date on which it files its definitive proxy statement with 
the Commission, provided its preliminary proxy statement is filed no 
later than 10 calendar days after the date that the registrant files its 
definitive proxy statement.
    (3) Content of the soliciting person's Notice of Internet 
Availability of Proxy Materials. (i) If, at the time a soliciting person 
other than the registrant sends its Notice of Internet Availability of 
Proxy Materials, the soliciting person is not aware of all matters on 
the registrant's agenda for the meeting of security holders, the 
soliciting person's Notice on Internet Availability of Proxy Materials 
must provide a clear and impartial identification of each separate 
matter on the agenda to the extent known by the soliciting person at 
that time. The soliciting person's notice also must include a clear 
statement indicating that there may be additional agenda items of which 
the soliciting person is not aware and that the security holder cannot 
direct a vote for those items on the soliciting person's proxy card 
provided at that time.

[[Page 260]]

    (ii) If a soliciting person other than the registrant sends a form 
of proxy not containing all matters intended to be acted upon, the 
Notice of Internet Availability of Proxy Materials must clearly state 
whether execution of the form of proxy will invalidate a security 
holder's prior vote on matters not presented on the form of proxy.
    (m) This section shall not apply to a proxy solicitation in 
connection with a business combination transaction, as defined in Sec.  
230.165 of this chapter, as well as transactions for cash consideration 
requiring disclosure under Item 14 of Sec.  240.14a-101.
    (n) Full Set Delivery Option. (1) For purposes of this paragraph 
(n), the term full set of proxy materials shall include all of the 
following documents:
    (i) A copy of the proxy statement;
    (ii) A copy of the annual report to security holders if required by 
Sec.  240.14a-3(b); and
    (iii) A form of proxy.
    (2) Notwithstanding paragraphs (e) and (f)(2) of this section, a 
registrant or other soliciting person may:
    (i) Accompany the Notice of Internet Availability of Proxy Materials 
with a full set of proxy materials; or
    (ii) Send a full set of proxy materials without a Notice of Internet 
Availability of Proxy Materials if all of the information required in a 
Notice of Internet Availability of Proxy Materials pursuant to 
paragraphs (d) and (n)(4) of this section is incorporated in the proxy 
statement and the form of proxy.
    (3) A registrant or other soliciting person that sends a full set of 
proxy materials to a security holder pursuant to this paragraph (n) need 
not comply with
    (i) The timing provisions of paragraphs (a) and (l)(2) of this 
section; and
    (ii) The obligation to provide copies pursuant to paragraph (j) of 
this section.
    (4) A registrant or other soliciting person that sends a full set of 
proxy materials to a security holder pursuant to this paragraph (n) need 
not include in its Notice of Internet Availability of Proxy Materials, 
proxy statement, or form of proxy the following disclosures:
    (i) Instructions regarding the nature of the communication pursuant 
to paragraph (d)(2) of this section;
    (ii) Instructions on how to request a copy of the proxy materials; 
and
    (iii) Instructions on how to access the form of proxy pursuant to 
paragraph (d)(10) of this section.

[72 FR 4168, Jan. 29, 2007, as amended at 72 FR 42238, Aug. 1, 2007; 72 
FR 42238, Aug. 1, 2007; 73 FR 17814, Apr. 1, 2008; 75 FR 9081, Feb. 26, 
2010; 83 FR 29204, June 22, 2018; 85 FR 26101, May 1, 2020]



Sec.  240.14a-17  Electronic shareholder forums.

    (a) A shareholder, registrant, or third party acting on behalf of a 
shareholder or registrant may establish, maintain, or operate an 
electronic shareholder forum to facilitate interaction among the 
registrant's shareholders and between the registrant and its 
shareholders as the shareholder or registrant deems appropriate. Subject 
to paragraphs (b) and (c) of this section, the forum must comply with 
the federal securities laws, including Section 14(a) of the Act and its 
associated regulations, other applicable federal laws, applicable state 
laws, and the registrant's governing documents.
    (b) No shareholder, registrant, or third party acting on behalf of a 
shareholder or registrant, by reason of establishing, maintaining, or 
operating an electronic shareholder forum, will be liable under the 
federal securities laws for any statement or information provided by 
another person to the electronic shareholder forum. Nothing in this 
section prevents or alters the application of the federal securities 
laws, including the provisions for liability for fraud, deception, or 
manipulation, or other applicable federal and state laws to the person 
or persons that provide a statement or information to an electronic 
shareholder forum.
    (c) Reliance on the exemption in Sec.  240.14a-2(b)(6) to 
participate in an electronic shareholder forum does not eliminate a 
person's eligibility to solicit proxies after the date that the 
exemption in Sec.  240.14a-2(b)(6) is no longer available, or is no 
longer being relied

[[Page 261]]

upon, provided that any such solicitation is conducted in accordance 
with this regulation.

[73 FR 4458, Jan. 25, 2008]



Sec.  240.14a-18  Disclosure regarding nominating shareholders and
nominees submitted for inclusion in a registrant's proxy materials
pursuant to applicable state or foreign law, or a registrant's governing
documents.

    To have a nominee included in a registrant's proxy materials 
pursuant to a procedure set forth under applicable state or foreign law, 
or the registrant's governing documents addressing the inclusion of 
shareholder director nominees in the registrant's proxy materials, the 
nominating shareholder or nominating shareholder group must provide 
notice to the registrant of its intent to do so on a Schedule 14N (Sec.  
240.14n-101) and file that notice, including the required disclosure, 
with the Commission on the date first transmitted to the registrant. 
This notice shall be postmarked or transmitted electronically to the 
registrant by the date specified by the registrant's advance notice 
provision or, where no such provision is in place, no later than 120 
calendar days before the anniversary of the date that the registrant 
mailed its proxy materials for the prior year's annual meeting, except 
that, if the registrant did not hold an annual meeting during the prior 
year, or if the date of the meeting has changed by more than 30 calendar 
days from the prior year, then the nominating shareholder or nominating 
shareholder group must provide notice a reasonable time before the 
registrant mails its proxy materials, as specified by the registrant in 
a Form 8-K (Sec.  249.308 of this chapter) filed pursuant to Item 5.08 
of Form 8-K.

    Instruction to Sec.  240.14a-18. The registrant is not responsible 
for any information provided in the Schedule 14N (Sec.  240.14n-101) by 
the nominating shareholder or nominating shareholder group, which is 
submitted as required by this section or otherwise provided by the 
nominating shareholder or nominating shareholder group that is included 
in the registrant's proxy materials.

[75 FR 56787, Sept. 16, 2010]



Sec.  240.14a-20  Shareholder approval of executive compensation of 
TARP recipients.

    If a solicitation is made by a registrant that is a TARP recipient, 
as defined in section 111(a)(3) of the Emergency Economic Stabilization 
Act of 2008 (12 U.S.C. 5221(a)(3)), during the period in which any 
obligation arising from financial assistance provided under the TARP, as 
defined in section 3(8) of the Emergency Economic Stabilization Act of 
2008 (12 U.S.C. 5202(8)), remains outstanding and the solicitation 
relates to an annual (or special meeting in lieu of the annual) meeting 
of security holders for which proxies will be solicited for the election 
of directors, as required pursuant to section 111(e)(1) of the Emergency 
Economic Stabilization Act of 2008 (12 U.S.C. 5221(e)(1)), the 
registrant shall provide a separate shareholder vote to approve the 
compensation of executives, as disclosed pursuant to Item 402 of 
Regulation S-K (Sec.  229.402 of this chapter), including the 
compensation discussion and analysis, the compensation tables, and any 
related material.

    Note to Sec.  240.14a-20: TARP recipients that are smaller reporting 
companies entitled to provide scaled disclosure pursuant to Item 402(l) 
of Regulation S-K are not required to include a compensation discussion 
and analysis in their proxy statements in order to comply with this 
section. In the case of these smaller reporting companies, the required 
vote must be to approve the compensation of executives as disclosed 
pursuant to Item 402(m) through (q) of Regulation S-K.

[75 FR 2794, Jan. 19, 2010]



Sec.  240.14a-21  Shareholder approval of executive compensation, 
frequency of votes for approval of executive compensation and shareholder
approval of golden parachute compensation.

    (a) If a solicitation is made by a registrant, other than an 
emerging growth company as defined in Rule 12b-2 (Sec.  240.12b-2), and 
the solicitation relates to an annual or other meeting of shareholders 
at which directors will be elected and for which the rules of the 
Commission require executive compensation disclosure pursuant to Item 
402 of Regulation S-K (Sec.  229.402 of this chapter), the registrant 
shall, for the

[[Page 262]]

first annual or other meeting of shareholders on or after January 21, 
2011, or for the first annual or other meeting of shareholders on or 
after January 21, 2013 if the registrant is a smaller reporting company, 
and thereafter no later than the annual or other meeting of shareholders 
held in the third calendar year after the immediately preceding vote 
under this subsection, include a separate resolution subject to 
shareholder advisory vote to approve the compensation of its named 
executive officers, as disclosed pursuant to Item 402 of Regulation S-K.

    Instruction to paragraph (a): The registrant's resolution shall 
indicate that the shareholder advisory vote under this subsection is to 
approve the compensation of the registrant's named executive officers as 
disclosed pursuant to Item 402 of Regulation S-K (Sec.  229.402 of this 
chapter). The following is a non-exclusive example of a resolution that 
would satisfy the requirements of this subsection: ``RESOLVED, that the 
compensation paid to the company's named executive officers, as 
disclosed pursuant to Item 402 of Regulation S-K, including the 
Compensation Discussion and Analysis, compensation tables and narrative 
discussion is hereby APPROVED.''

    (b) If a solicitation is made by a registrant, other than an 
emerging growth company as defined in Rule 12b-2 (Sec.  240.12b-2), and 
the solicitation relates to an annual or other meeting of shareholders 
at which directors will be elected and for which the rules of the 
Commission require executive compensation disclosure pursuant to Item 
402 of Regulation S-K (Sec.  229.402 of this chapter), the registrant 
shall, for the first annual or other meeting of shareholders on or after 
January 21, 2011, or for the first annual or other meeting of 
shareholders on or after January 21, 2013 if the registrant is a smaller 
reporting company, and thereafter no later than the annual or other 
meeting of shareholders held in the sixth calendar year after the 
immediately preceding vote under this subsection, include a separate 
resolution subject to shareholder advisory vote as to whether the 
shareholder vote required by paragraph (a) of this section should occur 
every 1, 2 or 3 years. Registrants required to provide a separate 
shareholder vote pursuant to Sec.  240.14a-20 of this chapter shall 
include the separate resolution required by this section for the first 
annual or other meeting of shareholders after the registrant has repaid 
all obligations arising from financial assistance provided under the 
TARP, as defined in section 3(8) of the Emergency Economic Stabilization 
Act of 2008 (12 U.S.C. 5202(8)), and thereafter no later than the annual 
or other meeting of shareholders held in the sixth calendar year after 
the immediately preceding vote under this subsection.
    (c) If a solicitation is made by a registrant, other than an 
emerging growth company as defined in Rule 12b-2 (Sec.  240.12b-2), for 
a meeting of shareholders at which shareholders are asked to approve an 
acquisition, merger, consolidation or proposed sale or other disposition 
of all or substantially all the assets of the registrant, the registrant 
shall include a separate resolution subject to shareholder advisory vote 
to approve any agreements or understandings and compensation disclosed 
pursuant to Item 402(t) of Regulation S-K (Sec.  229.402(t) of this 
chapter), unless such agreements or understandings have been subject to 
a shareholder advisory vote under paragraph (a) of this section. 
Consistent with section 14A(b) of the Exchange Act (15 U.S.C. 78n-1(b)), 
any agreements or understandings between an acquiring company and the 
named executive officers of the registrant, where the registrant is not 
the acquiring company, are not required to be subject to the separate 
shareholder advisory vote under this paragraph.

    Instructions to Sec.  240.14a-21: 1. Disclosure relating to the 
compensation of directors required by Item 402(k) (Sec.  229.402(k) of 
this chapter) and Item 402(r) of Regulation S-K (Sec.  229.402(r) of 
this chapter) is not subject to the shareholder vote required by 
paragraph (a) of this section. If a registrant includes disclosure 
pursuant to Item 402(s) of Regulation S-K (Sec.  229.402(s) of this 
chapter) about the registrant's compensation policies and practices as 
they relate to risk management and risk-taking incentives, these 
policies and practices would not be subject to the shareholder vote 
required by paragraph (a) of this section. To the extent that risk 
considerations are a material aspect of the registrant's compensation 
policies or decisions for named executive officers, the registrant is 
required to discuss them as part of its Compensation Discussion and 
Analysis under Sec.  229.402(b) of this chapter, and therefore such

[[Page 263]]

disclosure would be considered by shareholders when voting on executive 
compensation.
    2. If a registrant includes disclosure of golden parachute 
compensation arrangements pursuant to Item 402(t) (Sec.  229.402(t) of 
this chapter) in an annual meeting proxy statement, such disclosure 
would be subject to the shareholder advisory vote required by paragraph 
(a) of this section.
    3. Registrants that are smaller reporting companies entitled to 
provide scaled disclosure in accordance with Item 402(l) of Regulation 
S-K (Sec.  229.402(l) of this chapter) are not required to include a 
Compensation Discussion and Analysis in their proxy statements in order 
to comply with this section. For smaller reporting companies, the vote 
required by paragraph (a) of this section must be to approve the 
compensation of the named executive officers as disclosed pursuant to 
Item 402(m) through (q) of Regulation S-K (Sec.  229.402(m) through (q) 
of this chapter).
    4. A registrant that has ceased being an emerging growth company 
shall include the first separate resolution described under Sec.  
240.14a-21(a) not later than the end of (i) in the case of a registrant 
that was an emerging growth company for less than two years after the 
date of first sale of common equity securities of the registrant 
pursuant to an effective registration statement under the Securities Act 
of 1933 (15 U.S.C 77a et seq.), the three-year period beginning on such 
date; and (ii) in the case of any other registrant, the one-year period 
beginning on the date the registrant is no longer an emerging growth 
company.

[76 FR 6045, Feb. 2, 2011, as amended at 82 FR 17555, Apr. 12, 2017]



Sec.  240.14a-101  Schedule 14A. Information required in proxy statement.

                        Schedule 14A Information

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act 
                                 of 1934

                            (Amendment No. )

Filed by the Registrant [ ]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 
          14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Sec.  240.14a-12
________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
[ ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 
          0-11
    (1) Title of each class of securities to which transaction applies:
________________________________________________________________________
    (2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
    (3) Per unit price or other underlying value of transaction computed 
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the 
filing fee is calculated and state how it was determined):
________________________________________________________________________
    (4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
    (5) Total fee paid:
________________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange 
          Act Rule 0-11(a)(2) and identify the filing for which the 
          offsetting fee was paid previously. Identify the previous 
          filing by registration statement number, or the Form or 
          Schedule and the date of its filing.
    (1) Amount Previously Paid:
________________________________________________________________________
    (2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
    (3) Filing Party:
________________________________________________________________________
    (4) Date Filed:
________________________________________________________________________

                                  Notes

    Notes: A. Where any item calls for information with respect to any 
matter to be acted upon and such matter involves other matters with 
respect to which information is called for by other items of this 
schedule, the information called for by such other items also shall be 
given. For example, where a solicitation of security holders is for the 
purpose of approving the authorization of additional securities which 
are to be used to acquire another specified company, and the 
registrants' security holders will not have a separate opportunity to 
vote upon the transaction, the solicitation to authorize the securities 
is also a solicitation with respect to the acquisition. Under those 
facts, information required by Items 11, 13 and 14 shall be furnished.
    B. Where any item calls for information with respect to any matter 
to be acted upon at the meeting, such item need be answered in the 
registrant's soliciting material only with respect to proposals to be 
made by or on behalf of the registrant.

[[Page 264]]

    C. Except as otherwise specifically provided, where any item calls 
for information for a specified period with regard to directors, 
executive officers, officers or other persons holding specified 
positions or relationships, the information shall be given with regard 
to any person who held any of the specified positions or relationship at 
any time during the period. Information, other than information required 
by Item 404 of Regulation S-K (Sec.  229.404 of this chapter), need not 
be included for any portion of the period during which such person did 
not hold any such position or relationship, provided a statement to that 
effect is made.
    D. Information may be incorporated by reference only in the manner 
and to the extent specifically permitted in the items of this schedule. 
Where incorporation by reference is used, the following shall apply:
    1. Disclosure must not be incorporated by reference from a second 
document if that second document incorporates information pertinent to 
such disclosure by reference to a third document. A registrant 
incorporating any documents, or portions of documents, shall include a 
statement on the last page(s) of the proxy statement as to which 
documents, or portions of documents, are incorporated by reference. 
Information shall not be incorporated by reference in any case where 
such incorporation would render the statement incomplete, unclear or 
confusing.
    2. If a document is incorporated by reference but not delivered to 
security holders, include an undertaking to provide, without charge, to 
each person to whom a proxy statement is delivered, upon written or oral 
request of such person and by first class mail or other equally prompt 
means within one business day of receipt of such request, a copy of any 
and all of the information that has been incorporated by reference in 
the proxy statement (not including exhibits to the information that is 
incorporated by reference unless such exhibits are specifically 
incorporated by reference into the information that the proxy statement 
incorporates), and the address (including title or department) and 
telephone numbers to which such a request is to be directed. This 
includes information contained in documents filed subsequent to the date 
on which definitive copies of the proxy statement are sent or given to 
security holders, up to the date of responding to the request.
    3. If a document or portion of a document other than an annual 
report sent to security holders pursuant to the requirements of Rule 
14a-3 (Sec.  240.14a-3 of this chapter) with respect to the same meeting 
or solicitation of consents or authorizations as that to which the proxy 
statement relates is incorporated by reference in the manner permitted 
by Item 13(b) or 14(e)(1) of this schedule, the proxy statement must be 
sent to security holders no later than 20 business days prior to the 
date on which the meeting of such security holders is held or, if no 
meeting is held, at least 20 business days prior to the date the votes, 
consents or authorizations may be used to effect the corporate action.
    4. Electronic filings. If any of the information required by Items 
13 or 14 of this Schedule is incorporated by reference from an annual or 
quarterly report to security holders, such report, or any portion 
thereof incorporated by reference, shall be filed in electronic format 
with the proxy statement. This provision shall not apply to registered 
investment companies.
    E. In Item 13 of this Schedule, the reference to ``meets the 
requirement of Form S-3'' or ``meets the requirements of General 
Instruction A.2 of Form N-2'' shall refer to a registrant who meets the 
following requirements:
    (a) A registrant meets the requirements of Form S-3 if:
    (1) The registrant meets the requirements of General Instruction 
I.A. of Form S-3 (Sec.  239.13 of this chapter); and
    (2) One of the following is met:
    (i) The registrant meets the aggregate market value requirement of 
General Instruction I.B.1 of Form S-3; or
    (ii) Action is to be taken as described in Items 11, 12, and 14 of 
this schedule which concerns non-convertible debt or preferred 
securities issued by a registrant meeting the requirements of General 
Instruction I.B.2. of Form S-3 (referenced in 17 CFR 239.13); or
    (iii) The registrant is a majority-owned subsidiary and one of the 
conditions of General Instruction I.C. of Form S-3 is met.
    (b) A registrant meets the requirements of General Instruction A.2 
of Form N-2 (Sec. Sec.  239.14 and 274.11a-1 of this chapter) if the 
registrant meets the conditions included in such General Instruction, 
provided that General Instruction A.2.c of Form N-2 is subject to the 
same limitations described in paragraph (a)(2) of this Note E.
    Item 1. Date, time and place information. (a) State the date, time 
and place of the meeting of security holders, and the complete mailing 
address, including ZIP Code, of the principal executive offices of the 
registrant, unless such information is otherwise disclosed in material 
furnished to security holders with or preceding the proxy statement. If 
action is to be taken by written consent, state the date by which 
consents are to be submitted if state law requires that such a date be 
specified or if the person soliciting intends to set a date.
    (b) On the first page of the proxy statement, as delivered to 
security holders, state the approximate date on which the proxy 
statement and form of proxy are first sent or given to security holders.
    (c) Furnish the information required to be in the proxy statement by 
Rule 14a-5(e) (Sec.  240.14a-5(e) of this chapter).

[[Page 265]]

    Item 2. Revocability of proxy. State whether or not the person 
giving the proxy has the power to revoke it. If the right of revocation 
before the proxy is exercised is limited or is subject to compliance 
with any formal procedure, briefly describe such limitation or 
procedure.
    Item 3. Dissenters' right of appraisal. Outline briefly the rights 
of appraisal or similar rights of dissenters with respect to any matter 
to be acted upon and indicate any statutory procedure required to be 
followed by dissenting security holders in order to perfect such rights. 
Where such rights may be exercised only within a limited time after the 
date of adoption of a proposal, the filing of a charter amendment or 
other similar act, state whether the persons solicited will be notified 
of such date.
    Instructions. 1. Indicate whether a security holder's failure to 
vote against a proposal will constitute a waiver of his appraisal or 
similar rights and whether a vote against a proposal will be deemed to 
satisfy any notice requirements under State law with respect to 
appraisal rights. If the State law is unclear, state what position will 
be taken in regard to these matters.
    2. Open-end investment companies registered under the Investment 
Company Act of 1940 are not required to respond to this item.
    Item 4. Persons Making the Solicitation--(a) Solicitations not 
subject to Rule 14a-12(c) (Sec.  240.14a-12(c)). (1) If the solicitation 
is made by the registrant, so state. Give the name of any director of 
the registrant who has informed the registrant in writing that he 
intends to oppose any action intended to be taken by the registrant and 
indicate the action which he intends to oppose.
    (2) If the solicitation is made otherwise than by the registrant, so 
state and give the names of the participants in the solicitation, as 
defined in paragraphs (a) (iii), (iv), (v) and (vi) of Instruction 3 to 
this Item.
    (3) If the solicitation is to be made otherwise than by the use of 
the mails or pursuant to Sec.  240.14a-16, describe the methods to be 
employed. If the solicitation is to be made by specially, engaged 
employees or paid solicitors, state (i) the material features of any 
contract or arrangement for such solicitation and identify the parties, 
and (ii) the cost or anticipated cost thereof.
    (4) State the names of the persons by whom the cost of solicitation 
has been or will be borne, directly or indirectly.
    (b) Solicitations subject to Rule 14a-12(c) (Sec.  240.14a-12(c)). 
(1) State by whom the solicitation is made and describe the methods 
employed and to be employed to solicit security holders.
    (2) If regular employees of the registrant or any other participant 
in a solicitation have been or are to be employed to solicit security 
holders, describe the class or classes of employees to be so employed, 
and the manner and nature of their employment for such purpose.
    (3) If specially engaged employees, representatives or other persons 
have been or are to be employed to solicit security holders, state (i) 
the material features of any contract or arrangement for such 
solicitation and the identity of the parties, (ii) the cost or 
anticipated cost thereof and (iii) the approximate number of such 
employees of employees or any other person (naming such other person) 
who will solicit security holders).
    (4) State the total amount estimated to be spent and the total 
expenditures to date for, in furtherance of, or in connection with the 
solicitation of security holders.
    (5) State by whom the cost of the solicitation will be borne. If 
such cost is to be borne initially by any person other than the 
registrant, state whether reimbursement will be sought from the 
registrant, and, if so, whether the question of such reimbursement will 
be submitted to a vote of security holders.
    (6) If any such solicitation is terminated pursuant to a settlement 
between the registrant and any other participant in such solicitation, 
describe the terms of such settlement, including the cost or anticipated 
cost thereof to the registrant.
    Instructions. 1. With respect to solicitations subject to Rule 14a-
12(c) (Sec.  240.14a-12(c)), costs and expenditures within the meaning 
of this Item 4 shall include fees for attorneys, accountants, public 
relations or financial advisers, solicitors, advertising, printing, 
transportation, litigation and other costs incidental to the 
solicitation, except that the registrant may exclude the amount of such 
costs represented by the amount normally expended for a solicitation for 
an election of directors in the absence of a contest, and costs 
represented by salaries and wages of regular employees and officers, 
provided a statement to that effect is included in the proxy statement.
    2. The information required pursuant to paragraph (b)(6) of this 
Item should be included in any amended or revised proxy statement or 
other soliciting materials relating to the same meeting or subject 
matter furnished to security holders by the registrant subsequent to the 
date of settlement.
    3. For purposes of this Item 4 and Item 5 of this Schedule 14A:
    (a) The terms ``participant'' and ``participant in a solicitation'' 
include the following:
    (i) The registrant;
    (ii) Any director of the registrant, and any nominee for whose 
election as a director proxies are solicited;
    (iii) Any committee or group which solicits proxies, any member of 
such committee or group, and any person whether or not named as a member 
who, acting alone or with one or more other persons, directly or 
indirectly

[[Page 266]]

takes the initiative, or engages, in organizing, directing, or arranging 
for the financing of any such committee or group;
    (iv) Any person who finances or joins with another to finance the 
solicitation of proxies, except persons who contribute not more than 
$500 and who are not otherwise participants;
    (v) Any person who lends money or furnishes credit or enters into 
any other arrangements, pursuant to any contract or understanding with a 
participant, for the purpose of financing or otherwise inducing the 
purchase, sale, holding or voting of securities of the registrant by any 
participant or other persons, in support of or in opposition to a 
participant; except that such terms do not include a bank, broker or 
dealer who, in the ordinary course of business, lends money or executes 
orders for the purchase or sale of securities and who is not otherwise a 
participant; and
    (vi) Any person who solicits proxies.
    (b) The terms ``participant'' and ``participant in a solicitation'' 
do not include:
    (i) Any person or organization retained or employed by a participant 
to solicit security holders and whose activities are limited to the 
duties required to be performed in the course of such employment;
    (ii) Any person who merely transmits proxy soliciting material or 
performs other ministerial or clerical duties;
    (iii) Any person employed by a participant in the capacity of 
attorney, accountant, or advertising, public relations or financial 
adviser, and whose activities are limited to the duties required to be 
performed in the course of such employment;
    (iv) Any person regularly employed as an officer or employee of the 
registrant or any of its subsidiaries who is not otherwise a 
participant; or
    (v) Any officer or director of, or any person regularly employed by, 
any other participant, if such officer, director or employee is not 
otherwise a participant.
    Item 5. Interest of certain Persons in Matters To Be Acted Upon (a) 
Solicitations not subject to Rule 14a-12(c) (Sec.  240.14a-12(c)). 
Describe briefly any substantial interest, direct or indirect, by 
security holdings or otherwise, of each of the following persons in any 
matter to be acted upon, other than elections to office:
    (1) If the solicitation is made on behalf of the registrant, each 
person who has been a director or executive officer of the registrant at 
any time since the beginning of the last fiscal year.
    (2) If the solicitation is made otherwise than on behalf of the 
registrant, each participant in the solicitation, as defined in 
paragraphs (a) (iii), (iv), (v), and (vi) of Instruction 3 to Item 4 of 
this Schedule 14A.
    (3) Each nominee for election as a director of the registrant.
    (4) Each associate of any of the foregoing persons.
    (5) If the solicitation is made on behalf of the registrant, furnish 
the information required by Item 402(t) of Regulation S-K (Sec.  
229.402(t) of this chapter).

    Instruction to paragraph (a). Except in the case of a solicitation 
subject to this regulation made in opposition to another solicitation 
subject to this regulation, this sub-item (a) shall not apply to any 
interest arising from the ownership of securities of the registrant 
where the security holder receives no extra or special benefit not 
shared on a pro rata basis by all other holders of the same class.

    (b) Solicitation subject to Rule 14a-12(c) (Sec.  240.14a-12(c)). 
With respect to any solicitation subject to Rule 14a-12(c) (Sec.  
240.14a-12(c)):
    (1) Describe briefly any substantial interest, direct or indirect, 
by security holdings or otherwise, of each participant as defined in 
paragraphs (a) (ii), (iii), (iv), (v) and (vi) of Instruction 3 to Item 
4 of this Schedule 14A, in any matter to be acted upon at the meeting, 
and include with respect to each participant the following information, 
or a fair and accurate summary thereof:
    (i) Name and business address of the participant.
    (ii) The participant's present principal occupation or employment 
and the name, principal business and address of any corporation or other 
organization in which such employment is carried on.
    (iii) State whether or not, during the past ten years, the 
participant has been convicted in a criminal proceeding (excluding 
traffic violations or similar misdemeanors) and, if so, give dates, 
nature of conviction, name and location of court, and penalty imposed or 
other disposition of the case. A negative answer need not be included in 
the proxy statement or other soliciting material.
    (iv) State the amount of each class of securities of the registrant 
which the participant owns beneficially, directly or indirectly.
    (v) State the amount of each class of securities of the registrant 
which the participant owns of record but not beneficially.
    (vi) State with respect to all securities of the registrant 
purchased or sold within the past two years, the dates on which they 
were purchased or sold and the amount purchased or sold on each such 
date.
    (vii) If any part of the purchase price or market value of any of 
the shares specified in paragraph (b)(1)(vi) of this Item is represented 
by funds borrowed or otherwise obtained for the purpose of acquiring or 
holding such securities, so state and indicate the amount of the 
indebtedness as of the latest practicable date. If such funds were 
borrowed or obtained otherwise than pursuant to a margin account or bank 
loan in the regular

[[Page 267]]

course of business of a bank, broker or dealer, briefly describe the 
transaction, and state the names of the parties.
    (viii) State whether or not the participant is, or was within the 
past year, a party to any contract, arrangements or understandings with 
any person with respect to any securities of the registrant, including, 
but not limited to joint ventures, loan or option arrangements, puts or 
calls, guarantees against loss or guarantees of profit, division of 
losses or profits, or the giving or withholding of proxies. If so, name 
the parties to such contracts, arrangements or understandings and give 
the details thereof.
    (ix) State the amount of securities of the registrant owned 
beneficially, directly or indirectly, by each of the participant's 
associates and the name and address of each such associate.
    (x) State the amount of each class of securities of any parent or 
subsidiary of the registrant which the participant owns beneficially, 
directly or indirectly.
    (xi) Furnish for the participant and associates of the participant 
the information required by Item 404(a) of Regulation S-K (Sec.  
229.404(a) of this chapter).
    (xii) State whether or not the participant or any associates of the 
participant have any arrangement or understanding with any person--
(A) with respect to any future employment by the registrant or its 
affiliates; or
(B) with respect to any future transactions to which the registrant or 
any of its affiliates will or may be a party.

If so, describe such arrangement or understanding and state the names of 
the parties thereto.
    (2) With respect to any person, other than a director or executive 
officer of the registrant acting solely in that capacity, who is a party 
to an arrangement or understanding pursuant to which a nominee for 
election as director is proposed to be elected, describe any substantial 
interest, direct or indirect, by security holdings or otherwise, that 
such person has in any matter to be acted upon at the meeting, and 
furnish the information called for by paragraphs (b)(1) (xi) and (xii) 
of this Item.
    (3) If the solicitation is made on behalf of the registrant, furnish 
the information required by Item 402(t) of Regulation S-K (Sec.  
229.402(t) of this chapter).

    Instruction to paragraph (b): For purposes of this Item 5, 
beneficial ownership shall be determined in accordance with Rule 13d-3 
under the Act (Section 240.13d-3 of this chapter).

    Item 6. Voting securities and principal holders thereof, (a) As to 
each class of voting securities of the registrant entitled to be voted 
at the meeting (or by written consents or authorizations if no meeting 
is held), state the number of shares outstanding and the number of votes 
to which each class is entitled.
    (b) State the record date, if any, with respect to this 
solicitation. If the right to vote or give consent is not to be 
determined, in whole or in part, by reference to a record date, indicate 
the criteria for the determination of security holders entitled to vote 
or give consent.
    (c) If action is to be taken with respect to the election of 
directors and if the persons solicited have cumulative voting rights: 
(1) Make a statement that they have such rights, (2) briefly describe 
such rights, (3) state briefly the conditions precedent to the exercise 
thereof, and (4) if discretionary authority to cumulate votes is 
solicited, so indicate.
    (d) Furnish the information required by Item 403 of Regulation S-K 
(Sec.  229.403 of this chapter) to the extent known by the persons on 
whose behalf the solicitation is made.
    (e) If, to the knowledge of the persons on whose behalf the 
solicitation is made, a change in control of the registrant has occurred 
since the beginning of its last fiscal year, state the name of the 
person(s) who acquired such control, the amount and the source of the 
consideration used by such person or persons; the basis of the control, 
the date and a description of the transaction(s) which resulted in the 
change of control and the percentage of voting securities of the 
registrant now beneficially owned directly or indirectly by the 
person(s) who acquired control; and the identity of the person(s) from 
whom control was assumed. If the source of all or any part of the 
consideration used is a loan made in the ordinary course of business by 
a bank as defined by section 3(a)(6) of the Act, the identity of such 
bank shall be omitted provided a request for confidentiality has been 
made pursuant to section 13(d)(1)(B) of the Act by the person(s) who 
acquired control. In lieu thereof, the material shall indicate that the 
identity of the bank has been so omitted and filed separately with the 
Commission.
    Instruction. 1. State the terms of any loans or pledges obtained by 
the new control group for the purpose of acquiring control, and the 
names of the lenders or pledgees.
    2. Any arrangements or understandings among members of both the 
former and new control groups and their associates with respect to 
election of directors or other matters should be described.
    Item 7. Directors and executive officers. If action is to be taken 
with respect to the election of directors, furnish the following 
information in tabular form to the extent practicable. If, however, the 
solicitation is made on behalf of persons other than the registrant, the 
information required need be furnished only as to nominees of the 
persons making the solicitation.

[[Page 268]]

    (a) The information required by Item 103(c)(2) of Regulation S-K 
(Sec.  229.103(c)(2) of this chapter) with respect to directors and 
executive officers.
    (b) The information required by Items 401, 404(a) and (b), 405 and 
407 of Regulation S-K (Sec. Sec.  229.401, 229.404(a) and (b), 229.405 
and 229.407 of this chapter), other than the information required by:
    (i) Paragraph (c)(3) of Item 407 of Regulation S-K (Sec.  
229.407(c)(3) of this chapter); and
    (ii) Paragraphs (e)(4) and (e)(5) of Item 407 of Regulation S-K 
(Sec. Sec.  229.407(e)(4) and 229.407(e)(5) of this chapter) (which are 
required by Item 8 of this Schedule 14A).
    (c) If a shareholder nominee or nominees are submitted to the 
registrant for inclusion in the registrant's proxy materials pursuant to 
Sec.  240.14a-11 and the registrant is not permitted to exclude the 
nominee or nominees pursuant to the provisions of Sec.  240.14a-11, the 
registrant must include in its proxy statement the disclosure required 
from the nominating shareholder or nominating shareholder group under 
Item 5 of Sec.  240.14n-101 with regard to the nominee or nominees and 
the nominating shareholder or nominating shareholder group.
    (d) If a registrant is required to include a shareholder nominee or 
nominees submitted to the registrant for inclusion in the registrant's 
proxy materials pursuant to a procedure set forth under applicable state 
or foreign law, or the registrant's governing documents providing for 
the inclusion of shareholder director nominees in the registrant's proxy 
materials, the registrant must include in its proxy statement the 
disclosure required from the nominating shareholder or nominating 
shareholder group under Item 6 of Sec.  240.14n-101 with regard to the 
nominee or nominees and the nominating shareholder or nominating 
shareholder group.

    Instruction to Item 7. The information disclosed pursuant to 
paragraphs (c) and (d) of this Item 7 will not be deemed incorporated by 
reference into any filing under the Securities Act of 1933 (15 U.S.C. 
77a et seq.), the Securities Exchange Act of 1934 (15 U.S.C. 78a et 
seq.), or the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), 
except to the extent that the registrant specifically incorporates that 
information by reference.

    (e) In lieu of the information required by this Item 7, investment 
companies registered under the Investment Company Act of 1940 (15 U.S.C. 
80a) must furnish the information required by Item 22(b) of this 
Schedule 14A.
    Item 8. Compensation of directors and executive officers. Furnish 
the information required by Item 402 of Regulation S-K (Sec.  229.402 of 
this chapter) and paragraphs (e)(4) and (e)(5) of Item 407 of Regulation 
S-K (Sec.  229.407(e)(4) and (e)(5) of this chapter) if action is to be 
taken with regard to:
    (a) The election of directors;
    (b) Any bonus, profit sharing or other compensation plan, contract 
or arrangement in which any director, nominee for election as a 
director, or executive officer of the registrant will participate;
    (c) Any pension or retirement plan in which any such person will 
participate; or
    (d) The granting or extension to any such person of any options, 
warrants or rights to purchase any securities, other than warrants or 
rights issued to security holders as such, on a pro rata basis.
    However, if the solicitation is made on behalf of persons other than 
the registrant, the information required need be furnished only as to 
nominees of the persons making the solicitation and associates of such 
nominees. In the case of investment companies registered under the 
Investment Company Act of 1940 (15 U.S.C. 80a), furnish the information 
required by Item 22(b)(13) of this Schedule 14A.
    Instruction. If an otherwise reportable compensation plan became 
subject to such requirements because of an acquisition or merger and, 
within one year of the acquisition or merger, such plan was terminated 
for purposes of prospective eligibility, the registrant may furnish a 
description of its obligation to the designated individuals pursuant to 
the compensation plan. Such description may be furnished in lieu of a 
description of the compensation plan in the proxy statement.
    Item 9. Independent public accountants. If the solicitation is made 
on behalf of the registrant and relates to: (1) The annual (or special 
meeting in lieu of annual) meeting of security holders at which 
directors are to be elected, or a solicitation of consents or 
authorizations in lieu of such meeting or (2) the election, approval or 
ratification of the registrant's accountant, furnish the following 
information describing the registrant's relationship with its 
independent public accountant:
    (a) The name of the principal accountant selected or being 
recommended to security holders for election, approval or ratification 
for the current year. If no accountant has been selected or recommended, 
so state and briefly describe the reasons therefor.
    (b) The name of the principal accountant for the fiscal year most 
recently completed if different from the accountant selected or 
recommended for the current year or if no accountant has yet been 
selected or recommended for the current year.
    (c) The proxy statement shall indicate: (1) Whether or not 
representatives of the principal accountant for the current year and for 
the most recently completed fiscal year are expected to be present at 
the security holders' meeting, (2) whether or not they will

[[Page 269]]

have the opportunity to make a statement if they desire to do so, and 
(3) whether or not such representatives are expected to be available to 
respond to appropriate questions.
    (d) If during the registrant's two most recent fiscal years or any 
subsequent interim period, (1) an independent accountant who was 
previously engaged as the principal accountant to audit the registrant's 
financial statements, or an independent accountant on whom the principal 
accountant expressed reliance in its report regarding a significant 
subsidiary, has resigned (or indicated it has declined to stand for re-
election after the completion of the current audit) or was dismissed, or 
(2) a new independent accountant has been engaged as either the 
principal accountant to audit the registrant's financial statements or 
as an independent accountant on whom the principal accountant has 
expressed or is expected to express reliance in its report regarding a 
significant subsidiary, then, notwithstanding any previous disclosure, 
provide the information required by Item 304(a) of Regulation S-K (Sec.  
229.304 of this chapter).
    (e)(1) Disclose, under the caption Audit Fees, the aggregate fees 
billed for each of the last two fiscal years for professional services 
rendered by the principal accountant for the audit of the registrant's 
annual financial statements and review of financial statements included 
in the registrant's Form 10-Q (17 CFR 249.308a) or services that are 
normally provided by the accountant in connection with statutory and 
regulatory filings or engagements for those fiscal years.
    (2) Disclose, under the caption Audit-Related Fees, the aggregate 
fees billed in each of the last two fiscal years for assurance and 
related services by the principal accountant that are reasonably related 
to the performance of the audit or review of the registrant's financial 
statements and are not reported under paragraph (e)(1) of this section. 
Registrants shall describe the nature of the services comprising the 
fees disclosed under this category.
    (3) Disclose, under the caption Tax Fees, the aggregate fees billed 
in each of the last two fiscal years for professional services rendered 
by the principal accountant for tax compliance, tax advice, and tax 
planning. Registrants shall describe the nature of the services 
comprising the fees disclosed under this category.
    (4) Disclose, under the caption All Other Fees, the aggregate fees 
billed in each of the last two fiscal years for products and services 
provided by the principal accountant, other than the services reported 
in paragraphs (e)(1) through (e)(3) of this section. Registrants shall 
describe the nature of the services comprising the fees disclosed under 
this category.
    (5)(i) Disclose the audit committee's pre-approval policies and 
procedures described in 17 CFR 210.2-01(c)(7)(i).
    (ii) Disclose the percentage of services described in each of 
paragraphs (e)(2) through (e)(4) of this section that were approved by 
the audit committee pursuant to 17 CFR 210.2-01(c)(7)(i)(C).
    (6) If greater than 50 percent, disclose the percentage of hours 
expended on the principal accountant's engagement to audit the 
registrant's financial statements for the most recent fiscal year that 
were attributed to work performed by persons other than the principal 
accountant's full-time, permanent employees.
    (7) If the registrant is an investment company, disclose the 
aggregate non-audit fees billed by the registrant's accountant for 
services rendered to the registrant, and to the registrant's investment 
adviser (not including any subadviser whose role is primarily portfolio 
management and is subcontracted with or overseen by another investment 
adviser), and any entity controlling, controlled by, or under common 
control with the adviser that provides ongoing services to the 
registrant for each of the last two fiscal years of the registrant.
    (8) If the registrant is an investment company, disclose whether the 
audit committee of the board of directors has considered whether the 
provision of non-audit services that were rendered to the registrant's 
investment adviser (not including any subadviser whose role is primarily 
portfolio management and is subcontracted with or overseen by another 
investment adviser), and any entity controlling, controlled by, or under 
common control with the investment adviser that provides ongoing 
services to the registrant that were not pre-approved pursuant to 17 CFR 
210.2-01(c)(7)(ii) is compatible with maintaining the principal 
accountant's independence.
    Instruction to Item 9(e). For purposes of Item 9(e)(2), (3), and 
(4), registrants that are investment companies must disclose fees billed 
for services rendered to the registrant and separately, disclose fees 
required to be approved by the investment company registrant's audit 
committee pursuant to 17 CFR 210.2-01(c)(7)(ii). Registered investment 
companies must also disclose the fee percentages as required by item 
9(e)(5)(ii) for the registrant and separately, disclose the fee 
percentages as required by item 9(e)(5)(ii) for the fees required to be 
approved by the investment company registrant's audit committee pursuant 
to 17 CFR 210.2-01(c)(7)(ii).
    Item 10. Compensation Plans. If action is to be taken with respect 
to any plan pursuant to which cash or noncash compensation may be paid 
or distributed, furnish the following information:
    (a) Plans subject to security holder action. (1) Describe briefly 
the material features of the

[[Page 270]]

plan being acted upon, identify each class of persons who will be 
eligible to participate therein, indicate the approximate number of 
persons in each such class, and state the basis of such participation.
    (2)(i) In the tabular format specified below, disclose the benefits 
or amounts that will be received by or allocated to each of the 
following under the plan being acted upon, if such benefits or amounts 
are determinable:

                            New Plan Benefits
------------------------------------------------------------------------
                                Plan name
-------------------------------------------------------------------------
         Name and position            Dollar value ($)   Number of units
------------------------------------------------------------------------
CEO................................
A..................................
B..................................
C..................................
D..................................
Executive Group....................
Non-Executive Director Group.......
Non-Executive Officer Employee
 Group.
------------------------------------------------------------------------

    (ii) The table required by paragraph (a)(2)(i) of this Item shall 
provide information as to the following persons:
    (A) Each person (stating name and position) specified in paragraph 
(a)(3) of Item 402 of Regulation S-K (Sec.  229.402(a)(3) of this 
chapter);
    Instruction: In the case of investment companies registered under 
the Investment Company Act of 1940, furnish the information for 
Compensated Persons as defined in Item 22(b)(13) of this Schedule in 
lieu of the persons specified in paragraph (a)(3) of Item 402 of 
Regulation S-K (Sec.  229.402(a)(3) of this chapter).
    (B) All current executive officers as a group;
    (C) All current directors who are not executive officers as a group; 
and
    (D) All employees, including all current officers who are not 
executive officers, as a group.

                 Instruction to New Plan Benefits Table

    Additional columns should be added for each plan with respect to 
which security holder action is to be taken.
    (iii) If the benefits or amounts specified in paragraph (a)(2)(i) of 
this item are not determinable, state the benefits or amounts which 
would have been received by or allocated to each of the following for 
the last completed fiscal year if the plan had been in effect, if such 
benefits or amounts may be determined, in the table specified in 
paragraph (a)(2)(i) of this Item:
    (A) Each person (stating name and position) specified in paragraph 
(a)(3) of Item 402 of Regulation S-K (Sec.  229.402(a)(3) of this 
chapter);
    (B) All current executive officers as a group;
    (C) All current directors who are not executive officers as a group; 
and
    (D) All employees, including all current officers who are not 
executive officers, as a group.
    (3) If the plan to be acted upon can be amended, otherwise than by a 
vote of security holders, to increase the cost thereof to the registrant 
or to alter the allocation of the benefits as between the persons and 
groups specified in paragraph (a)(2) of this item, state the nature of 
the amendments which can be so made.
    (b)(1) Additional information regarding specified plans subject to 
security holder action. With respect to any pension or retirement plan 
submitted for security holder action, state:
    (i) The approximate total amount necessary to fund the plan with 
respect to past services, the period over which such amount is to be 
paid and the estimated annual payments necessary to pay the total amount 
over such period; and
    (ii) The estimated annual payment to be made with respect to current 
services. In the case of a pension or retirement plan, information 
called for by paragraph (a)(2) of this Item may be furnished in the 
format specified by paragraph (h)(2) of Item 402 of Regulation S-K 
(Sec.  229.402(h)(2) of this chapter).

    Instruction to paragraph (b)(1)(ii). In the case of investment 
companies registered under the Investment Company Act of 1940 (15 U.S.C. 
80a), refer to Instruction 4 in Item 22(b)(13)(i) of this Schedule in 
lieu of paragraph (h)(2) of Item 402 of Regulation S-K (Sec.  
229.402(h)(2) of this chapter).

    (2)(i) With respect to any specific grant of or any plan containing 
options, warrants or rights submitted for security holder action, state:
    (A) The title and amount of securities underlying such options, 
warrants or rights;
    (B) The prices, expiration dates and other material conditions upon 
which the options, warrants or rights may be exercised;
    (C) The consideration received or to be received by the registrant 
or subsidiary for the granting or extension of the options, warrants or 
rights;
    (D) The market value of the securities underlying the options, 
warrants, or rights as of the latest practicable date; and
    (E) In the case of options, the federal income tax consequences of 
the issuance and exercise of such options to the recipient and the 
registrant; and
    (ii) State separately the amount of such options received or to be 
received by the following persons if such benefits or amounts are 
determinable:
    (A) Each person (stating name and position) specified in paragraph 
(a)(3) of Item 402

[[Page 271]]

of Regulation S-K (Sec.  229.402(a)(3) of this chapter);
    (B) All current executive officers as a group;
    (C) All current directors who are not executive officers as a group;
    (D) Each nominee for election as a director;
    (E) Each associate of any of such directors, executive officers or 
nominees;
    (F) Each other person who received or is to receive 5 percent of 
such options, warrants or rights; and
    (G) All employees, including all current officers who are not 
executive officers, as a group.
    (c) Information regarding plans and other arrangements not subject 
to security holder action. Furnish the information required by Item 
201(d) of Regulation S-K (Sec.  229.201(d) of this chapter).

    Instructions to paragraph (c). 1. If action is to be taken as 
described in paragraph (a) of this Item with respect to the approval of 
a new compensation plan under which equity securities of the registrant 
are authorized for issuance, information about the plan shall be 
disclosed as required under paragraphs (a) and (b) of this Item and 
shall not be included in the disclosure required by Item 201(d) of 
Regulation S-K (Sec.  229.201(d) of this chapter). If action is to be 
taken as described in paragraph (a) of this Item with respect to the 
amendment or modification of an existing plan under which equity 
securities of the registrant are authorized for issuance, the registrant 
shall include information about securities previously authorized for 
issuance under the plan (including any outstanding options, warrants and 
rights previously granted pursuant to the plan and any securities 
remaining available for future issuance under the plan) in the 
disclosure required by Item 201(d) of Regulation S-K (Sec.  229.201(d) 
of this chapter). Any additional securities that are the subject of the 
amendments or modification of the existing plan shall be disclosed as 
required under paragraphs (a) and (b) of this Item and shall not be 
included in the Item 201(d) disclosure.

                              Instructions

    1. The term plan as used in this Item means any plan as defined in 
paragraph (a)(6)(ii) of Item 402 of Regulation S-K (Sec.  
229.402(a)(6)(ii) of this chapter).
    2. If action is to be taken with respect to a material amendment or 
modification of an existing plan, the item shall be answered with 
respect to the plan as proposed to be amended or modified and shall 
indicate any material differences from the existing plan.
    3. If the plan to be acted upon is set forth in a written document, 
three copies thereof shall be filed with the Commission at the time 
copies of the proxy statement and form of proxy are first filed pursuant 
to paragraph (a) or (b) of Sec.  240.14a-6. Electronic filers shall file 
with the Commission a copy of such written plan document in electronic 
format as an appendix to the proxy statement. It need not be provided to 
security holders unless it is a part of the proxy statement.
    4. Paragraph (b)(2)(ii) does not apply to warrants or rights to be 
issued to security holders as such on a pro rata basis.
    5. The Commission shall be informed, as supplemental information, 
when the proxy statement is first filed, as to when the options, 
warrants or rights and the shares called for thereby will be registered 
under the Securities Act or, if such registration is not contemplated, 
the section of the Securities Act or rule of the Commission under which 
exemption from such registration is claimed and the facts relied upon to 
make the exemption available.
    Item 11. Authorization or issuance of securities otherwise than for 
exchange. If action is to be taken with respect to the authorization or 
issuance of any securities otherwise than for exchange for outstanding 
securities of the registrant, furnish the following information:
    (a) State the title and amount of securities to be authorized or 
issued.
    (b) Furnish the information required by Item 202 of Regulation S-K 
(Sec.  229.202 of this chapter). If the terms of the securities cannot 
be stated or estimated with respect to any or all of the securities to 
be authorized, because no offering thereof is contemplated in the 
proximate future, and if no further authorization by security holders 
for the issuance thereof is to be obtained, it should be stated that the 
terms of the securities to be authorized, including dividend or interest 
rates, conversion prices, voting rights, redemption prices, maturity 
dates, and similar matters will be determined by the board of directors. 
If the securities are additional shares of common stock of a class 
outstanding, the description may be omitted except for a statement of 
the preemptive rights, if any. Where the statutory provisions with 
respect to preemptive rights are so indefinite or complex that they 
cannot be stated in summarized form, it will suffice to make a statement 
in the form of an opinion of counsel as to the existence and extent of 
such rights.
    (c) Describe briefly the transaction in which the securities are to 
be issued including a statement as to (1) the nature and approximate 
amount of consideration received or to be received by the registrant and 
(2) the approximate amount devoted to each purpose so far as 
determinable for which the net proceeds have been or are to be used. If 
it is impracticable to describe the transaction in which the securities 
are to be issued, state the reason, indicate the purpose of the 
authorization of the securities, and

[[Page 272]]

state whether further authorization for the issuance of the securities 
by a vote of security holders will be solicited prior to such issuance.
    (d) If the securities are to be issued otherwise than in a public 
offering for cash, state the reasons for the proposed authorization or 
issuance and the general effect thereof upon the rights of existing 
security holders.
    (e) Furnish the information required by Item 13(a) of this schedule.
    Item 12. Modification or exchange of securities. If action is to be 
taken with respect to the modification of any class of securities of the 
registrant, or the issuance or authorization for issuance of securities 
of the registrant in exchange for outstanding securities of the 
registrant furnish the following information:
    (a) If outstanding securities are to be modified, state the title 
and amount thereof. If securities are to be issued in exchange for 
outstanding securities, state the title and amount of securities to be 
so issued, the title and amount of outstanding securities to be 
exchanged therefor and the basis of the exchange.
    (b) Describe any material differences between the outstanding 
securities and the modified or new securities in respect of any of the 
matters concerning which information would be required in the 
description of the securities in Item 202 of Regulation S-K (Sec.  
229.202 of this chapter).
    (c) State the reasons for the proposed modification or exchange and 
the general effect thereof upon the rights of existing security holders.
    (d) Furnish a brief statement as to arrears in dividends or as to 
defaults in principal or interest in respect to the outstanding 
securities which are to be modified or exchanged and such other 
information as may be appropriate in the particular case to disclose 
adequately the nature and effect of the proposed action.
    (e) Outline briefly any other material features of the proposed 
modification or exchange. If the plan of proposed action is set forth in 
a written document, file copies thereof with the Commission in 
accordance with Sec.  240.14a-6.
    (f) Furnish the information required by Item 13(a) of this Schedule.
    Instruction. If the existing security is presently listed and 
registered on a national securities exchange, state whether the 
registrant intends to apply for listing and registration of the new or 
reclassified security on such exchange or any other exchange. If the 
registrant does not intend to make such application, state the effect of 
the termination of such listing and registration.
    Item 13. Financial and other information. (See Notes D and E at the 
beginning of this Schedule.)
    (a) Information required. If action is to be taken with respect to 
any matter specified in Item 11 or 12, furnish the following 
information:
    (1) Financial statements meeting the requirements of Regulation S-X, 
including financial information required by Rule 3-05 and Article 11 of 
Regulation S-X with respect to transactions other than pursuant to which 
action is to be taken as described in this proxy statement (A smaller 
reporting company may provide the information in Rules 8-04 and 8-05 of 
Regulation S-X (Sec. Sec.  210.8-04 and 210.8-05 of this chapter) in 
lieu of the financial information required by Rule 3-05 and Article 11 
of Regulation S-X);
    (2) Item 302 of Regulation S-K, supplementary financial information;
    (3) Item 303 of Regulation S-K, management's discussion and analysis 
of financial condition and results of operations;
    (4) Item 304 of Regulation S-K, changes in and disagreements with 
accountants on accounting and financial disclosure;
    (5) Item 305 of Regulation S-K, quantitative and qualitative 
disclosures about market risk; and
    (6) A statement as to whether or not representatives of the 
principal accountants for the current year and for the most recently 
completed fiscal year:
    (i) Are expected to be present at the security holders' meeting;
    (ii) Will have the opportunity to make a statement if they desire to 
do so; and
    (iii) Are expected to be available to respond to appropriate 
questions.
    (b) Incorporation by reference. The information required pursuant to 
paragraph (a) of this Item may be incorporated by reference into the 
proxy statement as follows:
    (1) S-3 registrants and certain N-2 registrants. If the registrant 
meets the requirements of Form S-3 or General Instruction A.2 of Form N-
2 (see Note E to this Schedule), it may incorporate by reference to 
previously-filed documents any of the information required by paragraph 
(a) of this Item, provided that the requirements of paragraph (c) are 
met. Where the registrant meets the requirements of Form S-3 or General 
Instruction A.2 of Form N-2 and has elected to furnish the required 
information by incorporation by reference, the registrant may elect to 
update the information so incorporated by reference to information in 
subsequently-filed documents.
    (2) All registrants. The registrant may incorporate by reference any 
of the information required by paragraph (a) of this Item, provided that 
the information is contained in an annual report to security holders or 
a previously-filed statement or report, such report or statement is 
delivered to security holders with the proxy statement and the 
requirements of paragraph (c) are met.

[[Page 273]]

    (c) Certain conditions applicable to incorporation by reference. 
Registrants eligible to incorporate by reference into the proxy 
statement the information required by paragraph (a) of this Item in the 
manner specified by paragraphs (b)(1) and (b)(2) may do so only if:
    (1) The information is not required to be included in the proxy 
statement pursuant to the requirement of another Item;
    (2) The proxy statement identifies on the last page(s) the 
information incorporated by reference; and
    (3) The material incorporated by reference substantially meets the 
requirements of this Item or the appropriate portions of this Item.
    Instructions to Item 13. 1. Notwithstanding the provisions of this 
Item, any or all of the information required by paragraph (a) of this 
Item not material for the exercise of prudent judgment in regard to the 
matter to be acted upon may be omitted. In the usual case the 
information is deemed material to the exercise of prudent judgment where 
the matter to be acted upon is the authorization or issuance of a 
material amount of senior securities, but the information is not deemed 
material where the matter to be acted upon is the authorization or 
issuance of common stock, otherwise than in an exchange, merger, 
consolidation, acquisition or similar transaction, the authorization of 
preferred stock without present intent to issue or the authorization of 
preferred stock for issuance for cash in an amount constituting fair 
value.
    2. In order to facilitate compliance with Rule 2-02(a) of Regulation 
S-X, one copy of the definitive proxy statement filed with the 
Commission shall include a manually signed copy of the accountant's 
report. If the financial statements are incorporated by reference, a 
manually signed copy of the accountant's report shall be filed with the 
definitive proxy statement.
    3. Notwithstanding the provisions of Regulation S-X, no schedules 
other than those prepared in accordance with Rules 12-15, 12-28 and 12-
29 (or, for management investment companies, Rules 12-12 through 12-14) 
of that regulation need be furnished in the proxy statement.
    4. Unless registered on a national securities exchange or otherwise 
required to furnish such information, registered investment companies 
need not furnish the information required by paragraph (a)(2) or (3) of 
this Item.
    5. If the registrant submits preliminary proxy material 
incorporating by reference financial statements required by this Item, 
the registrant should furnish a draft of the financial statements if the 
document from which they are incorporated has not been filed with or 
furnished to the Commission.
    6. A registered investment company need not comply with items 
(a)(2), (a)(3), and (a)(5) of this Item 13.
    Item 14. Mergers, consolidations, acquisitions and similar matters. 
(See Notes A and D at the beginning of this Schedule)
    Instructions to Item 14: 1. In transactions in which the 
consideration offered to security holders consists wholly or in part of 
securities registered under the Securities Act of 1933, furnish the 
information required by Form S-4 (Sec.  239.25 of this chapter), Form F-
4 (Sec.  239.34 of this chapter), or Form N-14 (Sec.  239.23 of this 
chapter), as applicable, instead of this Item. Only a Form S-4, Form F-
4, or Form N-14 must be filed in accordance with Sec.  240.14a-6(j).
    2. (a) In transactions in which the consideration offered to 
security holders consists wholly of cash, the information required by 
paragraph (c)(1) of this Item for the acquiring company need not be 
provided unless the information is material to an informed voting 
decision (e.g., the security holders of the target company are voting 
and financing is not assured).
    (b) Additionally, if only the security holders of the target company 
are voting:
    i. The financial information in paragraphs (b)(8)-(11) of this Item 
for the acquiring company and the target need not be provided; and
    ii. The information in paragraph (c)(2) of this Item for the target 
company need not be provided.
    If, however, the transaction is a going-private transaction (as 
defined by Sec.  240.13e-3), then the information required by paragraph 
(c)(2) of this Item must be provided and to the extent that the going-
private rules require the information specified in paragraph (b)(8)-
(b)(11) of this Item, that information must be provided as well.
    3. In transactions in which the consideration offered to security 
holders consists wholly of securities exempt from registration under the 
Securities Act of 1933 or a combination of exempt securities and cash, 
information about the acquiring company required by paragraph (c)(1) of 
this Item need not be provided if only the security holders of the 
acquiring company are voting, unless the information is material to an 
informed voting decision. If only the security holders of the target 
company are voting, information about the target company in paragraph 
(c)(2) of this Item need not be provided. However, the information 
required by paragraph (c)(2) of this Item must be provided if the 
transaction is a going-private (as defined by Sec.  240.13e-3) or roll-
up (as described by Item 901 of Regulation S-K (Sec.  229.901 of this 
chapter)) transaction.
    4. The information required by paragraphs (b)(8)-(11) and (c) need 
not be provided if the plan being voted on involves only the acquiring 
company and one or more of its totally

[[Page 274]]

held subsidiaries and does not involve a liquidation or a spin off.
    5. To facilitate compliance with Rule 2-02(a) of Regulation S-X 
(Sec.  210.2-02(a) of this chapter) (technical requirements relating to 
accountants' reports), one copy of the definitive proxy statement filed 
with the Commission must include a signed copy of the accountant's 
report. If the financial statements are incorporated by reference, a 
signed copy of the accountant's report must be filed with the definitive 
proxy statement. Signatures may be typed if the document is filed 
electronically on EDGAR. See Rule 302 of Regulation S-T (Sec.  232.302 
of this chapter).
    6. Notwithstanding the provisions of Regulation S-X, no schedules 
other than those prepared in accordance with Sec.  210.12-15, Sec.  
210.12-28 and Sec.  210.12-29 of this chapter (or, for management 
investment companies, Sec. Sec.  210.12-12 through 210.12-14 of this 
chapter) of that regulation need be furnished in the proxy statement.
    7. If the preliminary proxy material incorporates by reference 
financial statements required by this Item, a draft of the financial 
statements must be furnished to the Commission staff upon request if the 
document from which they are incorporated has not been filed with or 
furnished to the Commission.
    (a) Applicability. If action is to be taken with respect to any of 
the following transactions, provide the information required by this 
Item:
    (1) A merger or consolidation;
    (2) An acquisition of securities of another person;
    (3) An acquisition of any other going business or the assets of a 
going business;
    (4) A sale or other transfer of all or any substantial part of 
assets; or
    (5) A liquidation or dissolution.
    (b) Transaction information. Provide the following information for 
each of the parties to the transaction unless otherwise specified:
    (1) Summary term sheet. The information required by Item 1001 of 
Regulation M-A (Sec.  229.1001 of this chapter).
    (2) Contact information. The name, complete mailing address and 
telephone number of the principal executive offices.
    (3) Business conducted. A brief description of the general nature of 
the business conducted.
    (4) Terms of the transaction. The information required by Item 
1004(a)(2) of Regulation M-A (Sec.  229.1004 of this chapter).
    (5) Regulatory approvals. A statement as to whether any federal or 
state regulatory requirements must be complied with or approval must be 
obtained in connection with the transaction and, if so, the status of 
the compliance or approval.
    (6) Reports, opinions, appraisals. If a report, opinion or appraisal 
materially relating to the transaction has been received from an outside 
party, and is referred to in the proxy statement, furnish the 
information required by Item 1015(b) of Regulation M-A (Sec.  229.1015 
of this chapter).
    (7) Past contacts, transactions or negotiations. The information 
required by Items 1005(b) and 1011(a)(1) of Regulation M-A (Sec.  
229.1005 of this chapter and Sec.  229.1011 of this chapter), for the 
parties to the transaction and their affiliates during the periods for 
which financial statements are presented or incorporated by reference 
under this Item.
    (8)--(10) [Reserved]
    (11) Financial information. If material, financial information 
required by Article 11 of Regulation S-X (Sec. Sec.  210.10-01 through 
229.11-03 of this chapter) with respect to this transaction.

    Instructions to paragraph (b)(11): 1. Present any Article 11 
information required with respect to transactions other than those being 
voted upon (where not incorporated by reference) together with the pro 
forma information relating to the transaction being voted upon. In 
presenting this information, you must clearly distinguish between the 
transaction being voted upon and any other transaction.
    2. If current pro forma financial information with respect to all 
other transactions is incorporated by reference, you need only present 
the pro forma effect of this transaction.

    (c) Information about the parties to the transaction--(1) Acquiring 
company. Furnish the information required by Part B (Registrant 
Information) of Form S-4 (Sec.  239.25 of this chapter) or Form F-4 
(Sec.  239.34 of this chapter), as applicable, for the acquiring 
company. However, financial statements need only be presented for the 
latest two fiscal years and interim periods.
    (2) Acquired company. Furnish the information required by Part C 
(Information with Respect to the Company Being Acquired) of Form S-4 
(Sec.  239.25 of this chapter) or Form F-4 (Sec.  239.34 of this 
chapter), as applicable.
    (d) Information about parties to the transaction: registered 
investment companies and business development companies. If the 
acquiring company or the acquired company is an investment company 
registered under the Investment Company Act of 1940 or a business 
development company as defined by Section 2(a)(48) of the Investment 
Company Act of 1940, provide the following information for that company 
instead of the information specified by paragraph (c) of this Item:
    (1) Information required by Item 101 of Regulation S-K (Sec.  
229.101 of this chapter), description of business;
    (2) Information required by Item 102 of Regulation S-K (Sec.  
229.102 of this chapter), description of property;

[[Page 275]]

    (3) Information required by Item 103 of Regulation S-K (Sec.  
229.103 of this chapter), legal proceedings;
    (4) Information required by Item 201(a), (b) and (c) of Regulation 
S-K (Sec.  229.201(a), (b) and (c) of this chapter), market price of and 
dividends on the registrant's common equity and related stockholder 
matters;
    (5) Financial statements meeting the requirements of Regulation S-X, 
including financial information required by Rule 3-05 and Article 11 of 
Regulation S-X (Sec.  210.3-05 and Sec.  210.11-01 through Sec.  210.11-
03 of this chapter) with respect to transactions other than that as to 
which action is to be taken as described in this proxy statement;
    (6) [Reserved]
    (7) Information required by Item 302 of Regulation S-K (Sec.  
229.302 of this chapter), supplementary financial information;
    (8) Information required by Item 303 of Regulation S-K (Sec.  
229.303 of this chapter), management's discussion and analysis of 
financial condition and results of operations; and
    (9) Information required by Item 304 of Regulation S-K (Sec.  
229.304 of this chapter), changes in and disagreements with accountants 
on accounting and financial disclosure.

    Instruction to paragraph (d) of Item 14: Unless registered on a 
national securities exchange or otherwise required to furnish such 
information, registered investment companies need not furnish the 
information required by paragraphs (d)(6), (d)(7) and (d)(8) of this 
Item.

    (e) Incorporation by reference. (1) The information required by 
paragraph (c) of this section may be incorporated by reference into the 
proxy statement to the same extent as would be permitted by Form S-4 
(Sec.  239.25 of this chapter) or Form F-4 (Sec.  239.34 of this 
chapter), as applicable.
    (2) Alternatively, the registrant may incorporate by reference into 
the proxy statement the information required by paragraph (c) of this 
Item if it is contained in an annual report sent to security holders in 
accordance with Sec.  240.14a-3 of this chapter with respect to the same 
meeting or solicitation of consents or authorizations that the proxy 
statement relates to and the information substantially meets the 
disclosure requirements of Item 14 or Item 17 of Form S-4 (Sec.  239.25 
of this chapter) or Form F-4 (Sec.  239.34 of this chapter), as 
applicable.
    Item 15. Acquisition or disposition of property. If action is to be 
taken with respect to the acquisition or disposition of any property, 
furnish the following information:
    (a) Describe briefly the general character and location of the 
property.
    (b) State the nature and amount of consideration to be paid or 
received by the registrant or any subsidiary. To the extent practicable, 
outline briefly the facts bearing upon the question of the fairness of 
the consideration.
    (c) State the name and address of the transferer or transferee, as 
the case may be and the nature of any material relationship of such 
person to the registrant or any affiliate of the registrant.
    (d) Outline briefly any other material features of the contract or 
transaction.
    Item 16. Restatement of accounts. If action is to be taken with 
respect to the restatement of any asset, capital, or surplus account of 
the registrant furnish the following information:
    (a) State the nature of the restatement and the date as of which it 
is to be effective.
    (b) Outline briefly the reasons for the restatement and for the 
selection of the particular effective date.
    (c) State the name and amount of each account (including any reserve 
accounts) affected by the restatement and the effect of the restatement 
thereon. Tabular presentation of the amounts shall be made when 
appropriate, particularly in the case of recapitalizations.
    (d) To the extent practicable, state whether and the extent, if any, 
to which, the restatement will, as of the date thereof, alter the amount 
available for distribution to the holders of equity securities.
    Item 17. Action with respect to reports. If action is to be taken 
with respect to any report of the registrant or of its directors, 
officers or committees or any minutes of a meeting of its security 
holders, furnish the following information:
    (a) State whether or not such action is to constitute approval or 
disapproval of any of the matters referred to in such reports or 
minutes.
    (b) Identify each of such matters which it is intended will be 
approved or disapproved, and furnish the information required by the 
appropriate item or items of this schedule with respect to each such 
matter.
    Item 18. Matters not required to be submitted. If action is to be 
taken with respect to any matter which is not required to be submitted 
to a vote of security holders, state the nature of such matter, the 
reasons for submitting it to a vote of security holders and what action 
is intended to be taken by the registrant in the event of a negative 
vote on the matter by the security holders.
    Item 19. Amendment of character, bylaws or other documents. If 
action is to be taken with respect to any amendment of the registrant's 
charter, bylaws or other documents as to which information is not 
required above, state briefly the reasons for and the general effect of 
such amendment.
    Instructions. 1. Where the matter to be acted upon is the 
classification of directors, state whether vacancies which occur during 
the year may be filled by the board of directors to serve only until the 
next annual

[[Page 276]]

meeting or may be so filled for the remainder of the full term.
    2. Attention is directed to the discussion of disclosure regarding 
anti-takeover and similar proposals in Release No. 34-15230 (October 13, 
1978).
    Item 20. Other proposed action. If action is to be taken on any 
matter not specifically referred to in this Schedule 14A, describe 
briefly the substance of each such matter in substantially the same 
degree of detail as is required by Items 5 to 19, inclusive, of this 
Schedule, and, with respect to investment companies registered under the 
Investment Company Act of 1940, Item 22 of this Schedule. Registrants 
required to provide a separate shareholder vote pursuant to section 
111(e)(1) of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 
5221(e)(1)) and Sec.  240.14a-20 shall disclose that they are providing 
such a vote as required pursuant to the Emergency Economic Stabilization 
Act of 2008, and briefly explain the general effect of the vote, such as 
whether the vote is non-binding.
    Item 21. Voting procedures. As to each matter which is to be 
submitted to a vote of security holders, furnish the following 
information:
    (a) State the vote required for approval or election, other than for 
the approval of auditors.
    (b) Disclose the method by which votes will be counted, including 
the treatment and effect of abstentions and broker non-votes under 
applicable state law as well as registrant charter and by-law 
provisions.
    Item 22. Information required in investment company proxy statement. 
(a) General.
    (1) Definitions. Unless the context otherwise requires, terms used 
in this Item that are defined in Sec.  240.14a-1 (with respect to proxy 
soliciting material), in Sec.  240.14c-1 (with respect to information 
statements), and in the Investment Company Act of 1940 shall have the 
same meanings provided therein and the following terms shall also apply:
    (i) Administrator. The term ``Administrator'' shall mean any person 
who provides significant administrative or business affairs management 
services to a Fund.
    (ii) Affiliated broker. The term ``Affiliated Broker'' shall mean 
any broker:
    (A) That is an affiliated person of the Fund;
    (B) That is an affiliated person of such person; or
    (C) An affiliated person of which is an affiliated person of the 
Fund, its investment adviser, principal underwriter, or Administrator.
    (iii) Distribution plan. The term ``Distribution Plan'' shall mean a 
plan adopted pursuant to Rule 12b-1 under the Investment Company Act of 
1940 (Sec.  270.12b-1 of this chapter).
    (iv) Family of Investment Companies. The term ``Family of Investment 
Companies'' shall mean any two or more registered investment companies 
that:
    (A) Share the same investment adviser or principal underwriter; and
    (B) Hold themselves out to investors as related companies for 
purposes of investment and investor services.
    (v) Fund. The term ``Fund'' shall mean a Registrant or, where the 
Registrant is a series company, a separate portfolio of the Registrant.
    (vi) Fund complex. The term ``Fund Complex'' shall mean two or more 
Funds that:
    (A) Hold themselves out to investors as related companies for 
purposes of investment and investor services; or
    (B) Have a common investment adviser or have an investment adviser 
that is an affiliated person of the investment adviser of any of the 
other Funds.
    (vii) Immediate Family Member. The term ``Immediate Family Member'' 
shall mean a person's spouse; child residing in the person's household 
(including step and adoptive children); and any dependent of the person, 
as defined in section 152 of the Internal Revenue Code (26 U.S.C. 152).
    (viii) Officer. The term ``Officer'' shall mean the president, vice-
president, secretary, treasurer, controller, or any other officer who 
performs policy-making functions.
    (ix) Parent. The term ``Parent'' shall mean the affiliated person of 
a specified person who controls the specified person directly or 
indirectly through one or more intermediaries.
    (x) Registrant. The term ``Registrant'' shall mean an investment 
company registered under the Investment Company Act of 1940 (15 U.S.C. 
80a) or a business development company as defined by section 2(a)(48) of 
the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(48)).
    (xi) Sponsoring Insurance Company. The term ``Sponsoring Insurance 
Company'' of a Fund that is a separate account shall mean the insurance 
company that establishes and maintains the separate account and that 
owns the assets of the separate account.
    (xii) Subsidiary. The term ``Subsidiary'' shall mean an affiliated 
person of a specified person who is controlled by the specified person 
directly, or indirectly through one or more intermediaries.
    (2) [Reserved]
    (3) General disclosure. Furnish the following information in the 
proxy statement of a Fund or Funds:
    (i) State the name and address of the Fund's investment adviser, 
principal underwriter, and Administrator.
    (ii) When a Fund proxy statement solicits a vote on proposals 
affecting more than one Fund or class of securities of a Fund (unless 
the proposal or proposals are the same and affect all Fund or class 
shareholders), present a summary of all of the proposals in

[[Page 277]]

tabular form on one of the first three pages of the proxy statement and 
indicate which Fund or class shareholders are solicited with respect to 
each proposal.
    (iii) Unless the proxy statement is accompanied by a copy of the 
Fund's most recent annual report, state prominently in the proxy 
statement that the Fund will furnish, without charge, a copy of the 
annual report and the most recent semi-annual report succeeding the 
annual report, if any, to a shareholder upon request, providing the 
name, address, and toll-free telephone number of the person to whom such 
request shall be directed (or, if no toll-free telephone number is 
provided, a self-addressed postage paid card for requesting the annual 
report). The Fund should provide a copy of the annual report and the 
most recent semi-annual report succeeding the annual report, if any, to 
the requesting shareholder by first class mail, or other means designed 
to assure prompt delivery, within three business days of the request.
    (iv) If the action to be taken would, directly or indirectly, 
establish a new fee or expense or increase any existing fee or expense 
to be paid by the Fund or its shareholders, provide a table showing the 
current and pro forma fees (with the required examples) using the format 
prescribed in the appropriate registration statement form under the 
Investment Company Act of 1940 (for open-end management investment 
companies, Item 3 of Form N-1A (Sec.  239.15A); for closed-end 
management investment companies, Item 3 of Form N-2 (Sec.  239.14); and 
for separate accounts that offer variable annuity contracts, Item 4 of 
Form N-3 (Sec.  239.17a)).
    Instructions. 1. Where approval is sought only for a change in asset 
breakpoints for a pre-existing fee that would not have increased the fee 
for the previous year (or have the effect of increasing fees or 
expenses, but for any other reason would not be reflected in a pro forma 
fee table), describe the likely effect of the change in lieu of 
providing pro forma fee information.
    2. An action would indirectly establish or increase a fee or expense 
where, for example, the approval of a new investment advisory contract 
would result in higher custodial or transfer agency fees.
    3. The tables should be prepared in a manner designed to facilitate 
understanding of the impact of any change in fees or expenses.
    4. A Fund that offers its shares exclusively to one or more separate 
accounts and thus is not required to include a fee table in its 
prospectus (see Item 3 of Form N-1A (Sec.  239.15A)) should nonetheless 
prepare a table showing current and pro forma expenses and disclose that 
the table does not reflect separate account expenses, including sales 
load.
    (v) If action is to be taken with respect to the election of 
directors or the approval of an advisory contract, describe any 
purchases or sales of securities of the investment adviser or its 
Parents, or Subsidiaries of either, since the beginning of the most 
recently completed fiscal year by any director or any nominee for 
election as a director of the Fund.
    Instructions. 1. Identify the parties, state the consideration, the 
terms of payment and describe any arrangement or understanding with 
respect to the composition of the board of directors of the Fund or of 
the investment adviser, or with respect to the selection of appointment 
of any person to any office with either such company.
    2. Transactions involving securities in an amount not exceeding one 
percent of the outstanding securities of any class of the investment 
adviser or any of its Parents or Subsidiaries may be omitted.
    (b) Election of Directors. If action is to be taken with respect to 
the election of directors of a Fund, furnish the following information 
in the proxy statement in addition to, in the case of business 
development companies, the information (and in the format) required by 
Item 7 and Item 8 of this Schedule 14A.

    Instructions to introductory text of paragraph (b). 1. Furnish 
information with respect to a prospective investment adviser to the 
extent applicable.
    2. If the solicitation is made by or on behalf of a person other 
than the Fund or an investment adviser of the Fund, provide information 
only as to nominees of the person making the solicitation.
    3. When providing information about directors and nominees for 
election as directors in response to this Item 22(b), furnish 
information for directors or nominees who are or would be ``interested 
persons'' of the Fund within the meaning of section 2(a)(19) of the 
Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(19)) separately from 
the information for directors or nominees who are not or would not be 
interested persons of the Fund. For example, when furnishing information 
in a table, you should provide separate tables (or separate sections of 
a single table) for directors and nominees who are or would be 
interested persons and for directors or nominees who are not or would 
not be interested persons. When furnishing information in narrative 
form, indicate by heading or otherwise the directors or nominees who are 
or would be interested persons and the directors or nominees who are not 
or would not be interested persons.
    4. No information need be given about any director whose term of 
office as a director will not continue after the meeting to which the 
proxy statement relates.
    (1) Provide the information required by the following table for each 
director, nominee for election as director, Officer of the Fund, person 
chosen to become an Officer of the

[[Page 278]]

Fund, and, if the Fund has an advisory board, member of the board. 
Explain in a footnote to the table any family relationship between the 
persons listed.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                (1)                            (2)                     (3)                    (4)                    (5)                    (6)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Name, Address, and Age.............  Position(s) Held with   Term of Office and      Principal              Number of Portfolios   Other Directorships
                                      Fund.                   Length of Time Served.  Occupation(s) During   in Fund Complex        Held by Director or
                                                                                      Past 5 Years.          Overseen by Director   Nominee for Director
                                                                                                             or Nominee for
                                                                                                             Director.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Instructions to paragraph (b)(1). 1. For purposes of this paragraph, 
the term ``family relationship'' means any relationship by blood, 
marriage, or adoption, not more remote than first cousin.
    2. No nominee or person chosen to become a director or Officer who 
has not consented to act as such may be named in response to this Item. 
In this regard, see Rule 14a-4(d) under the Exchange Act (Sec.  240.14a-
4(d)).
    3. If fewer nominees are named than the number fixed by or pursuant 
to the governing instruments, state the reasons for this procedure and 
that the proxies cannot be voted for a greater number of persons than 
the number of nominees named.
    4. For each director or nominee for election as director who is or 
would be an ``interested person'' of the Fund within the meaning of 
section 2(a)(19) of the Investment Company Act of 1940 (15 U.S.C. 80a-
2(a)(19)), describe, in a footnote or otherwise, the relationship, 
events, or transactions by reason of which the director or nominee is or 
would be an interested person.
    5. State the principal business of any company listed under column 
(4) unless the principal business is implicit in its name.
    6. Include in column (5) the total number of separate portfolios 
that a nominee for election as director would oversee if he were 
elected.
    7. Indicate in column (6) directorships not included in column (5) 
that are held by a director or nominee for election as director in any 
company with a class of securities registered pursuant to section 12 of 
the Exchange Act (15 U.S.C. 78l), or subject to the requirements of 
section 15(d) of the Exchange Act (15 U.S.C. 78o(d)), or any company 
registered as an investment company under the Investment Company Act of 
1940, (15 U.S.C. 80a), as amended, and name the companies in which the 
directorships are held. Where the other directorships include 
directorships overseeing two or more portfolios in the same Fund 
Complex, identify the Fund Complex and provide the number of portfolios 
overseen as a director in the Fund Complex rather than listing each 
portfolio separately.

    (2) For each individual listed in column (1) of the table required 
by paragraph (b)(1) of this Item, except for any director or nominee for 
election as director who is not or would not be an ``interested person'' 
of the Fund within the meaning of section 2(a)(19) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-2(a)(19)), describe any positions, 
including as an officer, employee, director, or general partner, held 
with affiliated persons or principal underwriters of the Fund.

    Instruction to paragraph (b)(2). When an individual holds the same 
position(s) with two or more registered investment companies that are 
part of the same Fund Complex, identify the Fund Complex and provide the 
number of registered investment companies for which the position(s) are 
held rather than listing each registered investment company separately.

    (3)(i) For each director or nominee for election as director, 
briefly discuss the specific experience, qualifications, attributes, or 
skills that led to the conclusion that the person should serve as a 
director for the Fund at the time that the disclosure is made in light 
of the Fund's business and structure. If material, this disclosure 
should cover more than the past five years, including information about 
the person's particular areas of expertise or other relevant 
qualifications.
    (ii) Describe briefly any arrangement or understanding between any 
director, nominee for election as director, Officer, or person chosen to 
become an Officer, and any other person(s) (naming the person(s)) 
pursuant to which he was or is to be selected as a director, nominee, or 
Officer.

    Instruction to paragraph (b)(3)(ii). Do not include arrangements or 
understandings with directors or Officers acting solely in their 
capacities as such.

    (4)(i) Unless disclosed in the table required by paragraph (b)(1) of 
this Item, describe any positions, including as an officer, employee, 
director, or general partner, held by any director or nominee for 
election as director, who is not or would not be an ``interested 
person'' of the Fund within the meaning of section 2(a)(19) of the 
Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(19)), or Immediate 
Family Member of the director or nominee, during the past five years, 
with:
    (A) The Fund;

[[Page 279]]

    (B) An investment company, or a person that would be an investment 
company but for the exclusions provided by sections 3(c)(1) and 3(c)(7) 
of the Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(1) and 
(c)(7)), having the same investment adviser, principal underwriter, or 
Sponsoring Insurance Company as the Fund or having an investment 
adviser, principal underwriter, or Sponsoring Insurance Company that 
directly or indirectly controls, is controlled by, or is under common 
control with an investment adviser, principal underwriter, or Sponsoring 
Insurance Company of the Fund;
    (C) An investment adviser, principal underwriter, Sponsoring 
Insurance Company, or affiliated person of the Fund; or
    (D) Any person directly or indirectly controlling, controlled by, or 
under common control with an investment adviser, principal underwriter, 
or Sponsoring Insurance Company of the Fund.
    (ii) Unless disclosed in the table required by paragraph (b)(1) of 
this Item or in response to paragraph (b)(4)(i) of this Item, indicate 
any directorships held during the past five years by each director or 
nominee for election as director in any company with a class of 
securities registered pursuant to section 12 of the Exchange Act (15 
U.S.C. 78l) or subject to the requirements of section 15(d) of the 
Exchange Act (15 U.S.C. 78o(d)) or any company registered as an 
investment company under the Investment Company Act of 1940 (15 U.S.C. 
80a-1 et seq.), as amended, and name the companies in which the 
directorships were held.

    Instruction to paragraph (b)(4). When an individual holds the same 
position(s) with two or more portfolios that are part of the same Fund 
Complex, identify the Fund Complex and provide the number of portfolios 
for which the position(s) are held rather than listing each portfolio 
separately.

    (5) For each director or nominee for election as director, state the 
dollar range of equity securities beneficially owned by the director or 
nominee as required by the following table:
    (i) In the Fund; and
    (ii) On an aggregate basis, in any registered investment companies 
overseen or to be overseen by the director or nominee within the same 
Family of Investment Companies as the Fund.

------------------------------------------------------------------------
               (1)                        (2)                 (3)
------------------------------------------------------------------------
Name of Director or Nominee.....  Dollar Range of     Aggregate Dollar
                                   Equity Securities   Range of Equity
                                   in the Fund.        Securities in All
                                                       Funds Overseen or
                                                       to be Overseen by
                                                       Director or
                                                       Nominee in Family
                                                       of Investment
                                                       Companies
------------------------------------------------------------------------


    Instructions to paragraph (b)(5). 1. Information should be provided 
as of the most recent practicable date. Specify the valuation date by 
footnote or otherwise.
    2. Determine ``beneficial ownership'' in accordance with rule 16a-
1(a)(2) under the Exchange Act (Sec.  240.16a-1(a)(2)).
    3. If action is to be taken with respect to more than one Fund, 
disclose in column (2) the dollar range of equity securities 
beneficially owned by a director or nominee in each such Fund overseen 
or to be overseen by the director or nominee.
    4. In disclosing the dollar range of equity securities beneficially 
owned by a director or nominee in columns (2) and (3), use the following 
ranges: none, $1-$10,000, $10,001-$50,000, $50,001-$100,000, or over 
$100,000.

    (6) For each director or nominee for election as director who is not 
or would not be an ``interested person'' of the Fund within the meaning 
of section 2(a)(19) of the Investment Company Act of 1940 (15 U.S.C. 
80a-2(a)(19), and his Immediate Family Members, furnish the information 
required by the following table as to each class of securities owned 
beneficially or of record in:
    (i) An investment adviser, principal underwriter, or Sponsoring 
Insurance Company of the Fund; or
    (ii) A person (other than a registered investment company) directly 
or indirectly controlling, controlled by, or under common control with 
an investment adviser, principal underwriter, or Sponsoring Insurance 
Company of the Fund:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                (1)                            (2)                     (3)                    (4)                    (5)                    (6)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Name of Director or Nominee........  Name of Owners and      Company...............  Title of Class.......  Value of Securities..  Percent of Class
                                      Relationships to
                                      Director or Nominee.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Instructions to paragraph (b)(6). 1. Information should be provided 
as of the most recent practicable date. Specify the valuation date by 
footnote or otherwise.

[[Page 280]]

    2. An individual is a ``beneficial owner'' of a security if he is a 
``beneficial owner'' under either rule 13d-3 or rule 16a-1(a)(2) under 
the Exchange Act (Sec. Sec.  240.13d-3 or 240.16a-1(a)(2)).
    3. Identify the company in which the director, nominee, or Immediate 
Family Member of the director or nominee owns securities in column (3). 
When the company is a person directly or indirectly controlling, 
controlled by, or under common control with an investment adviser, 
principal underwriter, or Sponsoring Insurance Company, describe the 
company's relationship with the investment adviser, principal 
underwriter, or Sponsoring Insurance Company.
    4. Provide the information required by columns (5) and (6) on an 
aggregate basis for each director (or nominee) and his Immediate Family 
Members.

    (7) Unless disclosed in response to paragraph (b)(6) of this Item, 
describe any direct or indirect interest, the value of which exceeds 
$120,000, of each director or nominee for election as director who is 
not or would not be an ``interested person'' of the Fund within the 
meaning of section 2(a)(19) of the Investment Company Act of 1940 (15 
U.S.C. 80a-2(a)(19)), or Immediate Family Member of the director or 
nominee, during the past five years, in:
    (i) An investment adviser, principal underwriter, or Sponsoring 
Insurance Company of the Fund; or
    (ii) A person (other than a registered investment company) directly 
or indirectly controlling, controlled by, or under common control with 
an investment adviser, principal underwriter, or Sponsoring Insurance 
Company of the Fund.

    Instructions to paragraph (b)(7). 1. A director, nominee, or 
Immediate Family Member has an interest in a company if he is a party to 
a contract, arrangement, or understanding with respect to any securities 
of, or interest in, the company.
    2. The interest of the director (or nominee) and the interests of 
his Immediate Family Members should be aggregated in determining whether 
the value exceeds $120,000.

    (8) Describe briefly any material interest, direct or indirect, of 
any director or nominee for election as director who is not or would not 
be an ``interested person'' of the Fund within the meaning of section 
2(a)(19) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(19)), 
or Immediate Family Member of the director or nominee, in any 
transaction, or series of similar transactions, since the beginning of 
the last two completed fiscal years of the Fund, or in any currently 
proposed transaction, or series of similar transactions, in which the 
amount involved exceeds $120,000 and to which any of the following 
persons was or is to be a party:
    (i) The Fund;
    (ii) An Officer of the Fund;
    (iii) An investment company, or a person that would be an investment 
company but for the exclusions provided by sections 3(c)(1) and 3(c)(7) 
of the Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(1) and 
(c)(7)), having the same investment adviser, principal underwriter, or 
Sponsoring Insurance Company as the Fund or having an investment 
adviser, principal underwriter, or Sponsoring Insurance Company that 
directly or indirectly controls, is controlled by, or is under common 
control with an investment adviser, principal underwriter, or Sponsoring 
Insurance Company of the Fund;
    (iv) An Officer of an investment company, or a person that would be 
an investment company but for the exclusions provided by sections 
3(c)(1) and 3(c)(7) of the Investment Company Act of 1940 (15 U.S.C. 
80a-3(c)(1) and (c)(7)), having the same investment adviser, principal 
underwriter, or Sponsoring Insurance Company as the Fund or having an 
investment adviser, principal underwriter, or Sponsoring Insurance 
Company that directly or indirectly controls, is controlled by, or is 
under common control with an investment adviser, principal underwriter, 
or Sponsoring Insurance Company of the Fund;
    (v) An investment adviser, principal underwriter, or Sponsoring 
Insurance Company of the Fund;
    (vi) An Officer of an investment adviser, principal underwriter, or 
Sponsoring Insurance Company of the Fund;
    (vii) A person directly or indirectly controlling, controlled by, or 
under common control with an investment adviser, principal underwriter, 
or Sponsoring Insurance Company of the Fund; or
    (viii) An Officer of a person directly or indirectly controlling, 
controlled by, or under common control with an

[[Page 281]]

investment adviser, principal underwriter, or Sponsoring Insurance 
Company of the Fund.

    Instructions to paragraph (b)(8). 1. Include the name of each 
director, nominee, or Immediate Family Member whose interest in any 
transaction or series of similar transactions is described and the 
nature of the circumstances by reason of which the interest is required 
to be described.
    2. State the nature of the interest, the approximate dollar amount 
involved in the transaction, and, where practicable, the approximate 
dollar amount of the interest.
    3. In computing the amount involved in the transaction or series of 
similar transactions, include all periodic payments in the case of any 
lease or other agreement providing for periodic payments.
    4. Compute the amount of the interest of any director, nominee, or 
Immediate Family Member of the director or nominee without regard to the 
amount of profit or loss involved in the transaction(s).
    5. As to any transaction involving the purchase or sale of assets, 
state the cost of the assets to the purchaser and, if acquired by the 
seller within two years prior to the transaction, the cost to the 
seller. Describe the method used in determining the purchase or sale 
price and the name of the person making the determination.
    6. If the proxy statement relates to multiple portfolios of a series 
Fund with different fiscal years, then, in determining the date that is 
the beginning of the last two completed fiscal years of the Fund, use 
the earliest date of any series covered by the proxy statement.
    7. Disclose indirect, as well as direct, material interests in 
transactions. A person who has a position or relationship with, or 
interest in, a company that engages in a transaction with one of the 
persons listed in paragraphs (b)(8)(i) through (b)(8)(viii) of this Item 
may have an indirect interest in the transaction by reason of the 
position, relationship, or interest. The interest in the transaction, 
however, will not be deemed ``material'' within the meaning of paragraph 
(b)(8) of this Item where the interest of the director, nominee, or 
Immediate Family Member arises solely from the holding of an equity 
interest (including a limited partnership interest, but excluding a 
general partnership interest) or a creditor interest in a company that 
is a party to the transaction with one of the persons specified in 
paragraphs (b)(8)(i) through (b)(8)(viii) of this Item, and the 
transaction is not material to the company.
    8. The materiality of any interest is to be determined on the basis 
of the significance of the information to investors in light of all the 
circumstances of the particular case. The importance of the interest to 
the person having the interest, the relationship of the parties to the 
transaction with each other, and the amount involved in the transaction 
are among the factors to be considered in determining the significance 
of the information to investors.
    9. No information need be given as to any transaction where the 
interest of the director, nominee, or Immediate Family Member arises 
solely from the ownership of securities of a person specified in 
paragraphs (b)(8)(i) through (b)(8)(viii) of this Item and the director, 
nominee, or Immediate Family Member receives no extra or special benefit 
not shared on a pro rata basis by all holders of the class of 
securities.
    10. Transactions include loans, lines of credit, and other 
indebtedness. For indebtedness, indicate the largest aggregate amount of 
indebtedness outstanding at any time during the period, the nature of 
the indebtedness and the transaction in which it was incurred, the 
amount outstanding as of the latest practicable date, and the rate of 
interest paid or charged.
    11. No information need be given as to any routine, retail 
transaction. For example, the Fund need not disclose that a director has 
a credit card, bank or brokerage account, residential mortgage, or 
insurance policy with a person specified in paragraphs (b)(8)(i) through 
(b)(8)(viii) of this Item unless the director is accorded special 
treatment.

    (9) Describe briefly any direct or indirect relationship, in which 
the amount involved exceeds $120,000, of any director or nominee for 
election as director who is not or would not be an ``interested person'' 
of the Fund within the meaning of section 2(a)(19) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-2(a)(19)), or Immediate Family Member 
of the director or nominee, that exists, or has existed at any time 
since the beginning of the last two completed fiscal years of the Fund, 
or is currently proposed, with any of the persons specified in 
paragraphs (b)(8)(i) through (b)(8)(viii) of this Item. Relationships 
include:
    (i) Payments for property or services to or from any person 
specified in paragraphs (b)(8)(i) through (b)(8)(viii) of this Item;
    (ii) Provision of legal services to any person specified in 
paragraphs (b)(8)(i) through (b)(8)(viii) of this Item;
    (iii) Provision of investment banking services to any person 
specified in paragraphs (b)(8)(i) through (b)(8)(viii) of this Item, 
other than as a participating underwriter in a syndicate; and

[[Page 282]]

    (iv) Any consulting or other relationship that is substantially 
similar in nature and scope to the relationships listed in paragraphs 
(b)(9)(i) through (b)(9)(iii) of this Item.

    Instructions to paragraph (b)(9). 1. Include the name of each 
director, nominee, or Immediate Family Member whose relationship is 
described and the nature of the circumstances by reason of which the 
relationship is required to be described.
    2. State the nature of the relationship and the amount of business 
conducted between the director, nominee, or Immediate Family Member and 
the person specified in paragraphs (b)(8)(i) through (b)(8)(viii) of 
this Item as a result of the relationship since the beginning of the 
last two completed fiscal years of the Fund or proposed to be done 
during the Fund's current fiscal year.
    3. In computing the amount involved in a relationship, include all 
periodic payments in the case of any agreement providing for periodic 
payments.
    4. If the proxy statement relates to multiple portfolios of a series 
Fund with different fiscal years, then, in determining the date that is 
the beginning of the last two completed fiscal years of the Fund, use 
the earliest date of any series covered by the proxy statement.
    5. Disclose indirect, as well as direct, relationships. A person who 
has a position or relationship with, or interest in, a company that has 
a relationship with one of the persons listed in paragraphs (b)(8)(i) 
through (b)(8)(viii) of this Item may have an indirect relationship by 
reason of the position, relationship, or interest.
    6. In determining whether the amount involved in a relationship 
exceeds $120,000, amounts involved in a relationship of the director (or 
nominee) should be aggregated with those of his Immediate Family 
Members.
    7. In the case of an indirect interest, identify the company with 
which a person specified in paragraphs (b)(8)(i) through (b)(8)(viii) of 
this Item has a relationship; the name of the director, nominee, or 
Immediate Family Member affiliated with the company and the nature of 
the affiliation; and the amount of business conducted between the 
company and the person specified in paragraphs (b)(8)(i) through 
(b)(8)(viii) of this Item since the beginning of the last two completed 
fiscal years of the Fund or proposed to be done during the Fund's 
current fiscal year.
    8. In calculating payments for property and services for purposes of 
paragraph (b)(9)(i) of this Item, the following may be excluded:
    A. Payments where the transaction involves the rendering of services 
as a common contract carrier, or public utility, at rates or charges 
fixed in conformity with law or governmental authority; or
    B. Payments that arise solely from the ownership of securities of a 
person specified in paragraphs (b)(8)(i) through (b)(8)(viii) of this 
Item and no extra or special benefit not shared on a pro rata basis by 
all holders of the class of securities is received.
    9. No information need be given as to any routine, retail 
relationship. For example, the Fund need not disclose that a director 
has a credit card, bank or brokerage account, residential mortgage, or 
insurance policy with a person specified in paragraphs (b)(8)(i) through 
(b)(8)(viii) of this Item unless the director is accorded special 
treatment.

    (10) If an Officer of an investment adviser, principal underwriter, 
or Sponsoring Insurance Company of the Fund, or an Officer of a person 
directly or indirectly controlling, controlled by, or under common 
control with an investment adviser, principal underwriter, or Sponsoring 
Insurance Company of the Fund, serves, or has served since the beginning 
of the last two completed fiscal years of the Fund, on the board of 
directors of a company where a director of the Fund or nominee for 
election as director who is not or would not be an ``interested person'' 
of the Fund within the meaning of section 2(a)(19) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-2(a)(19)), or Immediate Family Member 
of the director or nominee, is, or was since the beginning of the last 
two completed fiscal years of the Fund, an Officer, identify:
    (i) The company;
    (ii) The individual who serves or has served as a director of the 
company and the period of service as director;
    (iii)The investment adviser, principal underwriter, or Sponsoring 
Insurance Company or person controlling, controlled by, or under common 
control with the investment adviser, principal underwriter, or 
Sponsoring Insurance Company where the individual named in paragraph 
(b)(10)(ii) of this Item holds or held office and the office held; and
    (iv) The director of the Fund, nominee for election as director, or 
Immediate Family Member who is or was an Officer of the company; the 
office held; and the period of holding the office.

    Instruction to paragraph (b)(10). If the proxy statement relates to 
multiple portfolios of a series Fund with different fiscal

[[Page 283]]

years, then, in determining the date that is the beginning of the last 
two completed fiscal years of the Fund, use the earliest date of any 
series covered by the proxy statement.

    (11) Provide in tabular form, to the extent practicable, the 
information required by Items 401(f) and (g), 404(a), 405, and 407(h) of 
Regulation S-K (Sec. Sec.  229.401(f) and (g), 229.404(a), 229.405, and 
229.407(h) of this chapter).

    Instruction to paragraph (b)(11). Information provided under 
paragraph (b)(8) of this Item 22 is deemed to satisfy the requirements 
of Item 404(a) of Regulation S-K for information about directors, 
nominees for election as directors, and Immediate Family Members of 
directors and nominees, and need not be provided under this paragraph 
(b)(11).

    (12) Describe briefly any material pending legal proceedings, other 
than ordinary routine litigation incidental to the Fund's business, to 
which any director or nominee for director or affiliated person of such 
director or nominee is a party adverse to the Fund or any of its 
affiliated persons or has a material interest adverse to the Fund or any 
of its affiliated persons. Include the name of the court where the case 
is pending, the date instituted, the principal parties, a description of 
the factual basis alleged to underlie the proceeding, and the relief 
sought.
    (13) In the case of a Fund that is an investment company registered 
under the Investment Company Act of 1940 (15 U.S.C. 80a), for all 
directors, and for each of the three highest-paid Officers that have 
aggregate compensation from the Fund for the most recently completed 
fiscal year in excess of $60,000 (``Compensated Persons''):
    (i) Furnish the information required by the following table for the 
last fiscal year:

                                               Compensation Table
----------------------------------------------------------------------------------------------------------------
               (1)                        (2)                 (3)                 (4)                 (5)
----------------------------------------------------------------------------------------------------------------
Name of Person, Position........  Aggregate           Pension or          Estimated Annual    Total Compensation
                                   Compensation From   Retirement          Benefits Upon       From Fund and
                                   Fund.               Benefits Accrued    Retirement.         Complex Paid to
                                                       as Part of Fund                         Directors
                                                       Expenses.
----------------------------------------------------------------------------------------------------------------

    Instructions to paragraph (b)(13)(i). 1. For column (1), indicate, 
if necessary, the capacity in which the remuneration is received. For 
Compensated Persons that are directors of the Fund, compensation is 
amounts received for service as a director.
    2. If the Fund has not completed its first full year since its 
organization, furnish the information for the current fiscal year, 
estimating future payments that would be made pursuant to an existing 
agreement or understanding. Disclose in a footnote to the Compensation 
Table the period for which the information is furnished.
    3. Include in column (2) amounts deferred at the election of the 
Compensated Person, whether pursuant to a plan established under Section 
401(k) of the Internal Revenue Code (26 U.S.C. 401(k)) or otherwise, for 
the fiscal year in which earned. Disclose in a footnote to the 
Compensation Table the total amount of deferred compensation (including 
interest) payable to or accrued for any Compensated Person.
    4. Include in columns (3) and (4) all pension or retirement benefits 
proposed to be paid under any existing plan in the event of retirement 
at normal retirement date, directly or indirectly, by the Fund or any of 
its Subsidiaries, or by other companies in the Fund Complex. Omit column 
(4) where retirement benefits are not determinable.
    5. For any defined benefit or actuarial plan under which benefits 
are determined primarily by final compensation (or average final 
compensation) and years of service, provide the information required in 
column (4) in a separate table showing estimated annual benefits payable 
upon retirement (including amounts attributable to any defined benefit 
supplementary or excess pension award plans) in specified compensation 
and years of service classifications. Also provide the estimated 
credited years of service for each Compensated Person.
    6. Include in column (5) only aggregate compensation paid to a 
director for service on the board and other boards of investment 
companies in a Fund Complex specifying the number of such other 
investment companies.

    (ii) Describe briefly the material provisions of any pension, 
retirement, or other plan or any arrangement other than fee arrangements 
disclosed in paragraph (b)(13)(i) of this Item pursuant to which 
Compensated Persons are or may be compensated for any services provided, 
including amounts paid,

[[Page 284]]

if any, to the Compensated Person under any such arrangements during the 
most recently completed fiscal year. Specifically include the criteria 
used to determine amounts payable under any plan, the length of service 
or vesting period required by the plan, the retirement age or other 
event that gives rise to payments under the plan, and whether the 
payment of benefits is secured or funded by the Fund.
    (14) State whether or not the Fund has a separately designated audit 
committee established in accordance with section 3(a)(58)(A) of the Act 
(15 U.S.C. 78c(a)(58)(A)). If the entire board of directors is acting as 
the Fund's audit committee as specified in section 3(a)(58)(B) of the 
Act (15 U.S.C. 78c(a)(58)(B)), so state. If applicable, provide the 
disclosure required by Sec.  240.10A-3(d) regarding an exemption from 
the listing standards for audit committees. Identify the other standing 
committees of the Fund's board of directors, and provide the following 
information about each committee, including any separately designated 
audit committee and any nominating committee:
    (i) A concise statement of the functions of the committee;
    (ii) The members of the committee and, in the case of a nominating 
committee, whether or not the members of the committee are ``interested 
persons'' of the Fund as defined in section 2(a)(19) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-2(a)(19)); and
    (iii) The number of committee meetings held during the last fiscal 
year.

    Instruction to paragraph (b)(14): For purposes of Item 22(b)(14), 
the term ``nominating committee'' refers not only to nominating 
committees and committees performing similar functions, but also to 
groups of directors fulfilling the role of a nominating committee, 
including the entire board of directors.

    (15)(i) Provide the information (and in the format) required by 
Items 407(b)(1), (b)(2) and (f) of Regulation S-K (Sec.  229.407(b)(1), 
(b)(2) and (f) of this chapter); and
    (ii) Provide the following regarding the requirements for the 
director nomination process:
    (A) The information (and in the format) required by Items 407(c)(1) 
and (c)(2) of Regulation S-K (Sec.  229.407(c)(1) and (c)(2) of this 
chapter); and
    (B) If the Fund is a listed issuer (as defined in Sec.  240.10A-3 of 
this chapter) whose securities are listed on a national securities 
exchange registered pursuant to section 6(a) of the Act (15 U.S.C. 
78f(a)) or in an automated inter-dealer quotation system of a national 
securities association registered pursuant to section 15A of the Act (15 
U.S.C. 78o-3(a)) that has independence requirements for nominating 
committee members, identify each director that is a member of the 
nominating committee that is not independent under the independence 
standards described in this paragraph. In determining whether the 
nominating committee members are independent, use the Fund's definition 
of independence that it uses for determining if the members of the 
nominating committee are independent in compliance with the independence 
standards applicable for the members of the nominating committee in the 
listing standards applicable to the Fund. If the Fund does not have 
independence standards for the nominating committee, use the 
independence standards for the nominating committee in the listing 
standards applicable to the Fund.

    Instruction to paragraph (b)(15)(ii)(B). If the national securities 
exchange or inter-dealer quotation system on which the Fund's securities 
are listed has exemptions to the independence requirements for 
nominating committee members upon which the Fund relied, disclose the 
exemption relied upon and explain the basis for the Fund's conclusion 
that such exemption is applicable.

    (16) In the case of a Fund that is a closed-end investment company:
    (i) Provide the information (and in the format) required by Item 
407(d)(1), (d)(2) and (d)(3) of Regulation S-K (Sec.  229.407(d)(1), 
(d)(2) and (d)(3) of this chapter); and
    (ii) Identify each director that is a member of the Fund's audit 
committee that is not independent under the independence standards 
described in this paragraph. If the Fund does not have a separately 
designated audit committee, or committee performing similar functions, 
the Fund must provide the disclosure with respect to all members of its 
board of directors.

[[Page 285]]

    (A) If the Fund is a listed issuer (as defined in Sec.  240.10A-3 of 
this chapter) whose securities are listed on a national securities 
exchange registered pursuant to section 6(a) of the Act (15 U.S.C. 
78f(a)) or in an automated inter-dealer quotation system of a national 
securities association registered pursuant to section 15A of the Act (15 
U.S.C. 78o-3(a)) that has independence requirements for audit committee 
members, in determining whether the audit committee members are 
independent, use the Fund's definition of independence that it uses for 
determining if the members of the audit committee are independent in 
compliance with the independence standards applicable for the members of 
the audit committee in the listing standards applicable to the Fund. If 
the Fund does not have independence standards for the audit committee, 
use the independence standards for the audit committee in the listing 
standards applicable to the Fund.
    (B) If the Fund is not a listed issuer whose securities are listed 
on a national securities exchange registered pursuant to section 6(a) of 
the Act (15 U.S.C. 78f(a)) or in an automated inter-dealer quotation 
system of a national securities association registered pursuant to 
section 15A of the Act (15 U.S.C. 78o-3(a)), in determining whether the 
audit committee members are independent, use a definition of 
independence of a national securities exchange registered pursuant to 
section 6(a) of the Act (15 U.S.C. 78f(a)) or an automated inter-dealer 
quotation system of a national securities association registered 
pursuant to section 15A of the Act (15 U.S.C. 780-3(a)) which has 
requirements that a majority of the board of directors be independent 
and that has been approved by the Commission, and state which definition 
is used. Whatever such definition the Fund chooses, it must use the same 
definition with respect to all directors and nominees for director. If 
the national securities exchange or national securities association 
whose standards are used has independence standards for the members of 
the audit committee, use those specific standards.

    Instruction to paragraph (b)(16)(ii). If the national securities 
exchange or inter-dealer quotation system on which the Fund's securities 
are listed has exemptions to the independence requirements for 
nominating committee members upon which the Fund relied, disclose the 
exemption relied upon and explain the basis for the Fund's conclusion 
that such exemption is applicable. The same disclosure should be 
provided if the Fund is not a listed issuer and the national securities 
exchange or inter-dealer quotation system selected by the Fund has 
exemptions that are applicable to the Fund.

    (17) In the case of a Fund that is an investment company registered 
under the Investment Company Act of 1940 (15 U.S.C. 80a), if a director 
has resigned or declined to stand for re-election to the board of 
directors since the date of the last annual meeting of security holders 
because of a disagreement with the registrant on any matter relating to 
the registrant's operations, policies or practices, and if the director 
has furnished the registrant with a letter describing such disagreement 
and requesting that the matter be disclosed, the registrant shall state 
the date of resignation or declination to stand for re-election and 
summarize the director's description of the disagreement. If the 
registrant believes that the description provided by the director is 
incorrect or incomplete, it may include a brief statement presenting its 
view of the disagreement.
    (18) If a shareholder nominee or nominees are submitted to the Fund 
for inclusion in the Fund's proxy materials pursuant to Sec.  240.14a-11 
and the Fund is not permitted to exclude the nominee or nominees 
pursuant to the provisions of Sec.  240.14a-11, the Fund must include in 
its proxy statement the disclosure required from the nominating 
shareholder or nominating shareholder group under Item 5 of Sec.  
240.14n-101 with regard to the nominee or nominees and the nominating 
shareholder or nominating shareholder group.

    Instruction to paragraph (b)(18). The information disclosed pursuant 
to paragraph (b)(18) of this Item will not be deemed incorporated by 
reference into any filing under the Securities Act of 1933 (15 U.S.C. 
77a et seq.), the Securities Exchange Act of 1934 (15 U.S.C. 78a et 
seq.), or the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), 
except to the extent that the Fund specifically incorporates that 
information by reference.


[[Page 286]]


    (19) If a Fund is required to include a shareholder nominee or 
nominees submitted to the Fund for inclusion in the Fund's proxy 
materials pursuant to a procedure set forth under applicable state or 
foreign law or the Fund's governing documents providing for the 
inclusion of shareholder director nominees in the Fund's proxy 
materials, the Fund must include in its proxy statement the disclosure 
required from the nominating shareholder or nominating shareholder group 
under Item 6 of Sec.  240.14n-101 with regard to the nominee or nominees 
and the nominating shareholder or nominating shareholder group.

    Instruction to paragraph (b)(19). The information disclosed pursuant 
to paragraph (b)(19) of this Item will not be deemed incorporated by 
reference into any filing under the Securities Act of 1933 (15 U.S.C. 
77a et seq.), the Securities Exchange Act of 1934 (15 U.S.C. 78a et 
seq.), or the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), 
except to the extent that the Fund specifically incorporates that 
information by reference.

    (c) Approval of investment advisory contract. If action is to be 
taken with respect to an investment advisory contract, include the 
following information in the proxy statement.
    Instruction. Furnish information with respect to a prospective 
investment adviser to the extent applicable (including the name and 
address of the prospective investment adviser).
    (1) With respect to the existing investment advisory contract:
    (i) State the date of the contract and the date on which it was last 
submitted to a vote of security holders of the Fund, including the 
purpose of such submission;
    (ii) Briefly describe the terms of the contract, including the rate 
of compensation of the investment adviser;
    (iii) State the aggregate amount of the investment adviser's fee and 
the amount and purpose of any other material payments by the Fund to the 
investment adviser, or any affiliated person of the investment adviser, 
during the last fiscal year of the Fund;
    (iv) If any person is acting as an investment adviser of the Fund 
other than pursuant to a written contract that has been approved by the 
security holders of the company, identify the person and describe the 
nature of the services and arrangements;
    (v) Describe any action taken with respect to the investment 
advisory contract since the beginning of the Fund's last fiscal year by 
the board of directors of the Fund (unless described in response to 
paragraph (c)(1)(vi)) of this Item 22); and
    (vi) If an investment advisory contract was terminated or not 
renewed for any reason, state the date of such termination or non-
renewal, identify the parties involved, and describe the circumstances 
of such termination or non-renewal.
    (2) State the name, address and principal occupation of the 
principal executive officer and each director or general partner of the 
investment adviser.
    Instruction. If the investment adviser is a partnership with more 
than ten general partners, name:
    (i) The general partners with the five largest economic interests in 
the partnership, and, if different, those general partners comprising 
the management or executive committee of the partnership or exercising 
similar authority;
    (ii) The general partners with significant management 
responsibilities relating to the fund.
    (3) State the names and addresses of all Parents of the investment 
adviser and show the basis of control of the investment adviser and each 
Parent by its immediate Parent.
    Instructions. 1. If any person named is a corporation, include the 
percentage of its voting securities owned by its immediate Parent.
    2. If any person named is a partnership, name the general partners 
having the three largest partnership interests (computed by whatever 
method is appropriate in the particular case).
    (4) If the investment adviser is a corporation and if, to the 
knowledge of the persons making the solicitation or the persons on whose 
behalf the solicitation is made, any person not named in answer to 
paragraph (c)(3) of this Item 22 owns, of record or beneficially, ten 
percent or more of the outstanding voting securities of the investment 
adviser, indicate that fact and state the name and address of each such 
person.
    (5) Name each officer or director of the Fund who is an officer, 
employee,

[[Page 287]]

director, general partner or shareholder of the investment adviser. As 
to any officer or director who is not a director or general partner of 
the investment adviser and who owns securities or has any other material 
direct or indirect interest in the investment adviser or any other 
person controlling, controlled by or under common control with the 
investment adviser, describe the nature of such interest.
    (6) Describe briefly and state the approximate amount of, where 
practicable, any material interest, direct or indirect, of any director 
of the Fund in any material transactions since the beginning of the most 
recently completed fiscal year, or in any material proposed 
transactions, to which the investment adviser of the Fund, any Parent or 
Subsidiary of the investment adviser (other than another Fund), or any 
Subsidiary of the Parent of such entities was or is to be a party.
    Instructions. 1. Include the name of each person whose interest in 
any transaction is described and the nature of the relationship by 
reason of which such interest is required to be described. Where it is 
not practicable to state the approximate amount of the interest, 
indicate the approximate amount involved in the transaction.
    2. As to any transaction involving the purchase or sale of assets by 
or to the investment adviser, state the cost of the assets to the 
purchaser and the cost thereof to the seller if acquired by the seller 
within two years prior to the transaction.
    3. If the interest of any person arises from the position of the 
person as a partner in a partnership, the proportionate interest of such 
person in transactions to which the partnership is a party need not be 
set forth, but state the amount involved in the transaction with the 
partnership.
    4. No information need be given in response to this paragraph (c)(6) 
of Item 22 with respect to any transaction that is not related to the 
business or operations of the Fund and to which neither the Fund nor any 
of its Parents or Subsidiaries is a party.
    (7) Disclose any financial condition of the investment adviser that 
is reasonably likely to impair the financial ability of the adviser to 
fulfill its commitment to the fund under the proposed investment 
advisory contract.
    (8) Describe the nature of the action to be taken on the investment 
advisory contract and the reasons therefor, the terms of the contract to 
be acted upon, and, if the action is an amendment to, or a replacement 
of, an investment advisory contract, the material differences between 
the current and proposed contract.
    (9) If a change in the investment advisory fee is sought, state:
    (i) The aggregate amount of the investment adviser's fee during the 
last year;
    (ii) The amount that the adviser would have received had the 
proposed fee been in effect; and
    (iii) The difference between the aggregate amounts stated in 
response to paragraphs (i) and (ii) of this item (c)(9) as a percentage 
of the amount stated in response to paragraph (i) of this item (c)(9).
    (10) If the investment adviser acts as such with respect to any 
other Fund having a similar investment objective, identify and state the 
size of such other Fund and the rate of the investment adviser's 
compensation. Also indicate for any Fund identified whether the 
investment adviser has waived, reduced, or otherwise agreed to reduce 
its compensation under any applicable contract.
    Instruction. Furnish the information in response to this paragraph 
(c)(10) of Item 22 in tabular form.
    (11) Discuss in reasonable detail the material factors and the 
conclusions with respect thereto that form the basis for the 
recommendation of the board of directors that the shareholders approve 
an investment advisory contract. Include the following in the 
discussion:
    (i) Factors relating to both the board's selection of the investment 
adviser and approval of the advisory fee and any other amounts to be 
paid by the Fund under the contract. This would include, but not be 
limited to, a discussion of the nature, extent, and quality of the 
services to be provided by the investment adviser; the investment 
performance of the Fund and the investment adviser; the costs of the 
services to be provided and profits to

[[Page 288]]

be realized by the investment adviser and its affiliates from the 
relationship with the Fund; the extent to which economies of scale would 
be realized as the Fund grows; and whether fee levels reflect these 
economies of scale for the benefit of Fund investors. Also indicate in 
the discussion whether the board relied upon comparisons of the services 
to be rendered and the amounts to be paid under the contract with those 
under other investment advisory contracts, such as contracts of the same 
and other investment advisers with other registered investment companies 
or other types of clients (e.g., pension funds and other institutional 
investors). If the board relied upon such comparisons, describe the 
comparisons that were relied on and how they assisted the board in 
determining to recommend that the shareholders approve the advisory 
contract; and
    (ii) If applicable, any benefits derived or to be derived by the 
investment adviser from the relationship with the Fund such as soft 
dollar arrangements by which brokers provide research to the Fund or its 
investment adviser in return for allocating Fund brokerage.
    Instructions. 1. Conclusory statements or a list of factors will not 
be considered sufficient disclosure. Relate the factors to the specific 
circumstances of the Fund and the investment advisory contract for which 
approval is sought and state how the board evaluated each factor. For 
example, it is not sufficient to state that the board considered the 
amount of the investment advisory fee without stating what the board 
concluded about the amount of the fee and how that affected its 
determination to recommend approval of the contract.
    2. If any factor enumerated in paragraph (c)(11)(i) of this Item 22 
is not relevant to the board's evaluation of the investment advisory 
contract for which approval is sought, note this and explain the reasons 
why that factor is not relevant.
    (12) Describe any arrangement or understanding made in connection 
with the proposed investment advisory contract with respect to the 
composition of the board of directors of the Fund or the investment 
adviser or with respect to the selection or appointment of any person to 
any office with either such company.
    (13) For the most recently completed fiscal year, state:
    (i) The aggregate amount of commissions paid to any Affiliated 
Broker; and
    (ii) The percentage of the Fund's aggregate brokerage commissions 
paid to any such Affiliated Broker.
    Instruction. Identify each Affiliated Broker and the relationships 
that cause the broker to be an Affiliated Broker.
    (14) Disclose the amount of any fees paid by the Fund to the 
investment adviser, its affiliated persons or any affiliated person of 
such person during the most recent fiscal year for services provided to 
the Fund (other than under the investment advisory contract or for 
brokerage commissions). State whether these services will continue to be 
provided after the investment advisory contract is approved.
    (d) Approval of distribution plan. If action is to be taken with 
respect to a Distribution Plan, include the following information in the 
proxy statement.
    Instruction. Furnish information on a prospective basis to the 
extent applicable.
    (1) Describe the nature of the action to be taken on the 
Distribution Plan and the reason therefor, the terms of the Distribution 
Plan to be acted upon, and, if the action is an amendment to, or a 
replacement of, a Distribution Plan, the material differences between 
the current and proposed Distribution Plan.
    (2) If the Fund has a Distribution Plan in effect:
    (i) Provide the date that the Distribution Plan was adopted and the 
date of the last amendment, if any;
    (ii) Disclose the persons to whom payments may be made under the 
Distribution Plan, the rate of the distribution fee and the purposes for 
which such fee may be used;
    (iii) Disclose the amount of distribution fees paid by the Fund 
pursuant to the plan during its most recent fiscal year, both in the 
aggregate and as a percentage of the Fund's average net assets during 
the period;
    (iv) Disclose the name of, and the amount of any payments made under

[[Page 289]]

the Distribution Plan by the Fund during its most recent fiscal year to, 
any person who is an affiliated person of the Fund, its investment 
adviser, principal underwriter, or Administrator, an affiliated person 
of such person, or a person that during the most recent fiscal year 
received 10% or more of the aggregate amount paid under the Distribution 
Plan by the Fund;
    (v) Describe any action taken with respect to the Distribution Plan 
since the beginning of the Fund's most recent fiscal year by the board 
of directors of the Fund; and
    (vi) If a Distribution Plan was or is to be terminated or not 
renewed for any reason, state the date or prospective date of such 
termination or non-renewal, identify the parties involved, and describe 
the circumstances of such termination or non-renewal.
    (3) Describe briefly and state the approximate amount of, where 
practicable, any material interest, direct or indirect, of any director 
or nominee for election as a director of the Fund in any material 
transactions since the beginning of the most recently completed fiscal 
year, or in any material proposed transactions, to which any person 
identified in response to Item 22(d)(2)(iv) was or is to be a party.
    Instructions. 1. Include the name of each person whose interest in 
any transaction is described and the nature of the relationship by 
reason of which such interest is required to be described. Where it is 
not practicable to state the approximate amount of the interest, 
indicate the approximate amount involved in the transaction.
    2. As to any transaction involving the purchase or sale of assets, 
state the cost of the assets to the purchaser and the cost thereof to 
the seller if acquired by the seller within two years prior to the 
transaction.
    3. If the interest of any person arises from the position of the 
person as a partner in a partnership, the proportionate interest of such 
person in transactions to which the partnership is a party need not be 
set forth but state the amount involved in the transaction with the 
partnership.
    4. No information need be given in response to this paragraph (d)(3) 
of Item 22 with respect to any transaction that is not related to the 
business or operations of the Fund and to which neither the Fund nor any 
of its Parents or Subsidiaries is a party.
    (4) Discuss in reasonable detail the material factors and the 
conclusions with respect thereto which form the basis for the conclusion 
of the board of directors that there is a reasonable likelihood that the 
proposed Distribution Plan (or amendment thereto) will benefit the Fund 
and its shareholders.
    Instruction. Conclusory statements or a list of factors will not be 
considered sufficient disclosure.
    Item 23. Delivery of documents to security holders sharing an 
address. If one annual report to security holders, proxy statement, or 
Notice of Internet Availability of Proxy Materials is being delivered to 
two or more security holders who share an address in accordance with 
Sec.  240.14a-3(e)(1), furnish the following information:
    (a) State that only one annual report to security holders, proxy 
statement, or Notice of Internet Availability of Proxy Materials, as 
applicable, is being delivered to multiple security holders sharing an 
address unless the registrant has received contrary instructions from 
one or more of the security holders;
    (b) Undertake to deliver promptly upon written or oral request a 
separate copy of the annual report to security holders, proxy statement, 
or Notice of Internet Availability of Proxy Materials, as applicable, to 
a security holder at a shared address to which a single copy of the 
documents was delivered and provide instructions as to how a security 
holder can notify the registrant that the security holder wishes to 
receive a separate copy of an annual report to security holders, proxy 
statement, or Notice of Internet Availability of Proxy Materials, as 
applicable;
    (c) Provide the phone number and mailing address to which a security 
holder can direct a notification to the registrant that the security 
holder wishes to receive a separate annual report to security holders, 
proxy statement, or Notice of Internet Availability of Proxy Materials, 
as applicable, in the future; and

[[Page 290]]

    (d) Provide instructions how security holders sharing an address can 
request delivery of a single copy of annual reports to security holders, 
proxy statements, or Notices of Internet Availability of Proxy Materials 
if they are receiving multiple copies of annual reports to security 
holders, proxy statements, or Notices of Internet Availability of Proxy 
Materials.
    Item 24. Shareholder Approval of Executive Compensation. Registrants 
required to provide any of the separate shareholder votes pursuant to 
Sec.  240.14a-21 of this chapter shall disclose that they are providing 
each such vote as required pursuant to section 14A of the Securities 
Exchange Act (15 U.S.C. 78n-1), briefly explain the general effect of 
each vote, such as whether each such vote is non-binding, and, when 
applicable, disclose the current frequency of shareholder advisory votes 
on executive compensation required by Rule 14a-21(a) and when the next 
such shareholder advisory vote will occur.
    Item 25. Exhibits. Provide the legal opinion required to be filed by 
Item 402(u)(4)(i) of Regulation S-K (17 CFR 229.402(u)) in an exhibit to 
this Schedule 14A.

[51 FR 42063, Nov. 20, 1986; 51 FR 45576, Dec. 19, 1986]

    Editorial Note: For Federal Register citations affecting Sec.  
240.14a-101, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.govinfo.gov.



Sec.  240.14a-102  [Reserved]



Sec.  240.14a-103  Notice of Exempt Solicitation. Information to be 
included in statements submitted by or on behalf of a person pursuant
to Sec.  240.14a-6(g).

      U.S. Securities and Exchange Commission Washington, DC 20549

                      Notice of Exempt Solicitation

1. Name of the Registrant:
________________________________________________________________________
2. Name of person relying on exemption:
________________________________________________________________________
3. Address of person relying on exemption:
________________________________________________________________________
4. Written materials. Attach written material required to be submitted 
          pursuant to Rule 14a-6(g)(1) [Sec.  240.14a-6(g)(1)].

[57 FR 48294, Oct. 22, 1992]



Sec.  240.14a-104  Notice of Exempt Preliminary Roll-up Communication.
Information regarding ownership interests and any potential conflicts of
interest to be included in statements submitted by or on behalf of a person 
pursuant to Sec.  240.14a-2(b)(4) and Sec.  240.14a-6(n).

 United States Securities and Exchange Commission Washington, D.C. 20549

           Notice of Exempt Preliminary Roll-Up Communication

1. Name of registrant appearing on Securities Act of 1933 registration 
          statement for the roll-up transaction (or, if registration 
          statement has not been filed, name of entity into which 
          partnerships are to be rolled up):
________________________________________________________________________
2. Name of partnership that is the subject of the proposed roll-up 
          transaction:
________________________________________________________________________
3. Name of person relying on exemption:
________________________________________________________________________
4. Address of person relying on exemption:
________________________________________________________________________
5. Ownership interest of security holder in partnership that is the 
          subject of the proposed roll-up transaction:
________________________________________________________________________
________________________________________________________________________

    Note: To the extent that the holder owns securities in any other 
entities involved in this roll-up transaction, disclosure of these 
interests also should be made.

6. Describe any and all relations of the holder to the parties to the 
          transaction or to the transaction itself:
a. The holder is engaged in the business of buying and selling limited 
          partnership interests in the secondary market would be 
          adversely affected if the roll-up transaction were completed.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
b. The holder would suffer direct (or indirect) material financial 
          injury if the roll-up transaction were completed since it is a 
          service provider to an affected limited partnership.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
c. The holder is engaged in another transaction that may be competitive 
          with the pending roll-up transaction.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
d. Any other relations to the parties involved in the transaction or to 
          the transaction itself, or any benefits enjoyed by the holder 
          not shared on a pro rata basis

[[Page 291]]

          by all other holders of the same class of securities of the 
          partnership that is the subject of the proposed roll-up 
          transaction.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

[59 FR 63685, Dec. 8, 1994]



Sec.  240.14b-1  Obligation of registered brokers and dealers in 
connection with the prompt forwarding of certain communications to
beneficial owners.

    (a) Definitions. Unless the context otherwise requires, all terms 
used in this section shall have the same meanings as in the Act and, 
with respect to proxy soliciting material, as in Sec.  240.14a-1 
thereunder and, with respect to information statements, as in Sec.  
240.14c-1 thereunder. In addition, as used in this section, the term 
``registrant'' means:
    (1) The issuer of a class of securities registered pursuant to 
section 12 of the Act; or
    (2) An investment company registered under the Investment Company 
Act of 1940.
    (b) Dissemination and beneficial owner information requirements. A 
broker or dealer registered under Section 15 of the Act shall comply 
with the following requirements for disseminating certain communications 
to beneficial owners and providing beneficial owner information to 
registrants.
    (1) The broker or dealer shall respond, by first class mail or other 
equally prompt means, directly to the registrant no later than seven 
business days after the date it receives an inquiry made in accordance 
with Sec.  240.14a-13(a) or Sec.  240.14c-7(a) by indicting, by means of 
a search card or otherwise:
    (i) The approximate number of customers of the broker or dealer who 
are beneficial owners of the registrant's securities that are held of 
record by the broker, dealer, or its nominee;
    (ii) The number of customers of the broker or dealer who are 
beneficial owners of the registrant's securities who have objected to 
disclosure of their names, addresses,and securities positions if the 
registrant has indicated, pursuant to Sec.  240.14a-13(a)(1)(ii)(A) or 
Sec.  240.14c-7(a)(1)(ii)(A), that it will distribute the annual report 
to security holders to beneficial owners of its securities whose names, 
addresses and securities positions are disclosed pursuant to paragraph 
(b)(3) of this section; and
    (iii) The identity of the designated agent of the broker or dealer, 
if any, acting on its behalf in fulfilling its obligations under 
paragraph (b)(3) of this section; Provided, however, that if the broker 
or dealer has informed the registrant that a designated office(s) or 
department(s) is to receive such inquiries, receipt for purposes of 
paragraph (b)(1) of this section shall mean receipt by such designated 
office(s) or department(s).
    (2) The broker or dealer shall, upon receipt of the proxy, other 
proxy soliciting material, information statement, and/or annual report 
to security holders from the registrant or other soliciting person, 
forward such materials to its customers who are beneficial owners of the 
registrant's securities no later than five business days after receipt 
of the proxy material, information statement or annual report to 
security holders.

    Note to paragraph (b)(2): At the request of a registrant, or on its 
own initiative so long as the registrant does not object, a broker or 
dealer may, but is not required to, deliver one annual report to 
security holders, proxy statement, information statement, or Notice of 
Internet Availability of Proxy Materials to more than one beneficial 
owner sharing an address if the requirements set forth in Sec.  240.14a-
3(e)(1) (with respect to annual reports to security holders, proxy 
statements, and Notices of Internet Availability of Proxy Materials) and 
Sec.  240.14c-3(c) (with respect to annual reports to security holders, 
information statements, and Notices of Internet Availability of Proxy 
Materials) applicable to registrants, with the exception of Sec.  
240.14a-3(e)(1)(i)(E), are satisfied instead by the broker or dealer.

    (3) The broker or dealer shall, through its agent or directly:
    (i) Provide the registrant, upon the registrant's request, with the 
names, addresses, and securities positions, compiled as of a date 
specified in the registrant's request which is no earlier than five 
business days after the date the registrant's request is received, of 
its customers who are beneficial owners of the registrant's securities 
and

[[Page 292]]

who have not objected to disclosure of such information; Provided , 
however, that if the broker or dealer has informed the registrant that a 
designated office(s) or department(s) is to receive such requests, 
receipt shall mean receipt by such designated office(s) or 
department(s); and
    (ii) Transmit the data specified in paragraph (b)(3)(i) of this 
section to the registrant no later than five business days after the 
record date or other date specified by the registrant.

    Note 1: Where a broker or dealer employs a designated agent to act 
on its behalf in performing the obligations imposed on the broker or 
dealer by paragraph (b)(3) of this section, the five business day time 
period for determining the date as of which the beneficial owner 
information is to be compiled is calculated from the date the designated 
agent receives the registrant's request. In complying with the 
registrant's request for beneficial owner information under paragraph 
(b)(3) of this section, a broker or dealer need only supply the 
registrant with the names, addresses, and securities positions of non-
objecting beneficial owners.
    Note 2: If a broker or dealer receives a registrant's request less 
than five business days before the requested compilation date, it must 
provide a list compiled as of a date that is no more than five business 
days after receipt and transmit the list within five business days after 
the compilation date.

    (c) Exceptions to dissemination and beneficial owner information 
requirements. A broker or dealer registered under section 15 of the Act 
shall be subject to the following with respect to its dissemination and 
beneficial owner information requirements.
    (1) With regard to beneficial owners of exempt employee benefit plan 
securities, the broker or dealer shall:
    (i) Not include information in its response pursuant to paragraph 
(b)(1) of this section or forward proxies (or in lieu thereof requests 
for voting instructions), proxy soliciting material, information 
statements, or annual reports to security holders pursuant to paragraph 
(b)(2) of this section to such beneficial owners; and
    (ii) Not include in its response, pursuant to paragraph (b)(3) of 
this section, data concerning such beneficial owners.
    (2) A broker or dealer need not satisfy:
    (i) Its obligations under paragraphs (b)(2), (b)(3) and (d) of this 
section if the registrant or other soliciting person, as applicable, 
does not provide assurance of reimbursement of the broker's or dealer's 
reasonable expenses, both direct and indirect, incurred in connection 
with performing the obligations imposed by paragraphs (b)(2), (b)(3) and 
(d) of this section; or
    (ii) Its obligation under paragraph (b)(2) of this section to 
forward annual reports to security holders to non-objecting beneficial 
owners identified by the broker or dealer, through its agent or 
directly, pursuant to paragraph (b)(3) of this section if the registrant 
notifies the broker or dealer pursuant to Sec.  240.14a-13(c) or Sec.  
240.14c-7(c) that the registrant will send the annual report to security 
holders to such non-objecting beneficial owners identified by the broker 
or dealer and delivered in a list to the registrant pursuant to 
paragraph (b)(3) of this section.
    (3) In its response pursuant to paragraph (b)(1) of this section, a 
broker or dealer shall not include information about annual reports to 
security holders, proxy statements or information statements that will 
not be delivered to security holders sharing an address because of the 
broker or dealer's reliance on the procedures referred to in the Note to 
paragraph (b)(2) of this section.
    (d) Upon receipt from the soliciting person of all of the 
information listed in Sec.  240.14a-16(d), the broker or dealer shall:
    (1) Prepare and send a Notice of Internet Availability of Proxy 
Materials containing the information required in paragraph (e) of this 
section to beneficial owners no later than:
    (i) With respect to a registrant, 40 calendar days prior to the 
security holder meeting date or, if no meeting is to be held, 40 
calendar days prior to the date the votes, consents, or authorizations 
may be used to effect the corporate action; and
    (ii) With respect to a soliciting person other than the registrant, 
the later of:
    (A) 40 calendar days prior to the security holder meeting date or, 
if no meeting is to be held, 40 calendar days prior to the date the 
votes, consents, or

[[Page 293]]

authorizations may be used to effect the corporate action; or
    (B) 10 calendar days after the date that the registrant first sends 
its proxy statement or Notice of Internet Availability of Proxy 
Materials to security holders.
    (2) Establish a Web site at which beneficial owners are able to 
access the broker or dealer's request for voting instructions and, at 
the broker or dealer's option, establish a Web site at which beneficial 
owners are able to access the proxy statement and other soliciting 
materials, provided that such Web sites are maintained in a manner 
consistent with paragraphs (b), (c), and (k) of Sec.  240.14a-16;
    (3) Upon receipt of a request from the registrant or other 
soliciting person, send to security holders specified by the registrant 
or other soliciting person a copy of the request for voting instructions 
accompanied by a copy of the intermediary's Notice of Internet 
Availability of Proxy Materials 10 calendar days or more after the 
broker or dealer sends its Notice of Internet Availability of Proxy 
Materials pursuant to paragraph (d)(1); and
    (4) Upon receipt of a request for a copy of the materials from a 
beneficial owner:
    (i) Request a copy of the soliciting materials from the registrant 
or other soliciting person, in the form requested by the beneficial 
owner, within three business days after receiving the beneficial owner's 
request;
    (ii) Forward a copy of the soliciting materials to the beneficial 
owner, in the form requested by the beneficial owner, within three 
business days after receiving the materials from the registrant or other 
soliciting person; and
    (iii) Maintain records of security holder requests to receive a 
paper or e-mail copy of the proxy materials in connection with future 
proxy solicitations and provide copies of the proxy materials to a 
security holder who has made such a request for all securities held in 
the account of that security holder until the security holder revokes 
such request.
    (5) Notwithstanding any other provisions in this paragraph (d), if 
the broker or dealer receives copies of the proxy statement and annual 
report to security holders (if applicable) from the soliciting person 
with instructions to forward such materials to beneficial owners, the 
broker or dealer:
    (i) Shall either:
    (A) Prepare a Notice of Internet Availability of Proxy Materials and 
forward it with the proxy statement and annual report to security 
holders (if applicable); or
    (B) Incorporate any information required in the Notice of Internet 
Availability of Proxy Materials that does not appear in the proxy 
statement into the broker or dealer's request for voting instructions to 
be sent with the proxy statement and annual report (if applicable);
    (ii) Need not comply with the following provisions:
    (A) The timing provisions of paragraph (d)(1)(ii) of this section; 
and
    (B) Paragraph (d)(4) of this section; and
    (iii) Need not include in its Notice of Internet Availability of 
Proxy Materials or request for voting instructions the following 
disclosures:
    (A) Legends 1 and 3 in Sec.  240.14a-16(d)(1); and
    (B) Instructions on how to request a copy of the proxy materials.
    (e) Content of Notice of Internet Availability of Proxy Materials. 
The broker or dealer's Notice of Internet Availability of Proxy 
Materials shall:
    (1) Include all information, as it relates to beneficial owners, 
required in a registrant's Notice of Internet Availability of Proxy 
Materials under Sec.  240.14a-16(d), provided that the broker or dealer 
shall provide its own, or its agent's, toll-free telephone number, an e-
mail address, and an Internet Web site to service requests for copies 
from beneficial owners;
    (2) Include a brief description, if applicable, of the rules that 
permit the broker or dealer to vote the securities if the beneficial 
owner does not return his or her voting instructions; and
    (3) Otherwise be prepared and sent in a manner consistent with 
paragraphs (e), (f), and (g) of Sec.  240.14a-16.

[57 FR 1099, Jan. 10, 1992, as amended at 65 FR 65751, Nov. 2, 2000; 72 
FR 4170, Jan. 29, 2007; 72 FR 42238, Aug. 1, 2007; 73 FR 17814, Apr. 1, 
2008]

[[Page 294]]



Sec.  240.14b-2  Obligation of banks, associations and other entities
that exercise fiduciary powers in connection with the prompt forwarding
of certain communications to beneficial owners.

    (a) Definitions. Unless the context otherwise requires, all terms 
used in this section shall have the same meanings as in the Act and, 
with respect to proxy soliciting material, as in Sec.  240.14a-1 
thereunder and, with respect to information statements, as in Sec.  
240.14c-1 thereunder. In addition, as used in this section, the 
following terms shall apply:
    (1) The term bank means a bank, association, or other entity that 
exercises fiduciary powers.
    (2) The term beneficial owner includes any person who has or shares, 
pursuant to an instrument, agreement, or otherwise, the power to vote, 
or to direct the voting of a security.

    Note 1: If more than one person shares voting power, the provisions 
of the instrument creating that voting power shall govern with respect 
to whether consent to disclosure of beneficial owner information has 
been given.
    Note 2: If more than one person shares voting power or if the 
instrument creating that voting power provides that such power shall be 
exercised by different persons depending on the nature of the corporate 
action involved, all persons entitled to exercise such power shall be 
deemed beneficial owners; Provided, however, that only one such 
beneficial owner need be designated among the beneficial owners to 
receive proxies or requests for voting instructions, other proxy 
soliciting material, information statements, and/or annual reports to 
security holders, if the person so designated assumes the obligation to 
disseminate, in a timely manner, such materials to the other beneficial 
owners.

    (3) The term registrant means:
    (i) The issuer of a class of securities registered pursuant to 
section 12 of the Act; or
    (ii) An investment company registered under the Investment Company 
Act of 1940.
    (b) Dissemination and beneficial owner information requirements. A 
bank shall comply with the following requirements for disseminating 
certain communications to beneficial owners and providing beneficial 
owner information to registrants.
    (1) The bank shall:
    (i) Respond, by first class mail or other equally prompt means, 
directly to the registrant, no later than one business day after the 
date it receives an inquiry made in accordance with Sec.  240.14a-13(a) 
or Sec.  240.14c-7(a) by indicating the name and address of each of its 
respondent banks that holds the registrant's securities on behalf of 
beneficial owners, if any; and
    (ii) Respond, by first class mail or other equally prompt means, 
directly to the registrant no later than seven business days after the 
date it receives an inquiry made in accordance with Sec.  240.14a-13(a) 
or Sec.  240.14c-7(a) by indicating, by means of a search card or 
otherwise:
    (A) The approximate number of customers of the bank who are 
beneficial owners of the registrant's securities that are held of record 
by the bank or its nominee;
    (B) If the registrant has indicated, pursuant to Sec.  240.14a-
13(a)(1)(ii)(A) or Sec.  240.14c-7(a)(1)(ii)(A), that it will distribute 
the annual report to security holders to beneficial owners of its 
securities whose names, addresses, and securities positions are 
disclosed pursuant to paragraphs (b)(4) (ii) and (iii) of this section:
    (1) With respect to customer accounts opened on or before December 
28, 1986, the number of beneficial owners of the registrant's securities 
who have affirmatively consented to disclosure of their names, 
addresses, and securities positions; and
    (2) With respect to customer accounts opened after December 28, 
1986, the number of beneficial owners of the registrant's securities who 
have not objected to disclosure of their names, addresses, and 
securities positions; and
    (C) The identity of its designated agent, if any, acting on its 
behalf in fulfilling its obligations under paragraphs (b)(4) (ii) and 
(iii) of this section;

Provided, however, that, if the bank or respondent bank has informed the 
registrant that a designated office(s) or department(s) is to receive 
such inquiries, receipt for purposes of paragraphs (b)(1) (i) and (ii) 
of this section shall mean receipt by such designated office(s) or 
department(s).

[[Page 295]]

    (2) Where proxies are solicited, the bank shall, within five 
business days after the record date:
    (i) Execute an omnibus proxy, including a power of substitution, in 
favor of its respondent banks and forward such proxy to the registrant; 
and
    (ii) Furnish a notice to each respondent bank in whose favor an 
omnibus proxy has been executed that it has executed such a proxy, 
including a power of substitution, in its favor pursuant to paragraph 
(b)(2)(i) of this section.
    (3) Upon receipt of the proxy, other proxy soliciting material, 
information statement, and/or annual report to security holders from the 
registrant or other soliciting person, the bank shall forward such 
materials to each beneficial owner on whose behalf it holds securities, 
no later than five business days after the date it receives such 
material and, where a proxy is solicited, the bank shall forward, with 
the other proxy soliciting material and/or the annual report to security 
holders, either:
    (i) A properly executed proxy:
    (A) Indicating the number of securities held for such beneficial 
owner;
    (B) Bearing the beneficial owner's account number or other form of 
identification, together with instructions as to the procedures to vote 
the securities;
    (C) Briefly stating which other proxies, if any, are required to 
permit securities to be voted under the terms of the instrument creating 
that voting power or applicable state law; and
    (D) Being accompanied by an envelope addressed to the registrant or 
its agent, if not provided by the registrant; or
    (ii) A request for voting instructions (for which registrant's form 
of proxy may be used and which shall be voted by the record holder bank 
or respondent bank in accordance with the instructions received), 
together with an envelope addressed to the record holder bank or 
respondent bank.

    Note to paragraph (b)(3): At the request of a registrant, or on its 
own initiative so long as the registrant does not object, a bank may, 
but is not required to, deliver one annual report to security holders, 
proxy statement, information statement, or Notice of Internet 
Availability of Proxy Materials to more than one beneficial owner 
sharing an address if the requirements set forth in Sec.  240.14a-
3(e)(1) (with respect to annual reports to security holders, proxy 
statements, and Notices of Internet Availability of Proxy Materials) and 
Sec.  240.14c-3(c) (with respect to annual reports to security holders, 
information statements, and Notices of Internet Availability of Proxy 
Materials) applicable to registrants, with the exception of Sec.  
240.14a-3(e)(1)(i)(E), are satisfied instead by the bank.

    (4) The bank shall:
    (i) Respond, by first class mail or other equally prompt means, 
directly to the registrant no later than one business day after the date 
it receives an inquiry made in accordance with Sec.  240.14a-13(b)(1) or 
Sec.  240.14c-7(b)(1) by indicating the name and address of each of its 
respondent banks that holds the registrant's securities on behalf of 
beneficial owners, if any;
    (ii) Through its agent or directly, provide the registrant, upon the 
registrant's request, and within the time specified in paragraph 
(b)(4)(iii) of this section, with the names, addresses, and securities 
position, compiled as of a date specified in the registrant's request 
which is no earlier than five business days after the date the 
registrant's request is received, of:
    (A) With respect to customer accounts opened on or before December 
28, 1986, beneficial owners of the registrant's securities on whose 
behalf it holds securities who have consented affirmatively to 
disclosure of such information, subject to paragraph (b)(5) of this 
section; and
    (B) With respect to customer accounts opened after December 28, 
1986, beneficial owners of the registrant's securities on whose behalf 
it holds securities who have not objected to disclosure of such 
information;

Provided, however, that if the record holder bank or respondent bank has 
informed the registrant that a designated office(s) or department(s) is 
to receive such requests, receipt for purposes of paragraphs (b)(4) (i) 
and (ii) of this section shall mean receipt by such designated office(s) 
or department(s); and
    (iii) Through its agent or directly, transmit the data specified in 
paragraph (b)(4)(ii) of this section to the registrant no later than 
five business days after the date specified by the registrant.


[[Page 296]]


    Note 1: Where a record holder bank or respondent bank employs a 
designated agent to act on its behalf in performing the obligations 
imposed on it by paragraphs (b)(4) (ii) and (iii) of this section, the 
five business day time period for determining the date as of which the 
beneficial owner information is to be compiled is calculated from the 
date the designated agent receives the registrant's request. In 
complying with the registrant's request for beneficial owner information 
under paragraphs (b)(4) (ii) and (iii) of this section, a record holder 
bank or respondent bank need only supply the registrant with the names, 
addresses and securities positions of affirmatively consenting and non-
objecting beneficial owners.
    Note 2: If a record holder bank or respondent bank receives a 
registrant's request less than five business days before the requested 
compilation date, it must provide a list compiled as of a date that is 
no more than five business days after receipt and transmit the list 
within five business days after the compilation date.

    (5) For customer accounts opened on or before December 28, 1986, 
unless the bank has made a good faith effort to obtain affirmative 
consent to disclosure of beneficial owner information pursuant to 
paragraph (b)(4)(ii) of this section, the bank shall provide such 
information as to beneficial owners who do not object to disclosure of 
such information. A good faith effort to obtain affirmative consent to 
disclosure of beneficial owner information shall include, but shall not 
be limited to, making an inquiry:
    (i) Phrased in neutral language, explaining the purpose of the 
disclosure and the limitations on the registrant's use thereof;
    (ii) Either in at least one mailing separate from other account 
mailings or in repeated mailings; and
    (iii) In a mailing that includes a return card, postage paid 
enclosure.
    (c) Exceptions to dissemination and beneficial owner information 
requirements. The bank shall be subject to the following respect to its 
dissemination and beneficial owner requirements.
    (1) With regard to beneficial owners of exempt employee benefit plan 
securities, the bank shall not:
    (i) Include information in its response pursuant to paragraph (b)(1) 
of this section; or forward proxies (or in lieu thereof requests for 
voting instructions), proxy soliciting material, information statements, 
or annual reports to security holders pursuant to paragraph (b)(3) of 
this section to such beneficial owners; or
    (ii) Include in its response pursuant to paragraphs (b)(4) and 
(b)(5) of this section data concerning such beneficial owners.
    (2) The bank need not satisfy:
    (i) Its obligations under paragraphs (b)(2), (b)(3), (b)(4) and (d) 
of this section if the registrant or other soliciting person, as 
applicable, does not provide assurance of reimbursement of its 
reasonable expenses, both direct and indirect, incurred in connection 
with performing the obligations imposed by paragraphs (b)(2), (b)(3), 
(b)(4) and (d) of this section; or
    (ii) Its obligation under paragraph (b)(3) of this section to 
forward annual reports to security holders to consenting and non-
objecting beneficial owners identified pursuant to paragraphs (b)(4) 
(ii) and (iii) of this section if the registrant notifies the record 
holder bank or respondent bank, pursuant to Sec.  240.14a-13(c) or Sec.  
240.14c-7(c), that the registrant will send the annual report to 
security holders to beneficial owners whose names addresses and 
securities positions are disclosed pursuant to paragraphs (b)(4) (ii) 
and (iii) of this section.
    (3) For the purposes of determining the fees which may be charged to 
registrants pursuant to Sec.  240.14a-13(b)(5), Sec.  240.14c-7(a)(5), 
and paragraph (c)(2) of this section for performing obligations under 
paragraphs (b)(2), (b)(3), and (b)(4) of this section, an amount no 
greater than that permitted to be charged by brokers or dealers for 
reimbursement of their reasonable expenses, both direct and indirect, 
incurred in connection with performing the obligations imposed by 
paragraphs (b)(2) and (b)(3) of Sec.  240.14b-1, shall be deemed to be 
reasonable.
    (4) In its response pursuant to paragraph (b)(1)(ii)(A) of this 
section, a bank shall not include information about annual reports to 
security holders, proxy statements or information statements that will 
not be delivered to security holders sharing an address because of the 
bank's reliance on the procedures referred to in the Note to paragraph 
(b)(3) of this section.

[[Page 297]]

    (d) Upon receipt from the soliciting person of all of the 
information listed in Sec.  240.14a-16(d), the bank shall:
    (1) Prepare and send a Notice of Internet Availability of Proxy 
Materials containing the information required in paragraph (e) of this 
section to beneficial owners no later than:
    (i) With respect to a registrant, 40 calendar days prior to the 
security holder meeting date or, if no meeting is to be held, 40 
calendar days prior to the date the votes, consents, or authorizations 
may be used to effect the corporate action; and
    (ii) With respect to a soliciting person other than the registrant, 
the later of:
    (A) 40 calendar days prior to the security holder meeting date or, 
if no meeting is to be held, 40 calendar days prior to the date the 
votes, consents, or authorizations may be used to effect the corporate 
action; or
    (B) 10 calendar days after the date that the registrant first sends 
its proxy statement or Notice of Internet Availability of Proxy 
Materials to security holders.
    (2) Establish a Web site at which beneficial owners are able to 
access the bank's request for voting instructions and, at the bank's 
option, establish a Web site at which beneficial owners are able to 
access the proxy statement and other soliciting materials, provided that 
such Web sites are maintained in a manner consistent with paragraphs 
(b), (c), and (k) of Sec.  240.14a-16;
    (3) Upon receipt of a request from the registrant or other 
soliciting person, send to security holders specified by the registrant 
or other soliciting person a copy of the request for voting instructions 
accompanied by a copy of the intermediary's Notice of Internet 
Availability of Proxy Materials 10 days or more after the bank sends its 
Notice of Internet Availability of Proxy Materials pursuant to paragraph 
(d)(1); and
    (4) Upon receipt of a request for a copy of the materials from a 
beneficial owner:
    (i) Request a copy of the soliciting materials from the registrant 
or other soliciting person, in the form requested by the beneficial 
owner, within three business days after receiving the beneficial owner's 
request;
    (ii) Forward a copy of the soliciting materials to the beneficial 
owner, in the form requested by the beneficial owner, within three 
business days after receiving the materials from the registrant or other 
soliciting person; and
    (iii) Maintain records of security holder requests to receive a 
paper or e-mail copy of the proxy materials in connection with future 
proxy solicitations and provide copies of the proxy materials to a 
security holder who has made such a request for all securities held in 
the account of that security holder until the security holder revokes 
such request.
    (5) Notwithstanding any other provisions in this paragraph (d), if 
the bank receives copies of the proxy statement and annual report to 
security holders (if applicable) from the soliciting person with 
instructions to forward such materials to beneficial owners, the bank:
    (i) Shall either:
    (A) Prepare a Notice of Internet Availability of Proxy Materials and 
forward it with the proxy statement and annual report to security 
holders (if applicable); or
    (B) Incorporate any information required in the Notice of Internet 
Availability of Proxy Materials that does not appear in the proxy 
statement into the bank's request for voting instructions to be sent 
with the proxy statement and annual report (if applicable);
    (ii) Need not comply with the following provisions:
    (A) The timing provisions of paragraph (d)(1)(ii) of this section; 
and
    (B) Paragraph (d)(4) of this section; and
    (iii) Need not include in its Notice of Internet Availability of 
Proxy Materials or request for voting instructions the following 
disclosures:
    (A) Legends 1 and 3 in Sec.  240.14a-16(d)(1); and
    (B) Instructions on how to request a copy of the proxy materials.
    (e) Content of Notice of Internet Availability of Proxy Materials. 
The bank's Notice of Internet Availability of Proxy Materials shall:
    (1) Include all information, as it relates to beneficial owners, 
required in a registrant's Notice of Internet Availability of Proxy 
Materials under

[[Page 298]]

Sec.  240.14a-16(d), provided that the bank shall provide its own, or 
its agent's, toll-free telephone number, e-mail address, and Internet 
Web site to service requests for copies from beneficial owners; and
    (2) Otherwise be prepared and sent in a manner consistent with 
paragraphs (e), (f), and (g) of Sec.  240.14a-16.

[57 FR 1100, Jan. 10, 1992, as amended at 65 FR 65751, Nov. 2, 2000; 72 
FR 4171, Jan. 29, 2007; 72 FR 42239, Aug. 1, 2007; 73 FR 17814, Apr. 1, 
2008]

  Regulation 14C: Distribution of Information Pursuant to Section 14(c)

                       ATTENTION ELECTRONIC FILERS

THIS REGULATION SHOULD BE READ IN CONJUNCTION WITH REGULATION S-T (PART 
232 OF THIS CHAPTER), WHICH GOVERNS THE PREPARATION AND SUBMISSION OF 
DOCUMENTS IN ELECTRONIC FORMAT. MANY PROVISIONS RELATING TO THE 
PREPARATION AND SUBMISSION OF DOCUMENTS IN PAPER FORMAT CONTAINED IN 
THIS REGULATION ARE SUPERSEDED BY THE PROVISIONS OF REGULATION S-T FOR 
DOCUMENTS REQUIRED TO BE FILED IN ELECTRONIC FORMAT.



Sec.  240.14c-1  Definitions.

    Unless the context otherwise requires, all terms used in this 
regulation have the same meanings as in the Act or elsewhere in the 
general rules and regulations thereunder. In addition, the following 
definitions apply unless the context otherwise requires:
    (a) Associate. The term ``associate,'' used to indicate a 
relationship with any person, means:
    (1) Any corporation or organization (other than the registrant or a 
majority owned subsidiary of the registrant) of which such person is an 
officer or partner or is, directly or indirectly, the beneficial owner 
of 10 percent or more of any class of equity securities;
    (2) Any trust or other estate in which such person has a substantial 
beneficial interest or as to which such person serves as trustee or in a 
similar fidiciary capacity; and
    (3) Any relative or spouse of such person, or any relative of such 
spouse, who has the same home as such person or who is a director or 
officer of the registrant or any of its parents or subsidiaries.
    (b) Employee benefit plan. For purposes of Sec.  240.14c-7, the term 
``employee benefit plan'' means any purchase, savings, option, bonus, 
appreciation, profit sharing, thrift, incentive, pension or similar plan 
primarily for employees, directors, trustees or officers.
    (c) Entity that exercises fiduciary powers. The term ``entity that 
exercises fiduciary powers'' means any entity that holds securities in 
nominee name or otherwise on behalf of a beneficial owner but does not 
include a clearing agency registered pursuant to section 17A of the Act, 
or a broker or a dealer.
    (d) Exempt employee benefit plan securities. For purposes of Sec.  
240.14c-7, the term ``exempt employee benefit plan securities'' means:
    (1) Securities of the registrant held by an employee benefit plan, 
as defined in paragraph (b) of this section, where such plan is 
established by the registrant; or
    (2) If notice regarding the current distribution of information 
statements has been given pursuant to Sec.  240.14c-7(a)(1)(ii)(C) or if 
notice regarding the current request for a list of names, addresses and 
securities positions of beneficial owners has been given pursuant to 
Sec.  240.14c-7(b)(3), securities of the registrant held by an employee 
benefit plan, as defined in paragraph (b) of this section, where such 
plan is established by an affiliate of the registrant.
    (e) Information statement. The term ``information statement'' means 
the statement required by Sec.  240.14c-2, whether or not contained in a 
single document.
    (f) Last fiscal year. The term ``last fiscal year'' of the 
registrant means the last fiscal year of the registrant ending prior to 
the date of the meeting with respect to which an information statement 
is required to be distributed, or if the information statement involves 
consents or authorizations in lieu of a meeting, the earliest date on 
which they may be used to effect corporate action.
    (g) Proxy. The term ``proxy'' includes every proxy, consent or 
authorization within the meaning of section 14(a) of the Act. The 
consent or authorization

[[Page 299]]

may take the form of failure to object or to dissent.
    (h) Record date. The term ``record date'' means the date as of which 
the record holders of securities entitled to vote at a meeting or by 
written consent or authorization shall be determined.
    (i) Record holder. For purposes of Sec.  240.14c-7, the term 
``record holder'' means any broker, dealer, voting trustee, bank, 
association or other entity that exercises fiduciary powers which holds 
securities of record in nominee name or otherwise or as a participant in 
a clearing agency registered pursuant to section 17A of the Act.
    (j) Registrant. The term ``registrant'' means:
    (1) The issuer of a class of securities registered pursuant to 
section 12 of the Act; or
    (2) An investment company registered under the Investment Company 
Act of 1940 that has made a public offering of its securities.
    (k) Respondent bank. For purposes of Sec.  240.14c-7, the term 
``respondent bank'' means any bank, association or other entity that 
exercises fiduciary powers which holds securities on behalf of 
beneficial owners and deposits such securities for safekeeping with 
another bank, association or other entity that exercises fiduciary 
powers.

[51 FR 44279, Dec. 9, 1986, as amended at 52 FR 23649, June 24, 1987; 53 
FR 16406, May 9, 1988; 57 FR 1101, Jan. 10, 1992]



Sec.  240.14c-2  Distribution of information statement.

    (a)(1) In connection with every annual or other meeting of the 
holders of the class of securities registered pursuant to section 12 of 
the Act or of a class of securities issued by an investment company 
registered under the Investment Company Act of 1940 that has made a 
public offering of securities, including the taking of corporate action 
by the written authorization or consent of security holders, the 
registrant shall transmit to every security holder of the class that is 
entitled to vote or give an authorization or consent in regard to any 
matter to be acted upon and from whom proxy authorization or consent is 
not solicited on behalf of the registrant pursuant to section 14(a) of 
the Act:
    (i) A written information statement containing the information 
specified in Schedule 14C (Sec.  240.14c-101);
    (ii) A publicly-filed information statement, in the form and manner 
described in Sec.  240.14c-3(d), containing the information specified in 
Schedule 14C (Sec.  240.14c-101); or
    (iii) A written information statement included in a registration 
statement filed under the Securities Act of 1933 on Form S-4 or F-4 
(Sec.  239.25 or Sec.  239.34 of this chapter) or Form N-14 (Sec.  
239.23 of this chapter) and containing the information specified in such 
Form.
    (2) Notwithstanding paragraph (a)(1) of this section:
    (i) In the case of a class of securities in unregistered or bearer 
form, such statements need to be transmitted only to those security 
holders whose names are known to the registrant; and
    (ii) No such statements need to be transmitted to a security holder 
if a registrant would be excused from delivery of an annual report to 
security holders or a proxy statement under Sec.  240.14a-3(e)(2) if 
such section were applicable.
    (b) The information statement shall be sent or given at least 20 
calendar days prior to the meeting date or, in the case of corporate 
action taken pursuant to the consents or authorizations of security 
holders, at least 20 calendar days prior to the earliest date on which 
the corporate action may be taken.
    (c) If a transaction is a roll-up transaction as defined in Item 
901(c) of Regulation S-K (17 CFR 229.901(c)) and is registered (or 
authorized to be registered) on Form S-4 (17 CFR 229.25) or Form F-4 (17 
CFR 229.34), the information statement must be distributed to security 
holders no later than the lesser of 60 calendar days prior to the date 
on which the meeting of security holders is held or action is taken, or 
the maximum number of days permitted for giving notice under applicable 
state law.
    (d) A registrant shall transmit an information statement to security 
holders pursuant to paragraph (a) of this section by satisfying the 
requirements set forth in Sec.  240.14a-16; provided, however, that the 
registrant shall revise

[[Page 300]]

the information required in the Notice of Internet Availability of Proxy 
Materials, including changing the title of that notice, to reflect the 
fact that the registrant is not soliciting proxies for the meeting.

[51 FR 42070, Nov. 20, 1986, as amended at 56 FR 57254, Nov. 8, 1991; 57 
FR 1102, Jan. 10, 1992; 57 FR 48295, Oct. 22, 1992; 72 FR 4171, Jan. 29, 
2007; 72 FR 42239, Aug. 1, 2007]



Sec.  240.14c-3  Annual report to be furnished security holders.

    (a) If the information statement relates to an annual (or special 
meeting in lieu of the annual) meeting, or written consent in lieu of 
such meeting, of security holders at which directors of the registrant, 
other than an investment company registered under the Investment Company 
Act of 1940, are to be elected, it shall be accompanied or preceded by 
an annual report to security holders:
    (1) The annual report to security holders shall contain the 
information specified in paragraphs (b)(1) through (b)(11) of Sec.  
240.14a-3.
    (2) [Reserved]
    (b) Seven copies of the report sent to security holders pursuant to 
this rule shall be mailed to the Commission, solely for its information, 
not later than the date on which such report is first sent or given to 
security holders or the date on which preliminary copies, or definitive 
copies, if preliminary filing was not required, of the information 
statement are filed with the Commission pursuant to Rule 14c-5, 
whichever date is later. The report is not deemed to be ``filed'' with 
the Commission or subject to this regulation otherwise than as provided 
in this rule, or to the liabilities of section 18 of the Act, except to 
the extent that the registrant specifically requests that it be treated 
as a part of the information statement or incorporates it in the 
information statement or other filed report by reference.
    (c) A registrant will be considered to have delivered a Notice of 
Internet Availability of Proxy Materials, annual report to security 
holders or information statement to security holders of record who share 
an address if the requirements set forth in Sec.  240.14a-3(e)(1) are 
satisfied with respect to the Notice of Internet Availability of Proxy 
Materials, annual report to security holders or information statement, 
as applicable.
    (d) A registrant shall furnish an annual report to security holders 
pursuant to paragraph (a) of this section by satisfying the requirements 
set forth in Sec.  240.14a-16.

[39 FR 40770, Nov. 20, 1974, as amended at 45 FR 63647, Sept. 25, 1980; 
51 FR 42071, Nov. 20, 1986; 52 FR 48984, Dec. 29, 1987; 58 FR 26519, May 
4, 1993; 59 FR 52700, Oct. 19, 1994; 59 FR 67765, Dec. 30, 1994; 64 FR 
62547, Nov. 16, 1999; 65 FR 65751, Nov. 2, 2000; 72 FR 4172, Jan. 29, 
2007; 72 FR 42239, Aug. 1, 2007; 73 FR 977, Jan. 4, 2008]



Sec.  240.14c-4  Presentation of information in information statement.

    (a) The information included in the information statement shall be 
clearly presented and the statements made shall be divided into groups 
according to subject matter and the various groups of statements shall 
be preceded by appropriate headings. The order of items and sub-items in 
the schedule need not be followed. Where practicable and appropriate, 
the information shall be presented in tabular form. All amounts shall be 
stated in figures. Information required by more than one applicable item 
need not be repeated. No statement need be made in response to any item 
or sub-item which is inapplicable.
    (b) Any information required to be included in the information 
statement as to terms of securities or other subject matters which from 
a standpoint of practical necessity must be determined in the future may 
be stated in terms of present knowledge and intention. Subject to the 
foregoing, information which is not known to the registrant and which it 
is not reasonably within the power of the registrant to ascertain or 
procure may be omitted, if a brief statement of the circumstances 
rendering such information unavailable is made.
    (c) All printed information statements shall be in roman type at 
least as large and as legible as 10-point modern type except that to the 
extent necessary for convenient presentation, financial statements and 
other tabular data, but not the notes thereto, may be in roman type at 
least as large and as

[[Page 301]]

legible as 8-point modern type. All such type shall be leaded at least 2 
points.
    (d) Where an information statement is delivered through an 
electronic medium, issuers may satisfy legibility requirements 
applicable to printed documents, such as type size and font, by 
presenting all required information in a format readily communicated to 
investors.

[31 FR 262, Jan. 8, 1966, as amended at 36 FR 8935, May 15, 1971; 51 FR 
42071, Nov. 20, 1986; 61 FR 24657, May 15, 1996]



Sec.  240.14c-5  Filing requirements.

    (a) Preliminary information statement. Five preliminary copies of 
the information statement shall be filed with the Commission at least 10 
calendar days prior to the date definitive copies of such statement are 
first sent or given to security holders, or such shorter period prior to 
that date as the Commission may authorize upon a showing of good cause 
therefor. In computing the 10-day period, the filing date of the 
preliminary copies is to be counted as the first day and the 11th day is 
the date on which definitive copies of the information statement may be 
sent to security holders. A registrant, however, shall not file with the 
Commission a preliminary information statement if it relates to an 
annual (or special meeting in lieu of the annual) meeting, of security 
holders at which the only matters to be acted upon are:
    (1) The election of directors;
    (2) The election, approval or ratification of accountant(s);
    (3) A security holder proposal identified in the registrant's 
information statement pursuant to Item 4 of Schedule 14C (Sec.  240.14c-
101); and/or
    (4) The approval or ratification of a plan as defined in paragraph 
(a)(6)(ii) of Item 402 of Regulation S-K (Sec.  229.402(a)(6)(ii) of 
this chapter) or amendments to such a plan.

This exclusion from filing a preliminary information statement does not 
apply if the registrant comments upon or refers to a solicitation in 
opposition in connection with the meeting in its information statement.

    Note 1: The filing of revised material does not recommence the ten 
day time period unless the revised material contains material revisions 
or material new proposal(s) that constitute a fundamental change in the 
information statement.
    Note 2: The officials responsible for the preparation of the 
information statement should make every effort to verify the accuracy 
and completeness of the information required by the applicable rules. 
The preliminary statement should be filed with the Commission at the 
earliest practicable date.
    Note 3: Solicitation in Opposition--For purposes of the exclusion 
from filing a preliminary information statement, a ``solicitation in 
opposition'' includes: (a) Any solicitation opposing a proposal 
supported by the registrant; and (b) any solicitation supporting a 
proposal that the registrant does not expressly support, other than a 
security holder proposal identified in the registrant's information 
statement pursuant to Item 4 of Schedule 14C (Sec.  240.14c-101 of this 
chapter). The identification of a security holder proposal in the 
registrant's information statement does not constitute a ``solicitation 
in opposition,'' even if the registrant opposes the proposal and/or 
includes a statement in opposition to the proposal.
    Note 4: A registrant that is filing an information statement in 
preliminary form only because the registrant has commented on or 
referred to an opposing solicitation should indicate that fact in a 
transmittal letter when filing the preliminary material with the 
Commission.

    (b) Definitive information statement. Eight definitive copies of the 
information statement, in the form in which it is furnished to security 
holders, must be filed with the Commission no later than the date the 
information statement is first sent or given to security holders. Three 
copies of these materials also must be filed with, or mailed for filing 
to, each national securities exchange on which the registrant has a 
class of securities listed and registered.
    (c) Release dates. All preliminary material filed pursuant to 
paragraph (a) of this section shall be accompanied by a statement of the 
date on which copies thereof filed pursuant to paragraph (b) of this 
section are intended to be released to security holders. All definitive 
material filed pursuant to paragraph (b) of this section shall be 
accompanied by a statement of the date on which copies of such material 
have been released to security holders or, if not released, the date on 
which copies thereof are intended to be released.
    (d)(1) Public availability of information. All copies of material 
filed pursuant to paragraph (a) of this section shall be

[[Page 302]]

clearly marked ``Preliminary Copies,'' and shall be deemed immediately 
available for public inspection unless confidential treatment is 
obtained pursuant to paragraph (d)(2) of this section.
    (2) Confidential treatment. If action will be taken on any matter 
specified in Item 14 of Schedule 14A (Sec.  240.14a-101), all copies of 
the preliminary information statement filed under paragraph (a) of this 
section will be for the information of the Commission only and will not 
be deemed available for public inspection until filed with the 
Commission in definitive form so long as:
    (i) The information statement does not relate to a matter or 
proposal subject to Sec.  240.13e-3 or a roll-up transaction as defined 
in Item 901(c) of Regulation S-K (Sec.  229.901(c) of this chapter);
    (ii) Neither the parties to the transaction nor any persons 
authorized to act on their behalf have made any public communications 
relating to the transaction except for statements where the content is 
limited to the information specified in Sec.  230.135 of this chapter; 
and
    (iii) The materials are filed in paper and marked ``Confidential, 
For Use of the Commission Only''. In all cases, the materials may be 
disclosed to any department or agency of the United States Government 
and to the Congress, and the Commission may make any inquiries or 
investigation into the materials as may be necessary to conduct an 
adequate review by the Commission.

    Instruction to paragraph (d)(2): If communications are made publicly 
that go beyond the information specified in Sec.  230.135, the materials 
must be re-filed publicly with the Commission.

    (e) Revised information statements. Where any information statement 
filed pursuant to this section is amended or revised, two of the copies 
of such amended or revised material filed pursuant to this section shall 
be marked to indicate clearly and precisely the changes effected 
therein. If the amendment or revision alters the text of the material, 
the changes in such text shall be indicated by means of underscoring or 
in some other appropriate manner.
    (f) Merger material. Notwithstanding the foregoing provisions of 
this section, any information statement or other material included in a 
registration statement filed under the Securities Act of 1933 on Form N-
14, S-4, or F-4 (Sec.  239.23, Sec.  239.25 or Sec.  239.34 of this 
chapter) shall be deemed filed both for the purposes of that Act and for 
the purposes of this section, but separate copies of such material need 
not be furnished pursuant to this section, nor shall any fee be required 
under paragraph (a) of this section. However, any additional material 
used after the effective date of the registration statement on Form N-
14, S-4, or F-4 shall be filed in accordance with this section, unless 
separate copies of such material are required to be filed as an 
amendment of such registration statement.
    (g) Fees. At the time of filing a preliminary information statement 
regarding an acquisition, merger, spinoff, consolidation or proposed 
sale or other disposition of substantially all the assets of the 
company, the registrant shall pay the Commission a fee, no part of which 
shall be refunded, established in accordance with Sec.  240.0-11.
    (h) Cover page. Each information statement filed with the Commission 
shall include a cover page in the form set forth in Schedule 14C (Sec.  
240.14c-101). The cover page required by this paragraph need not be 
distributed to security holders.

[51 FR 42071, Nov. 20, 1986, as amended at 52 FR 48984, Dec. 29, 1987; 
57 FR 48295, Oct. 22, 1992; 58 FR 14684, Mar. 18, 1993; 58 FR 69226, 
Dec. 30, 1993; 59 FR 67765, Dec. 30, 1994; 61 FR 49960, Sept. 24, 1996; 
64 FR 61459, Nov. 10, 1999; 71 FR 53263, Sept. 8, 2006; 72 FR 4172, Jan. 
29, 2007]



Sec.  240.14c-6  False or misleading statements.

    (a) No information statement shall contain any statement which, at 
the time and in the light of the circumstances under which it is made, 
is false or misleading with respect to any material fact, or which omits 
to state any material fact necessary in order to make the statements 
therein not false or misleading or necessary to correct any statement in 
any earlier communication with respect to the same

[[Page 303]]

meeting or subject matter which has become false or misleading.
    (b) The fact that an information statement has been filed with or 
examined by the Commission shall not be deemed a finding by the 
Commission that such material is accurate or complete or not false or 
misleading, or that the Commission has passed upon the merits of or 
approved any statement contained therein or any matter to be acted upon 
by security holders. No representation contrary to the foregoing shall 
be made.

[31 FR 262, Jan. 8, 1966]



Sec.  240.14c-7  Providing copies of material for certain beneficial owners.

    (a) If the registrant knows that securities of any class entitled to 
vote at a meeting, or by written authorizations or consents if no 
meeting is held, are held of record by a broker, dealer, voting trustee, 
or bank, association, or other entity that exercises fiduciary powers in 
nominee name or otherwise, the registrant shall:
    (1) By first class mail or other equally prompt means:
    (i) Inquire of each such record holder:
    (A) Whether other persons are the beneficial owners of such 
securities and, if so, the number of copies of the information statement 
necessary to supply such material to such beneficial owners;
    (B) In the case of an annual (or special meeting in lieu of the 
annual) meeting, or written consents in lieu of such meeting, at which 
directors are to be elected, the number of copies of the annual report 
to security holders, necessary to supply such report to such beneficial 
owners for whom proxy material has not been and is not to be made 
available and to whom such reports are to be distributed by such record 
holder or its nominee and not by the registrant;
    (C) If the record holder or respondent bank has an obligation under 
Sec.  240.14b-1(b)(3) or Sec.  240.14b-2(b)(4) (ii) and (iii), whether 
an agent has been designated to act on its behalf in fulfilling such 
obligation, and, if so, the name and address of such agent; and
    (D) Whether it holds the registrant's securities on behalf of any 
respondent bank and, if so, the name and address of each such respondent 
bank; and
    (ii) Indicate to each such record holder:
    (A) Whether the registrant pursuant to paragraph (c) of this 
section, intends to distribute the annual report to security holders to 
beneficial owners of its securities whose names, addresses and 
securities positions are disclosed pursuant to Sec.  240.14b-1(b)(3) and 
Sec.  240.14b-2(b)(4) (ii) and (iii);
    (B) The record date; and
    (C) At the option of the registrant, any employee benefit plan 
established by an affiliate of the registrant that holds securities of 
the registrant that the registrant elects to treat as exempt employee 
benefit plan securities;
    (2) Upon receipt of a record holder's or respondent bank's response 
indicating, pursuant to Sec.  240.14b-2(a)(1), the names and addresses 
of its respondent banks, within one business day after the date such 
response is received, make an inquiry of and give notification to each 
such respondent bank in the same manner required by paragraph (a)(1) of 
this section; Provided, however, the inquiry required by paragraphs 
(a)(1) and (a)(2) of this section shall not cover beneficial owners of 
exempt employee benefit plan securities;
    (3) Make the inquiry required by paragraph (a)(1) of this section on 
the earlier of:
    (i) At least 20 business days prior to the record date of the 
meeting of security holders or the record date of written consents in 
lieu of a meeting; or
    (ii) At least 20 business days prior to the date the information 
statement is required to be sent or given pursuant to Sec.  240.14c-
2(b);


Provided, however, That, if a record holder or respondent bank has 
informed the registrant that a designated office(s) or department(s) is 
to receive such inquiries, the inquiry shall be made to such designated 
office(s) or department(s);
    (4) Supply, in a timely manner, each record holder and respondent 
bank of whom the inquiries required by paragraphs (a)(1) and (a)(2) of 
this section are made with copies of the information statement and/or 
the annual report to security holders, in such quantities, assembled in 
such form and at

[[Page 304]]

such place(s), as the record holder or respondent bank may reasonably 
request in order to send such material to each beneficial owner of 
securities who is to be furnished with such material by the record 
holder or respondent bank; and
    (5) Upon the request of any record holder or respondent bank that is 
supplied with Notices of Internet Availability of Proxy Materials, 
information statements and/or annual reports to security holders 
pursuant to paragraph (a)(3) of this section, pay its reasonable 
expenses for completing the sending of such material to beneficial 
owners.

    Note 1: If the registrant's list of security holders indicates that 
some of its securities are registered in the name of a clearing agency 
registered pursuant to section 17A of the Act (e.g., ``Cede & Co.,'' 
nominee for the Depository Trust Company), the registrant shall make 
appropriate inquiry of the clearing agency and thereafter of the 
participants in such clearing agency who may hold on behalf of a 
beneficial owner or respondent bank, and shall comply with the above 
paragraph with respect to any such participant (see Sec.  240.14c-1 
(h)).
    Note 2: The attention of registrants is called to the fact that each 
broker, dealer, bank, association, and other entity that exercises 
fiduciary powers has an obligation pursuant to Sec.  240.14b-1 and Sec.  
240.14b-2 (except as provided therein with respect to exempt employee 
benefit plan securities held in nominee name) and, with respect to 
brokers and dealers, applicable self-regulatory organization 
requirements to obtain and forward, within the time periods prescribed 
therein, (a) information statements to beneficial owners on whose behalf 
it holds securities, and (b) annual reports to security holders to 
beneficial owners on whose behalf it holds securities, unless the 
registrant has notified the record holder or respondent bank that it has 
assumed responsibility to send such material to beneficial owners whose 
names, addresses, and securities positions are disclosed pursuant to 
Sec.  240.14b-1(b)(3) and Sec.  240.14b-2(b)(4) (ii) and (iii).
    Note 3: The attention of registrants is called to the fact that 
registrants have an obligation, pursuant to paragraph (d) of this 
section, to cause information statements and annual reports to security 
holders to be furnished, in accordance with Sec.  240.14c-2, to 
beneficial owners of exempt employee benefit plan securities.

    (b) Any registrant requesting pursuant to Sec.  240.14b-1(b)(3) and 
Sec.  240.14b-2(b)(4) (ii) and (iii) a list of names, addresses and 
securities positions of beneficial owners of its securities who either 
have consented or have not objected to disclosure of such information 
shall:
    (1) By first class mail or other equally prompt means, inquire of 
each record holder and each respondent bank identified to the registrant 
pursuant to Sec.  240.14b-2(e)(1) whether such record holder or 
respondent bank holds the registrant's securities on behalf of any 
respondent banks and, if so, the name and address of each such 
respondent bank;
    (2) Request such list be compiled as of a date no earlier than five 
business days after the date the registant's request is received by the 
record holder or respondent bank; Provided, however, That if the record 
holder or respondent bank has informed the registrant that a designated 
office(s) or department(s) is to receive such requests, the request 
shall be made to such designated office(s) or department(s);
    (3) Make such request to the following persons that hold the 
registrant's securities on behalf of beneficial owners: all brokers, 
dealers, banks, associations and other entities that exercise fiduciary 
powers; Provided, however, such request shall not cover beneficial 
owners of exempt employee benefit plan securities as defined in Sec.  
240.14a-1(d)(1); and, at the option of the registrant, such request may 
give notice of any employee benefit plan established by an affiliate of 
the registrant that holds securities of the registrant that the 
registrant elects to treat as exempt employee benefit plan securities;
    (4) Use the information furnished in response to such request 
exclusively for purposes of corporate communications; and
    (5) Upon the request of any record holder or respondent bank to whom 
such request is made, pay the reasonable expenses, both direct and 
indirect, of providing beneficial owner information.

    Note: A registrant will be deemed to have satisfied its obligations 
under paragraph (b) of this section by requesting consenting and non-
objecting beneficial owner lists from a designated agent acting on 
behalf of the record holder or respondent bank and paying

[[Page 305]]

to that designated agent the reasonable expenses of providing the 
beneficial owner information.

    (c) A registrant, at its option, may send by mail or other equally 
prompt means, its annual report to security holders to the beneficial 
owners whose identifying information is provided by record holders and 
respondent banks, pursuant to Sec.  240.14b-1(b)(3) and Sec.  240.14b-
2(b)(4) (ii) and (iii), provided that such registrant notifies the 
record holders and respondent banks at the time it makes the inquiry 
required by paragraph (a) of this section that the registrant will send 
the annual report to security holders to the beneficial owners so 
identified.
    (d) If a registrant furnishes information statements to record 
holders and respondent banks who hold securities on behalf of beneficial 
owners, the registrant shall cause information statements and annual 
reports to security holders to be furnished, in accordance with Sec.  
240.14c-2, to beneficial owners of exempt employee benefit plan 
securities.

[51 FR 44280, Dec. 9, 1986, as amended at 52 FR 23649, June 24, 1987; 53 
FR 16406, May 9, 1988; 57 FR 1102, Jan. 10, 1992; 61 FR 24657, May 15, 
1996; 64 FR 62547, Nov. 16, 1999; 72 FR 4172, Jan. 29, 2007]



Sec.  240.14c-101  Schedule 14C. Information required in information statement.

                        Schedule 14C Information

   Information Statement Pursuant to Section 14(c) of the Securities 
                          Exchange Act of 1934

                            (Amendment No. )

Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 
          14c-5(d)(2))
[ ] Definitive Information Statement
________________________________________________________________________
(Name of Registrant As Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11
    (1) Title of each class of securities to which transaction applies:
________________________________________________________________________
    (2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
    (3) Per unit price or other underlying value of transaction computed 
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the 
filing fee is calculated and state how it was determined):
________________________________________________________________________
    (4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
    (5) Total fee paid:
________________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange 
          Act Rule 0-11(a)(2) and identify the filing for which the 
          offsetting fee was paid previously. Identify the previous 
          filing by registration statement number, or the Form or 
          Schedule and the date of its filing.
    (1) Amount Previously Paid:
________________________________________________________________________
    (2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
    (3) Filing Party:
________________________________________________________________________
    (4) Date Filed:
________________________________________________________________________

                                  Note

    Note to Cover Page: Where any item, other than Item 4, calls for 
information with respect to any matter to be acted upon at the meeting 
or, if no meeting is being held, by written authorization or consent, 
such item need be answered only with respect to proposals to be made by 
the registrant. Registrants and acquirees that meet the definition of 
``smaller reporting company'' under Rule 12b-2 of the Exchange Act 
(Sec.  240.12b-2) shall refer to the disclosure items in Regulation S-K 
(Sec. Sec.  229.10 through 229.1123 of this chapter) with specific 
attention to the scaled disclosure requirements for smaller reporting 
companies, if any. A smaller reporting company may provide the 
information in Article 8 of Regulation S-X in lieu of any financial 
statements required by Item 1 of Sec.  240.14c-101.

    Item 1. Information required by Items of Schedule 14A (17 CFR 
240.14a-101). Furnish the information called for by all of the items of 
Schedule 14A of Regulation 14A (17 CFR 240.14a-101) (other than Items 
1(c). 2, 4 and 5 thereof) which would be applicable to any matter to be 
acted upon at the meeting if proxies were to be solicited in connection 
with the meeting. Notes A, C, D, and E to Schedule 14A are also 
applicable to Schedule 14C.
    Item 2. Statement that proxies are not solicited. The following 
statement shall be set forth on the first page of the information 
statement in bold-face type:

[[Page 306]]

We Are Not Asking You for a Proxy and You are Requested Not To Send Us a 
                                  Proxy

    Item 3. Interest of certain persons in or opposition to matters to 
be acted upon. (a) Describe briefly any substantial interest, direct or 
indirect, by security holdings or otherwise, of each of the following 
persons in any matter to be acted upon, other than elections to office:
    (1) Each person who has been a director or officer of the registrant 
at any time since the beginning of the last fiscal year;
    (2) Each nominee for election as a director of the registrant;
    (3) Each associate of any of the foregoing persons.
    (b) Give the name of any director of the registrant who has informed 
the registrant in writing that he intends to oppose any action to be 
taken by the registrant at the meeting and indicate the action which he 
intends to oppose.
    (c) Furnish the information required by Item 402(t) of Regulation S-
K (Sec.  229.402(t) of this chapter).
    Item 4. Proposals by security holders. If any security holder 
entitled to vote at the meeting or by written authorization or consent 
has submitted to the registrant a reasonable time before the information 
statement is to be transmitted to security holders a proposal, other 
than elections to office, which is accompanied by notice of his 
intention to present the proposal for action at the meeting the 
registrant shall, if a meeting is held, make a statement to that effect, 
identify the proposal and indicate the disposition proposed to be made 
of the proposal by the registrant at the meeting.
    Instructions. 1. This item need not be answered as to any proposal 
submitted with respect to an annual meeting if such proposal is 
submitted less than 60 days in advance of a day corresponding to the 
date of sending a proxy statement or information statement in connection 
with the last annual meeting of security holders.
    2. If the registrant intends to rule a proposal out of order, the 
Commission shall be so advised 20 calendar days prior to the date the 
definitive copies of the information statement are filed with the 
Commission, together with a statement of the reasons why the proposal is 
not deemed to be a proper subject for action by security holders.
    Item 5. Delivery of documents to security holders sharing an 
address. If one annual report to security holders, information 
statement, or Notice of Internet Availability of Proxy Materials is 
being delivered to two or more security holders who share an address, 
furnish the following information in accordance with Sec.  240.14a-
3(e)(1):
    (a) State that only one annual report to security holders, 
information statement, or Notice of Internet Availability of Proxy 
Materials, as applicable, is being delivered to multiple security 
holders sharing an address unless the registrant has received contrary 
instructions from one or more of the security holders;
    (b) Undertake to deliver promptly upon written or oral request a 
separate copy of the annual report to security holders, information 
statement, or Notice of Internet Availability of Proxy Materials, as 
applicable, to a security holder at a shared address to which a single 
copy of the documents was delivered and provide instructions as to how a 
security holder can notify the registrant that the security holder 
wishes to receive a separate copy of an annual report to security 
holders, information statement, or Notice of Internet Availability of 
Proxy Materials, as applicable;
    (c) Provide the phone number and mailing address to which a security 
holder can direct a notification to the registrant that the security 
holder wishes to receive a separate annual report to security holders, 
information statement, or Notice of Internet Availability of Proxy 
Materials, as applicable, in the future; and
    (d) Provide instructions how security holders sharing an address can 
request delivery of a single copy of annual reports to security holders, 
information statements, or Notices of Internet Availability of Proxy 
Materials if they are receiving multiple copies of annual reports to 
security holders, information statements, or Notices of Internet 
Availability of Proxy Materials.

[51 FR 42072, Nov. 20, 1986, as amended at 52 FR 48984, Dec. 29, 1987; 
57 FR 36495, Aug. 13, 1992; 58 FR 14684, Mar. 18, 1993; 59 FR 67765, 
Dec. 30, 1994; 61 FR 49960, Sept. 24, 1996; 65 FR 65752, Nov. 2, 2000; 
72 FR 4172, Jan. 29, 2007; 73 FR 977, Jan. 4, 2008; 76 FR 6046, Feb. 2, 
2011]

                             Regulation 14D

                       ATTENTION ELECTRONIC FILERS

THIS REGULATION SHOULD BE READ IN CONJUNCTION WITH REGULATION S-T (PART 
232 OF THIS CHAPTER), WHICH GOVERNS THE PREPARATION AND SUBMISSION OF 
DOCUMENTS IN ELECTRONIC FORMAT. MANY PROVISIONS RELATING

[[Page 307]]

TO THE PREPARATION AND SUBMISSION OF DOCUMENTS IN PAPER FORMAT CONTAINED 
IN THIS REGULATION ARE SUPERSEDED BY THE PROVISIONS OF REGULATION S-T 
FOR DOCUMENTS REQUIRED TO BE FILED IN ELECTRONIC FORMAT.



Sec.  240.14d-1  Scope of and definitions applicable to Regulations
14D and 14E.

    (a) Scope. Regulation 14D (Sec. Sec.  240.14d-1 through 240.14d-101) 
shall apply to any tender offer that is subject to section 14(d)(1) of 
the Act (15 U.S.C. 78n(d)(1)), including, but not limited to, any tender 
offer for securities of a class described in that section that is made 
by an affiliate of the issuer of such class. Regulation 14E (Sec. Sec.  
240.14e-1 through 240.14e-8) shall apply to any tender offer for 
securities (other than exempted securities) unless otherwise noted 
therein.
    (b) The requirements imposed by sections 14(d)(1) through 14(d)(7) 
of the Act, Regulation 14D and Schedules TO and 14D-9 thereunder, and 
Rule 14e-1 of Regulation 14E under the Act, shall be deemed satisfied 
with respect to any tender offer, including any exchange offer, for the 
securities of an issuer incorporated or organized under the laws of 
Canada or any Canadian province or territory, if such issuer is a 
foreign private issuer and is not an investment company registered or 
required to be registered under the Investment Company Act of 1940, if 
less than 40 percent of the class of securities outstanding that is the 
subject of the tender offer is held by U.S. holders, and the tender 
offer is subject to, and the bidder complies with, the laws, regulations 
and policies of Canada and/or any of its provinces or territories 
governing the conduct of the offer (unless the bidder has received an 
exemption(s) from, and the tender offer does not comply with, 
requirements that otherwise would be prescribed by Regulation 14D or 
14E), provided that:
    (1) In the case of tender offers subject to section 14(d)(1) of the 
Act, where the consideration for a tender offer subject to this section 
consists solely of cash, the entire disclosure document or documents 
required to be furnished to holders of the class of securities to be 
acquired shall be filed with the Commission on Schedule 14D-1F (Sec.  
240.14d-102) and disseminated to shareholders of the subject company 
residing in the United States in accordance with such Canadian laws, 
regulations and policies; or
    (2) Where the consideration for a tender offer subject to this 
section includes securities of the bidder to be issued pursuant to the 
offer, any registration statement and/or prospectus relating thereto 
shall be filed with the Commission along with the Schedule 14D-1F 
referred to in paragraph (b)(1) of this section, and shall be 
disseminated, together with the home jurisdiction document(s) 
accompanying such Schedule, to shareholders of the subject company 
residing in the United States in accordance with such Canadian laws, 
regulations and policies.

    Notes: 1. For purposes of any tender offer, including any exchange 
offer, otherwise eligible to proceed in accordance with Rule 14d-1(b) 
under the Act, the issuer of the subject securities will be presumed to 
be a foreign private issuer and U.S. holders will be presumed to hold 
less than 40 percent of such outstanding securities, unless (a) the 
aggregate trading volume of that class on national securities exchanges 
in the United States and on NASDAQ exceeded its aggregate trading volume 
on securities exchanges in Canada and on the Canadian Dealing Network, 
Inc. (``CDN'') over the 12 calendar month period prior to commencement 
of this offer, or if commenced in response to a prior offer, over the 12 
calendar month period prior to the commencement of the initial offer 
(based on volume figures published by such exchanges and NASDAQ and 
CDN); (b) the most recent annual report or annual information form filed 
or submitted by the issuer with securities regulators of Ontario, 
Quebec, British Columbia or Alberta (or, if the issuer of the subject 
securities is not a reporting issuer in any of such provinces, with any 
other Canadian securities regulator) or with the Commission indicates 
that U.S. holders hold 40 percent or more of the outstanding subject 
class of securities; or (c) the offeror has actual knowledge that the 
level of U.S. ownership equals or exceeds 40 percent of such securities.
    2. Notwithstanding the grant of an exemption from one or more of the 
applicable Canadian regulatory provisions imposing requirements that 
otherwise would be prescribed by Regulation 14D or 14E, the tender offer 
will be eligible to proceed in accordance with the requirements of this 
section if the

[[Page 308]]

Commission by order determines that the applicable Canadian regulatory 
provisions are adequate to protect the interest of investors.

    (c) Tier I. Any tender offer for the securities of a foreign private 
issuer as defined in Sec.  240.3b-4 is exempt from the requirements of 
sections 14(d)(1) through 14(d)(7) of the Act (15 U.S.C. 78n(d)(1) 
through 78n(d)(7)), Regulation 14D (Sec. Sec.  240.14d-1 through 
240.14d-10) and Schedules TO (Sec.  240.14d-100) and 14D-9 (Sec.  
240.14d-101) thereunder, and Sec.  240.14e-1 and Sec.  240.14e-2 of 
Regulation 14E under the Act if the following conditions are satisfied:
    (1) U.S. ownership limitation. Except in the case of a tender offer 
that is commenced during the pendency of a tender offer made by a prior 
bidder in reliance on this paragraph or Sec.  240.13e-4(h)(8), U.S. 
holders do not hold more than 10 percent of the class of securities 
sought in the offer (as determined under Instructions 2 or 3 to 
paragraphs (c) and (d) of this section).
    (2) Equal treatment. The bidder must permit U.S. holders to 
participate in the offer on terms at least as favorable as those offered 
any other holder of the same class of securities that is the subject of 
the tender offer; however:
    (i) Registered exchange offers. If the bidder offers securities 
registered under the Securities Act of 1933 (15 U.S.C. 77a et seq.), the 
bidder need not extend the offer to security holders in those states or 
jurisdictions that prohibit the offer or sale of the securities after 
the bidder has made a good faith effort to register or qualify the offer 
and sale of securities in that state or jurisdiction, except that the 
bidder must offer the same cash alternative to security holders in any 
such state or jurisdiction that it has offered to security holders in 
any other state or jurisdiction.
    (ii) Exempt exchange offers. If the bidder offers securities exempt 
from registration under Sec.  230.802 of this chapter, the bidder need 
not extend the offer to security holders in those states or 
jurisdictions that require registration or qualification, except that 
the bidder must offer the same cash alternative to security holders in 
any such state or jurisdiction that it has offered to security holders 
in any other state or jurisdiction.
    (iii) Cash only consideration. The bidder may offer U.S. holders 
only a cash consideration for the tender of the subject securities, 
notwithstanding the fact that the bidder is offering security holders 
outside the United States a consideration that consists in whole or in 
part of securities of the bidder, so long as the bidder has a reasonable 
basis for believing that the amount of cash is substantially equivalent 
to the value of the consideration offered to non-U.S. holders, and 
either of the following conditions are satisfied:
    (A) The offered security is a ``margin security'' within the meaning 
of Regulation T (12 CFR 220.2) and the issuer undertakes to provide, 
upon the request of any U.S. holder or the Commission staff, the closing 
price and daily trading volume of the security on the principal trading 
market for the security as of the last trading day of each of the six 
months preceding the announcement of the offer and each of the trading 
days thereafter; or
    (B) If the offered security is not a ``margin security'' within the 
meaning of Regulation T (12 CFR 220.2) the issuer undertakes to provide, 
upon the request of any U.S. holder or the Commission staff, an opinion 
of an independent expert stating that the cash consideration offered to 
U.S. holders is substantially equivalent to the value of the 
consideration offered security holders outside the United States.
    (iv) Disparate tax treatment. If the bidder offers loan notes solely 
to offer sellers tax advantages not available in the United States and 
these notes are neither listed on any organized securities market nor 
registered under the Securities Act of 1933 (15 U.S.C. 77a et seq.), the 
loan notes need not be offered to U.S. holders.
    (3) Informational documents. (i) The bidder must disseminate any 
informational document to U.S. holders, including any amendments 
thereto, in English, on a comparable basis to that provided to security 
holders in the home jurisdiction.
    (ii) If the bidder disseminates by publication in its home 
jurisdiction, the bidder must publish the information in the United 
States in a manner reasonably calculated to inform U.S. holders of the 
offer.

[[Page 309]]

    (iii) In the case of tender offers for securities described in 
section 14(d)(1) of the Act (15 U.S.C. 78n(d)(1)), if the bidder 
publishes or otherwise disseminates an informational document to the 
holders of the securities in connection with the tender offer, the 
bidder must furnish that informational document, including any 
amendments thereto, in English, to the Commission on Form CB (Sec.  
249.480 of this chapter) by the first business day after publication or 
dissemination. If the bidder is a foreign company, it must also file a 
Form F-X (Sec.  239.42 of this chapter) with the Commission at the same 
time as the submission of Form CB to appoint an agent for service in the 
United States.
    (4) Investment companies. The issuer of the securities that are the 
subject of the tender offer is not an investment company registered or 
required to be registered under the Investment Company Act of 1940 (15 
U.S.C. 80a-1 et seq.), other than a registered closed-end investment 
company.
    (d) Tier II. A person conducting a tender offer (including any 
exchange offer) that meets the conditions in paragraph (d)(1) of this 
section shall be entitled to the exemptive relief specified in paragraph 
(d)(2) of this section, provided that such tender offer complies with 
all the requirements of this section other than those for which an 
exemption has been specifically provided in paragraph (d)(2) of this 
section. In addition, a person conducting a tender offer subject only to 
the requirements of section 14(e) of the Act (15 U.S.C. 78n(e)) and 
Regulation 14E thereunder (Sec. Sec.  240.14e-1 through 240.14e-8) that 
meets the conditions in paragraph (d)(1) of the section also shall be 
entitled to the exemptive relief specified in paragraph (d)(2) of this 
section, to the extent needed under the requirements of Regulation 14E, 
so long as the tender offer complies with all requirements of Regulation 
14E other than those for which an exemption has been specifically 
provided in paragraph (d)(2) of this section:
    (1) Conditions. (i) The subject company is a foreign private issuer 
as defined in Sec.  240.3b-4 and is not an investment company registered 
or required to be registered under the Investment Company Act of 1940 
(15 U.S.C. 80a-1 et seq.), other than a registered closed-end investment 
company;
    (ii) Except in the case of a tender offer that is commenced during 
the pendency of a tender offer made by a prior bidder in reliance on 
this paragraph or Sec.  240.13e-4(i), U.S. holders do not hold more than 
40 percent of the class of securities sought in the offer (as determined 
under Instructions 2 or 3 to paragraphs (c) and (d) of this section); 
and
    (iii) The bidder complies with all applicable U.S. tender offer laws 
and regulations, other than those for which an exemption has been 
provided for in paragraph (d)(2) of this section.
    (2) Exemptions--(i) Equal treatment--loan notes. If the bidder 
offers loan notes solely to offer sellers tax advantages not available 
in the United States and these notes are neither listed on any organized 
securities market nor registered under the Securities Act of 1933 (15 
U.S.C. 77a et seq.), the loan notes need not be offered to U.S. holders, 
notwithstanding Sec.  240.14d-10.
    (ii) Equal treatment--separate U.S. and foreign offers. 
Notwithstanding the provisions of Sec.  240.14d-10, a bidder conducting 
a tender offer meeting the conditions of paragraph (d)(1) of this 
section may separate the offer into multiple offers: One offer made to 
U.S. holders, which also may include all holders of American Depositary 
Shares representing interests in the subject securities, and one or more 
offers made to non-U.S. holders. The U.S. offer must be made on terms at 
least as favorable as those offered any other holder of the same class 
of securities that is the subject of the tender offers. U.S. holders may 
be included in the foreign offer(s) only where the laws of the 
jurisdiction governing such foreign offer(s) expressly preclude the 
exclusion of U.S. holders from the foreign offer(s) and where the offer 
materials distributed to U.S. holders fully and adequately disclose the 
risks of participating in the foreign offer(s).
    (iii) Notice of extensions. Notice of extensions made in accordance 
with the requirements of the home jurisdiction law or practice will 
satisfy the requirements of Sec.  240.14e-1(d).

[[Page 310]]

    (iv) Prompt payment. Payment made in accordance with the 
requirements of the home jurisdiction law or practice will satisfy the 
requirements of Sec.  240.14e-1(c). Where payment may not be made on a 
more expedited basis under home jurisdiction law or practice, payment 
for securities tendered during any subsequent offering period within 20 
business days of the date of tender will satisfy the prompt payment 
requirements of Sec.  240.14d-11(e). For purposes of this paragraph (d), 
a business day is determined with reference to the target's home 
jurisdiction.
    (v) Subsequent offering period/Withdrawal rights. A bidder will 
satisfy the announcement and prompt payment requirements of Sec.  
240.14d-11(d), if the bidder announces the results of the tender offer, 
including the approximate number of securities deposited to date, and 
pays for tendered securities in accordance with the requirements of the 
home jurisdiction law or practice and the subsequent offering period 
commences immediately following such announcement. Notwithstanding 
section 14(d)(5) of the Act (15 U.S.C. 78n(d)(5)), the bidder need not 
extend withdrawal rights following the close of the offer and prior to 
the commencement of the subsequent offering period.
    (vi) Payment of interest on securities tendered during subsequent 
offering period. Notwithstanding the requirements of Sec.  240.14d-
11(f), the bidder may pay interest on securities tendered during a 
subsequent offering period, if required under applicable foreign law. 
Paying interest on securities tendered during a subsequent offering 
period in accordance with this section will not be deemed to violate 
Sec.  240.14d-10(a)(2).
    (vii) Suspension of withdrawal rights during counting of tendered 
securities. The bidder may suspend withdrawal rights required under 
section 14(d)(5) of the Act (15 U.S.C. 78n(d)(5)) at the end of the 
offer and during the period that securities tendered into the offer are 
being counted, provided that:
    (A) The bidder has provided an offer period including withdrawal 
rights for a period of at least 20 U.S. business days;
    (B) At the time withdrawal rights are suspended, all offer 
conditions have been satisfied or waived, except to the extent that the 
bidder is in the process of determining whether a minimum acceptance 
condition included in the terms of the offer has been satisfied by 
counting tendered securities; and
    (C) Withdrawal rights are suspended only during the counting process 
and are reinstated immediately thereafter, except to the extent that 
they are terminated through the acceptance of tendered securities.
    (viii) Mix and match elections and the subsequent offering period. 
Notwithstanding the requirements of Sec.  240.14d-11(b), where the 
bidder offers target security holders a choice between different forms 
of consideration, it may establish a ceiling on one or more forms of 
consideration offered. Notwithstanding the requirements of Sec.  
240.14d-11(f), a bidder that establishes a ceiling on one or more forms 
of consideration offered pursuant to this subsection may offset 
elections of tendering security holders against one another, subject to 
proration, so that elections are satisfied to the greatest extent 
possible and prorated to the extent that they cannot be satisfied in 
full. Such a bidder also may separately offset and prorate securities 
tendered during the initial offering period and those tendered during 
any subsequent offering period, notwithstanding the requirements of 
Sec.  240.14d-10(c).
    (ix) Early termination of an initial offering period. A bidder may 
terminate an initial offering period, including a voluntary extension of 
that period, if at the time the initial offering period and withdrawal 
rights terminate, the following conditions are met:
    (A) The initial offering period has been open for at least 20 U.S. 
business days;
    (B) The bidder has adequately discussed the possibility of and the 
impact of the early termination in the original offer materials;
    (C) The bidder provides a subsequent offering period after the 
termination of the initial offering period;
    (D) All offer conditions are satisfied as of the time when the 
initial offering period ends; and
    (E) The bidder does not terminate the initial offering period or any 
extension of that period during any mandatory

[[Page 311]]

extension required under U.S. tender offer rules.

    Instructions to paragraphs (c) and (d): 1. Home jurisdiction means 
both the jurisdiction of the subject company's incorporation, 
organization or chartering and the principal foreign market where the 
subject company's securities are listed or quoted.
    2. U.S. holder means any security holder resident in the United 
States. Except as otherwise provided in Instruction 3 below, to 
determine the percentage of outstanding securities held by U.S. holders:
    i. Calculate the U.S. ownership as of a date no more than 60 before 
and no more than 30 days after public announcement of the tender offer. 
If you are unable to calculate as of a date within these time frames, 
the calculation may be made as of the most recent practicable date 
before public announcement, but in no event earlier than 120 days before 
announcement;
    ii. Include securities underlying American Depositary Shares 
convertible or exchangeable into the securities that are the subject of 
the tender offer when calculating the number of subject securities 
outstanding, as well as the number held by U.S. holders. Exclude from 
the calculations other types of securities that are convertible or 
exchangeable into the securities that are the subject of the tender 
offer, such as warrants, options and convertible securities. Exclude 
from those calculations securities held by the bidder;
    iii. Use the method of calculating record ownership in Rule 12g3-
2(a) under the Act (Sec.  240.12g3-2(a) of this chapter), except that 
your inquiry as to the amount of securities represented by accounts of 
customers resident in the United States may be limited to brokers, 
dealers, banks and other nominees located in the United States, the 
subject company's jurisdiction of incorporation or that of each 
participant in a business combination, and the jurisdiction that is the 
primary trading market for the subject securities, if different than the 
subject company's jurisdiction of incorporation;
    iv. If, after reasonable inquiry, you are unable to obtain 
information about the amount of securities represented by accounts of 
customers resident in the United States, you may assume, for purposes of 
this definition, that the customers are residents of the jurisdiction in 
which the nominee has its principal place of business; and
    v. Count securities as beneficially owned by residents of the United 
States as reported on reports of beneficial ownership that are provided 
to you or publicly filed and based on information otherwise provided to 
you.
    3. In a tender offer by a bidder other than an affiliate of the 
issuer of the subject securities that is not made pursuant to an 
agreement with the issuer of the subject securities, the issuer of the 
subject securities will be presumed to be a foreign private issuer and 
U.S. holders will be presumed to hold less than 10 percent (40 percent 
in the case of paragraph (d) of this section) of such outstanding 
securities, unless paragraphs 3.i., ii., or iii. of the instructions to 
paragraphs (c) and (d) of this section indicate otherwise. In addition, 
where the bidder is unable to conduct the analysis of U.S. ownership set 
forth in Instruction 2 to paragraphs (c) and (d) of this section, the 
bidder may presume that the percentage of securities held by U.S. 
holders is less than 10 percent (40 percent in the case of paragraph (d) 
of this section) of the outstanding securities so long as there is a 
primary trading market for the subject securities outside the U.S., as 
defined in Sec.  240.12h-6(f)(5) of this chapter, unless:
    i. Average daily trading volume of the subject securities in the 
United States for a recent twelve-month period ending on a date no more 
than 60 days before the public announcement of the offer exceeds 10 
percent (40 percent in the case of paragraph (d) of this section) of the 
average daily trading volume of that class of securities on a worldwide 
basis for the same period; or
    ii. The most recent annual report or annual information filed or 
submitted by the issuer with securities regulators of the home 
jurisdiction or with the Commission or any jurisdiction in which the 
subject securities trade before the public announcement of the offer 
indicates that U.S. holders hold more than 10 percent (40 percent in the 
case of paragraph (d) of this section) of the outstanding subject class 
of securities; or
    iii. The bidder knows or has reason to know, before the public 
announcement of the offer, that the level of U.S. ownership exceeds 10 
percent (40 percent in the case of paragraph (d) of this section) of 
such securities. As an example, a bidder is deemed to know information 
about U.S. ownership of the subject class of securities that is publicly 
available and that appears in any filing with the Commission or any 
regulatory body in the issuer's jurisdiction of incorporation or (if 
different) the non-U.S. jurisdiction in which the primary trading market 
for the subject securities is located. The bidder is deemed to know 
information about U.S. ownership available from the issuer or obtained 
or readily available from any other source that is reasonably reliable, 
including from persons it has retained to advise it about the 
transaction, as well as from third-party information providers. These 
examples are not intended to be exclusive.
    iv. The bidder knows or has reason to know that the level of U.S. 
ownership exceeds 10 percent (40 percent in the case of 14d-1(d)) of 
such securities.
    4. United States means the United States of America, its territories 
and possessions, any

[[Page 312]]

State of the United States, and the District of Columbia.
    5. The exemptions provided by paragraphs (c) and (d) of this section 
are not available for any securities transaction or series of 
transactions that technically complies with paragraph (c) or (d) of this 
section but are part of a plan or scheme to evade the provisions of 
Regulations 14D or 14E.
    (e) Notwithstanding paragraph (a) of this section, the requirements 
imposed by sections 14(d)(1) through 14(d)(7) of the Act [15 U.S.C. 
78n(d)(1) through 78n(d)(7)], Regulation 14D promulgated thereunder 
(Sec. Sec.  240.14d-1 through 240.14d-10), and Sec. Sec.  240.14e-1 and 
240.14e-2 shall not apply by virtue of the fact that a bidder for the 
securities of a foreign private issuer, as defined in Sec.  240.3b-4, 
the subject company of such a tender offer, their representatives, or 
any other person specified in Sec.  240.14d-9(d), provides any 
journalist with access to its press conferences held outside of the 
United States, to meetings with its representatives conducted outside of 
the United States, or to written press-related materials released 
outside the United States, at or in which a present or proposed tender 
offer is discussed, if:
    (1) Access is provided to both U.S. and foreign journalists; and
    (2) With respect to any written press-related materials released by 
the bidder or its representatives that discuss a present or proposed 
tender offer for equity securities registered under Section 12 of the 
Act [15 U.S.C. 78l], the written press-related materials must state that 
these written press-related materials are not an extension of a tender 
offer in the United States for a class of equity securities of the 
subject company. If the bidder intends to extend the tender offer in the 
United States at some future time, a statement regarding this intention, 
and that the procedural and filing requirements of the Williams Act will 
be satisfied at that time, also must be included in these written press-
related materials. No means to tender securities, or coupons that could 
be returned to indicate interest in the tender offer, may be provided as 
part of, or attached to, these written press-related materials.
    (f) For the purpose of Sec.  240.14d-1(e), a bidder may presume that 
a target company qualifies as a foreign private issuer if the target 
company is a foreign issuer and files registration statements or reports 
on the disclosure forms specifically designated for foreign private 
issuers, claims the exemption from registration under the Act pursuant 
to Sec.  240.12g3-2(b), or is not reporting in the United States.
    (g) Definitions. Unless the context otherwise requires, all terms 
used in Regulation 14D and Regulation 14E have the same meaning as in 
the Act and in Rule 12b-2 (Sec.  240.12b-2) promulgated thereunder. In 
addition, for purposes of sections 14(d) and 14(e) of the Act and 
Regulations 14D and 14E, the following definitions apply:
    (1) The term beneficial owner shall have the same meaning as that 
set forth in Rule 13d-3: Provided, however, That, except with respect to 
Rule 14d-3, Rule 14d-9(d), the term shall not include a person who does 
not have or share investment power or who is deemed to be a beneficial 
owner by virtue of Rule 13d-3(d)(1) (Sec.  240.13d-3(d)(1));
    (2) The term bidder means any person who makes a tender offer or on 
whose behalf a tender offer is made: Provided, however, That the term 
does not include an issuer which makes a tender offer for securities of 
any class of which it is the issuer;
    (3) The term business day means any day, other than Saturday, Sunday 
or a federal holiday, and shall consist of the time period from 12:01 
a.m. through 12:00 midnight Eastern time. In computing any time period 
under section 14(d)(5) or section 14(d)(6) of the Act or under 
Regulation 14D or Regulation 14E, the date of the event which begins the 
running of such time period shall be included except that if such event 
occurs on other than a business day such period shall begin to run on 
and shall include the first business day thereafter; and
    (4) The term initial offering period means the period from the time 
the offer commences until all minimum time periods, including 
extensions, required by Regulations 14D (Sec. Sec.  240.14d-1 through 
240.14d-103) and 14E (Sec. Sec.  240.14e-1 through 240.14e-8) have been 
satisfied and all conditions to the offer have been satisfied or waived 
within these time periods.

[[Page 313]]

    (5) The term security holders means holders of record and beneficial 
owners of securities which are the subject of a tender offer;
    (6) The term security position listing means, with respect to 
securities of any issuer held by a registered clearing agency in the 
name of the clearing agency or its nominee, a list of those participants 
in the clearing agency on whose behalf the clearing agency holds the 
issuer's securities and of the participants' respective positions in 
such securities as of a specified date.
    (7) The term subject company means any issuer of securities which 
are sought by a bidder pursuant to a tender offer;
    (8) The term subsequent offering period means the period immediately 
following the initial offering period meeting the conditions specified 
in Sec.  240.14d-11.
    (9) The term tender offer material means:
    (i) The bidder's formal offer, including all the material terms and 
conditions of the tender offer and all amendments thereto;
    (ii) The related transmittal letter (whereby securities of the 
subject company which are sought in the tender offer may be transmitted 
to the bidder or its depositary) and all amendments thereto; and
    (iii) Press releases, advertisements, letters and other documents 
published by the bidder or sent or given by the bidder to security 
holders which, directly or indirectly, solicit, invite or request 
tenders of the securities being sought in the tender offer;
    (h) Signatures. Where the Act or the rules, forms, reports or 
schedules thereunder require a document filed with or furnished to the 
Commission to be signed, such document shall be manually signed, or 
signed using either typed signatures or duplicated or facsimile versions 
of manual signatures. Where typed, duplicated, or facsimile signatures 
are used, each signatory to the filing shall manually or electronically 
sign a signature page or other document authenticating, acknowledging, 
or otherwise adopting his or her signature that appears in the filing 
(``authentication document''). Such authentication document shall be 
executed before or at the time the filing is made and shall be retained 
by the filer for a period of five years. The requirements set forth in 
Sec.  232.302(b) must be met with regards to the use of an 
electronically signed authentication document pursuant to this paragraph 
(h). Upon request, the filer shall furnish to the Commission or its 
staff a copy of any or all documents retained pursuant to this section.
    (h) Signatures. Where the Act or the rules, forms, reports or 
schedules thereunder require a document filed with or furnished to the 
Commission to be signed, such document shall be manually signed, or 
signed using either typed signatures or duplicated or facsimile versions 
of manual signatures. Where typed, duplicated, or facsimile signatures 
are used, each signatory to the filing shall manually or electronically 
sign a signature page or other document authenticating, acknowledging, 
or otherwise adopting his or her signature that appears in the filing 
(``authentication document''). Such authentication document shall be 
executed before or at the time the filing is made and shall be retained 
by the filer for a period of five years. The requirements set forth in 
Sec.  232.302(b) must be met with regards to the use of an 
electronically signed authentication document pursuant to this paragraph 
(h). Upon request, the filer shall furnish to the Commission or its 
staff a copy of any or all documents retained pursuant to this section.

[44 FR 70340, Dec. 6, 1979, as amended at 47 FR 11470, Mar. 16, 1982; 56 
FR 30071, July 1, 1991; 60 FR 26622, May 17, 1995; 61 FR 30403, June 14, 
1996; 62 FR 53955, Oct. 17, 1997; 64 FR 61404, 61459, Nov. 10, 1999; 73 
FR 17814, Apr. 1, 2008; 73 FR 60091, Oct. 9, 2008; 85 FR 78229, Dec. 4, 
2020]



Sec.  240.14d-2  Commencement of a tender offer.

    (a) Date of commencement. A bidder will have commenced its tender 
offer for purposes of section 14(d) of the Act (15 U.S.C. 78n) and the 
rules under that section at 12:01 a.m. on the date when the bidder has 
first published, sent or given the means to tender to security holders. 
For purposes of this section, the means to tender includes the 
transmittal form or a statement regarding

[[Page 314]]

how the transmittal form may be obtained.
    (b) Pre-commencement communications. A communication by the bidder 
will not be deemed to constitute commencement of a tender offer if:
    (1) It does not include the means for security holders to tender 
their shares into the offer; and
    (2) All written communications relating to the tender offer, from 
and including the first public announcement, are filed under cover of 
Schedule TO (Sec.  240.14d-100) with the Commission no later than the 
date of the communication. The bidder also must deliver to the subject 
company and any other bidder for the same class of securities the first 
communication relating to the transaction that is filed, or required to 
be filed, with the Commission.

    Instructions to paragraph (b)(2): 1. The box on the front of 
Schedule TO indicating that the filing contains pre-commencement 
communications must be checked.
    2. Any communications made in connection with an exchange offer 
registered under the Securities Act of 1933 need only be filed under 
Sec.  230.425 of this chapter and will be deemed filed under this 
section.
    3. Each pre-commencement written communication must include a 
prominent legend in clear, plain language advising security holders to 
read the tender offer statement when it is available because it contains 
important information. The legend also must advise investors that they 
can get the tender offer statement and other filed documents for free at 
the Commission's web site and explain which documents are free from the 
offeror.
    4. See Sec. Sec.  230.135, 230.165 and 230.166 of this chapter for 
pre-commencement communications made in connection with registered 
exchange offers.
    5. ``Public announcement'' is any oral or written communication by 
the bidder, or any person authorized to act on the bidder's behalf, that 
is reasonably designed to, or has the effect of, informing the public or 
security holders in general about the tender offer.

    (c) Filing and other obligations triggered by commencement. As soon 
as practicable on the date of commencement, a bidder must comply with 
the filing requirements of Sec.  240.14d-3(a), the dissemination 
requirements of Sec.  240.14d-4(a) or (b), and the disclosure 
requirements of Sec.  240.14d-6(a).

[64 FR 61459, Nov. 10, 1999]



Sec.  240.14d-3  Filing and transmission of tender offer statement.

    (a) Filing and transmittal. No bidder shall make a tender offer if, 
after consummation thereof, such bidder would be the beneficial owner of 
more than 5 percent of the class of the subject company's securities for 
which the tender offer is made, unless as soon as practicable on the 
date of the commencement of the tender offer such bidder:
    (1) Files with the Commission a Tender Offer Statement on Schedule 
TO (Sec.  240.14d-100), including all exhibits thereto;
    (2) Delivers a copy of such Schedule TO, including all exhibits 
thereto:
    (i) To the subject company at its principal executive office; and
    (ii) To any other bidder, which has filed a Schedule TO with the 
Commission relating to a tender offer which has not yet terminated for 
the same class of securities of the subject company, at such bidder's 
principal executive office or at the address of the person authorized to 
receive notices and communications (which is disclosed on the cover 
sheet of such other bidder's Schedule TO);
    (3) Gives telephonic notice of the information required by Rule 14d-
6(d)(2)(i) and (ii) (Sec.  240.14d-6(d)(2)(i) and (ii)) and mails by 
means of first class mail a copy of such Schedule TO, including all 
exhibits thereto:
    (i) To each national securities exchange where such class of the 
subject company's securities is registered and listed for trading (which 
may be based upon information contained in the subject company's most 
recent Annual Report on Form 10-K (Sec.  249.310 of this chapter) filed 
with the Commission unless the bidder has reason to believe that such 
information is not current), which telephonic notice shall be made when 
practicable before the opening of each such exchange; and
    (ii) To the National Association of Securities Dealers, Inc. 
(``NASD'') if such class of the subject company's securities is 
authorized for quotation in the NASDAQ interdealer quotation system.
    (b) Post-commencement amendments and additional materials. The 
bidder making the tender offer must file with the Commission:

[[Page 315]]

    (1) An amendment to Schedule TO (Sec.  240.14d-100) reporting 
promptly any material changes in the information set forth in the 
schedule previously filed and including copies of any additional tender 
offer materials as exhibits; and
    (2) A final amendment to Schedule TO (Sec.  240.14d-100) reporting 
promptly the results of the tender offer.

    Instruction to paragraph (b): A copy of any additional tender offer 
materials or amendment filed under this section must be sent promptly to 
the subject company and to any exchange and/or NASD, as required by 
paragraph (a) of this section, but in no event later than the date the 
materials are first published, sent or given to security holders.

    (c) Certain announcements. Notwithstanding the provisions of 
paragraph (b) of this section, if the additional tender offer material 
or an amendment to Schedule TO discloses only the number of shares 
deposited to date, and/or announces an extension of the time during 
which shares may be tendered, then the bidder may file such tender offer 
material or amendment and send a copy of such tender offer material or 
amendment to the subject company, any exchange and/or the NASD, as 
required by paragraph (a) of this section, promptly after the date such 
tender offer material is first published or sent or given to security 
holders.

[44 FR 70341, Dec. 6, 1979; 64 FR 61460, Nov. 10, 1999, as amended at 73 
FR 977, Jan. 4, 2008; 73 FR 17814, Apr. 1, 2008]



Sec.  240.14d-4  Dissemination of tender offers to security holders.

    As soon as practicable on the date of commencement of a tender 
offer, the bidder must publish, send or give the disclosure required by 
Sec.  240.14d-6 to security holders of the class of securities that is 
the subject of the offer, by complying with all of the requirements of 
any of the following:
    (a) Cash tender offers and exempt securities offers. For tender 
offers in which the consideration consists solely of cash and/or 
securities exempt from registration under section 3 of the Securities 
Act of 1933 (15 U.S.C. 77c):
    (1) Long-form publication. The bidder makes adequate publication in 
a newspaper or newspapers of long-form publication of the tender offer.
    (2) Summary publication. (i) If the tender offer is not subject to 
Rule 13e-3 (Sec.  240.13e-3), the bidder makes adequate publication in a 
newspaper or newspapers of a summary advertisement of the tender offer; 
and
    (ii) Mails by first class mail or otherwise furnishes with 
reasonable promptness the bidder's tender offer materials to any 
security holder who requests such tender offer materials pursuant to the 
summary advertisement or otherwise.
    (3) Use of stockholder lists and security position listings. Any 
bidder using stockholder lists and security position listings under 
Sec.  240.14d-5 must comply with paragraph (a)(1) or (2) of this section 
on or before the date of the bidder's request under Sec.  240.14d-5(a).

    Instruction to paragraph (a): Tender offers may be published or sent 
or given to security holders by other methods, but with respect to 
summary publication and the use of stockholder lists and security 
position listings under Sec.  240.14d-5, paragraphs (a)(2) and (a)(3) of 
this section are exclusive.

    (b) Registered securities offers. For tender offers in which the 
consideration consists solely or partially of securities registered 
under the Securities Act of 1933, a registration statement containing 
all of the required information, including pricing information, has been 
filed and a preliminary prospectus or a prospectus that meets the 
requirements of section 10(a) of the Securities Act (15 U.S.C. 77j(a)), 
including a letter of transmittal, is delivered to security holders. 
However, for going-private transactions (as defined by Sec.  240.13e-3) 
and roll-up transactions (as described by Item 901 of Regulation S-K 
(Sec.  229.901 of this chapter)), a registration statement registering 
the securities to be offered must have become effective and only a 
prospectus that meets the requirements of section 10(a) of the 
Securities Act may be delivered to security holders on the date of 
commencement.

    Instructions to paragraph (b): 1. If the prospectus is being 
delivered by mail, mailing on the date of commencement is sufficient.
    2. A preliminary prospectus used under this section may not omit 
information under Sec. Sec.  230.430 or 230.430A of this chapter.
    3. If a preliminary prospectus is used under this section and the 
bidder must disseminate

[[Page 316]]

material changes, the tender offer must remain open for the period 
specified in paragraph (d)(2) of this section.
    4. If a preliminary prospectus is used under this section, tenders 
may be requested in accordance with Sec.  230.162(a) of this chapter.

    (c) Adequate publication. Depending on the facts and circumstances 
involved, adequate publication of a tender offer pursuant to this 
section may require publication in a newspaper with a national 
circulation or may only require publication in a newspaper with 
metropolitan or regional circulation or may require publication in a 
combination thereof: Provided, however, That publication in all editions 
of a daily newspaper with a national circulation shall be deemed to 
constitute adequate publication.
    (d) Publication of changes and extension of the offer. (1) If a 
tender offer has been published or sent or given to security holders by 
one or more of the methods enumerated in this section, a material change 
in the information published or sent or given to security holders shall 
be promptly disseminated to security holders in a manner reasonably 
designed to inform security holders of such change; Provided, however, 
That if the bidder has elected pursuant to rule 14d-5 (f)(1) of this 
section to require the subject company to disseminate amendments 
disclosing material changes to the tender offer materials pursuant to 
Rule 14d-5, the bidder shall disseminate material changes in the 
information published or sent or given to security holders at least 
pursuant to Rule 14d-5.
    (2) In a registered securities offer where the bidder disseminates 
the preliminary prospectus as permitted by paragraph (b) of this 
section, the offer must remain open from the date that material changes 
to the tender offer materials are disseminated to security holders, as 
follows:
    (i) Five business days for a prospectus supplement containing a 
material change other than price or share levels;
    (ii) Ten business days for a prospectus supplement containing a 
change in price, the amount of securities sought, the dealer's 
soliciting fee, or other similarly significant change;
    (iii) Ten business days for a prospectus supplement included as part 
of a post-effective amendment; and
    (iv) Twenty business days for a revised prospectus when the initial 
prospectus was materially deficient.

[44 FR 70341, Dec. 6, 1979, as amended at 64 FR 61460, Nov. 10, 1999; 76 
FR 71876, Nov. 21, 2011]



Sec.  240.14d-5  Dissemination of certain tender offers by the use of
stockholder lists and security position listings.

    (a) Obligations of the subject company. Upon receipt by a subject 
company at its principal executive offices of a bidder's written 
request, meeting the requirements of paragraph (e) of this section, the 
subject company shall comply with the following sub-paragraphs.
    (1) The subject company shall notify promptly transfer agents and 
any other person who will assist the subject company in complying with 
the requirements of this section of the receipt by the subject company 
of a request by a bidder pursuant to this section.
    (2) The subject company shall promptly ascertain whether the most 
recently prepared stockholder list, written or otherwise, within the 
access of the subject company was prepared as of a date earlier than ten 
business days before the date of the bidder's request and, if so, the 
subject company shall promptly prepare or cause to be prepared a 
stockholder list as of the most recent practicable date which shall not 
be more than ten business days before the date of the bidder's request.
    (3) The subject company shall make an election to comply and shall 
comply with all of the provisions of either paragraph (b) or paragraph 
(c) of this section. The subject company's election once made shall not 
be modified or revoked during the bidder's tender offer and extensions 
thereof.
    (4) No later than the second business day after the date of the 
bidder's request, the subject company shall orally notify the bidder, 
which notification shall be confirmed in writing, of the subject 
company's election made pursuant to paragraph (a)(3) of this section. 
Such notification shall indicate (i) the approximate number of security 
holders of the class of securities being

[[Page 317]]

sought by the bidder and, (ii) if the subject company elects to comply 
with paragraph (b) of this section, appropriate information concerning 
the location for delivery of the bidder's tender offer materials and the 
approximate direct costs incidental to the mailing to security holders 
of the bidder's tender offer materials computed in accordance with 
paragraph (g)(2) of this section.
    (b) Mailing of tender offer materials by the subject company. A 
subject company which elects pursuant to paragraph (a)(3) of this 
section to comply with the provisions of this paragraph shall perform 
the acts prescribed by the following paragraphs.
    (1) The subject company shall promptly contact each participant 
named on the most recent security position listing of any clearing 
agency within the access of the subject company and make inquiry of each 
such participant as to the approximate number of beneficial owners of 
the subject company securities being sought in the tender offer held by 
each such participant.
    (2) No later than the third business day after delivery of the 
bidder's tender offer materials pursuant to paragraph (g)(1) of this 
section, the subject company shall begin to mail or cause to be mailed 
by means of first class mail a copy of the bidder's tender offer 
materials to each person whose name appears as a record holder of the 
class of securities for which the offer is made on the most recent 
stockholder list referred to in paragraph (a)(2) of this section. The 
subject company shall use its best efforts to complete the mailing in a 
timely manner but in no event shall such mailing be completed in a 
substantially greater period of time than the subject company would 
complete a mailing to security holders of its own materials relating to 
the tender offer.
    (3) No later than the third business day after the delivery of the 
bidder's tender offer materials pursuant to paragraph (g)(1) of this 
section, the subject company shall begin to transmit or cause to be 
transmitted a sufficient number of sets of the bidder's tender offer 
materials to the participants named on the security position listings 
described in paragraph (b)(1) of this section. The subject company shall 
use its best efforts to complete the transmittal in a timely manner but 
in no event shall such transmittal be completed in a substantially 
greater period of time than the subject company would complete a 
transmittal to such participants pursuant to security position listings 
of clearing agencies of its own material relating to the tender offer.
    (4) The subject company shall promptly give oral notification to the 
bidder, which notification shall be confirmed in writing, of the 
commencement of the mailing pursuant to paragraph (b)(2) of this section 
and of the transmittal pursuant to paragraph (b)(3) of this section.
    (5) During the tender offer and any extension thereof the subject 
company shall use reasonable efforts to update the stockholder list and 
shall mail or cause to be mailed promptly following each update a copy 
of the bidder's tender offer materials (to the extent sufficient sets of 
such materials have been furnished by the bidder) to each person who has 
become a record holder since the later of (i) the date of preparation of 
the most recent stockholder list referred to in paragraph (a)(2) of this 
section or (ii) the last preceding update.
    (6) If the bidder has elected pursuant to paragraph (f)(1) of this 
section to require the subject company to disseminate amendments 
disclosing material changes to the tender offer materials pursuant to 
this section, the subject company, promptly following delivery of each 
such amendment, shall mail or cause to be mailed a copy of each such 
amendment to each record holder whose name appears on the shareholder 
list described in paragraphs (a)(2) and (b)(5) of this section and shall 
transmit or cause to be transmitted sufficient copies of such amendment 
to each participant named on security position listings who received 
sets of the bidder's tender offer materials pursuant to paragraph (b)(3) 
of this section.
    (7) The subject company shall not include any communication other 
than the bidder's tender offer materials or amendments thereto in the 
envelopes or other containers furnished by the bidder.

[[Page 318]]

    (8) Promptly following the termination of the tender offer, the 
subject company shall reimburse the bidder the excess, if any, of the 
amounts advanced pursuant to paragraph (f)(3)(iii) over the direct costs 
incidental to compliance by the subject company and its agents in 
performing the acts required by this section computed in accordance with 
paragraph (g)(2) of this section.
    (c) Delivery of stockholder lists and security position listings. A 
subject company which elects pursuant to paragraph (a)(3) of this 
section to comply with the provisions of this paragraph shall perform 
the acts prescribed by the following paragraphs.
    (1) No later than the third business day after the date of the 
bidder's request, the subject company must furnish to the bidder at the 
subject company's principal executive office a copy of the names and 
addresses of the record holders on the most recent stockholder list 
referred to in paragraph (a)(2) of this section; the names and addresses 
of participants identified on the most recent security position listing 
of any clearing agency that is within the access of the subject company; 
and the most recent list of names, addresses and security positions of 
beneficial owners as specified in Sec.  240.14a-13(b), in the possession 
of the subject company, or that subsequently comes into its possession. 
All security holder list information must be in the format requested by 
the bidder to the extent the format is available to the subject company 
without undue burden or expense.
    (2) If the bidder has elected pursuant to paragraph (f)(1) of this 
section to require the subject company to disseminate amendments 
disclosing material changes to the tender offer materials, the subject 
company shall update the stockholder list by furnishing the bidder with 
the name and address of each record holder named on the stockholder 
list, and not previously furnished to the bidder, promptly after such 
information becomes available to the subject company during the tender 
offer and any extensions thereof.
    (d) Liability of subject company and others. Neither the subject 
company nor any affiliate or agent of the subject company nor any 
clearing agency shall be:
    (1) Deemed to have made a solicitation or recommendation respecting 
the tender offer within the meaning of section 14(d)(4) based solely 
upon the compliance or noncompliance by the subject company or any 
affiliate or agent of the subject company with one or more requirements 
of this section;
    (2) Liable under any provision of the Federal securities laws to the 
bidder or to any security holder based solely upon the inaccuracy of the 
current names or addresses on the stockholder list or security position 
listing, unless such inaccuracy results from a lack of reasonable care 
on the part of the subject company or any affiliate or agent of the 
subject company;
    (3) Deemed to be an ``underwriter'' within the meaning of section 
(2)(11) of the Securities Act of 1933 for any purpose of that Act or any 
rule or regulation promulgated thereunder based solely upon the 
compliance or noncompliance by the subject company or any affiliate or 
agent of the subject company with one or more of the requirements of 
this section;
    (4) Liable under any provision of the Federal securities laws for 
the disclosure in the bidder's tender offer materials, including any 
amendment thereto, based solely upon the compliance or noncompliance by 
the subject company or any affiliate or agent of the subject company 
with one or more of the requirements of this section.
    (e) Content of the bidder's request. The bidder's written request 
referred to in paragraph (a) of this section shall include the 
following:
    (1) The identity of the bidder;
    (2) The title of the class of securities which is the subject of the 
bidder's tender offer;
    (3) A statement that the bidder is making a request to the subject 
company pursuant to paragraph (a) of this section for the use of the 
stockholder list and security position listings for the purpose of 
disseminating a tender offer to security holders;
    (4) A statement that the bidder is aware of and will comply with the 
provisions of paragraph (f) of this section;
    (5) A statement as to whether or not it has elected pursuant to 
paragraph

[[Page 319]]

(f)(1) of this section to disseminate amendments disclosing material 
changes to the tender offer materials pursuant to this section; and
    (6) The name, address and telephone number of the person whom the 
subject company shall contact pursuant to paragraph (a)(4) of this 
section.
    (f) Obligations of the bidder. Any bidder who requests that a 
subject company comply with the provisions of paragraph (a) of this 
section shall comply with the following paragraphs.
    (1) The bidder shall make an election whether or not to require the 
subject company to disseminate amendments disclosing material changes to 
the tender offer materials pursuant to this section, which election 
shall be included in the request referred to in paragraph (a) of this 
section and shall not be revocable by the bidder during the tender offer 
and extensions thereof.
    (2) With respect to a tender offer subject to section 14(d)(1) of 
the Act in which the consideration consists solely of cash and/or 
securities exempt from registration under section 3 of the Securities 
Act of 1933, the bidder shall comply with the requirements of Rule 14d-
4(a)(3).
    (3) If the subject company elects to comply with paragraph (b) of 
this section,
    (i) The bidder shall promptly deliver the tender offer materials 
after receipt of the notification from the subject company as provided 
in paragraph (a)(4) of this section;
    (ii) The bidder shall promptly notify the subject company of any 
amendment to the bidder's tender offer materials requiring compliance by 
the subject company with paragraph (b)(6) of this section and shall 
promptly deliver such amendment to the subject company pursuant to 
paragraph (g)(1) of this section;
    (iii) The bidder shall advance to the subject company an amount 
equal to the approximate cost of conducting mailings to security holders 
computed in accordance with paragraph (g)(2) of this section;
    (iv) The bidder shall promptly reimburse the subject company for the 
direct costs incidental to compliance by the subject company and its 
agents in performing the acts required by this section computed in 
accordance with paragraph (g)(2) of this section which are in excess of 
the amount advanced pursuant to paragraph (f)(2)(iii) of this section; 
and
    (v) The bidder shall mail by means of first class mail or otherwise 
furnish with reasonable promptness the tender offer materials to any 
security holder who requests such materials.
    (4) If the subject company elects to comply with paragraph (c) of 
this section,
    (i) The bidder shall use the stockholder list and security position 
listings furnished to the bidder pursuant to paragraph (c) of this 
section exclusively in the dissemination of tender offer materials to 
security holders in connection with the bidder's tender offer and 
extensions thereof;
    (ii) The bidder shall return the stockholder lists and security 
position listings furnished to the bidder pursuant to paragraph (c) of 
this section promptly after the termination of the bidder's tender 
offer;
    (iii) The bidder shall accept, handle and return the stockholder 
lists and security position listings furnished to the bidder pursuant to 
paragraph (c) of this section to the subject company on a confidential 
basis;
    (iv) The bidder shall not retain any stockholder list or security 
position listing furnished by the subject company pursuant to paragraph 
(c) of this section, or any copy thereof, nor retain any information 
derived from any such list or listing or copy thereof after the 
termination of the bidder's tender offer;
    (v) The bidder shall mail by means of first class mail, at its own 
expense, a copy of its tender offer materials to each person whose 
identity appears on the stockholder list as furnished and updated by the 
subject company pursuant to paragraphs (c)(1) and (2) of this section;
    (vi) The bidder shall contact the participants named on the security 
position listing of any clearing agency, make inquiry of each 
participant as to the approximate number of sets of tender offer 
materials required by each such participant, and furnish, at its own 
expense, sufficient sets of tender offer materials and any amendment

[[Page 320]]

thereto to each such participant for subsequent transmission to the 
beneficial owners of the securities being sought by the bidder;
    (vii) The bidder shall mail by means of first class mail or 
otherwise furnish with reasonable promptness the tender offer materials 
to any security holder who requests such materials; and
    (viii) The bidder shall promptly reimburse the subject company for 
direct costs incidental to compliance by the subject company and its 
agents in performing the acts required by this section computed in 
accordance with paragraph (g)(2) of this section.
    (g) Delivery of materials, computation of direct costs. (1) Whenever 
the bidder is required to deliver tender offer materials or amendments 
to tender offer materials, the bidder shall deliver to the subject 
company at the location specified by the subject company in its notice 
given pursuant to paragraph (a)(4) of this section a number of sets of 
the materials or of the amendment, as the case may be, at least equal to 
the approximate number of security holders specified by the subject 
company in such notice, together with appropriate envelopes or other 
containers therefor: Provided, however, That such delivery shall be 
deemed not to have been made unless the bidder has complied with 
paragraph (f)(3)(iii) of this section at the time the materials or 
amendments, as the case may be, are delivered.
    (2) The approximate direct cost of mailing the bidder's tender offer 
materials shall be computed by adding (i) the direct cost incidental to 
the mailing of the subject company's last annual report to shareholders 
(excluding employee time), less the costs of preparation and printing of 
the report, and postage, plus (ii) the amount of first class postage 
required to mail the bidder's tender offer materials. The approximate 
direct costs incidental to the mailing of the amendments to the bidder's 
tender offer materials shall be computed by adding (iii) the estimated 
direct costs of preparing mailing labels, of updating shareholder lists 
and of third party handling charges plus (iv) the amount of first class 
postage required to mail the bidder's amendment. Direct costs incidental 
to the mailing of the bidder's tender offer materials and amendments 
thereto when finally computed may include all reasonable charges paid by 
the subject company to third parties for supplies or services, including 
costs attendant to preparing shareholder lists, mailing labels, handling 
the bidder's materials, contacting participants named on security 
position listings and for postage, but shall exclude indirect costs, 
such as employee time which is devoted to either contesting or 
supporting the tender offer on behalf of the subject company. The final 
billing for direct costs shall be accompanied by an appropriate 
accounting in reasonable detail.

    Note to Sec.  240.14d-5. Reasonably prompt methods of distribution 
to security holders may be used instead of mailing. If alternative 
methods are chosen, the approximate direct costs of distribution shall 
be computed by adding the estimated direct costs of preparing the 
document for distribution through the chosen medium (including updating 
of shareholder lists) plus the estimated reasonable cost of distribution 
through that medium. Direct costs incidental to the distribution of 
tender offer materials and amendments thereto may include all reasonable 
charges paid by the subject company to third parties for supplies or 
services, including costs attendant to preparing shareholder lists, 
handling the bidder's materials, and contacting participants named on 
security position listings, but shall not include indirect costs, such 
as employee time which is devoted to either contesting or supporting the 
tender offer on behalf of the subject company.

[44 FR 70342, Dec. 6, 1979, as amended at 61 FR 24657, May 15, 1996; 64 
FR 61460, Nov. 10, 1999]



Sec.  240.14d-6  Disclosure of tender offer information to security
holders.

    (a) Information required on date of commencement--(1) Long-form 
publication. If a tender offer is published, sent or given to security 
holders on the date of commencement by means of long-form publication 
under Sec.  240.14d-4(a)(1), the long-form publication must include the 
information required by paragraph (d)(1) of this section.
    (2) Summary publication. If a tender offer is published, sent or 
given to security holders on the date of commencement by means of 
summary publication under Sec.  240.14d-4(a)(2):

[[Page 321]]

    (i) The summary advertisement must contain at least the information 
required by paragraph (d)(2) of this section; and
    (ii) The tender offer materials furnished by the bidder upon request 
of any security holder must include the information required by 
paragraph (d)(1) of this section.
    (3) Use of stockholder lists and security position listings. If a 
tender offer is published, sent or given to security holders on the date 
of commencement by the use of stockholder lists and security position 
listings under Sec.  240.14d-4(a)(3):
    (i) The summary advertisement must contain at least the information 
required by paragraph (d)(2) of this section; and
    (ii) The tender offer materials transmitted to security holders 
pursuant to such lists and security position listings and furnished by 
the bidder upon the request of any security holder must include the 
information required by paragraph (d)(1) of this section.
    (4) Other tender offers. If a tender offer is published or sent or 
given to security holders other than pursuant to Sec.  240.14d-4(a), the 
tender offer materials that are published or sent or given to security 
holders on the date of commencement of such offer must include the 
information required by paragraph (d)(1) of this section.
    (b) Information required in other tender offer materials published 
after commencement. Except for tender offer materials described in 
paragraphs (a)(2)(ii) and (a)(3)(ii) of this section, additional tender 
offer materials published, sent or given to security holders after 
commencement must include:
    (1) The identities of the bidder and subject company;
    (2) The amount and class of securities being sought;
    (3) The type and amount of consideration being offered; and
    (4) The scheduled expiration date of the tender offer, whether the 
tender offer may be extended and, if so, the procedures for extension of 
the tender offer.

    Instruction to paragraph (b): If the additional tender offer 
materials are summary advertisements, they also must include the 
information required by paragraphs (d)(2)(v) of this section.

    (c) Material changes. A material change in the information published 
or sent or given to security holders must be promptly disclosed to 
security holders in additional tender offer materials.
    (d) Information to be included--(1) Tender offer materials other 
than summary publication. The following information is required by 
paragraphs (a)(1), (a)(2)(ii), (a)(3)(ii) and (a)(4) of this section:
    (i) The information required by Item 1 of Schedule TO (Sec.  
240.14d-100) (Summary Term Sheet); and
    (ii) The information required by the remaining items of Schedule TO 
(Sec.  240.14d-100) for third-party tender offers, except for Item 12 
(exhibits) of Schedule TO (Sec.  240.14d-100), or a fair and adequate 
summary of the information.
    (2) Summary Publication. The following information is required in a 
summary advertisement under paragraphs (a)(2)(i) and (a)(3)(i) of this 
section:
    (i) The identity of the bidder and the subject company;
    (ii) The information required by Item 1004(a)(1) of Regulation M-A 
(Sec.  229.1004(a)(1) of this chapter);
    (iii) If the tender offer is for less than all of the outstanding 
securities of a class of equity securities, a statement as to whether 
the purpose or one of the purposes of the tender offer is to acquire or 
influence control of the business of the subject company;
    (iv) A statement that the information required by paragraph (d)(1) 
of this section is incorporated by reference into the summary 
advertisement;
    (v) Appropriate instructions as to how security holders may obtain 
promptly, at the bidder's expense, the bidder's tender offer materials; 
and
    (vi) In a tender offer published or sent or given to security 
holders by use of stockholder lists and security position listings under 
Sec.  240.14d-4(a)(3), a statement that a request is being made for such 
lists and listings. The summary publication also must state that tender 
offer materials will be mailed to record holders and will be furnished 
to brokers, banks and similar persons whose name appears or whose 
nominee appears on the list of security holders

[[Page 322]]

or, if applicable, who are listed as participants in a clearing agency's 
security position listing for subsequent transmittal to beneficial 
owners of such securities. If the list furnished to the bidder also 
included beneficial owners pursuant to Sec.  240.14d-5(c)(1) and tender 
offer materials will be mailed directly to beneficial holders, include a 
statement to that effect.
    (3) No transmittal letter. Neither the initial summary advertisement 
nor any subsequent summary advertisement may include a transmittal 
letter (the letter furnished to security holders for transmission of 
securities sought in the tender offer) or any amendment to the 
transmittal letter.

[64 FR 61460, Nov. 10, 1999]



Sec.  240.14d-7  Additional withdrawal rights.

    (a) Rights. (1) In addition to the provisions of section 14(d)(5) of 
the Act, any person who has deposited securities pursuant to a tender 
offer has the right to withdraw any such securities during the period 
such offer request or invitation remains open.
    (2) Exemption during subsequent offering period. Notwithstanding the 
provisions of section 14(d)(5) of the Act (15 U.S.C. 78n(d)(5)) and 
paragraph (a) of this section, the bidder need not offer withdrawal 
rights during a subsequent offering period.
    (b) Notice of withdrawal. Notice of withdrawal pursuant to this 
section shall be deemed to be timely upon the receipt by the bidder's 
depositary of a written notice of withdrawal specifying the name(s) of 
the tendering stockholder(s), the number or amount of the securities to 
be withdrawn and the name(s) in which the certificate(s) is (are) 
registered, if different from that of the tendering security holder(s). 
A bidder may impose other reasonable requirements, including certificate 
numbers and a signed request for withdrawal accompained by a signature 
guarantee, as conditions precedent to the physical release of withdrawn 
securities.

[44 FR 70345, Dec. 6, 1979, as amended at 51 FR 25882, July 17, 1986; 51 
FR 32630, Sept. 15, 1986; 64 FR 61461, Nov. 10, 1999; 76 FR 71876, Nov. 
21, 2011]



Sec.  240.14d-8  Exemption from statutory pro rata requirements.

    Notwithstanding the pro rata provisions of section 14(d)(6) of the 
Act, if any person makes a tender offer or request or invitation for 
tenders, for less than all of the outstanding equity securities of a 
class, and if a greater number of securities are deposited pursuant 
thereto than such person is bound or willing to take up and pay for, the 
securities taken up and paid for shall be taken up and paid for as 
nearly as may be pro rata, disregarding fractions, according to the 
number of securities deposited by each depositor during the period such 
offer, request or invitation remains open.

(Sec. 23, 48 Stat. 901; sec. 203(a), 49 Stat. 704; sec. 8, 49 Stat. 
1379; sec. 10, 78 Stat. 580; sec. 3, 82 Stat. 455; secs. 3-5, 84 Stat. 
1497; sec. 18, 89 Stat. 155; 15 U.S.C. 78n(e), 78w(a))

[47 FR 57680, Dec. 28, 1982]



Sec.  240.14d-9  Recommendation or solicitation by the subject company
and others.

    (a) Pre-commencement communications. A communication by a person 
described in paragraph (e) of this section with respect to a tender 
offer will not be deemed to constitute a recommendation or solicitation 
under this section if:
    (1) The tender offer has not commenced under Sec.  240.14d-2; and
    (2) The communication is filed under cover of Schedule 14D-9 (Sec.  
240.14d-101) with the Commission no later than the date of the 
communication.

    Instructions to paragraph (a)(2): 1. The box on the front of 
Schedule 14D-9 (Sec.  240.14d-101) indicating that the filing contains 
pre-commencement communications must be checked.
    2. Any communications made in connection with an exchange offer 
registered under the Securities Act of 1933 need only be filed under 
Sec.  230.425 of this chapter and will be deemed filed under this 
section.
    3. Each pre-commencement written communication must include a 
prominent legend in clear, plain language advising security holders to 
read the company's solicitation/recommendation statement when it is 
available because it contains important information. The legend also 
must advise investors that they can get the recommendation and

[[Page 323]]

other filed documents for free at the Commission's web site and explain 
which documents are free from the filer.
    4. See Sec. Sec.  230.135, 230.165 and 230.166 of this chapter for 
pre-commencement communications made in connection with registered 
exchange offers.

    (b) Post-commencement communications. After commencement by a bidder 
under Sec.  240.14d-2, no solicitation or recommendation to security 
holders may be made by any person described in paragraph (e) of this 
section with respect to a tender offer for such securities unless as 
soon as practicable on the date such solicitation or recommendation is 
first published or sent or given to security holders such person 
complies with the following:
    (1) Such person shall file with the Commission a Tender Offer 
Solicitation/Recommendation Statement on Schedule 14D-9 (Sec.  240.14d-
101), including all exhibits thereto; and
    (2) If such person is either the subject company or an affiliate of 
the subject company,
    (i) Such person shall hand deliver a copy of the Schedule 14D-9 to 
the bidder at its principal office or at the address of the person 
authorized to receive notices and communications (which is set forth on 
the cover sheet of the bidder's Schedule TO (Sec.  240.14d-100) filed 
with the Commission; and
    (ii) Such person shall give telephonic notice (which notice to the 
extent possible shall be given prior to the opening of the market) of 
the information required by Items 1003(d) and 1012(a) of Regulation M--A 
(Sec.  229.1003(d) and Sec.  229.1012(a)) and shall mail a copy of the 
Schedule to each national securities exchange where the class of 
securities is registered and listed for trading and, if the class is 
authorized for quotation in the NASDAQ interdealer quotation system, to 
the National Association of Securities Dealers, Inc. (``NASD'').
    (3) If such person is neither the subject company nor an affiliate 
of the subject company,
    (i) Such person shall mail a copy of the schedule to the bidder at 
its principal office or at the address of the person authorized to 
receive notices and communications (which is set forth on the cover 
sheet of the bidder's Schedule TO (Sec.  240.14d-100) filed with the 
Commission); and
    (ii) Such person shall mail a copy of the Schedule to the subject 
company at its principal office.
    (c) Amendments. If any material change occurs in the information set 
forth in the Schedule 14D-9 (Sec.  240.14d-101) required by this 
section, the person who filed such Schedule 14D-9 shall:
    (1) File with the Commission an amendment on Schedule 14D-9 (Sec.  
240.14d-101) disclosing such change promptly, but not later than the 
date such material is first published, sent or given to security 
holders; and
    (2) Promptly deliver copies and give notice of the amendment in the 
same manner as that specified in paragraph (b)(2) or (3) of this 
section, whichever is applicable; and
    (3) Promptly disclose and disseminate such change in a manner 
reasonably designed to inform security holders of such change.
    (d) Information required in solicitation or recommendation. Any 
solicitation or recommendation to holders of a class of securities 
referred to in section 14(d)(1) of the Act with respect to a tender 
offer for such securities shall include the name of the person making 
such solicitation or recommendation and the information required by 
Items 1 through 8 of Schedule 14D-9 (Sec.  240.14d-101) or a fair and 
adequate summary thereof: Provided, however, That such solicitation or 
recommendation may omit any of such information previously furnished to 
security holders of such class of securities by such person with respect 
to such tender offer.
    (e) Applicability. (1) Except as is provided in paragraphs (e)(2) 
and (f) of this section, this section shall only apply to the following 
persons:
    (i) The subject company, any director, officer, employee, affiliate 
or subsidiary of the subject company;
    (ii) Any record holder or beneficial owner of any security issued by 
the subject company, by the bidder, or by any affiliate of either the 
subject company or the bidder; and
    (iii) Any person who makes a solicitation or recommendation to 
security holders on behalf of any of the foregoing or on behalf of the 
bidder other

[[Page 324]]

than by means of a solicitation or recommendation to security holders 
which has been filed with the Commission pursuant to this section or 
Rule 14d-3 (Sec.  240.14d-3).
    (2) Notwithstanding paragraph (e)(1) of this section, this section 
shall not apply to the following persons:
    (i) A bidder who has filed a Schedule TO (Sec.  240.14d-100) 
pursuant to Rule 14d-3 (Sec.  240.14d-3);
    (ii) Attorneys, banks, brokers, fiduciaries or investment advisers 
who are not participating in a tender offer in more than a ministerial 
capacity and who furnish information and/or advice regarding such tender 
offer to their customers or clients on the unsolicited request of such 
customers or clients or solely pursuant to a contract or a relationship 
providing for advice to the customer or client to whom the information 
and/or advice is given.
    (iii) Any person specified in paragraph (e)(1) of this section if:
    (A) The subject company is the subject of a tender offer conducted 
under Sec.  240.14d-1(c);
    (B) Any person specified in paragraph (e)(1) of this section 
furnishes to the Commission on Form CB (Sec.  249.480 of this chapter) 
the entire informational document it publishes or otherwise disseminates 
to holders of the class of securities in connection with the tender 
offer no later than the next business day after publication or 
dissemination;
    (C) Any person specified in paragraph (e)(1) of this section 
disseminates any informational document to U.S. holders, including any 
amendments thereto, in English, on a comparable basis to that provided 
to security holders in the issuer's home jurisdiction; and
    (D) Any person specified in paragraph (e)(1) of this section 
disseminates by publication in its home jurisdiction, such person must 
publish the information in the United States in a manner reasonably 
calculated to inform U.S. security holders of the offer.
    (f) Stop-look-and-listen communication. This section shall not apply 
to the subject company with respect to a communication by the subject 
company to its security holders which only:
    (1) Identifies the tender offer by the bidder;
    (2) States that such tender offer is under consideration by the 
subject company's board of directors and/or management;
    (3) States that on or before a specified date (which shall be no 
later than 10 business days from the date of commencement of such tender 
offer) the subject company will advise such security holders of (i) 
whether the subject company recommends acceptance or rejection of such 
tender offer; expresses no opinion and remains neutral toward such 
tender offer; or is unable to take a position with respect to such 
tender offer and (ii) the reason(s) for the position taken by the 
subject company with respect to the tender offer (including the 
inability to take a position); and
    (4) Requests such security holders to defer making a determination 
whether to accept or reject such tender offer until they have been 
advised of the subject company's position with respect thereto pursuant 
to paragraph (f)(3) of this section.
    (g) Statement of management's position. A statement by the subject 
company's of its position with respect to a tender offer which is 
required to be published or sent or given to security holders pursuant 
to Rule 14e-2 shall be deemed to constitute a solicitation or 
recommendation within the meaning of this section and section 14(d)(4) 
of the Act.

[44 FR 70345, Dec. 6, 1979, as amended at 64 FR 61406, 61461, Nov. 10, 
1999; 73 FR 17814, Apr. 1, 2008]



Sec.  240.14d-10  Equal treatment of security holders.

    (a) No bidder shall make a tender offer unless:
    (1) The tender offer is open to all security holders of the class of 
securities subject to the tender offer; and
    (2) The consideration paid to any security holder for securities 
tendered in the tender offer is the highest consideration paid to any 
other security holder for securities tendered in the tender offer.
    (b) Paragraph (a)(1) of this section shall not:
    (1) Affect dissemination under Rule 14d-4 (Sec.  240.14d-4); or

[[Page 325]]

    (2) Prohibit a bidder from making a tender offer excluding all 
security holders in a state where the bidder is prohibited from making 
the tender offer by administrative or judicial action pursuant to a 
state statute after a good faith effort by the bidder to comply with 
such statute.
    (c) Paragraph (a)(2) of this section shall not prohibit the offer of 
more than one type of consideration in a tender offer, Provided, That:
    (1) Security holders are afforded equal right to elect among each of 
the types of consideration offered; and
    (2) The highest consideration of each type paid to any security 
holder is paid to any other security holder receiving that type of 
consideration.
    (d)(1) Paragraph (a)(2) of this section shall not prohibit the 
negotiation, execution or amendment of an employment compensation, 
severance or other employee benefit arrangement, or payments made or to 
be made or benefits granted or to be granted according to such an 
arrangement, with respect to any security holder of the subject company, 
where the amount payable under the arrangement:
    (i) Is being paid or granted as compensation for past services 
performed, future services to be performed, or future services to be 
refrained from performing, by the security holder (and matters 
incidental thereto); and
    (ii) Is not calculated based on the number of securities tendered or 
to be tendered in the tender offer by the security holder.
    (2) The provisions of paragraph (d)(1) of this section shall be 
satisfied and, therefore, pursuant to this non-exclusive safe harbor, 
the negotiation, execution or amendment of an arrangement and any 
payments made or to be made or benefits granted or to be granted 
according to that arrangement shall not be prohibited by paragraph 
(a)(2) of this section, if the arrangement is approved as an employment 
compensation, severance or other employee benefit arrangement solely by 
independent directors as follows:
    (i) The compensation committee or a committee of the board of 
directors that performs functions similar to a compensation committee of 
the subject company approves the arrangement, regardless of whether the 
subject company is a party to the arrangement, or, if the bidder is a 
party to the arrangement, the compensation committee or a committee of 
the board of directors that performs functions similar to a compensation 
committee of the bidder approves the arrangement; or
    (ii) If the subject company's or bidder's board of directors, as 
applicable, does not have a compensation committee or a committee of the 
board of directors that performs functions similar to a compensation 
committee or if none of the members of the subject company's or bidder's 
compensation committee or committee that performs functions similar to a 
compensation committee is independent, a special committee of the board 
of directors formed to consider and approve the arrangement approves the 
arrangement; or
    (iii) If the subject company or bidder, as applicable, is a foreign 
private issuer, any or all members of the board of directors or any 
committee of the board of directors authorized to approve employment 
compensation, severance or other employee benefit arrangements under the 
laws or regulations of the home country approves the arrangement.

    Instructions to paragraph (d)(2): For purposes of determining 
whether the members of the committee approving an arrangement in 
accordance with the provisions of paragraph (d)(2) of this section are 
independent, the following provisions shall apply:
    1. If the bidder or subject company, as applicable, is a listed 
issuer (as defined in Sec.  240.10A-3 of this chapter) whose securities 
are listed either on a national securities exchange registered pursuant 
to section 6(a) of the Exchange Act (15 U.S.C. 78f(a)) or in an inter-
dealer quotation system of a national securities association registered 
pursuant to section 15A(a) of the Exchange Act (15 U.S.C. 78o-3(a)) that 
has independence requirements for compensation committee members that 
have been approved by the Commission (as those requirements may be 
modified or supplemented), apply the bidder's or subject company's 
definition of independence that it uses for determining that the members 
of the compensation committee are independent in compliance with the 
listing standards applicable to compensation committee members of the 
listed issuer.
    2. If the bidder or subject company, as applicable, is not a listed 
issuer (as defined in

[[Page 326]]

Sec.  240.10A-3 of this chapter), apply the independence requirements 
for compensation committee members of a national securities exchange 
registered pursuant to section 6(a) of the Exchange Act (15 U.S.C. 
78f(a)) or an inter-dealer quotation system of a national securities 
association registered pursuant to section 15A(a) of the Exchange Act 
(15 U.S.C. 78o-3(a)) that have been approved by the Commission (as those 
requirements may be modified or supplemented). Whatever definition the 
bidder or subject company, as applicable, chooses, it must apply that 
definition consistently to all members of the committee approving the 
arrangement.
    3. Notwithstanding Instructions 1 and 2 to paragraph (d)(2), if the 
bidder or subject company, as applicable, is a closed-end investment 
company registered under the Investment Company Act of 1940, a director 
is considered to be independent if the director is not, other than in 
his or her capacity as a member of the board of directors or any board 
committee, an ``interested person'' of the investment company, as 
defined in section 2(a)(19) of the Investment Company Act of 1940 (15 
U.S.C. 80a-2(a)(19)).
    4. If the bidder or the subject company, as applicable, is a foreign 
private issuer, apply either the independence standards set forth in 
Instructions 1 and 2 to paragraph (d)(2) or the independence 
requirements of the laws, regulations, codes or standards of the home 
country of the bidder or subject company, as applicable, for members of 
the board of directors or the committee of the board of directors 
approving the arrangement.
    5. A determination by the bidder's or the subject company's board of 
directors, as applicable, that the members of the board of directors or 
the committee of the board of directors, as applicable, approving an 
arrangement in accordance with the provisions of paragraph (d)(2) are 
independent in accordance with the provisions of this instruction to 
paragraph (d)(2) shall satisfy the independence requirements of 
paragraph (d)(2).

    Instruction to paragraph (d): The fact that the provisions of 
paragraph (d) of this section extend only to employment compensation, 
severance and other employee benefit arrangements and not to other 
arrangements, such as commercial arrangements, does not raise any 
inference that a payment under any such other arrangement constitutes 
consideration paid for securities in a tender offer.

    (e) If the offer and sale of securities constituting consideration 
offered in a tender offer is prohibited by the appropriate authority of 
a state after a good faith effort by the bidder to register or qualify 
the offer and sale of such securities in such state:
    (1) The bidder may offer security holders in such state an 
alternative form of consideration; and
    (2) Paragraph (c) of this section shall not operate to require the 
bidder to offer or pay the alternative form of consideration to security 
holders in any other state.
    (f) This section shall not apply to any tender offer with respect to 
which the Commission, upon written request or upon its own motion, 
either unconditionally or on specified terms and conditions, determines 
that compliance with this section is not necessary or appropriate in the 
public interest or for the protection of investors.

[51 FR 25882, July 17, 1986, as amended at 71 FR 65408, Nov. 8, 2006]



Sec.  240.14d-11  Subsequent offering period.

    A bidder may elect to provide a subsequent offering period of at 
least three business days during which tenders will be accepted if:
    (a) The initial offering period of at least 20 business days has 
expired;
    (b) The offer is for all outstanding securities of the class that is 
the subject of the tender offer, and if the bidder is offering security 
holders a choice of different forms of consideration, there is no 
ceiling on any form of consideration offered;
    (c) The bidder immediately accepts and promptly pays for all 
securities tendered during the initial offering period;
    (d) The bidder announces the results of the tender offer, including 
the approximate number and percentage of securities deposited to date, 
no later than 9:00 a.m. Eastern time on the next business day after the 
expiration date of the initial offering period and immediately begins 
the subsequent offering period;
    (e) The bidder immediately accepts and promptly pays for all 
securities as they are tendered during the subsequent offering period; 
and
    (f) The bidder offers the same form and amount of consideration to 
security holders in both the initial and the subsequent offering period.


[[Page 327]]


    Note to Sec.  240.14d-11: No withdrawal rights apply during the 
subsequent offering period in accordance with Sec.  240.14d-7(a)(2).

[64 FR 61462, Nov. 10, 1999, as amended at 73 FR 60092, Oct. 9, 2008]



Sec.  240.14d-100  Schedule TO. Tender offer statement under 
section 14(d)(1) or 13(e)(1) of the Securities Exchange Act of 1934.

Securities and Exchange Commission,
Washington, D.C. 20549

Schedule TO

Tender Offer Statement under Section 14(d)(1) or 13(e)(1) of the 
Securities Exchange Act of 1934

(Amendment No. ___)*

________________________________________________________________________
(Name of Subject Company (issuer))

________________________________________________________________________
(Names of Filing Persons (identifying status as offeror, issuer or other 
person))

________________________________________________________________________
(Title of Class of Securities)

________________________________________________________________________
(CUSIP Number of Class of Securities)

(Name, address, and telephone numbers of person authorized to receive 
notices and communications on behalf of filing persons)

                        Calculation of Filing Fee
------------------------------------------------------------------------
          Transaction valuation*                Amount of filing fee
------------------------------------------------------------------------
 
------------------------------------------------------------------------
 *Set forth the amount on which the filing fee is calculated and state
  how it was determined.

    [ ] Check the box if any part of the fee is offset as provided by 
Rule 0-11(a)(2) and identify the filing with which the offsetting fee 
was previously paid. Identify the previous filing by registration 
statement number, or the Form or Schedule and the date of its filing.

Amount Previously Paid:_________________________________________________
Form or Registration No.:_______________________________________________
Filing Party:___________________________________________________________
Date Filed:_____________________________________________________________
    [ ] Check the box if the filing relates solely to preliminary 
communications made before the commencement of a tender offer.
    Check the appropriate boxes below to designate any transactions to 
which the statement relates:
    [ ] third-party tender offer subject to Rule 14d-1.
    [ ] issuer tender offer subject to Rule 13e-4.
    [ ] going-private transaction subject to Rule 13e-3.
    [ ] amendment to Schedule 13D under Rule 13d-2.
    Check the following box if the filing is a final amendment reporting 
the results of the tender offer: [ ]
    If applicable, check the appropriate box(es) below to designate the 
appropriate rule provision(s) relied upon:
    [ ] Rule 13e-4(i) (Cross-Border Issuer Tender Offer)
    [ ] Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)
    General Instructions:
    A. File eight copies of the statement, including all exhibits, with 
the Commission if paper filing is permitted.
    B. This filing must be accompanied by a fee payable to the 
Commission as required by Sec.  240.0-11.
    C. If the statement is filed by a general or limited partnership, 
syndicate or other group, the information called for by Items 3 and 5-8 
for a third-party tender offer and Items 5-8 for an issuer tender offer 
must be given with respect to: (i) Each partner of the general 
partnership; (ii) each partner who is, or functions as, a general 
partner of the limited partnership; (iii) each member of the syndicate 
or group; and (iv) each person controlling the partner or member. If the 
statement is filed by a corporation or if a person referred to in (i), 
(ii), (iii) or (iv) of this Instruction is a corporation, the 
information called for by the items specified above must be given with 
respect to: (a) Each executive officer and director of the corporation; 
(b) each person controlling the corporation; and (c) each executive 
officer and director of any corporation or other person ultimately in 
control of the corporation.
    D. If the filing contains only preliminary communications made 
before the commencement of a tender offer, no signature or filing fee is 
required. The filer need not respond to the items in the schedule. Any 
pre-commencement communications that are filed under cover of this 
schedule need not be incorporated by reference into the schedule.
    E. If an item is inapplicable or the answer is in the negative, so 
state. The statement published, sent or given to security holders may 
omit negative and not applicable responses. If the schedule includes any 
information that is not published, sent or given to security holders, 
provide that information or specifically incorporate it by reference 
under the appropriate item number and heading in the schedule. Do not 
recite the text of disclosure requirements in the schedule or any 
document published, sent or given to security holders. Indicate clearly 
the coverage of the requirements without referring to the text of the 
items.
    F. Information contained in exhibits to the statement may be 
incorporated by reference in answer or partial answer to any item unless 
it would render the answer misleading, incomplete, unclear or confusing. 
A copy of

[[Page 328]]

any information that is incorporated by reference or a copy of the 
pertinent pages of a document containing the information must be 
submitted with this statement as an exhibit, unless it was previously 
filed with the Commission electronically on EDGAR. If an exhibit 
contains information responding to more than one item in the schedule, 
all information in that exhibit may be incorporated by reference once in 
response to the several items in the schedule for which it provides an 
answer. Information incorporated by reference is deemed filed with the 
Commission for all purposes of the Act.
    G. A filing person may amend its previously filed Schedule 13D 
(Sec.  240.13d-101) on Schedule TO (Sec.  240.14d-100) if the 
appropriate box on the cover page is checked to indicate a combined 
filing and the information called for by the fourteen disclosure items 
on the cover page of Schedule 13D (Sec.  240.13d-101) is provided on the 
cover page of the combined filing with respect to each filing person.
    H. The final amendment required by Sec.  240.14d-3(b)(2) and Sec.  
240.13e-4(c)(4) will satisfy the reporting requirements of section 13(d) 
of the Act with respect to all securities acquired by the offeror in the 
tender offer.
    I. Amendments disclosing a material change in the information set 
forth in this statement may omit any information previously disclosed in 
this statement.
    J. If the tender offer disclosed on this statement involves a going-
private transaction, a combined Schedule TO (Sec.  240.14d-100) and 
Schedule 13E-3 (Sec.  240.13e-100) may be filed with the Commission 
under cover of Schedule TO. The Rule 13e-3 box on the cover page of the 
Schedule TO must be checked to indicate a combined filing. All 
information called for by both schedules must be provided except that 
Items 1-3, 5, 8 and 9 of Schedule TO may be omitted to the extent those 
items call for information that duplicates the item requirements in 
Schedule 13E-3.
    K. For purposes of this statement, the following definitions apply:
    (1) The term offeror means any person who makes a tender offer or on 
whose behalf a tender offer is made;
    (2) The term issuer tender offer has the same meaning as in Rule 
13e-4(a)(2); and
    (3) The term third-party tender offer means a tender offer that is 
not an issuer tender offer.

           Special Instructions for Complying With Schedule TO

    Under Sections 13(e), 14(d) and 23 of the Act and the rules and 
regulations of the Act, the Commission is authorized to solicit the 
information required to be supplied by this schedule.
    Disclosure of the information specified in this schedule is 
mandatory. The information will be used for the primary purpose of 
disclosing tender offer and going-private transactions. This statement 
will be made a matter of public record. Therefore, any information given 
will be available for inspection by any member of the public.
    Because of the public nature of the information, the Commission can 
use it for a variety of purposes, including referral to other 
governmental authorities or securities self-regulatory organizations for 
investigatory purposes or in connection with litigation involving the 
federal securities laws or other civil, criminal or regulatory statutes 
or provisions.
    Failure to disclose the information required by this schedule may 
result in civil or criminal action against the persons involved for 
violation of the federal securities laws and rules.

                       Item 1. Summary Term Sheet

    Furnish the information required by Item 1001 of Regulation M-A 
(Sec.  229.1001 of this chapter) unless information is disclosed to 
security holders in a prospectus that meets the requirements of Sec.  
230.421(d) of this chapter.

                   Item 2. Subject Company Information

    Furnish the information required by Item 1002(a) through (c) of 
Regulation M-A (Sec.  229.1002 of this chapter).

            Item 3. Identity and Background of Filing Person

    Furnish the information required by Item 1003(a) through (c) of 
Regulation M-A (Sec.  229.1003 of this chapter) for a third-party tender 
offer and the information required by Item 1003(a) of Regulation M-A 
(Sec.  229.1003 of this chapter) for an issuer tender offer.

                    Item 4. Terms of the Transaction

    Furnish the information required by Item 1004(a) of Regulation M-A 
(Sec.  229.1004 of this chapter) for a third-party tender offer and the 
information required by Item 1004(a) through (b) of Regulation M-A 
(Sec.  229.1004 of this chapter) for an issuer tender offer.

    Item 5. Past Contacts, Transactions, Negotiations and Agreements

    Furnish the information required by Item 1005(a) and (b) of 
Regulation M-A (Sec.  229.1005 of this chapter) for a third-party tender 
offer and the information required by Item 1005(e) of Regulation M-A 
(Sec.  229.1005) for an issuer tender offer.

       Item 6. Purposes of the Transaction and Plans or Proposals

    Furnish the information required by Item 1006(a) and (c)(1) through 
(7) of Regulation M-A (Sec.  229.1006 of this chapter) for a third-

[[Page 329]]

party tender offer and the information required by Item 1006(a) through 
(c) of Regulation M-A (Sec.  229.1006 of this chapter) for an issuer 
tender offer.

        Item 7. Source and Amount of Funds or Other Consideration

    Furnish the information required by Item 1007(a), (b) and (d) of 
Regulation M-A (Sec.  229.1007 of this chapter).

          Item 8. Interest in Securities of the Subject Company

    Furnish the information required by Item 1008 of Regulation M-A 
(Sec.  229.1008 of this chapter).

     Item 9. Persons/Assets, Retained, Employed, Compensated or Used

    Furnish the information required by Item 1009(a) of Regulation M-A 
(Sec.  229.1009 of this chapter).

                      Item 10. Financial Statements

    If material, furnish the information required by Item 1010(a) and 
(b) of Regulation M-A (Sec.  229.1010 of this chapter) for the issuer in 
an issuer tender offer and for the offeror in a third-party tender 
offer.
    Instructions to Item 10: 1. Financial statements must be provided 
when the offeror's financial condition is material to security holder's 
decision whether to sell, tender or hold the securities sought. The 
facts and circumstances of a tender offer, particularly the terms of the 
tender offer, may influence a determination as to whether financial 
statements are material, and thus required to be disclosed.
    2. Financial statements are not considered material when: (a) The 
consideration offered consists solely of cash; (b) the offer is not 
subject to any financing condition; and either: (c) the offeror is a 
public reporting company under Section 13(a) or 15(d) of the Act that 
files reports electronically on EDGAR, or (d) the offer is for all 
outstanding securities of the subject class. Financial information may 
be required, however, in a two-tier transaction. See Instruction 5 
below.
    3. The filing person may incorporate by reference financial 
statements contained in any document filed with the Commission, solely 
for the purposes of this schedule, if: (a) The financial statements 
substantially meet the requirements of this item; (b) an express 
statement is made that the financial statements are incorporated by 
reference; (c) the information incorporated by reference is clearly 
identified by page, paragraph, caption or otherwise; and (d) if the 
information incorporated by reference is not filed with this schedule, 
an indication is made where the information may be inspected and copies 
obtained. Financial statements that are required to be presented in 
comparative form for two or more fiscal years or periods may not be 
incorporated by reference unless the material incorporated by reference 
includes the entire period for which the comparative data is required to 
be given. See General Instruction F to this schedule.
    4. If the offeror in a third-party tender offer is a natural person, 
and such person's financial information is material, disclose the net 
worth of the offeror. If the offeror's net worth is derived from 
material amounts of assets that are not readily marketable or there are 
material guarantees and contingencies, disclose the nature and 
approximate amount of the individual's net worth that consists of 
illiquid assets and the magnitude of any guarantees or contingencies 
that may negatively affect the natural person's net worth.
    5. Pro forma financial information is required in a negotiated 
third-party cash tender offer when securities are intended to be offered 
in a subsequent merger or other transaction in which remaining target 
securities are acquired and the acquisition of the subject company is 
significant to the offeror under Sec.  210.11-01(b)(1) of this chapter. 
The offeror must disclose the financial information specified in Item 
3(f) and Item 5 of Form S-4 (Sec.  239.25 of this chapter) in the 
schedule filed with the Commission, but may furnish only the summary 
financial information specified in Item 3(d), (e) and (f) of Form S-4 in 
the disclosure document sent to security holders. If pro forma financial 
information is required by this instruction, the historical financial 
statements specified in Item 1010 of Regulation M-A (Sec.  229.1010 of 
this chapter) are required for the bidder.
    6. The disclosure materials disseminated to security holders may 
contain the summarized financial information specified by Item 1010(c) 
of Regulation M-A (Sec.  229.1010 of this chapter) instead of the 
financial information required by Item 1010(a) and (b). In that case, 
the financial information required by Item 1010(a) and (b) of Regulation 
M-A must be disclosed in the statement. If summarized financial 
information is disseminated to security holders, include appropriate 
instructions on how more complete financial information can be obtained. 
If the summarized financial information is prepared on the basis of a 
comprehensive body of accounting principles other than U.S. GAAP, the 
summarized financial information must be accompanied by a reconciliation 
as described in Instruction 8 of this Item.
    7. If the offeror is not subject to the periodic reporting 
requirements of the Act, the financial statements required by this Item 
need not be audited if audited financial statements are not available or 
obtainable without unreasonable cost or expense. Make a statement to 
that effect and the reasons for their unavailability.

[[Page 330]]

    8. If the financial statements required by this Item are prepared on 
the basis of a comprehensive body of accounting principles other than 
U.S. GAAP, provide a reconciliation to U.S. GAAP in accordance with Item 
17 of Form 20-F (Sec.  249.220f of this chapter), unless a 
reconciliation is unavailable or not obtainable without unreasonable 
cost or expense. At a minimum, however, when financial statements are 
prepared on a basis other than U.S. GAAP, a narrative description of all 
material variations in accounting principles, practices and methods used 
in preparing the non-U.S. GAAP financial statements from those accepted 
in the U.S. must be presented.

                    Item 11. Additional Information.

    Furnish the information required by Item 1011(a) and (c) of 
Regulation M-A (Sec.  229.1011 of this chapter).

                            Item 12. Exhibits

    File as an exhibit to the Schedule all documents specified by Item 
1016 (a), (b), (d), (g) and (h) of Regulation M-A (Sec.  229.1016 of 
this chapter).

             Item 13. Information Required by Schedule 13E-3

    If the Schedule TO is combined with Schedule 13E-3 (Sec.  240.13e-
100), set forth the information required by Schedule 13E-3 that is not 
included or covered by the items in Schedule TO.

Signature. After due inquiry and to the best of my knowledge and belief, 
I certify that the information set forth in this statement is true, 
complete and correct.

________________________________________________________________________
(Signature)

________________________________________________________________________
(Name and title)

________________________________________________________________________
(Date)

    Instruction to Signature: The statement must be signed by the filing 
person or that person's authorized representative. If the statement is 
signed on behalf of a person by an authorized representative (other than 
an executive officer of a corporation or general partner of a 
partnership), evidence of the representative's authority to sign on 
behalf of the person must be filed with the statement. The name and any 
title of each person who signs the statement must be typed or printed 
beneath the signature. See Sec. Sec.  240.12b-11 and 240.14d-1(h) with 
respect to signature requirements.

[64 FR 61462, Nov. 10, 1999, as amended at 72 FR 45112, Aug. 10, 2007; 
73 FR 17814, Apr. 1, 2008; 73 FR 60093, Oct. 9, 2008; 76 FR 6046, Feb. 
2, 2011]



Sec.  240.14d-101  Schedule 14D-9.

Securities and Exchange Commission,
Washington, D.C. 20549

Schedule 14D-9

Solicitation/Recommendation Statement under Section 14(d)(4) of the 
Securities Exchange Act of 1934

(Amendment No. ___)

________________________________________________________________________
(Name of Subject Company)

________________________________________________________________________
(Names of Persons Filing Statement)

________________________________________________________________________
(Title of Class of Securities)

________________________________________________________________________
(CUSIP Number of Class of Securities)

________________________________________________________________________
(Name, address, and telephone numbers of person authorized to receive 
notices and communications on behalf of the persons filing statement)

    [ ] Check the box if the filing relates solely to preliminary 
communications made before the commencement of a tender offer.
    General Instructions:
    A. File eight copies of the statement, including all exhibits, with 
the Commission if paper filing is permitted.
    B. If the filing contains only preliminary communications made 
before the commencement of a tender offer, no signature is required. The 
filer need not respond to the items in the schedule. Any pre-
commencement communications that are filed under cover of this schedule 
need not be incorporated by reference into the schedule.
    C. If an item is inapplicable or the answer is in the negative, so 
state. The statement published, sent or given to security holders may 
omit negative and not applicable responses. If the schedule includes any 
information that is not published, sent or given to security holders, 
provide that information or specifically incorporate it by reference 
under the appropriate item number and heading in the schedule. Do not 
recite the text of disclosure requirements in the schedule or any 
document published, sent or given to security holders. Indicate clearly 
the coverage of the requirements without referring to the text of the 
items.
    D. Information contained in exhibits to the statement may be 
incorporated by reference in answer or partial answer to any item unless 
it would render the answer misleading, incomplete, unclear or confusing. 
A copy of any information that is incorporated by reference or a copy of 
the pertinent pages of a document containing the information must be 
submitted with this statement as an exhibit, unless it was previously 
filed with the Commission electronically on EDGAR. If an exhibit 
contains information responding to

[[Page 331]]

more than one item in the schedule, all information in that exhibit may 
be incorporated by reference once in response to the several items in 
the schedule for which it provides an answer. Information incorporated 
by reference is deemed filed with the Commission for all purposes of the 
Act.
    E. Amendments disclosing a material change in the information set 
forth in this statement may omit any information previously disclosed in 
this statement.

                   Item 1. Subject Company Information

    Furnish the information required by Item 1002(a) and (b) of 
Regulation M-A (Sec.  229.1002 of this chapter).

            Item 2. Identity and Background of Filing Person

    Furnish the information required by Item 1003(a) and (d) of 
Regulation M-A (Sec.  229.1003 of this chapter).

    Item 3. Past Contacts, Transactions, Negotiations and Agreements

    Furnish the information required by Item 1005(d) of Regulation M-A 
(Sec.  229.1005 of this chapter).

               Item 4. The Solicitation or Recommendation

    Furnish the information required by Item 1012(a) through (c) of 
Regulation M-A (Sec.  229.1012 of this chapter).

     Item 5. Person/Assets, Retained, Employed, Compensated or Used

    Furnish the information required by Item 1009(a) of Regulation M-A 
(Sec.  229.1009 of this chapter).

          Item 6. Interest in Securities of the Subject Company

    Furnish the information required by Item 1008(b) of Regulation M-A 
(Sec.  229.1008 of this chapter).

       Item 7. Purposes of the Transaction and Plans or Proposals

    Furnish the information required by Item 1006(d) of Regulation M-A 
(Sec.  229.1006 of this chapter).

                     Item 8. Additional Information

    Furnish the information required by Item 1011(b) and (c) of 
Regulation M-A (Sec.  229.1011 of this chapter).

                            Item 9. Exhibits

    File as an exhibit to the Schedule all documents specified by Item 
1016(a), (e) and (g) of Regulation M-A (Sec.  229.1016 of this chapter).
    Signature. After due inquiry and to the best of my knowledge and 
belief, I certify that the information set forth in this statement is 
true, complete and correct.

________________________________________________________________________
(Signature)

________________________________________________________________________
(Name and title)

________________________________________________________________________
(Date)

    Instruction to Signature: The statement must be signed by the filing 
person or that person's authorized representative. If the statement is 
signed on behalf of a person by an authorized representative (other than 
an executive officer of a corporation or general partner of a 
partnership), evidence of the representative's authority to sign on 
behalf of the person must be filed with the statement. The name and any 
title of each person who signs the statement must be typed or printed 
beneath the signature. See Sec.  240.14d-1(h) with respect to signature 
requirements.

[64 FR 61464, Nov. 10, 1999, as amended at 73 FR 17814, Apr. 1, 2008; 76 
FR 6046, Feb. 2, 2011]



Sec.  240.14d-102  Schedule 14D-1F. Tender offer statement pursuant to
rule 14d-1(b) under the Securities Exchange Act of 1934.

                   Securities and Exchange Commission

                             Washington, DC

                             Schedule 14D-1F

 Tender Offer Statement Pursuant to Rule 14d-1(b) Under the Securities 
                          Exchange Act of 1934

                          [Amendment No. ____]

________________________________________________________________________
(Name of Subject Company [Issuer])
________________________________________________________________________
(Translation of Subject Company's [Issuer's] name into English (if 
applicable))
________________________________________________________________________
(Jurisdiction of Subject Company's [Issuer's] Incorporation or 
Organization)
________________________________________________________________________
(Bidder)
________________________________________________________________________
(Title of Class of Securities)
________________________________________________________________________
(CUSIP Number of Class of Securities (if applicable))
________________________________________________________________________
(Name, address (including zip code) and telephone number (including area 
code) of person(s) authorized to receive notices and communications on 
behalf of bidder)
________________________________________________________________________
(Date tender offer first published, sent or given to securityholders)

Calculation of Filing Fee*
    Transaction Valuation
    Amount of Filing Fee


[[Page 332]]


    * Set forth the amount on which the filing fee is calculated and 
state how it was determined. See General Instruction II. C. for rules 
governing the calculation of the filing fee.

[ ] Check box if any part of the fee is offset as provided by Rule 0-
          11(a) (2) and identify the filing with which the offsetting 
          fee was previously paid. Identify the previous filing by 
          registration statement number, or the Form or Schedule and the 
          date of its filing.

Amount Previously Paid:_________________________________________________

Registration No.:_______________________________________________________
Filing Party:___________________________________________________________

Form:___________________________________________________________________

Date Filed:_____________________________________________________________

                          General Instructions

         I. Eligibility Requirements for Use of Schedule 14D-1F

    A. Schedule 14D-1F may be used by any person making a cash tender or 
exchange offer (the ``bidder'') for securities of any issuer 
incorporated or organized under the laws of Canada or any Canadian 
province or territory that is a foreign private issuer, where less than 
40 percent of the outstanding class of such issuer's securities that is 
the subject of the offer is held by U.S. holders. The calculation of 
U.S. holders shall be made as of the end of the subject issuer's last 
quarter or, if such quarter terminated within 60 days of the filing 
date, as of the end of such issuer's preceding quarter.

                              Instructions

    1. For purposes of this Schedule, ``foreign private issuer'' shall 
be construed in accordance with Rule 405 under the Securities Act.
    2. For purposes of this Schedule, the term ``U. S. holder'' shall 
mean any person whose address appears on the records of the issuer, any 
voting trustee, any depositary, any share transfer agent or any person 
acting in a similar capacity on behalf of the issuer as being located in 
the United States.
    3. With respect to any tender offer, including any exchange offer, 
otherwise eligible to proceed in accordance with Rule 14d-1(b) under the 
Securities Exchange Act of 1934 (the ``Exchange Act''), the issuer of 
the subject securities will be presumed to be a foreign private issuer 
and U. S. holders will be presumed to hold less than 40 percent of such 
outstanding securities, unless (a) the aggregate trading volume of that 
class on national securities exchanges in the United States and on 
NASDAQ exceeded its aggregate trading volume on securities exchanges in 
Canada and on the Canadian Dealing Network, Inc. (``CDN'') over the 12 
calendar month period prior to commencement of this offer, or if 
commenced in response to a prior offer, over the 12 calendar month 
period prior to commencement of the initial offer (based on volume 
figures published by such exchanges and NASDAQ and CDN) ; (b) the most 
recent annual report or annual information form filed or submitted by 
the issuer with securities regulators of Ontario, Quebec, British 
Columbia or Alberta (or, if the issuer of the subject securities is not 
a reporting issuer in any of such provinces, with any other Canadian 
securities regulator) or with the Commission indicates that U. S. 
holders hold 40 percent or more of the subject class of securities; or 
(c) the offeror has actual knowledge that the level of U. S. ownership 
equals or exceeds 40 percent of such securities.
    4. If this Schedule is filed during the pendency of one or more 
ongoing cash tender or exchange offers for securities of the class 
subject to this offer that was commenced or was eligible to be commenced 
on Schedule 13E-4F, Schedule 14D-1F and/or Form F-8 or Form F-80, the 
date for calculation of U. S. ownership for purposes of this Schedule 
shall be the same as that date used by the initial bidder or issuer.
    5. For purposes of this Schedule, the class of subject securities 
shall not include any securities that may be converted into or are 
exchangeable for the subject securities.
    B. Any bidder using this Schedule must extend the cash tender or 
exchange offer to U. S. holders of securities of the subject company 
upon terms and conditions not less favorable than those extended to any 
other holder of such securities, and must comply with the requirements 
of any Canadian federal, provincial and/or territorial law, regulation 
or policy relating to the terms and conditions of the offer.
    C. This Schedule shall not be used if the subject company is an 
investment company registered or required to be registered under the 
Investment Company Act of 1940.
    D. This Schedule shall not be used to comply with the reporting 
requirements of section 13(d) of the Exchange Act. Persons using this 
Schedule are reminded of their obligation to file or update a Schedule 
13D where required by section 13(d)(1) of the Exchange Act and the 
Commission's rules and regulations thereunder.

                     II. Filing Instructions and Fee

    A.(1) The bidder must file this Schedule and any amendment to the 
Schedule (see Part I, Item 1.(b)), including all exhibits and other 
documents filed as part of the Schedule or amendment, in electronic 
format via the Commission's Electronic Data Gathering, Analysis, and 
Retrieval (EDGAR) system in accordance with the EDGAR rules set forth in 
Regulation S-T (17 CFR Part 232). For assistance with technical 
questions about EDGAR or to request an access code, call the EDGAR Filer 
Support Office at (202) 551-8900. For assistance with the EDGAR

[[Page 333]]

rules, call the Office of EDGAR and Information Analysis at (202) 551-
3610.
    (2) If filing the Schedule in paper under a hardship exemption in 17 
CFR 232.201 or 232.202 of Regulation S-T, or as otherwise permitted, the 
bidder must file with the Commission at its principal office five copies 
of the complete Schedule and any amendment, including exhibits and all 
other documents filed as a part of the Schedule or amendment. The bidder 
must bind, staple or otherwise compile each copy in one or more parts 
without stiff covers. The bidder must further bind the Schedule or 
amendment on the side or stitching margin in a manner that leaves the 
reading matter legible. The bidder must provide three additional copies 
of the Schedule or amendment without exhibits to the Commission.
    B. An electronic filer must provide the signatures required for the 
Schedule or amendment in accordance with 17 CFR 232.302 of Regulation S-
T. A bidder filing in paper must have the original and at least one copy 
of the Schedule and any amendment signed in accordance with Exchange Act 
Rule 12b-11(d) (17 CFR 12b-11(d)) by the persons whose signatures are 
required for this Schedule or amendment. The bidder must also conform 
the unsigned copies.
    C. At the time of filing this Schedule with the Commission, the 
bidder shall pay to the Commission in accordance with Rule 0-11 of the 
Exchange Act, a fee in U. S. dollars in the amount prescribed by section 
14(g)(3) of the Exchange Act. See also Rule 0-9 under the Exchange Act.
    (1) Where the bidder is offering securities or other non-cash 
consideration for some or all of the securities to be acquired, whether 
or not in combination with a cash payment for the same securities, the 
value of the consideration shall be based on the market value of the 
securities to be received by the bidder as established by paragraph 3 of 
this section.
    (2) If there is no market for the securities to be acquired by the 
bidder, the book value of such securities computed as of the latest 
practicable date prior to the date of filing the Schedule shall be used, 
unless the issuer of such securities is in bankruptcy or receivership or 
has an accumulated capital deficit, in which case one-third of the 
principal amount, par value or stated value of such securities shall be 
used.
    (3) When the fee is based upon the market value of the securities, 
such market value shall be calculated upon the basis of either the 
average of the high and low prices reported in the consolidated 
reporting system (for exchange traded securities and last sale reported 
for over-the-counter securities) or the average of the bid and asked 
price (for other over-the-counter securities) as of a specified date 
within five business days prior to the date of filing the Schedule.
    D. If at any time after the initial payment of the fee the aggregate 
consideration offered is increased, an additional filing fee based upon 
such increase shall be paid with the required amended filing.
    E. The bidder must file the Schedule or amendment in electronic 
format in the English language in accordance with 17 CFR 232.306 of 
Regulation S-T. The bidder may file part of the Schedule or amendment, 
or exhibit or other attachment to the Schedule or amendment, in both 
French and English if the bidder included the French text to comply with 
the requirements of the Canadian securities administrator or other 
Canadian authority and, for an electronic filing, if the filing is an 
HTML document, as defined in 17 CFR 232.11 of Regulation S-T. For both 
an electronic filing and a paper filing, the bidder may provide an 
English translation or English summary of a foreign language document as 
an exhibit or other attachment to the Schedule or amendment as permitted 
by the rules of the applicable Canadian securities administrator.
    F. A paper filer must number sequentially the signed original of the 
Schedule or amendment (in addition to any internal numbering that 
otherwise may be present) by handwritten, typed, printed or other 
legible form of notation from the first page through the last page of 
the Schedule or amendment, including any exhibits or attachments. A 
paper filer must disclose the total number of pages on the first page of 
the sequentially numbered Schedule or amendment.

                  III. Compliance With the Exchange Act

    A. Pursuant to Rule 14d-1(b) under the Exchange Act, the bidder 
shall be deemed to comply with the requirements of sections 14(d)(1) 
through 14(d)(7) of the Exchange Act, Regulation 14D under the Exchange 
Act and Schedule TO thereunder, and Rule 14e-1 under Regulation 14E of 
the Exchange Act, in connection with a cash tender or exchange offer for 
securities that may be made pursuant to this Schedule; provided that, if 
an exemption has been granted from requirements of Canadian federal, 
provincial, and/or territorial laws, regulations or policies, and the 
tender offer does not comply with requirements that otherwise would be 
prescribed by Regulation 14D or 14E, the bidder (absent an order from 
the Commission) shall comply with the provisions of sections 14(d)(1) 
through 14(d)(7) of the Exchange Act, Regulation 14D and Schedule TO 
thereunder, and Rule 14e-1 under Regulation 14E.
    B. Any cash tender or exchange offer made pursuant to this Schedule 
is not exempt from the antifraud provisions of section 10(b) of the 
Exchange Act and Rule 10b-5 thereunder, and section 14(e) of the 
Exchange Act and Rule 14e-3 thereunder, and this Schedule

[[Page 334]]

shall be deemed ``filed'' for purposes of section 18 of the Exchange 
Act.
    C. The bidder's attention is directed to Regulation M (Sec. Sec.  
242.100 through 242.105 of this chapter) in the case of an exchange 
offer, and to Rule 14e-5 under the Exchange Act (Sec.  240.14e-5) for 
any exchange or cash tender offer. [See Exchange Act Release No. 29355 
(June 21, 1991) containing an exemption from Rule 10b-13, the 
predecessor to Rule 14e-5.]

         PART I--INFORMATION REQUIRED TO BE SENT TO SHAREHOLDERS

                   Item 1. Home Jurisdiction Documents

    (a) This Schedule shall be accompanied by the entire disclosure 
document or documents required to be delivered to holders of securities 
to be acquired in the proposed transaction by the bidder pursuant to the 
laws, regulations or policies of Canada and/or any of its provinces or 
territories governing the conduct of the tender offer. It shall not 
include any documents incorporated by reference into such disclosure 
document(s) and not distributed to offerees pursuant to any such law, 
regulation or policy.
    (b) Any amendment made by the bidder to a home jurisdiction document 
or documents shall be filed with the Commission under cover of this 
Schedule, which must indicate on the cover page the number of the 
amendment.
    (c) In an exchange offer where securities of the bidder have been or 
are to be offered or cancelled in the transaction, such securities shall 
be registered on forms promulgated by the Commission under the 
Securities Act of 1933 including, where available, the Commission's Form 
F-8 or F-80 providing for inclusion in that registration statement of 
the home jurisdiction prospectus.

                      Item 2. Informational Legends

    The following legends, to the extent applicable, shall appear on the 
outside front cover page of the home-jurisdiction document(s) in bold-
face roman type at least as high as ten-point modern type and at least 
two points leaded:
    ``This tender offer is made for the securities of a foreign issuer 
and while the offer is subject to disclosure requirements of the country 
in which the subject company is incorporated or organized, investors 
should be aware that these requirements are different from those of the 
United States. Financial statements included herein, if any, have been 
prepared in accordance with foreign generally accepted accounting 
principles and thus may not be comparable to financial statements of 
United States companies.
    ``The enforcement by investors of civil liabilities under the 
federal securities laws may be affected adversely by the fact that the 
subject company is located in a foreign country, and that some or all of 
its officers and directors are residents of a foreign country.
    ``Investors should be aware that the bidder or its affiliates, 
directly or indirectly, may bid for or make purchases of the issuer's 
securities subject to the offer, or of the issuer's related securities, 
during the period of the tender offer, as permitted by applicable 
Canadian laws or provincial laws or regulations. ''
    In the case of an exchange offer:
    ``Investors should be aware that the bidder or its affiliates, 
directly or indirectly, may bid for or make purchases of the issuer's 
securities subject to the offer or of the issuer's related securities, 
or of the bidder's securities to be distributed or of the bidder's 
related securities, during the period of the tender offer, as permitted 
by applicable Canadian laws or provincial laws or regulations. ''

    Note to Item 2. If the home-jurisdiction document(s) are delivered 
through an electronic medium, the issuer may satisfy the legibility 
requirements for the required legends relating to type size and font by 
presenting the legend in any manner reasonably calculated to draw 
security holder attention to it.

      PART II--INFORMATION NOT REQUIRED TO BE SENT TO SHAREHOLDERS

    The exhibits specified below shall be filed as part of the Schedule, 
but are not required to be sent to shareholders unless so required 
pursuant to the laws, regulations or policies of Canada and/or any of 
its provinces or territories. Exhibits shall be appropriately lettered 
or numbered for convenient reference.
    (1) File any reports or information that, in accordance with the 
requirements of the home jurisdiction(s), must be made publicly 
available by the bidder in connection with the transaction but need not 
be disseminated to shareholders.
    (2) File copies of any documents incorporated by reference into the 
home jurisdiction document(s).
    (3) If any name is signed to this Schedule pursuant to power of 
attorney, manually signed copies of any such power of attorney shall be 
filed. If the name of any officer signing on behalf of the bidder is 
signed pursuant to a power of attorney, certified copies of the bidder's 
board of directors authorizing such signature also shall be filed.

        PART III--UNDERTAKINGS AND CONSENT TO SERVICE OF PROCESS

    1. Undertakings
    The Schedule shall set forth the following undertakings of the 
bidder:
    a. The bidder undertakes to make available, in person or by 
telephone, representatives to respond to inquiries made by the 
Commission staff, and to furnish promptly,

[[Page 335]]

when requested to do so by the Commission staff, information relating to 
this Schedule or to transactions in said securities.
    b. The bidder undertakes to disclose in the United States, on the 
same basis as it is required to make such disclosure pursuant to 
applicable Canadian federal and/or provincial or territorial laws, 
regulations or policies, or otherwise discloses, information regarding 
purchases of the issuer's securities in connection with the cash tender 
or exchange offer covered by this Schedule. Such information shall be 
set forth in amendments to this Schedule.
    c. In the case of an exchange offer:
    The bidder undertakes to disclose in the United States, on the same 
basis as it is required to make such disclosure pursuant to any 
applicable Canadian federal and/or provincial or territorial law, 
regulation or policy, or otherwise discloses, information regarding 
purchases of the issuer's or bidder's securities in connection with the 
offer.
    2. Consent to Service of Process
    (a) At the time of filing this Schedule, the bidder (if a non-U. S. 
person) shall file with the Commission a written irrevocable consent and 
power of attorney on Form F-X.
    (b) Any change to the name or address of a registrant's agent for 
service shall be communicated promptly to the Commission by amendment to 
Form F-X referencing the file number of the registrant.

                           PART IV--SIGNATURES

    A. The Schedule shall be signed by each person on whose behalf the 
Schedule is filed or its authorized representative. If the Schedule is 
signed on behalf of a person by his authorized representative (other 
than an executive officer or general partner of the bidder), evidence of 
the representative's authority shall be filed with the Schedule.
    B. The name and any title of each person who signs the Schedule 
shall be typed or printed beneath his signature.
    C. By signing this Schedule, the bidder consents without power of 
revocation that any administrative subpoena may be served, or any 
administrative proceeding, civil suit or civil action where the cause of 
action arises out of or relates to or concerns any offering made or 
purported to be made in connection with the filing on Schedule 14D-1F or 
any purchases or sales of any security in connection therewith, may be 
commenced against it in any administrative tribunal or in any 
appropriate court in any place subject to the jurisdiction of any state 
or of the United States by service of said subpoena or process upon the 
registrant's designated agent.
    After due inquiry and to the best of my knowledge and belief, I 
certify that the information set forth in this statement is true, 
complete and correct.
________________________________________________________________________
    (Signature)
________________________________________________________________________
    (Name and Title)
________________________________________________________________________
    (Date)

[56 FR 30071, July 1, 1991; 57 FR 10615, Mar. 27, 1992, as amended at 61 
FR 24657, May 15, 1996; 62 FR 544, Jan. 3, 1997; 67 FR 36705, May 24, 
2002; 73 FR 17814, Apr. 1, 2008]



Sec.  240.14d-103  Schedule 14D-9F. Solicitation/recommendation statement
pursuant to section 14(d)(4) of the Securities Exchange Act of 1934 and
rules 14d-1(b) and 14e-2(c) thereunder.

Securities and Exchange Commission Washington, DC 20549
Schedule 14D-9F
Solicitation/Recommendation Statement Pursuant to Section 14(d)(4) of 
the Securities Exchange Act of 1934 and Rules 14d-1(b) and 14e-2(c) 
Thereunder
[Amendment No. __]
________________________________________________________________________
    (Name of Subject Company [Issuer])
________________________________________________________________________
    (Translation of Subject Company's [Issuer's] Name into English (if 
applicable))
________________________________________________________________________
    (Jurisdiction of Subject Company's [Issuer's] Incorporation or 
Organization)
________________________________________________________________________
    (Name(s) of Person(s) Filing Statement)
________________________________________________________________________
    (Title of Class of Securities)
________________________________________________________________________
    (CUSIP Number of Class of Securities (if applicable))
________________________________________________________________________
    (Name, address (including zip code) and telephone number (including 
area code) of person(s) authorized to receive notices and communications 
on behalf of the person(s) filing statement)

                          General Instructions

         I. Eligibility Requirements for Use of Schedule 14D-9F

    A. Schedule 14D-9F is used by any issuer incorporated or organized 
under the laws of Canada or any Canadian province or territory that is a 
foreign private issuer (the ``subject company'') , or by any director or 
officer of such issuer, where the issuer is the subject of a cash tender 
or exchange offer for a class of its securities filed on Schedule 14D-
1F.
    For purposes of this Schedule, ``foreign private issuer'' shall be 
construed in accordance with Rule 405 under the Securities Act.
    B. Any person(s) using this Schedule must comply with the 
requirements of any Canadian federal, provincial and/or territorial

[[Page 336]]

law, regulation or policy relating to a recommendation by the subject 
issuer's board of directors, or any director or officer thereof, with 
respect to the offer.

                         II. Filing Instructions

    A.(1) The subject issuer must file this Schedule and any amendment 
to the Schedule (see Part I, Item 1.(b)), including all exhibits and 
other documents filed as part of the Schedule or amendment, in 
electronic format via the Commission's Electronic Data Gathering, 
Analysis, and Retrieval (EDGAR) system in accordance with the EDGAR 
rules set forth in Regulation S-T (17 CFR Part 232). For assistance with 
technical questions about EDGAR or to request an access code, call the 
EDGAR Filer Support Office at (202) 551-8900. For assistance with the 
EDGAR rules, call the Office of EDGAR and Information Analysis at (202) 
551-3610.
    (2) If filing the Schedule in paper under a hardship exemption in 17 
CFR 232.201 or 232.202 of Regulation S-T, or as otherwise permitted, the 
subject issuer must file with the Commission at its principal office 
five copies of the complete Schedule and any amendment, including 
exhibits and all other documents filed as a part of the Schedule or 
amendment. The subject issuer must bind, staple or otherwise compile 
each copy in one or more parts without stiff covers. The subject issuer 
must further bind the Schedule or amendment on the side or stitching 
margin in a manner that leaves the reading matter legible. The subject 
issuer must provide three additional copies of the Schedule or amendment 
without exhibits to the Commission.
    B. An electronic filer must provide the signatures required for the 
Schedule or amendment in accordance with 17 CFR 232.302 of Regulation S-
T. A subject issuer filing in paper must have the original and at least 
one copy of the Schedule and any amendment signed in accordance with 
Exchange Act Rule 12b-11(d) (17 CFR 12b-11(d)) by the persons whose 
signatures are required for this Schedule or amendment. The subject 
issuer must also conform the unsigned copies.
    C. The subject issuer must file the Schedule or amendment in 
electronic format in the English language in accordance with 17 CFR 
232.306 of Regulation S-T. The subject issuer may file part of the 
Schedule or amendment, or exhibit or other attachment to the Schedule or 
amendment, in both French and English if the bidder included the French 
text to comply with the requirements of the Canadian securities 
administrator or other Canadian authority and, for an electronic filing, 
if the filing is an HTML document, as defined in 17 CFR 232.11 of 
Regulation S-T. For both an electronic filing and a paper filing, the 
subject issuer may provide an English translation or English summary of 
a foreign language document as an exhibit or other attachment to the 
Schedule or amendment as permitted by the rules of the applicable 
Canadian securities administrator.
    D. A paper filer must number sequentially the signed original of the 
Schedule or amendment (in addition to any internal numbering that 
otherwise may be present) by handwritten, typed, printed or other 
legible form of notation from the first page through the last page of 
the Schedule or amendment, including any exhibits or attachments. A 
paper filer must disclose the total number of pages on the first page of 
the sequentially numbered Schedule or amendment.

                  III. Compliance with the Exchange Act

    A. Pursuant to Rule 14e-2(c) under the Securities Exchange Act of 
1934 (the ``Exchange Act''), this Schedule shall be filed by an issuer, 
a class of the securities of which is the subject of a cash tender or 
exchange offer filed on Schedule 14D-1F, and may be filed by any 
director or officer of such issuer.
    B. Any recommendation with respect to a cash tender or exchange 
offer for a class of securities of the subject company made pursuant to 
this Schedule is not exempt from the antifraud provisions of section 
10(b) of the Exchange Act and Rule 10b-5 thereunder and section 14(e) of 
the Exchange Act and Rule 14e-3 thereunder, and this Schedule shall be 
deemed ``filed'' with the Commission for purposes of section 18 of the 
Exchange Act.

         Part I--Information Required To Be Sent to Shareholders

                   Item 1. Home Jurisdiction Documents

    (a) This Schedule shall be accompanied by the entire disclosure 
document or documents required to be delivered to holders of securities 
to be acquired in the proposed transaction pursuant to the laws, 
regulations or policies of Canada and/or any of its provinces or 
territories governing the conduct of the offer. It shall not include any 
documents incorporated by reference into such disclosure document(s) and 
not distributed to offerees pursuant to any such law, regulation or 
policy.
    (b) Any amendment made to a home jurisdiction document or documents 
shall be filed with the Commission under cover of this Schedule, which 
must indicate on the cover page the number of the amendment.

                      Item 2. Informational Legends

    The following legends, to the extent applicable, shall appear on the 
outside front cover page of the home jurisdiction document(s) in bold-
face roman type at least as high as ten-

[[Page 337]]

point modern type and at least two points leaded:
    ``This tender offer is made for the securities of a foreign issuer 
and while the offer is subject to disclosure requirements of the country 
in which the subject issuer is incorporated or organized, investors 
should be aware that these requirements are different from those of the 
United States. Financial statements included herein, if any, have been 
prepared in accordance with foreign generally accepted accounting 
principles and thus may not be comparable to financial statements of 
United States companies.
    ``The enforcement by investors of civil liabilities under the 
federal securities laws may be affected adversely by the fact that the 
issuer is located in a foreign country, and that some or all of its 
officers and directors are residents of a foreign country.''

    Note to Item 2. If the home jurisdiction document(s) are delivered 
through an electronic medium, the issuer may satisfy the legibility 
requirements for the required legends relating to type size and font by 
presenting the legend in any manner reasonably calculated to draw 
security holder attention to it.

      Part II--Information Not Required To Be Sent to Shareholders

    The exhibits specified below shall be filed as part of the Schedule, 
but are not required to be sent to shareholders unless so required 
pursuant to the laws, or regulations or policies of Canada and/or any of 
its provinces or territories. Exhibits shall be appropriately lettered 
or numbered for convenient reference.
    (1) File any reports or information that, in accordance with the 
requirements of the home jurisdiction(s), must be made publicly 
available by the person(s) filing this Schedule in connection with the 
transaction, but need not be disseminated to shareholders.
    (2) File copies of any documents incorporated by reference into the 
home jurisdiction document(s) .
    (3) If any name is signed to the Schedule pursuant to power of 
attorney, manually signed copies of any such power of attorney shall be 
filed. If the name of any officer signing on behalf of the issuer is 
signed pursuant to a power of attorney, certified copies of a resolution 
of the issuer's board of directors authorizing such signature also shall 
be filed.

         Part III--Undertaking and Consent to Service of Process

    1. Undertaking
    The Schedule shall set forth the following undertaking of the person 
filing it:
    The person(s) filing this Schedule undertakes to make available, in 
person or by telephone, representatives to respond to inquiries made by 
the Commission staff, and to furnish promptly, when requested to do so 
by the Commission staff, information relating to this Schedule or to 
transactions in said securities.
    2. Consent to Service of Process.
    (a) At the time of filing this Schedule, the person(s) (if a non-U. 
S. person) so filing shall file with the Commission a written 
irrevocable consent and power of attorney on Form F-X.
    (b) Any change to the name or address of a registrant's agent for 
service shall be communicated promptly to the Commission by amendment to 
Form F-X referencing the file number of the registrant.

                           Part IV--Signatures

    A. The Schedule shall be signed by each person on whose behalf the 
Schedule is filed or its authorized representative. If the Schedule is 
signed on behalf of a person by his authorized representative (other 
than an executive officer or general partner of the subject company), 
evidence of the representative's authority shall be filed with the 
Schedule.
    B. The name and any title of each person who signs the Schedule 
shall be typed or printed beneath his signature.
    C. By signing this Schedule, the persons signing consent without 
power of revocation that any administrative subpoena may be served, or 
any administrative proceeding, civil suit or civil action where the 
cause of action arises out of or relates to or concerns any offering 
made or purported to be made in connection with filing on this Schedule 
14D-9F or any purchases or sales of any security in connection 
therewith, may be commenced against them in any administrative tribunal 
or in any appropriate court in any place subject to the jurisdiction of 
any state or of the United States by service of said subpoena or process 
upon the registrant's designated agent.
    After due inquiry and to the best of my knowledge and belief, I 
certify that the information set forth in this statement is true, 
complete and correct.
________________________________________________________________________
    (Signature)
________________________________________________________________________
    (Name and Title)
________________________________________________________________________
    (Date)

[56 FR 30073, July 1, 1991, as amended at 61 FR 24657, May 15, 1996; 67 
FR 36706, May 24, 2002; 73 FR 17814, Apr. 1, 2008]

                             Regulation 14E

    Note: For the scope of and definitions applicable to Regulation 14E, 
refer to Sec.  240.14d-1.

[[Page 338]]



Sec.  240.14e-1  Unlawful tender offer practices.

    As a means reasonably designed to prevent fraudulent, deceptive or 
manipulative acts or practices within the meaning of section 14(e) of 
the Act, no person who makes a tender offer shall:
    (a) Hold such tender offer open for less than twenty business days 
from the date such tender offer is first published or sent to security 
holders; provided, however, that if the tender offer involves a roll-up 
transaction as defined in Item 901(c) of Regulation S-K (17 CFR 
229.901(c)) and the securities being offered are registered (or 
authorized to be registered) on Form S-4 (17 CFR 229.25) or Form F-4 (17 
CFR 229.34), the offer shall not be open for less than sixty calendar 
days from the date the tender offer is first published or sent to 
security holders;
    (b) Increase or decrease the percentage of the class of securities 
being sought or the consideration offered or the dealer's soliciting fee 
to be given in a tender offer unless such tender offer remains open for 
at least ten business days from the date that notice of such increase or 
decrease is first published or sent or given to security holders.

Provided, however, That, for purposes of this paragraph, the acceptance 
for payment of an additional amount of securities not to exceed two 
percent of the class of securities that is the subject of the tender 
offer shall not be deemed to be an increase. For purposes of this 
paragraph, the percentage of a class of securities shall be calculated 
in accordance with section 14(d)(3) of the Act.
    (c) Fail to pay the consideration offered or return the securities 
deposited by or on behalf of security holders promptly after the 
termination or withdrawal of a tender offer. This paragraph does not 
prohibit a bidder electing to offer a subsequent offering period under 
Sec.  240.14d-11 from paying for securities during the subsequent 
offering period in accordance with that section.
    (d) Extend the length of a tender offer without issuing a notice of 
such extension by press release or other public announcement, which 
notice shall include disclosure of the approximate number of securities 
deposited to date and shall be issued no later than the earlier of: (i) 
9:00 a.m. Eastern time, on the next business day after the scheduled 
expiration date of the offer or (ii), if the class of securities which 
is the subject of the tender offer is registered on one or more national 
securities exchanges, the first opening of any one of such exchanges on 
the next business day after the scheduled expiration date of the offer.
    (e) The periods of time required by paragraphs (a) and (b) of this 
section shall be tolled for any period during which the bidder has 
failed to file in electronic format, absent a hardship exemption 
(Sec. Sec.  232.201 and 232.202 of this chapter), the Schedule TO Tender 
Offer Statement (Sec.  240.14d-100), any tender offer material required 
to be filed by Item 12 of that Schedule pursuant to paragraph (a) of 
Item 1016 of Regulation M-A (Sec.  229.1016(a) of this chapter), and any 
amendments thereto. If such documents were filed in paper pursuant to a 
hardship exemption (see Sec.  232.201 and Sec.  232.202(d)), the minimum 
offering periods shall be tolled for any period during which a required 
confirming electronic copy of such Schedule and tender offer material is 
delinquent.

[44 FR 70348, Dec. 6, 1979, as amended at 51 FR 3035, Jan. 23, 1986; 51 
FR 25883, July 17, 1986; 51 FR 32630, Sept. 15, 1986; 56 FR 57255, Nov. 
8, 1991; 58 FR 14682, 14685, Mar. 18, 1993; 59 FR 67765, Dec. 30, 1994; 
62 FR 36459, July 8, 1997; 64 FR 61465, Nov. 10, 1999; 73 FR 17814, Apr. 
1, 2008]



Sec.  240.14e-2  Position of subject company with respect to a
tender offer.

    (a) Position of subject company. As a means reasonably designed to 
prevent fraudulent, deceptive or manipulative acts or practices withing 
the meaning of section 14(e) of the Act, the subject company, no later 
than 10 business days from the date the tender offer is first published 
or sent or given, shall publish, send or give to security holders a 
statement disclosing that the subject company:
    (1) Recommends acceptance or rejection of the bidder's tender offer;
    (2) Expresses no opinion and is remaining neutral toward the 
bidder's tender offer; or
    (3) Is unable to take a position with respect to the bidder's tender 
offer. Such statement shall also include the

[[Page 339]]

reason(s) for the position (including the inability to take a position) 
disclosed therein.
    (b) Material change. If any material change occurs in the disclosure 
required by paragraph (a) of this section, the subject company shall 
promptly publish or send or give a statement disclosing such material 
change to security holders.
    (c) Any issuer, a class of the securities of which is the subject of 
a tender offer filed with the Commission on Schedule 14D-1F and 
conducted in reliance upon and in conformity with Rule 14d-1(b) under 
the Act, and any director or officer of such issuer where so required by 
the laws, regulations and policies of Canada and/or any of its provinces 
or territories, in lieu of the statements called for by paragraph (a) of 
this section and Rule 14d-9 under the Act, shall file with the 
Commission on Schedule 14D-9F the entire disclosure document(s) required 
to be furnished to holders of securities of the subject issuer by the 
laws, regulations and policies of Canada and/or any of its provinces or 
territories governing the conduct of the tender offer, and shall 
disseminate such document(s) in the United States in accordance with 
such laws, regulations and policies.
    (d) Exemption for cross-border tender offers. The subject company 
shall be exempt from this section with respect to a tender offer 
conducted under Sec.  240.14d-1(c).

[44 FR 70348, Dec. 6, 1979, as amended at 56 FR 30075, July 1, 1991; 64 
FR 61406, Nov. 10, 1999]



Sec.  240.14e-3  Transactions in securities on the basis of material,
nonpublic information in the context of tender offers.

    (a) If any person has taken a substantial step or steps to commence, 
or has commenced, a tender offer (the ``offering person''), it shall 
constitute a fraudulent, deceptive or manipulative act or practice 
within the meaning of section 14(e) of the Act for any other person who 
is in possession of material information relating to such tender offer 
which information he knows or has reason to know is nonpublic and which 
he knows or has reason to know has been acquired directly or indirectly 
from:
    (1) The offering person,
    (2) The issuer of the securities sought or to be sought by such 
tender offer, or
    (3) Any officer, director, partner or employee or any other person 
acting on behalf of the offering person or such issuer, to purchase or 
sell or cause to be purchased or sold any of such securities or any 
securities convertible into or exchangeable for any such securities or 
any option or right to obtain or to dispose of any of the foregoing 
securities, unless within a reasonable time prior to any purchase or 
sale such information and its source are publicly disclosed by press 
release or otherwise.
    (b) A person other than a natural person shall not violate paragraph 
(a) of this section if such person shows that:
    (1) The individual(s) making the investment decision on behalf of 
such person to purchase or sell any security described in paragraph (a) 
of this section or to cause any such security to be purchased or sold by 
or on behalf of others did not know the material, nonpublic information; 
and
    (2) Such person had implemented one or a combination of policies and 
procedures, reasonable under the circumstances, taking into 
consideration the nature of the person's business, to ensure that 
individual(s) making investment decision(s) would not violate paragraph 
(a) of this section, which policies and procedures may include, but are 
not limited to, (i) those which restrict any purchase, sale and causing 
any purchase and sale of any such security or (ii) those which prevent 
such individual(s) from knowing such information.
    (c) Notwithstanding anything in paragraph (a) of this section to 
contrary, the following transactions shall not be violations of 
paragraph (a) of this section:
    (1) Purchase(s) of any security described in paragraph (a) of this 
section by a broker or by another agent on behalf of an offering person; 
or
    (2) Sale(s) by any person of any security described in paragraph (a) 
of this section to the offering person.
    (d)(1) As a means reasonably designed to prevent fraudulent, 
deceptive or manipulative acts or practices within the

[[Page 340]]

meaning of section 14(e) of the Act, it shall be unlawful for any person 
described in paragraph (d)(2) of this section to communicate material, 
nonpublic information relating to a tender offer to any other person 
under circumstances in which it is reasonably foreseeable that such 
communication is likely to result in a violation of this section except 
that this paragraph shall not apply to a communication made in good 
faith,
    (i) To the officers, directors, partners or employees of the 
offering person, to its advisors or to other persons, involved in the 
planning, financing, preparation or execution of such tender offer;
    (ii) To the issuer whose securities are sought or to be sought by 
such tender offer, to its officers, directors, partners, employees or 
advisors or to other persons, involved in the planning, financing, 
preparation or execution of the activities of the issuer with respect to 
such tender offer; or
    (iii) To any person pursuant to a requirement of any statute or rule 
or regulation promulgated thereunder.
    (2) The persons referred to in paragraph (d)(1) of this section are:
    (i) The offering person or its officers, directors, partners, 
employees or advisors;
    (ii) The issuer of the securities sought or to be sought by such 
tender offer or its officers, directors, partners, employees or 
advisors;
    (iii) Anyone acting on behalf of the persons in paragraph (d)(2)(i) 
of this section or the issuer or persons in paragraph (d)(2)(ii) of this 
section; and
    (iv) Any person in possession of material information relating to a 
tender offer which information he knows or has reason to know is 
nonpublic and which he knows or has reason to know has been acquired 
directly or indirectly from any of the above.

[45 FR 60418, Sept. 12, 1980]



Sec.  240.14e-4  Prohibited transactions in connection with partial 
tender offers.

    (a) Definitions. For purposes of this section:
    (1) The amount of a person's ``net long position'' in a subject 
security shall equal the excess, if any, of such person's ``long 
position'' over such person's ``short position.'' For the purposes of 
determining the net long position as of the end of the proration period 
and for tendering concurrently to two or more partial tender offers, 
securities that have been tendered in accordance with the rule and not 
withdrawn are deemed to be part of the person's long position.
    (i) Such person's long position is the amount of subject securities 
that such person:
    (A) Or his agent has title to or would have title to but for having 
lent such securities; or
    (B) Has purchased, or has entered into an unconditional contract, 
binding on both parties thereto, to purchase but has not yet received; 
or
    (C) Has exercised a standardized call option for; or
    (D) Has converted, exchanged, or exercised an equivalent security 
for; or
    (E) Is entitled to receive upon conversion, exchange, or exercise of 
an equivalent security.
    (ii) Such person's short position, is the amount of subject 
securities or subject securities underlying equivalent securities that 
such person:
    (A) Has sold, or has entered into an unconditional contract, binding 
on both parties thereto, to sell; or
    (B) Has borrowed; or
    (C) Has written a non-standardized call option, or granted any other 
right pursuant to which his shares may be tendered by another person; or
    (D) Is obligated to deliver upon exercise of a standardized call 
option sold on or after the date that a tender offer is first publicly 
announced or otherwise made known by the bidder to holders of the 
security to be acquired, if the exercise price of such option is lower 
than the highest tender offer price or stated amount of the 
consideration offered for the subject security. For the purpose of this 
paragraph, if one or more tender offers for the same security are 
ongoing on such date, the announcement date shall be that of the first 
announced offer.
    (2) The term equivalent security means:
    (i) Any security (including any option, warrant, or other right to 
purchase the subject security), issued by

[[Page 341]]

the person whose securities are the subject of the offer, that is 
immediately convertible into, or exchangeable or exercisable for, a 
subject security, or
    (ii) Any other right or option (other than a standardized call 
option) that entitles the holder thereof to acquire a subject security, 
but only if the holder thereof reasonably believes that the maker or 
writer of the right or option has title to and possession of the subject 
security and upon exercise will promptly deliver the subject security.
    (3) The term subject security means a security that is the subject 
of any tender offer or request or invitation for tenders.
    (4) For purposes of this rule, a person shall be deemed to 
``tender'' a security if he:
    (i) Delivers a subject security pursuant to an offer,
    (ii) Causes such delivery to be made,
    (iii) Guarantees delivery of a subject security pursuant to a tender 
offer,
    (iv) Causes a guarantee of such delivery to be given by another 
person, or
    (v) Uses any other method by which acceptance of a tender offer may 
be made.
    (5) The term partial tender offer means a tender offer or request or 
invitation for tenders for less than all of the outstanding securities 
subject to the offer in which tenders are accepted either by lot or on a 
pro rata basis for a specified period, or a tender offer for all of the 
outstanding shares that offers a choice of consideration in which 
tenders for different forms of consideration may be accepted either by 
lot or on a pro rata basis for a specified period.
    (6) The term standardized call option means any call option that is 
traded on an exchange, or for which quotation information is 
disseminated in an electronic interdealer quotation system of a 
registered national securities association.
    (b) It shall be unlawful for any person acting alone or in concert 
with others, directly or indirectly, to tender any subject security in a 
partial tender offer:
    (1) For his own account unless at the time of tender, and at the end 
of the proration period or period during which securities are accepted 
by lot (including any extensions thereof), he has a net long position 
equal to or greater than the amount tendered in:
    (i) The subject security and will deliver or cause to be delivered 
such security for the purpose of tender to the person making the offer 
within the period specified in the offer; or
    (ii) An equivalent security and, upon the acceptance of his tender 
will acquire the subject security by conversion, exchange, or exercise 
of such equivalent security to the extent required by the terms of the 
offer, and will deliver or cause to be delivered the subject security so 
acquired for the purpose of tender to the person making the offer within 
the period specified in the offer; or
    (2) For the account of another person unless the person making the 
tender:
    (i) Possesses the subject security or an equivalent security, or
    (ii) Has a reasonable belief that, upon information furnished by the 
person on whose behalf the tender is made, such person owns the subject 
security or an equivalent security and will promptly deliver the subject 
security or such equivalent security for the purpose of tender to the 
person making the tender.
    (c) This rule shall not prohibit any transaction or transactions 
which the Commission, upon written request or upon its own motion, 
exempts, either unconditionally or on specified terms and conditions.

[49 FR 13870, Apr. 9, 1984, as amended at 50 FR 8102, Feb. 28, 1985. 
Redesignated and amended at 55 FR 50320, Dec. 6, 1990]



Sec.  240.14e-5  Prohibiting purchases outside of a tender offer.

    (a) Unlawful activity. As a means reasonably designed to prevent 
fraudulent, deceptive or manipulative acts or practices in connection 
with a tender offer for equity securities, no covered person may 
directly or indirectly purchase or arrange to purchase any subject 
securities or any related securities except as part of the tender offer. 
This prohibition applies from the time of public announcement of the 
tender offer until the tender offer expires. This prohibition does not 
apply to any purchases or arrangements to purchase made during

[[Page 342]]

the time of any subsequent offering period as provided for in Sec.  
240.14d-11 if the consideration paid or to be paid for the purchases or 
arrangements to purchase is the same in form and amount as the 
consideration offered in the tender offer.
    (b) Excepted activity. The following transactions in subject 
securities or related securities are not prohibited by paragraph (a) of 
this section:
    (1) Exercises of securities. Transactions by covered persons to 
convert, exchange, or exercise related securities into subject 
securities, if the covered person owned the related securities before 
public announcement;
    (2) Purchases for plans. Purchases or arrangements to purchase by or 
for a plan that are made by an agent independent of the issuer;
    (3) Purchases during odd-lot offers. Purchases or arrangements to 
purchase if the tender offer is excepted under Sec.  240.13e-4(h)(5);
    (4) Purchases as intermediary. Purchases by or through a dealer-
manager or its affiliates that are made in the ordinary course of 
business and made either:
    (i) On an agency basis not for a covered person; or
    (ii) As principal for its own account if the dealer-manager or its 
affiliate is not a market maker, and the purchase is made to offset a 
contemporaneous sale after having received an unsolicited order to buy 
from a customer who is not a covered person;
    (5) Basket transactions. Purchases or arrangements to purchase a 
basket of securities containing a subject security or a related security 
if the following conditions are satisfied:
    (i) The purchase or arrangement to purchase is made in the ordinary 
course of business and not to facilitate the tender offer;
    (ii) The basket contains 20 or more securities; and
    (iii) Covered securities and related securities do not comprise more 
than 5% of the value of the basket;
    (6) Covering transactions. Purchases or arrangements to purchase 
that are made to satisfy an obligation to deliver a subject security or 
a related security arising from a short sale or from the exercise of an 
option by a non-covered person if:
    (i) The short sale or option transaction was made in the ordinary 
course of business and not to facilitate the offer;
    (ii) In the case of a short sale, the short sale was entered into 
before public announcement of the tender offer; and
    (iii) In the case of an exercise of an option, the covered person 
wrote the option before public announcement of the tender offer;
    (7) Purchases pursuant to contractual obligations. Purchases or 
arrangements to purchase pursuant to a contract if the following 
conditions are satisfied:
    (i) The contract was entered into before public announcement of the 
tender offer;
    (ii) The contract is unconditional and binding on both parties; and
    (iii) The existence of the contract and all material terms including 
quantity, price and parties are disclosed in the offering materials;
    (8) Purchases or arrangements to purchase by an affiliate of the 
dealer-manager. Purchases or arrangements to purchase by an affiliate of 
a dealer-manager if the following conditions are satisfied:
    (i) The dealer-manager maintains and enforces written policies and 
procedures reasonably designed to prevent the flow of information to or 
from the affiliate that might result in a violation of the federal 
securities laws and regulations;
    (ii) The dealer-manager is registered as a broker or dealer under 
Section 15(a) of the Act;
    (iii) The affiliate has no officers (or persons performing similar 
functions) or employees (other than clerical, ministerial, or support 
personnel) in common with the dealer-manager that direct, effect, or 
recommend transactions in securities; and
    (iv) The purchases or arrangements to purchase are not made to 
facilitate the tender offer;
    (9) Purchases by connected exempt market makers or connected exempt 
principal traders. Purchases or arrangements to purchase if the 
following conditions are satisfied:

[[Page 343]]

    (i) The issuer of the subject security is a foreign private issuer, 
as defined in Sec.  240.3b-4(c);
    (ii) The tender offer is subject to the United Kingdom's City Code 
on Takeovers and Mergers;
    (iii) The purchase or arrangement to purchase is effected by a 
connected exempt market maker or a connected exempt principal trader, as 
those terms are used in the United Kingdom's City Code on Takeovers and 
Mergers;
    (iv) The connected exempt market maker or the connected exempt 
principal trader complies with the applicable provisions of the United 
Kingdom's City Code on Takeovers and Mergers; and
    (v) The tender offer documents disclose the identity of the 
connected exempt market maker or the connected exempt principal trader 
and disclose, or describe how U.S. security holders can obtain, 
information regarding market making or principal purchases by such 
market maker or principal trader to the extent that this information is 
required to be made public in the United Kingdom;
    (10) Purchases during cross-border tender offers. Purchases or 
arrangements to purchase if the following conditions are satisfied:
    (i) The tender offer is excepted under Sec.  240.13e-4(h)(8) or 
Sec.  240.14d-1(c);
    (ii) The offering documents furnished to U.S. holders prominently 
disclose the possibility of any purchases, or arrangements to purchase, 
or the intent to make such purchases;
    (iii) The offering documents disclose the manner in which any 
information about any such purchases or arrangements to purchase will be 
disclosed;
    (iv) The offeror discloses information in the United States about 
any such purchases or arrangements to purchase in a manner comparable to 
the disclosure made in the home jurisdiction, as defined in Sec.  
240.13e-4(i)(3); and
    (v) The purchases comply with the applicable tender offer laws and 
regulations of the home jurisdiction; and
    (11) Purchases or arrangements to purchase pursuant to a foreign 
tender offer(s). Purchases or arrangements to purchase pursuant to a 
foreign offer(s) where the offeror seeks to acquire subject securities 
through a U.S. tender offer and a concurrent or substantially concurrent 
foreign offer(s), if the following conditions are satisfied:
    (i) The U.S. and foreign tender offer(s) meet the conditions for 
reliance on the Tier II cross-border exemptions set forth in Sec.  
240.14d-1(d);
    (ii) The economic terms and consideration in the U.S. tender offer 
and foreign tender offer(s) are the same, provided that any cash 
consideration to be paid to U.S. security holders may be converted from 
the currency to be paid in the foreign tender offer(s) to U.S. dollars 
at an exchange rate disclosed in the U.S. offering documents;
    (iii) The procedural terms of the U.S. tender offer are at least as 
favorable as the terms of the foreign tender offer(s);
    (iv) The intention of the offeror to make purchases pursuant to the 
foreign tender offer(s) is disclosed in the U.S. offering documents; and
    (v) Purchases by the offeror in the foreign tender offer(s) are made 
solely pursuant to the foreign tender offer(s) and not pursuant to an 
open market transaction(s), a private transaction(s), or other 
transaction(s); and
    (12) Purchases or arrangements to purchase by an affiliate of the 
financial advisor and an offeror and its affiliates. (i) Purchases or 
arrangements to purchase by an affiliate of a financial advisor and an 
offeror and its affiliates that are permissible under and will be 
conducted in accordance with the applicable laws of the subject 
company's home jurisdiction, if the following conditions are satisfied:
    (A) The subject company is a foreign private issuer as defined in 
Sec.  240.3b-4(c);
    (B) The covered person reasonably expects that the tender offer 
meets the conditions for reliance on the Tier II cross-border exemptions 
set forth in Sec.  240.14d-1(d);
    (C) No purchases or arrangements to purchase otherwise than pursuant 
to the tender offer are made in the United States;
    (D) The United States offering materials disclose prominently the 
possibility of, or the intention to make, purchases or arrangements to 
purchase subject securities or related securities outside of the tender 
offer, and if there will be public disclosure of purchases of

[[Page 344]]

subject or related securities, the manner in which information regarding 
such purchases will be disseminated;
    (E) There is public disclosure in the United States, to the extent 
that such information is made public in the subject company's home 
jurisdiction, of information regarding all purchases of subject 
securities and related securities otherwise than pursuant to the tender 
offer from the time of public announcement of the tender offer until the 
tender offer expires;
    (F) Purchases or arrangements to purchase by an offeror and its 
affiliates must satisfy the following additional condition: the tender 
offer price will be increased to match any consideration paid outside of 
the tender offer that is greater than the tender offer price; and
    (G) Purchases or arrangements to purchase by an affiliate of a 
financial advisor must satisfy the following additional conditions:
    (1) The financial advisor and the affiliate maintain and enforce 
written policies and procedures reasonably designed to prevent the 
transfer of information among the financial advisor and affiliate that 
might result in a violation of U.S. federal securities laws and 
regulations through the establishment of information barriers;
    (2) The financial advisor has an affiliate that is registered as a 
broker or dealer under section 15(a) of the Act (15 U.S.C. 78o(a));
    (3) The affiliate has no officers (or persons performing similar 
functions) or employees (other than clerical, ministerial, or support 
personnel) in common with the financial advisor that direct, effect, or 
recommend transactions in the subject securities or related securities 
who also will be involved in providing the offeror or subject company 
with financial advisory services or dealer-manager services; and
    (4) The purchases or arrangements to purchase are not made to 
facilitate the tender offer.
    (ii) [Reserved]
    (c) Definitions. For purposes of this section, the term:
    (1) Affiliate has the same meaning as in Sec.  240.12b-2;
    (2) Agent independent of the issuer has the same meaning as in Sec.  
242.100(b) of this chapter;
    (3) Covered person means:
    (i) The offeror and its affiliates;
    (ii) The offeror's dealer-manager and its affiliates;
    (iii) Any advisor to any of the persons specified in paragraph 
(c)(3)(i) and (ii) of this section, whose compensation is dependent on 
the completion of the offer; and
    (iv) Any person acting, directly or indirectly, in concert with any 
of the persons specified in this paragraph (c)(3) in connection with any 
purchase or arrangement to purchase any subject securities or any 
related securities;
    (4) Plan has the same meaning as in Sec.  242.100(b) of this 
chapter;
    (5) Public announcement is any oral or written communication by the 
offeror or any person authorized to act on the offeror's behalf that is 
reasonably designed to, or has the effect of, informing the public or 
security holders in general about the tender offer;
    (6) Related securities means securities that are immediately 
convertible into, exchangeable for, or exercisable for subject 
securities;
    (7) Subject securities has the same meaning as in Sec.  229.1000 of 
this chapter; and
    (8) Subject company has the same meaning as in Sec.  229.1000 of 
this chapter; and
    (9) Home jurisdiction has the same meaning as in the Instructions to 
paragraphs (c) and (d) of Sec.  240.14d-1.
    (d) Exemptive authority. Upon written application or upon its own 
motion, the Commission may grant an exemption from the provisions of 
this section, either unconditionally or on specified terms or 
conditions, to any transaction or class of transactions or any security 
or class of security, or any person or class of persons.

[64 FR 61465, Nov. 10, 1999, as amended at 73 FR 60093, Oct. 9, 2008]



Sec.  240.14e-6  Repurchase offers by certain closed-end registered 
investment companies.

    Sections 240.14e-1 and 240.14e-2 shall not apply to any offer by a 
closed-end management investment company to repurchase equity securities 
of which it

[[Page 345]]

is the issuer pursuant to Sec.  270.23c-3 of this chapter.

[58 FR 19343, Apr. 14, 1993]



Sec.  240.14e-7  Unlawful tender offer practices in connection with
roll-ups.

    In order to implement section 14(h) of the Act (15 U.S.C. 78n(h)):
    (a)(1) It shall be unlawful for any person to receive compensation 
for soliciting tenders directly from security holders in connection with 
a roll-up transaction as provided in paragraph (a)(2) of this section, 
if the compensation is:
    (i) Based on whether the solicited person participates in the tender 
offer; or
    (ii) Contingent on the success of the tender offer.
    (2) Paragraph (a)(1) of this section is applicable to a roll-up 
transaction as defined in Item 901(c) of Regulation S-K (Sec.  
229.901(c) of this chapter), structured as a tender offer, except for a 
transaction involving only:
    (i) Finite-life entities that are not limited partnerships;
    (ii) Partnerships whose investors will receive new securities or 
securities in another entity that are not reported under a transaction 
reporting plan declared effective before December 17, 1993 by the 
Commission under section 11A of the Act (15 U.S.C. 78k-1); or
    (iii) Partnerships whose investors' securities are reported under a 
transaction reporting plan declared effective before December 17, 1993 
by the Commission under section 11A of the Act (15 U.S.C. 78k-1).
    (b)(1) It shall be unlawful for any finite-life entity that is the 
subject of a roll-up transaction as provided in paragraph (b)(2) of this 
section to fail to provide a security holder list or mail communications 
related to a tender offer that is in furtherance of the roll-up 
transaction, at the option of a requesting security holder, pursuant to 
the procedures set forth in Sec.  240.14a-7.
    (2) Paragraph (b)(1) of this section is applicable to a roll-up 
transaction as defined in Item 901(c) of Regulation S-K (Sec.  
229.901(c) of this chapter), structured as a tender offer, that 
involves:
    (i) An entity with securities registered pursuant to section 12 of 
the Act (15 U.S.C. 78l); or
    (ii) A limited partnership, unless the transaction involves only:
    (A) Partnerships whose investors will receive new securities or 
securities in another entity that are not reported under a transaction 
reporting plan declared effective before December 17, 1993 by the 
Commission under section 11A of the Act (15 U.S.C. 78k-1); or
    (B) Partnerships whose investors' securities are reported under a 
transaction reporting plan declared effective before December 17, 1993 
by the Commission under section 11A of the Act (15 U.S.C. 78k-1).

[59 FR 63685, Dec. 8, 1994]



Sec.  240.14e-8  Prohibited conduct in connection with pre-commencement
communications.

    It is a fraudulent, deceptive or manipulative act or practice within 
the meaning of section 14(e) of the Act (15 U.S.C. 78n) for any person 
to publicly announce that the person (or a party on whose behalf the 
person is acting) plans to make a tender offer that has not yet been 
commenced, if the person:
    (a) Is making the announcement of a potential tender offer without 
the intention to commence the offer within a reasonable time and 
complete the offer;
    (b) Intends, directly or indirectly, for the announcement to 
manipulate the market price of the stock of the bidder or subject 
company; or
    (c) Does not have the reasonable belief that the person will have 
the means to purchase securities to complete the offer.

[64 FR 61466, Nov. 10, 1999]



Sec.  240.14f-1  Change in majority of directors.

    If, pursuant to any arrangement or understanding with the person or 
persons acquiring securities in a transaction subject to section 13(d) 
or 14(d) of the Act, any persons are to be elected or designated as 
directors of the issuer, otherwise than at a meeting of security 
holders, and the persons so elected or designated will constitute a 
majority of the directors of the issuer, then, not less than 10 days 
prior to the date any such person take office as a director, or such 
shorter period prior to

[[Page 346]]

that date as the Commission may authorize upon a showing of good cause 
therefor, the issuer shall file with the Commission and transmit to all 
holders of record of securities of the issuer who would be entitled to 
vote at a meeting for election of directors, information substantially 
equivalent to the information which would be required by Items 6 (a), 
(d) and (e), 7 and 8 of Schedule 14A of Regulation 14A (Sec.  240.14a-
101 of this chapter) to be transmitted if such person or persons were 
nominees for election as directors at a meeting of such security 
holders. Eight copies of such information shall be filed with the 
Commission.

[33 FR 11017, Aug. 2, 1968, as amended at 34 FR 6101, Apr. 4, 1969; 51 
FR 42072, Nov. 20, 1986]

   Regulation 14N: Filings Required by Certain Nominating Shareholders



Sec.  240.14n-1  Filing of Schedule 14N.

    (a) A shareholder or group of shareholders that submits a nominee or 
nominees in accordance with Sec.  240.14a-11 or a procedure set forth 
under applicable state or foreign law, or a registrant's governing 
documents providing for the inclusion of shareholder director nominees 
in the registrant's proxy materials shall file with the Commission a 
statement containing the information required by Schedule 14N (Sec.  
240.14n-101) and simultaneously provide the notice on Schedule 14N to 
the registrant.
    (b)(1) Whenever two or more persons are required to file a statement 
containing the information required by Schedule 14N (Sec.  240.14n-101), 
only one statement need be filed. The statement must identify all such 
persons, contain the required information with regard to each such 
person, indicate that the statement is filed on behalf of all such 
persons, and include, as an appendix, their agreement in writing that 
the statement is filed on behalf of each of them. Each person on whose 
behalf the statement is filed is responsible for the timely filing of 
that statement and any amendments thereto, and for the completeness and 
accuracy of the information concerning such person contained therein; 
such person is not responsible for the completeness or accuracy of the 
information concerning the other persons making the filing.
    (2) If the group's members elect to make their own filings, each 
filing should identify all members of the group but the information 
provided concerning the other persons making the filing need only 
reflect information which the filing person knows or has reason to know.

[75 FR 56788, Sept. 16, 2010]



Sec.  240.14n-2  Filing of amendments to Schedule 14N.

    (a) If any material change occurs with respect to the nomination, or 
in the disclosure or certifications set forth in the Schedule 14N (Sec.  
240.14n-101) required by Sec.  240.14n-1(a), the person or persons who 
were required to file the statement shall promptly file or cause to be 
filed with the Commission an amendment disclosing that change.
    (b) An amendment shall be filed within 10 calendar days of the final 
results of the election being announced by the registrant stating the 
nominating shareholder's or the nominating shareholder group's intention 
with regard to continued ownership of their shares.

[75 FR 56788, Sept. 16, 2010]



Sec.  240.14n-3  Dissemination.

    One copy of Schedule 14N (Sec.  240.14n-101) filed pursuant to 
Sec. Sec.  240.14n-1 and 240.14n-2 shall be mailed by registered or 
certified mail or electronically transmitted to the registrant at its 
principal executive office. Three copies of the material must at the 
same time be filed with, or mailed for filing to, each national 
securities exchange upon which any class of securities of the registrant 
is listed and registered.

[75 FR 56788, Sept. 16, 2010]



Sec.  240.14n-101  Schedule 14N--Information to be included in statements
filed pursuant to Sec.  240.14n-1 and amendments thereto filed pursuant
to Sec. 240.14n-2.

Securities and Exchange Commission, Washington, DC 20549
Schedule 14N
Under the Securities Exchange Act of 1934
(Amendment No. _)*


(Name of Issuer)

[[Page 347]]

________________________________________________________________________


(Title of Class of Securities)
________________________________________________________________________


(CUSIP Number)
________________________________________________________________________

[ ] Solicitation pursuant to Sec.  240.14a-2(b)(7)
[ ] Solicitation pursuant to Sec.  240.14a-2(b)(8)
[ ] Notice of Submission of a Nominee or Nominees in Accordance with 
    Sec.  240.14a-11
[ ] Notice of Submission of a Nominee or Nominees in Accordance with 
    Procedures Set Forth Under Applicable State or Foreign Law, or the 
    Registrant's Governing Documents

    * The remainder of this cover page shall be filled out for a 
reporting person's initial filing on this form, and for any subsequent 
amendment containing information which would alter the disclosures 
provided in a prior cover page.
    The information required in the remainder of this cover page shall 
not be deemed to be ``filed'' for the purpose of Section 18 of the 
Securities Exchange Act of 1934 (``Act'') or otherwise subject to the 
liabilities of that section of the Act but shall be subject to all other 
provisions of the Act.
    (1) Names of reporting persons: ____________
    (2) Mailing address and phone number of each reporting person (or, 
where applicable, the authorized representative): ____________
    (3) Amount of securities held that are entitled to be voted on the 
election of directors held by each reporting person (and, where 
applicable, amount of securities held in the aggregate by the nominating 
shareholder group), but including loaned securities and net of 
securities sold short or borrowed for purposes other than a short sale: 
____________
    (4) Number of votes attributable to the securities entitled to be 
voted on the election of directors represented by amount in Row (3) 
(and, where applicable, aggregate number of votes attributable to the 
securities entitled to be voted on the election of directors held by 
group): ____________
    Instructions for Cover Page:
    (1) Names of Reporting Persons--Furnish the full legal name of each 
person for whom the report is filed--i.e., each person required to sign 
the schedule itself--including each member of a group. Do not include 
the name of a person required to be identified in the report but who is 
not a reporting person.
    (3) and (4) Amount Held by Each Reporting Person--Rows (3) and (4) 
are to be completed in accordance with the provisions of Item 3 of 
Schedule 14N.

    Notes: Attach as many copies of parts one through three of the cover 
page as are needed, one reporting person per copy.

    Filing persons may, in order to avoid unnecessary duplication, 
answer items on Schedule 14N by appropriate cross references to an item 
or items on the cover page(s). This approach may only be used where the 
cover page item or items provide all the disclosure required by the 
schedule item. Moreover, such a use of a cover page item will result in 
the item becoming a part of the schedule and accordingly being 
considered as ``filed'' for purposes of Section 18 of the Act or 
otherwise subject to the liabilities of that section of the Act.

          Special Instructions for Complying With Schedule 14N

    Under Sections 14 and 23 of the Securities Exchange Act of 1934 and 
the rules and regulations thereunder, the Commission is authorized to 
solicit the information required to be supplied by this Schedule. The 
information will be used for the primary purpose of determining and 
disclosing the holdings and interests of a nominating shareholder or 
nominating shareholder group. This statement will be made a matter of 
public record. Therefore, any information given will be available for 
inspection by any member of the public.
    Because of the public nature of the information, the Commission can 
use it for a variety of purposes, including referral to other 
governmental authorities or securities self-regulatory organizations for 
investigatory purposes or in connection with litigation involving the 
Federal securities laws or other civil, criminal or regulatory statutes 
or provisions. Failure to disclose the information requested by this 
schedule may result in civil or criminal action

[[Page 348]]

against the persons involved for violation of the Federal securities 
laws and rules promulgated thereunder, or in some cases, exclusion of 
the nominee from the registrant's proxy materials.

                General Instructions to Item Requirements

    The item numbers and captions of the items shall be included but the 
text of the items is to be omitted. The answers to the items shall be 
prepared so as to indicate clearly the coverage of the items without 
referring to the text of the items. Answer every item. If an item is 
inapplicable or the answer is in the negative, so state.

                      Item 1(a). Name of Registrant

     Item 1(b). Address of Registrant's Principal Executive Offices

                    Item 2(a). Name of Person Filing

 Item 2(b). Address or Principal Business Office or, if None, Residence

                 Item 2(c). Title of Class of Securities

                          Item 2(d). CUSIP No.

                            Item 3. Ownership

    Provide the following information, in accordance with Instruction 3 
to Sec.  240.14a-11(b)(1):
    (a) Amount of securities held and entitled to be voted on the 
election of directors (and, where applicable, amount of securities held 
in the aggregate by the nominating shareholder group): ______.
    (b) The number of votes attributable to the securities referred to 
in paragraph (a) of this Item: ______.
    (c) The number of votes attributable to securities that have been 
loaned but which the reporting person:
    (i) has the right to recall; and
    (ii) will recall upon being notified that any of the nominees will 
be included in the registrant's proxy statement and proxy card: ______.
    (d) The number of votes attributable to securities that have been 
sold in a short sale that is not closed out, or that have been borrowed 
for purposes other than a short sale: ______.
    (e) The sum of paragraphs (b) and (c), minus paragraph (d) of this 
Item, divided by the aggregate number of votes derived from all classes 
of securities of the registrant that are entitled to vote on the 
election of directors, and expressed as a percentage: ______.

  Item 4. Statement of Ownership From a Nominating Shareholder or Each 
Member of a Nominating Shareholder Group Submitting this Notice Pursuant 
                           to Sec.  240.14a-11

    (a) If the nominating shareholder, or each member of the nominating 
shareholder group, is the registered holder of the shares, please so 
state. Otherwise, attach to the Schedule 14N one or more written 
statements from the persons (usually brokers or banks) through which the 
nominating shareholder's securities are held, verifying that, within 
seven calendar days prior to filing the shareholder notice on Schedule 
14N with the Commission and transmitting the notice to the registrant, 
the nominating shareholder continuously held the amount of securities 
being used to satisfy the ownership threshold for a period of at least 
three years. In the alternative, if the nominating shareholder has filed 
a Schedule 13D (Sec.  240.13d-101), Schedule 13G (Sec.  240.13d-102), 
Form 3 (Sec.  249.103 of this chapter), Form 4 (Sec.  249.104 of this 
chapter), and/or Form 5 (Sec.  249.105 of this chapter), or amendments 
to those documents, reflecting ownership of the securities as of or 
before the date on which the three-year eligibility period begins, so 
state and incorporate that filing or amendment by reference.
    (b) Provide a written statement that the nominating shareholder, or 
each member of the nominating shareholder group, intends to continue to 
hold the amount of securities that are used for purposes of satisfying 
the minimum ownership requirement of Sec.  240.14a-11(b)(1) through the 
date of the meeting of shareholders, as required by Sec.  240.14a-
11(b)(4). Additionally, provide a written statement from the nominating 
shareholder or each member of the nominating shareholder group regarding 
the nominating shareholder's or nominating shareholder group member's 
intent with respect to continued ownership after the election of 
directors, as required by Sec.  240.14a-11(b)(5).

[[Page 349]]

    Instruction to Item 4. If the nominating shareholder or any member 
of the nominating shareholder group is not the registered holder of the 
securities and is not proving ownership for purposes of Sec.  240.14a-
11(b)(3) by providing previously filed Schedules 13D or 13G or Forms 3, 
4, or 5, and the securities are held in an account with a broker or bank 
that is a participant in the Depository Trust Company (``DTC'') or other 
clearing agency acting as a securities depository, a written statement 
or statements from that participant or participants in the following 
form will satisfy Sec.  240.14a-11(b)(3):
    As of [date of this statement], [name of nominating shareholder or 
member of the nominating shareholder group] held at least [number of 
securities owned continuously for at least three years] of the 
[registrant's] [class of securities], and has held at least this amount 
of such securities continuously for [at least three years]. [Name of 
clearing agency participant] is a participant in [name of clearing 
agency] whose nominee name is [nominee name].

     [name of clearing agency participant]
     By: [name and title of representative]
     Date:


If the securities are held through a broker or bank (e.g. in an omnibus 
account) that is not a participant in a clearing agency acting as a 
securities depository, the nominating shareholder or member of the 
nominating shareholder group must (a) obtain and submit a written 
statement or statements (the ``initial broker statement'') from the 
broker or bank with which the nominating shareholder or member of the 
nominating shareholder group maintains an account that provides the 
information about securities ownership set forth above and (b) obtain 
and submit a separate written statement from the clearing agency 
participant through which the securities of the nominating shareholder 
or member of the nominating shareholder group are held, that (i) 
identifies the broker or bank for whom the clearing agency participant 
holds the securities, and (ii) states that the account of such broker or 
bank has held, as of the date of the separate written statement, at 
least the number of securities specified in the initial broker 
statement, and (iii) states that this account has held at least that 
amount of securities continuously for at least three years.
    If the securities have been held for less than three years at the 
relevant entity, provide written statements covering a continuous period 
of three years and modify the language set forth above as appropriate.
    For purposes of complying with Sec.  240.14a-11(b)(3), loaned 
securities may be included in the amount of securities set forth in the 
written statements.

   Item 5. Disclosure Required for Shareholder Nominations Submitted 
                      Pursuant to Sec.  240.14a-11

    If a nominating shareholder or nominating shareholder group is 
submitting this notice in connection with the inclusion of a shareholder 
nominee or nominees for director in the registrant's proxy materials 
pursuant to Sec.  240.14a-11, provide the following information:
    (a) A statement that the nominee consents to be named in the 
registrant's proxy statement and form of proxy and, if elected, to serve 
on the registrant's board of directors;
    (b) Disclosure about the nominee as would be provided in response to 
the disclosure requirements of Items 4(b), 5(b), 7(a), (b) and (c) and, 
for investment companies, Item 22(b) of Schedule 14A (Sec.  240.14a-
101), as applicable;
    (c) Disclosure about the nominating shareholder or each member of a 
nominating shareholder group as would be required of a participant in 
response to the disclosure requirements of Items 4(b) and 5(b) of 
Schedule 14A (Sec.  240.14a-101), as applicable;
    (d) Disclosure about whether the nominating shareholder or any 
member of a nominating shareholder group has been involved in any legal 
proceeding during the past ten years, as specified in Item 401(f) of 
Regulation S-K (Sec.  229.10 of this chapter). Disclosure pursuant to 
this paragraph need not be provided if provided in response to Item 5(c) 
of this section;
    Instruction 1 to Item 5(c) and (d). Where the nominating shareholder 
is a

[[Page 350]]

general or limited partnership, syndicate or other group, the 
information called for in paragraphs (c) and (d) of this Item must be 
given with respect to:
    a. Each partner of the general partnership;
    b. Each partner who is, or functions as, a general partner of the 
limited partnership;
    c. Each member of the syndicate or group; and
    d. Each person controlling the partner or member.
    Instruction 2 to Item 5(c) and (d). If the nominating shareholder is 
a corporation or if a person referred to in a., b., c. or d. of 
Instruction 1 to paragraphs (c) and (d) of this Item is a corporation, 
the information called for in paragraphs (c) and (d) of this Item must 
be given with respect to:
    a. Each executive officer and director of the corporation;
    b. Each person controlling the corporation; and
    c. Each executive officer and director of any corporation or other 
person ultimately in control of the corporation.
    (e) Disclosure about whether, to the best of the nominating 
shareholder's or group's knowledge, the nominee meets the director 
qualifications, if any, set forth in the registrant's governing 
documents;
    (f) A statement that, to the best of the nominating shareholder's or 
group's knowledge, in the case of a registrant other than an investment 
company, the nominee meets the objective criteria for ``independence'' 
of the national securities exchange or national securities association 
rules applicable to the registrant, if any, or, in the case of a 
registrant that is an investment company, the nominee is not an 
``interested person'' of the registrant as defined in section 2(a)(19) 
of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(19)).
    Instruction to Item 5(f). For this purpose, the nominee would be 
required to meet the definition of ``independence'' that is generally 
applicable to directors of the registrant and not any particular 
definition of independence applicable to members of the audit committee 
of the registrant's board of directors. To the extent a national 
securities exchange or national securities association rule imposes a 
standard regarding independence that requires a subjective determination 
by the board or a group or committee of the board (for example, 
requiring that the board of directors or any group or committee of the 
board of directors make a determination regarding the existence of 
factors material to a determination of a nominee's independence), the 
nominee would not be required to meet the subjective determination of 
independence as part of the shareholder nomination process.
    (g) The following information regarding the nature and extent of the 
relationships between the nominating shareholder or nominating 
shareholder group, the nominee, and/or the registrant or any affiliate 
of the registrant:
    (1) Any direct or indirect material interest in any contract or 
agreement between the nominating shareholder or any member of the 
nominating shareholder group, the nominee, and/or the registrant or any 
affiliate of the registrant (including any employment agreement, 
collective bargaining agreement, or consulting agreement);
    (2) Any material pending or threatened legal proceeding in which the 
nominating shareholder or any member of the nominating shareholder group 
and/or the nominee is a party or a material participant, and that 
involves the registrant, any of its executive officers or directors, or 
any affiliate of the registrant; and
    (3) Any other material relationship between the nominating 
shareholder or any member of the nominating shareholder group, the 
nominee, and/or the registrant or any affiliate of the registrant not 
otherwise disclosed;

    Note to Item 5(g)(3): Any other material relationship of the 
nominating shareholder or any member of the nominating shareholder group 
or nominee with the registrant or any affiliate of the registrant may 
include, but is not limited to, whether the nominating shareholder or 
any member of the nominating shareholder group currently has, or has had 
in the past, an employment relationship with the registrant or any 
affiliate of the registrant (including consulting arrangements).

    (h) The Web site address on which the nominating shareholder or 
nominating

[[Page 351]]

shareholder group may publish soliciting materials, if any; and
    (i) Any statement in support of the shareholder nominee or nominees, 
which may not exceed 500 words for each nominee, if the nominating 
shareholder or nominating shareholder group elects to have such 
statement included in the registrant's proxy materials.

             Item 6. Disclosure Required by Sec.  240.14a-18

    If a nominating shareholder or nominating shareholder group is 
submitting this notice in connection with the inclusion of a shareholder 
nominee or nominees for director in the registrant's proxy materials 
pursuant to a procedure set forth under applicable state or foreign law, 
or the registrant's governing documents provide the following 
disclosure:
    (a) A statement that the nominee consents to be named in the 
registrant's proxy statement and form of proxy and, if elected, to serve 
on the registrant's board of directors;
    (b) Disclosure about the nominee as would be provided in response to 
the disclosure requirements of Items 4(b), 5(b), 7(a), (b) and (c) and, 
for investment companies, Item 22(b) of Schedule 14A (Sec.  240.14a-
101), as applicable;
    (c) Disclosure about the nominating shareholder or each member of a 
nominating shareholder group as would be required in response to the 
disclosure requirements of Items 4(b) and 5(b) of Schedule 14A (Sec.  
240.14a-101), as applicable;
    (d) Disclosure about whether the nominating shareholder or any 
member of a nominating shareholder group has been involved in any legal 
proceeding during the past ten years, as specified in Item 401(f) of 
Regulation S-K (Sec.  229.10 of this chapter). Disclosure pursuant to 
this paragraph need not be provided if provided in response to Item 6(c) 
of this section;
    Instruction 1 to Item 6(c) and (d). Where the nominating shareholder 
is a general or limited partnership, syndicate or other group, the 
information called for in paragraphs (c) and (d) of this Item must be 
given with respect to:
    a. Each partner of the general partnership;
    b. Each partner who is, or functions as, a general partner of the 
limited partnership;
    c. Each member of the syndicate or group; and
    d. Each person controlling the partner or member.
    Instruction 2 to Item 6(c) and (d). If the nominating shareholder is 
a corporation or if a person referred to in a., b., c. or d. of 
Instruction 1 to paragraphs (c) and (d) of this Item is a corporation, 
the information called for in paragraphs (c) and (d) of this Item must 
be given with respect to:
    a. Each executive officer and director of the corporation;
    b. Each person controlling the corporation; and
    c. Each executive officer and director of any corporation or other 
person ultimately in control of the corporation.
    (e) The following information regarding the nature and extent of the 
relationships between the nominating shareholder or nominating 
shareholder group, the nominee, and/or the registrant or any affiliate 
of the registrant:
    (1) Any direct or indirect material interest in any contract or 
agreement between the nominating shareholder or any member of the 
nominating shareholder group, the nominee, and/or the registrant or any 
affiliate of the registrant (including any employment agreement, 
collective bargaining agreement, or consulting agreement);
    (2) Any material pending or threatened legal proceeding in which the 
nominating shareholder or any member of the nominating shareholder group 
and/or nominee is a party or a material participant, involving the 
registrant, any of its executive officers or directors, or any affiliate 
of the registrant; and
    (3) Any other material relationship between the nominating 
shareholder or any member of the nominating shareholder group, the 
nominee, and/or the registrant or any affiliate of the registrant not 
otherwise disclosed; and
    Instruction to Item 6(e)(3). Any other material relationship of the 
nominating shareholder or any member of the nominating shareholder group 
with

[[Page 352]]

the registrant or any affiliate of the registrant may include, but is 
not limited to, whether the nominating shareholder or any member of the 
nominating shareholder group currently has, or has had in the past, an 
employment relationship with the registrant or any affiliate of the 
registrant (including consulting arrangements).
    (f) The Web site address on which the nominating shareholder or 
nominating shareholder group may publish soliciting materials, if any.

  Item 7. Notice of Dissolution of Group or Termination of Shareholder 
                               Nomination

    Notice of dissolution of a nominating shareholder group or the 
termination of a shareholder nomination shall state the date of the 
dissolution or termination.

                           Item 8. Signatures

    (a) The following certifications shall be provided by the filing 
person submitting this notice pursuant to Sec.  240.14a-11, or in the 
case of a group, each filing person whose securities are being 
aggregated for purposes of meeting the ownership threshold set out in 
Sec.  240.14a-11(b)(1) exactly as set forth below:
    I, [identify the certifying individual], after reasonable inquiry 
and to the best of my knowledge and belief, certify that:
    (1) I [or if signed by an authorized representative, the name of the 
nominating shareholder or each member of the nominating shareholder 
group, as appropriate] am [is] not holding any of the registrant's 
securities with the purpose, or with the effect, of changing control of 
the registrant or to gain a number of seats on the board of directors 
that exceeds the maximum number of nominees that the registrant could be 
required to include under Sec.  240.14a-11(d);
    (2) I [or if signed by an authorized representative, the name of the 
nominating shareholder or each member of the nominating shareholder 
group, as appropriate] otherwise satisfy [satisfies] the requirements of 
Sec.  240.14a-11(b), as applicable;
    (3) The nominee or nominees satisfies the requirements of Sec.  
240.14a-11(b), as applicable; and
    (4) The information set forth in this notice on Schedule 14N is 
true, complete and correct.
    (b) The following certification shall be provided by the filing 
person or persons submitting this notice in connection with the 
submission of a nominee or nominees in accordance with procedures set 
forth under applicable state or foreign law or the registrant's 
governing documents:
    I, [identify the certifying individual], after reasonable inquiry 
and to the best of my knowledge and belief, certify that the information 
set forth in this notice on Schedule 14N is true, complete and correct.

 Dated:_________________________________________________________________
 Signature:_____________________________________________________________
 Name/Title:____________________________________________________________

    The original statement shall be signed by each person on whose 
behalf the statement is filed or his authorized representative. If the 
statement is signed on behalf of a person by his authorized 
representative other than an executive officer or general partner of the 
filing person, evidence of the representative's authority to sign on 
behalf of such person shall be filed with the statement, provided, 
however, that a power of attorney for this purpose which is already on 
file with the Commission may be incorporated by reference. The name and 
any title of each person who signs the statement shall be typed or 
printed beneath his signature.
    Attention: Intentional misstatements or omissions of fact constitute 
Federal criminal violations (see 18 U.S.C. 1001).

[75 FR 56788, Sept. 16, 2010]

              Exemption of Certain OTC Derivatives Dealers



Sec.  240.15a-1  Securities activities of OTC derivatives dealers.

    Preliminary Note: OTC derivatives dealers are a special class of 
broker-dealers that are exempt from certain broker-dealer requirements, 
including membership in a self-regulatory organization (Sec.  240.15b9-
2), regular broker-dealer margin rules (Sec.  240.36a1-1), and

[[Page 353]]

application of the Securities Investor Protection Act of 1970 (Sec.  
240.36a1-2). OTC derivative dealers are subject to special requirements, 
including limitations on the scope of their securities activities (Sec.  
240.15a-1), specified internal risk management control systems (Sec.  
240.15c3-4), recordkeeping obligations (Sec.  240.17a-3(a)(10)), and 
reporting responsibilities (Sec.  240.17a-12). They are also subject to 
alternative net capital treatment (Sec.  240.15c3-1(a)(5)). This rule 
15a-1 uses a number of defined terms in setting forth the securities 
activities in which an OTC derivatives dealer may engage: ``OTC 
derivatives dealer,'' ``eligible OTC derivative instrument,'' ``cash 
management securities activities,'' and ``ancillary portfolio management 
securities activities.'' These terms are defined under Rules 3b-12 
through 3b-15 (Sec.  240.3b-12 through Sec.  240.3b-15).

    (a) The securities activities of an OTC derivatives dealer shall:
    (1) Be limited to:
    (i) Engaging in dealer activities in eligible OTC derivative 
instruments that are securities;
    (ii) Issuing and reacquiring securities that are issued by the 
dealer, including warrants on securities, hybrid securities, and 
structured notes;
    (iii) Engaging in cash management securities activities;
    (iv) Engaging in ancillary portfolio management securities 
activities; and
    (v) Engaging in such other securities activities that the Commission 
designates by order pursuant to paragraph (b)(1) of this section; and
    (2) Consist primarily of the activities described in paragraphs 
(a)(1)(i), (a)(1)(ii), and (a)(1)(iii) of this section; and
    (3) Not consist of any other securities activities, including 
engaging in any transaction in any security that is not an eligible OTC 
derivative instrument, except as permitted under paragraphs (a)(1)(iii), 
(a)(1)(iv), and (a)(1)(v) of this section.
    (b) The Commission, by order, entered upon its own initiative or 
after considering an application for exemptive relief, may clarify or 
expand the scope of eligible OTC derivative instruments and the scope of 
permissible securities activities of an OTC derivatives dealer. Such 
orders may:
    (1) Identify other permissible securities activities;
    (2) Determine that a class of fungible instruments that are 
standardized as to their material economic terms is within the scope of 
eligible OTC derivative instrument;
    (3) Clarify whether certain contracts, agreements, or transactions 
are within the scope of eligible OTC derivative instrument; or
    (4) Clarify whether certain securities activities are within the 
scope of ancillary portfolio management securities activities.
    (c) To the extent an OTC derivatives dealer engages in any 
securities transaction pursuant to paragraphs (a)(1)(i) through 
(a)(1)(v) of this section, such transaction shall be effected through a 
registered broker or dealer (other than an OTC derivatives dealer) that, 
in the case of any securities transaction pursuant to paragraphs 
(a)(1)(i), or (a)(1)(iii) through (a)(1)(v) of this section, is an 
affiliate of the OTC derivatives dealer, except that this paragraph (c) 
shall not apply if:
    (1) The counterparty to the transaction with the OTC derivatives 
dealer is acting as principal and is:
    (i) A registered broker or dealer;
    (ii) A bank acting in a dealer capacity, as permitted by U.S. law;
    (iii) A foreign broker or dealer; or
    (iv) An affiliate of the OTC derivatives dealer; or
    (2) The OTC derivatives dealer is engaging in an ancillary portfolio 
management securities activity, and the transaction is in a foreign 
security, and a registered broker or dealer, a bank, or a foreign broker 
or dealer is acting as agent for the OTC derivatives dealer.
    (d) To the extent an OTC derivatives dealer induces or attempts to 
induce any counterparty to enter into any securities transaction 
pursuant to paragraphs (a)(1)(i) through (a)(1)(v) of this section, any 
communication or contact with the counterparty concerning the 
transaction (other than clerical and ministerial activities conducted by 
an associated person of the OTC derivatives dealer) shall be conducted 
by one or more registered persons that, in the case of any securities 
transaction pursuant to paragraphs (a)(1)(i), or (a)(1)(iii) through 
(a)(1)(v) of this section, is associated with an affiliate of the OTC 
derivatives dealer, except that this paragraph (d) shall not apply if 
the

[[Page 354]]

counterparty to the transaction with the OTC derivatives dealer is:
    (1) A registered broker or dealer;
    (2) A bank acting in a dealer capacity, as permitted by U.S. law;
    (3) A foreign broker or dealer; or
    (4) An affiliate of the OTC derivatives dealer.
    (e) For purposes of this section, the term hybrid security means a 
security that incorporates payment features economically similar to 
options, forwards, futures, swap agreements, or collars involving 
currencies, interest or other rates, commodities, securities, indices, 
quantitative measures, or other financial or economic interests or 
property of any kind, or any payment or delivery that is dependent on 
the occurrence or nonoccurrence of any event associated with a potential 
financial, economic, or commercial consequence (or any combination, 
permutation, or derivative of such contract or underlying interest).
    (f) For purposes of this section, the term affiliate means any 
organization (whether incorporated or unincorporated) that directly or 
indirectly controls, is controlled by, or is under common control with, 
the OTC derivatives dealer.
    (g) For purposes of this section, the term foreign broker or dealer 
means any person not resident in the United States (including any U.S. 
person engaged in business as a broker or dealer entirely outside the 
United States, except as otherwise permitted by Sec.  240.15a-6) that is 
not an office or branch of, or a natural person associated with, a 
registered broker or dealer, whose securities activities, if conducted 
in the United States, would be described by the definition of ``broker'' 
in section 3(a)(4) of the Act (15 U.S.C. 78c(a)(4)) or ``dealer'' in 
section 3(a)(5) of the Act (15 U.S.C. 78c(a)(5)).
    (h) For purposes of this section, the term foreign security means 
any security (including a depositary share issued by a United States 
bank, provided that the depositary share is initially offered and sold 
outside the United States in accordance with Regulation S (17 CFR 
230.901 through 230.904)) issued by a person not organized or 
incorporated under the laws of the United States, provided the 
transaction that involves such security is not effected on a national 
securities exchange or on a market operated by a registered national 
securities association; or a debt security (including a convertible debt 
security) issued by an issuer organized or incorporated under the laws 
of the United States that is initially offered and sold outside the 
United States in accordance with Regulation S (17 CFR 230.901 through 
230.904).
    (i) For purposes of this section, the term registered person is:
    (A) A natural person who is associated with a registered broker or 
dealer and is registered or approved under the rules of a self-
regulatory organization of which such broker or dealer is a member; or
    (B) If the counterparty to the transaction with the OTC derivatives 
dealer is a resident of a jurisdiction other than the United States, a 
natural person who is not resident in the United States and is 
associated with a broker or dealer that is registered or licensed by a 
foreign financial regulatory authority in the jurisdiction in which such 
counterparty is resident or in which such natural person is located, in 
accordance with applicable legal requirements, if any.

[63 FR 59396, Nov. 3, 1998]

           Exemption of Certain Securities From Section 15(a)



Sec.  240.15a-2  Exemption of certain securities of cooperative apartment
houses from section 15(a).

    Shares of a corporation which represent ownership, or entitle the 
holders thereof to possession and occupancy, of specific apartment units 
in property owned by such corporations and organized and operated on a 
cooperative basis are hereby exempted from the operation of section 
15(a) of the Securities Exchange Act of 1934, when such shares are sold 
by or through a real estate broker licensed under the laws of the 
political subdivision in which the property is located.

(Secs. 3, 48 Stat. 882, as amended, 895, as amended; 15 U.S.C. 78c, 78o)

[13 FR 8204, Dec. 22, 1948]

[[Page 355]]



Sec.  240.15a-3  [Reserved]



Sec.  240.15a-4  Forty-five day exemption from registration for certain 
members of national securities exchanges.

    (a) A natural person who is a member of a national securities 
exchange shall, upon termination of his association with a registered 
broker-dealer, be exempt, for a period of forty-five days after such 
termination, from the registration requirement of section 15(a) of the 
Act solely for the purpose of continuing to effect transactions on the 
floor of such exchange if (1) such person has filed with the Commission 
an application for registration as a broker-dealer and such person 
complies in all material respects with rules of the Commission 
applicable to registered brokers and dealers and (2) such exchange has 
filed with the Commission a statement that it has reviewed such 
application and that there do not appear to be grounds for its denial.
    (b) The exemption from registration provided by this rule shall not 
be available to any person while there is pending before the Commission 
any proceeding involving any such person pursuant to section 15(b)(1)(B) 
of the Act.

[41 FR 18290, May 3, 1976]



Sec.  240.15a-5  Exemption of certain nonbank lenders.

    A lender approved under the rules and regulations of the Small 
Business Administration shall be exempt from the registration 
requirement of section 15(a) (1) of the Act if it does not engage in the 
business of effecting transactions in securities or of buying and 
selling securities for its own account except in respect of receiving 
notes evidencing loans to small business concerns and selling the 
portion of such notes guaranteed by the Small Business Administration 
through or to a registered broker or dealer or to a bank, a savings 
institution, an insurance company, or an account over which an 
investment adviser registered pursuant to the Investment Advisers Act of 
1940 exercises investment discretion.

[41 FR 50645, Nov. 17, 1976]

                   Registration of Brokers and Dealers



Sec.  240.15a-6  Exemption of certain foreign brokers or dealers.

    (a) A foreign broker or dealer shall be exempt from the registration 
requirements of sections 15(a)(1) or 15B(a)(1) of the Act to the extent 
that the foreign broker or dealer:
    (1) Effects transactions in securities with or for persons that have 
not been solicited by the foreign broker or dealer; or
    (2) Furnishes research reports to major U.S. institutional 
investors, and effects transactions in the securities discussed in the 
research reports with or for those major U.S. institutional investors, 
provided that:
    (i) The research reports do not recommend the use of the foreign 
broker or dealer to effect trades in any security;
    (ii) The foreign broker or dealer does not initiate contact with 
those major U.S. institutional investors to follow up on the research 
reports, and does not otherwise induce or attempt to induce the purchase 
or sale of any security by those major U.S. institutional investors;
    (iii) If the foreign broker or dealer has a relationship with a 
registered broker or dealer that satisfies the requirements of paragraph 
(a)(3) of this section, any transactions with the foreign broker or 
dealer in securities discussed in the research reports are effected only 
through that registered broker or dealer, pursuant to the provisions of 
paragraph (a)(3) of this section; and
    (iv) The foreign broker or dealer does not provide research to U.S. 
persons pursuant to any express or implied understanding that those U.S. 
persons will direct commission income to the foreign broker or dealer; 
or
    (3) Induces or attempts to induce the purchase or sale of any 
security by a U.S. institutional investor or a major U.S. institutional 
investor, provided that:
    (i) The foreign broker or dealer:
    (A) Effects any resulting transactions with or for the U.S. 
institutional investor or the major U.S. institutional investor through 
a registered

[[Page 356]]

broker or dealer in the manner described by paragraph (a)(3)(iii) of 
this section; and
    (B) Provides the Commission (upon request or pursuant to agreements 
reached between any foreign securities authority, including any foreign 
government, as specified in section 3(a)(50) of the Act, and the 
Commission or the U.S. Government) with any information or documents 
within the possession, custody, or control of the foreign broker or 
dealer, any testimony of foreign associated persons, and any assistance 
in taking the evidence of other persons, wherever located, that the 
Commission requests and that relates to transactions under paragraph 
(a)(3) of this section, except that if, after the foreign broker or 
dealer has exercised its best efforts to provide the information, 
documents, testimony, or assistance, including requesting the 
appropriate governmental body and, if legally necessary, its customers 
(with respect to customer information) to permit the foreign broker or 
dealer to provide the information, documents, testimony, or assistance 
to the Commission, the foreign broker or dealer is prohibited from 
providing this information, documents, testimony, or assistance by 
applicable foreign law or regulations, then this paragraph (a)(3)(i)(B) 
shall not apply and the foreign broker or dealer will be subject to 
paragraph (c) of this section;
    (ii) The foreign associated person of the foreign broker or dealer 
effecting transactions with the U.S. institutional investor or the major 
U.S. institutional investor:
    (A) Conducts all securities activities from outside the U.S., except 
that the foreign associated persons may conduct visits to U.S. 
institutional investors and major U.S. institutional investors within 
the United States, provided that:
    (1) The foreign associated person is accompanied on these visits by 
an associated person of a registered broker or dealer that accepts 
responsibility for the foreign associated person's communications with 
the U.S. institutional investor or the major U.S institutional investor; 
and
    (2) Transactions in any securities discussed during the visit by the 
foreign associated person are effected only through the registered 
broker or dealer, pursuant to paragraph (a)(3) of this section; and
    (B) Is determined by the registered broker or dealer to:
    (1) Not be subject to a statutory disqualification specified in 
section 3(a)(39) of the Act, or any substantially equivalent foreign
    (i) Expulsion or suspension from membership,
    (ii) Bar or suspension from association,
    (iii) Denial of trading privileges,
    (iv) Order denying, suspending, or revoking registration or barring 
or suspending association, or
    (v) Finding with respect to causing any such effective foreign 
suspension, expulsion, or order;
    (2) Not to have been convicted of any foreign offense, enjoined from 
any foreign act, conduct, or practice, or found to have committed any 
foreign act substantially equivalent to any of those listed in sections 
15(b)(4) (B), (C), (D), or (E) of the Act; and
    (3) Not to have been found to have made or caused to be made any 
false foreign statement or omission substantially equivalent to any of 
those listed in section 3(a)(39)(E) of the Act; and
    (iii) The registered broker or dealer through which the transaction 
with the U.S. institutional investor or the major U.S. institutional 
investor is effected:
    (A) Is responsible for:
    (1) Effecting the transactions conducted under paragraph (a)(3) of 
this section, other than negotiating their terms;
    (2) Issuing all required confirmations and statements to the U.S. 
institutional investor or the major U.S. institutional investor;
    (3) As between the foreign broker or dealer and the registered 
broker or dealer, extending or arranging for the extension of any credit 
to the U.S. institutional investor or the major U.S. institutional 
investor in connection with the transactions;
    (4) Maintaining required books and records relating to the 
transactions, including those required by Rules 17a-3 and 17a-4 under 
the Act (17 CFR 2410.17a-3 and l7a-4);

[[Page 357]]

    (5) Complying with Rule 15c3-1 under the Act (17 CFR 240.15c3-1) 
with respect to the transactions; and
    (6) Receiving, delivering, and safeguarding funds and securities in 
connection with the transactions on behalf of the U.S. institutional 
investor or the major U.S. institutional investor in compliance with 
Rule 15c3-3 under the Act (17 CFR 240.15c3-3);
    (B) Participates through an associated person in all oral 
communications between the foreign associated person and the U.S. 
institutional investor, other than a major U.S. institutional investor;
    (C) Has obtained from the foreign broker or dealer, with respect to 
each foreign associated person, the types of information specified in 
Rule l7a-3(a)(12) under the Act (17 CFR 240.17a-3(a)(12)), provided that 
the information required by paragraph (a)(12)(d) of that Rule shall 
include sanctions imposed by foreign securities authorities, exchanges, 
or associations, including without limitation those described in 
paragraph (a)(3)(ii)(B) of this section;
    (D) Has obtained from the foreign broker or dealer and each foreign 
associated person written consent to service of process for any civil 
action brought by or proceeding before the Commission or a self-
regulatory organization (as defined in section 3(a)(26) of the Act), 
providing that process may be served on them by service on the 
registered broker or dealer in the manner set forth on the registered 
broker's or dealer's current Form BD; and
    (E) Maintains a written record of the information and consents 
required by paragraphs (a)(3)(iii) (C) and (D) of this section, and all 
records in connection with trading activities of the U.S. institutional 
investor or the major U.S. institutional investor involving the foreign 
broker or dealer conducted under paragraph (a)(3) of this section, in an 
office of the registered broker or dealer located in the United States 
(with respect to nonresident registered brokers or dealers, pursuant to 
Rule 17a-7(a) under the Act (17 CFR 240.17a-7(a))), and makes these 
records available to the Commission upon request; or
    (4) Effects transactions in securities with or for, or induces or 
attempts to induce the purchase or sale of any security by:
    (i) A registered broker or dealer, whether the registered broker or 
dealer is acting as principal for its own account or as agent for 
others, or a bank acting pursuant to an exception or exemption from the 
definition of ``broker'' or ``dealer'' in sections 3(a)(4)(B), 
3(a)(4)(E), or 3(a)(5)(C) of the Act (15 U.S.C. 78c(a)(4)(B), 15 U.S.C. 
78c(a)(4)(E), or 15 U.S.C. 78c(a)(5)(C)) or the rules thereunder;
    (ii) The African Development Bank, the Asian Development Bank, the 
Inter-American Development Bank, the International Bank for 
Reconstruction and Development, the International Monetary Fund, the 
United Nations, and their agencies, affiliates, and pension funds;
    (iii) A foreign person temporarily present in the United States, 
with whom the foreign broker or dealer had a bona fide, pre-existing 
relationship before the foreign person entered the United States;
    (iv) Any agency or branch of a U.S. person permanently located 
outside the United States, provided that the transactions occur outside 
the United States; or
    (v) U.S. citizens resident outside the United States, provided that 
the transactions occur outside the United States, and that the foreign 
broker or dealer does not direct its selling efforts toward identifiable 
groups of U.S. citizens resident abroad.
    (b) When used in this rule,
    (1) The term family of investment companies shall mean:
    (i) Except for insurance company separate accounts, any two or more 
separately registered investment companies under the Investment Company 
Act of 1940 that share the same investment adviser or principal 
underwriter and hold themselves out to investors as related companies 
for purposes of investment and investor services; and
    (ii) With respect to insurance company separate accounts, any two or 
more separately registered separate accounts under the Investment 
Company Act of 1940 that share the same investment adviser or principal 
underwriter

[[Page 358]]

and function under operational or accounting or control systems that are 
substantially similar.
    (2) The term foreign associated person shall mean any natural person 
domiciled outside the United States who is an associated person, as 
defined in section 3(a)(18) of the Act, of the foreign broker or dealer, 
and who participates in the solicitation of a U.S. institutional 
investor or a major U.S. institutional investor under paragraph (a)(3) 
of this section.
    (3) The term foreign broker or dealer shall mean any non-U.S. 
resident person (including any U.S. person engaged in business as a 
broker or dealer entirely outside the United States, except as otherwise 
permitted by this rule) that is not an office or branch of, or a natural 
person associated with, a registered broker or dealer, whose securities 
activities, if conducted in the United States, would be described by the 
definition of ``broker'' or ``dealer'' in sections 3(a)(4) or 3(a)(5) of 
the Act.
    (4) The term major U.S. institutional investor shall mean a person 
that is:
    (i) A U.S. institutional investor that has, or has under management, 
total assets in excess of $100 million; provided, however, that for 
purposes of determining the total assets of an investment company under 
this rule, the investment company may include the assets of any family 
of investment companies of which it is a part; or
    (ii) An investment adviser registered with the Commission under 
section 203 of the Investment Advisers Act of 1940 that has total assets 
under management in excess of $100 million.
    (5) The term registered broker or dealer shall mean a person that is 
registered with the Commission under sections 15(b), 15B(a)(2), or 
15C(a)(2) of the Act.
    (6) The term United States shall mean the United States of America, 
including the States and any territories and other areas subject to its 
jurisdiction.
    (7) The term U.S. institutional investor shall mean a person that 
is:
    (i) An investment company registered with the Commission under 
section 8 of the Investment Company Act of 1940; or
    (ii) A bank, savings and loan association, insurance company, 
business development company, small business investment company, or 
employee benefit plan defined in Rule 501(a)(1) of Regulation D under 
the Securities Act of 1933 (17 CFR 230.501(a)(1)); a private business 
development company defined in Rule 501(a)(2) (17 CFR 230.501(a)(2)); an 
organization described in section 501(c)(3) of the Internal Revenue 
Code, as defined in Rule 501(a)(3) (17 CFR 230.501(a)(3)); or a trust 
defined in Rule 501(a)(7) (17 CFR 230.501(a)(7)).
    (c) The Commission, by order after notice and opportunity for 
hearing, may withdraw the exemption provided in paragraph (a)(3) of this 
section with respect to the subsequent activities of a foreign broker or 
dealer or class of foreign brokers or dealers conducted from a foreign 
country, if the Commission finds that the laws or regulations of that 
foreign country have prohibited the foreign broker or dealer, or one of 
a class of foreign brokers or dealers, from providing, in response to a 
request from the Commission, information or documents within its 
possession, custody, or control, testimony of foreign associated 
persons, or assistance in taking the evidence of other persons, wherever 
located, related to activities exempted by paragraph (a)(3) of this 
section.

[54 FR 30031, July 18, 1989, as amended at 72 FR 56568, Oct. 3, 2007]



Sec. Sec.  240.15a-7--240.15a-9  [Reserved]



Sec.  240.15a-10  Exemption of certain brokers or dealers with respect
to security futures products.

    (a) A broker or dealer that is registered by notice with the 
Commission pursuant to section 15(b)(11)(A) of the Act (15 U.S.C. 
78o(b)(11)(A)) and that is not a member of either a national securities 
exchange registered pursuant to section 6(a) of the Act (15 U.S.C. 
78f(a)) or a national securities association registered pursuant to 
section 15A(a) of the Act (15 U.S.C. 78o-3(a)) will be exempt from the 
registration requirement of section 15(a)(1) of the Act (15 U.S.C. 
78o(a)(1)) solely to act as a broker or a dealer in security futures 
products.
    (b) A broker or dealer that is registered by notice with the 
Commission pursuant to section 15(b)(11)(A) of the Act (15 U.S.C. 
78o(b)(11)(A)) and that is

[[Page 359]]

a member of either a national securities exchange registered pursuant to 
section 6(a) of the Act (15 U.S.C. 78f(a)) or a national securities 
association registered pursuant to section 15A(a) of the Act (15 U.S.C. 
78o-3(a)) will be exempt from the registration requirement of section 
15(a)(1) of the Act (15 U.S.C. 78o(a)(1)) solely to act as a broker or a 
dealer in security futures products, if:
    (1) The rules of any such exchange or association of which the 
broker or dealer is a member provides specifically for a broker or 
dealer that is registered by notice with the Commission pursuant to 
section 15(b)(11)(A) of the Act (15 U.S.C. 78o(b)(11)(A)) to become a 
member of such exchange or association; and
    (2) The broker or dealer complies with section 11(a)-(c) of the Act 
(15 U.S.C. 78k(a)-(c)) with respect to any transactions in security 
futures products on a national securities exchange registered pursuant 
to section 6(a) of the Act (15 U.S.C. 78f(a)) of which it is a member, 
notwithstanding section 15(b)(11)(B)(ii) of the Act (15 U.S.C. 
78o(b)(11)(B)(ii)).

[66 FR 45146, Aug. 27, 2001]



Sec.  240.15a-11  [Reserved]



Sec.  240.15b1-1  Application for registration of brokers or dealers.

    (a) An application for registration of a broker or dealer that is 
filed pursuant to section 15(b) of the Act (15 U.S.C. 78o(b)) shall be 
filed on Form BD (Sec.  249.501 of this chapter) in accordance with the 
instructions to the form. A broker or dealer that is an OTC derivatives 
dealer shall indicate where appropriate on Form BD that the type of 
business in which it is engaged is that of acting as an OTC derivatives 
dealer.
    (b) Every application for registration of a broker or dealer that is 
filed on or after January 25, 1993, shall be filed with the Central 
Registration Depository operated by the Financial Industry Regulatory 
Authority, Inc.
    (c) An application for registration that is filed with the Central 
Registration Depository pursuant to this section shall be considered a 
``report'' filed with the Commission for purposes of Sections 15(b), 
17(a), 18(a), 32(a) (15 U.S.C. 78o(b), 78q(a), 78r(a), 78ff(a)) and 
other applicable provisions of the Act.

[19 FR 1041, Feb. 24, 1954. Redesignated at 30 FR 11851, Sept. 16, 1965, 
and amended at 58 FR 14, Jan. 4, 1993; 63 FR 59397, Nov. 3, 1998; 64 FR 
25147, May 10, 1999; 73 FR 4692, Jan. 28, 2008]



Sec.  240.15b1-2  [Reserved]



Sec.  240.15b1-3  Registration of successor to registered broker or
dealer.

    (a) In the event that a broker or dealer succeeds to and continues 
the business of a broker or dealer registered pursuant to section 15(b) 
of the Act, the registration of the predecessor shall be deemed to 
remain effective as the registration of the successor if the successor, 
within 30 days after such succession, files an application for 
registration on Form BD, and the predecessor files a notice of 
withdrawal from registration on Form BDW; Provided, however, That the 
registration of the predecessor broker or dealer will cease to be 
effective as the registration of the successor broker or dealer 45 days 
after the application for registration on Form BD is filed by such 
successor.
    (b) Notwithstanding paragraph (a) of this section, if a broker or 
dealer succeeds to and continues the business of a registered 
predecessor broker or dealer, and the succession is based solely on a 
change in the predecessor's date or state of incorporation, form of 
organization, or composition of a partnership, the successor may, within 
30 days after the succession, amend the registration of the predecessor 
broker or dealer on Form BD to reflect these changes. This amendment 
shall be deemed an application for registration filed by the predecessor 
and adopted by the successor.

[58 FR 10, Jan. 4, 1993]



Sec.  240.15b1-4  Registration of fiduciaries.

    The registration of a broker or dealer shall be deemed to be the 
registration of any executor, administrator, guardian, conservator, 
assignee for the benefit of creditors, receiver, trustee in insolvency 
or bankruptcy, or other fiduciary, appointed or qualified by order, 
judgment, or decree of a court of competent jurisdiction to continue the

[[Page 360]]

business of such registered broker or dealer; Provided, That such 
fiduciary files with the Commission, within 30 days after entering upon 
the performance of his duties, a statement setting forth as to such 
fiduciary substantially the information required by Form BD.

(Secs. 15, 17, 48 Stat. 895, as amended, 897 as amended; 15 U.S.C. 78o, 
78q)

[19 FR 1041, Feb. 24, 1954. Redesignated at 30 FR 11851, Sept. 16, 1965]



Sec.  240.15b1-5  Consent to service of process to be furnished by 
nonresident brokers or dealers and by nonresident general partners or
managing agents of brokers or dealers.

    (a) Each nonresident broker or dealer registered or applying for 
registration pursuant to section 15(b) of the Securities Exchange Act of 
1934, each nonresident general partner of a broker or dealer partnership 
which is registered or applying for registration, and each nonresident 
managing agent of any other unincorporated broker or dealer which is 
registered or applying for registration, shall furnish to the 
Commission, in a form prescribed by or acceptable to it, a written 
irrevocable consent and power of attorney which (1) designates the 
Securities and Exchange Commission as an agent upon whom may be served 
any process, pleadings, or other papers in any civil suit or action 
brought in any appropriate court in any place subject to the 
jurisdiction of the United States, with respect to any cause of action 
(i) which accrues during the period beginning when such broker or dealer 
becomes registered pursuant to section 15 of the Securities Exchange Act 
of 1934 and the rules and regulations thereunder and ending either when 
such registration is cancelled or revoked, or when the Commission 
receives from such broker or dealer a notice to withdraw from such 
registration, whichever is earlier, (ii) which arises out of any 
activity, in any place subject to the jurisdiction of the United States, 
occurring in connection with the conduct of business of a broker or 
dealer, and (iii) which is founded directly or indirectly, upon the 
provisions of the Securities Act of 1933, the Securities Exchange Act of 
1934, the Trust Indenture Act of 1939, the Investment Company Act of 
1940, the Investment Advisers Act of 1940, or any rule or regulation 
under any of said Acts; and (2) stipulates and agrees that any such 
civil suit or action may be commended by the service of process upon the 
Commission and the forwarding of a copy thereof as provided in paragraph 
(c) of this section, and that the service as aforesaid of any such 
process, pleadings, or other papers upon the Commission shall be taken 
and held in all courts to be as valid and binding as if due personal 
service thereof had been made.
    (b) The required consent and power of attorney shall be furnished to 
the Commission within the following period of time:
    (1) Each nonresident broker or dealer registered at the time this 
section becomes effective, and each nonresident general partner or 
managing agent of an unincorporated broker or dealer registered at the 
time this section becomes effective, shall furnish such consent and 
power of attorney within 60 days after such date;
    (2) Each broker or dealer applying for registration after the 
effective date of this section shall furnish, at the time of filing such 
application, all the consents and powers of attorney required to be 
furnished by such broker or dealer and by each general partner or 
managing agent thereof; Provided, however, That where an application for 
registration of a broker or dealer is pending at the time this section 
becomes effective such consents and powers of attorney shall be 
furnished within 30 days after this section becomes effective.
    (3) Each broker or dealer registered or applying for registration 
who or which becomes a nonresident broker or dealer after the effective 
date of this section, and each general partner or managing agent, of an 
unincorporated broker or dealer registered or applying for registration, 
who becomes a nonresident after the effective date of this section, 
shall furnish such consent and power of attorney within 30 days 
thereafter.
    (c) Service of any process, pleadings or other papers on the 
Commission under this part shall be made by delivering the requisite 
number of copies

[[Page 361]]

thereof to the Secretary of the Commission or to such other person as 
the Commission may authorize to act in its behalf. Whenever any process, 
pleadings or other papers as aforesaid are served upon the Commission, 
it shall promptly forward a copy thereof by registered or certified mail 
to the appropriate defendants at their last address of record filed with 
the Commission. The Commission shall be furnished a sufficient number of 
copies for such purpose, and one copy for its file.
    (d) For purposes of this section the following definitions shall 
apply:
    (1) The term broker shall have the meaning set out in section 
3(a)(4) of the Securities Exchange Act of 1934.
    (2) The term dealer shall have the meaning set out in section 
3(a)(5) of the Securities Exchange Act of 1934.
    (3) The term managing agent shall mean any person, including a 
trustee, who directs or manages or who participated in the directing or 
managing of the affairs of any unincoprorated organization or 
association which is not a partnership.
    (4) The term nonresident broker or dealer shall mean (i) in the case 
of an individual, one who resides in or has his principal place of 
business in any place not subject to the jurisdiction of the United 
States; (ii) in the case of a corporation, one incorporated in or having 
its principal place of business in any place not subject to the 
jurisdiction of the United States; (iii) in the case of a partnership or 
other unincoporated organization or association, one having its 
principal place of business in any place not subject to the jurisdiction 
of the United States.
    (5) A general partner or managing agent of a broker or dealer shall 
be deemed to be a nonresident if he resides in any place not subject to 
the jurisdiction of the United States.

(Sec. 319, 53 Stat. 1173, secs. 38, 211, 54 Stat. 641, 855; 15 U.S.C. 
77sss, 80a-37, 80b-11)

[18 FR 2578, May 2, 1953, as amended at 23 FR 9691, Dec. 16, 1958; 29 FR 
16982, Dec. 11, 1964. Redesignated at 30 FR 11851, Sept. 16, 1965]



Sec.  240.15b1-6  Notice to brokers and dealers of requirements regarding
lost securityholders and unresponsive payees.

    Brokers and dealers are hereby notified of Rule 17Ad-17 (Sec.  
240.17Ad-17), which addresses certain requirements with respect to lost 
securityholders and unresponsive payees that may be applicable to them.

[78 FR 4783, Jan. 23, 2013]



Sec.  240.15b2-2  Inspection of newly registered brokers and dealers.

    (a) Definition. For the purpose of this section the term applicable 
financial responsibility rules shall include:
    (1) Any rule adopted by the Commission pursuant to sections 8, 
15(c)(3), 17(a), or 17(e)(1)(A) of the Act;
    (2) Any rule adopted by the Commission relating to hypothecation or 
lending of customer securities;
    (3) Any other rule adopted by the Commission relating to the 
protection of funds or securities; and
    (4) Any rule adopted by the Secretary of the Treasury pursuant to 
section 15C(b)(1) of the Act.
    (b) Each self-regulatory organization that has responsibility for 
examining a broker or dealer member (including members that are 
government securities brokers or government securities dealers 
registered pursuant to section 15C(a)(1)(A) of the Act) for compliance 
with applicable financial responsibility rules is authorized and 
directed to conduct an inspection of the member, within six months of 
the member's registration with the Commission, to determine whether the 
member is operating in conformity with applicable financial 
responsibility rules.
    (c) The examining self-regulatory organization is further authorized 
and directed to conduct an inspection of the member no later than twelve 
months from the member's registration with the Commission, to determine 
whether the member is operating in conformity with all other applicable 
provisions of the Act and rules thereunder.
    (d) In each case where the examining self-regulatory organization 
determines that a broker or dealer member has not commenced actual 
operations within six months of the member's registration with the 
Commission, it shall

[[Page 362]]

delay the inspection pursuant to this section until the second six month 
period from the member's registration with the Commission.
    (e) No inspection need be conducted as provided for in paragraphs 
(b) and (c) of this section if:
    (1) The member was registered with the Commission prior to April 26, 
1982;
    (2) An inspection of the member has already been conducted by 
another self-regulatory organization pursuant to this section;
    (3) An inspection of the member has already been conducted by the 
Commission pursuant to section 15(b)(2)(C) of the Act.; or
    (4) The member is registered with the Commission pursuant to section 
15(b)(11)(A) of the Act (15 U.S.C. 78o(b)(11)(A)).

[47 FR 11269, Mar. 16, 1982, as amended at 52 FR 16838, May 6, 1987; 53 
FR 4121, Feb. 12, 1988; 66 FR 45147, Aug. 27, 2001]



Sec.  240.15b3-1  Amendments to application.

    (a) If the information contained in any application for registration 
as a broker or dealer, or in any amendment thereto, is or becomes 
inaccurate for any reason, the broker or dealer shall promptly file with 
the Central Registration Depository (operated by the Financial Industry 
Regulatory Authority, Inc.) an amendment on Form BD correcting such 
information.
    (b) Every amendment filed with the Central Registration Depository 
pursuant to this section shall constitute a ``report'' filed with the 
Commission within the meaning of Sections 15(b), 17(a), 18(a), 32(a) (15 
U.S.C. 78o(b), 78q(a), 78r(a), 78ff(a)) and other applicable provisions 
of the Act.

[58 FR 14, Jan. 4, 1993, as amended at 64 FR 25147, May 10, 1999; 64 FR 
37593, July 12, 1999; 64 FR 42595, Aug. 5, 1999; 73 FR 4692, Jan. 28, 
2008]



Sec.  240.15b5-1  Extension of registration for purposes of the Securities
Investor Protection Act of 1970 after cancellation or revocation.

    Commission revocation or cancellation of the registration of a 
broker or dealer pursuant to section 15(b) of the Act: (i) shall be 
effective for all purposes, except as hereinafter provided, on the date 
of the order of revocation or cancellation or, if such order is stayed, 
on the date the stay is terminated; and (ii) shall be effective six 
months after the date of the order of revocation or cancellation (or, if 
such order is stayed, the date the stay is terminated) with respect to a 
broker's or dealer's registration status as a member within the meaning 
of Section 3(a)(2) of the Securities Investor Protection Act of 1970 for 
purposes of the application of sections 5, 6, and 7 thereof to customer 
claims arising prior to the date of the order of revocation or 
cancellation (or, if such order is stayed, the date the stay is 
terminated).

[39 FR 37485, Oct. 22, 1974]



Sec.  240.15b6-1  Withdrawal from registration.

    (a) Notice of withdrawal from registration as a broker or dealer 
pursuant to Section 15(b) of the Act shall be filed on Form BDW (17 CFR 
249.501a) in accordance with the instructions contained therein. Every 
notice of withdrawal from registration as a broker or dealer shall be 
filed with the Central Registration Depository (operated by the 
Financial Industry Regulatory Authority, Inc.) in accordance with 
applicable filing requirements. Prior to filing a notice of withdrawal 
from registration on Form BDW (17 CFR 249.501a), a broker or dealer 
shall amend Form BD (17 CFR 249.501) in accordance with Sec.  240.15b3-
1(a) to update any inaccurate information.
    (b) A notice of withdrawal from registration filed by a broker or 
dealer pursuant to Section 15(b) of the Act (15 U.S.C. 78o(b)) shall 
become effective for all matters (except as provided in this paragraph 
(b) and in paragraph (c) of this section) on the 60th day after the 
filing thereof with the Commission, within such longer period of time as 
to which such broker or dealer consents or which the Commission by order 
may determine as necessary or appropriate in the public interest or for 
the protection of investors, or within such shorter period of time as 
the Commission may determine. If a notice of withdrawal from 
registration is filed with the Commission at any time subsequent to the 
date of the issuance of a

[[Page 363]]

Commission order instituting proceedings pursuant to Section 15(b) of 
the Act (15 U.S.C. 78o(b)) to censure, place limitations on the 
activities, functions or operations of, or suspend or revoke the 
registration of, such broker or dealer, or if prior to the effective 
date of the notice of withdrawal pursuant to this paragraph (b), the 
Commission institutes such a proceeding or a proceeding to impose terms 
or conditions upon such withdrawal, the notice of withdrawal shall not 
become effective pursuant to this paragraph (b) except at such time and 
upon such terms and conditions as the Commission deems necessary or 
appropriate in the public interest or for the protection of investors.
    (c) With respect to a broker's or dealer's registration status as a 
member within the meaning of Section 3(a)(2) of the Securities Investor 
Protection Act of 1970 (15 U.S.C. 78ccc(a)(2)) for purposes of the 
application of Sections 5, 6, and 7 (15 U.S.C. 78eee, 78fff, and 78fff-
1) thereof to customer claims arising prior to the effective date of 
withdrawal pursuant to paragraph (b) of this section, the effective date 
of a broker's or dealer's withdrawal from registration pursuant to this 
paragraph (c) shall be six months after the effective date of withdrawal 
pursuant to paragraph (b) of this section or such shorter period of time 
as the Commission may determine.
    (d) Every notice of withdrawal filed with the Central Registration 
Depository pursuant to this section shall constitute a ``report'' filed 
with the Commission within the meaning of Sections 15(b), 17(a), 18(a), 
32(a) (15 U.S.C. 78o(b), 78q(a), 78r(a), 78ff(a)) and other applicable 
provisions of the Act.
    (e) The Commission, by order, may exempt any broker or dealer from 
the filing requirements provided in Form BDW (17 CFR 249.501a) under 
conditions that differ from the filing instructions contained in Form 
BDW.

[64 FR 25147, May 10, 1999, as amended at 64 FR 42595, Aug. 5, 1999; 73 
FR 4692, Jan. 28, 2008]



Sec.  240.15b7-1  Compliance with qualification requirements of
self-regulatory organizations.

    No registered broker or dealer shall effect any transaction in, or 
induce the purchase or sale of, any security unless any natural person 
associated with such broker or dealer who effects or is involved in 
effecting such transaction is registered or approved in accordance with 
the standards of training, experience, competence, and other 
qualification standards (including but not limited to submitting and 
maintaining all required forms, paying all required fees, and passing 
any required examinations) established by the rules of any national 
securities exchange or national securities association of which such 
broker or dealer is a member or under the rules of the Municipal 
Securities Rulemaking Board (if it is subject to the rules of that 
organization).

[58 FR 27658, May 11, 1993]



Sec.  240.15b7-3T  Operational capability in a Year 2000 environment.

    (a) This section applies to every broker or dealer registered 
pursuant to Section 15 of the Act, (15 U.S.C. 78o) that uses computers 
in the conduct of its business as a broker or dealer. If you have a 
material Year 2000 problem, then you do not have operational capability 
within the meaning of Section 15(b)(7) of the Act (15 U.S.C. 78o(b)(7)).
    (b)(1) You have a material Year 2000 problem under paragraph (a) of 
this section if, at any time on or after August 31, 1999:
    (i) Any of your mission critical computer systems incorrectly 
identifies any date in the Year 1999 or the Year 2000; and
    (ii) The error impairs or, if uncorrected, is likely to impair, any 
of your mission critical systems.
    (2) You will be presumed to have a material Year 2000 problem if, at 
any time on or after August 31, 1999, you:
    (i) Do not have written procedures reasonably designed to identify, 
assess, and remediate any Year 2000 problems in mission critical systems 
under your control;
    (ii) Have not verified your Year 2000 remediation efforts through 
reasonable internal testing of mission critical systems under your 
control;

[[Page 364]]

    (iii) Have not verified your Year 2000 remediation efforts by 
satisfying Year 2000 testing requirements imposed by self-regulatory 
organizations to which you are subject; or
    (iv) Have not remediated all exceptions related to your mission 
critical systems contained in any independent public accountant's report 
prepared on your behalf pursuant to Sec.  240.17a-5(e)(5)(vi).
    (c) If you have or are presumed to have a material Year 2000 
problem, you must immediately notify the Commission and your designated 
examining authority of the problem. You must send this notice to the 
Commission by overnight delivery to the Division of Market Regulation, 
U.S. Securities and Exchange Commission, 100 F Street, NE., Washington, 
DC 20549-6628 Attention: Y2K Compliance.
    (d)(1) If you are a broker or dealer that is not operationally 
capable because you have or are presumed to have a material Year 2000 
problem, you may not, on or after August 31, 1999:
    (i) Effect any transaction in, or induce the purchase or sale of, 
any security; or
    (ii) Receive or hold customer funds or securities, or carry customer 
accounts.
    (2) Notwithstanding paragraph (d)(1) of this section, you may 
continue to effect transactions in, or induce the purchase or sale of, a 
security, receive or hold customer funds or securities, or carry 
customer accounts:
    (i) Until December 1, 1999, if you have submitted a certificate to 
the Commission in compliance with paragraph (e) of this section; or
    (ii) Solely to the extent necessary to effect an orderly cessation 
or transfer of these functions.
    (e)(1)(i) If you are a broker or dealer that is not operationally 
capable because you have or are presumed to have a material Year 2000 
problem, you may, in addition to providing the Commission the notice 
required by paragraph (c) of this section, provide the Commission and 
your designated examining authority a certificate signed by your chief 
executive officer (or an individual with similar authority) stating:
    (A) You are in the process of remediating your material Year 2000 
problem;
    (B) You have scheduled testing of your affected mission critical 
systems to verify that the material Year 2000 problem has been 
remediated, and specify the testing dates;
    (C) The date by which you anticipate completing remediation of the 
material Year 2000 problem in your mission critical systems, and will 
therefore be operationally capable; and
    (D) Based on inquiries and to the best of the chief executive 
officer's knowledge, you do not anticipate that the existence of the 
material Year 2000 problem in your mission critical systems will impair 
your ability, depending on the nature of your business, to ensure prompt 
and accurate processing of securities transactions, including order 
entry, execution, comparison, allocation, clearance and settlement of 
securities transactions, the maintenance of customer accounts, or the 
delivery of funds and securities; and you anticipate that the steps 
referred to in paragraphs (e)(1)(i)(A) through (C) of this section will 
result in remedying the material Year 2000 problem on or before November 
15, 1999.
    (ii) If the information contained in any certificate provided to the 
Commission pursuant to paragraph (e) of this section is or becomes 
misleading or inaccurate for any reason, you must promptly file an 
updated certificate correcting such information. In addition to the 
information contained in the certificate, you may provide the Commission 
with any other information necessary to establish that your mission 
critical systems will not have material Year 2000 problems on or after 
November 15, 1999.
    (2) If you have submitted a certificate pursuant to paragraph (e)(1) 
of this section, you must submit a certificate to the Commission and 
your designated examining authority signed by your chief executive 
officer (or an individual with similar authority) on or before November 
15, 1999, stating that, based on inquiries and to the best of the chief 
executive officer's knowledge, you have remediated your Year 2000 
problem or that you will cease operations. This certificate must be sent 
to the Commission by overnight delivery to the Division of Market 
Regulation,

[[Page 365]]

U.S. Securities and Exchange Commission, 100 F Street, NE., Washington, 
DC 20549-6628 Attention: Y2K Compliance.
    (f) Notwithstanding paragraph (d)(2) of this section, you must 
comply with the requirements of paragraph (d)(1) of this section if you 
have been so ordered by the Commission or by a court.
    (g) For the purposes of this section:
    (1) The term mission critical system means any system that is 
necessary, depending on the nature of your business, to ensure prompt 
and accurate processing of securities transactions, including order 
entry, execution, comparison, allocation, clearance and settlement of 
securities transactions, the maintenance of customer accounts, and the 
delivery of funds and securities; and
    (2) The term customer includes a broker or dealer.
    (h) This temporary section will expire on July 1, 2001.

[64 FR 42028, Aug. 3, 1999, as amended at 73 FR 32227, June 5, 2008]



Sec.  240.15b9-1  Exemption for certain exchange members.

    (a) Any broker or dealer required by section 15(b)(8) of the Act to 
become a member of a registered national securities association shall be 
exempt from such requirement if it: (1) Is a member of a national 
securities exchange, (2) carries no customer accounts, and (3) has 
annual gross income derived from purchases and sales of securities 
otherwise than on a national securities exchange of which it is a member 
in an amount no greater than $1,000.
    (b) The gross income limitation contained in paragraph (a) of this 
section, shall not apply to income derived from transactions (1) for the 
dealer's own account with or through another registered broker or dealer 
or (2) through the Intermarket Trading System.
    (c) For purposes of this section, the term Intermarket Trading 
System shall mean the intermarket communications linkage operated 
jointly by certain self-regulatory organizations pursuant to a plan 
filed with, and approved by, the Commission pursuant to Sec.  242.608 of 
this chapter.

[48 FR 53691, Nov. 29, 1983, as amended at 70 FR 37618, June 29, 2005]



Sec.  240.15b9-2  Exemption from SRO membership for OTC derivatives
dealers.

    An OTC derivatives dealer, as defined in Sec.  240.3b-12, shall be 
exempt from any requirement under section 15(b)(8) of the Act (15 U.S.C. 
78o(b)(8)) to become a member of a registered national securities 
association.

[63 FR 59397, Nov. 3, 1998]



Sec.  240.15b11-1  Registration by notice of security futures product
broker-dealers.

    (a) A broker or dealer may register by notice pursuant to section 
15(b)(11)(A) of the Act (15 U.S.C. 78o(b)(11)(A)) if it:
    (1) Is registered with the Commodity Futures Trading Commission as a 
futures commission merchant or an introducing broker, as those terms are 
defined in the Commodity Exchange Act (7 U.S.C. 1, et seq.), 
respectively;
    (2) Is a member of the National Futures Association or another 
national securities association registered under section 15A(k) of the 
Act (15 U.S.C. 78o-3(k)); and
    (3) Is not required to register as a broker or dealer in connection 
with transactions in securities other than security futures products.
    (b) A broker or dealer registering by notice pursuant to section 
15(b)(11)(A) of the Act (15 U.S.C. 78o(b)(11)(A)) must file Form BD-N 
(17 CFR 249.501b) in accordance with the instructions to the form. A 
broker or dealer registering by notice pursuant to this section must 
indicate where appropriate on Form BD-N that it satisfies all of the 
conditions in paragraph (a) of this section.
    (c) If the information contained in any notice of registration filed 
on Form BD-N (17 CFR 249.501b) pursuant to this section is or becomes 
inaccurate for any reason, the broker or dealer shall promptly file an 
amendment on Form BD-N correcting such information.
    (d) An application for registration by notice, and any amendments 
thereto, that are filed on Form BD-N (17 CFR 249.501b) pursuant to this 
section will be considered a ``report'' filed with the Commission for 
purposes of sections 15(b), 17(a), 18(a), 32(a) (15 U.S.C. 78o(b),

[[Page 366]]

78q(a), 78r(a), 78ff(a)) and other applicable provisions of the Act.

[66 FR 45146, Aug. 27, 2001]

               Rules Relating to Over-the-Counter Markets



Sec.  240.15c1-1  Definitions.

    As used in any rule adopted pursuant to section 15(c)(1) of the Act:
    (a) The term customer shall not include a broker or dealer or a 
municipal securities dealer; provided, however, that the term 
``customer'' shall include a municipal securities dealer (other than a 
broker or dealer) with respect to transactions in securities other than 
municipal securities.
    (b) The term the completion of the transaction means:
    (1) In the case of a customer who purchases a security through or 
from a broker, dealer or municipal securities dealer, except as provided 
in paragraph (b)(2) of this section, the time when such customer pays 
the broker, dealer or municipal securities dealer any part of the 
purchase price, or, if payment is effected by a bookkeeping entry, the 
time when such bookkeeping entry is made by the broker, dealer or 
municipal securities dealer for any part of the purchase price;
    (2) In the case of a customer who purchases a security through or 
from a broker, dealer or municipal securities dealer and who makes 
payment therefor prior to the time when payment is requested or 
notification is given that payment is due, the time when such broker, 
dealer or municipal securities dealer delivers the security to or into 
the account of such customer;
    (3) In the case of a customer who sells a security through or to a 
broker, dealer or municipal securities dealer except as provided in 
paragraph (b)(4) of this section, if the security is not in the custody 
of the broker, dealer or municipal securities dealer at the time of 
sale, the time when the security is delivered to the broker, dealer or 
municipal securities dealer, and if the security is in the custody of 
the broker, dealer or municipal securities dealer at the time of sale, 
the time when the broker, dealer or municipal securities dealer 
transfers the security from the account of such customer;
    (4) In the case of a customer who sells a security through or to a 
broker, dealer or municipal securities dealer and who delivers such 
security to such broker, dealer or municipal securities dealer prior to 
the time when delivery is requested or notification is given that 
delivery is due, the time when such broker, dealer or municipal 
securities dealer makes payment to or into the account of such customer.

[41 FR 22825, June 7, 1976]



Sec.  240.15c1-2  Fraud and misrepresentation.

    (a) The term manipulative, deceptive, or other fraudulent device or 
contrivance, as used in section 15(c)(1) of the Act (section 2, 52 Stat. 
1075; 15 U.S.C. 78o(c)(1), is hereby defined to include any act, 
practice, or course of business which operates or would operate as a 
fraud or deceit upon any person.
    (b) The term manipulative, deceptive, or other fraudulent device or 
contrivance, as used in section 15(c)(1) of the Act, is hereby defined 
to include any untrue statement of a material fact and any omission to 
state a material fact necessary in order to make the statements made, in 
the light of the circumstances under which they are made, not 
misleading, which statement or omission is made with knowledge or 
reasonable grounds to believe that it is untrue or misleading.
    (c) The scope of this section shall not be limited by any specific 
definitions of the term ``manipulative, deceptive, or other fraudulent 
device or contrivance'' contained in other rules adopted pursuant to 
section 15(c)(1) of the act.

(Sec. 2, 52 Stat. 1075; 15 U.S.C. 78o)

    Cross Reference: For regulation prohibiting employment of 
manipulative and deceptive devices as such term is used in section 15 of 
the Act, by any broker or dealer, see Sec.  240.10b-3.

[13 FR 8205, Dec. 22, 1948]



Sec.  240.15c1-3  Misrepresentation by brokers, dealers and municipal
securities dealers as to registration.

    The term manipulative, deceptive, or other fraudulent device or 
contrivance, as used in section 15(c)(1) of the Act, is hereby defined 
to include any representation by a broker, dealer or municipal

[[Page 367]]

securities dealer that the registration of a broker or dealer, pursuant 
to section 15(b) of the Act, or the registration of a municipal 
securities dealer pursuant to section 15B(a) of the Act, or the failure 
of the Commission to deny or revoke such registration, indicates in any 
way that the Commission has passed upon or approved the financial 
standing, business, or conduct of such registered broker, dealer or 
municipal securities dealer or the merits of any security or any 
transaction or transactions therein.

[41 FR 22825, June 7, 1976]



Sec.  240.15c1-4  [Reserved]



Sec.  240.15c1-5  Disclosure of control.

    The term manipulative, deceptive, or other fraudulent device or 
contrivance, as used in section 15(c)(1) of the Act, is hereby defined 
to include any act of any broker, dealer or municipal securities dealer 
controlled by, controlling, or under common control with, the issuer of 
any security, designed to effect with or for the account of a customer 
any transaction in, or to induce the purchase or sale by such customer 
of, such security unless such broker, dealer or municipal securities 
dealer, before entering into any contract with or for such customer for 
the purchase or sale of such security, discloses to such customer the 
existence of such control, and unless such disclosure, if not made in 
writing, is supplemented by the giving or sending of written disclosure 
at or before the completion of the transaction.

[41 FR 22825, June 7, 1976]



Sec.  240.15c1-6  Disclosure of interest in distribution.

    The term manipulative, deceptive, or other fraudulent device or 
contrivance, as used in section 15(c)(1) of the Act, is hereby defined 
to include any act of any broker who is acting for a customer or for 
both such customer and some other person, or of any dealer or municipal 
securities dealer who receives or has promise of receiving a fee from a 
customer for advising such customer with respect to securities, designed 
to effect with or for the account of such customer any transaction in, 
or to induce the purchase or sale by such customer of, any security in 
the primary or secondary distribution of which such broker, dealer or 
municipal securities dealer is participating or is otherwise financially 
interested unless such broker, dealer or municipal securities dealer, at 
or before the completion of each such transaction gives or sends to such 
customer written notification of the existence of such participation or 
interest.

[41 FR 22826, June 7, 1976]



Sec.  240.15c1-7  Discretionary accounts.

    (a) The term manipulative, deceptive, or other fraudulent device or 
contrivance, as used in section 15(c) of the Act, is hereby defined to 
include any act of any broker, dealer or municipal securities dealer 
designed to effect with or for any customer's account in respect to 
which such broker, dealer or municipal securities dealer or his agent or 
employee is vested with any discretionary power any transactions or 
purchase or sale which are excessive in size or frequency in view of the 
financial resources and character of such account.
    (b) The term manipulative, deceptive, or other fraudulent device or 
contrivance, as used in section 15(c)(1) of the Act, is hereby defined 
to include any act of any broker, dealer or municipal securities dealer 
designed to effect with or for any customer's account in respect to 
which such broker, dealer or municipal securities dealer or his agent or 
employee is vested with any discretionary power any transaction of 
purchase or sale unless immediately after effecting such transaction 
such broker, dealer or municipal securities dealer makes a record of 
such transaction which record includes the name of such customer, the 
name, amount and price of the security, and the date and time when such 
transaction took place.

[41 FR 22826, June 7, 1976]



Sec.  240.15c1-8  Sales at the market.

    The term manipulative, deceptive, or other fraudulent device or 
contrivance, as used in section 15(c)(1) of the Act, is hereby defined 
to include any representation made to a customer by a broker, dealer or 
municipal securities dealer

[[Page 368]]

who is participating or otherwise financially interested in the primary 
or secondary distribution of any security which is not admitted to 
trading on a national securities exchange that such security is being 
offered to such customer ``at the market'' or at a price related to the 
market price unless such broker, dealer or municipal securities dealer 
knows or has reasonable grounds to believe that a market for such 
security exists other than that made, created, or controlled by him, or 
by any person for whom he is acting or with whom he is associated in 
such distribution, or by any person controlled by, controlling or under 
common control with him.

[41 FR 22826, June 7, 1976]



Sec.  240.15c1-9  Use of pro forma balance sheets.

    The term manipulative, deceptive, or other fraudulent device or 
contrivance, as used in section 15(c)(1) of the Act, is hereby defined 
to include the use of financial statements purporting to give effect to 
the receipt and application of any part of the proceeds from the sale or 
exchange of securities, unless the assumptions upon which each such 
financial statement is based are clearly set forth as part of the 
caption to each such statement in type at least as large as that used 
generally in the body of the statement.

(Sec. 2, 52 Stat. 1075; 15 U.S.C. 78o)

[13 FR 8205, Dec. 22, 1948]



Sec.  240.15c2-1  Hypothecation of customers' securities.

    (a) General provisions. The term fraudulent, deceptive, or 
manipulative act or practice, as used in section 15(c) (2) of the Act, 
is hereby defined to include the direct or indirect hypothecation by a 
broker or dealer, or his arranging for or permitting, directly or 
indirectly, the continued hypothecation of any securities carried for 
the account of any customer under circumstances:
    (1) That will permit the commingling of securities carried for the 
account of any such customer with securities carried for the account of 
any other customer, without first obtaining the written consent of each 
such customer to such hypothecation;
    (2) That will permit such securities to be commingled with 
securities carried for the account of any person other than a bona fide 
customer of such broker or dealer under a lien for a loan made to such 
broker or dealer; or
    (3) That will permit securities carried for the account of customers 
to be hypothecated, or subjected to any lien or liens or claims or 
claims of the pledgee or pledgees, for a sum which exceeds the aggregate 
indebtedness of all customers in respect of securities carried for their 
accounts; except that this clause shall not be deemed to be violated by 
reason of an excess arising on any day through the reduction of the 
aggregate indebtedness of customers on such day, provided that funds or 
securities in an amount sufficient to eliminate such excess are paid or 
placed in transfer to pledgees for the purpose of reducing the sum of 
the liens or claims to which securities carried for the account of 
customers are subject as promptly as practicable after such reduction 
occurs, but before the lapse of one half hour after the commencement of 
banking hours on the next banking day at the place where the largest 
principal amount of loans of such broker or dealer are payable and, in 
any event, before such broker or dealer on such day has obtained or 
increased any bank loan collateralized by securities carried for the 
account of customers.
    (b) Definitions. For the purposes of this section:
    (1) The term customer shall not include any general or special 
partner or any director or officer of such broker or dealer, or any 
participant, as such, in any joint, group or syndicate account with such 
broker or dealer or with any partner, officer or director thereof. The 
term also shall not include a counterparty who has delivered collateral 
to an OTC derivatives dealer pursuant to a transaction in an eligible 
OTC derivative instrument, or pursuant to the OTC derivatives dealer's 
cash management securities activities or ancillary portfolio management 
securities activities, and who has received a prominent written notice 
from the OTC derivatives dealer that:
    (i) Except as otherwise agreed in writing by the OTC derivatives 
dealer

[[Page 369]]

and the counterparty, the dealer may repledge or otherwise use the 
collateral in its business;
    (ii) In the event of the OTC derivatives dealer's failure, the 
counterparty will likely be considered an unsecured creditor of the 
dealer as to that collateral;
    (iii) The Securities Investor Protection Act of 1970 (15 U.S.C 78aaa 
through 78lll) does not protect the counterparty; and
    (iv) The collateral will not be subject to the requirements of Sec.  
240.8c-1, Sec.  240.15c2-1, Sec.  240.15c3-2, or Sec.  240.15c3-3;
    (2) The term securities carried for the account of any customer 
shall be deemed to mean:
    (i) Securities received by or on behalf of such broker or dealer for 
the account of any customer;
    (ii) Securities sold and appropriated by such broker or dealer to a 
customer, except that if such securities were subject to a lien when 
appropriated to a customer they shall not be deemed to be ``securities 
carried for the account of any customer'' pending their release from 
such lien as promptly as practicable;
    (iii) Securities sold, but not appropriated, by such broker or 
dealer to a customer who has made any payment therefor, to the extent 
that such broker or dealer owns and has received delivery of securities 
of like kind, except that if such securities were subject to a lien when 
such payment was made they shall not be deemed to be ``securities 
carried for the account of any customer'' pending their release from 
such lien as promptly as practicable;
    (3) Aggregate indebtedness shall not be deemed to be reduced by 
reason of uncollected items. In computing aggregate indebtedness, 
related guaranteed and guarantor accounts shall be treated as a single 
account and considered on a consolidated basis, and balances in accounts 
carrying both long and short positions shall be adjusted by treating the 
market value of the securities required to cover such short positions as 
though such market value were a debit; and
    (4) In computing the sum of the liens or claims to which securities 
carried for the account of customers of a broker or dealer are subject, 
any rehypothecation of such securities by another broker or dealer who 
is subject to this section or to Sec.  240.8c-1 shall be disregarded.
    (c) Exemption for cash accounts. The provisions of paragraph (a)(1) 
of this section shall not apply to any hypothecation of securities 
carried for the account of a customer in a special cash account within 
the meaning of 12 CFR 220.4(c): Provided, That at or before the 
completion of the transaction of purchase of such securities for, or of 
sale of such securities to, such customer, written notice is given or 
sent to such customer disclosing that such securities are or may be 
hypothecated under circumstances which will permit the commingling 
thereof with securities carried for the account of other customers. The 
term the completion of the transaction shall have the meaning given to 
such term by Sec.  240.15c1-1(b).
    (d) Exemption for clearing house liens. The provisions of paragraphs 
(a)(2), (a)(3), and (f) of this section shall not apply to any lien or 
claim of the clearing corporation, or similar department or association, 
of a national securities exchange or a registered national securities 
association, for a loan made and to be repaid on the same calendar day, 
which is incidental to the clearing of transactions in securities or 
loans through such corporation, department, or association: Provided, 
however, That for the purpose of paragraph (a)(3) of this section, 
``aggregate indebtedness of all customers in respect of securities 
carried for their accounts'' shall not include indebtedness in respect 
of any securities subject to any lien or claim exempted by this 
paragraph.
    (e) Exemption for certain liens on securities of noncustomers. The 
provisions of paragraph (a)(2) of this section shall not be deemed to 
prevent such broker or dealer from permitting securities not carried for 
the account of a customer to be subjected (1) to a lien for a loan made 
against securities carried for the account of customers, or (2) to a 
lien for a loan made and to be repaid on the same calendar day. For the 
purpose of this exemption, a loan shall be deemed to be ``made against 
securities carried for the account of customers''

[[Page 370]]

if only securities carried for the account of customers are used to 
obtain or to increase such loan or as substitutes for other securities 
carried for the account of customers.
    (f) Notice and certification requirements. No person subject to this 
section shall hypothecate any security carried for the account of a 
customer unless, at or prior to the time of each such hypothecation, he 
gives written notice to the pledgee that the security pledged is carried 
for the account of a customer and that such hypothecation does not 
contravene any provision of this section, except that in the case of an 
omnibus account the broker or dealer for whom such account is carried 
may furnish a signed statement to the person carrying such account that 
all securities carried therein by such broker or dealer will be 
securities carried for the account of his customers and that the 
hypothecation thereof by such broker or dealer will not contravene any 
provision of this section. The provisions of this paragraph shall not 
apply to any hypothecation of securities under any lien or claim of a 
pledgee securing a loan made and to be repaid on the same calendar day.
    (g) The fact that securities carried for the accounts of customers 
and securities carried for the accounts of others are represented by one 
or more certificates in the custody of a clearing corporation or other 
subsidiary organization of either a national securities exchange or of a 
registered national securities association, or of a custodian bank, in 
accordance with a system for the central handling of securities 
established by a national securities exchange or a registered national 
securities association, pursuant to which system the hypothecation of 
such securities is effected by bookkeeping entries without physical 
delivery of such securities, shall not, in and of itself, result in a 
commingling of securities prohibited by paragraph (a)(1) or (a)(2) of 
this section, whenever a participating member, broker or dealer 
hypothecates securities in accordance with such system: Provided, 
however, That (1) any such custodian of any securities held by or for 
such system shall agree that it will not for any reason, including the 
assertion of any claim, right or lien of any kind, refuse or refrain 
from promptly delivering any such securities (other than securities then 
hypothecated in accordance with such system) to such clearing 
corporation or other subsidiary organization or as directed by it, 
except that nothing in such agreement shall be deemed to require the 
custodian to deliver any securities in contravention of any notice of 
levy, seizure or similar notice, or order or judgment, issued or 
directed by a governmental agency or court, or officer thereof, having 
jurisdiction over such custodian, which on its face affects such 
securities; (2) such systems shall have safeguards in the handling, 
transfer and delivery of securities and provisions for fidelity bond 
coverage of the employees and agents of the clearing corporation or 
other subsidiary organization and for periodic examinations by 
independent public accountants; and (3) the provisions of this paragraph 
(g) shall not be effective with respect to any particular system unless 
the agreement required by paragraph (g)(1) of this section and the 
safeguards and provisions required by paragraph (g)(2) of this section 
shall have been deemed adequate by the Commission for the protection of 
investors, and unless any subsequent amendments to such agreement, 
safeguards or provisions shall have been deemed adequate by the 
Commission for the protection of investors.

(Secs. 8, 15, 48 Stat. 888, 895, sec. 2, 52 Stat. 1075; 15 U.S.C. 78b. 
78o)

    Cross Reference: For interpretative releases applicable to Sec.  
240.15c2-1, see Nos. 2690 and 2822 in tabulation, part 241 of this 
chapter.

[13 FR 8205, Dec. 22, 1948, as amended at 31 FR 7741, June 1, 1966; 37 
FR 73, Jan. 5, 1972; 63 FR 59397, Nov. 3, 1998]



Sec.  240.15c2-3  [Reserved]



Sec.  240.15c2-4  Transmission or maintenance of payments received 
in connection with underwritings.

    It shall constitute a ``fraudulent, deceptive, or manipulative act 
or practice'' as used in section 15(c)(2) of the Act, for any broker, 
dealer or municipal securities dealer participating in any distribution 
of securities, other than a firm-commitment underwriting,

[[Page 371]]

to accept any part of the sale price of any security being distributed 
unless:
    (a) The money or other consideration received is promptly 
transmitted to the persons entitled thereto; or
    (b) If the distribution is being made on an ``all-or-none'' basis, 
or on any other basis which contemplates that payment is not to be made 
to the person on whose behalf the distribution is being made until some 
further event or contingency occurs, (1) the money or other 
consideration received is promptly deposited in a separate bank account, 
as agent or trustee for the persons who have the beneficial interests 
therein, until the appropriate event or contingency has occurred, and 
then the funds are promptly transmitted or returned to the persons 
entitled thereto, or (2) all such funds are promptly transmitted to a 
bank which has agreed in writing to hold all such funds in escrow for 
the persons who have the beneficial interests therein and to transmit or 
return such funds directly to the persons entitled thereto when the 
appropriate event or contingency has occurred.

[41 FR 22826, June 7, 1976]



Sec.  240.15c2-5  Disclosure and other requirements when extending or
arranging credit in certain transactions.

    (a) It shall constitute a ``fraudulent, deceptive, or manipulative 
act or practice'' as used in section 15(c)(2) of the Act for any broker 
or dealer to offer or sell any security to, or to attempt to induce the 
purchase of any security by, any person, in connection with which such 
broker or dealer directly or indirectly offers to extend any credit to 
or to arrange any loan for such person, or extends to or participates in 
arranging any loan for such person, unless such broker or dealer, before 
any purchase, loan or other related element of the transaction is 
entered into:
    (1) Delivers to such person a written statement setting forth the 
exact nature and extent of (i) such person's obligations under the 
particular loan arrangement, including among other things, the specific 
charges which such person will incur under such loan in each period 
during which the loan may continue or be extended, (ii) the risks and 
disadvantages which such person will incur in the entire transaction, 
including the loan arrangement, (iii) all commissions, discounts, and 
other remuneration received and to be received in connection with the 
entire transaction including the loan arrangment, by the broker or 
dealer, by any person controlling, controlled by, or under common 
control with the broker or dealer, and by any other person participating 
in the transaction; Provided, however, That the broker or dealer shall 
be deemed to be in compliance with this paragraph if the customer, 
before any purchase, loan, or other related element of the transaction 
is entered into in a manner legally binding upon the customer, receives 
a statement from the lender, or receives a prospectus or offering 
circular from the broker or dealer, which statement, prospectus or 
offering circular contains the information required by this paragraph; 
and
    (2) Obtains from such person information concerning his financial 
situation and needs, reasonably determines that the entire transaction, 
including the loan arrangement, is suitable for such person, and retains 
in his files a written statement setting forth the basis upon which the 
broker or dealer made such determination; Provided, however, That the 
written statement referred to in this paragraph must be made available 
to the customer on request.
    (b) This section shall not apply to any credit extended or any loan 
arranged by any broker or dealer subject to the provisions of Regulation 
T (12 CFR part 220) if such credit is extended or such loan is arranged, 
in compliance with the requirements of such regulation, only for the 
purpose of purchasing or carrying the security offered or sold: 
Provided, however, That notwithstanding this paragraph, the provisions 
of paragraph (a) shall apply in full force with respect to any 
transaction involving the extension of or arrangement for credit by a 
broker or dealer (i) in a special insurance premium funding account 
within the meaning of section 4(k) of Regulation T (12 CFR 220.4(k)) or 
(ii) in compliance with the terms of Sec.  240.3a12-5 of this chapter.
    (c) This section shall not apply to any offer to extend credit or 
arrange

[[Page 372]]

any loan, or to any credit extended or loan arranged, in connection with 
any offer or sale, or attempt to induce the purchase, of any municipal 
security.
    (d) This section shall not apply to a transaction involving the 
extension of credit by an OTC derivatives dealer, as defined in Sec.  
240.3b-12, if the transaction is exempt from the provisions of Section 
7(c) of the Act (15 U.S.C. 78g(c)) pursuant to Sec.  240.36a1-1.

(Sec. 3(a)(12), 48 Stat. 882, as amended, 84 Stat. 718, 1435, 1499 (15 
U.S.C. 78c(12)); sec. 7(c), 48 Stat. 886, as amended, 82 Stat. 452 (15 
U.S.C. 78g(c)); sec. 11(d)(1), 48 Stat. 891 as amended, 68 Stat. 686 (15 
U.S.C. 78k(d)(1)); sec. 15(c), 48 Stat. 895, as amended, 52 Stat. 1075, 
84 Stat. 1653 (15 U.S.C. 78o(c)); sec. 23(a), 48 Stat. 901, as amended, 
49 Stat. 704, 1379 (15 U.S.C. 78w(a))

[40 FR 6646, Feb. 13, 1975, as amended at 41 FR 22826, June 7, 1976; 63 
FR 59397, Nov. 3, 1998]



Sec.  240.15c2-6  [Reserved]



Sec.  240.15c2-7  Identification of quotations.

    (a) It shall constitute an attempt to induce the purchase or sale of 
a security by making a ``fictitious quotation'' within the meaning of 
section 15(c)(2) of the Act, for any broker or dealer to furnish or 
submit, directly or indirectly, any quotation for a security (other than 
a municipal security) to an inter-dealer quotation system unless:
    (1) The inter-dealer-quotation-system is informed, if such is the 
case, that the quotation is furnished or submitted;
    (i) By a correspondent broker or dealer for the account or in behalf 
of another broker or dealer, and if so, the identity of such other 
broker or dealer; and/or
    (ii) In furtherance of one or more other arrangements (including a 
joint account, guarantee of profit, guarantee against loss, commission, 
markup, markdown, indication of interest and accommodation arrangement) 
between or among brokers or dealers, and if so, the identity of each 
broker or dealer participating in any such arrangement or arrangements: 
Provided, however, That the provisions of this subparagraph shall not 
apply if only one of the brokers or dealers participating in any such 
arrangment or arrangements furnishes or submits a quotation with respect 
to the security to an inter-dealer-quotation-system.
    (2) The inter-dealer-quotation-system to which the quotation is 
furnished or submitted makes it a general practice to disclose with each 
published quotation, by appropriate symbol or otherwise, the category or 
categories (paragraph (a)(1)(i) and/or (ii) of this section) in 
furtherance of which the quotation is submitted, and the identities of 
all other brokers and dealers referred to in paragraph (a)(1) of this 
section where such information is supplied to the inter-dealer-
quotation-system under the provisions of paragraph (a)(1) of this 
section.
    (b) It shall constitute an attempt to induce the purchase or sale of 
a security by making a ``fictitious quotation,'' within the meaning of 
section 15(c)(2) of the Act, for a broker or dealer to enter into any 
correspondent or other arrangement (including a joint account, guarantee 
of profit, guarantee against loss, commission, markup, markdown, 
indication of interest and accommodation arrangement) in furtherance of 
which two or more brokers or dealers furnish or submit quotations with 
respect to a particular security unless such broker or dealer informs 
all brokers or dealers furnishing or submitting such quotations of the 
existence of such correspondent and other arrangments, and the identity 
of the parties thereto.
    (c) For purposes of this section:
    (1) The term inter-dealer-quotation-system shall mean any system of 
general circulation to brokers and dealers which regularly disseminates 
quotations of identified brokers or dealers but shall not include a 
quotation sheet prepared and distributed by a broker or dealer in the 
regular course of his business and containing only quotations of such 
broker or dealer.
    (2) The term quotation shall mean any bid or offer, or any 
indication of interest (such as OW or BW) in any bid or offer.
    (3) The term correspondent shall mean a broker or dealer who has a 
direct line of communication to another broker or

[[Page 373]]

dealer located in a different city or geographic area.

(Sec. 15, 48 Stat. 895, as amended; 15 U.S.C. 78o)

[29 FR 11530, Aug. 12, 1964, as amended at 41 FR 22826, June 7, 1976]



Sec.  240.15c2-8  Delivery of prospectus.

    (a) It shall constitute a deceptive act or practice, as those terms 
are used in section 15(c)(2) of the Act, for a broker or dealer to 
participate in a distribution of securities with respect to which a 
registration statement has been filed under the Securities Act of 1933 
unless he complies with the requirements set forth in paragraphs (b) 
through (h) of this section. For the purposes of this section, a broker 
or dealer participating in the distribution shall mean any underwriter 
and any member or proposed member of the selling group.
    (b) In connection with an issue of securities, the issuer of which 
has not previously been required to file reports pursuant to sections 
13(a) or 15(d) of the Securities Exchange Act of 1934, unless such 
issuer has been exempted from the requirement to file reports thereunder 
pursuant to section 12(h) of the Act, such broker or dealer shall 
deliver a copy of the preliminary prospectus to any person who is 
expected to receive a confirmation of sale at least 48 hours prior to 
the sending of such confirmation. This paragraph (b) does not apply with 
respect to asset-backed securities (as defined in Sec.  229.1101 of this 
chapter) that meet the requirements of General Instruction I.B.5 of Form 
S-3 (Sec.  239.13 of this chapter). Provided, however, this paragraph 
(b) shall apply to all issuances of asset-backed securities (as defined 
in Sec.  229.1101(c) of this chapter) regardless of whether the issuer 
has previously been required to file reports pursuant to sections 13(a) 
or 15(d) of the Securities Exchange Act of 1934, or exempted from the 
requirement to file reports thereunder pursuant to section 12(h) of the 
Act (15 U.S.C. 78l).
    (c) Such broker or dealer shall take reasonable steps to furnish to 
any person who makes written request for a preliminary prospectus 
between the filing date and a reasonable time prior to the effective 
date of the registration statement to which such prospectus relates, a 
copy of the latest preliminary prospectus on file with the Commission. 
Reasonable steps shall include receiving an undertaking by the managing 
underwriter or underwriters to send such copy to the address given in 
the requests.
    (d) Such broker or dealer shall take reasonable steps to comply 
promptly with the written request of any person for a copy of the final 
prospectus relating to such securities during the period between the 
effective date of the registration statement and the later of either the 
termination of such distribution, or the expiration of the applicable 
40- or 90-day period under section 4(3) of the Securities Act of 1933. 
Reasonable steps shall include receiving an undertaking by the managing 
underwriter or underwriters to send such copy to the address given in 
the requests. (The 40-day and 90-day periods referred to above shall be 
deemed to apply for purposes of this rule irrespective of the provisions 
of paragraphs (b) and (d) of Sec.  230.174 of this chapter).
    (e) Such broker or dealer shall take reasonable steps (1) to make 
available a copy of the preliminary prospectus relating to such 
securities to each of his associated persons who is expected, prior to 
the effective date, to solicit customers' order for such securities 
before the making of any such solicitation by such associated persons 
and (2) to make available to each such associated person a copy of any 
amended preliminary prospectus promptly after the filing thereof.
    (f) Such broker or dealer shall take reasonable steps to make 
available a copy of the final prospectus relating to such securities to 
each of his associated persons who is expected, after the effective 
date, to solicit customers orders for such securities prior to the 
making of any such solicitation by such associated persons, unless a 
preliminary prospectus which is substantially the same as the final 
prospectus except for matters relating to the price of the stocks, has 
been so made available.
    (g) If the broker or dealer is a managing underwriter of such 
distribution, he shall take reasonable steps to see to it that all other 
brokers or dealers participating in such distribution are

[[Page 374]]

promptly furnished with sufficient copies, as requested by them, of each 
preliminary prospectus, each amended preliminary prospectus and the 
final prospectus to enable them to comply with paragraphs (b), (c), (d), 
and (e) of this section.
    (h) If the broker or dealer is a managing underwriter of such 
distribution, he shall take reasonable steps to see that any broker or 
dealer participating in the distribution or trading in the registered 
security is furnished reasonable quantities of the final prospectus 
relating to such securities, as requested by him, in order to enable him 
to comply with the prospectus delivery requirements of section 5(b) (1) 
and (2) of the Securities Act of 1933.
    (i) This section shall not require the furnishing of prospectuses in 
any state where such furnishing would be unlawful under the laws of such 
state: Provided, however, That this provision is not to be construed to 
relieve a broker or dealer from complying with the requirements of 
section 5(b)(1) and (2) of the Securities Act of 1933.

[35 FR 18457, Dec. 4, 1970, as amended at 47 FR 11470, Mar. 16, 1982; 53 
FR 11845, Apr. 11, 1988; 60 FR 26622, May 17, 1995; 70 FR 1622, Jan. 7, 
2005; 79 FR 57344, Sept. 24, 2014]



Sec.  [thinsp]240.15c2-11  Publication or submission of quotations 
without specified information.

    (a) Unlawful activity. As a means reasonably designed to prevent 
fraudulent, deceptive, or manipulative acts or practices, it shall be 
unlawful for:
    (1) Brokers or dealers. A broker or dealer to publish any quotation 
for a security or, directly or indirectly, to submit any such quotation 
for publication, in any quotation medium, unless:
    (i)(A) Such broker or dealer has in its records the documents and 
information specified in paragraph (b) of this section;
    (B) Such documents and information specified in paragraph (b) of 
this section (excluding paragraphs (b)(5)(i)(N) through (P) of this 
section) are current and publicly available; and
    (C) Based upon a review of the documents and information specified 
in paragraph (b) of this section, together with any other documents and 
information required by paragraph (c) of this section, such broker or 
dealer has a reasonable basis under the circumstances for believing 
that:
    (1) The documents and information specified in paragraph (b) of this 
section are accurate in all material respects; and
    (2) The sources of the documents and information specified in 
paragraph (b) of this section are reliable; or
    (ii)(A) The quotation medium is a qualified interdealer quotation 
system that made a publicly available determination that it has 
performed the activities described in paragraph (a)(2)(i) through (iii) 
of this section; and
    (B) Such quotation is published or submitted for publication within 
three business days after such qualified interdealer quotation system 
makes such publicly available determination.
    (2) Qualified interdealer quotation systems. A qualified interdealer 
quotation system to make known to others the quotation of a broker or 
dealer that is published or submitted for publication pursuant to 
paragraph (a)(1)(ii) of this section, unless:
    (i) Such qualified interdealer quotation system has in its records 
the documents and information specified in paragraph (b) of this section 
(excluding paragraphs (b)(5)(i)(N) through (P) of this section except 
where the qualified interdealer quotation system has knowledge or 
possession of this information);
    (ii) Such documents and information specified in paragraph (b) of 
this section (excluding paragraphs (b)(5)(i)(N) through (P) of this 
section) are current and publicly available;
    (iii) Based upon a review of the documents and information specified 
in paragraph (b) of this section (excluding paragraphs (b)(5)(i)(N) 
through (P) of this section, except where the qualified interdealer 
quotation system has knowledge or possession of this information), 
together with any other documents and information required by paragraph 
(c) of this section, such qualified interdealer quotation system has a 
reasonable basis under the circumstances for believing that:
    (A) The documents and information specified in paragraph (b) of this 
section are accurate in all material respects; and

[[Page 375]]

    (B) The sources of the documents and information specified in 
paragraph (b) of this section are reliable; and
    (iv) The qualified interdealer quotation system makes a publicly 
available determination that it has performed the activities described 
in paragraphs (a)(2)(i) through (iii) of this section; or
    (3) Qualified interdealer quotation systems or registered national 
securities Associations. A qualified interdealer quotation system or 
registered national securities association to make a publicly available 
determination described in paragraph (f)(2)(iii)(B), (f)(3)(ii)(A), or 
(f)(7) of this section, unless such qualified interdealer quotation 
system or registered national securities association establishes, 
maintains, and enforces reasonably designed written policies and 
procedures to determine whether:
    (i) The documents and information specified in paragraph (b) of this 
section are current and publicly available; and
    (ii) The requirements of an exception under paragraph (f) of this 
section are met, if it makes a publicly available determination 
described in paragraph (f)(7) of this section.
    (b) Specified information. (1) A copy of the prospectus specified by 
section 10(a) of the Securities Act of 1933 for an issuer that has filed 
a registration statement under the Securities Act of 1933, other than a 
registration statement on Form F-6, that became effective less than 90 
calendar days prior to the day on which such broker or dealer publishes 
or submits the quotation to the quotation medium; Provided, That such 
registration statement has not thereafter been the subject of a stop 
order that is still in effect when the quotation is published or 
submitted; or
    (2) A copy of the offering circular provided for under Regulation A 
(Sec. Sec.  [thinsp]230.251 through 230.263 of this chapter) for an 
issuer that has filed an offering statement under Regulation A that was 
qualified less than 40 calendar days prior to the day on which such 
broker or dealer publishes or submits the quotation to the quotation 
medium; Provided, That the Regulation A exemption, with respect to such 
issuer, has not thereafter become subject to a suspension order that is 
still in effect when the quotation is published or submitted; or
    (3) A current copy of:
    (i) An annual report filed pursuant to section 13 or 15(d) of the 
Act, together with any periodic and current reports that have been filed 
thereafter under the Act by the issuer, except for current reports filed 
during the three business days prior to the publication or submission of 
the quotation; Provided, however, That, until such issuer has filed its 
first such annual report, the broker, dealer, or qualified interdealer 
quotation system has in its records a copy of the registration statement 
filed by the issuer under the Securities Act of 1933, other than a 
registration statement on Form F-6, that became effective within the 
prior 16 months, or a copy of any registration statement filed by the 
issuer under section 12 of the Act that became effective within the 
prior 16 months, together with any periodic and current reports filed 
thereafter under section 13 or 15(d) of the Act;
    (ii) An annual report filed pursuant to Regulation A, together with 
any periodic and current reports filed thereafter under Regulation A by 
the issuer, except for current reports filed during the three business 
days prior to the publication or submission of the quotation; Provided, 
however, That, until such issuer has filed its first such annual report, 
the broker, dealer, or qualified interdealer quotation system has in its 
records a copy of the offering statement filed by the issuer under 
Regulation A, that was qualified within the prior 16 months, together 
with any periodic and current reports filed thereafter under Regulation 
A;
    (iii) An annual report filed pursuant to Regulation Crowdfunding 
(Sec. Sec.  [thinsp]227.100 through 227.503 of this chapter); Provided, 
however, that, until such issuer has filed its first such annual report, 
the broker, dealer, or qualified interdealer quotation system has in its 
records a copy of the Form C filed by the issuer under Regulation 
Crowdfunding within the prior 16 months, together with any Form C/A and 
Form C/U filed thereafter under Regulation Crowdfunding;

[[Page 376]]

    (iv) An annual statement referred to in section 12(g)(2)(G)(i) of 
the Act (in the case of an issuer required to file reports pursuant to 
section 13 or 15(d) of the Act), together with any periodic and current 
reports filed thereafter under the Act by the issuer, except for current 
reports filed during the three business days prior to the publication or 
submission of the quotation; Provided, however, that, until such issuer 
has filed its first such annual statement, the broker, dealer, or 
qualified interdealer quotation system has in its records a copy of the 
registration statement filed by the issuer under the Securities Act of 
1933, other than a registration statement on Form F-6, that became 
effective within the prior 16 months, or a copy of any registration 
statement filed by the issuer under section 12 of the Act, that became 
effective within the prior 16 months, together with any periodic and 
current reports filed thereafter under section 13 or 15(d) of the Act; 
or
    (v) An annual statement referred to in section 12(g)(2)(G)(i) of the 
Act (in the case of an issuer of a security that falls within the 
provisions of section 12(g)(2)(G) of the Act); or
    (4) A copy of the information that, since the first day of its most 
recently completed fiscal year, the issuer has published as required to 
establish the exemption from registration under section 12(g) of the Act 
pursuant to Sec.  [thinsp]240.12g3-2(b) of this chapter, which the 
broker or dealer must make available upon the request of a person 
expressing an interest in a proposed transaction in the issuer's 
security with the broker or dealer, such as by providing the requesting 
person with appropriate instructions regarding how to obtain the 
information electronically; or
    (5)(i) The following information, which must be (excluding 
paragraphs (b)(5)(i)(N) through (P) of this section) as of a date within 
12 months prior to the publication or submission of the quotation, 
unless otherwise specified:
    (A) The name of the issuer and any predecessors during the past five 
years;
    (B) The address(es) of the issuer's principal executive office and 
of its principal place of business;
    (C) The state of incorporation or registration of the issuer and of 
each of its predecessors (if any) during the past five years;
    (D) The title, class, and ticker symbol (if assigned) of the 
security;
    (E) The par or stated value of the security;
    (F) The number of shares or total amount of the securities 
outstanding as of the end of the issuer's most recent fiscal year;
    (G) The name and address of the transfer agent;
    (H) A description of the issuer's business;
    (I) A description of products or services offered by the issuer;
    (J) A description and extent of the issuer's facilities;
    (K) The name and title of all company insiders;
    (L) The issuer's most recent balance sheet (as of a date less than 
16 months before the publication or submission of the quotation) and 
profit and loss and retained earnings statements (for the 12 months 
preceding the date of the most recent balance sheet);
    (M) Similar financial information for such part of the two preceding 
fiscal years as the issuer or its predecessors has been in existence;
    (N) Whether the broker or dealer or any associated person of the 
broker or dealer is affiliated, directly or indirectly, with the issuer;
    (O) Whether the quotation is being published or submitted on behalf 
of any other broker or dealer and, if so, the name of such broker or 
dealer; and
    (P) Whether the quotation is being submitted or published, directly 
or indirectly, by or on behalf of the issuer or a company insider and, 
if so, the name of such person and the basis for any exemption under the 
federal securities laws for any sales of such securities on behalf of 
such person.
    (ii) The broker or dealer must make the documents and information 
specified in paragraph (b)(5)(i) of this section available upon the 
request of a person expressing an interest in a proposed transaction in 
the issuer's security with the broker or dealer, such as by providing 
the requesting person

[[Page 377]]

with appropriate instructions regarding how to obtain such publicly 
available documents and information electronically. If such information 
is made available to others upon request pursuant to this paragraph, 
such delivery, unless otherwise represented, shall not constitute a 
representation by such broker or dealer that such information is 
accurate but shall constitute a representation by such broker or dealer 
that the information is current in relation to the day the quotation is 
submitted, the broker or dealer has a reasonable basis under the 
circumstances for believing the information is accurate in all material 
respects, and the information was obtained from sources that the broker 
or dealer has a reasonable basis under the circumstances for believing 
are reliable. The documents and information specified in paragraph 
(b)(5) of this section must be reviewed where paragraphs (b)(1) through 
(4) of this section do not apply to such issuer. For purposes of 
compliance with paragraph (a)(1)(i)(B) or (a)(2)(ii) of this section, 
the documents and information specified in paragraph (b)(5) of this 
section must be reviewed for an issuer for which the documents and 
information specified in paragraph (b)(1), (2), (3), or (4) of this 
section regarding such issuer are not current.
    (c) Supplemental information. With respect to any security the 
quotation of which is within the provisions of this section, the broker 
or dealer submitting or publishing such quotation, or any qualified 
interdealer quotation system that makes known to others the quotation of 
a broker or dealer pursuant to paragraph (a)(2) of this section, shall 
have in its records the following documents and information:
    (1) Records related to the submission or publication of such 
quotation, including the identity of the person or persons for whom the 
quotation is being published or submitted, whether such person or 
persons is the issuer or a company insider, and any information 
regarding the transactions provided to the broker, dealer, or qualified 
interdealer quotation system by such person or persons;
    (2) A copy of any trading suspension order issued by the Commission 
pursuant to section 12(k) of the Act regarding any securities of the 
issuer or its predecessor (if any) during the 12 months preceding the 
date of the publication or submission of the quotation or a copy of the 
public release issued by the Commission announcing such trading 
suspension order; and
    (3) A copy or a written record of any other material information 
(including adverse information) regarding the issuer that comes to the 
knowledge or possession of the broker, dealer, or qualified interdealer 
quotation system before the publication or submission of the quotation.
    (d) Recordkeeping. (1)(i) The following persons shall preserve for a 
period of not less than three years, the first two years in an easily 
accessible place, the documents and information required under 
paragraphs (a), (b), and (c) of this section, except for the documents 
and information that are available on the Commission's Electronic Data 
Gathering, Analysis and Retrieval System (EDGAR):
    (A) Any broker or dealer that publishes or submits a quotation 
pursuant to paragraph (a)(1) of this section for a security; or
    (B) Any qualified interdealer quotation system that makes known to 
others the quotation of a broker or dealer pursuant to paragraph (a)(2) 
of this section for a security;
    (ii) Any broker or dealer that publishes or submits a quotation 
pursuant to paragraph (a)(1)(ii) of this section shall preserve for a 
period of not less than three years, the first two years in an easily 
accessible place, the name of the qualified interdealer quotation system 
that made a publicly available determination that it has performed the 
activities described in paragraph (a)(2)(i) through (iii) of this 
section.
    (2) The following persons shall preserve for a period of not less 
than three years, the first two years in an easily accessible place, the 
documents and information that demonstrate that the requirements for an 
exception under paragraph (f)(2), (3), (5), (6), or (7) of this section 
are met, except for the documents and information that are available on 
EDGAR:
    (i) Any qualified interdealer quotation system or registered 
national securities association that

[[Page 378]]

makes a publicly available determination described in paragraph 
(f)(2)(iii)(B), (f)(3)(ii)(A), or (f)(7) of this section; and
    (ii) Any broker or dealer that publishes or submits a quotation 
pursuant to paragraph (f) of this section; Provided, however, That any 
broker or dealer that relies on a publicly available determination 
described in paragraph (f)(2)(iii)(B) or (f)(3)(ii)(A) of this section 
shall preserve only a record of the name of the qualified interdealer 
quotation system or registered national securities association that 
determined whether the documents and information specified in paragraph 
(b) of this section are current and publicly available in addition to 
the documents and information that demonstrate that the other 
requirements of the exception provided in paragraph (f)(2) or (3), 
respectively, are met; and that any broker or dealer that relies on a 
publicly available determination described in paragraph (f)(7) of this 
section shall preserve only a record of the exception provided in 
paragraph (f)(1), (f)(3)(i), or (f)(4) or (5) for which the publicly 
available determination is made and the name of the qualified 
interdealer quotation system or registered national securities 
association that determined that the requirements of that exception are 
met.
    (e) Definitions. For purposes of this section:
    (1) Company insider shall mean any officer or director of the 
issuer, or person that performs a similar function, or any person who 
is, directly or indirectly, the beneficial owner of more than 10 percent 
of the outstanding units or shares of any class of any equity security 
of the issuer.
    (2) Current shall mean, for the documents and information specified 
in:
    (i) Paragraph (b)(1), (2), (4), or (5) of this section, filed, 
published, or are as of a date in accordance with the time frames 
specified in the applicable paragraph for such documents and 
information; or
    (ii) Paragraph (b)(3) of this section, the most recently required 
annual report or statement filed pursuant to section 13 or 15(d) of the 
Act and any rule(s) thereunder, Regulation A, Regulation Crowdfunding, 
or section 12(G)(2)(g) of the Act, together with any subsequently 
required periodic reports or statements, filed pursuant to section 13 or 
15(d) of the Act and any rule(s) thereunder, Regulation A, Regulation 
Crowdfunding, or section 12(G)(2)(g) of the Act.
    (3) Interdealer quotation system shall mean any system of general 
circulation to brokers or dealers that regularly disseminates quotations 
of identified brokers or dealers.
    (4) Issuer, in the case of quotations for American Depositary 
Receipts, shall mean the issuer of the deposited shares represented by 
such American Depositary Receipts.
    (5) Publicly available shall mean available on EDGAR; on the website 
of a state or federal agency, a qualified interdealer quotation system, 
a registered national securities association, an issuer, or a registered 
broker or dealer; or through an electronic information delivery system 
that is generally available to the public in the primary trading market 
of a foreign private issuer as defined in Sec.  240.3b-4 of this 
chapter; Provided, however, that publicly available shall mean where 
access is not restricted by user name, password, fees, or other 
restraints.
    (6) Qualified interdealer quotation system shall mean any 
interdealer quotation system that meets the definition of an 
``alternative trading system'' under Sec.  242.300(a) of this chapter 
and operates pursuant to the exemption from the definition of an 
``exchange'' under Sec.  240.3a1-1(a)(2) of this chapter.
    (7) Quotation, except as otherwise specified in this section, shall 
mean any bid or offer at a specified price with respect to a security, 
or any indication of interest by a broker or dealer in receiving bids or 
offers from others for a security, or any indication by a broker or 
dealer that wishes to advertise its general interest in buying or 
selling a particular security.
    (8) Quotation medium shall mean any ``interdealer quotation system'' 
or any publication or electronic communications network or other device 
that is used by brokers or dealers to make known to others their 
interest in transactions in any security, including offers to buy or 
sell at a stated price or

[[Page 379]]

otherwise, or invitations of offers to buy or sell.
    (9) Shell company shall mean any issuer, other than a business 
combination related shell company, as defined in Sec.  230.405 of this 
chapter, or an asset-backed issuer as defined in Item 1101(b) of 
Regulation AB (Sec.  229.1101(b) of this chapter), that has:
    (i) No or nominal operations; and
    (ii) Either:
    (A) No or nominal assets;
    (B) Assets consisting solely of cash and cash equivalents; or
    (C) Assets consisting of any amount of cash and cash equivalents and 
nominal other assets.
    (f) Exceptions. Except as provided in paragraph (d)(2) of this 
section, the provisions of this section shall not apply to:
    (1) The publication or submission of a quotation for a security that 
is admitted to trading on a national securities exchange and that is 
traded on such an exchange on the same day as, or on the business day 
next preceding, the day the quotation is published or submitted.
    (2)(i) The publication or submission by a broker or dealer, solely 
on behalf of a customer (other than a person acting as or for a dealer), 
of a quotation that represents the customer's unsolicited indication of 
interest;
    (ii) Provided, however, that this paragraph (f)(2) shall not apply 
to a quotation:
    (A) Consisting of both a bid and an offer, each of which is at a 
specified price, unless the quotation medium specifically identifies the 
quotation as representing such an unsolicited customer interest; or
    (B) Published or submitted, directly or indirectly on behalf of a 
company insider or affiliate as defined in Sec.  230.144(a)(1) of this 
chapter, unless the documents and information specified in paragraph (b) 
of this section are current and publicly available.
    (iii) For purposes of paragraph (f)(2)(ii)(B) of this section, a 
broker or dealer that publishes or submits quotations may rely on either 
a:
    (A) Written representation from the customer's broker that such 
customer is not a company insider or an affiliate if:
    (1) Such representation is received prior to, and on the same day 
that, the quotation representing the customer's unsolicited indication 
of interest is published or submitted; and
    (2) The broker or dealer has a reasonable basis under the 
circumstances for believing that the customer's broker is a reliable 
source; or
    (B) Publicly available determination by a qualified interdealer 
quotation system or registered national securities association that the 
documents and information specified in paragraph (b) of this section are 
current and publicly available.
    (3)(i)(A) The publication or submission, in an interdealer quotation 
system that specifically identifies as such unsolicited customer 
indications of interest of the kind described in paragraph (f)(2) of 
this section, of a quotation for a security that has been the subject of 
a bid or offer quotation (exclusive of any identified customer 
interests) in such a system at a specified price, with no more than four 
business days in succession without such a quotation;
    (B) Provided, however, that this paragraph (f)(3) shall not apply to 
a quotation that is published or submitted by a broker or dealer for the 
security of an issuer that:
    (1) Was the subject of a trading suspension order issued by the 
Commission pursuant to section 12(k) of the Act until 60 calendar days 
after the expiration of such order;
    (2) Such broker or dealer, or any qualified interdealer quotation 
system or registered national securities association, has a reasonable 
basis under the circumstances for believing is a shell company, unless 
such quotation is published or submitted within the 18 months following 
the initial quotation for such issuer's security that is the subject of 
a bid or offer quotation in an interdealer quotation system at a 
specified price;
    (C) Provided further, that this paragraph (f)(3) shall apply to the 
publication or submission of a quotation for a security of an issuer 
only if the documents and information regarding such issuer that are 
specified in:

[[Page 380]]

    (1) Paragraph (b)(3)(i), (iv), or (v) of this section are filed 
within 180 calendar days from the end of the issuer's most recent fiscal 
year or any quarterly reporting period that is covered by a report 
required by section 13 or 15(d) of the Act, as applicable;
    (2) Paragraph (b)(3)(ii) or (iii) of this section are timely filed;
    (3) Paragraph (b)(4) or (b)(5)(i) (excluding paragraphs (b)(5)(i)(N) 
through (P)) are current and publicly available; or
    (4) Paragraph (b)(3)(i), (ii), (iii), (iv), or (v) are filed within 
15 calendar days starting on the date on which a publicly available 
determination is made pursuant to paragraph (f)(3)(ii)(A) of this 
section; or
    (ii) If the documents and information specified in paragraph (b) of 
this section (excluding paragraphs (b)(5)(i)(N) through (P)) regarding 
an issuer are no longer current and publicly available, timely filed, or 
filed within 180 calendar days, as specified in paragraph (f)(3)(i)(C) 
of this section, a broker or dealer may continue to publish or submit a 
quotation for such issuer's security in an interdealer quotation system 
during the time frame specified in in paragraph (f)(3)(ii)(C) if:
    (A) Within the first four business days that such documents and 
information are no longer current and publicly available, timely filed, 
or filed within 180 calendar days, as applicable, a qualified 
interdealer quotation system or registered national securities 
association makes a publicly available determination that:
    (1) Such documents and information are no longer current and 
publicly available, timely filed, or filed within 180 calendar days, as 
specified in paragraph (f)(3)(i)(C) of this section; and
    (2) The exception provided in paragraph (f)(3)(ii) of this section 
is available only during the 15 calendar days starting on the date on 
which the publicly available determination described in paragraph 
(f)(3)(ii)(A)(1) of this section is made; and
    (B) The broker or dealer complies with the requirements of 
paragraphs (d)(2) and (f)(3)(i) of this section, except for the 
requirement that the documents and information specified in paragraph 
(b) (excluding paragraphs (b)(5)(i)(N) through (P)) regarding such 
issuer be current and publicly available, timely filed, or filed within 
180 calendar days, as applicable;
    (C) Provided, however, that the provisions of this paragraph 
(f)(3)(ii) shall apply only during the shorter of the period beginning 
with the date on which a qualified interdealer quotation system or 
registered national securities association makes a publicly available 
determination identified in paragraph (f)(3)(ii)(A) and ending on:
    (1) The date on which the documents and information specified in 
paragraph (b) of this section (excluding paragraphs (b)(5)(i)(N) through 
(P)) regarding such issuer become current and publicly available or 
filed; or
    (2) The fourteenth calendar day following the date on which such 
publicly available determination was made.
    (4) The publication or submission of a quotation for a municipal 
security.
    (5) The publication or submission of a quotation for:
    (i) A security with a worldwide average daily trading volume value 
of at least $100,000 reported during the 60 calendar days immediately 
before the publication of the quotation of such security; and
    (ii) The issuer of such security has at least $50 million in total 
assets and $10 million in shareholders' equity as reflected in the 
issuer's publicly available audited balance sheet issued within six 
months after the end of its most recent fiscal year.
    (6) The publication or submission of a quotation for a security by a 
broker or dealer that is named as an underwriter in a registration 
statement for an offering of that class of security referenced in 
paragraph (b)(1) of this section or in an offering statement for an 
offering of that class of security referenced in paragraph (b)(2) of 
this section; Provided, however, that this paragraph (f)(6) shall apply 
only to the publication or submission of a quotation for such security 
within the time frames specified in paragraph (b)(1) or (2) of this 
section.
    (7) The publication or submission of a quotation by a broker or 
dealer that relies on a publicly available determination by a qualified 
interdealer

[[Page 381]]

quotation system or registered national securities association that the 
requirements of an exception provided in paragraph (f)(1), (f)(3)(i), or 
(f)(4) or (5) of this section are met; Provided, however, that any 
qualified interdealer quotation system or registered national securities 
association that makes a publicly available determination that the 
requirements of the exception provided in paragraph (f)(3)(i) of this 
section are met must subsequently make a publicly available 
determination under paragraph (f)(3)(ii)(A) of this section, as 
applicable.
    (g) Exemptive authority. Upon written application or upon its own 
motion, the Commission may, conditionally or unconditionally, exempt by 
order any person, security, or transaction, or any class or classes of 
persons, securities, or transactions, from any provision or provisions 
of this section, to the extent that such exemption is necessary or 
appropriate in the public interest, and is consistent with the 
protection of investors.

[85 FR 68203, Oct. 27, 2020]



Sec.  240.15c2-12  Municipal securities disclosure.

    Preliminary Note: For a discussion of disclosure obligations 
relating to municipal securities, issuers, brokers, dealers, and 
municipal securities dealers should refer to Securities Act Release No. 
7049, Securities Exchange Act Release No. 33741, FR-42 (March 9, 1994). 
For a discussion of the obligations of underwriters to have a reasonable 
basis for recommending municipal securities, brokers, dealers, and 
municipal securities dealers should refer to Securities Exchange Act 
Release No. 26100 (Sept. 22, 1988) and Securities Exchange Act Release 
No. 26985 (June 28, 1989).

    (a) General. As a means reasonably designed to prevent fraudulent, 
deceptive, or manipulative acts or practices, it shall be unlawful for 
any broker, dealer, or municipal securities dealer (a ``Participating 
Underwriter'' when used in connection with an Offering) to act as an 
underwriter in a primary offering of municipal securities with an 
aggregate principal amount of $1,000,000 or more (an ``Offering'') 
unless the Participating Underwriter complies with the requirements of 
this section or is exempted from the provisions of this section.
    (b) Requirements. (1) Prior to the time the Participating 
Underwriter bids for, purchases, offers, or sells municipal securities 
in an Offering, the Participating Underwriter shall obtain and review an 
official statement that an issuer of such securities deems final as of 
its date, except for the omission of no more than the following 
information: The offering price(s), interest rate(s), selling 
compensation, aggregate principal amount, principal amount per maturity, 
delivery dates, any other terms or provisions required by an issuer of 
such securities to be specified in a competitive bid, ratings, other 
terms of the securities depending on such matters, and the identity of 
the underwriter(s).
    (2) Except in competitively bid offerings, from the time the 
Participating Underwriter has reached an understanding with an issuer of 
municipal securities that it will become a Participating Underwriter in 
an Offering until a final official statement is available, the 
Participating Underwriter shall send no later than the next business 
day, by first-class mail or other equally prompt means, to any potential 
customer, on request, a single copy of the most recent preliminary 
official statement, if any.
    (3) The Participating Underwriter shall contract with an issuer of 
municipal securities or its designated agent to receive, within seven 
business days after any final agreement to purchase, offer, or sell the 
municipal securities in an Offering and in sufficient time to accompany 
any confirmation that requests payment from any customer, copies of a 
final official statement in sufficient quantity to comply with paragraph 
(b)(4) of this rule and the rules of the Municipal Securities Rulemaking 
Board.
    (4) From the time the final official statement becomes available 
until the earlier of--
    (i) Ninety days from the end of the underwriting period or
    (ii) The time when the official statement is available to any person 
from the Municipal Securities Rulemaking Board, but in no case less than 
twenty-

[[Page 382]]

five days following the end of the underwriting period, the 
Participating Underwriter in an Offering shall send no later than the 
next business day, by first-class mail or other equally prompt means, to 
any potential customer, on request, a single copy of the final official 
statement.
    (5)(i) A Participating Underwriter shall not purchase or sell 
municipal securities in connection with an Offering unless the 
Participating Underwriter has reasonably determined that an issuer of 
municipal securities, or an obligated person for whom financial or 
operating data is presented in the final official statement has 
undertaken, either individually or in combination with other issuers of 
such municipal securities or obligated persons, in a written agreement 
or contract for the benefit of holders of such securities, to provide 
the following to the Municipal Securities Rulemaking Board in an 
electronic format as prescribed by the Municipal Securities Rulemaking 
Board, either directly or indirectly through an indenture trustee or a 
designated agent:
    (A) Annual financial information for each obligated person for whom 
financial information or operating data is presented in the final 
official statement, or, for each obligated person meeting the objective 
criteria specified in the undertaking and used to select the obligated 
persons for whom financial information or operating data is presented in 
the final official statement, except that, in the case of pooled 
obligations, the undertaking shall specify such objective criteria;
    (B) If not submitted as part of the annual financial information, 
then when and if available, audited financial statements for each 
obligated person covered by paragraph (b)(5)(i)(A) of this section;
    (C) In a timely manner not in excess of ten business days after the 
occurrence of the event, notice of any of the following events with 
respect to the securities being offered in the Offering:
    (1) Principal and interest payment delinquencies;
    (2) Non-payment related defaults, if material;
    (3) Unscheduled draws on debt service reserves reflecting financial 
difficulties;
    (4) Unscheduled draws on credit enhancements reflecting financial 
difficulties;
    (5) Substitution of credit or liquidity providers, or their failure 
to perform;
    (6) Adverse tax opinions, the issuance by the Internal Revenue 
Service of proposed or final determinations of taxability, Notices of 
Proposed Issue (IRS Form 5701-TEB) or other material notices or 
determinations with respect to the tax status of the security, or other 
material events affecting the tax status of the security;
    (7) Modifications to rights of security holders, if material;
    (8) Bond calls, if material, and tender offers;
    (9) Defeasances;
    (10) Release, substitution, or sale of property securing repayment 
of the securities, if material;
    (11) Rating changes;
    (12) Bankruptcy, insolvency, receivership or similar event of the 
obligated person;

    Note to paragraph (b)(5)(i)(C)(12): For the purposes of the event 
identified in paragraph (b)(5)(i)(C)(12) of this section, the event is 
considered to occur when any of the following occur: The appointment of 
a receiver, fiscal agent or similar officer for an obligated person in a 
proceeding under the U.S. Bankruptcy Code or in any other proceeding 
under state or federal law in which a court or governmental authority 
has assumed jurisdiction over substantially all of the assets or 
business of the obligated person, or if such jurisdiction has been 
assumed by leaving the existing governing body and officials or officers 
in possession but subject to the supervision and orders of a court or 
governmental authority, or the entry of an order confirming a plan of 
reorganization, arrangement or liquidation by a court or governmental 
authority having supervision or jurisdiction over substantially all of 
the assets or business of the obligated person.

    (13) The consummation of a merger, consolidation, or acquisition 
involving an obligated person or the sale of all or substantially all of 
the assets of the obligated person, other than in the ordinary course of 
business, the entry into a definitive agreement to undertake such an 
action or the termination of a definitive agreement relating to

[[Page 383]]

any such actions, other than pursuant to its terms, if material;
    (14) Appointment of a successor or additional trustee or the change 
of name of a trustee, if material;
    (15) Incurrence of a financial obligation of the obligated person, 
if material, or agreement to covenants, events of default, remedies, 
priority rights, or other similar terms of a financial obligation of the 
obligated person, any of which affect security holders, if material; and
    (16) Default, event of acceleration, termination event, modification 
of terms, or other similar events under the terms of a financial 
obligation of the obligated person, any of which reflect financial 
difficulties; and
    (D) In a timely manner, notice of a failure of any person specified 
in paragraph (b)(5)(i)(A) of this section to provide required annual 
financial information, on or before the date specified in the written 
agreement or contract.
    (ii) The written agreement or contract for the benefit of holders of 
such securities also shall identify each person for whom annual 
financial information and notices of material events will be provided, 
either by name or by the objective criteria used to select such persons, 
and, for each such person shall:
    (A) Specify, in reasonable detail, the type of financial information 
and operating data to be provided as part of annual financial 
information;
    (B) Specify, in reasonable detail, the accounting principles 
pursuant to which financial statements will be prepared, and whether the 
financial statements will be audited; and
    (C) Specify the date on which the annual financial information for 
the preceding fiscal year will be provided.
    (iii) Such written agreement or contract for the benefit of holders 
of such securities also may provide that the continuing obligation to 
provide annual financial information and notices of events may be 
terminated with respect to any obligated person, if and when such 
obligated person no longer remains an obligated person with respect to 
such municipal securities.
    (iv) Such written agreement or contract for the benefit of holders 
of such securities also shall provide that all documents provided to the 
Municipal Securities Rulemaking Board shall be accompanied by 
identifying information as prescribed by the Municipal Securities 
Rulemaking Board.
    (c) Recommendations. As a means reasonably designed to prevent 
fraudulent, deceptive, or manipulative acts or practices, it shall be 
unlawful for any broker, dealer, or municipal securities dealer to 
recommend the purchase or sale of a municipal security unless such 
broker, dealer, or municipal securities dealer has procedures in place 
that provide reasonable assurance that it will receive prompt notice of 
any event disclosed pursuant to paragraph (b)(5)(i)(C), paragraph 
(b)(5)(i)(D), and paragraph (d)(2)(ii)(B) of this section with respect 
to that security.
    (d) Exemptions. (1) This section shall not apply to a primary 
offering of municipal securities in authorized denominations of $100,000 
or more, if such securities:
    (i) Are sold to no more than thirty-five persons each of whom the 
Participating Underwriter reasonably believes:
    (A) Has such knowledge and experience in financial and business 
matters that it is capable of evaluating the merits and risks of the 
prospective investment; and
    (B) Is not purchasing for more than one account or with a view to 
distributing the securities; or
    (ii) Have a maturity of nine months or less.
    (2) Paragraph (b)(5) of this section shall not apply to an Offering 
of municipal securities if, at such time as an issuer of such municipal 
securities delivers the securities to the Participating Underwriters:
    (i) No obligated person will be an obligated person with respect to 
more than $10,000,000 in aggregate amount of outstanding municipal 
securities, including the offered securities and excluding municipal 
securities that were offered in a transaction exempt from this section 
pursuant to paragraph (d)(1) of this section;
    (ii) An issuer of municipal securities or obligated person has 
undertaken, either individually or in combination with other issuers of 
municipal securities or obligated persons, in a written

[[Page 384]]

agreement or contract for the benefit of holders of such municipal 
securities, to provide the following to the Municipal Securities 
Rulemaking Board in an electronic format as prescribed by the Municipal 
Securities Rulemaking Board:
    (A) At least annually, financial information or operating data 
regarding each obligated person for which financial information or 
operating data is presented in the final official statement, as 
specified in the undertaking, which financial information and operating 
data shall include, at a minimum, that financial information and 
operating data which is customarily prepared by such obligated person 
and is publicly available; and
    (B) In a timely manner not in excess of ten business days after the 
occurrence of the event, notice of events specified in paragraph 
(b)(5)(i)(C) of this section with respect to the securities that are the 
subject of the Offering; and
    (C) Such written agreement or contract for the benefit of holders of 
such securities also shall provide that all documents provided to the 
Municipal Securities Rulemaking Board shall be accompanied by 
identifying information as prescribed by the Municipal Securities 
Rulemaking Board; and
    (iii) The final official statement identifies by name, address, and 
telephone number the persons from which the foregoing information, data, 
and notices can be obtained.
    (3) The provisions of paragraph (b)(5) of this section, other than 
paragraph (b)(5)(i)(C) of this section, shall not apply to an Offering 
of municipal securities, if such municipal securities have a stated 
maturity of 18 months or less.
    (4) The provisions of paragraph (c) of this section shall not apply 
to municipal securities:
    (i) Sold in an Offering to which paragraph (b)(5) of this section 
did not apply, other than Offerings exempt under paragraph (d)(2)(ii) of 
this section; or
    (ii) Sold in an Offering exempt from this section under paragraph 
(d)(1) of this section.
    (5) With the exception of paragraphs (b)(1) through (b)(4), this 
section shall apply to a primary offering of municipal securities in 
authorized denominations of $100,000 or more if such securities may, at 
the option of the holder thereof, be tendered to an issuer of such 
securities or its designated agent for redemption or purchase at par 
value or more at least as frequently as every nine months until 
maturity, earlier redemption, or purchase by an issuer or its designated 
agent; provided, however, that paragraphs (b)(5) and (c) of this section 
shall not apply to such securities outstanding on November 30, 2010, for 
so long as they continuously remain in authorized denominations of 
$100,000 or more and may, at the option of the holder thereof, be 
tendered to an issuer of such securities or its designated agent for 
redemption or purchase at par value or more at least as frequently as 
every nine months until maturity, earlier redemption, or purchase by an 
issuer or its designated agent.
    (e) Exemptive authority. The Commission, upon written request, or 
upon its own motion, may exempt any broker, dealer, or municipal 
securities dealer, whether acting in the capacity of a Participating 
Underwriter or otherwise, that is a participant in a transaction or 
class of transactions from any requirement of this section, either 
unconditionally or on specified terms and conditions, if the Commission 
determines that such an exemption is consistent with the public interest 
and the protection of investors.
    (f) Definitions. For the purposes of this rule--
    (1) The term authorized denominations of $100,000 or more means 
municipal securities with a principal amount of $100,000 or more and 
with restrictions that prevent the sale or transfer of such securities 
in principal amounts of less than $100,000 other than through a primary 
offering; except that, for municipal securities with an original issue 
discount of 10 percent or more, the term means municipal securities with 
a minimum purchase price of $100,000 or more and with restrictions that 
prevent the sale or transfer of such securities, in principal amounts 
that are less than the original principal amount at the time of the 
primary offering, other than through a primary offering.

[[Page 385]]

    (2) The term end of the underwriting period means the later of such 
time as
    (i) The issuer of municipal securities delivers the securities to 
the Participating Underwriters or
    (ii) The Participating Underwriter does not retain, directly or as a 
member or an underwriting syndicate, an unsold balance of the securities 
for sale to the public.
    (3) The term final official statement means a document or set of 
documents prepared by an issuer of municipal securities or its 
representatives that is complete as of the date delivered to the 
Participating Underwriter(s) and that sets forth information concerning 
the terms of the proposed issue of securities; information, including 
financial information or operating data, concerning such issuers of 
municipal securities and those other entities, enterprises, funds, 
accounts, and other persons material to an evaluation of the Offering; 
and a description of the undertakings to be provided pursuant to 
paragraph (b)(5)(i), paragraph (d)(2)(ii), and paragraph (d)(2)(iii) of 
this section, if applicable, and of any instances in the previous five 
years in which each person specified pursuant to paragraph (b)(5)(ii) of 
this section failed to comply, in all material respects, with any 
previous undertakings in a written contract or agreement specified in 
paragraph (b)(5)(i) of this section. Financial information or operating 
data may be set forth in the document or set of documents, or may be 
included by specific reference to documents available to the public on 
the Municipal Securities Rulemaking Board's Internet Web site or filed 
with the Commission.
    (4) The term issuer of municipal securities means the governmental 
issuer specified in section 3(a)(29) of the Act and the issuer of any 
separate security, including a sepatate security as defined in rule 3b-
5(a) under the Act.
    (5) The term potential customer means (i) Any person contacted by 
the Participating Underwriter concerning the purchase of municipal 
securities that are intended to be offered or have been sold in an 
offering, (ii) Any person who has expressed an interest to the 
Participating Underwriter in possibly purchasing such municipal 
securities, and (iii) Any person who has a customer account with the 
Participating Underwriter.
    (6) The term preliminary official statement means an official 
statement prepared by or for an issuer of municipal securities for 
dissemination to potential customers prior to the availability of the 
final official statement.
    (7) The term primary offering means an offering of municipal 
securities directly or indirectly by or on behalf of an issuer of such 
securities, including any remarketing of municipal securities.
    (i) That is accompanied by a change in the authorized denomination 
of such securities from $100,000 or more to less than $100,000, or
    (ii) That is accompanied by a change in the period during which such 
securities may be tendered to an issuer of such securities or its 
designated agent for redemption or purchase from a period of nine months 
or less to a period of more than nine months.
    (8) The term underwriter means any person who has purchased from an 
issuer of municipal securities with a view to, or offers or sells for an 
issuer of municipal securities in connection with, the offering of any 
municipal security, or participates or has a direct or indirect 
participation in any such undertaking, or participates or has a 
participation in the direct or indirect underwriting of any such 
undertaking; except, that such term shall not include a person whose 
interest is limited to a commission, concession, or allowance from an 
underwriter, broker, dealer, or municipal securities dealer not in 
excess of the usual and customary distributors' or sellers' commission, 
concession, or allowance.
    (9) The term annual financial information means financial 
information or operating data, provided at least annually, of the type 
included in the final official statement with respect to an obligated 
person, or in the case where no financial information or operating data 
was provided in the final official statement with respect to such 
obligated person, of the type included in the final official statement 
with respect to those obligated persons that meet the objective criteria 
applied to select the persons for which financial

[[Page 386]]

information or operating data will be provided on an annual basis. 
Financial information or operating data may be set forth in the document 
or set of documents, or may be included by specific reference to 
documents available to the public on the Municipal Securities Rulemaking 
Board's Internet Web site or filed with the Commission.
    (10) The term obligated person means any person, including an issuer 
of municipal securities, who is either generally or through an 
enterprise, fund, or account of such person committed by contract or 
other arrangement to support payment of all, or part of the obligations 
on the municipal securities to be sold in the Offering (other than 
providers of municipal bond insurance, letters of credit, or other 
liquidity facilities).
    (11)(i) The term financial obligation means a:
    (A) Debt obligation;
    (B) Derivative instrument entered into in connection with, or 
pledged as security or a source of payment for, an existing or planned 
debt obligation; or
    (C) Guarantee of paragraph (f)(11)(i)(A) or (B).
    (ii) The term financial obligation shall not include municipal 
securities as to which a final official statement has been provided to 
the Municipal Securities Rulemaking Board consistent with this rule.
    (g) Transitional provision. If on July 28, 1989, a Participating 
Underwriter was contractually committed to act as underwriter in an 
Offering of municipal securities originally issued before July 29, 1989, 
the requirements of paragraphs (b)(3) and (b)(4) shall not apply to the 
Participating Underwriter in connection with such an Offering. Paragraph 
(b)(5) of this section shall not apply to a Participating Underwriter 
that has contractually committed to act as an underwriter in an Offering 
of municipal securities before July 3, 1995; except that paragraph 
(b)(5)(i)(A) and paragraph (b)(5)(i)(B) shall not apply with respect to 
fiscal years ending prior to January 1, 1996. Paragraph (c) shall become 
effective on January 1, 1996. Paragraph (d)(2)(ii) and paragraph 
(d)(2)(iii) of this section shall not apply to an Offering of municipal 
securities commencing prior to January 1, 1996.

[54 FR 28813, July 10, 1989, as amended at 59 FR 59609, Nov. 17, 1994; 
73 FR 76132, Dec. 15, 2008; 75 FR 33155, June 10, 2010; 83 FR 44742, 
Aug. 31, 2018]



Sec.  240.15c3-1  Net capital requirements for brokers or dealers.

    (a) Every broker or dealer must at all times have and maintain net 
capital no less than the greater of the highest minimum requirement 
applicable to its ratio requirement under paragraph (a)(1) of this 
section, or to any of its activities under paragraph (a)(2) of this 
section, and must otherwise not be ``insolvent'' as that term is defined 
in paragraph (c)(16) of this section. In lieu of applying paragraphs 
(a)(1) and (a)(2) of this section, an OTC derivatives dealer shall 
maintain net capital pursuant to paragraph (a)(5) of this section. Each 
broker or dealer also shall comply with the supplemental requirements of 
paragraphs (a)(4) and (a)(9) of this section, to the extent either 
paragraph is applicable to its activities. In addition, a broker or 
dealer shall maintain net capital of not less than its own net capital 
requirement plus the sum of each broker's or dealer's subsidiary or 
affiliate minimum net capital requirements, which is consolidated 
pursuant to appendix C, Sec.  240.15c3-1c.

                           Ratio Requirements

                     Aggregate Indebtedness Standard

    (1)(i) No broker or dealer, other than one that elects the 
provisions of paragraph (a)(1)(ii) of this section, shall permit its 
aggregate indebtedness to all other persons to exceed 1500 percent of 
its net capital (or 800 percent of its net capital for 12 months after 
commencing business as a broker or dealer).

                          Alternative Standard

    (ii) A broker or dealer may elect not to be subject to the Aggregate 
Indebtedness Standard of paragraph (a)(1)(i) of this section. That 
broker or dealer shall not permit its net capital to be less than the 
greater of $250,000 or 2 percent of aggregate debit items computed in 
accordance with the Formula for Determination of Reserve Requirements 
for Brokers and Dealers (Exhibit

[[Page 387]]

A to Rule 15c3-3, Sec.  240.15c3-3a). Such broker or dealer shall notify 
its Examining Authority, in writing, of its election to operate under 
this paragraph (a)(1)(ii). Once a broker or dealer has notified its 
Examining Authority, it shall continue to operate under this paragraph 
unless a change is approved upon application to the Commission. A broker 
or dealer that elects this standard and is not exempt from Rule 15c3-3 
shall:
    (A) Make the computation required by Sec.  240.15c3-3(e) and set 
forth in Exhibit A, Sec.  240.15c3-3a, on a weekly basis and, in lieu of 
the 1 percent reduction of certain debit items required by Note E (3) in 
the computation of its Exhibit A requirement, reduce aggregate debit 
items in such computation by 3 percent;
    (B) Include in Items 7 and 8 of Exhibit A, Sec.  240.15c3-3a, the 
market value of items specified therein more than 7 business days old;
    (C) Exclude credit balances in accounts representing amounts payable 
for securities not yet received from the issuer or its agent which 
securities are specified in paragraphs (c)(2)(vi) (A) and (E) of this 
section and any related debit items from the Exhibit A requirement for 3 
business days; and
    (D) Deduct from net worth in computing net capital 1 percent of the 
contract value of all failed to deliver contracts or securities borrowed 
that were allocated to failed to receive contracts of the same issue and 
which thereby were excluded from Items 11 or 12 of Exhibit A, Sec.  
240.15c3-3a.

                      Futures Commission Merchants

    (iii) No broker or dealer registered as a futures commission 
merchant shall permit its net capital to be less than the greater of its 
requirement under paragraph (a)(1) (i) or (ii) of this section, or 4 
percent of the funds required to be segregated pursuant to the Commodity 
Exchange Act and the regulations thereunder (less the market value of 
commodity options purchased by option customers on or subject to the 
rules of a contract market, each such deduction not to exceed the amount 
of funds in the customer's account).

                          Minimum Requirements

    See Appendix E (Sec.  240.15c3-1E) for temporary minimum 
requirements.

             Brokers or Dealers That Carry Customer Accounts

    (2)(i) A broker or dealer (other than one described in paragraphs 
(a)(2)(ii) or (a)(8) of this section) shall maintain net capital of not 
less than $250,000 if it carries customer or broker or dealer accounts 
and receives or holds funds or securities for those persons. A broker or 
dealer shall be deemed to receive funds, or to carry customer or broker 
or dealer accounts and to receive funds from those persons if, in 
connection with its activities as a broker or dealer, it receives 
checks, drafts, or other evidences of indebtedness made payable to 
itself or persons other than the requisite registered broker or dealer 
carrying the account of a customer, escrow agent, issuer, underwriter, 
sponsor, or other distributor of securities. A broker or dealer shall be 
deemed to hold securities for, or to carry customer or broker or dealer 
accounts, and hold securities of, those persons if it does not promptly 
forward or promptly deliver all of the securities of customers or of 
other brokers or dealers received by the firm in connection with its 
activities as a broker or dealer. A broker or dealer, without complying 
with this paragraph (a)(2)(i), may receive securities only if its 
activities conform with the provisions of paragraphs (a)(2) (iv) or (v) 
of this section, and may receive funds only in connection with the 
activities described in paragraph (a)(2)(v) of this section.
    (ii) A broker or dealer that is exempt from the provisions of Sec.  
240.15c3-3 pursuant to paragraph (k)(2)(i) thereof shall maintain net 
capital of not less than $100,000.

                                 Dealers

    (iii) A dealer shall maintain net capital of not less than $100,000. 
For the purposes of this section, the term ``dealer'' includes:
    (A) Any broker or dealer that endorses or writes options otherwise 
than

[[Page 388]]

on a registered national securities exchange or a facility of a 
registered national securities association; and
    (B) Any broker or dealer that effects more than ten transactions in 
any one calendar year for its own investment account. This section shall 
not apply to those persons engaging in activities described in 
paragraphs (a)(2)(v), (a)(2)(vi) or (a)(8) of this section, or to those 
persons whose underwriting activities are limited solely to acting as 
underwriters in best efforts or all or none underwritings in conformity 
with paragraph (b)(2) of Sec.  240.15c2-4, so long as those persons 
engage in no other dealer activities.

    Brokers or Dealers That Introduce Customer Accounts And Receive 
                               Securities

    (iv) A broker or dealer shall maintain net capital of not less than 
$50,000 if it introduces transactions and accounts of customers or other 
brokers or dealers to another registered broker or dealer that carries 
such accounts on a fully disclosed basis, and if the broker or dealer 
receives but does not hold customer or other broker or dealer 
securities. A broker or dealer operating under this paragraph (a)(2)(iv) 
of this section may participate in a firm commitment underwriting 
without being subject to the provisions of paragraph (a)(2)(iii) of this 
section, but may not enter into a commitment for the purchase of shares 
related to that underwriting.

     Brokers or Dealers Engaged in the Sale of Redeemable Shares of 
    Registered Investment Companies and Certain Other Share Accounts

    (v) A broker or dealer shall maintain net capital of not less than 
$25,000 if it acts as a broker or dealer with respect to the purchase, 
sale and redemption of redeemable shares of registered investment 
companies or of interests or participations in an insurance company 
separate account directly from or to the issuer on other than a 
subscription way basis. A broker or dealer operating under this section 
may sell securities for the account of a customer to obtain funds for 
the immediate reinvestment in redeemable securities of registered 
investment companies. A broker or dealer operating under this paragraph 
(a)(2)(v) must promptly transmit all funds and promptly deliver all 
securities received in connection with its activities as a broker or 
dealer, and may not otherwise hold funds or securities for, or owe money 
or securities to, customers.

                        Other Brokers or Dealers

    (vi) A broker or dealer that does not receive, directly or 
indirectly, or hold funds or securities for, or owe funds or securities 
to, customers and does not carry accounts of, or for, customers and does 
not engage in any of the activities described in paragraphs (a)(2) (i) 
through (v) of this section shall maintain net capital of not less than 
$5,000. A broker or dealer operating under this paragraph may engage in 
the following dealer activities without being subject to the 
requirements of paragraph (a)(2)(iii) of this section:
    (A) In the case of a buy order, prior to executing such customer's 
order, it purchases as principal the same number of shares or purchases 
shares to accumulate the number of shares necessary to complete the 
order, which shall be cleared through another registered broker or 
dealer or
    (B) In the case of a sell order, prior to executing such customer's 
order, it sells as principal the same number of shares or a portion 
thereof, which shall be cleared through another registered broker or 
dealer.
    (3) [Reserved]

                 Capital Requirements for Market Makers

    (4) A broker or dealer engaged in activities as a market maker as 
defined in paragraph (c)(8) of this section shall maintain net capital 
in an amount not less than $2,500 for each security in which it makes a 
market (unless a security in which it makes a market has a market value 
of $5 or less, in which event the amount of net capital shall be not 
less than $1,000 for each such security) based on the average number of 
such markets made by such broker or dealer during the 30 days 
immediately preceding the computation date. Under no circumstances shall 
it have net capital less than that required by the provisions of 
paragraph (a) of this section, or be required to maintain net capital

[[Page 389]]

of more than $1,000,000 unless required by paragraph (a) of this 
section.
    (5)(i) In accordance with appendix F to this section (Sec.  
240.15c3-1f), the Commission may grant an application by an OTC 
derivatives dealer when calculating net capital to use the market risk 
standards of appendix F as to some or all of its positions in lieu of 
the provisions of paragraph (c)(2)(vi) of this section and the credit 
risk standards of appendix F to its receivables (including counterparty 
net exposure) arising from transactions in eligible OTC derivative 
instruments in lieu of the requirements of paragraph (c)(2)(iv) of this 
section. An OTC derivatives dealer shall at all times maintain tentative 
net capital of not less than $100 million and net capital of not less 
than $20 million.
    (ii) An OTC derivatives dealer that is also registered as a 
security-based swap dealer under section 15F of the Act (15 U.S.C. 78o-
10) is subject to the capital requirements in Sec. Sec.  240.18a-1, 
240.18a-1a, 240.18a-1b, 240.18a-1c and 240.18a-1d instead of the capital 
requirements of this section and its appendices.

          Market Makers, Specialists and Certain Other Dealers

    (6)(i) A dealer who meets the conditions of paragraph (a)(6)(ii) of 
this section may elect to operate under this paragraph (a)(6) and 
thereby not apply, except to the extent required by this paragraph 
(a)(6), the provisions of paragraphs (c)(2)(vi) or appendix A (Sec.  
240.15c3-1a) of this section to market maker and specialist transactions 
and, in lieu thereof, apply thereto the provisions of paragraph 
(a)(6)(iii) of this section.
    (ii) This paragraph (a)(6) shall be available to a dealer who does 
not effect transactions with other than brokers or dealers, who does not 
carry customer accounts, who does not effect transactions in options not 
listed on a registered national securities exchange or facility of a 
registered national securities association, and whose market maker or 
specialist transactions are effected through and carried in a market 
maker or specialist account cleared by another broker or dealer as 
provided in paragraph (a)(6)(iv) of this section.
    (iii) A dealer who elects to operate pursuant to this paragraph 
(a)(6) shall at all times maintain a liquidating equity in respect of 
securities positions in his market maker or specialist account at least 
equal to:
    (A) An amount equal to 25 percent (5 percent in the case of exempted 
securities) of the market value of the long positions and 30 percent of 
the market value of the short positions; provided, however, in the case 
of long or short positions in options and long or short positions in 
securities other than options which relate to a bona fide hedged 
position as defined in paragraph (c)(2)(x)(C) of this section, such 
amount shall equal the deductions in respect of such positions specified 
by appendix A (Sec.  240.15c3-1a).
    (B) Such lesser requirement as may be approved by the Commission 
under specified terms and conditions upon written application of the 
dealer and the carrying broker or dealer.
    (C) For purposes of this paragraph (a)(6)(iii), equity in such 
specialist or market maker account shall be computed by (1) marking all 
securities positions long or short in the account to their respective 
current market values, (2) adding (deducting in the case of a debit 
balance) the credit balance carried in such specialist or market maker 
account, and (3) adding (deducting in the case of short positions) the 
market value of positions long in such account.
    (iv) The dealer shall obtain from the broker or dealer carrying the 
market maker or specialist account a written undertaking which shall be 
designated ``Notice Pursuant to Sec.  240.15c3-1(a)(6) of Intention to 
Carry Specialist or Market Maker Account.'' Said undertaking shall 
contain the representations required by paragraph (a)(6) of this section 
and shall be filed with the Commission's Washington, DC, Office, the 
regional office of the Commission for the region in which the broker or 
dealer has its principal place of business and the Designated Examining 
Authorities of both firms prior to effecting any transactions in said 
account. The broker or dealer carrying such account:
    (A) Shall mark the account to the market not less than daily and 
shall issue appropriate calls for additional

[[Page 390]]

equity which shall be met by noon of the following business day;
    (B) Shall notify by telegraph the Commission and the Designated 
Examining Authorities pursuant to 17 CFR 240.17a-11, if the market maker 
or specialist fails to deposit any required equity within the time 
prescribed in paragraph (a)(6)(iv)(A) of this section; said telegraphic 
notice shall be received by the Commission and the Designated Examining 
Authorities not later than the close of business on the day said call is 
not met;
    (C) Shall not extend further credit in the account if the equity in 
the account falls below that prescribed in paragraph (a)(6)(iii) of this 
section, and
    (D) Shall take steps to liquidate promptly existing positions in the 
account in the event of a failure to meet a call for equity.
    (v) No such carrying broker or dealer shall permit the sum of (A) 
the deductions required by paragraph (c)(2)(x)(A) of this section in 
respect of all transactions in market maker accounts guaranteed, 
indorsed or carried by such broker or dealer pursuant to paragraph 
(c)(2)(x) of this section and (B) the equity required by paragraph (iii) 
of this paragraph (a)(6) in respect of all transactions in the accounts 
of specialists of market makers in options carried by such broker or 
dealer pursuant to this paragraph (a)(6) to exceed 1,000 percent of such 
broker's or dealer's net capital as defined in paragraph (c)(2) of this 
section for any period exceeding five business days; Provided, That 
solely for purposes of this paragraph (a)(6)(v), deductions or equity 
required in a specialist or market maker account in respect of positions 
in fully paid securities (other than options), which do not underlie 
options listed on the national securities exchange or facility of a 
national securities association of which the specialist or market marker 
is a member, need not be recognized. Provided further, That if at any 
time such sum exceeds 1,000 percent of such broker's or dealer's net 
capital, then the broker or dealer shall immediately transmit 
telegraphic notice of such event to the principal office of the 
Commission in Washington, DC, the regional office of the Commission for 
the region in which the broker or dealer maintains its principal place 
of business, and such broker's or dealer's Designated Examining 
Authority. Provided further, That if at any time such sum exceeds 1,000 
percent of such broker's or dealer's net capital, then such broker or 
dealer shall be subject to the prohibitions against withdrawal of equity 
capital set forth in paragraph (e) of this section, and to the 
prohibitions against reduction, prepayment and repayment of 
subordination agreements set forth in paragraph (b)(11) of Sec.  
240.15c3-1d, as if such broker or dealer's net capital were below the 
minimum standards specified by each of the aforementioned paragraphs.

Alternative Net Capital Computation for Broker-Dealers Authorized to Use 
                                 Models

    (7) In accordance with appendix E to this section (Sec.  240.15c3-
1e), the Commission may approve, in whole or in part, an application or 
an amendment to an application by a broker or dealer to calculate net 
capital using the market risk standards of appendix E to compute a 
deduction for market risk on some or all of its positions, instead of 
the provisions of paragraphs (c)(2)(vi) and (c)(2)(vii) of this section, 
and using the credit risk standards of appendix E to compute a deduction 
for credit risk on certain credit exposures arising from transactions in 
derivatives instruments, instead of the provisions of paragraph 
(c)(2)(iv) of this section, subject to any conditions or limitations on 
the broker or dealer the Commission may require as necessary or 
appropriate in the public interest or for the protection of investors. A 
broker or dealer that has been approved to calculate its net capital 
under appendix E must:
    (i)(A) At all times maintain tentative net capital of not less than 
$5 billion and net capital of not less than the greater of $1 billion or 
the sum of the ratio requirement under paragraph (a)(1) of this section 
and:
    (1) Two percent of the risk margin amount; or
    (2) Four percent or less of the risk margin amount if the Commission 
issues an order raising the requirement to four percent or less on or 
after the

[[Page 391]]

third anniversary of this section's compliance date; or
    (3) Eight percent or less of the risk margin amount if the 
Commission issues an order raising the requirement to eight percent or 
less on or after the fifth anniversary of this section's compliance date 
and the Commission had previously issued an order raising the 
requirement under paragraph (a)(7)(i)(B) of this section;
    (B) If, after considering the capital and leverage levels of brokers 
or dealers subject to paragraph (a)(7) of this section, as well as the 
risks of their security-based swap positions, the Commission determines 
that it may be appropriate to change the percentage pursuant to 
paragraph (a)(7)(i)(A)(2) or (3) of this section, the Commission will 
publish a notice of the potential change and subsequently will issue an 
order regarding any such change.
    (ii) Provide notice that same day in accordance with Sec.  240.17a-
11(g) if the broker's or dealer's tentative net capital is less than $6 
billion. The Commission may, upon written application, lower the 
threshold at which notification is necessary under this paragraph 
(a)(7)(ii), either unconditionally or on specified terms and conditions, 
if a broker or dealer satisfies the Commission that notification at the 
$6 billion threshold is unnecessary because of, among other factors, the 
special nature of its business, its financial position, its internal 
risk management system, or its compliance history; and
    (iii) Comply with Sec.  240.15c3-4 as though it were an OTC 
derivatives dealer with respect to all of its business activities, 
except that paragraphs (c)(5)(xiii), (c)(5)(xiv), (d)(8), and (d)(9) of 
Sec.  240.15c3-4 shall not apply.
    (8) Municipal securities brokers' brokers. (i) A municipal 
securities brokers' brokers, as defined in subsection (ii) of this 
paragraph (a)(8), may elect not to be subject to the limitations of 
paragraph (c)(2)(ix) of this section provided that such brokers' broker 
complies with the requirements set out in paragraphs (a)(8) (iii), (iv) 
and (v) of this section.
    (ii) The term municipal securities brokers' broker shall mean a 
municipal securities broker or dealer who acts exclusively as an 
undisclosed agent in the purchase or sale of municipal securities for a 
registered broker or dealer or registered municipal securities dealer, 
who has no ``customers'' as defined in this rule and who does not have 
or maintain any municipal securities in its proprietary or other 
accounts.
    (iii) In order to qualify to operate under this paragraph (a)(8), a 
brokers' broker shall at all times have and maintain net capital of not 
less than $150,000.
    (iv) For purposes of this paragraph (a)(8), a brokers' broker shall 
deduct from net worth 1% of the contract value of each municipal failed 
to deliver contract which is outstanding 21 business days or longer. 
Such deduction shall be increased by any excess of the contract price of 
the fail to deliver over the market value of the underlying security.
    (v) For purposes of this paragraph (a)(8), a brokers' broker may 
exclude from its aggregate indebtedness computation indebtedness 
adequately collateralized by municipal securities outstanding for not 
more than one business day and offset by municipal securities failed to 
deliver of the same issue and quantity. In no event may a brokers' 
broker exclude any overnight bank loan attributable to the same 
municipal securities failed to deliver contract for more than one 
business day. A brokers' broker need not deduct from net worth the 
amount by which the market value of securities failed to receive 
outstanding longer than thirty (30) calendar days exceeds the contract 
value of those failed to receive as required by Rule 15c3-
1(c)(2)(iv)(E).

Certain Additional Capital Requirements for Brokers or Dealers Engaging 
                    in Reverse Repurchase Agreements

    (9) A broker or dealer shall maintain net capital in addition to the 
amounts required under paragraph (a) of this section in an amount equal 
to 10 percent of:
    (i) The excess of the market value of United States Treasury Bills, 
Bonds and Notes subject to reverse repurchase agreements with any one 
party over 105 percent of the contract prices (including accrued 
interest) for reverse repurchase agreements with that party;

[[Page 392]]

    (ii) The excess of the market value of securities issued or 
guaranteed as to principal or interest by an agency of the United States 
or mortgage related securities as defined in section 3(a)(41) of the Act 
subject to reverse repurchase agreements with any one party over 110 
percent of the contract prices (including accrued interest) for reverse 
repurchase agreements with that party; and
    (iii) The excess of the market value of other securities subject to 
reverse repurchase agreements with any one party over 120 percent of the 
contract prices (including accrued interest) for reverse repurchase 
agreements with that party.

        Broker-Dealers Registered as Security-Based Swap Dealers

    (10) A broker or dealer registered with the Commission as a 
security-based swap dealer, other than a broker or dealer subject to the 
provisions of paragraph (a)(7) of this section, must:
    (i)(A) At all times maintain net capital of not less than the 
greater of $20 million or the sum of the ratio requirement under 
paragraph (a)(1) of this section and:
    (1) Two percent of the risk margin amount; or
    (2) Four percent or less of the risk margin amount if the Commission 
issues an order raising the requirement to four percent or less on or 
after the third anniversary of this section's compliance date; or
    (3) Eight percent or less of the risk margin amount if the 
Commission issues an order raising the requirement to eight percent or 
less on or after the fifth anniversary of this section's compliance date 
and the Commission had previously issued an order raising the 
requirement under paragraph (a)(10)(i)(B) of this section;
    (B) If, after considering the capital and leverage levels of brokers 
or dealers subject to paragraph (a)(10) of this section, as well as the 
risks of their security-based swap positions, the Commission determines 
that it may be appropriate to change the percentage pursuant to 
paragraph (a)(10)(i)(A)(2) or (3) of this section, the Commission will 
publish a notice of the potential change and subsequently will issue an 
order regarding any such change; and
    (ii) Comply with Sec.  240.15c3-4 as though it were an OTC 
derivatives dealer with respect to all of its business activities, 
except that paragraphs (c)(5)(xiii) and (xiv), and (d)(8) and (9) of 
Sec.  240.15c3-4 shall not apply.
    (b) Exemptions:
    (1) The provisions of this section shall not apply to any 
specialist:
    (i) Whose securities business, except for an occasional non-
specialist related securities transaction for its own account, is 
limited to that of acting as an options market maker on a national 
securities exchange;
    (ii) That is a member in good standing and subject to the capital 
requirements of a national securities exchange;
    (iii) That does not transact a business in securities with other 
than a broker or dealer registered with the Commission under section 15 
or section 15C of the Act or a member of a national securities exchange; 
and
    (iv) That is not a clearing member of The Options Clearing 
Corporation and whose securities transactions are effected through and 
carried in an account cleared by another broker or dealer registered 
with the Commission under section 15 of the Act.
    (2) A member in good standing of a national securities exchange who 
acts as a floor broker (and whose activities do not require compliance 
with other provisions of this rule), may elect to comply, in lieu of the 
other provisions of this section, with the following financial 
responsibility standard: The value of the exchange membership of the 
member (based on the lesser of the most recent sale price or current bid 
price for an exchange membership) is not less than $15,000, or an amount 
equal to the excess of $15,000 over the value of the exchange membership 
is held by an independent agent in escrow: Provided, That the rules of 
such exchange require that the proceeds from the sale of the exchange 
membership of the member and the amount held in escrow pursuant to this 
paragraph shall be subject to the prior claims of the exchange and its 
clearing corporation and those arising directly

[[Page 393]]

from the closing out of contracts entered into on the floor of such 
exchanges.
    (3) The Commission may, upon written application, exempt from the 
provisions of this section, either unconditionally or on specified terms 
and conditions, any broker or dealer who satisfies the Commission that, 
because of the special nature of its business, its financial position, 
and the safeguards it has established for the protection of customers' 
funds and securities, it is not necessary in the public interest or for 
the protection of investors to subject the particular broker or dealer 
to the provisions of this section.
    (c) Definitions. For the purpose of this section:

                         Aggregate Indebtedness

    (1) The term aggregate indebtedness shall be deemed to mean the 
total money liabilities of a broker or dealer arising in connection with 
any transaction whatsoever and includes, among other things, money 
borrowed, money payable against securities loaned and securities 
``failed to receive,'' the market value of securities borrowed to the 
extent to which no equivalent value is paid or credited (other than the 
market value of margin securities borrowed from customers in accordance 
with the provisions of 17 CFR 240.15c3-3 and margin securities borrowed 
from non-customers), customers' and non-customers' free credit balances, 
credit balances in customers' and non-customers' accounts having short 
positions in securities, equities in customers' and non-customers' 
future commodities accounts and credit balances in customers' and non-
customers' commodities accounts, but excluding:

                 Exclusions From Aggregate Indebtedness

    (i) Indebtedness adequately collateralized by securities which are 
carried long by the broker or dealer and which have not been sold or by 
securities which collateralize a secured demand note pursuant to 
appendix D to this section 17 CFR 240.15c3-1d; indebtedness adequately 
collateralized by spot commodities which are carried long by the broker 
or dealer and which have not been sold; or, until October 1, 1976, 
indebtedness adequately collateralized by municipal securities 
outstanding for not more than one business day and offset by municipal 
securities failed to deliver of the same issue and quantity, where such 
indebtedness is incurred by a broker or dealer effecting transactions 
solely in municipal securities who is either registered with the 
Commission or temporarily exempt from such registration pursuant to 17 
CFR 240.15a-1(T) or 17 CFR 240.15Ba2-3(T);
    (ii) Amounts payable against securities loaned, which securities are 
carried long by the broker or dealer and which have not been sold or 
which securities collateralize a secured demand note pursuant to 
Appendix (D) (17 CFR 240.15c)
    (iii) Amounts payable against securities failed to receive which 
securities are carried long by the broker or dealer and which have not 
been sold or which securities collateralize a secured demand note 
pursuant to Appendix (D) (17 CFR 240.15c3-1d) or amounts payable against 
securities failed to receive for which the broker or dealer also has a 
receivable related to securities of the same issue and quantity thereof 
which are either fails to deliver or securities borrowed by the broker 
or dealer;
    (iv) Credit balances in accounts representing amounts payable for 
securities or money market instruments not yet received from the issuer 
or its agent which securities are specified in paragraph (c)(2)(vi)(E) 
and which amounts are outstanding in such accounts not more than three 
(3) business days;
    (v) Equities in customers' and non-customers' accounts segregated in 
accordance with the provisions of the Commodity Exchange Act and the 
rules and regulations thereunder;
    (vi) Liability reserves established and maintained for refunds of 
charges required by section 27(d) of the Investment Company Act of 1940, 
but only to the extent of amounts on deposit in a segregated trust 
account in accordance with 17 CFR 270.27d-1 under the Investment Company 
Act of 1940;

[[Page 394]]

    (vii) Amounts payable to the extent funds and qualified securities 
are required to be on deposit and are deposited in a ``Special Reserve 
Bank Account for the Exclusive Benefit of Customers'' pursuant to 17 CFR 
240.15c3-3 under the Securities Exchange Act of 1934;
    (viii) Fixed liabilities adequately secured by assets acquired for 
use in the ordinary course of the trade or business of a broker or 
dealer but no other fixed liabilities secured by assets of the broker or 
dealer shall be so excluded unless the sole recourse of the creditor for 
nonpayment of such liability is to such asset;
    (ix) Liabilities on open contractual commitments;
    (x) Indebtedness subordinated to the claims of creditors pursuant to 
a satisfactory subordination agreement, as defined in Appendix (D) (17 
CFR 240.15c3-1d);
    (xi) Liabilities which are effectively subordinated to the claims of 
creditors (but which are not subject to a satisfactory subordination 
agreement as defined in Appendix (D) (17 CFR 240.15c3-1d)) by non-
customers of the broker or dealer prior to such subordination, except 
such subordinations by customers as may be approved by the Examining 
Authority for such broker or dealer;
    (xii) Credit balances in accounts of general partners;
    (xiii) Deferred tax liabilities;
    (xiv) Eighty-five percent of amounts payable to a registered 
investment company related to fail to deliver receivables of the same 
quantity arising out of purchases of shares of those registered 
investment companies; and
    (xv) Eighty-five percent of amounts payable against securities 
loaned for which the broker or dealer has receivables related to 
securities of the same class and issue and quantity that are securities 
borrowed by the broker or dealer.

                               Net Capital

    (2) The term net capital shall be deemed to mean the net worth of a 
broker or dealer, adjusted by:
    (i) Adjustments to net worth related to unrealized profit or loss, 
deferred tax provisions, and certain liabilities. (A) Adding unrealized 
profits (or deducting unrealized losses) in the accounts of the broker 
or dealer;
    (B)(1) In determining net worth, all long and all short positions in 
listed options shall be marked to their market value and all long and 
all short securities and commodities positions shall be marked to their 
market value.
    (2) In determining net worth, the value attributed to any unlisted 
option shall be the difference between the option's exercise value and 
the market value of the underlying security. In the case of an unlisted 
call, if the market value of the underlying security is less than the 
exercise value of such call it shall be given no value and in the case 
of an unlisted put if the market value of the underlying security is 
more than the exercise value of the unlisted put it shall be given no 
value.
    (C) Adding to net worth the lesser of any deferred income tax 
liability related to the items in (1), (2), and (3) below, or the sum of 
(1), (2) and (3) below;
    (1) The aggregate amount resulting from applying to the amount of 
the deductions computed in accordance with paragraph (c)(2)(vi) of this 
section and Appendices A and B, Sec.  240.15c3-1a and 240.15c3-1b, the 
appropriate Federal and State tax rate(s) applicable to any unrealized 
gain on the asset on which the deduction was computed;
    (2) Any deferred tax liability related to income accrued which is 
directly related to an asset otherwise deducted pursuant to this 
section;
    (3) Any deferred tax liability related to unrealized appreciation in 
value of any asset(s) which has been otherwise deducted from net worth 
in accordance with the provisions of this section; and,
    (D) Adding, in the case of future income tax benefits arising as a 
result of unrealized losses, the amount of such benefits not to exceed 
the amount of income tax liabilities accrued on the books and records of 
the broker or dealer, but only to the extent such benefits could have 
been applied to reduce accrued tax liabilities on the date of the 
capital computation, had the related unrealized losses been realized on 
that date.
    (E) Adding to net worth any actual tax liability related to income 
accrued which is directly related to an asset

[[Page 395]]

otherwise deducted pursuant to this section.
    (F) Subtracting from net worth any liability or expense relating to 
the business of the broker or dealer for which a third party has assumed 
the responsibility, unless the broker or dealer can demonstrate that the 
third party has adequate resources independent of the broker or dealer 
to pay the liability or expense.
    (G) Subtracting from net worth any contribution of capital to the 
broker or dealer:
    (1) Under an agreement that provides the investor with the option to 
withdraw the capital; or
    (2) That is intended to be withdrawn within a period of one year of 
contribution. Any withdrawal of capital made within one year of its 
contribution is deemed to have been intended to be withdrawn within a 
period of one year, unless the withdrawal has been approved in writing 
by the Examining Authority for the broker or dealer.
    (ii) Subordinated liabilities. Excluding liabilities of the broker 
or dealer which are subordinated to the claims of creditors pursuant to 
a satisfactory subordination agreement, as defined in appendix (D) (17 
CFR 240.15c3-1d).
    (iii) Sole proprietors. Deducting, in the case of a broker or dealer 
who is a sole proprietor, the excess of liabilities which have not been 
incurred in the course of business as a broker or dealer over assets not 
used in the business.
    (iv) Assets not readily convertible into cash. Deducting fixed 
assets and assets which cannot be readily converted into cash (less any 
indebtedness excluded in accordance with subdivision (c)(1)(viii) of 
this section) including, among other things:
    (A) Fixed assets and prepaid items. Real estate; furniture and 
fixtures; exchange memberships; prepaid rent, insurance and other 
expenses; goodwill, organization expenses;

            Certain Unsecured and Partly Secured Receivables

    (B) All unsecured advances and loans; deficits in customers' and 
non-customers' unsecured and partly secured notes; deficits in omnibus 
credit accounts maintained in compliance with the requirements of 12 CFR 
220.7(f) of Regulation T under the Act, or similar accounts carried on 
behalf of another broker or dealer, after application of calls for 
margin, marks to the market or other required deposits that are 
outstanding 5 business days or less; deficits in customers' and non-
customers' unsecured and partly secured accounts after application of 
calls for margin, marks to market or other required deposits that are 
outstanding 5 business days or less, except deficits in cash accounts as 
defined in 12 CFR 220.8 of Regulation T under the Act for which not more 
than one extension respecting a specified securities transaction has 
been requested and granted, and deducting for securities carried in any 
of such accounts the percentages specified in paragraph (c)(2)(vi) of 
this section or appendix A, Sec.  240.15c3-1a; the market value of stock 
loaned in excess of the value of any collateral received therefor; 
receivables arising out of free shipments of securities (other than 
mutual fund redemptions) in excess of $5,000 per shipment and all free 
shipments (other than mutual fund redemptions) outstanding more than 7 
business days, and mutual fund redemptions outstanding more than 16 
business days; and any collateral deficiencies in secured demand notes 
as defined in appendix D, Sec.  240.15c3-1d; a broker or dealer that 
participates in a loan of securities by one party to another party will 
be deemed a principal for the purpose of the deductions required under 
this section, unless the broker or dealer has fully disclosed the 
identity of each party to the other and each party has expressly agreed 
in writing that the obligations of the broker or dealer do not include a 
guarantee of performance by the other party and that such party's 
remedies in the event of a default by the other party do not include a 
right of setoff against obligations, if any, of the broker or dealer.
    (C) Interest receivable, floor brokerage receivable, commissions 
receivable from other brokers or dealers (other than syndicate profits 
which shall be treated as required in paragraph (c)(2)(iv)(E) of this 
section), mutual fund concessions receivable and management fees 
receivable from registered investment companies, all of

[[Page 396]]

which receivables are outstanding longer than thirty (30) days from the 
date they arise; dividends receivable outstanding longer than thirty 
(30) days from the payable date; good faith deposits arising in 
connection with a non-municipal securities underwriting, outstanding 
longer than eleven (11) business days from the settlement of the 
underwriting with the issuer; receivables due from participation in 
municipal securities underwriting syndicates and municipal securities 
joint underwriting accounts which are outstanding longer than sixty (60) 
days from settlement of the underwriting with the issuer and good faith 
deposits arising in connection with an underwriting of municipal 
securities, outstanding longer than sixty (60) days from settlement of 
the underwriting with the issuer; and receivables due from participation 
in municipal securities secondary trading joint accounts, which are 
outstanding longer than sixty (60) days from the date all securities 
have been delivered by the account manager to the account members;
    (D) Insurance claims. Insurance claims which, after seven (7) 
business days from the date the loss giving rise to the claim is 
discovered, are not covered by an opinion of outside counsel that the 
claim is valid and is covered by insurance policies presently in effect; 
insurance claims which after twenty (20) business days from the date the 
loss giving rise to the claim is discovered and which are accompanied by 
an opinion of outside counsel described above, have not been 
acknowledged in writing by the insurance carrier as due and payable; and 
insurance claims acknowledged in writing by the carrier as due and 
payable outstanding longer than twenty (20) business days from the date 
they are so acknowledged by the carrier; and,
    (E) Other deductions. All other unsecured receivables; all assets 
doubtful of collection less any reserves established therefor; the 
amount by which the market value of securities failed to receive 
outstanding longer than thirty (30) calendar days exceeds the contract 
value of such fails to receive; and the funds on deposit in a 
``segregated trust account'' in accordance with 17 CFR 270.27d-1 under 
the Investment Company Act of 1940, but only to the extent that the 
amount on deposit in such segregated trust account exceeds the amount of 
liability reserves established and maintained for refunds of charges 
required by sections 27(d) and 27(f) of the Investment Company Act of 
1940; Provided, That the following need not be deducted:
    (1) Any amounts deposited in a Customer Reserve Bank Account or PAB 
Reserve Bank Account pursuant to Sec.  240.15c3-3(e) or in the ``special 
reserve account for the exclusive benefit of security-based swap 
customers'' established pursuant to Sec.  240.15c3-3(p)(3),
    (2) Cash and securities held in a securities account at a carrying 
broker or dealer (except where the account has been subordinated to the 
claims of creditors of the carrying broker or dealer), and
    (3) Clearing deposits.
    (F)(1) For purposes of this paragraph:
    (i) The term reverse repurchase agreement deficit shall mean the 
difference between the contract price for resale of the securities under 
a reverse repurchase agreement and the market value of those securities 
(if less than the contract price).
    (ii) The term repurchase agreement deficit shall mean the difference 
between the market value of securities subject to the repurchase 
agreement and the contract price for repurchase of the securities (if 
less than the market value of the securities).
    (iii) As used in paragraph (c)(2)(iv)(F)(1) of this section, the 
term contract price shall include accrued interest.
    (iv) Reverse repurchase agreement deficits and the repurchase 
agreement deficits where the counterparty is the Federal Reserve Bank of 
New York shall be disregarded.
    (2)(i) In the case of a reverse repurchase agreement, the deduction 
shall be equal to the reverse repurchase agreement deficit.
    (ii) In determining the required deductions under paragraph 
(c)(2)(iv)(F)(2)(i) of this section, the broker or dealer may reduce the 
reverse repurchase agreement deficit by:
    (A) Any margin or other deposits held by the broker or dealer on 
account of the reverse repurchase agreement;

[[Page 397]]

    (B) Any excess market value of the securities over the contract 
price for resale of those securities under any other reverse repurchase 
agreement with the same party;
    (C) The difference between the contract price for resale and the 
market value of securities subject to repurchase agreements with the 
same party (if the market value of those securities is less than the 
contract price); and
    (D) Calls for margin, marks to the market, or other required 
deposits which are outstanding one business day or less.
    (3) (i) In the case of repurchase agreements, the deduction shall 
be:
    (A) The excess of the repurchase agreement deficit over 5 percent of 
the contract price for resale of United States Treasury Bills, Notes and 
Bonds, 10 percent of the contract price for the resale of securities 
issued or guaranteed as to principal or interest by an agency of the 
United States or mortgage related securities as defined in section 
3(a)(41) of the Act and 20 percent of the contract price for the resale 
of other securities and;
    (B) The excess of the aggregate repurchase agreement deficits with 
any one party over 25 percent of the broker or dealer's net capital 
before the application of paragraph (c)(2)(vi) of this section (less any 
deduction taken with respect to repurchase agreements with that party 
under paragraph (c)(2)(iv)(F)(3)(i)(A) of this section) or, if greater;
    (C) The excess of the aggregate repurchase agreement deficits over 
300 percent of the broker's or dealer's net capital before the 
application of paragraph (c)(2)(vi) of this section.
    (ii) In determining the required deduction under paragraph 
(c)(2)(iv)(F)(3)(i) of this section, the broker or dealer may reduce a 
repurchase agreement deficit by:
    (A) Any margin or other deposits held by the broker or dealer on 
account of a reverse repurchase agreement with the same party to the 
extent not otherwise used to reduce a reverse repurchase deficit;
    (B) The difference between the contract price and the market value 
of securities subject to other repurchase agreements with the same party 
(if the market value of those securities is less than the contract 
price) not otherwise used to reduce a reverse repurchase agreement 
deficit; and
    (C) Calls for margin, marks to the market, or other required 
deposits which are outstanding one business day or less to the extent 
not otherwise used to reduce a reverse repurchase agreement deficit.
    (G) Securities borrowed. 1 percent of the market value of securities 
borrowed collateralized by an irrevocable letter of credit.
    (H) Any receivable from an affiliate of the broker or dealer (not 
otherwise deducted from net worth) and the market value of any 
collateral given to an affiliate (not otherwise deducted from net worth) 
to secure a liability over the amount of the liability of the broker or 
dealer unless the books and records of the affiliate are made available 
for examination when requested by the representatives of the Commission 
or the Examining Authority for the broker or dealer in order to 
demonstrate the validity of the receivable or payable. The provisions of 
this subsection shall not apply where the affiliate is a registered 
broker or dealer, registered government securities broker or dealer or 
bank as defined in section 3(a)(6) of the Act or insurance company as 
defined in section 3(a)(19) of the Act or investment company registered 
under the Investment Company Act of 1940 or federally insured savings 
and loan association or futures commission merchant registered pursuant 
to the Commodity Exchange Act.
    (v)(A) Deducting the market value of all short securities 
differences (which shall include securities positions reflected on the 
securities record which are not susceptible to either count or 
confirmation) unresolved after discovery in accordance with the 
following schedule:

------------------------------------------------------------------------
                                                              Numbers of
                                                               business
                       Differences \1\                        days after
                                                               discovery
------------------------------------------------------------------------
25 percent..................................................           7
50 percent..................................................          14
75 percent..................................................          21
100 percent.................................................          28
------------------------------------------------------------------------
\1\ Percentage of market value of short securities differences.


[[Page 398]]

    (B) Deducting the market value of any long securities differences, 
where such securities have been sold by the broker or dealer before they 
are adequately resolved, less any reserves established therefor;
    (C) The designated examining authority for a broker or dealer may 
extend the periods in (v)(A) of this section for up to 10 business days 
if it finds that exceptional circumstances warrant an extension.

                           Securities Haircuts

    (vi) Deducting the percentages specified in paragraphs (c)(2)(vi) 
(A) through (M) of this section (or the deductions prescribed for 
securities positions set forth in Appendix A (Sec.  240.15c3-1a) of the 
market value of all securities, money market instruments or options in 
the proprietary or other accounts of the broker or dealer.
    (A)(1) In the case of a security issued or guaranteed as to 
principal or interest by the United States or any agency thereof, the 
applicable percentages of the market value of the net long or short 
position in each of the categories specified below are:

                               Category 1

    (i) Less than 3 months to maturity--0 percent.
    (ii) 3 months but less than 6 months to maturity--\1/2\ of 1 
percent.
    (iii) 6 months but less than 9 months to maturity--\3/4\ of 1 
percent.
    (iv) 9 months but less than 12 months to maturity--1 percent.

                               Category 2

    (i) 1 year but less than 2 years to maturity--1\1/2\ percent.
    (ii) 2 years but less than 3 years to maturity--2 percent.

                               Category 3

    (i) 3 years but less than 5 years to maturity--3%.
    (ii) 5 years but less than 10 years to maturity--4%.

                               Category 4

    (i) 10 years but less than 15 years to maturity--4\1/2\%.
    (ii) 15 years but less than 20 years to maturity--5%.
    (iii) 20 years but less than 25 years to maturity--5\1/2\%.
    (iv) 25 years or more to maturity--6%.


Brokers or dealers shall compute a deduction for each category above as 
follows: Compute the deductions for the net long or short positions in 
each subcategory above. The deduction for the category shall be the net 
of the aggregate deductions on the long positions and the aggregate 
deductions on the short positions in each category plus 50% of the 
lesser of the aggregate deductions on the long or short positions.
    (2) A broker or dealer may elect to deduct, in lieu of the 
computation required under paragraph (c)(2)(vi)(A)(1) of this section, 
the applicable percentages of the market value of the net long or short 
positions in each of the subcategories specified in paragraph 
(c)(2)(vi)(A)(1) of this section.
    (3) In computing deductions under paragraph (c)(2)(vi)(A)(1) of this 
section, a broker or dealer may elect to exclude the market value of a 
long or short security from one category and a security from another 
category, Provided, That:
    (i) Such securities have maturity dates:
    (A) Between 9 months and 15 months and within 3 months of one 
another.
    (B) Between 2 years and 4 years and within 1 year of one another; or
    (C) Between 8 years and 12 years and within 2 years of one another.
    (ii) The net market value of the two excluded securities shall 
remain in the category of the security with the higher market value.
    (4) In computing deductions under paragraph (c)(2)(vi)(A)(1) of this 
section, a broker or dealer may include in the categories specified in 
paragraph (c)(2)(vi)(A)(1) of this section, long or short positions in 
securities issued by the United States or any agency thereof that are 
deliverable against long or short positions in futures contracts 
relating to Government securities, traded on a recognized contract 
market approved by the Commodity Futures Trading Commission, which are 
held in the proprietary or other accounts of the broker or dealer. The 
value of the long or short positions included in the categories shall be 
determined by the contract value of the futures contract held in the 
account. The provisions of Appendix B to Rule 15c3-1 (17 CFR

[[Page 399]]

240.15c3-1b) will in any event apply to the positions in futures 
contracts.
    (5) In the case of a Government securities dealer that reports to 
the Federal Reserve System, that transacts business directly with the 
Federal Reserve System, and that maintains at all times a minimum net 
capital of at least $50,000,000, before application of the deductions 
provided for in paragraph (c)(2)(vi) of this section, the deduction for 
a security issued or guaranteed as to principal or interest by the 
United States or any agency thereof shall be 75 percent of the deduction 
otherwise computed under paragraph (c)(2)(vi)(A) of this section.
    (B)(1) In the case of any municipal security which has a scheduled 
maturity at date of issue of 731 days or less and which is issued at par 
value and pays interest at maturity, or which is issued at a discount, 
and which is not traded flat or in default as to principal or interest, 
the applicable percentages of the market value on the greater of the 
long or short position in each of the categories specified below are:
    (i) Less than 30 days to maturity--0%.
    (ii) 30 days but less than 91 days to maturity--\1/8\ of 1%.
    (iii) 91 days but less than 181 days to maturity--\1/4\ of 1%.
    (iv) 181 days but less than 271 days to maturity--\3/8\ of 1%.
    (v) 271 days but less than 366 days to maturity--\1/2\ of 1%.
    (vi) 366 days but less than 456 days to maturity--\3/4\ of 1%.
    (vii) 456 days but less than 732 days to maturity--1%.
    (2) In the case of any municipal security, other than those 
specified in paragraph (c)(2)(vi)(B)(1), which is not traded flat or in 
default as to principal or interest, the applicable percentages of the 
market value of the greater of the long or short position in each of the 
categories specified below are:
    (i) Less than 1 year to maturity--1%.
    (ii) 1 year but less than 2 years to maturity--2%.
    (iii) 2 years but less than 3\1/2\ years to maturity--3%.
    (iv) 3\1/2\ years but less than 5 years to maturity--4%.
    (v) 5 years but less than 7 years to maturity--5%.
    (vi) 7 years but less than 10 years to maturity--5\1/2\%.
    (vii) 10 years but less than 15 years to maturity--6%.
    (viii) 15 years but less than 20 years to maturity--6\1/2\%.
    (ix) 20 years or more to maturity--7%.
    (C) Canadian Debt Obligations. In the case of any security issued or 
unconditionally guaranteed as to principal and interest by the 
Government of Canada, the percentages of market value to be deducted 
shall be the same as in paragraph (A) of this section.
    (D)(1) In the case of redeemable securities of an investment company 
registered under the Investment Company Act of 1940, which assets 
consist of cash or money market instruments and which is described in 
Sec.  270.2a-7 of this chapter, the deduction will be 2% of the market 
value of the greater of the long or short position.
    (2) In the case of redeemable securities of an investment company 
registered under the Investment Company Act of 1940, which assets are in 
the form of cash or securities or money market instruments of any 
maturity which are described in paragraph (c)(2)(vi) (A) through (C) or 
(E) of this section, the deduction shall be 7% of the market value of 
the greater of the long or short positions.
    (3) In the case of redeemable securities of an investment company 
registered under the Investment Company Act of 1940, which assets are in 
the form of cash or securities or money market instruments which are 
described in paragraphs (c)(2)(vi) (A) through (C) or (E) and (F) of 
this section, the deduction shall be 9% of the market value of the long 
or short position.
    (E) Commercial paper, bankers' acceptances and certificates of 
deposit. In the case of any short term promissory note or evidence of 
indebtedness which has a fixed rate of interest or is sold at a 
discount, which has a maturity date at date of issuance not exceeding 
nine months exclusive of days of grace, or any renewal thereof, the 
maturity of which is likewise limited and has only a minimal amount of 
credit risk, or in the case of any negotiable certificates of deposit or 
bankers' acceptance or

[[Page 400]]

similar type of instrument issued or guaranteed by any bank as defined 
in section 3(a)(6) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(6)), the applicable percentage of the market value of the greater 
of the long or short position in each of the categories specified below 
are:
    (1) Less than 30 days to maturity--0 percent.
    (2) 30 days but less than 91 days to maturity \1/8\ of 1 percent.
    (3) 91 days but less than 181 days to maturity \1/4\ of 1 percent.
    (4) 181 days but less than 271 days to maturity \3/8\ of 1 percent.
    (5) 271 days but less than 1 year to maturity \1/2\ of 1 percent; 
and
    (6) With respect to any negotiable certificate of deposit or bankers 
acceptance or similar type of instrument issued or guaranteed by any 
bank, as defined above, having 1 year or more to maturity, the deduction 
shall be on the greater of the long or short position and shall be the 
same percentage as that prescribed in paragraph (c)(2)(vi)(A) of this 
section.
    (F)(1) Nonconvertible debt securities. In the case of nonconvertible 
debt securities having a fixed interest rate and a fixed maturity date, 
which are not traded flat or in default as to principal or interest and 
which have only a minimal amount of credit risk, the applicable 
percentages of the market value of the greater of the long or short 
position in each of the categories specified below are:
    (i) Less than 1 year to maturity--2%
    (ii) 1 year but less than 2 years to maturity--3%
    (iii) 2 years but less than 3 years to maturity--5%
    (iv) 3 years but less than 5 years to maturity--6%
    (v) 5 years but less than 10 years to maturity--7%
    (vi) 10 years but less than 15 years to maturity--7\1/2\%
    (vii) 15 years but less than 20 years to maturity--8%
    (viii) 20 years but less than 25 years to maturity--8\1/2\%
    (ix) 25 years or more to maturity--9%
    (2) A broker or dealer may elect to exclude from the above 
categories long or short positions that are hedged with short or long 
positions in securities issued by the United States or any agency 
thereof or nonconvertible debt securities having a fixed interest rate 
and a fixed maturity date and which are not traded flat or in default as 
to principal or interest, and which have only a minimal amount of credit 
risk if such securities have maturity dates:
    (i) Less than five years and within 6 months of each other;
    (ii) Between 5 years and 10 years and within 9 months of each other;
    (iii) Between 10 years and 15 years and within 2 years of each 
other; or
    (iv) 15 years or more and within 10 years of each other.


The broker-dealer shall deduct the amounts specified in paragraphs 
(c)(2)(vi)(F) (3) and (4) of this section.
    (3) With respect to those positions described in paragraph 
(c)(2)(vi)(F)(2) of this section that include a long or short position 
in securities issued by the United States or any agency thereof, the 
broker or dealer shall exclude the hedging short or long United States 
or agency securities position from the applicable haircut category under 
paragraph (c)(2)(vi)(A) of this section. The broker or dealer shall 
deduct the percentage of the market value of the hedged long or short 
position in nonconvertible debt securities as specified in each of the 
categories below:
    (i) Less than 5 years to maturity--1\1/2\%
    (ii) 5 years but less than 10 years to maturity--2\1/2\%
    (iii) 10 years but less than 15 years to maturity--2\3/4\%
    (iv) 15 years or more to maturity--3%
    (4) With respect to those positions described in paragraph 
(c)(2)(vi)(F)(2) of this section that include offsetting long and short 
positions in nonconvertible debt securities, the broker or dealer shall 
deduct a percentage of the market value of the hedged long or short 
position in nonconvertible debt securities as specified in each of the 
categories below:
    (i) Less than 5 years to maturity--1\3/4\%
    (ii) 5 years but less than 10 years to maturity--3%
    (iii) 10 years but less than 15 years to maturity--3\1/4\%

[[Page 401]]

    (iv) 15 years or more to maturity--3\1/2\%
    (5) In computing deductions under paragraph (c)(2)(vi)(F)(3) of this 
section, a broker or dealer may include in the categories specified in 
paragraph (c)(2)(vi)(F)(3) of this section, long or short positions in 
securities issued by the United States or any agency thereof that are 
deliverable against long or short positions in futures contracts 
relating to Government securities, traded on a recognized contract 
market approved by the Commodity Futures Trading Commission, which are 
held in the proprietary or other accounts of the broker or dealer. The 
value of the long or short positions included in the categories shall be 
determined by the contract value of the futures contract held in the 
account.
    (6) The provisions of Appendix B to Rule 15c3-1 (17 CFR 240.15c3-1b) 
will in any event apply to the positions in futures contracts.
    (G) Convertible debt securities. In the case of a debt security not 
in default which has a fixed rate of interest and a fixed maturity date 
and which is convertible into an equity security, the deductions shall 
be as follows: If the market value is 100 percent or more of the 
principal amount, the deduction shall be determined as specified in 
paragraph (c)(2)(vi)(J) of this section; if the market value is less 
than the principal amount, the deduction shall be determined as 
specified in paragraph (F) of this section; if such securities are rated 
as required of paragraph (F) of this section;
    (H) In the case of cumulative, non-convertible preferred stock 
ranking prior to all other classes of stock of the same issuer, which 
has only a minimal amount of credit risk and which are not in arrears as 
to dividends, the deduction shall be 10% of the market value of the 
greater of the long or short position.
    (I) In order to apply a deduction under paragraphs (c)(2)(vi)(E), 
(c)(2)(vi)(F)(1), (c)(2)(vi)(F)(2), or (c)(2)(vi)(H) of this section, 
the broker or dealer must assess the creditworthiness of the security or 
money market instrument pursuant to policies and procedures for 
assessing and monitoring creditworthiness that the broker or dealer 
establishes, documents, maintains, and enforces. The policies and 
procedures must be reasonably designed for the purpose of determining 
whether a security or money market instrument has only a minimal amount 
of credit risk. Policies and procedures that are reasonably designed for 
this purpose should result in assessments of creditworthiness that 
typically are consistent with market data. A broker-dealer that opts not 
to make an assessment of creditworthiness under this paragraph may not 
apply the deductions under paragraphs (c)(2)(vi)(E), (c)(2)(vi)(F)(1), 
(c)(2)(vi)(F)(2), or (c)(2)(vi)(H) of this section.
    Note to paragraph (c)(2)(vi)(I): For a discussion of the ``minimal 
amount of credit risk'' standard, see Removal of Certain References to 
Credit Ratings Under the Securities Exchange Act of 1934, Exchange Act 
Release No. 34-71194 (Dec. 27, 2013), at http://www.sec.gov/rules/
final.shtml.

                          All Other Securities

    (J) In the case of all securities or evidences of indebtedness, 
except those described in appendix A, Sec.  240.15c3-1a, which are not 
included in any of the percentage categories enumerated in paragraphs 
(c)(2)(vi) (A) through (H) of this section or paragraph 
(c)(2)(vi)(K)(ii) of this section, the deduction shall be 15 percent of 
the market value of the greater of the long or short positions and to 
the extent the market value of the lesser of the long or short positions 
exceeds 25 percent of the market value of the greater of the long or 
short positions, the percentage deduction on such excess shall be 15 
percent of the market value of such excess. No deduction need be made in 
the case of:
    (1) A security that is convertible into or exchangeable for another 
security within a period of 90 days, subject to no conditions other than 
the payment of money, and the other securities into which such security 
is convertible or for which it is exchangeable, are short in the 
accounts of such broker or dealer; or
    (2) A security that has been called for redemption and that is 
redeemable within 90 days.

[[Page 402]]

    (K) Securities with a limited market. In the case of securities 
(other than exempted securities, nonconvertible debt securities, and 
cumulative nonconvertible preferred stock) which are not: (1) Traded on 
a national securities exchange; (2) designated as ``OTC Margin Stock'' 
pursuant to Regulation T under the Securities Exchange Act of 1934; (3) 
quoted on ``NASDAQ''; or (4) redeemable shares of investment companies 
registered under the Investment Company Act of 1940, the deduction shall 
be as follows:
    (i) In the case where there are regular quotations in an inter-
dealer quotations system for the securities by three or more independent 
market-makers (exclusive of the computing broker or dealer) and where 
each such quotation represents a bona fide offer to brokers or dealers 
to both buy and sell in reasonable quantities at stated prices, or where 
a ready market as defined in paragraph (c)(11) (ii) is deemed to exist, 
the deduction shall be determined in accordance with paragraph 
(c)(2)(vi)(J) of this section;
    (ii) In the case where there are regular quotations in an inter-
dealer quotations system for the securities by only one or two 
independent market-makers (exclusive of the computing broker or dealer) 
and where each such quotation represents a bona fide offer to brokers or 
dealers both to buy and sell in reasonable quantities, at stated prices, 
the deduction on both the long and short position shall be 40 percent.
    (L) Where a broker or dealer demonstrates that there is sufficient 
liquidity for any securities long or short in the proprietary or other 
accounts of the broker or dealer which are subject to a deduction 
required by paragraph (c)(2)(vi)(K) of this section, such deduction, 
upon a proper showing to the Examining Authority for the broker or 
dealer, may be appropriately decreased, but in no case shall such 
deduction be less than that prescribed in paragraph (c)(2)(vi)(J) of 
this section.

                           Undue Concentration

    (M)(1) In the case of money market instruments, or securities of a 
single class or series of an issuer, including any option written, 
endorsed or held to purchase or sell securities of such a single class 
or series of an issuer (other than ``exempted securities'' and 
redeemable securities of an investment company registered pursuant to 
the Investment Company Act of 1940), and securities underwritten (in 
which case the deduction provided for herein shall be applied after 11 
business days), which are long or short in the proprietary or other 
accounts of a broker or dealer, including securities that are collateral 
to secured demand notes defined in appendix D, Sec.  240.15c3-1d, and 
that have a market value of more than 10 percent of the ``net capital'' 
of a broker or dealer before the application of paragraph (c)(2)(vi) of 
this section or appendix A, Sec.  240.15c3-1a, there shall be an 
additional deduction from net worth and/or the Collateral Value for 
securities collateralizing a secured demand note defined in appendix D, 
Sec.  240.15c3-1d, equal to 50 percent of the percentage deduction 
otherwise provided by this paragraph (c)(2)(vi) of this section or 
appendix A, Sec.  240.15c3-1a, on that portion of the securities 
position in excess of 10 percent of the ``net capital'' of the broker or 
dealer before the application of paragraph (c)(2)(vi) of this section 
and appendix A, Sec.  240.15c3-1a. In the case of securities described 
in paragraph (c)(2)(vi)(J), the additional deduction required by this 
paragraph (c)(2)(vi)(M) shall be 15 percent.
    (2) This paragraph (c)(2)(vi)(M) shall apply notwithstanding any 
long or short position exemption provided for in paragraph (c)(2)(vi)(J) 
of this section (except for long or short position exemptions arising 
out of the first proviso to paragraph (c)(2)(vi)(J)) and the deduction 
on any such exempted position shall be 15 percent of that portion of the 
securities position in excess of 10 percent of the broker or dealer's 
net capital before the application of paragraph (c)(2)(vi) of this 
section and appendix A, Sec.  240.15c3-1a.
    (3) This paragraph (c)(2)(vi)(M) shall be applied to an issue of 
equity securities only on the market value of such securities in excess 
of $10,000 or the market value of 500 shares, whichever is greater, or 
$25,000 in the case of a debt security.

[[Page 403]]

    (4) This paragraph (c)(2)(vi)(M) will be applied to an issue of 
municipal securities having the same security provisions, date of issue, 
interest rate, day, month and year of maturity only if such securities 
have a market value in excess of $500,000 in bonds ($5,000,000 in notes) 
or 10 percent of tentative net capital, whichever is greater, and are 
held in position longer than 20 business days from the date the 
securities are received by the syndicate manager from the issuer.
    (5) Any specialist that is subject to a deduction required by this 
paragraph (c)(2)(vi)(M), respecting its specialty stock, that can 
demonstrate to the satisfaction of the Examining Authority for such 
broker or dealer that there is sufficient liquidity for such 
specialist's specialty stock and that such deduction need not be applied 
in the public interest for the protection of investors, may upon a 
proper showing to such Examining Authority have such undue concentration 
deduction appropriately decreased, but in no case shall the deduction 
prescribed in paragraph (c)(2)(vi)(J) of this section above be reduced. 
Each such Examining Authority shall make and preserve for a period of 
not less than 3 years a record of each application granted pursuant to 
this paragraph (c)(2)(vi)(M)(5), which shall contain a summary of the 
justification for the granting of the application.
    (N) Any specialist that limits its securities business to that of a 
specialist (except for an occasional non-specialist related securities 
transaction for its own account), that does not transact a business in 
securities with other than a broker or dealer registered with the 
Commission under section 15 or 15C of the Act or a member of a national 
securities exchange, and that is not a clearing member of The Options 
Clearing Corporation need not deduct from net worth in computing net 
capital those deductions, as to its specialty securities, set forth in 
paragraph (c)(2)(vi) of this section or appendix A to this section, 
except for paragraph (e) of this section limiting withdrawals of equity 
capital and appendix D to this section relating to satisfactory 
subordination agreements. As to a specialist that is solely an options 
specialist, in paragraph (e) the term ``net capital'' shall be deemed to 
mean ``net capital before the application of paragraph (c)(2)(vi) of 
this section or appendix A to this section'' and ``excess net capital'' 
shall be deemed to be the amount of net capital before the application 
of paragraph (c)(2)(vi) of this section or appendix A to this section in 
excess of the amount of net capital required under paragraph (a) of this 
section. In reports filed pursuant to Sec.  240.17a-5 and in making the 
record required by Sec.  240.17a-3(a)(11) each specialists shall include 
the deductions that would otherwise have been required by paragraph 
(c)(2)(vi) of this section or appendix A to this section in the absence 
of this paragraph (c)(2)(vi)(N).
    (O) Cleared security-based swaps. In the case of a cleared security-
based swap held in a proprietary account of the broker or dealer, 
deducting the amount of the applicable margin requirement of the 
clearing agency or, if the security-based swap references an equity 
security, the broker or dealer may take a deduction using the method 
specified in Sec.  240.15c3-1a.
    (P) Non-cleared security-based swaps--(1) Credit default swaps--(i) 
Short positions (selling protection). In the case of a non-cleared 
security-based swap that is a short credit default swap, deducting the 
percentage of the notional amount based upon the current basis point 
spread of the credit default swap and the maturity of the credit default 
swap in accordance with table 1 to Sec.  240.15c3-1(c)(2)(vi)(P)(1)(i):

                                Table 1 to Sec.   240.15c3-1(c)(2)(vi)(P)(1)(i )
----------------------------------------------------------------------------------------------------------------
                                                                 Basis point spread
   Length of time to maturity of   -----------------------------------------------------------------------------
   credit default swap contract     100 or less                                                      700 or more
                                          %       101-300  %   301-400  %   401-500  %   501-699  %        %
----------------------------------------------------------------------------------------------------------------
Less than 12 months...............         1.00         2.00         5.00         7.50        10.00        15.00
12 months but less than 24 months.         1.50         3.50         7.50        10.00        12.50        17.50
24 months but less than 36 months.         2.00         5.00        10.00        12.50        15.00        20.00
36 months but less than 48 months.         3.00         6.00        12.50        15.00        17.50        22.50
48 months but less than 60 months.         4.00         7.00        15.00        17.50        20.00        25.00

[[Page 404]]

 
60 months but less than 72 months.         5.50         8.50        17.50        20.00        22.50        27.50
72 months but less than 84 months.         7.00        10.00        20.00        22.50        25.00        30.00
84 months but less than 120 months         8.50        15.00        22.50        25.00        27.50        40.00
120 months and longer.............        10.00        20.00        25.00        27.50        30.00        50.00
----------------------------------------------------------------------------------------------------------------

    (ii) Long positions (purchasing protection). In the case of a non-
cleared security-based swap that is a long credit default swap, 
deducting 50 percent of the deduction that would be required by 
paragraph (c)(2)(vi)(P)(1)(i) of this section if the non-cleared 
security-based swap was a short credit default swap, each such deduction 
not to exceed the current market value of the long position.
    (iii) Long and short credit default swaps. In the case of non-
cleared security-based swaps that are long and short credit default 
swaps referencing the same entity (in the case of non-cleared credit 
default swap security-based swaps referencing a corporate entity) or 
obligation (in the case of non-cleared credit default swap security-
based swaps referencing an asset-backed security), that have the same 
credit events which would trigger payment by the seller of protection, 
that have the same basket of obligations which would determine the 
amount of payment by the seller of protection upon the occurrence of a 
credit event, that are in the same or adjacent spread category, and that 
are in the same or adjacent maturity category and have a maturity date 
within three months of the other maturity category, deducting the 
percentage of the notional amount specified in the higher maturity 
category under paragraph (c)(2)(vi)(P)(1)(i) or (ii) on the excess of 
the long or short position. In the case of non-cleared security-based 
swaps that are long and short credit default swaps referencing corporate 
entities in the same industry sector and the same spread and maturity 
categories prescribed in paragraph (c)(2)(vi)(P)(1)(i) of this section, 
deducting 50 percent of the amount required by paragraph 
(c)(2)(vi)(P)(1)(i) of this section on the short position plus the 
deduction required by paragraph (c)(2)(vi)(P)(1)(ii) of this section on 
the excess long position, if any. For the purposes of this section, the 
broker or dealer must use an industry sector classification system that 
is reasonable in terms of grouping types of companies with similar 
business activities and risk characteristics and the broker or dealer 
must document the industry sector classification system used pursuant to 
this section.
    (iv) Long security and long credit default swap. In the case of a 
non-cleared security-based swap that is a long credit default swap 
referencing a debt security and the broker or dealer is long the same 
debt security, deducting 50 percent of the amount specified in paragraph 
(c)(2)(vi) or (vii) of this section for the debt security, provided that 
the broker or dealer can deliver the debt security to satisfy the 
obligation of the broker or dealer on the credit default swap.
    (v) Short security and short credit default swap. In the case of a 
non-cleared security-based swap that is a short credit default swap 
referencing a debt security or a corporate entity, and the broker or 
dealer is short the debt security or a debt security issued by the 
corporate entity, deducting the amount specified in paragraph (c)(2)(vi) 
or (vii) of this section for the debt security. In the case of a non-
cleared security-based swap that is a short credit default swap 
referencing an asset-backed security and the broker or dealer is short 
the asset-backed security, deducting the amount specified in paragraph 
(c)(2)(vi) or (vii) of this section for the asset-backed security.
    (2) Non-cleared security-based swaps that are not credit default 
swaps. In the case of a non-cleared security-based swap that is not a 
credit default swap, deducting the amount calculated by multiplying the 
notional amount of the

[[Page 405]]

security-based swap and the percentage specified in paragraph (c)(2)(vi) 
of this section applicable to the reference security. A broker or dealer 
may reduce the deduction under this paragraph (c)(2)(vi)(P)(2) by an 
amount equal to any reduction recognized for a comparable long or short 
position in the reference security under paragraph (c)(2)(vi) of this 
section and, in the case of a security-based swap referencing an equity 
security, the method specified in Sec.  240.15c3-1a.
    (vii) Non-marketable securities. Deducting 100 percent of the 
carrying value in the case of securities or evidence of indebtedness in 
the proprietary or other accounts of the broker or dealer, for which 
there is no ready market, as defined in paragraph (c)(11) of this 
section, and securities, in the proprietary or other accounts of the 
broker or dealer, which cannot be publicly offered or sold because of 
statutory, regulatory or contractual arrangements or other restrictions.

                      Open Contractual Commitments

    (viii) Deducting, in the case of a broker or dealer that has open 
contractual commitments (other than those option positions subject to 
appendix A, Sec.  240.15c3-1a), the respective deductions as specified 
in paragraph (c)(2)(vi) of this section or appendix B, Sec.  240.15c3-
1b, from the value (which shall be the market value whenever there is a 
market) of each net long and each net short position contemplated by any 
open contractual commitment in the proprietary or other accounts of the 
broker or dealer.
    (A) The deduction for contractual commitments in those securities 
that are treated in paragraph (c)(2)(vi)(J) of this section shall be 30 
percent unless the class and issue of the securities subject to the open 
contractual commitment deduction are listed for trading on a national 
securities exchange or are designated as NASDAQ National Market System 
Securities.
    (B) A broker or dealer that maintains in excess of $250,000 of net 
capital may add back to net worth up to $150,000 of any deduction 
computed under this paragraph (c)(2)(viii)(B).
    (C) The deduction with respect to any single commitment shall be 
reduced by the unrealized profit in such commitment, in an amount not 
greater than the deduction provided for by this paragraph (or increased 
by the unrealized loss), in such commitment, and in no event shall an 
unrealized profit on any closed transactions operate to increase net 
capital.
    (ix) Deducting from the contract value of each failed to deliver 
contract that is outstanding five business days or longer (21 business 
days or longer in the case of municipal securities) the percentages of 
the market value of the underlying security that would be required by 
application of the deduction required by paragraph (c)(2)(vi) of this 
section. Such deduction, however, shall be increased by any excess of 
the contract price of the failed to deliver contract over the market 
value of the underlying security or reduced by any excess of the market 
value of the underlying security over the contract value of the failed 
to deliver contract, but not to exceed the amount of such deduction. The 
designated examining authority for the broker or dealer may, upon 
application of the broker or dealer, extend for a period up to 5 
business days, any period herein specified when it is satisfied that the 
extension is warranted. The designated examining authority upon 
expiration of the extension may extend for one additional period of up 
to 5 business days, any period herein specified when it is satisfied 
that the extension is warranted.

   Brokers or Dealers Carrying Accounts of Listed Options Specialists

    (x)(A) With respect to any transaction of a specialist in listed 
options, who is either not otherwise subject to the provisions of this 
section or is described in paragraph (c)(2)(vi)(N) of this section, for 
whose specialist account a broker or dealer acts as a guarantor, 
endorser, or carrying broker or dealer, such broker or dealer shall 
adjust its net worth by deducting as of noon of each business day the 
amounts computed as of the prior business day pursuant to Sec.  
240.15c3-1a. The required deductions may be reduced by any liquidating 
equity that exists in such specialist's market-maker account as of that 
time and shall be increased to the extent of any liquidating deficit in

[[Page 406]]

such account. Noon shall be determined according to the local time where 
the broker or dealer is headquartered. In no event shall excess equity 
in the specialist's market-maker account result in an increase of the 
net capital of any such guarantor, endorser, or carrying broker or 
dealer.
    (B) Definitions. (1) The term listed option shall mean any option 
traded on a registered national securities exchange or automated 
facility of a registered national securities association.
    (2) For purposes of this section, the equity in an individual 
specialist's market-maker account shall be computed by:
    (i) Marking all securities positions long or short in the account to 
their respective current market values;
    (ii) Adding (deducting in the case of a debit balance) the credit 
balance carried in such specialist's market-maker account; and
    (iii) Adding (deducting in the case of short positions) the market 
value of positions long in such account.
    (C) No guarantor, endorser, or carrying broker or dealer shall 
permit the sum of the deductions required pursuant to Sec.  240.15c3-1a 
in respect of all transactions in specialists' market-maker accounts 
guaranteed, endorsed, or carried by such broker or dealer to exceed 
1,000 percent of such broker's or dealer's net capital as defined in 
Sec.  240.15c3-1(c)(2) for any period exceeding three business days. If 
at any time such sum exceeds 1,000 percent of such broker's or dealer's 
net capital, then the broker or dealer shall:
    (1) Immediately transmit telegraphic or facsimile notice of such 
event to the Division of Market Regulation in the headquarters office of 
the Commission in Washington, DC, to the regional office of the 
Commission for the region in which the broker or dealer maintains its 
principal place of business, and to its examining authority designated 
pursuant to section 17(d) of the Act (15 U.S.C. 78q(d)) (``Designated 
Examining Authority''); and
    (2) Be subject to the prohibitions against withdrawal of equity 
capital set forth in Sec.  240.15c3-1(e) and to the prohibitions against 
reduction, prepayment, and repayment of subordination agreements set 
forth in paragraph (b)(11) of Sec.  240.15c3-1d, as if such broker or 
dealer's net capital were below the minimum standards specified by each 
of those paragraphs.
    (D) If at any time there is a liquidating deficit in a specialist's 
market-maker account, then the broker or dealer guaranteeing, endorsing, 
or carrying listed options transactions in such specialist's market-
maker account may not extend any further credit in that account, and 
shall take steps to liquidate promptly existing positions in the 
account. This paragraph shall not prevent the broker or dealer from, 
upon approval by the broker's or dealer's Designated Examining 
Authority, entering into hedging positions in the specialist's market-
maker account. The broker or dealer also shall transmit telegraphic or 
facsimile notice of the deficit and its amount by the close of business 
of the following business day to its Designated Examining Authority and 
the Designated Examining Authority of the specialist, if different from 
its own.
    (E) Upon written application to the Commission by the specialist and 
the broker or dealer guaranteeing, endorsing, or carrying options 
transactions in such specialist's market-maker account, the Commission 
may approve upon specified terms and conditions lesser adjustments to 
net worth than those specified in Sec.  240.15c3-1a.
    (xi) Brokers or dealers carrying specialists or market makers 
accounts. With respect to a broker or dealer who carries a market maker 
or specialist account, or with respect to any transaction in options 
listed on a registered national securities exchange for which a broker 
or dealer acts as a guarantor or endorser of options written by a 
specialist in a specialist account, the broker or dealer shall deduct, 
for each account carried or for each class or series of options 
guaranteed or endorsed, any deficiency in collateral required by 
paragraph (a)(6) of this section.
    (xii)(A) Deduction from net worth for certain undermargined 
accounts. Deducting the amount of cash required in each customer's or 
non-customer's account to meet the maintenance margin requirements of 
the Examining Authority for the broker or dealer, after application of 
calls for margin, marks

[[Page 407]]

to the market or other required deposits which are outstanding 5 
business days or less.
    (B) Deducting the amount of cash required in the account of each 
security-based swap and swap customer to meet the margin requirements of 
a clearing agency, Examining Authority, the Commission, derivatives 
clearing organization, or the Commodity Futures Trading Commission, as 
applicable, after application of calls for margin, marks to the market, 
or other required deposits which are outstanding within the required 
time frame to collect the margin, mark to the market, or other required 
deposits.
    (xiii) Deduction from net worth for indebtedness collateralized by 
exempted securities. Deducting, at the option of the broker or dealer, 
in lieu of including such amounts in aggregate indebtedness, 4 percent 
of the amount of any indebtedness secured by exempted securities or 
municipal securities if such indebtedness would otherwise be includable 
in aggregate indebtedness.
    (xiv) Deduction from net worth for excess deductible amounts related 
to fidelity bond coverage. Deducting the amount specified by rule of the 
Examining Authority for the broker or dealer with respect to a 
requirement to maintain fidelity bond coverage.
    (xv) Deduction from net worth in lieu of collecting collateral for 
non-cleared security-based swap and swap transactions--(A) Security-
based swaps. Deducting the initial margin amount calculated pursuant to 
Sec.  240.18a-3(c)(1)(i)(B) for the account of a counterparty at the 
broker or dealer that is subject to a margin exception set forth in 
Sec.  240.18a-3(c)(1)(iii), less the margin value of collateral held in 
the account.
    (B) Swaps. Deducting the initial margin amount calculated pursuant 
to the margin rules of the Commodity Futures Trading Commission in the 
account of a counterparty at the broker or dealer that is subject to a 
margin exception in those rules, less the margin value of collateral 
held in the account.
    (C) Treatment of collateral held at a third-party custodian. For the 
purposes of the deductions required pursuant to paragraphs (c)(2)(xv)(A) 
and (B) of this section, collateral held by an independent third-party 
custodian as initial margin may be treated as collateral held in the 
account of the counterparty at the broker or dealer if:
    (1) The independent third-party custodian is a bank as defined in 
section 3(a)(6) of the Act or a registered U.S. clearing organization or 
depository that is not affiliated with the counterparty or, if the 
collateral consists of foreign securities or currencies, a supervised 
foreign bank, clearing organization, or depository that is not 
affiliated with the counterparty and that customarily maintains custody 
of such foreign securities or currencies;
    (2) The broker or dealer, the independent third-party custodian, and 
the counterparty that delivered the collateral to the custodian have 
executed an account control agreement governing the terms under which 
the custodian holds and releases collateral pledged by the counterparty 
as initial margin that is a legal, valid, binding, and enforceable 
agreement under the laws of all relevant jurisdictions, including in the 
event of bankruptcy, insolvency, or a similar proceeding of any of the 
parties to the agreement, and that provides the broker or dealer with 
the right to access the collateral to satisfy the counterparty's 
obligations to the broker or dealer arising from transactions in the 
account of the counterparty; and
    (3) The broker or dealer maintains written documentation of its 
analysis that in the event of a legal challenge the relevant court or 
administrative authorities would find the account control agreement to 
be legal, valid, binding, and enforceable under the applicable law, 
including in the event of the receivership, conservatorship, insolvency, 
liquidation, or a similar proceeding of any of the parties to the 
agreement.

                           Exempted Securities

    (3) The term exempted securities shall mean those securities deemed 
exempted securities by section 3(a)(12) of the Securities Exchange Act 
of 1934 and rules thereunder.

                         Contractual Commitments

    (4) The term contractual commitments shall include underwriting, 
when

[[Page 408]]

issued, when distributed and delayed delivery contracts, the writing or 
endorsement of puts and calls and combinations thereof, commitments in 
foreign currencies, and spot (cash) commodities contracts, but shall not 
include uncleared regular way purchases and sales of securities and 
contracts in commodities futures. A series of contracts of purchase or 
sale of the same security conditioned, if at all, only upon issuance may 
be treated as an individual commitment.

                           Adequately Secured

    (5) Indebtedness shall be deemed to be adequately secured within the 
meaning of this section when the excess of the market value of the 
collateral over the amount of the indebtedness is sufficient to make the 
loan acceptable as a fully secured loan to banks regularly making 
secured loans to brokers or dealers.

                                Customer

    (6) The term customer shall mean any person from whom, or on whose 
behalf, a broker or dealer has received, acquired or holds funds or 
securities for the account of such person, but shall not include a 
broker or dealer or a registered municipal securities dealer, or a 
general, special or limited partner or director or officer of the broker 
or dealer, or any person to the extent that such person has a claim for 
property or funds which by contract, agreement, or understanding, or by 
operation of law, is part of the capital of the broker or dealer. 
Provided, however, That the term ``customer'' shall also include a 
broker or dealer, but only insofar as such broker or dealer maintains a 
special omnibus account carried with another broker or dealer in 
compliance with 12 CFR 220.4(b) of Regulation T under the Securities 
Exchange Act of 1934.

                              Non-Customer

    (7) The term non-customer means a broker or dealer, registered 
municipal securities dealer, general partner, limited partner, officer, 
director and persons to the extent their claims are subordinated to the 
claims of creditors of the broker or dealer.

                              Market Maker

    (8) The term market maker shall mean a dealer who, with respect to a 
particular security, (i) regularly publishes bona fide, competitive bid 
and offer quotations in a recognized interdealer quotation system; or 
(ii) furnishes bona fide competitive bid and offer quotations on 
request; and, (iii) is ready, willing and able to effect transactions in 
reasonable quantities at his quoted prices with other brokers or 
dealers.

                      Promptly Transmit and Deliver

    (9) A broker or dealer is deemed to ``promptly transmit'' all funds 
and to ``promptly deliver'' all securities within the meaning of 
paragraphs (a)(2)(i) and (a)(2)(v) of this section where such 
transmission or delivery is made no later than noon of the next business 
day after the receipt of such funds or securities; provided, however, 
that such prompt transmission or delivery shall not be required to be 
effected prior to the settlement date for such transaction.

                            Promptly Forward

    (10) A broker or dealer is deemed to ``promptly forward'' funds or 
securities within the meaning of paragraph (a)(2)(i) of this section 
only when such forwarding occurs no later than noon of the next business 
day following receipt of such funds or securities.

                              Ready Market

    (11)(i) The term ready market shall include a recognized established 
securities market in which there exists independent bona fide offers to 
buy and sell so that a price reasonably related to the last sales price 
or current bona fide competitive bid and offer quotations can be 
determined for a particular security almost instantaneously and where 
payment will be received in settlement of a sale at such price within a 
relatively short time conforming to trade custom.
    (ii) A ready market shall also be deemed to exist where securities 
have been accepted as collateral for a loan by a bank as defined in 
section 3(a)(6) of the Securities Exchange Act of 1934

[[Page 409]]

and where the broker or dealer demonstrates to its Examining Authority 
that such securities adequately secure such loans as that term is 
defined in paragraph (c)(5) of this section.

                           Examining Authority

    (12) The term Examining Authority of a broker or dealer shall mean 
for the purposes of 17 CFR 240.15c3-1 and 240.15c3-1a-d the national 
securities exchange or national securities association of which the 
broker or dealer is a member or, if the broker or dealer is a member of 
more than one such self-regulatory organization, the organization 
designated by the Commission as the Examining Authority for such broker 
or dealer, or if the broker or dealer is not a member of any such self-
regulatory organization, the Regional Office of the Commission where 
such broker or dealer has its principal place of business.

                Entities That Have a Principal Regulator

    (13)(i) For purposes of Sec.  240.15c3-1e and Sec.  240.15c3-1g, the 
term entity that has a principal regulator shall mean a person (other 
than a natural person) that is not a registered broker or dealer (other 
than a broker or dealer registered under section 15(b)(11) of the Act 
(15 U.S.C. 78o(b)(11)), provided that the person is:
    (A) An insured depository institution as defined in section 3(c)(2) 
of the Federal Deposit Insurance Act (12 U.S.C. 1813(c)(2));
    (B) Registered as a futures commission merchant or an introducing 
broker with the Commodity Futures Trading Commission;
    (C) Registered with or licensed by a State insurance regulator and 
issues any insurance, endowment, or annuity policy or contract;
    (D) A foreign bank as defined in section 1(b)(7) of the 
International Banking Act of 1978 (12 U.S.C. 3101(7)) that has its 
headquarters in a jurisdiction for which any foreign bank has been 
approved by the Board of Governors of the Federal Reserve System to 
conduct business pursuant to the standards set forth in 12 CFR 
211.24(c), provided such foreign bank represents to the Commission that 
it is subject to the same supervisory regime as the foreign bank 
previously approved by the Board of Governors of the Federal Reserve 
System;
    (E) Not primarily in the securities business, and the person is:
    (1) A corporation organized under section 25A of the Federal Reserve 
Act (12 U.S.C. 611 through 633); or
    (2) A corporation having an agreement or undertaking with the Board 
of Governors of the Federal Reserve System under section 25 of the 
Federal Reserve Act (12 U.S.C. 601 through 604a); or
    (F) A person that the Commission finds is another entity that is 
subject to comprehensive supervision, has in place appropriate 
arrangements so that information that the person provides to the 
Commission is sufficiently reliable for the purposes of determining 
compliance with Sec.  240.15c3-1e and Sec.  240.15c3-1g, and it is 
appropriate to consider the person to be an entity that has a principal 
regulator considering all relevant circumstances, including the person's 
mix of business.
    (ii) For purposes of Sec. Sec.  240.15c3-1e, 240.15c3-1g, 240.17h-
1T, and 240.17h2T, the term ultimate holding company that has a 
principal regulator shall mean a person (other than a natural person) 
that:
    (A) Is a financial holding company or a company that is treated as a 
financial holding company under the Bank Holding Company Act of 1956 (12 
U.S.C. 1840 et seq.), or
    (B) The Commission determines to be an ultimate holding company that 
has a principal regulator, if that person is subject to consolidated, 
comprehensive supervision; there are in place appropriate arrangements 
so that information that the person provides to the Commission is 
sufficiently reliable for the purposes of determining compliance with 
Sec.  240.15c3-1e and Sec.  240.15c3-1g; and it is appropriate to 
consider the person to be an ultimate holding company that has a 
principal regulator in view of all relevant circumstances, including the 
person's mix of business.
    (14) The term municipal securities shall mean those securities 
included within the definition of ``municipal securities'' in section 
3(a)(29) of the Securities Exchange Act of 1934.

[[Page 410]]

    (15) The term tentative net capital shall mean the net capital of a 
broker or dealer before deducting the securities haircuts computed 
pursuant to paragraph (c)(2)(vi) of this section and the charges on 
inventory computed pursuant to appendix B to this section (Sec.  
240.15c3-1b). However, for purposes of paragraph (a)(5) of this section, 
the term tentative net capital means the net capital of an OTC 
derivatives dealer before deducting the charges for market and credit 
risk as computed pursuant to appendix F to this section (Sec.  240.15c3-
1f) or paragraph (c)(2)(vi) of this section, if applicable, and 
increased by the balance sheet value (including counterparty net 
exposure) resulting from transactions in eligible OTC derivative 
instruments which would otherwise be deducted by virtue of paragraph 
(c)(2)(iv) of this section. For purposes of paragraph (a)(7) of this 
section, the term tentative net capital means the net capital of the 
broker or dealer before deductions for market and credit risk computed 
pursuant to Sec.  240.15c3-1e or paragraph (c)(2)(vi) of this section, 
if applicable, and increased by the balance sheet value (including 
counterparty net exposure) resulting from transactions in derivative 
instruments which would otherwise be deducted by virtue of paragraph 
(c)(2)(iv) of this section. Tentative net capital shall include 
securities for which there is no ready market, as defined in paragraph 
(c)(11) of this section, if the use of mathematical models has been 
approved for purposes of calculating deductions from net capital for 
those securities pursuant to Sec.  240.15c3-1e.

                                Insolvent

    (16) For the purposes of this section, a broker or dealer is 
insolvent if the broker or dealer:
    (i) Is the subject of any bankruptcy, equity receivership proceeding 
or any other proceeding to reorganize, conserve, or liquidate such 
broker or dealer or its property or is applying for the appointment or 
election of a receiver, trustee, or liquidator or similar official for 
such broker or dealer or its property;
    (ii) Has made a general assignment for the benefit of creditors;
    (iii) Is insolvent within the meaning of section 101 of title 11 of 
the United States Code, or is unable to meet its obligations as they 
mature, and has made an admission to such effect in writing or in any 
court or before any agency of the United States or any State; or
    (iv) Is unable to make such computations as may be necessary to 
establish compliance with this section or with Sec.  240.15c3-3.
    (17) The term risk margin amount means the sum of:
    (i) The total initial margin required to be maintained by the broker 
or dealer at each clearing agency with respect to security-based swap 
transactions cleared for security-based swap customers; and
    (ii) The total initial margin amount calculated by the broker or 
dealer with respect to non-cleared security-based swaps pursuant to 
Sec.  240.18a-3(c)(1)(i)(B).
    (d) Debt-equity requirements. No broker or dealer shall permit the 
total of outstanding principal amounts of its satisfactory subordination 
agreements (other than such agreements which qualify under this 
paragraph (d) as equity capital) to exceed 70 percent of its debt-equity 
total, as hereinafter defined, for a period in excess of 90 days or for 
such longer period which the Commission may, upon application of the 
broker or dealer, grant in the public interest or for the protection of 
investors. In the case of a corporation, the debt-equity total shall be 
the sum of its outstanding principal amounts of satisfactory 
subordination agreements, par or stated value of capital stock, paid in 
capital in excess of par, retained earnings, unrealized profit and loss 
or other capital accounts. In the case of a partnership, the debt-equity 
total shall be the sum of its outstanding principal amounts of 
satisfactory subordination agreements, capital accounts of partners 
(exclusive of such partners' securities accounts) subject to the 
provisions of paragraph (e) of this section, and unrealized profit and 
loss. In the case of a sole proprietorship, the debt-equity total shall 
include the sum of its outstanding principal amounts of satisfactory 
subordination agreements, capital accounts of the sole proprietorship 
and unrealized

[[Page 411]]

profit and loss. Provided, however, That a satisfactory subordination 
agreement entered into by a partner or stockholder which has an initial 
term of at least three years and has a remaining term of not less than 
12 months shall be considered equity for the purposes of this paragraph 
(d) if:
    (1) It does not have any of the provisions for accelerated maturity 
provided for by paragraphs (b)(9)(i), (10)(i) or (10)(ii) of Appendix 
(D) (17 CFR 240.15c3-1d) and is maintained as capital subject to the 
provisions restricting the withdrawal thereof required by paragraph (e) 
of this section or
    (2) The partnership agreement provides that capital contributed 
pursuant to a satisfactory subordination agreement as defined in 
Appendix (D) (17 CFR 240.15c3-1d) shall in all respects be partnership 
capital subject to the provisions restricting the withdrawal thereof 
required by paragraph (e) of this section.
    (e)(1) Notice provisions relating to limitations on the withdrawal 
of equity capital. No equity capital of the broker or dealer or a 
subsidiary or affiliate consolidated pursuant to appendix C (17 CFR 
240.15c3-1c) may be withdrawn by action of a stockholder or a partner or 
by redemption or repurchase of shares of stock by any of the 
consolidated entities or through the payment of dividends or any similar 
distribution, nor may any unsecured advance or loan be made to a 
stockholder, partner, sole proprietor, employee or affiliate without 
written notice given in accordance with paragraph (e)(1)(iv) of this 
section:
    (i) Two business days prior to any withdrawals, advances or loans if 
those withdrawals, advances or loans on a net basis exceed in the 
aggregate in any 30 calendar day period, 30 percent of the broker or 
dealer's excess net capital. A broker or dealer, in an emergency 
situation, may make withdrawals, advances or loans that on a net basis 
exceed 30 percent of the broker or dealer's excess net capital in any 30 
calendar day period without giving the advance notice required by this 
paragraph, with the prior approval of its Examining Authority. Where a 
broker or dealer makes a withdrawal with the consent of its Examining 
Authority, it shall in any event comply with paragraph (e)(1)(ii) of 
this section; or
    (ii) Two business days after any withdrawals, advances or loans if 
those withdrawals, advances or loans on a net basis exceed in the 
aggregate in any 30 calendar day period, 20 percent of the broker or 
dealer's excess net capital.
    (iii) This paragraph (e)(1) does not apply to:
    (A) Securities or commodities transactions in the ordinary course of 
business between a broker or dealer and an affiliate where the broker or 
dealer makes payment to or on behalf of such affiliate for such 
transaction and then receives payment from such affiliate for the 
securities or commodities transaction within two business days from the 
date of the transaction; or
    (B) Withdrawals, advances or loans which in the aggregate in any 
thirty calendar day period, on a net basis, equal $500,000 or less.
    (iv) Each required notice shall be effective when received by the 
Commission in Washington, DC, the regional office of the Commission for 
the region in which the broker or dealer has its principal place of 
business, the broker or dealer's Examining Authority and the Commodity 
Futures Trading Commission if such broker or dealer is registered with 
that Commission.
    (2) Limitations on Withdrawal of equity capital. No equity capital 
of the broker or dealer or a subsidiary or affiliate consolidated 
pursuant to appendix C (17 CFR 240.15c3-1c) may be withdrawn by action 
of a stockholder or a partner or by redemption or repurchase of shares 
of stock by any of the consolidated entities or through the payment of 
dividends or any similar distribution, nor may any unsecured advance or 
loan be made to a stockholder, partner, sole proprietor, employee or 
affiliate, if after giving effect thereto and to any other such 
withdrawals, advances or loans and any Payments of Payment Obligations 
(as defined in appendix D (17 CFR 240.15c3-1d)) under satisfactory 
subordination agreements which are scheduled to occur within 180 days 
following such withdrawal, advance or loan if:

[[Page 412]]

    (i) The broker or dealer's net capital would be less than 120 
percent of the minimum dollar amount required by paragraph (a) of this 
section;
    (ii) The broker-dealer is registered as a futures commission 
merchant, its net capital would be less than 7 percent of the funds 
required to be segregated pursuant to the Commodity Exchange Act and the 
regulations thereunder (less the market value of commodity options 
purchased by option customers on or subject to the rules of a contract 
market, each such deduction not to exceed the amount of funds in the 
option customer's account);
    (iii) The broker-dealer's net capital would be less than 25 percent 
of deductions from net worth in computing net capital required by 
paragraphs (c)(2)(vi), (f) and appendix A, of this section, unless the 
broker or dealer has the prior approval of the Commission to make such 
withdrawal;
    (iv) The total outstanding principal amounts of satisfactory 
subordination agreements of the broker or dealer and any subsidiaries or 
affiliates consolidated pursuant to appendix C (17 CFR 240.15c3-1c) 
(other than such agreements which qualify as equity under paragraph (d) 
of this section) would exceed 70% of the debt-equity total as defined in 
paragraph (d) of this section;
    (v) The broker or dealer is subject to the aggregate indebtedness 
limitations of paragraph (a) of this section, the aggregate indebtedness 
of any of the consolidated entities exceeds 1000 percent of its net 
capital; or
    (vi) The broker or dealer is subject to the alternative net capital 
requirement of paragraph (f) of this section, its net capital would be 
less than 5 percent of aggregate debit items computed in accordance with 
17 CFR 240.15c3-3a.
    (3)(i) Temporary restrictions on withdrawal of net capital. The 
Commission may by order restrict, for a period of up to twenty business 
days, any withdrawal by the broker or dealer of equity capital or 
unsecured loan or advance to a stockholder, partner, sole proprietor, 
member, employee or affiliate under such terms and conditions as the 
Commission deems necessary or appropriate in the public interest or 
consistent with the protection of investors if the Commission, based on 
the information available, concludes that such withdrawal, advance or 
loan may be detrimental to the financial integrity of the broker or 
dealer, or may unduly jeopardize the broker or dealer's ability to repay 
its customer claims or other liabilities which may cause a significant 
impact on the markets or expose the customers or creditors of the broker 
or dealer to loss without taking into account the application of the 
Securities Investor Protection Act of 1970.
    (ii) An order temporarily prohibiting the withdrawal of capital 
shall be rescinded if the Commission determines that the restriction on 
capital withdrawal should not remain in effect. A hearing on an order 
temporarily prohibiting the withdrawal of capital will be held within 
two business days from the date of the request in writing by the broker 
or dealer.
    (4)(i) Miscellaneous provisions. Excess net capital is that amount 
in excess of the amount required under paragraph (a) of this section. 
For the purposes of paragraphs (e)(1) and (e)(2) of this section, a 
broker or dealer may use the amount of excess net capital and deductions 
required under paragraphs (c)(2)(vi), (f) and appendix A of this section 
reported in its most recently required filed Form X-17A-5 for the 
purposes of calculating the effect of a projected withdrawal, advance or 
loan relative to excess net capital or deductions. The broker or dealer 
must assure itself that the excess net capital or the deductions 
reported on the most recently required filed Form X-17A-5 have not 
materially changed since the time such report was filed.
    (ii) The term equity capital includes capital contributions by 
partners, par or stated value of capital stock, paid-in capital in 
excess of par, retained earnings or other capital accounts. The term 
equity capital does not include securities in the securities accounts of 
partners and balances in limited partners' capital accounts in excess of 
their stated capital contributions.
    (iii) Paragraphs (e)(1) and (e)(2) of this section shall not 
preclude a broker or dealer from making required tax payments or 
preclude the payment to partners of reasonable compensation,

[[Page 413]]

and such payments shall not be included in the calculation of 
withdrawals, advances, or loans for purposes of paragraphs (e)(1) and 
(e)(2) of this section.
    (iv) For the purpose of this paragraph (e) of this section, any 
transaction between a broker or dealer and a stockholder, partner, sole 
proprietor, employee or affiliate that results in a diminution of the 
broker or dealer's net capital shall be deemed to be an advance or loan 
of net capital.

[40 FR 29799, July 16, 1975]

    Editorial Note: For Federal Register citations affecting Sec.  
240.15c3-1, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.govinfo.gov.



Sec.  240.15c3-1a  Options (Appendix A to 17 CFR 240.15c3-1).

    (a) Definitions. (1) The term unlisted option shall mean any option 
not included in the definition of listed option provided in paragraph 
(c)(2)(x) of Sec.  240.15c3-1.
    (2) The term option series refers to listed option contracts of the 
same type (either a call or a put) and exercise style, covering the same 
underlying security with the same exercise price, expiration date, and 
number of underlying units.
    (3) The term related instrument within an option class or product 
group refers to futures contracts, options on futures contracts, 
security-based swaps on a narrow-based security index, and swaps 
covering the same underlying instrument. In relation to options on 
foreign currencies, a related instrument within an option class also 
shall include forward contracts on the same underlying currency.
    (4) The term underlying instrument refers to long and short 
positions, as appropriate, covering the same foreign currency, the same 
security, security future, or security-based swap other than a security-
based swap on a narrow-based security index, or a security which is 
exchangeable for or convertible into the underlying security within a 
period of 90 days. If the exchange or conversion requires the payment of 
money or results in a loss upon conversion at the time when the security 
is deemed an underlying instrument for purposes of this section, the 
broker or dealer will deduct from net worth the full amount of the 
conversion loss. The term underlying instrument shall not be deemed to 
include securities options, futures contracts, options on futures 
contracts, security-based swaps on a narrow-based security index, 
qualified stock baskets, unlisted instruments, or swaps.
    (5) The term options class refers to all options contracts covering 
the same underlying instrument.
    (6) The term product group refers to two or more option classes, 
related instruments, underlying instruments, and qualified stock baskets 
in the same portfolio type (see paragraph (b)(1)(ii) of this section) 
for which it has been determined that a percentage of offsetting profits 
may be applied to losses at the same valuation point.
    (b) The deduction under this Appendix A to Sec.  240.15c3-1 shall 
equal the sum of the deductions specified in paragraphs (b)(1)(v)(C) or 
(b)(2) of this section.

                       Theoretical Pricing Charges

    (1)(i) Definitions. (A) The terms theoretical gains and losses shall 
mean the gain and loss in the value of individual option series, the 
value of underlying instruments, related instruments, and qualified 
stock baskets within that option's class, at 10 equidistant intervals 
(valuation points) ranging from an assumed movement (both up and down) 
in the current market value of the underlying instrument equal to the 
percentage corresponding to the deductions otherwise required under 
Sec.  240.15c3-1 for the underlying instrument (See paragraph 
(a)(1)(iii) of this section). Theoretical gains and losses shall be 
calculated using a theoretical options pricing model that satisfies the 
criteria set forth in paragraph (a)(1)(i)(B) of this section.
    (B) The term theoretical options pricing model shall mean any 
mathematical model, other than a broker-dealer proprietary model, 
approved by a Designated Examining Authority. Such Designated Examining 
Authority shall submit the model to the Commission, together with a 
description of its methods for approving models. Any such model shall 
calculate theoretical gains

[[Page 414]]

and losses as described in paragraph (a)(1)(i)(A) of this section for 
all series and issues of equity, index and foreign currency options and 
related instruments, and shall be made available equally and on the same 
terms to all registered brokers or dealers. Its procedures shall include 
the arrangement of the vendor to supply accurate and timely data to each 
broker-dealer with respect to its services, and the fees for 
distribution of the services. The data provided to brokers or dealers 
shall also contain the minimum requirements set forth in paragraphs 
(b)(1)(v)(C) of this section and the product group offsets set forth in 
paragraphs (b)(1)(v)(B) of this section. At a minimum, the model shall 
consider the following factors in pricing the option:
    (1) The current spot price of the underlying asset;
    (2) The exercise price of the option;
    (3) The remaining time until the option's expiration;
    (4) The volatility of the underlying asset;
    (5) Any cash flows associated with ownership of the underlying asset 
that can reasonably be expected to occur during the remaining life of 
the option; and
    (6) The current term structure of interest rates.
    (C) The term major market foreign currency shall mean the currency 
of a sovereign nation for which there is a substantial inter-bank 
forward currency market.
    (D) The term qualified stock basket shall mean a set or basket of 
stock positions which represents no less than 50% of the capitalization 
for a high-capitalization or non-high-capitalization diversified market 
index, or, in the case of a narrow-based index, no less than 95% of the 
capitalization for such narrow-based index.
    (ii) With respect to positions involving listed options in a single 
specialist's market-maker account, and, separately, with respect to 
positions involving listed option positions in its proprietary or other 
account, the broker or dealer shall group long and short positions into 
the following portfolio types:
    (A) Equity options on the same underlying instrument and positions 
in that underlying instrument;
    (B) Options on the same major market foreign currency, positions in 
that major market foreign currency, and related instruments within those 
options' classes;
    (C) High-capitalization diversified market index options, related 
instruments within the option's class, and qualified stock baskets in 
the same index;
    (D) Non-high-capitalization diversified index options, related 
instruments within the index option's class, and qualified stock baskets 
in the same index; and
    (E) Narrow-based index options, related instruments within the index 
option's class, and qualified stock baskets in the same index.
    (iii) Before making the computation, each broker or dealer shall 
obtain the theoretical gains and losses for each options series and for 
the related and underlying instruments within those options' class in 
each specialist's market-maker account guaranteed, endorsed, or carried 
by a broker or dealer, or in the proprietary or other accounts of that 
broker or dealer. For each option series, the theoretical options 
pricing model shall calculate theoretical prices at 10 equidistant 
valuation points within a range consisting of an increase or a decrease 
of the following percentages of the daily market price of the underlying 
instrument:
    (A) + (-)15% for equity securities with a ready market, narrow-based 
indexes, and non-high-capitalization diversified indexes;
    (B) + (-)6% for major market foreign currencies;
    (C) + (-) 20% for all other currencies; and
    (D) + (-)10% for high-capitalization diversified indexes.
    (iv) As to non-clearing option specialists and market-makers, the 
percentages of the daily market price of the underlying instrument shall 
be:
    (A) + (-) 4\1/2\% for major market foreign currencies; and
    (B) + 6(-)8% for high-capitalization diversified indexes.
    (C) + (-) 10% for a non-clearing market-maker, or specialist in non-
high

[[Page 415]]

capitalization diversified index product group.
    (v)(A) The broker or dealer shall multiply the corresponding 
theoretical gains and losses at each of the 10 equidistant valuation 
points by the number of positions held in a particular options series, 
the related instruments and qualified stock baskets within the option's 
class, and the positions in the same underlying instrument.
    (B) In determining the aggregate profit or loss for each portfolio 
type, the broker or dealer will be allowed the following offsets in the 
following order, provided, that in the case of qualified stock baskets, 
the broker or dealer may elect to net individual stocks between 
qualified stock baskets and take the appropriate deduction on the 
remaining, if any, securities:
    (1) First, a broker or dealer is allowed the following offsets 
within an option's class:
    (i) Between options on the same underlying instrument, positions 
covering the same underlying instrument, and related instruments within 
the option's class, 100% of a position's gain shall offset another 
position's loss at the same valuation point;
    (ii) Between index options, related instruments within the option's 
class, and qualified stock baskets on the same index, 95%, or such other 
amount as designated by the Commission, of gains shall offset losses at 
the same valuation point;
    (2) Second, a broker-dealer is allowed the following offsets within 
an index product group:
    (i) Among positions involving different high-capitalization 
diversified index option classes within the same product group, 90% of 
the gain in a high-capitalization diversified market index option, 
related instruments, and qualified stock baskets within that index 
option's class shall offset the loss at the same valuation point in a 
different high-capitalization diversified market index option, related 
instruments, and qualified stock baskets within that index option's 
class;
    (ii) Among positions involving different non-high-capitalization 
diversified index option classes within the same product group, 75% of 
the gain in a non-high-capitalization diversified market index option, 
related instruments, and qualified stock baskets within that index 
option's class shall offset the loss at the same valuation point in 
another non-high-capitalization diversified market index option, related 
instruments, and qualified stock baskets within that index option's 
class or product group;
    (iii) Among positions involving different narrow-based index option 
classes within the same product group, 90% of the gain in a narrow-based 
market index option, related instruments, and qualified stock baskets 
within that index option's class shall offset the loss at the same 
valuation point in another narrow-based market index option, related 
instruments, and qualified stock baskets within that index option's 
class or product group;
    (iv) No qualified stock basket should offset another qualified stock 
basket; and
    (3) Third, a broker-dealer is allowed the following offsets between 
product groups: Among positions involving different diversified index 
product groups within the same market group, 50% of the gain in a 
diversified market index option, a related instrument, or a qualified 
stock basket within that index option's product group shall offset the 
loss at the same valuation point in another product group;
    (C) For each portfolio type, the total deduction shall be the larger 
of:
    (1) The amount for any of the 10 equidistant valuation points 
representing the largest theoretical loss after applying the offsets 
provided in paragraph (b)(1)(v)(B) if this section; or
    (2) A minimum charge equal to 25% times the multiplier for each 
equity and index option contract and each related instrument within the 
option's class or product group, or $25 for each option on a major 
market foreign currency with the minimum charge for futures contracts 
and options on futures contracts adjusted for contract size 
differentials, not to exceed market value in the case of long positions 
in options and options on futures contracts; plus
    (3) In the case of portfolio types involving index options and 
related instruments offset by a qualified stock basket, there will be a 
minimum charge of 5 percent of the market value

[[Page 416]]

of the qualified stock basket for high-capitalization diversified and 
narrow-based indexes;
    (4) In the case of portfolio types involving index options and 
related instruments offset by a qualified stock basket, there will be a 
minimum charge of 7 \1/2\ percent of the market value of the qualified 
stock basket for non-high-capitalization diversified indexes; and
    (5) In the case of portfolio types involving security futures and 
equity options on the same underlying instrument and positions in that 
underlying instrument, there will be a minimum charge of 25 percent 
times the multiplier for each security future and equity option.

                    Alternative Strategy Based Method

    (2) A broker or dealer may elect to apply the alternative strategy 
based method in accordance with the provisions of this paragraph (b)(2).
    (i) Definitions. (A) The term intrinsic value or in-the-money amount 
shall mean the amount by which the exercise value, in the case of a 
call, is less than the current market value of the underlying 
instrument, and, in the case of a put, is greater than the current 
market value of the underlying instrument.
    (B) The term out-of-the-money amount shall mean the amount by which 
the exercise value, in the case of a call, is greater than the current 
market value of the underlying instrument, and, in the case of a put, is 
less than the current market value of the underlying instrument.
    (C) The term time value shall mean the current market value of an 
option contract that is in excess of its intrinsic value.
    (ii) Every broker or dealer electing to calculate adjustments to net 
worth in accordance with the provisions of this paragraph (b)(2) must 
make the following adjustments to net worth:
    (A) Add the time value of a short position in a listed option; and
    (B) Deduct the time value of a long position in a listed option, 
which relates to a position in the same underlying instrument or in a 
related instrument within the option class or product group as 
recognized in the strategies enumerated in paragraph (b)(2)(iii)(D) of 
this section; and
    (C) Add the net short market value or deduct the long market value 
of listed options as recognized in the strategies enumerated in 
paragraphs (b)(2)(iii)(E)(1) and (2) of this section.
    (iii) In computing net capital after the adjustments provided for in 
paragraph (b)(2)(ii) of this section, every broker or dealer shall 
deduct the percentages specified in this paragraph (b)(2)(iii) for all 
listed option positions, positions covering the same underlying 
instrument and related instruments within the options' class or product 
group.

                             Uncovered Calls

    (A) Where a broker or dealer is short a call, deducting the 
percentage required by paragraphs (c)(2)(vi) (A) through (K) of Sec.  
240.15c3-1 of the current market value of the underlying instrument for 
such option reduced by its out-of-the-money amount, to the extent that 
such reduction does not operate to increase net capital. In no event 
shall this deduction be less than the greater of $250 for each short 
call option contract for 100 shares or 50% of the aforementioned 
percentage.

                             Uncovered Puts

    (B) Where a broker or dealer is short a put, deducting the 
percentage required by paragraphs (c)(2)(vi) (A) through (K) of Sec.  
240.15c3-1 of the current market value of the underlying instrument for 
such option reduced by its out-of-the-money amount, to the extent that 
such reduction does not operate to increase net capital. In no event 
shall the deduction provided by this paragraph be less than the greater 
of $250 for each short put option contract for 100 shares or 50% of the 
aforementioned percentage.

                             Long Positions

    (C) Where a broker or dealer is long puts or calls, deducting 50 
percent of the market value of the net long put and call positions in 
the same options series.

[[Page 417]]

           Certain Security Positions With Offsetting Options

    (D)(1) Where a broker or dealer is long a put for which it has an 
offsetting long position in the same number of units of the same 
underlying instrument, deducting the percentage required by paragraphs 
(c)(2)(vi) (A) through (K) of Sec.  240.15c3-1 of the current market 
value of the underlying instrument for the long offsetting position, not 
to exceed the out-of-the-money amount of the option. In no event shall 
the deduction provided by this paragraph be less than $25 for each 
option contract for 100 shares, provided that the minimum charge need 
not exceed the intrinsic value of the option.
    (2) Where a broker or dealer is long a call for which it has an 
offsetting short position in the same number of units of the same 
underlying instrument, deducting the percentage required by paragraphs 
(c)(2)(vi) (A) through (K) of Sec.  240.15c3-1 of the current market 
value of the underlying instrument for the short offsetting position, 
not to exceed the out-of-the-money amount of the option. In no event 
shall the deduction provided by this paragraph be less than $25 for each 
option contract for 100 shares, provided that the minimum charge need 
not exceed the intrinsic value of the option.
    (3) Where a broker or dealer is short a call for which it has an 
offsetting long position in the same number of units of the same 
underlying instrument, deducting the percentage required by paragraphs 
(c)(2)(vi) (A) through (K) of Sec.  240.15c3-1 of the current market 
value of the underlying instrument for the offsetting long position 
reduced by the short call's intrinsic value. In no event shall the 
deduction provided by this paragraph be less than $25 for each option 
contract for 100 shares.

                        Certain Spread Positions

    (E)(1) Where a broker or dealer is short a listed call and is also 
long a listed call in the same class of options contracts and the long 
option expires on the same date as or subsequent to the short option, 
the deduction, after adjustments required in paragraph (b) of this 
section, shall be the amount by which the exercise value of the long 
call exceeds the exercise value of the short call. If the exercise value 
of the long call is less than or equal to the exercise value of the 
short call, no deduction is required.
    (2) Where a broker or dealer is short a listed put and is also long 
a listed put in the same class of options contracts and the long option 
expires on the same date as or subsequent to the short option, the 
deduction, after the adjustments required in paragraph (b) of this 
section, shall be the amount by which the exercise value of the short 
put exceeds the exercise value of the long put. If the exercise value of 
the long put is equal to or greater than the exercise value of the short 
put, no deduction is required.
    (c) With respect to transactions involving unlisted options, every 
broker or dealer shall determine the value of unlisted option positions 
in accordance with the provision of paragraph (c)(2)(i) of Sec.  
240.15c3-1, and shall deduct the percentages of all securities positions 
or unlisted options in the proprietary or other accounts of the broker 
or dealer specified in this paragraph (c). However, where computing the 
deduction required for a security position as if the security position 
had no related unlisted option position and positions in unlisted 
options as if uncovered would result in a lesser deduction from net 
worth, the broker or dealer may compute such deductions separately.

                             Uncovered Calls

    (1) Where a broker or dealer is short a call, deducting 15 percent 
(or such other percentage required by paragraphs (c)(2)(vi) (A) through 
(K) of Sec.  240.15c3-1) of the current market value of the security 
underlying such option reduced by any excess of the exercise value of 
the call over the current market value of the underlying security. In no 
event shall the deduction provided by this paragraph be less than $250 
for each option contract for 100 shares.

                             Uncovered Puts

    (2) Where a broker or dealer is short a put, deducting 15 percent 
(or such other percentage required by paragraphs (c)(2)(vi) (A) through 
(K) of

[[Page 418]]

Sec.  240.15c3-1) of the current market value of the security underlying 
the option reduced by any excess of the market value of the underlying 
security over the exercise value of the put. In no event shall the 
deduction provided by this paragraph be less than $250 for each option 
contract for 100 shares.

                              Covered Calls

    (3) Where a broker or dealer is short a call and long equivalent 
units of the underlying security, deducting 15 percent (or such other 
percentage required by paragraphs (c)(2)(vi) (A) through (K) of Sec.  
240.15c3-1) of the current market value of the underlying security 
reduced by any excess of the current market value of the underlying 
security over the exercise value of the call. No reduction under this 
paragraph shall have the effect of increasing net capital.

                              Covered Puts

    (4) Where a broker or dealer is short a put and short equivalent 
units of the underlying security, deducting 15 percent (or such other 
percentage required by paragraphs (c)(2)(vi) (A) through (K) of Sec.  
240.15c3-1) of the current market value of the underlying security 
reduced by any excess of the exercise value of the put over the market 
value of the underlying security. No such reduction shall have the 
effect of increasing net capital.

                           Conversion Accounts

    (5) Where a broker or dealer is long equivalent units of the 
underlying security, long a put written or endorsed by a broker or 
dealer and short a call in its proprietary or other accounts, deducting 
5 percent (or 50 percent of such other percentage required by paragraphs 
(c)(2)(vi) (A) through (K) of Sec.  240.15c3-1) of the current market 
value of the underlying security.
    (6) Where a broker or dealer is short equivalent units of the 
underlying security, long a call written or endorsed by a broker or 
dealer and short a put in his proprietary or other accounts, deducting 5 
percent (or 50 percent of such other percentage required by paragraphs 
(c)(2)(vi) (A) through (K) of Sec.  240.15c3-1) of the market value of 
the underlying security.

                              Long Options

    (7) Where a broker or dealer is long a put or call endorsed or 
written by a broker or dealer, deducting 15 percent (or such other 
percentage required by paragraphs (c)(2)(vi) (A) through (K) of Sec.  
240.15c3-1) of the market value of the underlying security, not to 
exceed any value attributed to such option in paragraph (c)(2)(i) of 
Sec.  240.15c3-1.

[62 FR 6481, Feb. 12, 1997, as amended at 78 FR 51901, Aug. 21, 2013; 79 
FR 1549, Jan. 8, 2014; 84 FR 44044, Aug. 22, 2019]



Sec.  240.15c3-1b  Adjustments to net worth and aggregate indebtedness
for certain commodities transactions (appendix B to 17 CFR 240.15c3-1).

    (a) Every broker or dealer in computing net capital pursuant to 17 
CFR 240.15c3-1 shall comply with the following:
    (1) Where a broker or dealer has an asset or liability which is 
treated or defined in paragraph (c) of 17 CFR 240.15c3-1, the inclusion 
or exclusion of all or part of such asset or liability for the 
computation of aggregate indebtedness and net capital shall be in 
accordance with paragraph (c) of 17 CFR 240.15c3-1, except as 
specifically provided otherwise in this appendix B. Where a commodity 
related asset or liability is specifically treated or defined in 17 CFR 
1.17 and is not generally or specifically treated or defined in 17 CFR 
240.15c3-1 or this appendix B, the inclusion or exclusion of all or part 
of such asset or liability for the computation of aggregate indebtedness 
and net capital shall be in accordance with 17 CFR 1.17.

                         Aggregate Indebtedness

    (2) The term aggregate indebtedness as defined in paragraph (c)(1) 
of this section shall exclude with respect to commodity-related 
transactions:
    (i) Indebtedness arising in connection with an advance to a non-
proprietary account when such indebtedness is adequately collateralized 
by spot commodities eligible for delivery on a contract market and when 
such spot commodities are covered.

[[Page 419]]

    (ii) Advances received by the broker or dealer against bills of 
lading issued in connection with the shipment of commodities sold by the 
broker or dealer; and
    (iii) Equity balances in the accounts of general partners.

                               Net Capital

    (3) In computing net capital as defined in paragraph (c)(2) of this 
section, the net worth of a broker or dealer shall be adjusted as 
follows with respect to commodity-related transactions:
    (i) Unrealized profit or loss for certain commodities transactions. 
(A) Unrealized profits shall be added and unrealized losses shall be 
deducted in the commodities accounts of the broker or dealer, including 
unrealized profits and losses on fixed price commitments and forward 
contracts; and
    (B) The value attributed to any commodity option which is not traded 
on a contract market shall be the difference between the option's strike 
price and the market value for the physical or futures contract which is 
the subject of the option. In the case of a long call commodity option, 
if the market value for the physical or futures contract which is the 
subject of the option is less than the strike price of the option, it 
shall be given no value. In the case of a long put commodity option, if 
the market value for the physical commodity or futures contract which is 
the subject of the option is more than the striking price of the option, 
it shall be given no value.
    (ii) Deduct any unsecured commodity futures or option account 
containing a ledger balance and open trades, the combination of which 
liquidates to a deficit or containing a debit ledger balance only: 
Provided, however, Deficits or debit ledger balances in unsecured 
customers', non-customers' and proprietary accounts, which are the 
subject of calls for margin or other required deposits need not be 
deducted until the close of business on the business day following the 
date on which such deficit or debit ledger balance originated;
    (iii) Deduct all unsecured receivables, advances and loans except 
for:
    (A) Management fees receivable from commodity pools outstanding no 
longer than thirty (30) days from the date they are due;
    (B) Receivables from foreign clearing organizations;
    (C) Receivables from registered futures commission merchants or 
brokers, resulting from cleared swap transactions or, commodity futures 
or option transactions, except those specifically excluded under 
paragraph (3)(ii) of this appendix B. In the case of an introducing 
broker or an applicant for registration as an introducing broker, 
include 50 percent of the value of a guarantee or security deposit with 
a futures commission merchant which carries or intends to carry accounts 
for the customers of the introducing broker.
    (iv) Deduct all inventories (including work in process, finished 
goods, raw materials and inventories held for resale) except for readily 
marketable spot commodities; or spot commodities which adequately 
collateralize indebtedness under paragraph (c)(7) of 17 CFR 1.17;
    (v) Guarantee deposits with commodities clearing organizations are 
not required to be deducted from net worth;
    (vi) Stock in commodities clearing organizations to the extent of 
its margin value is not required to be deducted from net worth;
    (vii) Deduct from net worth the amount by which any advances paid by 
the broker or dealer on cash commodity contracts and used in computing 
net capital exceeds 95 percent of the market value of the commodities 
covered by such contracts.
    (viii) Do not include equity in the commodity accounts of partners 
in net worth.
    (ix) In the case of all inventory, fixed price commitments and 
forward contracts, except for inventory and forward contracts in the 
inter-bank market in those foreign currencies which are purchased or 
sold for further delivery on or subject to the rules of a contract 
market and covered by an open futures contract for which there will be 
no charge, deduct the applicable percentage of the net position 
specified below:
    (A) Inventory which is currently registered as deliverable on a 
contract market and covered by an open futures

[[Page 420]]

contract or by a commodity option on a physical--No charge.
    (B) Inventory which is covered by an open futures contract or 
commodity option--5% of the market value.
    (C) Inventory which is not covered--20% of the market value.
    (D) Fixed price commitments (open purchases and sales) and forward 
contracts which are covered by an open futures contract or commodity 
option--10% of the market value.
    (E) Fixed price commitments (open purchases and sales) and forward 
contracts which are not covered by an open futures contract or commodity 
option--20% of the market value.
    (x) Deduct 4% of the market value of commodity options granted 
(sold) by option customers on or subject to the rules of a contract 
market.
    (xi) [Reserved]
    (xii) Deduct for undermargined customer commodity futures accounts 
the amount of funds required in each such account to meet maintenance 
margin requirements of the applicable board of trade or, if there are no 
such maintenance margin requirements, clearing organization margin 
requirements applicable to such positions, after application of calls 
for margin, or other required deposits which are outstanding three 
business days or less. If there are no such maintenance margin 
requirements or clearing organization margin requirements on such 
accounts, then deduct the amount of funds required to provide margin 
equal to the amount necessary after application of calls for margin, or 
other required deposits outstanding three days or less to restore 
original margin when the original margin has been depleted by 50 percent 
or more. Provided, To the extent a deficit is deducted from net worth in 
accordance with paragraph (a)(3)(ii) of this appendix B, such amount 
shall not also be deducted under this paragraph (a)(3)(xii). In the 
event that an owner of a customer account has deposited an asset other 
than cash to margin, guarantee or secure his account, the value 
attributable to such asset for purposes of this paragraph shall be the 
lesser of (A) the value attributable to such asset pursuant to the 
margin rules of the applicable board of trade, or (B) the market value 
of such asset after application of the percentage deductions specified 
in paragraph (a)(3)(ix) of this appendix B or, where appropriate, 
specified in paragraph (c)(2)(vi) or (c)(2)(vii) of Sec.  240.15c3-1 
this chapter;
    (xiii) Deduct for undermargined non-customer and omnibus commodity 
futures accounts the amount of funds required in each such account to 
meet maintenance margin requirements of the applicable board of trade 
or, if there are no such maintenance margin requirements, clearing 
organization margin requirements applicable to such positions, after 
application of calls for margin, or other required deposits which are 
outstanding two business days or less. If there are no such maintenance 
margin requirements or clearing organization margin requirements, then 
deduct the amount of funds required to provide margin equal to the 
amount necessary after application of calls for margin, or other 
required deposits outstanding two days or less to restore original 
margin when the original margin has been depleted by 50 percent or more. 
Provided, To the extent a deficit is deducted from net worth in 
accordance with paragraph (a)(3)(ii) of this appendix B such amount 
shall not also be deducted under this paragraph (a)(3)(xiii). In the 
event that an owner of a non-customer or omnibus account has deposited 
an asset other than cash to margin, guarantee or secure his account, the 
value attributable to such asset for purposes of this paragraph shall be 
the lesser of (A) the value attributable to such asset pursuant to the 
margin rules of the applicable board of trade, or (B) the market value 
of such asset after application of the percentage deductions specified 
in paragraph (a)(3)(ix) of this appendix B or, where appropriate, 
specified in paragraph (c)(2)(vi) or (c)(2)(vii) of Sec.  240.15c3-1 of 
this chapter;
    (xiv) In the case of open futures contracts and granted (sold) 
commodity options held in proprietary accounts carried by the broker or 
dealer which are not covered by a position held by the broker or dealer 
or which are not the result of a ``changer trade made in accordance with 
the rules of a contract market, deduct:
    (A) For a broker or dealer which is a clearing member of a contract 
market

[[Page 421]]

for the positions on such contract market cleared by such member, the 
applicable margin requirement of the applicable clearing organization;
    (B) For a broker or dealer which is a member of a self-regulatory 
organization 150% of the applicable maintenance margin requirement of 
the applicable board of trade or clearing organization, whichever is 
greater; or
    (C) For all other brokers or dealers, 200% of the applicable 
maintenance margin requirement of the applicable board of trade or 
clearing organization, whichever is greater; or
    (D) For open contracts or granted (sold) commodity options for which 
there are no applicable maintenance margin requirements, 200% of the 
applicable initial margin requirement;
    Provided, the equity in any such proprietary account shall reduce 
the deduction required by this paragraph (a)(3)(xiv) if such equity is 
not otherwise includable in net capital.
    (xv) In the case of a broker or dealer which is a purchaser of a 
commodity option which is traded on a contract market the deduction 
shall be the same safety factor as if the broker or dealer were the 
grantor of such option in accordance with paragraph (a)(3)(xiv), but in 
no event shall the safety factor be greater than the market value 
attributed to such option.
    (xvi) In the case of a broker or dealer which is a purchaser of a 
commodity option not traded on a contract market which has value and 
such value is used to increase net capital, the deduction is ten percent 
of the market value of the physical or futures contract which is the 
subject of such option but in no event more than the value attributed to 
such option.
    (xvii) Deduction 5% of all unsecured receivables includable under 
paragraph (a)(3)(iii)(C) of this appendix B used by the broker or dealer 
in computing ``net capital'' and which are not receivable from (A) a 
futures commission merchant registered as such with the Commodity 
Futures Trading Commission, or (B) a broker or dealer which is 
registered as such with the Securities and Exchange Commission.
    (xviii) A loan or advance or any other form of receivable shall not 
be considered ``secured'' for the purposes of paragraph (a)(3) of this 
appendix B unless the following conditions exist:
    (A) The receivable is secured by readily marketable collateral which 
is otherwise unencumbered and which can be readily converted into cash: 
Provided, however, That the receivable will be considered secured only 
to the extent of the market value of such collateral after application 
of the percentage deductions specified in paragraph (a)(3)(ix) of this 
appendix B; and
    (B)(1) The readily marketable collateral is in the possession or 
control of the broker or dealer; or
    (2) The broker or dealer has a legally enforceable, written security 
agreement, signed by the debtor, and has a perfected security interest 
in the readily marketable collateral within the meaning of the laws of 
the State in which the readily marketable collateral is located.
    (xix) The term cover for purposes of this appendix B shall mean 
cover as defined in 17 CFR 1.17(j).
    (xx) The term customer for purposes of this Appendix B shall mean 
customer as defined in 17 CFR 1.17(b)(2). The term ``non-customer'' for 
purposes of this appendix B shall mean non-customer as defined in 17 CFR 
1.17(b)(4).
    (b) Every broker or dealer in computing net capital pursuant to 
Sec.  240.15c3-1 must comply with the following:
    (1) Cleared swaps. In the case of a cleared swap held in a 
proprietary account of the broker or dealer, deducting the amount of the 
applicable margin requirement of the derivatives clearing organization 
or, if the swap references an equity security index, the broker or 
dealer may take a deduction using the method specified in Sec.  
240.15c3-1a.
    (2) Non-cleared swaps--(i) Credit default swaps referencing broad-
based security indices. In the case of a non-cleared credit default swap 
for which the deductions in Sec.  240.15c3-1e do not apply:
    (A) Short positions (selling protection). In the case of a non-
cleared swap that is a short credit default swap referencing a broad-
based security index, deducting the percentage of the notional amount 
based upon the current basis point spread of the credit default

[[Page 422]]

swap and the maturity of the credit default swap in accordance table 1 
to Sec.  240.15c3-1a(b)(2)(i)(A):

                                    Table 1 to Sec.   240.15c3-1a(b)(2)(i)(A)
----------------------------------------------------------------------------------------------------------------
                                                                 Basis point spread
   Length of time to maturity of   -----------------------------------------------------------------------------
   credit default swap contract     100 or less    101-300      301-400      401-500      501-699    700 or more
                                         (%)         (%)          (%)          (%)          (%)           (%)
----------------------------------------------------------------------------------------------------------------
Less than 12 months...............         0.67         1.33         3.33         5.00         6.67        10.00
12 months but less than 24 months.         1.00         2.33         5.00         6.67         8.33        11.67
24 months but less than 36 months.         1.33         3.33         6.67         8.33        10.00        13.33
36 months but less than 48 months.         2.00         4.00         8.33        10.00        11.67        15.00
48 months but less than 60 months.         2.67         4.67        10.00        11.67        13.33        16.67
60 months but less than 72 months.         3.67         5.67        11.67        13.33        15.00        18.33
72 months but less than 84 months.         4.67         6.67        13.33        15.00        16.67        20.00
84 months but less than 120 months         5.67        10.00        15.00        16.67        18.33        26.67
120 months and longer.............         6.67        13.33        16.67        18.33        20.00        33.33
----------------------------------------------------------------------------------------------------------------

    (B) Long positions (purchasing protection). In the case of a non-
cleared swap that is a long credit default swap referencing a broad-
based security index, deducting 50 percent of the deduction that would 
be required by paragraph (b)(2)(i)(A) of this section if the non-cleared 
swap was a short credit default swap, each such deduction not to exceed 
the current market value of the long position.
    (C) Long and short credit default swaps. In the case of non-cleared 
swaps that are long and short credit default swaps referencing the same 
broad-based security index, have the same credit events which would 
trigger payment by the seller of protection, have the same basket of 
obligations which would determine the amount of payment by the seller of 
protection upon the occurrence of a credit event, that are in the same 
or adjacent spread category, and that are in the same or adjacent 
maturity category and have a maturity date within three months of the 
other maturity category, deducting the percentage of the notional amount 
specified in the higher maturity category under paragraph (b)(2)(i)(A) 
or (B) of this section on the excess of the long or short position.
    (D) Long basket of obligors and long credit default swap. In the 
case of a non-cleared swap that is a long credit default swap 
referencing a broad-based security index and the broker or dealer is 
long a basket of debt securities comprising all of the components of the 
security index, deducting 50 percent of the amount specified in Sec.  
240.15c3-1(c)(2)(vi) for the component securities, provided the broker 
or dealer can deliver the component securities to satisfy the obligation 
of the broker or dealer on the credit default swap.
    (E) Short basket of obligors and short credit default swap. In the 
case of a non-cleared swap that is a short credit default swap 
referencing a broad-based security index and the broker or dealer is 
short a basket of debt securities comprising all of the components of 
the security index, deducting the amount specified in Sec.  240.15c3-
1(c)(2)(vi) for the component securities.
    (ii) All other swaps. (A) In the case of a non-cleared swap that is 
not a credit default swap for which the deductions in Sec.  240.15c3-1e 
do not apply, deducting the amount calculated by multiplying the 
notional value of the swap by the percentage specified in:
    (1) Section 240.15c3-1 applicable to the reference asset if Sec.  
240.15c3-1 specifies a percentage deduction for the type of asset;
    (2) 17 CFR 1.17 applicable to the reference asset if 17 CFR 1.17 
specifies a percentage deduction for the type of asset and Sec.  
240.15c3-1 does not specify a percentage deduction for the type of 
asset; or
    (3) In the case of non-cleared interest rate swap, Sec.  240.15c3-
1(c)(2)(vi)(A) based on the maturity of the swap, provided that the 
percentage deduction must be no less than one eighth of 1 percent of the 
amount of a long position that is netted against a short position in the 
case of a non-cleared swap with a maturity of three months or more.

[[Page 423]]

    (B) A broker or dealer may reduce the deduction under paragraph 
(b)(2)(ii)(A) by an amount equal to any reduction recognized for a 
comparable long or short position in the reference asset or interest 
rate under Sec.  240.15c3-1 or 17 CFR 1.17.

(Secs. 15(c)(3), 17(a) and 23(a), 15 U.S.C. 78o(c)(3), 78q(a), and 
78w(a))

[44 FR 34886, June 15, 1979, as amended at 46 FR 37041, July 17, 1981; 
49 FR 31848, Aug. 9, 1984; 84 FR 44044, Aug. 22, 2019]



Sec.  240.15c3-1c  Consolidated computations of net capital and aggregate
indebtedness for certain subsidiaries and affiliates (appendix C to 
17 CFR 240.15c3-1).

    (a) Flow through capital benefits. Every broker or dealer in 
computing its net capital and aggregate indebtedness pursuant to 17 CFR 
240.15c3-1 shall, subject to the provisions of paragraphs (b) and (d) of 
this appendix, consolidate in a single computation assets and 
liabilities of any subsidiary or affiliate for which it guarantees, 
endorses or assumes directly or indirectly the obligations or 
liabilities. The assets and liabilities of a subsidiary or affiliate 
whose liabilities and obligations have not been guaranteed, endorsed, or 
assumed directly or indirectly by the broker or dealer may also be so 
consolidated if an opinion of counsel is obtained as provided for in 
paragraph (b) of this section.
    (b) Required counsel opinions. (1) If the consolidation, provided 
for in paragraph (a) of this section, of any such subsidiary or 
affiliate results in the increase of the broker's or dealers's net 
capital and/or the decrease of the broker's or dealer's minimum net 
capital requirement under paragraph (a) of Sec.  240.15c3-1 and an 
opinion of counsel described in paragraph (b)(2) of this section has not 
been obtained, such benefits shall not be recognized in the broker's or 
dealer's computation required by this section.
    (2) Except as provided for in paragraph (b)(1) of this section, 
consolidation shall be permitted with respect to any subsidiaries or 
affiliates which are majority owned and controlled by the broker or 
dealer for which the broker or dealer can demonstrate to the 
satisfaction of the Commission, through the Examining Authority, by an 
opinion of counsel that the net asset values, or the portion thereof 
related to the parent's ownership interest in the subsidiary or 
affiliate may be caused by the broker or dealer or a trustee appointed 
pursuant to the Securities Investor Protection Act of 1970 or otherwise, 
to be distributed to the broker or dealer within 30 calendar days. Such 
opinion shall also set forth the actions necessary to cause such a 
distribution to be made, identify the parties having the authority to 
take such actions, identify and describe the rights of other parties or 
classes of parties, including but not limited to customers, general 
creditors, subordinated lenders, minority shareholders, employees, 
litigants and governmental or regulatory authorities, who may delay or 
prevent such a distribution and such other assurances as the Commission 
or the Examining Authority by rule or interpretation may require. Such 
opinion shall be current and periodically renewed in connection with the 
broker's or dealer's annual audit pursuant to 17 CFR 240.17a-5 under the 
Securities Exchange Act of 1934 or upon any material change in 
circumstances.
    (c) Principles of consolidation. In preparing a consolidated 
computation of net capital and/or aggregate indebtedness pursuant to 
this section, the following minimum and non-exclusive requirements shall 
be observed:
    (1) Consolidated net worth shall be reduced by the estimated amount 
of any tax reasonably anticipated to be incurred upon distribution of 
the assets of the subsidiary or affiliate.
    (2) Liabilities of a consolidated subsidiary or affiliate which are 
subordinated to the claims of present and future creditors pursuant to a 
satisfactory subordination agreement shall not be added to consolidated 
net worth unless such subordination extends also to the claims of 
present or future creditors of the parent broker or dealer and all 
consolidated subsidiaries.
    (3) Subordinated liabilities of a consolidated subsidiary or 
affiliate which are consolidated in accordance with paragraph (c)(2) of 
this section may not be prepaid, repaid or accelerated if any of the 
entities included in such consolidation would otherwise be unable to

[[Page 424]]

comply with the provisions of Appendix (D), 17 CFR 240.15c3-1d.
    (4) Each broker or dealer included within the consolidation shall at 
all times be in compliance with the net capital requirement to which it 
is subject.
    (d) Certain precluded acts. No broker or dealer shall guarantee, 
endorse or assume directly or indirectly any obligation or liability of 
a subsidiary or affiliate unless the obligation or liability is 
reflected in the computation of net capital and/or aggregate 
indebtedness pursuant to 17 CFR 240.15c3-1 or this appendix (C), except 
as provided in paragraph (b)(1) of this section.

[40 FR 29808, July 16, 1975, as amended at 57 FR 56988, Dec. 2, 1992]



Sec.  240.15c3-1d  Satisfactory Subordination Agreements (Appendix D to
17 CFR 240.15c3-1).

    (a) Introduction. (1) This appendix sets forth minimum and non-
exclusive requirements for satisfactory subordination agreements 
(hereinafter ``subordination agreement''). The Examining Authority may 
require or the broker or dealer may include such other provisions as 
deemed necessary or appropriate to the extent such provisions do not 
cause the subordination agreement to fail to meet the minimum 
requirements of this Appendix (D).
    (2) Certain definitions. For purposes of 17 CFR 240.15c3-1 and this 
Appendix (D):
    (i) A subordination agreement may be either a subordinated loan 
agreement or a secured demand note agreement.
    (ii) The term subordinated loan agreement shall mean the agreement 
or agreements evidencing or governing a subordinated borrowing of cash.
    (iii) The term collateral value of any securities pledged to secure 
a secured demand note shall mean the market value of such securities 
after giving effect to the percentage deductions set forth in paragraph 
(c)(2)(vi) of Sec.  240.15c3-1 except for paragraph (c)(2)(vi)(J). In 
lieu of the deduction under (c)(2)(vi)(J), the broker or dealer shall 
reduce the market value of the securities pledged to secure the secured 
demand note by 30 percent.
    (iv) The term payment obligation shall mean the obligation of a 
broker or dealer in respect to any subordination agreement (A) to repay 
cash loaned to the broker or dealer pursuant to a subordinated loan 
agreement or (B) to return a secured demand note contributed to the 
broker or dealer or reduce the unpaid principal amount thereof and to 
return cash or securities pledged as collateral to secure the secured 
demand note and (C) ``Payment'' shall mean the performance by a broker 
or dealer of a Payment Obligation.
    (v)(A) The term secured demand note agreement shall mean an 
agreement (including the related secured demand note) evidencing or 
governing the contribution of a secured demand note to a broker or 
dealer and the pledge of securities and/or cash with the broker or 
dealer as collateral to secure payment of such secured demand note. The 
secured demand note agreement may provide that neither the lender, his 
heirs, executors, administrators or assigns shall be personally liable 
on such note and that in the event of default the broker or dealer shall 
look for payment of such note solely to the collateral then pledged to 
secure the same.
    (B) The secured demand note shall be a promissory note executed by 
the lender and shall be payable on the demand of the broker or dealer to 
which it is contributed; provided, however, that the making of such 
demand may be conditioned upon the occurrence of any of certain events 
which are acceptable to the Commission and to the Examining Authority 
for such broker or dealer.
    (C) If such note is not paid upon presentment and demand as provided 
for therein, the broker or dealer shall have the right to liquidate all 
or any part of the securities then pledged as collateral to secure 
payment of the same and to apply the net proceeds of such liquidation, 
together with any cash then included in the collateral, in payment of 
such note. Subject to the prior rights of the broker or dealer as 
pledgee, the lender, as defined herein, may retain ownership of the 
collateral and have the benefit of any increases and bear the risks of 
any decreases in the value of the collateral and may retain the right to 
vote securities contained

[[Page 425]]

within the collateral and any right to income therefrom or distributions 
thereon, except the broker or dealer shall have the right to receive and 
hold as pledgee all dividends payable in securities and all partial and 
complete liquidating dividends.
    (D) Subject to the prior rights of the broker or dealer as pledgee, 
the lender may have the right to direct the sale of any securities 
included in the collateral, to direct the purchases of securities with 
any cash included therein, to withdraw excess collateral or to 
substitute cash or other securities as collateral, provided that the net 
proceeds of any such sale and the cash so substituted and the securities 
so purchased or substituted are held by the broker or dealer, as 
pledgee, and are included within the collateral to secure payment of the 
secured demand note, and provided further that no such transaction shall 
be permitted if, after giving effect thereto, the sum of the amount of 
any cash, plus the Collateral Value of the securities, then pledged as 
collateral to secure the secured demand note would be less than the 
unpaid principal amount of the secured demand note.
    (E) Upon payment by the lender, as distinguished from a reduction by 
the lender which is provided for in (b)(6)(iii) or reduction by the 
broker or dealer as provided for in subparagraph (b)(7) of this appendix 
(D), of all or any part of the unpaid principal amount of the secured 
demand note, a broker or dealer shall issue to the lender a subordinated 
loan agreement in the amount of such payment (or in the case of a broker 
or dealer that is a partnership credit a capital account of the lender) 
or issue preferred or common stock of the broker or dealer in the amount 
of such payment, or any combination of the foregoing, as provided for in 
the secured demand note agreement.
    (F) The term lender shall mean the person who lends cash to a broker 
or dealer pursuant to a subordinated loan agreement and the person who 
contributes a secured demand note to a broker or dealer pursuant to a 
secured demand note agreement.
    (b) Minimum requirements for subordination agreements. (1) Subject 
to paragraph (a) of this section, a subordination agreement shall mean a 
written agreement between the broker or dealer and the lender, which (i) 
has a minimum term of one year, except for temporary subordination 
agreements provided for in paragraph (c)(5) of this appendix (D), and 
(ii) is a valid and binding obligation enforceable in accordance with 
its terms (subject as to enforcement to applicable bankruptcy, 
insolvency, reorganization, moratorium and other similar laws) against 
the broker or dealer and the lender and their respective heirs, 
executors, administrators, successors and assigns.
    (2) Specific amount. All subordination agreements shall be for a 
specific dollar amount which shall not be reduced for the duration of 
the agreement except by installments as specifically provided for 
therein and except as otherwise provided in this appendix (D).
    (3) Effective subordination. The subordination agreement shall 
effectively subordinate any right of the lender to receive any Payment 
with respect thereto, together with accrued interest or compensation, to 
the prior payment or provision for payment in full of all claims of all 
present and future creditors of the broker or dealer arising out of any 
matter occurring prior to the date on which the related Payment 
Obligation matures consistent with the provisions of 17 CFR 240.15c3-1 
and 240.15c3-1d, except for claims which are the subject of 
subordination agreements which rank on the same priority as or junior to 
the claim of the lender under such subordination agreements.
    (4) Proceeds of subordinated loan agreements. The subordinated loan 
agreement shall provide that the cash proceeds thereof shall be used and 
dealt with by the broker or dealer as part of its capital and shall be 
subject to the risks of the business.
    (5) Certain rights of the broker or dealer. The subordination 
agreement shall provide that the broker or dealer shall have the right 
to:
    (i) Deposit any cash proceeds of a subordinated loan agreement and 
any cash pledged as collateral to secure a secured demand note in an 
account or accounts in its own name in any bank or trust company;

[[Page 426]]

    (ii) Pledge, repledge, hypothecate and rehypothecate, any or all of 
the securities pledged as collateral to secure a secured demand note, 
without notice, separately or in common with other securities or 
property for the purpose of securing any indebtedness of the broker or 
dealer; and
    (iii) Lend to itself or others any or all of the securities and cash 
pledged as collateral to secure a secured demand note.
    (6) Collateral for secured demand notes. Only cash and securities 
which are fully paid for and which may be publicly offered or sold 
without registration under the Securities Act of 1933, and the offer, 
sale and transfer of which are not otherwise restricted, may be pledged 
as collateral to secure a secured demand note. The secured demand note 
agreement shall provide that if at any time the sum of the amount of any 
cash, plus the Collateral Value of any securities, then pledged as 
collateral to secure the secured demand note is less than the unpaid 
principal amount of the secured demand note, the broker or dealer must 
immediately transmit written notice to that effect to the lender and the 
Examining Authority for such broker or dealer. The secured demand note 
agreement shall also require that following such transmittal:
    (i) The lender, prior to noon of the business day next succeeding 
the transmittal of such notice, may pledge as collateral additional cash 
or securities sufficient, after giving effect to such pledge, to bring 
the sum of the amount of any cash plus the Collateral Value of any 
securities, then pledged as collateral to secure the secured demand 
note, up to an amount not less than the unpaid principal amount of the 
secured demand note; and
    (ii) Unless additional cash or securities are pledged by the lender 
as provided in paragraph (b)(6)(i) of this section, the broker or dealer 
at noon on the business day next succeeding the transmittal of notice to 
the lender must commence sale, for the account of the lender, of such of 
the securities then pledged as collateral to secure the secured demand 
note and apply so much of the net proceeds thereof, together with such 
of the cash then pledged as collateral to secure the secured demand note 
as may be necessary to eliminate the unpaid principal amount of the 
secured demand note; Provided, however, That the unpaid principal amount 
of the secured demand note need not be reduced below the sum of the 
amount of any remaining cash, plus the Collateral Value of the remaining 
securities, then pledged as collateral to secure the secured demand 
note. The broker or dealer may not purchase for its own account any 
securities subject to such a sale.
    (iii) The secured demand note agreement also may provide that, in 
lieu of the procedures specified in the provisions required by paragraph 
(b)(6)(ii) of this section, the lender with the prior written consent of 
the broker or dealer and the Examining Authority for the broker or 
dealer may reduce the unpaid principal amount of the secured demand 
note. After giving effect to such reduction, the aggregate indebtedness 
of the broker or dealer may not exceed 1000 percent of its net capital 
or, in the case of a broker or dealer operating pursuant to paragraph 
(a)(1)(ii) of Sec.  240.15c3-1, net capital may not be less than 5 
percent of aggregate debit items computed in accordance with Sec.  
240.15c3-3a, or, if registered as a futures commission merchant, 7 
percent of the funds required to be segregated pursuant to the Commodity 
Exchange Act and the regulations thereunder (less the market value of 
commodity options purchased by option customers subject to the rules of 
a contract market, each such deduction not to exceed the amount of funds 
in the option customer's account), if greater. No single secured demand 
note shall be permitted to be reduced by more than 15 percent of its 
original principal amount and after such reduction no excess collateral 
may be withdrawn. No Examining Authority shall consent to a reduction of 
the principal amount of a secured demand note if, after giving effect to 
such reduction, net capital would be less than 120 percent of the 
minimum dollar amount required by Sec.  240.15c3-1.

                         Permissive Prepayments

    (7) A broker or dealer at its option but not at the option of the 
lender

[[Page 427]]

may, if the subordination agreement so provides, make a Payment of all 
or any portion of the Payment Obligation thereunder prior to the 
scheduled maturity date of such Payment Obligation (hereinafter referred 
to as a ``Prepayment''), but in no event may any Prepayment be made 
before the expiration of one year from the date such subordination 
agreement became effective. This restriction shall not apply to 
temporary subordination agreements that comply with the provisions of 
paragraph (c)(5) of this section. No Prepayment shall be made, if, after 
giving effect thereto (and to all Payments of Payment Obligations under 
any other subordinated agreements then outstanding the maturity or 
accelerated maturities of which are scheduled to fall due within six 
months after the date such Prepayment is to occur pursuant to this 
provision or on or prior to the date on which the Payment Obligation in 
respect of such Prepayment is scheduled to mature disregarding this 
provision, whichever date is earlier) without reference to any projected 
profit or loss of the broker or dealer, either aggregate indebtedness of 
the broker or dealer would exceed 1000 percent of its net capital or its 
net capital would be less than 120 percent of the minimum dollar amount 
required by Sec.  240.15c3-1 or, in the case of a broker or dealer 
operating pursuant to Sec.  240.15c3-1(a)(1)(ii), its net capital would 
be less than 5 percent of its aggregate debit items computed in 
accordance with Sec.  240.15c3-3a, or if registered as a futures 
commission merchant, 7 percent of the funds required to be segregated 
pursuant to the Commodity Exchange Act and the regulations thereunder 
(less the market value of commodity options purchased by option 
customers subject to the rules of a contract market, each such deduction 
not to exceed the amount of funds in the option customer's account), if 
greater, or its net capital would be less than 120 percent of the 
minimum dollar amount required by Sec.  240.15c3-1(a)(1)(ii), or if, in 
the case of a broker or dealer operating pursuant to Sec.  240.15c3-
1(a)(10), its net capital would be less than 120 percent of its minimum 
requirement.

                           Suspended Repayment

    (8)(i) The Payment Obligation of the broker or dealer in respect of 
any subordination agreement shall be suspended and shall not mature if, 
after giving effect to Payment of such Payment Obligation (and to all 
Payments of Payment Obligations of such broker or dealer under any other 
subordination agreement(s) then outstanding that are scheduled to mature 
on or before such Payment Obligation) either:
    (A) The aggregate indebtedness of the broker or dealer would exceed 
1200 percent of its net capital, or in the case of a broker or dealer 
operating pursuant to Sec.  240.15c3-1(a)(1)(ii), its net capital would 
be less than 5 percent of aggregate debit items computed in accordance 
with Sec.  240.15c3-3a or, if registered as a futures commission 
merchant, 6 percent of the funds required to be segregated pursuant to 
the Commodity Exchange Act and the regulations thereunder (less the 
market value of commodity options purchased by option customers on or 
subject to the rules of a contract market, each such deduction not to 
exceed the amount of funds in the option customer's account), if 
greater, or, in the case of a broker or dealer operating pursuant to 
Sec.  240.15c3-1(a)(10), its net capital would be less than 120 percent 
of its minimum requirement; or
    (B) Its net capital would be less than 120 percent of the minimum 
dollar amount required by Sec.  240.15c3-1 including paragraph 
(a)(1)(ii), if applicable. The subordination agreement may provide that 
if the Payment Obligation of the broker or dealer thereunder does not 
mature and is suspended as a result of the requirement of this paragraph 
(b)(8) for a period of not less than six months, the broker or dealer 
shall thereupon commence the rapid and orderly liquidation of its 
business, but the right of the lender to receive Payment, together with 
accrued interest or compensation, shall remain subordinate as required 
by the provisions of Sec. Sec.  240.15c3-1 and 240.15c3-1d.
    (ii) [Reserved]
    (9) Accelerated maturity-obligation to repay to remain subordinate. 
(i) Subject to the provisions of paragraph (b)(8) of this appendix, a 
subordination agreement may provide that the lender may,

[[Page 428]]

upon prior written notice to the broker or dealer and the Examining 
Authority given not earlier than six months after the effective date of 
such subordination agreement, accelerate the date on which the Payment 
Obligation of the broker or dealer, together with accrued interest or 
compensation, is scheduled to mature to a date not earlier than six 
months after the giving of such notice, but the right of the lender to 
receive Payment, together with accrued interest or compensation, shall 
remain subordinate as required by the provisions of 17 CFR 240.15c3-1 
and 240.15c3-1d.
    (ii) Notwithstanding the provisions of paragraph (b)(8) of this 
appendix, the Payment Obligation of the broker or dealer with respect to 
a subordination agreement, together with accrued interest and 
compensation, shall mature in the event of any receivership, insolvency, 
liquidation pursuant to the Securities Investor Protection Act of 1970 
or otherwise, bankruptcy, assignment for the benefit of creditors, 
reorganization whether or not pursuant to the bankruptcy laws, or any 
other marshalling of the assets and liabilities of the broker or dealer 
but the right of the lender to receive Payment, together with accrued 
interest or compensation, shall remain subordinate as required by the 
provisions of 17 CFR 240.15c3-1 and 240.15c3-1d.
    (10)(i) Accelerated maturity of subordination agreements on event of 
default and event of acceleration--obligation to repay to remain 
subordinate. A subordination agreement may provide that the lender may, 
upon prior written notice to the broker or dealer and the Examining 
Authority of the broker or dealer of the occurrence of any Event of 
Acceleration (as hereinafter defined) given no sooner than six months 
after the effective date of such subordination agreement, accelerate the 
date on which the Payment Obligation of the broker or dealer, together 
with accrued interest or compensation, is scheduled to mature, to the 
last business day of a calendar month which is not less than six months 
after notice of acceleration is received by the broker or dealer and the 
Examining Authority for the broker or dealer. Any subordination 
agreement containing such Events of Acceleration may also provide, that 
if upon such accelerated maturity date the Payment Obligation of the 
broker or dealer is suspended as required by paragraph (b)(8) of this 
appendix (D) and liquidation of the broker or dealer has not commenced 
on or prior to such accelerated maturity date, then notwithstanding 
paragraph (b)(8) of this appendix the Payment Obligation of the broker 
or dealer with respect to such subordination agreement shall mature on 
the day immediately following such accelerated maturity date and in any 
such event the Payment Obligations of the broker or dealer with respect 
to all other subordination agreements then outstanding shall also mature 
at the same time but the rights of the respective lenders to receive 
Payment, together with accrued interest or compensation, shall remain 
subordinate as required by the provisions of this Appendix (D). Events 
of Acceleration which may be included in a subordination agreement 
complying with this paragraph (b)(10) shall be limited to:
    (A) Failure to pay interest or any installment of principal on a 
subordination agreement as scheduled;
    (B) Failure to pay when due other money obligations of a specified 
material amount;
    (C) Discovery that any material, specified representation or 
warranty of the broker or dealer which is included in the subordination 
agreement and on which the subordination agreement was based or 
continued was inaccurate in a material respect at the time made;
    (D) Any specified and clearly measurable event which is included in 
the subordination agreement and which the lender and the broker or 
dealer agree (1) is a significant indication that the financial position 
of the broker or dealer has changed materially and adversely from agreed 
upon specified norms or (2) could materially and adversely affect the 
ability of the broker or dealer to conduct its business as conducted on 
the date the subordination agreement was made; or (3) is a significant 
change in the senior management of the broker or dealer or in the 
general business conducted by the broker or dealer from that which 
obtained on the date the subordination agreement became effective;

[[Page 429]]

    (E) Any continued failure to perform agreed covenants included in 
the subordination agreement relating to the conduct of the business of 
the broker or dealer or relating to the maintenance and reporting of its 
financial position; and
    (ii) Notwithstanding the provisions of paragraph (b)(8) of this 
appendix, a subordination agreement may provide that, if liquidation of 
the business of the broker or dealer has not already commenced, the 
Payment Obligation of the broker or dealer shall mature, together with 
accrued interest or compensation, upon the occurrence of an Event of 
Default (as hereinafter defined). Such agreement may also provide that, 
if liquidation of the business of the broker or dealer has not already 
commenced, the rapid and orderly liquidation of the business of the 
broker or dealer shall then commence upon the happening of an Event of 
Default. Any subordination agreement which so provides for maturity of 
the Payment Obligation upon the occurrence of an Event of Default shall 
also provide that the date on which such Event of Default occurs shall, 
if liquidation of the broker or dealer has not already commenced, be the 
date on which the Payment Obligations of the broker or dealer with 
respect to all other subordination agreements then outstanding shall 
mature but the rights of the respective lenders to receive Payment, 
together with accrued interest or compensation, shall remain subordinate 
as required by the provisions of this Appendix (D). Events of Default 
which may be included in a subordination agreement shall be limited to:
    (A) The making of an application by the Securities Investor 
Protection Corporation for a decree adjudicating that customers of the 
broker or dealer are in need of protection under the Securities Investor 
Protection Act of 1970 and the failure of the broker or dealer to obtain 
the dismissal of such application within 30 days;
    (B) The aggregate indebtedness of the broker or dealer exceeding 
1500 percent of its net capital or, in the case of a broker or dealer 
that has elected to operate under Sec.  240.15c3-1(a)(1)(ii), its net 
capital computed in accordance therewith is less than two percent of its 
aggregate debit items computed in accordance with Sec.  240.15c3-3a or, 
if registered as a futures commission merchant, four percent of the 
funds required to be segregated pursuant to the Commodity Exchange Act 
and the regulations thereunder (less the market value of commodity 
options purchased by option customers on or subject to the rules of a 
contract market, each such deduction not to exceed the amount of funds 
in the option customer's account), if greater, or, in the case of a 
broker or dealer operating pursuant to Sec.  240.15c3-1(a)(10), its net 
capital is less than its minimum requirement, throughout a period of 15 
consecutive business days, commencing on the day the broker or dealer 
first determines and notifies the Examining Authority for the broker or 
dealer, or the Examining Authority or the Commission first determines 
and notifies the broker or dealer of such fact;
    (C) The Commission shall revoke the registration of the broker or 
dealer;
    (D) The Examining Authority shall suspend (and not reinstate within 
10 days) or revoke the broker's or dealer's status as a member thereof;
    (E) Any receivership, insolvency, liquidation pursuant to the 
Securities Investor Protection Act of 1970 or otherwise, bankruptcy, 
assignment for the benefit of creditors, reorganization whether or not 
pursuant to bankruptcy laws, or any other marshalling of the assets and 
liabilities of the broker or dealer.

A subordination agreement which contains any of the provisions permitted 
by this paragraph (b)(10) shall not contain the provision otherwise 
permitted by clause (i) of paragraph (b)(9).

  Brokers and Dealers Carrying the Accounts of Specialists and Market 
                        Makers in Listed Options

    (11) A subordination agreement which becomes effective on or after 
August 1, 1977 in favor of a broker or dealer who guarantees, endorses, 
carries or clears specialist or market maker transactions in options 
listed on a national securities exchange or facility of a national 
securities association shall provide that reduction, prepayment or 
repayment of the unpaid principal

[[Page 430]]

amount thereof, pursuant to those terms of the agreement required or 
permitted by paragraphs (b)(6)(iii), (b)(7), or (b)(8)(i) of this 
section, shall not occur in contravention of paragraphs (a)(6)(v), 
(a)(7)(iv), or (c)(2)(x)(B)(1) of Sec.  240.15c3-1 insofar as they apply 
to such broker or dealer.
    (c) Miscellaneous Provisions--(1) Prohibited Cancellation. The 
subordination agreement shall not be subject to cancellation by either 
party; no Payment shall be made with respect thereto and the agreement 
shall not be terminated, rescinded or modified by mutual consent or 
otherwise if the effect thereof would be inconsistent with the 
requirements of 17 CFR 240.15c3-1 and 240.15c3-1d.
    (2) Every broker or dealer shall immediately notify the Examining 
Authority for such broker or dealer if, after giving effect to all 
Payments of Payment Obligations under subordination agreements then 
outstanding that are then due or mature within the following six months 
without reference to any projected profit or loss of the broker or 
dealer either the aggregate indebtedness of the broker or dealer would 
exceed 1200 percent of its net capital or its net capital would be less 
than 120 percent of the minimum dollar amount required by Sec.  
240.15c3-1, or, in the case of a broker or dealer operating pursuant to 
Sec.  240.15c3-1(a)(1)(ii), its net capital would be less than 5 percent 
of aggregate debit items computed in accordance with Sec.  240.15c3-3a, 
or, if registered as a futures commission merchant, 6 percent of the 
funds required to be segregated pursuant to the Commodity Exchange Act 
and the regulations thereunder (less the market value of commodity 
options purchased by option customers on or subject to the rules of a 
contract market, each such deduction not to exceed the amount of funds 
in the option customer's account), if greater, or less than 120 percent 
of the minimum dollar amount required by Sec.  240.15c3-1(a)(1)(ii), or, 
in the case of a broker or dealer operating pursuant to Sec.  240.15c3-
1(a)(10), its net capital would be less than 120 percent of its minimum 
requirement.
    (3) Certain legends. If all the provisions of a satisfactory 
subordination agreement do not appear in a single instrument, then the 
debenture or other evidence of indebtedness shall bear on its face an 
appropriate legend stating that it is issued subject to the provisions 
of a satisfactory subordination agreement which shall be adequately 
referred to and incorporated by reference.
    (4) Legal title to securities. All securities pledged as collateral 
to secure a secured demand note must be in bearer form, or registered in 
the name of the broker or dealer or the name of its nominee or 
custodian.

            Temporary and Revolving Subordination Agreements

    (5)(i) For the purpose of enabling a broker or dealer to participate 
as an underwriter of securities or other extraordinary activities in 
compliance with the net capital requirements of Sec.  240.15c3-1, a 
broker or dealer shall be permitted, on no more than three occasions in 
any 12 month period, to enter into a subordination agreement on a 
temporary basis that has a stated term of no more than 45 days from the 
date such subordination agreement became effective. This temporary 
relief shall not apply to a broker or dealer if, within the preceding 
thirty calendar days, it has given notice pursuant to Sec.  240.17a-11, 
or if immediately prior to entering into such subordination agreement, 
either:
    (A) The aggregate indebtedness of the broker or dealer exceeds 1000 
percent of its net capital or its net capital is less than 120 percent 
of the minimum dollar amount required by Sec.  240.15c3-1, or
    (B) In the case of a broker or dealer operating pursuant to Sec.  
240.15c3-1(a)(1)(ii), its net capital is less than 5 percent of 
aggregate debits computed in accordance with Sec.  240.15c3-1, or, if 
registered as a futures commission merchant, less than 7 percent of the 
funds required to be segregated pursuant to the Commodity Exchange Act 
and the regulations thereunder (less the market value of commodity 
options purchased by option customers on or subject to the rules of a 
contract market, each such deduction not to exceed the amount of funds 
in the option customer's account), if greater, or less than 120 percent 
of the minimum dollar amount required by paragraph (a)(1)(ii)

[[Page 431]]

of this section, or, in the case of a broker or dealer operating 
pursuant to Sec.  240.15c3-1(a)(10), its net capital would be less than 
120 percent of its minimum requirement, or
    (C) The amount of its then outstanding subordination agreements 
exceeds the limits specified in paragraph (d) of Sec.  240.15c3-1. Such 
temporary subordination agreement shall be subject to all other 
provisions of this appendix D.
    (ii) A broker or dealer shall be permitted to enter into a revolving 
subordinated loan agreement which provides for prepayment within less 
than one year of all or any portion of the Payment Obligation thereunder 
at the option of the broker or dealer upon the prior written approval of 
the Examining Authority for the broker or dealer. The Examining 
Authority, however, shall not approve any prepayment if:
    (A) After giving effect thereto (and to all Payments of Payment 
Obligations under any other subordinated agreements then outstanding, 
the maturity or accelerated maturities of which are scheduled to fall 
due within six months after the date such prepayment is to occur 
pursuant to this provision or on or prior to the date on which the 
Payment Obligation in respect of such prepayment is scheduled to mature 
disregarding this provision, whichever date is earlier) without 
reference to any projected profit or loss of the broker or dealer, 
either aggregate indebtedness of the broker or dealer would exceed 900 
percent of its net capital or its net capital would be less than 200 
percent of the minimum dollar amount required by Sec.  240.15c3-1 or, in 
the case of a broker or dealer operating pursuant to paragraph 
(a)(1)(ii) of Sec.  240.15c3-1, its net capital would be less than 6 
percent of aggregate debit items computed in accordance with Sec.  
240.15c3-3a, or, if registered as a futures commission merchant, 10 
percent of the funds required to be segregated pursuant to the Commodity 
Exchange Act and the regulations thereunder (less the market value of 
commodity options purchased by option customers on or subject to the 
rules of a contract market, each such deduction not to exceed the amount 
of funds in the option customer's account), if greater, or its net 
capital would be less than 200 percent of the minimum dollar amount 
required by paragraph (a)(1)(ii) of this section or
    (B) Pre-tax losses during the latest three-month period equalled 
more than 15% of current excess net capital.

Any subordination agreement entered into pursuant to this paragraph 
(c)(5)(ii) shall be subject to all the other provisions of this Appendix 
D. Any such subordination agreement shall not be considered equity for 
purposes of subsection (d) of section 15c3-1, despite the length of the 
initial term of the loan.
    (6)(i) Filing. Two copies of any proposed subordination agreement 
(including nonconforming subordination agreements) shall be filed at 
least 10 days prior to the proposed execution date of the agreement with 
the Commission's Regional Office for the region in which the broker or 
dealer maintains its principal place of business or at such other time 
as the Regional Office for good cause shall accept such filing. Copies 
of the proposed agreement shall also be filed with the Examining 
Authority in such quantities and at such time as the Examining Authority 
may require. The broker or dealer shall also file with said parties a 
statement setting forth the name and address of the lender, the business 
relationship of the lender to the broker or dealer, and whether the 
broker or dealer carried funds or securities for the lender at or about 
the time the proposed agreement was so filed. All agreements shall be 
examined by the Commission's Regional Office or the Examining Authority 
with whom such agreement is required to be filed prior to their becoming 
effective. No proposed agreement shall be a satisfactory subordination 
agreement for the purposes of this section unless and until the 
Examining Authority has found the agreement acceptable and such 
agreement has become effective in the form found acceptable.
    (ii) The broker or dealer need not file with the Regional Office for 
the region in which the broker or dealer maintains its principal place 
of business (if a Regional Office is not its Examining Authority) copies 
of any proposed subordination agreement or the statement

[[Page 432]]

described above if the Examining Authority for that broker or dealer has 
consented to file with the Commission periodic reports (not less than 
monthly) summarizing for the period, on a firm-by-firm basis, the 
subordination agreements it has approved for that period. Such reports 
should include at the minimum, the amount of the loan and its duration, 
the name of the lender and the business relationship of the lender to 
the broker or dealer.
    (7) Subordination agreements in effect prior to adoption. Any 
subordination agreement which has been entered into prior to December 
20, 1978 and which has been deemed to be satisfactorily subordinated 
pursuant to 17 CFR 240.15c3-1 as in effect prior to December 20, 1978, 
shall continue to be deemed a satisfactory subordination agreement until 
the maturity of such agreement. Provided, That no renewal of an 
agreement which provides for automatic or optional renewal by the broker 
or dealer or lender shall be deemed to be a satisfactory subordination 
agreement unless such renewed agreement meets the requirements of this 
appendix within 6 months from December 20, 1978. Provided, further, That 
all subordination agreements must meet the requirements of this appendix 
within 5 years of December 20, 1978.

[40 FR 29808, July 16, 1975, as amended at 42 FR 31778, June 23, 1977; 
44 FR 34887, June 15, 1979; 46 FR 35635, July 10, 1981; 47 FR 21775, May 
20, 1982; 49 FR 31848, Aug. 9, 1984; 57 FR 56988, Dec. 2, 1992; 58 FR 
37657, July 13, 1993; 59 FR 5945, Feb. 9, 1994; 73 FR 32228, June 5, 
2008; 84 FR 44045, Aug. 22, 2019]



Sec.  240.15c3-1e  Deductions for market and credit risk for certain 
brokers or dealers (Appendix E to 17 CFR 240.15c3-1).

    Sections 240.15c3-1e and 240.15c3-1g set forth a program that allows 
a broker or dealer to use an alternative approach to computing net 
capital deductions, subject to the conditions described in Sec. Sec.  
240.15c3-1e and 240.15c3-1g, including supervision of the broker's or 
dealer's ultimate holding company under the program. The program is 
designed to reduce the likelihood that financial and operational 
weakness in the holding company will destabilize the broker or dealer, 
or the broader financial system. The focus of this supervision of the 
ultimate holding company is its financial and operational condition and 
its risk management controls and methodologies.

                               Application

    (a) A broker or dealer may apply to the Commission for authorization 
to compute deductions for market risk pursuant to this section in lieu 
of computing deductions pursuant to Sec. Sec.  240.15c3-1(c)(2)(vi) and 
(vii) and 240.15c3-1b, and to compute deductions for credit risk 
pursuant to this section on credit exposures arising from transactions 
in derivatives instruments (if this section is used to calculate 
deductions for market risk on these instruments) in lieu of computing 
deductions pursuant to Sec.  240.15c3-1(c)(2)(iv) and (c)(2)(xv)(A) and 
(B):
    (1) A broker-dealer shall submit the following information to the 
Commission with its application:
    (i) An executive summary of the information provided to the 
Commission with its application and an identification of the ultimate 
holding company of the broker or dealer;
    (ii) A comprehensive description of the internal risk management 
control system of the broker or dealer and how that system satisfies the 
requirements set forth in Sec.  240.15c3-4;
    (iii) A list of the categories of positions that the broker or 
dealer holds in its proprietary accounts and a brief description of the 
methods that the broker or dealer will use to calculate deductions for 
market and credit risk on those categories of positions;
    (iv) A description of the mathematical models to be used to price 
positions and to compute deductions for market risk, including those 
portions of the deductions attributable to specific risk, if applicable, 
and deductions for credit risk; a description of the creation, use, and 
maintenance of the mathematical models; a description of the broker's or 
dealer's internal risk management controls over those models, including 
a description of each category of persons who may input data into the 
models; if a mathematical model incorporates empirical correlations 
across risk categories, a description of the process for measuring 
correlations; a description of the

[[Page 433]]

backtesting procedures the broker or dealer will use to backtest the 
mathematical model used to calculate maximum potential exposure; a 
description of how each mathematical model satisfies the applicable 
qualitative and quantitative requirements set forth in paragraph (d) of 
this appendix E; and a statement describing the extent to which each 
mathematical model used to compute deductions for market and credit risk 
will be used as part of the risk analyses and reports presented to 
senior management;
    (v) If the broker or dealer is applying to the Commission for 
approval to use scenario analysis to calculate deductions for market 
risk for certain positions, a list of those types of positions, a 
description of how those deductions will be calculated using scenario 
analysis, and an explanation of why each scenario analysis is 
appropriate to calculate deductions for market risk on those types of 
positions;
    (vi) A description of how the broker or dealer will calculate 
current exposure;
    (vii) A description of how the broker or dealer will determine 
internal credit ratings of counterparties and internal credit risk 
weights of counterparties, if applicable;
    (viii) A written undertaking by the ultimate holding company of the 
broker or dealer, if it is not an ultimate holding company that has a 
principal regulator, in a form acceptable to the Commission, signed by a 
duly authorized person at the ultimate holding company, to the effect 
that, as a condition of Commission approval of the application of the 
broker or dealer to compute deductions for market and credit risk 
pursuant to this appendix E, the ultimate holding company agrees to:
    (A) Comply with all applicable provisions of this appendix E;
    (B) Comply with all applicable provisions of Sec.  240.15c3-1g;
    (C) Comply with the provisions of Sec.  240.15c3-4 with respect to 
an internal risk management control system for the affiliate group as 
though it were an OTC derivatives dealer with respect to all of its 
business activities, except that paragraphs (c)(5)(xiii), (c)(5)(xiv), 
(d)(8), and (d)(9) of Sec.  240.15c3-4 shall not apply;
    (D) As part of the internal risk management control system for the 
affiliate group, establish, document, and maintain procedures for the 
detection and prevention of money laundering and terrorist financing;
    (E) Permit the Commission to examine the books and records of the 
ultimate holding company and any of its affiliates, if the affiliate is 
not an entity that has a principal regulator;
    (F) If the disclosure to the Commission of any information required 
as a condition for the broker or dealer to compute deductions for market 
and credit risk pursuant to this appendix E could be prohibited by law 
or otherwise, cooperate with the Commission, to the extent permissible, 
including by describing any secrecy laws or other impediments that could 
restrict the ability of material affiliates to provide information on 
their operations or activities and by discussing the manner in which the 
ultimate holding company and the broker or dealer propose to provide the 
Commission with adequate information or assurances of access to 
information;
    (G) Make available to the Commission information about the ultimate 
holding company or any of its material affiliates that the Commission 
finds is necessary to evaluate the financial and operational risk within 
the ultimate holding company and its material affiliates and to evaluate 
compliance with the conditions of eligibility of the broker or dealer to 
compute deductions to net capital under the alternative method of this 
appendix E;
    (H) Make available examination reports of principal regulators for 
those affiliates of the ultimate holding company that are not subject to 
Commission examination; and
    (I) Acknowledge that, if the ultimate holding company fails to 
comply in a material manner with any provision of its undertaking, the 
Commission may, in addition to any other conditions necessary or 
appropriate in the public interest or for the protection of investors, 
increase the multiplication factors the ultimate holding company uses to 
calculate allowances for market and credit risk, as defined in

[[Page 434]]

Sec.  240.15c3-1g(a)(2) and (a)(3) or impose any condition with respect 
to the broker or dealer listed in paragraph (e) of this appendix E; and
    (ix) A written undertaking by the ultimate holding company of the 
broker or dealer, if the ultimate holding company has a principal 
regulator, in a form acceptable to the Commission, signed by a duly 
authorized person at the ultimate holding company, to the effect that, 
as a condition of Commission approval of the application of the broker 
or dealer to compute deductions for market and credit risk pursuant to 
this appendix E, the ultimate holding company agrees to:
    (A) Comply with all applicable provisions of this appendix E;
    (B) Comply with all applicable provisions of Sec.  240.15c3-1g;
    (C) Make available to the Commission information about the ultimate 
holding company that the Commission finds is necessary to evaluate the 
financial and operational risk within the ultimate holding company and 
to evaluate compliance with the conditions of eligibility of the broker 
or dealer to compute net capital under the alternative method of this 
appendix E; and
    (D) Acknowledge that if the ultimate holding company fails to comply 
in a material manner with any provision of its undertaking, the 
Commission may, in addition to any other conditions necessary or 
appropriate in the public interest or for the protection of investors, 
impose any condition with respect to the broker or dealer listed in 
paragraph (e) of this appendix E;
    (2) As a condition of Commission approval, the ultimate holding 
company of the broker or dealer, if it is not an ultimate holding 
company that has a principal regulator, shall include the following 
information with the application:
    (i) A narrative description of the business and organization of the 
ultimate holding company;
    (ii) An alphabetical list of the affiliates of the ultimate holding 
company (referred to as the ``affiliate group,'' which shall include the 
ultimate holding company), with an identification of the financial 
regulator, if any, that regulates the affiliate, and a designation of 
the members of the affiliate group that are material to the ultimate 
holding company (``material affiliates'');
    (iii) An organizational chart that identifies the ultimate holding 
company, the broker or dealer, and the material affiliates;
    (iv) Consolidated and consolidating financial statements of the 
ultimate holding company as of the end of the quarter preceding the 
filing of the application;
    (v) Sample computations for the ultimate holding company of 
allowable capital and allowances for market risk, credit risk, and 
operational risk, determined pursuant to Sec.  240.15c3-1g(a)(1)-(a)(4);
    (vi) A list of the categories of positions that the affiliate group 
holds in its proprietary accounts and a brief description of the method 
that the ultimate holding company proposes to use to calculate 
allowances for market and credit risk, pursuant to Sec.  240.15c3-
1g(a)(2) and (a)(3), on those categories of positions;
    (vii) A description of the mathematical models to be used to price 
positions and to compute the allowance for market risk, including those 
portions of the allowance attributable to specific risk, if applicable, 
and the allowance for credit risk; a description of the creation, use, 
and maintenance of the mathematical models; a description of the 
ultimate holding company's internal risk management controls over those 
models, including a description of each category of persons who may 
input data into the models; if a mathematical model incorporates 
empirical correlations across risk categories, a description of the 
process for measuring correlations; a description of the backtesting 
procedures the ultimate holding company will use to backtest the 
mathematical model used to calculate maximum potential exposure; a 
description of how each mathematical model satisfies the applicable 
qualitative and quantitative requirements set forth in paragraph (d) of 
this appendix E; a statement describing the extent to which each 
mathematical model used to compute allowances for market and credit risk 
is used as part

[[Page 435]]

of the risk analyses and reports presented to senior management; and a 
description of any positions for which the ultimate holding company 
proposes to use a method other than VaR to compute an allowance for 
market risk and a description of how that allowance would be determined;
    (viii) A description of how the ultimate holding company will 
calculate current exposure;
    (ix) A description of how the ultimate holding company will 
determine the credit risk weights of counterparties and internal credit 
ratings of counterparties, if applicable;
    (x) A description of how the ultimate holding company will calculate 
an allowance for operational risk under Sec.  240.15c3-1g(a)(4);
    (xi) For each instance in which a mathematical model used by the 
broker or dealer to calculate a deduction for market risk or to 
calculate maximum potential exposure for a particular product or 
counterparty differs from the mathematical model used by the ultimate 
holding company to calculate an allowance for market risk or to 
calculate maximum potential exposure for that same product or 
counterparty, a description of the difference(s) between the 
mathematical models;
    (xii) A comprehensive description of the risk management control 
system for the affiliate group that the ultimate holding company has 
established to manage affiliate group-wide risk, including market, 
credit, liquidity and funding, legal and compliance, and operational 
risks, and how that system satisfies the requirements of Sec.  240.15c3-
4; and
    (xiii) Sample risk reports that are provided to the persons at the 
ultimate holding company who are responsible for managing group-wide 
risk and that will be provided to the Commission pursuant to Sec.  
240.15c3-1g(b)(1)(i)(H);
    (3) As a condition of Commission approval, the ultimate holding 
company of the broker or dealer, if the ultimate holding company has a 
principal regulator, shall include the following information with the 
broker's or dealer's application:
    (i) A narrative description of the business and organization of the 
ultimate holding company;
    (ii) An alphabetical list of the affiliates of the ultimate holding 
company (referred to as the ``affiliate group,'' which shall include the 
ultimate holding company), with an identification of the financial 
regulator, if any, that regulates the affiliate, and a designation of 
those affiliates that are material to the ultimate holding company 
(``material affiliates'');
    (iii) An organizational chart that identifies the ultimate holding 
company, the broker or dealer, and the material affiliates;
    (iv) Consolidated and consolidating financial statements of the 
ultimate holding company as of the end of the quarter preceding the 
filing of the application;
    (v) The most recent capital measurements of the ultimate holding 
company, as reported to its principal regulator, calculated in 
accordance with the standards published by the Basel Committee on 
Banking Supervision, as amended from time to time;
    (vi) For each instance in which a mathematical model to be used by 
the broker or dealer to calculate a deduction for market risk or to 
calculate maximum potential exposure for a particular product or 
counterparty differs from the mathematical model used by the ultimate 
holding company to calculate an allowance for market risk or to 
calculate maximum potential exposure for that same product or 
counterparty, a description of the difference(s) between the 
mathematical models; and
    (vii) Sample risk reports that are provided to the persons at the 
ultimate holding company who are responsible for managing group-wide 
risk and that will be provided to the Commission under Sec.  240.15c3-
1g(b)(1)(i)(H);
    (4) The application of the broker or dealer shall be supplemented by 
other information relating to the internal risk management control 
system, mathematical models, and financial position of the broker or 
dealer or the ultimate holding company of the broker or dealer that the 
Commission may request to complete its review of the application;

[[Page 436]]

    (5) The application shall be considered filed when received at the 
Commission's principal office in Washington, DC. A person who files an 
application pursuant to this section for which it seeks confidential 
treatment may clearly mark each page or segregable portion of each page 
with the words ``Confidential Treatment Requested.'' All information 
submitted in connection with the application will be accorded 
confidential treatment, to the extent permitted by law;
    (6) If any of the information filed with the Commission as part of 
the application of the broker or dealer is found to be or becomes 
inaccurate before the Commission approves the application, the broker or 
dealer must notify the Commission promptly and provide the Commission 
with a description of the circumstances in which the information was 
found to be or has become inaccurate along with updated, accurate 
information;
    (7)(i) The Commission may approve the application or an amendment to 
the application, in whole or in part, subject to any conditions or 
limitations the Commission may require, if the Commission finds the 
approval to be necessary or appropriate in the public interest or for 
the protection of investors, after determining, among other things, 
whether the broker or dealer has met the requirements of this appendix E 
and is in compliance with other applicable rules promulgated under the 
Act and by self-regulatory organizations, and whether the ultimate 
holding company of the broker or dealer is in compliance with the terms 
of its undertakings, as provided to the Commission;
    (ii) The Commission may approve the temporary use of a provisional 
model in whole or in part, subject to any conditions or limitations the 
Commission may require, if:
    (A) The broker or dealer has a complete application pending under 
this section;
    (B) The use of the provisional model has been approved by:
    (1) A prudential regulator;
    (2) The Commodity Futures Trading Commission or a futures 
association registered with the Commodity Futures Trading Commission 
under section 17 of the Commodity Exchange Act;
    (3) A foreign financial regulatory authority that administers a 
foreign financial regulatory system with capital requirements that the 
Commission has found are eligible for substituted compliance under Sec.  
240.3a71-6 if the provisional model is used for the purposes of 
calculating net capital;
    (4) A foreign financial regulatory authority that administers a 
foreign financial regulatory system with margin requirements that the 
Commission has found are eligible for substituted compliance under Sec.  
240.3a71-6 if the provisional model is used for the purposes of 
calculating initial margin pursuant to Sec.  240.18a-3; or
    (5) Any other foreign supervisory authority that the Commission 
finds has approved and monitored the use of the provisional model 
through a process comparable to the process set forth in this section.
    (8) A broker or dealer shall amend its application to calculate 
certain deductions for market and credit risk under this appendix E and 
submit the amendment to the Commission for approval before it may change 
materially a mathematical model used to calculate market or credit risk 
or before it may change materially its internal risk management control 
system;
    (9) As a condition to the broker's or dealer's calculation of 
deductions for market and credit risk under this appendix E, an ultimate 
holding company that does not have a principal regulator shall submit to 
the Commission, as an amendment to the broker's or dealer's application, 
any material changes to a mathematical model or other methods used to 
calculate allowances for market, credit, and operational risk, and any 
material changes to the internal risk management control system for the 
affiliate group. The ultimate holding company must submit these material 
changes to the Commission before making them;
    (10) As a condition for the broker or dealer to compute deductions 
for market and credit risk under this appendix E, the broker or dealer 
agrees that:

[[Page 437]]

    (i) It will notify the Commission 45 days before it ceases to 
compute deductions for market and credit risk under this appendix E; and
    (ii) The Commission may determine by order that the notice will 
become effective after a shorter or longer period of time if the broker 
or dealer consents or if the Commission determines that a shorter or 
longer period of time is necessary or appropriate in the public interest 
or for the protection of investors; and
    (11) Notwithstanding paragraph (a)(10) of this section, the 
Commission, by order, may revoke a broker's or dealer's exemption that 
allows it to use the market risk standards of this appendix E to 
calculate deductions for market risk, instead of the provisions of Sec.  
240.15c3-1(c)(2)(vi) and (c)(2)(vii), and the exemption to use the 
credit risk standards of this appendix E to calculate deductions for 
credit risk on certain credit exposures arising from transactions in 
derivatives instruments, instead of the provisions of Sec.  240.15c3-
1(c)(2)(iv), if the Commission finds that such exemption is no longer 
necessary or appropriate in the public interest or for the protection of 
investors. In making its finding, the Commission will consider the 
compliance history of the broker or dealer related to its use of models, 
the financial and operational strength of the broker or dealer and its 
ultimate holding company, the broker's or dealer's compliance with its 
internal risk management controls, and the ultimate holding company's 
compliance with its undertakings.

                               Market Risk

    (b) A broker or dealer whose application, including amendments, has 
been approved under paragraph (a) of this appendix E shall compute a 
deduction for market risk in an amount equal to the sum of the 
following:
    (1) For positions for which the Commission has approved the broker's 
or dealer's use of value-at risk (``VaR'') models, the VaR of the 
positions multiplied by the appropriate multiplication factor determined 
according to paragraph (d)(1)(iii) of this appendix E, except that the 
initial multiplication factor shall be three, unless the Commission 
determines, based on a review of the broker's or dealer's application or 
an amendment to the application under paragraph (a) of this appendix E, 
including a review of its internal risk management control system and 
practices and VaR models, that another multiplication factor is 
appropriate;
    (2) For positions for which the VaR model does not incorporate 
specific risk, a deduction for specific risk to be determined by the 
Commission based on a review of the broker's or dealer's application or 
an amendment to the application under paragraph (a) of this appendix E 
and the positions involved;
    (3) For positions for which the Commission has approved the broker's 
or dealer's application to use scenario analysis, the greatest loss 
resulting from a range of adverse movements in relevant risk factors, 
prices, or spreads designed to represent a negative movement greater 
than, or equal to, the worst ten-day movement over the four years 
preceding calculation of the greatest loss, or some multiple of the 
greatest loss based on the liquidity of the positions subject to 
scenario analysis. If historical data is insufficient, the deduction 
shall be the largest loss within a three standard deviation movement in 
those risk factors, prices, or spreads over a ten-day period, multiplied 
by an appropriate liquidity adjustment factor. Irrespective of the 
deduction otherwise indicated under scenario analysis, the resulting 
deduction for market risk must be at least $25 per 100 share equivalent 
contract for equity positions, or one-half of one percent of the face 
value of the contract for all other types of contracts, even if the 
scenario analysis indicates a lower amount. A qualifying scenario must 
include the following:
    (i) A set of pricing equations for the positions based on, for 
example, arbitrage relations, statistical analysis, historic 
relationships, merger evaluation, or fundamental valuation of an 
offering of securities;
    (ii) Auxiliary relationships mapping risk factors to prices; and
    (iii) Data demonstrating the effectiveness of the scenario in 
capturing market risk, including specific risk; and

[[Page 438]]

    (4) For all remaining positions, the deductions specified in 
Sec. Sec.  240.15c3-1(c)(2)(vi), (c)(2)(vii), and applicable appendices 
to Sec.  240.15c3-1.

                               Credit Risk

    (c) A broker or dealer whose application, including amendments, has 
been approved under paragraph (a) of this appendix E shall compute a 
deduction for credit risk on transactions in derivative instruments (if 
this appendix E is used to calculate a deduction for market risk on 
those instruments) in an amount equal to the sum of the following:
    (1) A counterparty exposure charge in an amount equal to the sum of 
the following:
    (i) The net replacement value in the account of each counterparty 
that is insolvent, or in bankruptcy, or that has senior unsecured long-
term debt in default; and
    (ii) For a counterparty not otherwise described in paragraph 
(c)(1)(i) of this appendix E, the credit equivalent amount of the 
broker's or dealer's exposure to the counterparty, as defined in 
paragraph (c)(4)(i) of this appendix E, multiplied by the credit risk 
weight of the counterparty, as defined in paragraph (c)(4)(vi) of this 
appendix E, multiplied by 8%;
    (2) A concentration charge by counterparty in an amount equal to the 
sum of the following:
    (i) For each counterparty with a credit risk weight of 20% or less, 
5% of the amount of the current exposure to the counterparty in excess 
of 5% of the tentative net capital of the broker or dealer;
    (ii) For each counterparty with a credit risk weight of greater than 
20% but less than 50%, 20% of the amount of the current exposure to the 
counterparty in excess of 5% of the tentative net capital of the broker 
or dealer; and
    (iii) For each counterparty with a credit risk weight of greater 
than 50%, 50% of the amount of the current exposure to the counterparty 
in excess of 5% of the tentative net capital of the broker or dealer; 
and
    (3) A portfolio concentration charge of 100 percent of the amount of 
the broker's or dealer's aggregate current exposure for all 
counterparties in excess of 10 percent of the tentative net capital of 
the broker or dealer;
    (4) Terms. (i) The credit equivalent amount of the broker's or 
dealer's exposure to a counterparty is the sum of the broker's or 
dealer's maximum potential exposure to the counterparty, as defined in 
paragraph (c)(4)(ii) of this appendix E, multiplied by the appropriate 
multiplication factor, and the broker's or dealer's current exposure to 
the counterparty, as defined in paragraph (c)(4)(iii) of this appendix 
E. The broker or dealer must use the multiplication factor determined 
according to paragraph (d)(1)(v) of this appendix E, except that the 
initial multiplication factor shall be one, unless the Commission 
determines, based on a review of the broker's or dealer's application or 
an amendment to the application approved under paragraph (a) of this 
appendix E, including a review of its internal risk management control 
system and practices and VaR models, that another multiplication factor 
is appropriate;
    (ii) The maximum potential exposure is the VaR of the counterparty's 
positions with the broker or dealer, after applying netting agreements 
with the counterparty meeting the requirements of paragraph (c)(4)(iv) 
of this appendix E, taking into account the value of collateral from the 
counterparty held by the broker or dealer in accordance with paragraph 
(c)(4)(v) of this appendix E, and taking into account the current 
replacement value of the counterparty's positions with the broker or 
dealer;
    (iii) The current exposure of the broker or dealer to a counterparty 
is the current replacement value of the counterparty's positions with 
the broker or dealer, after applying netting agreements with the 
counterparty meeting the requirements of paragraph (c)(4)(iv) of this 
appendix E and taking into account the value of collateral from the 
counterparty held by the broker or dealer in accordance with paragraph 
(c)(4)(v) of this appendix E;
    (iv) Netting agreements. A broker or dealer may include the effect 
of a netting agreement that allows the broker or dealer to net gross 
receivables from

[[Page 439]]

and gross payables to a counterparty upon default of the counterparty 
if:
    (A) The netting agreement is legally enforceable in each relevant 
jurisdiction, including in insolvency proceedings;
    (B) The gross receivables and gross payables that are subject to the 
netting agreement with a counterparty can be determined at any time; and
    (C) For internal risk management purposes, the broker-dealer 
monitors and controls its exposure to the counterparty on a net basis;
    (v) Collateral. When calculating maximum potential exposure and 
current exposure to a counterparty, the fair market value of collateral 
pledged and held may be taken into account provided:
    (A) The collateral is marked to market each day and is subject to a 
daily margin maintenance requirement;
    (B) The collateral is subject to the broker's or dealer's physical 
possession or control;
    (1) The collateral is subject to the broker's or dealer's physical 
possession or control and may be liquidated promptly by the firm without 
intervention by any other party; or
    (2) The collateral is held by an independent third-party custodian 
that is a bank as defined in section 3(a)(6) of the Act or a registered 
U.S. clearing organization or depository that is not affiliated with the 
counterparty or, if the collateral consists of foreign securities or 
currencies, a supervised foreign bank, clearing organization, or 
depository that is not affiliated with the counterparty and that 
customarily maintains custody of such foreign securities or currencies;
    (C) The collateral is liquid and transferable;
    (D) The collateral agreement is legally enforceable by the broker or 
dealer against the counterparty and any other parties to the agreement;
    (E) The collateral does not consist of securities issued by the 
counterparty or a party related to the broker or dealer or to the 
counterparty;
    (F) The Commission has approved the broker's or dealer's use of a 
VaR model to calculate deductions for market risk for the type of 
collateral in accordance with this appendix E; and
    (G) The collateral is not used in determining the credit rating of 
the counterparty;
    (vi) Credit risk weights of counterparties. A broker or dealer that 
computes its deductions for credit risk pursuant to this Appendix E 
shall apply a credit risk weight for transactions with a counterparty of 
either 20%, 50%, or 150% based on an internal credit rating the broker 
or dealer determines for the counterparty.
    (A) As part of its initial application or in an amendment, the 
broker or dealer may request Commission approval to apply a credit risk 
weight of either 20%, 50%, or 150% based on internal calculations of 
credit ratings, including internal estimates of the maturity adjustment. 
Based on the strength of the broker's or dealer's internal credit risk 
management system, the Commission may approve the application. The 
broker or dealer must make and keep current a record of the basis for 
the credit rating of each counterparty;
    (B) For the portion of a current exposure covered by a written 
guarantee where that guarantee is an unconditional and irrevocable 
guarantee of the due and punctual payment and performance of the 
obligation and the broker or dealer can demand immediate payment from 
the guarantor after any payment is missed without having to make 
collection efforts, the broker or dealer may substitute the credit risk 
weight of the guarantor for the credit risk weight of the counterparty; 
and
    (C) As part of its initial application or in an amendment, the 
broker or dealer may request Commission approval to reduce deductions 
for credit risk through the use of credit derivatives.

                               VaR Models

    (d) To be approved, each VaR model must meet the following minimum 
qualitative and quantitative requirements:
    (1) Qualitative requirements. (i) The VaR model used to calculate 
market or credit risk for a position must be integrated into the daily 
internal risk management system of the broker or dealer;

[[Page 440]]

    (ii) The VaR model must be reviewed both periodically and annually. 
The periodic review may be conducted by the broker's or dealer's 
internal audit staff, but the annual review must be conducted by a 
registered public accounting firm, as that term is defined in section 
2(a)(12) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201 et seq.); and
    (iii) For purposes of computing market risk, the broker or dealer 
must determine the appropriate multiplication factor as follows:
    (A) Beginning three months after the broker or dealer begins using 
the VaR model to calculate market risk, the broker or dealer must 
conduct backtesting of the model by comparing its actual daily net 
trading profit or loss with the corresponding VaR measure generated by 
the VaR model, using a 99 percent, one-tailed confidence level with 
price changes equivalent to a one business-day movement in rates and 
prices, for each of the past 250 business days, or other period as may 
be appropriate for the first year of its use;
    (B) On the last business day of each quarter, the broker or dealer 
must identify the number of backtesting exceptions of the VaR model, 
that is, the number of business days in the past 250 business days, or 
other period as may be appropriate for the first year of its use, for 
which the actual net trading loss, if any, exceeds the corresponding VaR 
measure; and
    (C) The broker or dealer must use the multiplication factor 
indicated in Table 1 of this appendix E in determining its market risk 
until it obtains the next quarter's backtesting results;

    Table 1--Multiplication factor based on the number of backtesting
                       exceptions of the VaR model
------------------------------------------------------------------------
                                                          Multiplication
                  Number of exceptions                        factor
------------------------------------------------------------------------
4 or fewer..............................................            3.00
5.......................................................            3.40
6.......................................................            3.50
7.......................................................            3.65
8.......................................................            3.75
9.......................................................            3.85
10 or more..............................................            4.00
------------------------------------------------------------------------

    (iv) For purposes of incorporating specific risk into a VaR model, a 
broker or dealer must demonstrate that it has methodologies in place to 
capture liquidity, event, and default risk adequately for each position. 
Furthermore, the models used to calculate deductions for specific risk 
must:
    (A) Explain the historical price variation in the portfolio;
    (B) Capture concentration (magnitude and changes in composition);
    (C) Be robust to an adverse environment; and
    (D) Be validated through backtesting; and
    (v) For purposes of computing the credit equivalent amount of the 
broker's or dealer's exposures to a counterparty, the broker or dealer 
must determine the appropriate multiplication factor as follows:
    (A) Beginning three months after it begins using the VaR model to 
calculate maximum potential exposure, the broker or dealer must conduct 
backtesting of the model by comparing, for at least 80 counterparties 
with widely varying types and sizes of positions with the firm, the ten-
business day change in its current exposure to the counterparty based on 
its positions held at the beginning of the ten-business day period with 
the corresponding ten-business day maximum potential exposure for the 
counterparty generated by the VaR model;
    (B) As of the last business day of each quarter, the broker or 
dealer must identify the number of backtesting exceptions of the VaR 
model, that is, the number of ten-business day periods in the past 250 
business days, or other period as may be appropriate for the first year 
of its use, for which the change in current exposure to a counterparty 
exceeds the corresponding maximum potential exposure; and
    (C) The broker or dealer will propose, as part of its application, a 
schedule of multiplication factors, which must be approved by the 
Commission based on the number of backtesting exceptions of the VaR 
model. The broker or dealer must use the multiplication factor indicated 
in the approved schedule in determining the credit equivalent amount of 
its exposures to a counterparty until it obtains the next quarter's 
backtesting results, unless the Commission determines, based on,

[[Page 441]]

among other relevant factors, a review of the broker's or dealer's 
internal risk management control system, including a review of the VaR 
model, that a different adjustment or other action is appropriate;
    (2) Quantitative requirements. (i) For purposes of determining 
market risk, the VaR model must use a 99 percent, one-tailed confidence 
level with price changes equivalent to a ten business-day movement in 
rates and prices;
    (ii) For purposes of determining maximum potential exposure, the VaR 
model must use a 99 percent, one-tailed confidence level with price 
changes equivalent to a one-year movement in rates and prices; or based 
on a review of the broker's or dealer's procedures for managing 
collateral and if the collateral is marked to market daily and the 
broker or dealer has the ability to call for additional collateral 
daily, the Commission may approve a time horizon of not less than ten 
business days;
    (iii) The VaR model must use an effective historical observation 
period of at least one year. The broker or dealer must consider the 
effects of market stress in its construction of the model. Historical 
data sets must be updated at least monthly and reassessed whenever 
market prices or volatilities change significantly; and
    (iv) The VaR model must take into account and incorporate all 
significant, identifiable market risk factors applicable to positions in 
the accounts of the broker or dealer, including:
    (A) Risks arising from the non-linear price characteristics of 
derivatives and the sensitivity of the market value of those positions 
to changes in the volatility of the derivatives' underlying rates and 
prices;
    (B) Empirical correlations with and across risk factors or, 
alternatively, risk factors sufficient to cover all the market risk 
inherent in the positions in the proprietary or other trading accounts 
of the broker or dealer, including interest rate risk, equity price 
risk, foreign exchange risk, and commodity price risk;
    (C) Spread risk, where applicable, and segments of the yield curve 
sufficient to capture differences in volatility and imperfect 
correlation of rates along the yield curve for securities and 
derivatives that are sensitive to different interest rates; and
    (D) Specific risk for individual positions.

                          Additional Conditions

    (e) As a condition for the broker or dealer to use this appendix E 
to calculate certain of its capital charges, the Commission may impose 
additional conditions on the broker or dealer, which may include, but 
are not limited to restricting the broker's or dealer's business on a 
product-specific, category-specific, or general basis; submitting to the 
Commission a plan to increase the broker's or dealer's net capital or 
tentative net capital; filing more frequent reports with the Commission; 
modifying the broker's or dealer's internal risk management control 
procedures; or computing the broker's or dealer's deductions for market 
and credit risk in accordance with Sec.  240.15c3-1(c)(2)(iv), (vi), and 
(vii), (c)(2)(xv)(A) and (B), as appropriate, and Sec.  240.15c-1b, as 
appropriate. If it is not an ultimate holding company that has a 
principal regulator, the Commission also may require, as a condition of 
continuation of the exemption, the ultimate holding company of the 
broker or dealer to file more frequent reports or to modify its group-
wide internal risk management control procedures. If the Commission 
finds it is necessary or appropriate in the public interest or for the 
protection of investors, the Commission may impose additional conditions 
on either the broker-dealer, or the ultimate holding company, if it is 
an ultimate holding company that does not have a principal regulator, 
if:
    (1) The broker or dealer is required by Sec.  240.15c3-1(a)(7)(ii) 
to provide notice to the Commission that the broker's or dealer's 
tentative net capital is less than $6 billion;
    (2) The broker or dealer or the ultimate holding company of the 
broker or dealer fails to meet the reporting requirements set forth in 
Sec.  240.17a-5 or 240.15c3-1g(b), as applicable;
    (3) Any event specified in Sec.  240.17a-11 occurs;
    (4) There is a material deficiency in the internal risk management 
control system or in the mathematical models used to price securities or 
to calculate

[[Page 442]]

deductions for market and credit risk or allowances for market and 
credit risk, as applicable, of the broker or dealer or the ultimate 
holding company of the broker or dealer;
    (5) The ultimate holding company of the broker or dealer fails to 
comply with its undertakings that the broker or dealer has filed with 
its application pursuant to paragraph (a)(1)(viii) or (a)(1)(ix) of this 
appendix E;
    (6) The broker or dealer fails to comply with this appendix E; or
    (7) The Commission finds that imposition of other conditions is 
necessary or appropriate in the public interest or for the protection of 
investors.

[69 FR 34462, June 21, 2004, as amended at 79 FR 1549, Jan. 8, 2014; 79 
FR 38451, July 8, 2014; 84 FR 44046, Aug. 22, 2019]



Sec.  240.15c3-1f  Optional market and credit risk requirements for OTC 
derivatives dealers (Appendix F to 17 CFR 240.15c3-1).

                        Application Requirements

    (a) An OTC derivatives dealer may apply to the Commission for 
authorization to compute capital charges for market and credit risk 
pursuant to this Appendix F in lieu of computing securities haircuts 
pursuant to Sec.  240.15c3-1(c)(2)(vi).
    (1) An OTC derivatives dealer's application shall contain the 
following information:
    (i) Executive summary. An OTC derivatives dealer shall include in 
its application an Executive Summary of information provided to the 
Commission.
    (ii) Description of methods for computing market risk charges. An 
OTC derivatives dealer shall provide a description of all statistical 
models used for pricing OTC derivative instruments and for computing 
value-at-risk (``VAR''), a description of the applicant's controls over 
those models, and a statement regarding whether the firm has developed 
its own internal VAR models. If the OTC derivatives dealer's VAR model 
incorporates empirical correlations across risk categories, the dealer 
shall describe its process for measuring correlations and describe the 
qualitative and quantitative aspects of the model which at a minimum 
must adhere to the criteria set forth in paragraph (e) of this appendix 
F. The application shall further state whether the OTC derivatives 
dealer intends to use an alternative method for computing its market 
risk charge for equity instruments and, if applicable, a description of 
how its own theoretical pricing model contains the minimum pricing 
factors set forth in appendix A (Sec.  240.15c3-1a). The application 
shall also describe any category of securities having no ready market or 
any category of debt securities which are below investment grade for 
which the OTC derivatives dealer wishes to use its VAR model to 
calculate its market risk charge or for which it wishes to use an 
alternative method for computing this charge and a description of how 
those charges would be determined.
    (iii) Internal risk management control systems. An OTC derivatives 
dealer shall provide a comprehensive description of its internal risk 
management control systems and how those systems adhere to the 
requirements set forth in Sec.  240.15c3-4(a) through (d).
    (2) The Commission may approve the application after reviewing the 
application to determine whether the OTC derivatives dealer:
    (i) Has adopted internal risk management control systems that meet 
the requirements set forth in Sec.  240.15c3-4; and
    (ii) Has adopted a VAR model that meets the requirements set forth 
in paragraphs (e)(1) and (e)(2) of this appendix F.
    (3) If the OTC derivatives dealer materially amends its VAR model or 
internal risk management control systems as described in its 
application, including any material change in the categories of non-
marketable securities that it wishes to include in its VAR model, the 
dealer shall file an application describing the changes which must be 
approved by the Commission before the changes may be implemented. After 
reviewing the application for changes to the dealer's VAR model or 
internal risk management control systems to determine whether, with the 
changes, the OTC derivatives dealer's VAR model and internal risk 
management control systems would meet the requirements set forth in this 
appendix

[[Page 443]]

F and Sec.  240.15c3-4, the Commission may approve the application.
    (4) The applications provided for in this paragraph (a) shall be 
considered filed when received at the Commission's principal office in 
Washington, DC. All applications filed pursuant to this paragraph (a) 
shall be deemed to be confidential.

                    Compliance With Sec.  240.15c3-4

    (b) An OTC derivatives dealer must be in compliance in all material 
respects with Sec.  240.15c3-4 regarding its internal risk management 
control systems in order to be in compliance with Sec.  240.15c3-1.

                               Market Risk

    (c) An OTC derivatives dealer electing to apply this appendix F 
shall compute a capital charge for market risk which shall be the 
aggregate of the charges computed below:
    (1) Value-at-Risk. An OTC derivatives dealer shall deduct from net 
worth an amount for market risk for eligible OTC derivative instruments 
and other positions in its proprietary or other accounts equal to the 
VAR of these positions obtained from its proprietary VAR model, 
multiplied by the appropriate multiplication factor in paragraph 
(e)(1)(iv)(C) of this appendix F. The OTC derivatives dealer may not 
elect to calculate its capital charges under this paragraph (c)(1) until 
its application to use the VAR model has been approved by the 
Commission.
    (2) Alternative method for equities. An OTC derivatives dealer may 
elect to use this alternative method to calculate its market risk for 
equity instruments, including OTC options, upon approval by the 
Commission on application by the dealer. Under this alternative method, 
the deduction for market risk must be the amount computed pursuant to 
appendix A to Rule 15c3-1

(Sec.  240.15c3-1a). In this computation, the OTC derivatives dealer may 
use its own theoretical pricing model provided that it contains the 
minimum pricing factors set forth in appendix A.
    (3) Non-marketable securities. An OTC derivatives dealer may not use 
a VAR model to determine a capital charge for any category of securities 
having no ready market or any category of debt securities which are 
below investment grade or any derivative instrument based on the value 
of these categories of securities, unless the Commission has granted, 
pursuant to paragraph (a)(1) of this appendix F, its application to use 
its VAR model for any such category of securities. The dealer in any 
event may apply, pursuant to paragraph (a)(1) of this appendix F, for an 
alternative treatment for any such category of securities, rather than 
calculate the market risk capital charge for such category of securities 
under Sec.  240.15c3-1(c)(2)(vi) and (vii).
    (4) Residual positions. To the extent that a position has not been 
included in the calculation of the market risk charge in paragraphs 
(c)(1) through (c)(3) of this section, the market risk charge for the 
position shall be computed under Sec.  240.15c3-1(c)(2)(vi).

                               Credit Risk

    (d) The capital charge for credit risk arising from an OTC 
derivatives dealer's transactions in eligible OTC derivative instruments 
shall be:
    (1) The net replacement value in the account of a counterparty 
(including the effect of legally enforceable netting agreements and the 
application of liquid collateral) that is insolvent, or in bankruptcy, 
or that has senior unsecured long-term debt in default;
    (2) As to a counterparty not otherwise described in paragraph (d)(1) 
of this section, the net replacement value in the account of the 
counterparty (including the effect of legally enforceable netting 
agreements and the application of liquid collateral) multiplied by 8%, 
and further multiplied by a counterparty factor of 20%, 50%, or 100% 
based on an internal credit rating the OTC derivatives dealer determines 
for the counterparty; and
    (3) A concentration charge where the net replacement value in the 
account of any one counterparty (other than a counterparty described in 
paragraph (d)(1) of this section) exceeds 25% of the OTC derivatives 
dealer's tentative net capital, calculated as follows:
    (i) For counterparties for which an OTC derivatives dealer assigns 
an internal rating for senior unsecured long-

[[Page 444]]

term debt or commercial paper that would apply a 20% counterparty factor 
under paragraph (d)(2) of this section, 5% of the amount of the net 
replacement value in excess of 25% of the OTC derivatives dealer's 
tentative net capital;
    (ii) For counterparties for which an OTC derivatives dealer assigns 
an internal rating for senior unsecured long-term debt that would apply 
a 50% counterparty factor under paragraph (d)(2) of this section, 20% of 
the amount of the net replacement value in excess of 25% of the OTC 
derivatives dealer's tentative net capital;
    (iii) For counterparties for which an OTC derivatives dealer assigns 
an internal rating for senior unsecured long-term debt that would apply 
a 100% counterparty factor under paragraph (d)(2) of this section, 50% 
of the amount of the net replacement value in excess of 25% of the OTC 
derivatives dealer's tentative net capital.
    (4) Counterparties may be rated by the OTC derivatives dealer, or by 
an affiliated bank or affiliated broker-dealer of the OTC derivatives 
dealer, upon approval by the Commission on application by the OTC 
derivatives dealer. Based on the strength of the OTC derivatives 
dealer's internal credit risk management system, the Commission may 
approve the application. The OTC derivatives dealer must make and keep 
current a record of the basis for the credit rating for each 
counterparty.

                               VAR Models

    (e) An OTC derivatives dealer's VAR model must meet the following 
qualitative and quantitative requirements:
    (1) Qualitative requirements. An OTC derivatives dealerapplying this 
appendix F must have a VAR model that meets the following minimum 
qualitative requirements:
    (i) The OTC derivatives dealer's VAR model must be integrated into 
the firm's daily risk management process;
    (ii) The OTC derivatives dealer must conduct appropriate stress 
tests of the VAR model, and develop appropriate procedures to follow in 
response to the results of such tests;
    (iii) The OTC derivatives dealer must conduct periodic reviews 
(which may be performed by internal audit staff) of its VAR model. The 
OTC derivatives dealer's VAR model also must be subject to annual 
reviews conducted by independent public accountants; and
    (iv) The OTC derivatives dealer must conduct backtesting of the VAR 
model pursuant to the following procedures:
    (A) Beginning one year after the OTC derivatives dealer begins using 
its VAR model to calculate its net capital, the OTC derivatives dealer 
must conduct backtesting by comparing each of its most recent 250 
business days' actual net trading profit or loss with the corresponding 
daily VAR measures generated for determining market risk capital charges 
and calibrated to a one-day holding period and a 99 percent, one-tailed 
confidence level;
    (B) Once each quarter, the OTC derivatives dealer must identify the 
number of exceptions, that is, the number of business days for which the 
actual daily net trading loss, if any, exceeded the corresponding daily 
VAR measure; and
    (C) An OTC derivatives dealer must use the multiplication factor 
indicated in Table 1 of this appendix F in determining its capital 
charge for market risk until it obtains the next quarter's backtesting 
results, unless the Commission determines that a different adjustment or 
other action is appropriate.

     Table 5--Multiplication Factor Based on Results of Backtesting
------------------------------------------------------------------------
                                                          Multiplication
                  Number of exceptions                        factor
------------------------------------------------------------------------
 4 or fewer.............................................         3.00
 5......................................................         3.40
 6......................................................         3.50
 7......................................................         3.65
 8......................................................         3.75
 9......................................................         3.85
10 or more..............................................         4.00
------------------------------------------------------------------------

    (2) Quantitative requirements. An OTC derivatives dealer applying 
this appendix F must have a VAR model that meets the following minimum 
quantitative requirements:
    (i) The VAR measures must be calculated on a daily basis using a 99 
percent, one-tailed confidence level with a price change equivalent to a 
ten-business day movement in rates and prices;

[[Page 445]]

    (ii) The effective historical observation period for VAR measures 
must be at least one year, and the weighted average time lag of the 
individual observations cannot be less than six months. Historical data 
sets must be updated at least every three months and reassessed whenever 
market prices or volatilities are subject to large changes;
    (iii) The VAR measures must include the risks arising from the non-
linear price characteristics of options positions and the sensitivity of 
the market value of the positions to changes in the volatility of the 
underlying rates or prices. An OTC derivatives dealer must measure the 
volatility of options positions by different maturities;
    (iv) The VAR measures may incorporate empirical correlations within 
and across risk categories, provided that the OTC derivatives dealer has 
described its process for measuring correlations in its application to 
apply this appendix F and the Commission has approved its application. 
In the event that the VAR measures do not incorporate empirical 
correlations across risk categories, the OTC derivatives dealer must add 
the separate VAR measures for the four major risk categories in 
paragraph (e)(2)(v) of this appendix F to determine its aggregate VAR 
measure; and
    (v) The OTC derivatives dealer's VAR model must use risk factors 
sufficient to measure the market risk inherent in all covered positions. 
The risk factors must address, at a minimum, the following major risk 
categories: interest rate risk, equity price risk, foreign exchange rate 
risk, and commodity price risk. For material exposures in the major 
currencies and markets, modeling techniques must capture, at a minimum, 
spread risk and must incorporate enough segments of the yield curve to 
capture differences in volatility and less-than-perfect correlation of 
rates along the yield curve. An OTC derivatives dealer must provide the 
Commission with evidence that the OTC derivatives dealer's VAR model 
takes account of specific risk in positions, including specific equity 
risk, if the OTC derivatives dealer intends to utilize its VAR model to 
compute capital charges for equity price risk.

[63 FR 59398, Nov. 3, 1998, as amended at 79 FR 1549, Jan. 8, 2014]



Sec.  240.15c3-1g  Conditions for ultimate holding companies of certain
brokers or dealers (Appendix G to 17 CFR 240.15c3-1).

    As a condition for a broker or dealer to compute certain of its 
deductions to capital in accordance with Sec.  240.15c3-1e, pursuant to 
its undertaking, the ultimate holding company of the broker or dealer 
shall:

     Conditions Regarding Computation of Allowable Capital and Risk 
                               Allowances

    (a) If it is not an ultimate holding company that has a principal 
regulator, as that term is defined in Sec.  240.15c3-1(c)(13), calculate 
allowable capital and allowances for market, credit, and operational 
risk on a consolidated basis as follows:
    (1) Allowable capital. The ultimate holding company must compute 
allowable capital as the sum of:
    (i) Common shareholders' equity on the consolidated balance sheet of 
the holding company less:
    (A) Goodwill;
    (B) Deferred tax assets, except those permitted for inclusion in 
Tier 1 capital by the Board of Governors of the Federal Reserve System 
(``Federal Reserve'') (12 CFR 225, appendix A);
    (C) Other intangible assets; and
    (D) Other deductions from common stockholders' equity as required by 
the Federal Reserve in calculating Tier 1 capital (as defined in 12 CFR 
225, appendix A);
    (ii) Cumulative and non-cumulative preferred stock, except that the 
amount of cumulative preferred stock may not exceed 33% of the items 
included in allowable capital pursuant to paragraph (a)(1)(i) of this 
appendix G, excluding cumulative preferred stock, provided that:
    (A) The stock does not have a maturity date;
    (B) The stock cannot be redeemed at the option of the holder of the 
instrument;

[[Page 446]]

    (C) The stock has no other provisions that will require future 
redemption of the issue; and
    (D) The issuer of the stock can defer or eliminate dividends;
    (iii) The sum of the following items on the consolidated balance 
sheet, to the extent that the sum does not exceed the sum of the items 
included in allowable capital pursuant to paragraphs (a)(1)(i) and (ii) 
of this Appendix G:
    (A) Cumulative preferred stock in excess of the 33% limit specified 
in paragraph (a)(1)(ii) of this appendix G and subject to the conditions 
of paragraphs (a)(1)(ii)(A) through (D) of this appendix G;
    (B) Subordinated debt if the original weighted average maturity of 
the subordinated debt is at least five years; each subordinated debt 
instrument states clearly on its face that repayment of the debt is not 
protected by any Federal agency or the Securities Investor Protection 
Corporation; the subordinated debt is unsecured and subordinated in 
right of payment to all senior indebtedness of the ultimate holding 
company; and the subordinated debt instrument permits acceleration only 
in the event of bankruptcy or reorganization of the ultimate holding 
company under Chapters 7 (liquidation) and 11 (reorganization) of the 
U.S. Bankruptcy Code; and
    (C) As part of the broker's or dealer's application to calculate 
deductions for market and credit risk under Sec.  240.15c3-1e, an 
ultimate holding company may request to include, for a period of three 
years after adoption of this appendix G, long-term debt that has an 
original weighted average maturity of at least five years and that 
cannot be accelerated, except upon the occurrence of certain events as 
the Commission may approve. As part of a subsequent amendment to the 
broker's or dealer's application, the broker or dealer may request 
permission for the ultimate holding company to include long-term debt 
that meets these criteria in allowable capital for up to an additional 
two years; and
    (iv) Hybrid capital instruments that are permitted for inclusion in 
Tier 2 capital by the Federal Reserve (as defined in 12 CFR 225, 
appendix A);
    (2) Allowance for market risk. The ultimate holding company shall 
compute an allowance for market risk for all proprietary positions, 
including debt instruments, equity instruments, commodity instruments, 
foreign exchange contracts, and derivative contracts, as the aggregate 
of the following:
    (i) Value at risk. The VaR of its positions, multiplied by the 
appropriate multiplication factor as set forth in Sec.  240.15c3-1e(d). 
The VaR of the positions must be obtained using approved VaR models 
meeting the applicable qualitative and quantitative requirements of 
Sec.  240.15c3-1e(d); and
    (ii) Alternative method. For positions for which there does not 
exist adequate historical data to support a VaR model, the ultimate 
holding company must propose a model that produces a suitable allowance 
for market risk for those positions;
    (3) Allowance for credit risk. The ultimate holding company shall 
compute an allowance for credit risk for certain assets on the 
consolidated balance sheet and certain off-balance sheet items, 
including loans and loan commitments, exposures due to derivatives 
contracts, structured financial products, and other extensions of 
credit, and credit substitutes as follows:
    (i) By multiplying the credit equivalent amount of the ultimate 
holding company's exposure to the counterparty, as defined in paragraphs 
(a)(3)(i)(A), (B) and (C) of this appendix G, by the appropriate credit 
risk weight, as defined in paragraph (a)(3)(i)(F) of this appendix G, of 
the asset, off-balance sheet item, or counterparty, then multiplying 
that product by 8%, in accordance with the following:
    (A) For certain loans and loan commitments, the credit equivalent 
amount is determined by multiplying the nominal amount of the contract 
by the following credit conversion factors:
    (1) 0% credit conversion factor for loan commitments that:
    (i) May be unconditionally cancelled by the lender; or
    (ii) May be cancelled by the lender due to credit deterioration of 
the borrower;
    (2) 20% credit conversion factor for:

[[Page 447]]

    (i) Loan commitments of less than one year; or
    (ii) Short-term self-liquidating trade related contingencies, 
including letters of credit;
    (3) 50% credit conversion factor for loan commitments with an 
original maturity of greater than one year that contain transaction 
contingencies, including performance bonds, revolving underwriting 
facilities, note issuance facilities and bid bonds; and
    (4) 100% credit conversion factor for bankers' acceptances, stand-by 
letters of credit, and forward purchases of assets, and similar direct 
credit substitutes;
    (B) For derivatives contracts and for repurchase agreements, reverse 
repurchase agreements, stock lending and borrowing, and similar 
collateralized transactions, the credit equivalent amount is the sum of 
the ultimate holding company's maximum potential exposure to the 
counterparty, as defined in paragraph (a)(3)(i)(E) of this appendix G, 
multiplied by the appropriate multiplication factor, and the ultimate 
holding company's current exposure to the counterparty, as defined in 
paragraph (a)(3)(i)(D) of this appendix G. The ultimate holding company 
must use the multiplication factor determined according to Sec.  
240.15c3-1e(d)(1)(v), except that the initial multiplication factor 
shall be one, unless the Commission determines, based on a review of the 
group-wide internal risk management control system and practices, 
including a review of the VaR models, that another multiplication factor 
is appropriate;
    (C) The credit equivalent amount for other assets shall be the 
asset's book value on the ultimate holding company's consolidated 
balance sheet or other amount as determined according to the standards 
published by the Basel Committee on Banking Supervision, as amended from 
time to time;
    (D) The current exposure is the current replacement value of a 
counterparty's positions, after applying netting agreements with that 
counterparty meeting the requirements of Sec.  240.15c3-1e(c)(4)(iv) and 
taking into account the value of collateral from the counterparty in 
accordance with Sec.  240.15c3-1e(c)(4)(v);
    (E) The maximum potential exposure is the VaR of the counterparty's 
positions with the member of the affiliate group, after applying netting 
agreements with the counterparty meeting the requirements of paragraph 
(c)(4)(iv) of Sec.  240.15c3-1e, taking into account the value of 
collateral from the counterparty held by the member of the affiliate in 
accordance with paragraph (c)(4)(v) of Sec.  240.15c3-1e, and taking 
into account the current replacement value of the counterparty's 
positions with the member of the affiliate group, except that for 
repurchase agreements, reverse repurchase agreements, stock lending and 
borrowing, and similar collateralized transactions, maximum potential 
exposure must be calculated using a time horizon of not less than five 
days;
    (F) Credit ratings and credit risk weights shall be determined 
according to the provisions of paragraphs (c)(4)(vi)(A) and 
(c)(4)(vi)(B) of Sec.  240.15c3-1e, respectively;
    (G) As part of the broker's or dealer's initial application or in an 
amendment, the ultimate holding company may request Commission approval 
to reduce allowances for credit risk through the use of credit 
derivatives;
    (H) For the portion of a current exposure covered by a written 
guarantee, where that guarantee is an unconditional and irrevocable 
guarantee of the due and punctual payment and performance of the 
obligation and the ultimate holding company or member of the affiliate 
group can demand payment after any payment is missed without having to 
make collection efforts, the ultimate holding company or member of the 
affiliate group may substitute the credit risk weight of the guarantor 
for the credit risk weight of the counterparty; or
    (ii) As part of the broker's or dealer's initial application or in 
an amendment to the application, the ultimate holding company may 
request Commission approval to use a method of calculating credit risk 
that is consistent with standards published by the Basel Committee on 
Banking Supervision in International Convergence of Capital Measurement 
and Capital Standards (July 1988), as amended from time to time; and

[[Page 448]]

    (4) Allowance for operational risk. The ultimate holding company 
shall compute an allowance for operational risk in accordance with the 
standards published by the Basel Committee on Banking Supervision, as 
amended from time to time.

               Conditions Regarding Reporting Requirements

    (b) File reports with the Commission in accordance with the 
following:
    (1) If it is not an ultimate holding company that has a principal 
regulator, as that term is defined in Sec.  240.15c3-1(c)(13), the 
ultimate holding company shall file with the Commission:
    (i) A report as of the end of each month, filed not later than 30 
calendar days after the end of the month. A monthly report need not be 
filed for a month-end that coincides with a fiscal quarter-end. The 
monthly report shall include:
    (A) A consolidated balance sheet and income statement (including 
notes to the financial statements) for the ultimate holding company and 
statements of allowable capital and allowances for market, credit, and 
operational risk computed pursuant to paragraph (a) of this appendix G, 
except that the consolidated balance sheet and income statement for the 
first month of the fiscal year may be filed at a later time to which the 
Commission agrees (when reviewing the affiliated broker's or dealer's 
application under Sec.  240.15c3-1e(a)). A statement of comprehensive 
income (as defined in Sec.  210.1-02 of Regulation S-X of this chapter) 
shall be included in place of an income statement, if required by the 
applicable generally accepted accounting principles.
    (B) A graph reflecting, for each business line, the daily intra-
month VaR;
    (C) Consolidated credit risk information, including aggregate 
current exposure and current exposures (including commitments) listed by 
counterparty for the 15 largest exposures;
    (D) The 10 largest commitments listed by counterparty;
    (E) Maximum potential exposure listed by counterparty for the 15 
largest exposures;
    (F) The aggregate maximum potential exposure;
    (G) A summary report reflecting the geographic distribution of the 
ultimate holding company's exposures on a consolidated basis for each of 
the top ten countries to which it is exposed (by residence of the main 
operating group of the counterparty); and
    (H) Certain regular risk reports provided to the persons responsible 
for managing group-wide risk as the Commission may request from time to 
time;
    (ii) A quarterly report as of the end of each fiscal quarter, filed 
not later than 35 calendar days after the end of the quarter. The 
quarterly report shall include, in addition to the information contained 
in the monthly report as required by paragraph (b)(1)(i) of this 
appendix G, the following:
    (A) Consolidating balance sheets and income statements for the 
ultimate holding company. The consolidating balance sheet must provide 
information regarding each material affiliate of the ultimate holding 
company in a separate column, but may aggregate information regarding 
members of the affiliate group that are not material affiliates into one 
column. Statements of comprehensive income (as defined in Sec.  210.1-02 
of Regulation S-X) shall be included in place of an income statement, if 
required by the applicable generally accepted accounting principles;
    (B) The results of backtesting of all internal models used to 
compute allowable capital and allowances for market and credit risk 
indicating, for each model, the number of backtesting exceptions;
    (C) A description of all material pending legal or arbitration 
proceedings, involving either the ultimate holding company or any of its 
affiliates, that are required to be disclosed by the ultimate holding 
company under generally accepted accounting principles;
    (D) The aggregate amount of unsecured borrowings and lines of 
credit, segregated into categories, scheduled to mature within twelve 
months from the most recent fiscal quarter as to each material 
affiliate; and
    (E) For a quarter-end that coincides with the ultimate holding 
company's fiscal year-end, the ultimate holding company need not include 
consolidated

[[Page 449]]

and consolidating balance sheets and income statements (or statements of 
comprehensive income, as applicable) in its quarterly reports. The 
consolidating balance sheet and income statement (or statement of 
comprehensive income, as applicable) for the quarter-end that coincides 
with the fiscal year-end may be filed at a later time to which the 
Commission agrees (when reviewing the affiliated broker's or dealer's 
application under Sec.  240.15c3-1e(a));
    (iii) An annual audited report as of the end of the ultimate holding 
company's fiscal year, filed not later than 65 calendar days after the 
end of the fiscal year. The annual report shall include:
    (A) Consolidated financial statements for the ultimate holding 
company audited by a registered public accounting firm, as that term is 
defined in section 2(a)(12) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 
7201 et seq.). The audit shall be made in accordance with the rules 
promulgated by the Public Company Accounting Oversight Board. The 
audited financial statements must include a supporting schedule 
containing statements of allowable capital and allowances for market, 
credit, and operational risk computed pursuant to paragraph (a) of this 
appendix G; and
    (B) A supplemental report entitled ``Accountant's Report on Internal 
Risk Management Control System'' prepared by a registered public 
accounting firm, as that term is defined in section 2(a)(12) of the 
Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201 et seq.), indicating the 
results of the registered public accounting firm's review of the 
ultimate holding company's compliance with Sec.  240.15c3-4. The 
procedures are to be performed and the report is to be prepared in 
accordance with procedures agreed upon by the ultimate holding company 
and the registered public accounting firm conducting the review. The 
agreed-upon procedures are to be performed and the report is to be 
prepared in accordance with rules promulgated by the Public Company 
Accounting Oversight Board. The ultimate holding company must file, 
before commencement of the initial review, the procedures agreed upon by 
the ultimate holding company and the registered public accounting firm 
with the Division of Market Regulation, Office of Financial 
Responsibility, at Commission's principal office in Washington, DC. 
Before commencement of each subsequent review, the ultimate holding 
company must notify the Commission of any changes in the procedures;
    (iv) An organizational chart, as of the ultimate holding company's 
fiscal year-end, concurrently with its quarterly report for the quarter-
end that coincides with its fiscal year-end. The ultimate holding 
company must provide quarterly updates of the organizational chart if a 
material change in the information provided to the Commission has 
occurred;
    (2) If the ultimate holding company is an entity that has a 
principal regulator, as that term is defined in Sec.  240.15c3-1(c)(13), 
the ultimate holding company must file with the Commission:
    (i) A quarterly report as of the end of each fiscal quarter, filed 
not later than 35 calendar days after the end of the quarter, or a later 
time to which the Commission may agree upon application. The quarterly 
report shall include:
    (A) Consolidated (including notes to the financial statements) and 
consolidating balance sheets and income statements for the ultimate 
holding company. Statements of comprehensive income (as defined in Sec.  
210.1-02 of Regulation S-X) shall be included in place of income 
statements, if required by the applicable generally accepted accounting 
principles;
    (B) Its most recent capital measurements computed in accordance with 
the standards published by the Basel Committee on Banking Supervision, 
as amended from time to time, as reported to its principal regulator;
    (C) Certain regular risk reports provided to the persons responsible 
for managing group-wide risk as the Commission may request from time to 
time; and
    (D) For a quarter-end that coincides with the ultimate holding 
company's fiscal year-end, the ultimate holding company need not include 
consolidated and consolidating balance sheets and income statements (or 
statements of

[[Page 450]]

comprehensive income, as applicable) in its quarterly reports. The 
consolidating balance sheet and income statement (or statement of 
comprehensive income, as applicable) for the quarter-end that coincides 
with the fiscal year-end may be filed at a later time to which the 
Commission agrees (when reviewing the affiliated broker's or dealer's 
application under Sec.  240.15c3-1e(a)).
    (ii) An annual audited report as of the end of the ultimate holding 
company's fiscal year, filed with the Commission when required to be 
filed by any regulator;
    (3) The reports that the ultimate holding company must file in 
accordance with paragraph (b) of this appendix G will be considered 
filed when two copies are received at the Commission's principal office 
in Washington, DC. A person who files reports pursuant to this section 
for which he or she seeks confidential treatment may clearly mark each 
page or segregable portion of each page with the words ``Confidential 
Treatment Requested.'' The copies shall be addressed to the Division of 
Market Regulation, Risk Assessment Group; and
    (4) The reports that the ultimate holding company must file with the 
Commission in accordance with paragraph (b) of this Appendix G will be 
accorded confidential treatment to the extent permitted by law.

                 Conditions Regarding Records To Be Made

    (c) If it is not an ultimate holding company that has a principal 
regulator, make and keep current the following records:
    (1) A record of the results of funding and liquidity stress tests 
that the ultimate holding company has conducted in response to the 
following events at least once each quarter and a record of the 
contingency plan to respond to each of these events:
    (i) A credit rating downgrade of the ultimate holding company;
    (ii) An inability of the ultimate holding company to access capital 
markets for unsecured short-term funding;
    (iii) An inability of the ultimate holding company to access liquid 
assets in regulated entities across international borders when the 
events described in paragraphs (c)(1)(i) or (ii) of this appendix G 
occur; and
    (iv) An inability of the ultimate holding company to access credit 
or assets held at a particular institution when the events described in 
paragraphs (c)(1)(i) or (ii) of this appendix G occur;
    (2) A record of the basis for the determination of credit risk 
weights for each counterparty;
    (3) A record of the basis for the determination of internal credit 
ratings for each counterparty; and
    (4) A record of the calculations of allowable capital and allowances 
for market, credit and operational risk computed currently at least once 
per month on a consolidated basis.

              Conditions Regarding Preservation of Records

    (d)(1) Must preserve the following information, documents, and 
reports for a period of not less than three years in an easily 
accessible place using any media acceptable under Sec.  240.17a-4(f):
    (i) The documents created in accordance with paragraph (c) of this 
Appendix G;
    (ii) Any application or documents filed with the Commission pursuant 
to Sec.  240.15c3-1e and this appendix G and any written responses 
received from the Commission;
    (iii) All reports and notices filed with the Commission pursuant to 
Sec.  240.15c3-1e and this appendix G; and
    (iv) If the ultimate holding company does not have a principal 
regulator, all written policies and procedures concerning the group-wide 
internal risk management control system established pursuant to Sec.  
240.15c3-1e(a)(1)(viii)(C); and
    (2) The ultimate holding company may maintain the records referred 
to in paragraph (d)(1) of this appendix G either at the ultimate holding 
company, at an affiliate, or at a records storage facility, provided 
that the records are located within the United States. If the records 
are maintained by an entity other than the ultimate holding company, the 
ultimate holding company shall obtain and file with the Commission a 
written undertaking by the entity maintaining the records, in a form 
acceptable to the Commission,

[[Page 451]]

signed by a duly authorized person at the entity maintaining the 
records, to the effect that the records will be treated as if the 
ultimate holding company were maintaining the records pursuant to this 
section and that the entity maintaining the records will permit 
examination of such records at any time or from time to time during 
business hours by representatives or designees of the Commission and 
will promptly furnish the Commission or its designee a true, legible, 
complete, and current paper copy of any or all or any part of such 
records. The election to operate pursuant to the provisions of this 
paragraph shall not relieve the ultimate holding company that is 
required to maintain and preserve such records from any of its reporting 
or recordkeeping responsibilities under this section.

                    Conditions Regarding Notification

    (e) The ultimate holding company of a broker or dealer that computes 
certain of its capital charges in accordance with Sec.  240.15c3-1e 
shall:
    (1) Send notice promptly (but within 24 hours) after the occurrence 
of the following events:
    (i) The early warning indications of low capital as the Commission 
may agree;
    (ii) The ultimate holding company files a Form 8-K (17 CFR 249.308) 
with the Commission; and
    (iii) A material affiliate declares bankruptcy or otherwise becomes 
insolvent; and
    (2) If it is not an ultimate holding company that has a principal 
regulator, as defined in Sec.  240.15c3-1(c)(13), send notice promptly 
(but within 24 hours) after the occurrence of the following events:
    (i) The ultimate holding company becomes aware that an NRSRO has 
determined to reduce materially its assessment of the creditworthiness 
of a material affiliate or the credit rating(s) assigned to one or more 
outstanding short or long-term obligations of a material affiliate;
    (ii) The ultimate holding company becomes aware that any financial 
regulatory agency or self-regulatory organization has taken significant 
enforcement or regulatory action against a material affiliate; and
    (iii) The occurrence of any backtesting exception under Sec.  
240.15c3-1e(d)(1)(iii) or (iv) that would require that the ultimate 
holding company use a higher multiplication factor in the calculation of 
its allowances for market or credit risk;
    (3) Every notice given or transmitted by paragraph (e) of this 
appendix G will be given or transmitted to the Division of Market 
Regulation, Office of Financial Responsibility, at the principal office 
of the Commission in Washington, DC. A person who files notification 
pursuant to this section for which he or she seeks confidential 
treatment may clearly mark each page or segregable portion of each page 
with the words ``Confidential Treatment Request.'' For the purposes of 
this appendix G, ``notice'' shall be given or transmitted by telegraphic 
notice or facsimile transmission. The notice described by paragraph 
(e)(2) of this appendix G may be transmitted by overnight delivery. 
Notices filed pursuant to this paragraph will be accorded confidential 
treatment to the extent permitted by law; and
    (4) Upon the written request of the ultimate holding company, or 
upon its own motion, the Commission may grant an extension of time or an 
exemption from any of the requirements of this paragraph (e) either 
unconditionally or on specified terms and conditions as are necessary or 
appropriate in the public interest or for the protection of investors.

[69 FR 34467, June 21, 2004, as amended at 79 FR 1550, Jan. 8, 2014; 83 
FR 50222, Oct. 4, 2018]



Sec.  240.15c3-2  [Reserved]



Sec.  240.15c3-3  Customer protection--reserves and custody of securities.

    Except where otherwise noted, Sec.  240.15c3-3 applies to a broker 
or dealer registered under section 15(b) of the Act (15 U.S.C. 78o(b)), 
including a broker or dealer also registered as a security-based swap 
dealer or major security-based swap participant under section 15F(b) of 
the Act (15 U.S.C. 78o-10(b)). A security-based swap dealer or major 
security-based swap participant registered under section 15F(b) of the

[[Page 452]]

Act that is not also registered as a broker or dealer under section 
15(b) of the Act is subject to the requirements under Sec.  240.18a-4.
    (a) Definitions. For the purpose of this section:
    (1) The term customer shall mean any person from whom or on whose 
behalf a broker or dealer has received or acquired or holds funds or 
securities for the account of that person. The term shall not include a 
broker or dealer, a municipal securities dealer, or a government 
securities broker or government securities dealer. The term shall, 
however, include another broker or dealer to the extent that broker or 
dealer maintains an omnibus account for the account of customers with 
the broker or dealer in compliance with Regulation T (12 CFR 220.1 
through 220.12). The term shall not include a general partner or 
director or principal officer of the broker or dealer or any other 
person to the extent that person has a claim for property or funds which 
by contract, agreement or understanding, or by operation of law, is part 
of the capital of the broker or dealer or is subordinated to the claims 
of creditors of the broker or dealer. In addition, the term shall not 
include a person to the extent that the person has a claim for security 
futures products held in a futures account, or any security futures 
product and any futures product held in a ``proprietary account'' as 
defined by the Commodity Futures Trading Commission in Sec.  1.3(y) of 
this chapter. The term also shall not include a counterparty who has 
delivered collateral to an OTC derivatives dealer pursuant to a 
transaction in an eligible OTC derivative instrument, or pursuant to the 
OTC derivatives dealer's cash management securities activities or 
ancillary portfolio management securities activities, and who has 
received a prominent written notice from the OTC derivatives dealer 
that:
    (i) Except as otherwise agreed in writing by the OTC derivatives 
dealer and the counterparty, the dealer may repledge or otherwise use 
the collateral in its business;
    (ii) In the event of the OTC derivatives dealer's failure, the 
counterparty will likely be considered an unsecured creditor of the 
dealer as to that collateral;
    (iii) The Securities Investor Protection Act of 1970 (SIPA) does not 
protect the counterparty; and
    (iv) The collateral will not be subject to the requirements of Sec.  
240.8c-1, Sec.  240.15c2-1, Sec.  240.15c3-2, or Sec.  240.15c3-3.
    (2) The term securities carried for the account of a customer 
(hereinafter also ``customer securities'') shall mean:
    (i) Securities received by or on behalf of a broker or dealer for 
the account of any customer and securities carried long by a broker or 
dealer for the account of any customer; and
    (ii) Securities sold to, or bought for, a customer by a broker or 
dealer.
    (3) The term fully paid securities means all securities carried for 
the account of a customer in a cash account as defined in Regulation T 
(12 CFR 220.1 et seq.), as well as securities carried for the account of 
a customer in a margin account or any special account under Regulation T 
that have no loan value for margin purposes, and all margin equity 
securities in such accounts if they are fully paid: Provided, however, 
that the term fully paid securities does not apply to any securities 
purchased in transactions for which the customer has not made full 
payment.
    (4) The term margin securities means those securities carried for 
the account of a customer in a margin account as defined in section 4 of 
Regulation T (12 CFR 220.4), as well as securities carried in any other 
account (such accounts hereinafter referred to as ``margin accounts'') 
other than the securities referred to in paragraph (a)(3) of this 
section.
    (5) The term excess margin securities shall mean those securities 
referred to in paragraph (a)(4) of this section carried for the account 
of a customer having a market value in excess of 140 percent of the 
total of the debit balances in the customer's account or accounts 
encompassed by paragraph (a)(4) of this section which the broker or 
dealer identifies as not constituting margin securities.
    (6) The term qualified security shall mean a security issued by the 
United States or a security in respect of which the principal and 
interest are guaranteed by the United States.

[[Page 453]]

    (7) The term bank means a bank as defined in section 3(a)(6) of the 
Act and will also mean any building and loan, savings and loan or 
similar banking institution subject to supervision by a Federal banking 
authority. With respect to a broker or dealer that maintains its 
principal place of business in Canada, the term ``bank'' also means a 
Canadian bank subject to supervision by a Canadian authority.
    (8) The term free credit balances means liabilities of a broker or 
dealer to customers which are subject to immediate cash payment to 
customers on demand, whether resulting from sales of securities, 
dividends, interest, deposits or otherwise, excluding, however, funds in 
commodity accounts which are segregated in accordance with the Commodity 
Exchange Act or in a similar manner, or which are funds carried in a 
proprietary account as that term is defined in regulations under the 
Commodity Exchange Act. The term ``free credit balances'' also includes, 
if subject to immediate cash payment to customers on demand, funds 
carried in a securities account pursuant to a self-regulatory 
organization portfolio margining rule approved by the Commission under 
section 19(b) of the Act (15 U.S.C. 78s(b)) (``SRO portfolio margining 
rule''), including variation margin or initial margin, marks to market, 
and proceeds resulting from margin paid or released in connection with 
closing out, settling or exercising futures contracts and options 
thereon.
    (9) The term other credit balances means cash liabilities of a 
broker or dealer to customers other than free credit balances and funds 
in commodity accounts which are segregated in accordance with the 
Commodity Exchange Act or in a similar manner, or funds carried in a 
proprietary account as that term is defined in regulations under the 
Commodity Exchange Act. The term ``other credit balances'' also includes 
funds that are cash liabilities of a broker or dealer to customers other 
than free credit balances and are carried in a securities account 
pursuant to an SRO portfolio margining rule, including variation margin 
or initial margin, marks to market, and proceeds resulting from margin 
paid or released in connection with closing out, settling or exercising 
futures contracts and options thereon.
    (10) The term funds carried for the account of any customer 
(hereinafter also ``customer funds'') shall mean all free credit and 
other credit balances carried for the account of the customer.
    (11) The term principal officer shall mean the president, executive 
vice president, treasurer, secretary or any other person performing a 
similar function with the broker or dealer.
    (12) The term household members and other persons related to 
principals includes husbands or wives, children, sons-in-law or 
daughters-in-law and any household relative to whose support a principal 
contributes directly or indirectly. For purposes of this paragraph 
(a)(12), a principal shall be deemed to be a director, general partner, 
or principal officer of the broker or dealer.
    (13) The term affiliated person includes any person who directly or 
indirectly controls a broker or dealer or any person who is directly or 
indirectly controlled by or under common control with the broker or 
dealer. Ownership of 10% or more of the common stock of the relevant 
entity will be deemed prima facie control of that entity for purposes of 
this paragraph.
    (14) The term securities account shall mean an account that is 
maintained in accordance with the requirements of section 15(c)(3) of 
the Act (15 U.S.C. 78o(c)(3)) and Sec.  240.15c3-3.
    (15) The term futures account (also referred to as ``commodity 
account'') shall mean an account that is maintained in accordance with 
the segregation requirements of section 4d of the Commodity Exchange Act 
(7 U.S.C. 6d) and the rules thereunder.
    (16) The term PAB account means a proprietary securities account of 
a broker or dealer (which includes a foreign broker or dealer, or a 
foreign bank acting as a broker or dealer) other than a delivery-versus-
payment account or a receipt-versus-payment account. The term does not 
include an account that has been subordinated to the claims of creditors 
of the carrying broker or dealer.
    (17) The term Sweep Program means a service provided by a broker or 
dealer

[[Page 454]]

where it offers to its customer the option to automatically transfer 
free credit balances in the securities account of the customer to either 
a money market mutual fund product as described in Sec.  270.2a-7 of 
this chapter or an account at a bank whose deposits are insured by the 
Federal Deposit Insurance Corporation.
    (b) Physical possession or control of securities. (1) A broker or 
dealer shall promptly obtain and shall thereafter maintain the physical 
possession or control of all fully-paid securities and excess margin 
securities carried by a broker or dealer for the account of customers.
    (2) A broker or dealer shall not be deemed to be in violation of the 
provisions of paragraph (b)(1) of this section regarding physical 
possession or control of customers' securities if, solely as the result 
of normal business operations, temporary lags occur between the time 
when a security is required to be in the possession or control of the 
broker or dealer and the time that it is placed in the broker's or 
dealer's physical possession or under its control, provided that the 
broker or dealer takes timely steps in good faith to establish prompt 
physical possession or control. The burden of proof shall be on the 
broker or dealer to establish that the failure to obtain physical 
possession or control of securities carried for the account of customers 
as required by paragraph (b)(1) of this section is merely temporary and 
solely the result of normal business operations including same day 
receipt and redelivery (turnaround), and to establish that it has taken 
timely steps in good faith to place them in its physical possession or 
control.
    (3) A broker or dealer shall not be deemed to be in violation of the 
provisions of paragraph (b)(1) of this section regarding physical 
possession or control of fully-paid or excess margin securities borrowed 
from any person, provided that the broker or dealer and the lender, at 
or before the time of the loan, enter into a written agreement that, at 
a minimum;
    (i) Sets forth in a separate schedule or schedules the basis of 
compensation for any loan and generally the rights and liabilities of 
the parties as to the borrowed securities;
    (ii) Provides that the lender will be given a schedule of the 
securities actually borrowed at the time of the borrowing of the 
securities;
    (iii) Specifies that the broker or dealer:
    (A) Must provide to the lender, upon the execution of the agreement 
or by the close of the business day of the loan if the loan occurs 
subsequent to the execution of the agreement, collateral, which fully 
secures the loan of securities, consisting exclusively of cash or United 
States Treasury bills and Treasury notes or an irrevocable letter of 
credit issued by a bank as defined in section 3(a)(6)(A)-(C) of the Act 
(15 U.S.C. 78c(a)(6)(A)-(C)) or such other collateral as the Commission 
designates as permissible by order as necessary or appropriate in the 
public interest and consistent with the protection of investors after 
giving consideration to the collateral's liquidity, volatility, market 
depth and location, and the issuer's creditworthiness; and
    (B) Must mark the loan to the market not less than daily and, in the 
event that the market value of all the outstanding securities loaned at 
the close of trading at the end of the business day exceeds 100 percent 
of the collateral then held by the lender, the borrowing broker or 
dealer must provide additional collateral of the type described in 
paragraph (b)(3)(iii)(A) of this section to the lender by the close of 
the next business day as necessary to equal, together with the 
collateral then held by the lender, not less than 100 percent of the 
market value of the securities loaned; and
    (iv) Contains a prominent notice that the provisions of the SIPA may 
not protect the lender with respect to the securities loan transaction 
and that, therefore, the collateral delivered to the lender may 
constitute the only source of satisfaction of the broker's or dealer's 
obligation in the event the broker or dealer fails to return the 
securities.
    (4)(i) Notwithstanding paragraph (k)(2)(i) of this section, a broker 
or

[[Page 455]]

dealer that retains custody of securities that are the subject of a 
repurchase agreement between the broker or dealer and a counterparty 
shall:
    (A) Obtain the repurchase agreement in writing;
    (B) Confirm in writing the specific securities that are the subject 
of a repurchase transaction pursuant to such agreement at the end of the 
trading day on which the transaction is intitiated and at the end of any 
other day during which other securities are substituted if the 
substitution results in a change to issuer, maturity date, par amount or 
coupon rate as specified in the previous confirmation;
    (C) Advise the counterparty in the repurchase agreement that the 
Securities Investor Protection Corporation has taken the position that 
the provisions of the SIPA do not protect the counterparty with respect 
to the repurchase agreement; and
    (D) Maintain possession or control of securities that are the 
subject of the agreement.
    (ii) For purpose of this paragraph (b)(4), securities are in the 
broker's or dealer's control only if they are in the control of the 
broker or dealer within the meaning of Sec.  240.15c3-3 (c)(1), (c)(3), 
(c)(5) or (c)(6) of this title.
    (iii) A broker or dealer shall not be in violation of the 
requirement to maintain possession or control pursuant to paragraph 
(b)(4)(i)(D) during the trading day if:
    (A) In the written repurchase agreement, the counterparty grants the 
broker or dealer the right to substitute other securities for those 
subject to the agreement; and
    (B) The provision in the written repurchase agreement governing the 
right, if any, to substitute is immediately preceded by the following 
disclosure statement, which must be prominently displayed:

                           Required Disclosure

    The [seller] is not permitted to substitute other securities for 
those subject to this agreement and therefore must keep the [buyer's] 
securities segregated at all times, unless in this agreement the [buyer] 
grants the [seller] the right to substitute other securities. If the 
[buyer] grants the right to substitute, this means that the [buyer's] 
securities will likely be commingled with the [seller's] own securities 
during the trading day. The [buyer] is advised that, during any trading 
day that the [buyer's] securities are commingled with the [seller's] 
securities, they will be subject to liens granted by the [seller] to its 
clearing bank and may be used by the [seller] for deliveries on other 
securities transactions. Whenever the securities are commingled, the 
[seller's] ability to resegregate substitute securities for the [buyer] 
will be subject to the [seller's] ability to satisfy the clearing lien 
or to obtain substitute securities.

    (iv) A confirmation issued in accordance with paragraph (b)(4)(i)(B) 
of this section shall specify the issuer, maturity date, coupon rate, 
par amount and market value of the security and shall further identify a 
CUSIP or mortgage-backed security pool number, as appropriate, except 
that a CUSIP or a pool number is not required on the confirmation if it 
is identified in internal records of the broker or dealer that designate 
the specific security of the counterparty. For purposes of this 
paragraph (b)(4)(iv), the market value of any security that is the 
subject of the repurchase transaction shall be the most recently 
available bid price plus accrued interest, obtained by any reasonable 
and consistent methodology.
    (v) This paragraph (b)(4) shall not apply to a repurchase agreement 
between the broker or dealer and another broker or dealer (including a 
government securities broker or dealer), a registered municipal 
securities dealer, or a general partner or director or principal officer 
of the broker or dealer or any person to the extent that the person's 
claim is explicitly subordinated to the claims of creditors of the 
broker or dealer.
    (5) A broker or dealer is required to obtain and thereafter maintain 
the physical possession or control of securities carried for a PAB 
account, unless the broker or dealer has provided written notice to the 
account holder that the securities may be used in the ordinary course of 
its securities business, and has provided an opportunity for the account 
holder to object.
    (c) Control of securities. Securities under the control of a broker 
or dealer shall be deemed to be securities which:
    (1) Are represented by one or more certificates in the custody or 
control of

[[Page 456]]

a clearing corporation or other subsidiary organization of either 
national securities exchanges or of a registered national securities 
association, or of a custodian bank in accordance with a system for the 
central handling of securities complying with the provisions of 
Sec. Sec.  240.8c-1(g) and 240.15c2-1(g) the delivery of which 
certificates to the broker or dealer does not require the payment of 
money or value, and if the books or records of the broker or dealer 
identify the customers entitled to receive specified quantities or units 
of the securities so held for such customers collectively; or
    (2) Are carried for the account of any customer by a broker or 
dealer and are carried in an omnibus credit account in the name of such 
broker or dealer with another broker or dealer in compliance with the 
requirements of section 7(f) of Regulation T (12 CFR 220.7(f)), such 
securities being deemed to be under the control of such broker or dealer 
to the extent that it has instructed such carrying broker or dealer to 
maintain physical possession or control of them free of any charge, 
lien, or claim of any kind in favor of such carrying broker or dealer or 
any persons claiming through such carrying broker or dealer; or
    (3) Are the subject of bona fide items of transfer; provided that 
securities shall be deemed not to be the subject of bona fide items of 
transfer if, within 40 calendar days after they have been transmitted 
for transfer by the broker or dealer to the issuer or its transfer 
agent, new certificates conforming to the instructions of the broker or 
dealer have not been received by the broker or deal, the broker or 
dealer has not received a written statement by the issuer or its 
transfer agent acknowledging the transfer instructions and the 
possession of the securities or the broker or dealer has not obtained a 
revalidation of a window ticket from a transfer agent with respect to 
the certificate delivered for transfer; or
    (4) Are in the custody of a foreign depository, foreign clearing 
agency or foreign custodian bank which the Commission upon application 
from a broker or dealer, a registered national securities exchange or a 
registered national securities association, or upon its own motion shall 
designate as a satisfactory control location for securities; or
    (5) Are in the custody or control of a bank as defined in section 
3(a)(6) of the Act, the delivery of which securities to the broker or 
dealer does not require the payment of money or value and the bank 
having acknowledged in writing that the securities in its custody or 
control are not subject to any right, charge, security interest, lien or 
claim of any kind in favor of a bank or any person claiming through the 
bank; or
    (6)(i) Are held in or are in transit between offices of the broker 
or dealer; or (ii) are held by a corporate subsidiary if the broker or 
dealer owns and exercises a majority of the voting rights of all of the 
voting securities of such subsidiary, assumes or guarantees all of the 
subsidiary's obligations and liabilities, operates the subsidiary as a 
branch office of the broker or dealer, and assumes full responsibility 
for compliance by the subsidiary and all of its associated persons with 
the provisions of the Federal securities laws as well as for all of the 
other acts of the subsidiary and such associated persons; or
    (7) Are held in such other locations as the Commission shall upon 
application from a broker or dealer find and designate to be adequate 
for the protection of customer securities.
    (d) Requirement to reduce securities to possession or control. Not 
later than the next business day, a broker or dealer, as of the close of 
the preceding business day, shall determine from its books or records 
the quantity of fully paid securities and excess margin securities in 
its possession or control and the quantity of fully paid securities and 
excess margin securities not in its possession or control. In making 
this daily determination inactive margin accounts (accounts having no 
activity by reason of purchase or sale of securities, receipt or 
delivery of cash or securities or similar type events) may be computed 
not less than once weekly. If such books or records indicate, as of such 
close of the business day, that such broker or dealer has not obtained 
physical possession or control of all fully paid and excess margin 
securities as required by this section and there are securities of the 
same issue and

[[Page 457]]

class in any of the following noncontrol locations:
    (1) Securities subject to a lien securing moneys borrowed by the 
broker or dealer or securities loaned to another broker or dealer or a 
clearing corporation, then the broker or dealer shall, not later than 
the business day following the day on which such determination is made, 
issue instructions for the release of such securities from the lien or 
return of such loaned securities and shall obtain physical possession or 
control of such securities within two business days following the date 
of issuance of the instructions in the case of securities subject to 
lien securing borrowed moneys and within five business days following 
the date of issuance of instructions in the case of securities loaned; 
or
    (2) Securities included on the broker's or dealer's books or records 
as failed to receive more than 30 calendar days, then the broker or 
dealer shall, not later than the business day following the day on which 
such determination is made, take prompt steps to obtain physical 
possession or control of securities so failed to receive through a buy-
in procedure or otherwise; or
    (3) Securities receivable by the broker or dealer as a security 
dividend receivable, stock split or similar distribution for more than 
45 calendar days, then the broker or dealer shall, not later than the 
business day following the day on which such determination is made, take 
prompt steps to obtain physical possession or control of securities so 
receivable through a buy-in procedure or otherwise; or
    (4) Securities included on the broker's or dealer's books or records 
that allocate to a short position of the broker or dealer or a short 
position for another person, excluding positions covered by paragraph 
(m) of this section, for more than 30 calendar days, then the broker or 
dealer must, not later than the business day following the day on which 
the determination is made, take prompt steps to obtain physical 
possession or control of such securities. For the purposes of this 
paragraph (d)(4), the 30 day time period will not begin to run with 
respect to a syndicate short position established in connection with an 
offering of securities until the completion of the underwriter's 
participation in the distribution as determined pursuant to Sec.  
242.100(b) of Regulation M of this chapter (17 CFR 242.100 through 
242.105); or
    (5) A broker or dealer which is subject to the requirements of Sec.  
240.15c3-3 with respect to physical possession or control of fully paid 
and excess margin securities shall prepare and maintain a current and 
detailed description of the procedures which it utilizes to comply with 
the possession or control requirements set forth in this section. The 
records required herein shall be made available upon request to the 
Commission and to the designated examining authority for such broker or 
dealer.
    (e) Special reserve bank accounts for the exclusive benefit of 
customers and PAB accounts. (1) Every broker or dealer must maintain 
with a bank or banks at all times when deposits are required or 
hereinafter specified a ``Special Reserve Bank Account for the Exclusive 
Benefit of Customers'' (hereinafter referred to as the Customer Reserve 
Bank Account) and a ``Special Reserve Bank Account for Brokers and 
Dealers'' (hereinafter referred to as the PAB Reserve Bank Account), 
each of which will be separate from the other and from any other bank 
account of the broker or dealer. Such broker or dealer must at all times 
maintain in the Customer Reserve Bank Account and the PAB Reserve Bank 
Account, through deposits made therein, cash and/or qualified securities 
in amounts computed in accordance with the formula attached as Exhibit A 
(17 CFR 240.15c3-3a), as applied to customer and PAB accounts 
respectively.
    (2) With respect to each computation required pursuant to paragraph 
(e)(1) of this section, a broker or dealer must not accept or use any of 
the amounts under items comprising Total Credits under the formula 
referred to in paragraph (e)(1) of this section except for the specified 
purposes indicated under items comprising Total Debits under the 
formula, and, to the extent Total Credits exceed Total Debits, at least 
the net amount thereof must be maintained in the Customer Reserve Bank

[[Page 458]]

Account and PAB Reserve Bank Account pursuant to paragraph (e)(1) of 
this section.
    (3) Reserve Bank Account computations. (i) Computations necessary to 
determine the amount required to be deposited in the Customer Reserve 
Bank Account and PAB Reserve Bank Account as specified in paragraph 
(e)(1) of this section must be made weekly, as of the close of the last 
business day of the week, and the deposit so computed must be made no 
later than one hour after the opening of banking business on the second 
following business day; provided, however, a broker or dealer which has 
aggregate indebtedness not exceeding 800 percent of net capital (as 
defined in Sec.  240.15c3-1) and which carries aggregate customer funds 
(as defined in paragraph (a)(10) of this section), as computed at the 
last required computation pursuant to this section, not exceeding 
$1,000,000, may in the alternative make the Customer Reserve Bank 
Account computation monthly, as of the close of the last business day of 
the month, and, in such event, must deposit not less than 105 percent of 
the amount so computed no later than one hour after the opening of 
banking business on the second following business day.
    (ii) If a broker or dealer, computing on a monthly basis, has, at 
the time of any required computation, aggregate indebtedness in excess 
of 800 percent of net capital, such broker or dealer must thereafter 
compute weekly as aforesaid until four successive weekly Customer 
Reserve Bank Account computations are made, none of which were made at a 
time when its aggregate indebtedness exceeded 800 percent of its net 
capital.
    (iii) A broker or dealer that does not carry the accounts of a 
``customer'' as defined by this section or conduct a proprietary trading 
business may make the computation to be performed with respect to PAB 
accounts under paragraph (e)(1) of this section monthly rather than 
weekly. If a broker or dealer performing the computation with respect to 
PAB accounts under paragraph (e)(1) of this section on a monthly basis 
is, at the time of any required computation, required to deposit 
additional cash or qualified securities in the PAB Reserve Bank Account, 
the broker or dealer must thereafter perform the computation required 
with respect to PAB accounts under paragraph (e)(1) of this section 
weekly until four successive weekly computations are made, none of which 
is made at a time when the broker or dealer was required to deposit 
additional cash or qualified securities in the PAB Reserve Bank Account.
    (iv) Computations in addition to the computations required in this 
paragraph (e)(3), may be made as of the close of any business day, and 
the deposits so computed must be made no later than one hour after the 
opening of banking business on the second following business day.
    (v) The broker or dealer must make and maintain a record of each 
such computation made pursuant to this paragraph (e)(3) or otherwise and 
preserve each such record in accordance with Sec.  240.17a-4.
    (4) If the computation performed under paragraph (e)(3) of this 
section with respect to PAB accounts results in a deposit requirement, 
the requirement may be satisfied to the extent of any excess debit in 
the computation performed under paragraph (e)(3) of this section with 
respect to customer accounts of the same date. However, a deposit 
requirement resulting from the computation performed under paragraph 
(e)(3) of this section with respect to customer accounts cannot be 
satisfied with excess debits from the computation performed under 
paragraph (e)(3) of this section with respect to PAB accounts.
    (5) In determining whether a broker or dealer maintains the minimum 
deposits required under this section, the broker or dealer must exclude 
the total amount of any cash deposited with an affiliated bank. The 
broker or dealer also must exclude cash deposited with a non-affiliated 
bank to the extent that the amount of the deposit exceeds 15% of the 
bank's equity capital as reported by the bank in its most recent Call 
Report or any successor form the bank is required to file by its 
appropriate Federal banking agency (as defined by section 3 of the 
Federal Deposit Insurance Act (12 U.S.C. 1813)).
    (f) Notification of banks. A broker or dealer required to maintain a 
Customer

[[Page 459]]

Reserve Bank Account and PAB Reserve Bank Account prescribed by 
paragraph (e)(1) of this section or who maintains a Special Account 
referred to in paragraph (k) of this section must obtain and preserve in 
accordance with Sec.  240.17a-4 a written notification from each bank 
with which it maintains a Customer Reserve Bank Account, a PAB Reserve 
Bank Account, or a Special Account that the bank was informed that all 
cash and/or qualified securities deposited therein are being held by the 
bank for the exclusive benefit of the customers and account holders of 
the broker or dealer in accordance with the regulations of the 
Commission, and are being kept separate from any other accounts 
maintained by the broker or dealer with the bank, and the broker or 
dealer must have a written contract with the bank which provides that 
the cash and/or qualified securities will at no time be used directly or 
indirectly as security for a loan to the broker or dealer by the bank 
and will not be subject to any right, charge, security interest, lien, 
or claim of any kind in favor of the bank or any person claiming through 
the bank.
    (g) Withdrawals from the reserve bank account. A broker or dealer 
may make withdrawals from a Customer Reserve Bank Account and a PAB 
Reserve Bank Account if and to the extent that at the time of the 
withdrawal the amount remaining in the Customer Reserve Bank Account and 
PAB Reserve Bank Account is not less than the amount then required by 
paragraph (e) of this section. A bank may presume that any request for 
withdrawal from a reserve bank account is in conformity and compliance 
with this paragraph (g). On any business day on which a withdrawal is 
made, the broker or dealer shall make a record of the computation on the 
basis of which he makes such withdrawal, and he shall preserve such 
computation in accordance with Sec.  240.17a-4.
    (h) Buy-in of short security differences. A broker or dealer shall 
within 45 calendar days after the date of the examination, count, 
verification and comparison of securities pursuant to Sec.  240.17a-13 
or otherwise or to the annual report of financial condition in 
accordance with Sec.  240.17a-5 or 240.17a-12, buy-in all short security 
differences which are not resolved during the 45-day period.
    (i) Notification in the event of failure to make a required deposit. 
If a broker or dealer shall fail to make in its Customer Reserve Bank 
Account, PAB Reserve Bank Account or special account a deposit, as 
required by this section, the broker or dealer shall by telegram 
immediately notify the Commission and the regulatory authority for the 
broker or dealer, which examines such broker or dealer as to financial 
responsibility and shall promptly thereafter confirm such notification 
in writing.
    (j) Treatment of free credit balances. (1) A broker or dealer must 
not accept or use any free credit balance carried for the account of any 
customer of the broker or dealer unless such broker or dealer has 
established adequate procedures pursuant to which each customer for whom 
a free credit balance is carried will be given or sent, together with or 
as part of the customer's statement of account, whenever sent but not 
less frequently than once every three months, a written statement 
informing the customer of the amount due to the customer by the broker 
or dealer on the date of the statement, and that the funds are payable 
on demand of the customer.
    (2) A broker or dealer must not convert, invest, or transfer to 
another account or institution, credit balances held in a customer's 
account except as provided in paragraphs (j)(2)(i) and (ii) of this 
section.
    (i) A broker or dealer is permitted to invest or transfer to another 
account or institution, free credit balances in a customer's account 
only upon a specific order, authorization, or draft from the customer, 
and only in the manner, and under the terms and conditions, specified in 
the order, authorization, or draft.
    (ii) A broker or dealer is permitted to transfer free credit 
balances held in a customer's securities account to a product in its 
Sweep Program or to transfer a customer's interest in one product in a 
Sweep Program to another product in a Sweep Program, provided:
    (A) For an account opened on or after the effective date of this 
paragraph

[[Page 460]]

(j)(2)(ii), the customer gives prior written affirmative consent to 
having free credit balances in the customer's securities account 
included in the Sweep Program after being notified:
    (1) Of the general terms and conditions of the products available 
through the Sweep Program; and
    (2) That the broker or dealer may change the products available 
under the Sweep Program.
    (B) For any account:
    (1) The broker or dealer provides the customer with the disclosures 
and notices regarding the Sweep Program required by each self-regulatory 
organization of which the broker or dealer is a member;
    (2) The broker or dealer provides notice to the customer, as part of 
the customer's quarterly statement of account, that the balance in the 
bank deposit account or shares of the money market mutual fund in which 
the customer has a beneficial interest can be liquidated on the 
customer's order and the proceeds returned to the securities account or 
remitted to the customer; and
    (3)(i) The broker or dealer provides the customer with written 
notice at least 30 calendar days before:
    (A) Making changes to the terms and conditions of the Sweep Program;
    (B) Making changes to the terms and conditions of a product 
currently available through the Sweep Program;
    (C) Changing, adding or deleting products available through the 
Sweep Program; or
    (D) Changing the customer's investment through the Sweep Program 
from one product to another.
    (ii) The notice must describe the new terms and conditions of the 
Sweep Program or product or the new product, and the options available 
to the customer if the customer does not accept the new terms and 
conditions or product.
    (k) Exemptions. (1) The provisions of this section shall not be 
applicable to a broker or dealer meeting all of the following 
conditions:
    (i) The broker's or dealer's transactions as dealer (as principal 
for its own account) are limited to the purchase, sale, and redemption 
of redeemable securities of registered investment companies or of 
interests or participations in an insurance company separate account, 
whether or not registered as an investment company; except that a broker 
or dealer transacting business as a sole proprietor may also effect 
occasional transactions in other securities for its own account with or 
through another registered broker or dealer;
    (ii) The broker's or dealer's transactions as broker (agent) are 
limited to:
    (a) The sale and redemption of redeemable securities of registered 
investment companies or of interests or participations in an insurance 
company separate account, whether or not registered as an investment 
company;
    (b) the solicitation of share accounts for savings and loan 
associations insured by an instrumentality of the United States; and
    (c) the sale of securities for the account of a customer to obtain 
funds for immediate reinvestment in redeemable securities of registered 
investment companies; and
    (iii) The broker or dealer promptly transmits all funds and delivers 
all securities received in connection with its activities as a broker or 
dealer, and does not otherwise hold funds or securities for, or owe 
money or securities to, customers.
    (iv) Notwithstanding the foregoing, this section shall not apply to 
any insurance company which is a registered broker-dealer, and which 
otherwise meets all of the conditions in paragraphs (k)(1) (i), (ii), 
and (iii) of this section, solely by reason of its participation in 
transactions that are a part of the business of insurance, including the 
purchasing, selling, or holding of securities for or on behalf of such 
company's general and separate accounts.
    (2) The provisions of this section shall not be applicable to a 
broker or dealer:
    (i) Who carries no margin accounts, promptly transmits all customer 
funds and delivers all securities received in connection with its 
activities as a broker or dealer, does not otherwise hold funds or 
securities for, or owe money or securities to, customers and effectuates 
all financial transactions between the broker or dealer and its

[[Page 461]]

customers through one or more bank accounts, each to be designated as 
``Special Account for the Exclusive Benefit of Customers of (name of the 
broker or dealer)''; or
    (ii) Who, as an introducing broker or dealer, clears all 
transactions with and for customers on a fully disclosed basis with a 
clearing broker or dealer, and who promptly transmits all customer funds 
and securities to the clearing broker or dealer which carries all of the 
accounts of such customers and maintains and preserves such books and 
records pertaining thereto pursuant to the requirements of Sec. Sec.  
240.17a-3 and 240.17a-4 of this chapter, as are customarily made and 
kept by a clearing broker or dealer.
    (3) Upon written application by a broker or dealer, the Commission 
may exempt such broker or dealer from the provisions of this section, 
either unconditionally or on specified terms and conditions, if the 
Commission finds that the broker or dealer has established safeguards 
for the protection of funds and securities of customers comparable with 
those provided for by this section and that it is not necessary in the 
public interest or for the protection of investors to subject the 
particular broker or dealer to the provisions of this section.
    (l) Delivery of securities. Nothing stated in this section shall be 
construed as affecting the absolute right of a customer of a broker or 
dealer to receive in the course of normal business operations following 
demand made on the broker or dealer, the physical delivery of 
certificates for:
    (1) Fully-paid securities to which he is entitled, and,
    (2) Margin securities upon full payment by such customer to the 
broker or dealer of the customer's indebtedness to the broker or dealer; 
and, subject to the right of the broker or dealer under Regulation T (12 
CFR 220) to retain collateral for its own protection beyond the 
requirements of Regulation T, excess margin securities not reasonably 
required to collateralize such customer's indebtedness to the broker or 
dealer.
    (m) Completion of sell orders on behalf of customers. If a broker or 
dealer executes a sell order of a customer (other than an order to 
execute a sale of securities which the seller does not own) and if for 
any reason whatever the broker or dealer has not obtained possession of 
the securities from the customer within 10 business days after the 
settlement date, the broker or dealer shall immediately thereafter close 
the transaction with the customer by purchasing securities of like kind 
and quantity: Provided, however, The term customer for the purpose of 
this paragraph (m) shall not include a broker or dealer who maintains an 
omnibus credit account with another broker or dealer in compliance with 
secttion 7(f) of Regulation T (12 CFR 220.7(f)).

    Note to paragraph (m): See 38 FR 12103, May 9, 1973 for an order 
suspending indefinitely the operation of paragraph (m) as to sell orders 
for exempted securities (e.g., U.S. Government and municipal 
obligations).

    (n) Extensions of time. If a registered national securities exchange 
or a registered national securities association is satisfied that a 
broker or dealer is acting in good faith in making the application and 
that exceptional circumstances warrant such action, such exchange or 
association, on application of the broker or dealer, may extend any 
period specified in paragraphs (d) (2) through (4), (h) and (m) of this 
section, relating to the requirement that such broker or dealer take 
action within a designated period of time to buy-in a security, for one 
or more limited periods commensurate with the circumstances. Each such 
exchange or association shall make and preserve for a period of not less 
than 3 years a record of each extension granted pursuant to paragraph 
(n) of this section which shall contain a summary of the justification 
for the granting of the extension.
    (o) Security futures products--(1) Where security futures products 
shall be held. A broker or dealer registered with the Commission 
pursuant to section 15(b)(1) of the Act (15 U.S.C. 78o(b)(1)) that is 
also a futures commission merchant registered with the Commodity Futures 
Trading Commission pursuant to section 4f(a)(1) of the Commodity 
Exchange Act (7 U.S.C. 6f(a)(1)):
    (i) Shall hold a customer's security futures products in either a 
securities account or a futures account; and

[[Page 462]]

    (ii) Shall establish written policies or procedures for determining 
whether customer security futures products will be placed in a 
securities account or a futures account and, if applicable, the process 
by which a customer may elect the type or types of account in which 
security futures products will be held (including the procedure to be 
followed if a customer fails to make an election of account type).
    (2) Disclosure and record requirements. (i) Except as provided in 
paragraph (o)(2)(ii), before a broker or dealer registered with the 
Commission pursuant to section 15(b)(1) of the Act (15 U.S.C. 78o(b)(1)) 
accepts the first order for a security futures product from or on behalf 
of a customer, the broker or dealer shall furnish the customer with a 
disclosure document containing the following information:
    (A) A description of the protections provided by the requirements 
set forth under this section and SIPA applicable to a securities 
account;
    (B) A description of the protections provided by the requirements 
set forth under section 4d of the Commodity Exchange Act (7 U.S.C. 6d) 
applicable to a futures account;
    (C) A statement indicating whether the customer's security futures 
products will be held in a securities account or a futures account, or 
whether the firm permits customers to make or change an election of 
account type; and
    (D) A statement that, with respect to holding the customer's 
security futures products in a securities account or a futures account, 
the alternative regulatory scheme is not available to the customer with 
relation to that account.
    (ii) Where a customer account containing an open security futures 
product position is transferred to a broker or dealer registered with 
the Commission pursuant to section 15(b)(1) of the Act (15 U.S.C. 
78o(b)(1)), that broker or dealer may instead provide the statements 
described in paragraphs (o)(2)(i)(C) and (o)(2)(i)(D) of this section no 
later than ten business days after the date the account is received.
    (3) Changes in account type. A broker or dealer registered with the 
Commission pursuant to section 15(b)(1) of the Act (15 U.S.C. 78o(b)(1)) 
that is also a futures commission merchant registered pursuant to 
section 4f(a)(1) of the Commodity Exchange Act (7 U.S.C. 6f(a)(1)) may 
change the type of account in which a customer's security futures 
products will be held; provided that:
    (i) The broker or dealer creates a record of each change in account 
type, including the name of the customer, the account number, the date 
the broker or dealer received the customer's request to change the 
account type, if applicable, and the date the change in account type 
became effective; and
    (ii) The broker or dealer, at least ten days before the customer's 
account type is changed:
    (A) Notifies the customer in writing of the date that the change 
will become effective; and
    (B) Provides the customer with the disclosures described in 
paragraph (o)(2)(i) of this section.
    (p) Segregation requirements for security-based swaps. The following 
requirements apply to the security-based swap activities of a broker or 
dealer.
    (1) Definitions. For the purposes of this paragraph:
    (i) The term cleared security-based swap means a security-based swap 
that is, directly or indirectly, submitted to and cleared by a clearing 
agency registered with the Commission pursuant to section 17A of the Act 
(15 U.S.C. 78q-1);
    (ii) The term excess securities collateral means securities and 
money market instruments carried for the account of a security-based 
swap customer that have a market value in excess of the current exposure 
of the broker or dealer (after reducing the current exposure by the 
amount of cash in the account) to the security-based swap customer, 
excluding:
    (A) Securities and money market instruments held in a qualified 
clearing agency account but only to the extent the securities and money 
market instruments are being used to meet a margin requirement of the 
clearing agency resulting from a security-based swap transaction of the 
security-based swap customer; and
    (B) Securities and money market instruments held in a qualified 
registered

[[Page 463]]

security-based swap dealer account or in a third-party custodial account 
but only to the extent the securities and money market instruments are 
being used to meet a regulatory margin requirement of a security-based 
swap dealer resulting from the broker or dealer entering into a non-
cleared security-based swap transaction with the security-based swap 
dealer to offset the risk of a non-cleared security-based swap 
transaction between the broker or dealer and the security-based swap 
customer;
    (iii) The term qualified clearing agency account means an account of 
a broker or dealer at a clearing agency registered with the Commission 
pursuant to section 17A of the Act (15 U.S.C. 78q-1) that holds funds 
and other property in order to margin, guarantee, or secure cleared 
security-based swap transactions for the security-based swap customers 
of the broker or dealer that meets the following conditions:
    (A) The account is designated ``Special Clearing Account for the 
Exclusive Benefit of the Cleared Security-Based Swap Customers of [name 
of broker or dealer]'';
    (B) The clearing agency has acknowledged in a written notice 
provided to and retained by the broker or dealer that the funds and 
other property in the account are being held by the clearing agency for 
the exclusive benefit of the security-based swap customers of the broker 
or dealer in accordance with the regulations of the Commission and are 
being kept separate from any other accounts maintained by the broker or 
dealer with the clearing agency; and
    (C) The account is subject to a written contract between the broker 
or dealer and the clearing agency which provides that the funds and 
other property in the account shall be subject to no right, charge, 
security interest, lien, or claim of any kind in favor of the clearing 
agency or any person claiming through the clearing agency, except a 
right, charge, security interest, lien, or claim resulting from a 
cleared security-based swap transaction effected in the account.
    (iv) The term qualified registered security-based swap dealer 
account means an account at a security-based swap dealer that is 
registered with the Commission pursuant to section 15F of the Act that 
meets the following conditions:
    (A) The account is designated ``Special Reserve Account for the 
Exclusive Benefit of the Security-Based Swap Customers of [name of 
broker or dealer]'';
    (B) The security-based swap dealer has acknowledged in a written 
notice provided to and retained by the broker or dealer that the funds 
and other property held in the account are being held by the security-
based swap dealer for the exclusive benefit of the security-based swap 
customers of the broker or dealer in accordance with the regulations of 
the Commission and are being kept separate from any other accounts 
maintained by the broker or dealer with the security-based swap dealer;
    (C) The account is subject to a written contract between the broker 
or dealer and the security-based swap dealer which provides that the 
funds and other property in the account shall be subject to no right, 
charge, security interest, lien, or claim of any kind in favor of the 
security-based swap dealer or any person claiming through the security-
based swap dealer, except a right, charge, security interest, lien, or 
claim resulting from a non-cleared security-based swap transaction 
effected in the account; and
    (D) The account and the assets in the account are not subject to any 
type of subordination agreement between the broker or dealer and the 
security-based swap dealer.
    (v) The term qualified security means:
    (A) Obligations of the United States;
    (B) Obligations fully guaranteed as to principal and interest by the 
United States; and
    (C) General obligations of any State or a political subdivision of a 
State that:
    (1) Are not traded flat and are not in default;
    (2) Were part of an initial offering of $500 million or greater; and
    (3) Were issued by an issuer that has published audited financial 
statements within 120 days of its most recent fiscal year end.
    (vi) The term security-based swap customer means any person from 
whom or

[[Page 464]]

on whose behalf the broker or dealer has received or acquired or holds 
funds or other property for the account of the person with respect to a 
cleared or non-cleared security-based swap transaction. The term does 
not include a person to the extent that person has a claim for funds or 
other property which by contract, agreement or understanding, or by 
operation of law, is part of the capital of the broker or dealer or, in 
the case of an affiliate of the broker or dealer, is subordinated to all 
claims of customers (including PAB customers) and security-based swap 
customers of the broker or dealer.
    (vii) The term special reserve account for the exclusive benefit of 
security-based swap customers means an account at a bank that meets the 
following conditions:
    (A) The account is designated ``Special Reserve Account for the 
Exclusive Benefit of the Security-Based Swap Customers of [name of 
broker or dealer]'';
    (B) The account is subject to a written acknowledgement by the bank 
provided to and retained by the broker or dealer that the funds and 
other property held in the account are being held by the bank for the 
exclusive benefit of the security-based swap customers of the broker or 
dealer in accordance with the regulations of the Commission and are 
being kept separate from any other accounts maintained by the broker or 
dealer with the bank; and
    (C) The account is subject to a written contract between the broker 
or dealer and the bank which provides that the funds and other property 
in the account shall at no time be used directly or indirectly as 
security for a loan or other extension of credit to the broker or dealer 
by the bank and, shall be subject to no right, charge, security 
interest, lien, or claim of any kind in favor of the bank or any person 
claiming through the bank.
    (viii) The term third-party custodial account means an account 
carried by an independent third-party custodian that meets the following 
conditions:
    (A) The account is established for the purposes of meeting 
regulatory margin requirements of another security-based swap dealer;
    (B) The account is carried by a bank as defined in section 3(a)(6) 
of the Act or a registered U.S. clearing organization or depository or, 
if the collateral to be held in the account consists of foreign 
securities or currencies, a supervised foreign bank, clearing 
organization, or depository that customarily maintains custody of such 
foreign securities or currencies;
    (C) The account is designated for and on behalf of the broker or 
dealer for the benefit of its security-based swap customers and the 
account is subject to a written acknowledgement by the bank, clearing 
organization, or depository provided to and retained by the broker or 
dealer that the funds and other property held in the account are being 
held by the bank, clearing organization, or depository for the exclusive 
benefit of the security-based swap customers of the broker or dealer and 
are being kept separate from any other accounts maintained by the broker 
or dealer with the bank, clearing organization, or depository; and
    (D) The account is subject to a written contract between the broker 
or dealer and the bank, clearing organization, or depository which 
provides that the funds and other property in the account shall at no 
time be used directly or indirectly as security for a loan or other 
extension of credit to the security-based swap dealer by the bank, 
clearing organization, or depository and, shall be subject to no right, 
charge, security interest, lien, or claim of any kind in favor of the 
bank, clearing organization, or depository or any person claiming 
through the bank, clearing organization, or depository.
    (2) Physical possession or control of excess securities collateral. 
(i) A broker or dealer must promptly obtain and thereafter maintain 
physical possession or control of all excess securities collateral 
carried for the security-based swap accounts of security-based swap 
customers.
    (ii) A broker or dealer has control of excess securities collateral 
only if the securities and money market instruments:
    (A) Are represented by one or more certificates in the custody or 
control of a clearing corporation or other subsidiary organization of 
either national

[[Page 465]]

securities exchanges, or of a custodian bank in accordance with a system 
for the central handling of securities complying with the provisions of 
Sec. Sec.  240.8c-1(g) and 240.15c2-1(g) the delivery of which 
certificates to the broker or dealer does not require the payment of 
money or value, and if the books or records of the broker or dealer 
identify the security-based swap customers entitled to receive specified 
quantities or units of the securities so held for such security-based 
swap customers collectively;
    (B) Are the subject of bona fide items of transfer; provided that 
securities and money market instruments shall be deemed not to be the 
subject of bona fide items of transfer if, within 40 calendar days after 
they have been transmitted for transfer by the broker or dealer to the 
issuer or its transfer agent, new certificates conforming to the 
instructions of the broker or dealer have not been received by the 
broker or dealer, the broker or dealer has not received a written 
statement by the issuer or its transfer agent acknowledging the transfer 
instructions and the possession of the securities or money market 
instruments, or the broker or dealer has not obtained a revalidation of 
a window ticket from a transfer agent with respect to the certificate 
delivered for transfer;
    (C) Are in the custody or control of a bank as defined in section 
3(a)(6) of the Act, the delivery of which securities or money market 
instruments to the broker or dealer does not require the payment of 
money or value and the bank having acknowledged in writing that the 
securities and money market instruments in its custody or control are 
not subject to any right, charge, security interest, lien or claim of 
any kind in favor of a bank or any person claiming through the bank;
    (D)(1) Are held in or are in transit between offices of the broker 
or dealer; or
    (2) Are held by a corporate subsidiary if the broker or dealer owns 
and exercises a majority of the voting rights of all of the voting 
securities of such subsidiary, assumes or guarantees all of the 
subsidiary's obligations and liabilities, operates the subsidiary as a 
branch office of the broker or dealer, and assumes full responsibility 
for compliance by the subsidiary and all of its associated persons with 
the provisions of the Federal securities laws as well as for all of the 
other acts of the subsidiary and such associated persons; or
    (E) Are held in such other locations as the Commission shall upon 
application from a broker or dealer find and designate to be adequate 
for the protection of security-based swap customer securities.
    (iii) Each business day the broker or dealer must determine from its 
books and records the quantity of excess securities collateral in its 
possession or control as of the close of the previous business day and 
the quantity of excess securities collateral not in its possession or 
control as of the previous business day. If the broker or dealer did not 
obtain possession or control of all excess securities collateral on the 
previous business day as required by this section and there are 
securities or money market instruments of the same issue and class in 
any of the following non-control locations:
    (A) Securities or money market instruments subject to a lien 
securing an obligation of the broker or dealer, then the broker or 
dealer, not later than the next business day on which the determination 
is made, must issue instructions for the release of the securities or 
money market instruments from the lien and must obtain physical 
possession or control of the securities or money market instruments 
within two business days following the date of the instructions;
    (B) Securities or money market instruments held in a qualified 
clearing agency account, then the broker or dealer, not later than the 
next business day on which the determination is made, must issue 
instructions for the release of the securities or money market 
instruments by the clearing agency and must obtain physical possession 
or control of the securities or money market instruments within two 
business days following the date of the instructions;
    (C) Securities or money market instruments held in a qualified 
registered security-based swap dealer account maintained by another 
security-based

[[Page 466]]

swap dealer or in a third-party custodial account, then the broker or 
dealer, not later than the next business day on which the determination 
is made, must issue instructions for the release of the securities or 
money market instruments by the security-based swap dealer or the third-
party custodian and must obtain physical possession or control of the 
securities or money market instruments within two business days 
following the date of the instructions;
    (D) Securities or money market instruments loaned by the broker or 
dealer, then the broker or dealer, not later than the next business day 
on which the determination is made, must issue instructions for the 
return of the loaned securities or money market instruments and must 
obtain physical possession or control of the securities or money market 
instruments within five business days following the date of the 
instructions;
    (E) Securities or money market instruments failed to receive more 
than 30 calendar days, then the broker or dealer, not later than the 
next business day on which the determination is made, must take prompt 
steps to obtain physical possession or control of the securities or 
money market instruments through a buy-in procedure or otherwise;
    (F) Securities or money market instruments receivable by the broker 
or dealer as a security dividend, stock split or similar distribution 
for more than 45 calendar days, then the broker or dealer, not later 
than the next business day on which the determination is made, must take 
prompt steps to obtain physical possession or control of the securities 
or money market instruments through a buy-in procedure or otherwise; or
    (G) Securities or money market instruments included on the broker's 
or dealer's books or records that allocate to a short position of the 
broker or dealer or a short position for another person, for more than 
30 calendar days, then the broker or dealer must, not later than the 
business day following the day on which the determination is made, take 
prompt steps to obtain physical possession or control of such securities 
or money market instruments.
    (3) Deposit requirement for special reserve account for the 
exclusive benefit of security-based swap customers. (i) A broker or 
dealer must maintain a special reserve account for the exclusive benefit 
of security-based swap customers that is separate from any other bank 
account of the broker or dealer. The broker or dealer must at all times 
maintain in the special reserve account for the exclusive benefit of 
security-based swap customers, through deposits into the account, cash 
and/or qualified securities in amounts computed in accordance with the 
formula set forth in Sec.  240.15c3-3b. In determining the amount 
maintained in a special reserve account for the exclusive benefit of 
security-based swap customers, the broker or dealer must deduct:
    (A) The percentage of the value of a general obligation of a State 
or a political subdivision of a State specified in Sec.  240.15c3-
1(c)(2)(vi);
    (B) The aggregate value of general obligations of a State or a 
political subdivision of a State to the extent the amount of the 
obligations of a single issuer (after applying the deduction in 
paragraph (p)(3)(i)(A) of this section) exceeds two percent of the 
amount required to be maintained in the special reserve account for the 
exclusive benefit of security-based swap customers;
    (C) The aggregate value of all general obligations of States or 
political subdivisions of States to the extent the amount of the 
obligations (after applying the deduction in paragraph (p)(3)(i)(A) of 
this section) exceeds 10 percent of the amount required to be maintained 
in the special reserve account for the exclusive benefit of security-
based swap customers;
    (D) The amount of cash deposited with a single non-affiliated bank 
to the extent the amount exceeds 15 percent of the equity capital of the 
bank as reported by the bank in its most recent Call Report or any 
successor form the bank is required to file by its appropriate federal 
banking agency (as defined by section 3 of the Federal Deposit Insurance 
Act (12 U.S.C. 1813)); and
    (E) The total amount of cash deposited with an affiliated bank.
    (ii) A broker or dealer must not accept or use credits identified in 
the

[[Page 467]]

items of the formula set forth in Sec.  240.15c3-3b except for the 
specified purposes indicated under items comprising Total Debits under 
the formula, and, to the extent Total Credits exceed Total Debits, at 
least the net amount thereof must be maintained in the Special Reserve 
Account pursuant to paragraph (p)(3)(i) of this section.
    (iii)(A) The computations necessary to determine the amount required 
to be maintained in the special reserve account for the exclusive 
benefit of security-based swap customers must be made weekly as of the 
close of the last business day of the week and any deposit required to 
be made into the account must be made no later than one hour after the 
opening of banking business on the second following business day. The 
broker or dealer may make a withdrawal from the special reserve account 
for the exclusive benefit of security-based swap customers only if the 
amount remaining in the account after the withdrawal is equal to or 
exceeds the amount required to be maintained in the account pursuant to 
paragraph (p)(3) of this section.
    (ii) (B) Computations in addition to the computations required 
pursuant to paragraph (p)(3)(iii)(A) of this section may be made as of 
the close of any business day, and deposits so computed must be made no 
later than one hour after the open of banking business on the second 
following business day.
    (iv) A broker or dealer must promptly deposit into a special reserve 
account for the exclusive benefit of security-based swap customers cash 
and/or qualified securities of the broker or dealer if the amount of 
cash and/or qualified securities in one or more special reserve accounts 
for the exclusive benefit of security-based swap customers falls below 
the amount required to be maintained pursuant to this section.
    (4) Requirements for non-cleared security-based swaps--(i) Notice. A 
broker or dealer registered under section 15F(b) of the Act (15 U.S.C. 
78o-10(b)) as a security-based swap dealer or major security-based swap 
participant must provide the notice required pursuant to section 
3E(f)(1)(A) of the Act (15 U.S.C. 78c-5(f)) in writing to a duly 
authorized individual prior to the execution of the first non-cleared 
security-based swap transaction with the counterparty occurring after 
the compliance date of this section.
    (ii) Subordination--(A) Counterparty that elects to have individual 
segregation at an independent third-party custodian. A broker or dealer 
must obtain an agreement from a counterparty whose funds or other 
property to meet a margin requirement of the broker or dealer are held 
at a third-party custodian in which the counterparty agrees to 
subordinate its claims against the broker or dealer for the funds or 
other property held at the third-party custodian to the claims of 
customers (including PAB customers) and security-based swap customers of 
the broker or dealer but only to the extent that funds or other property 
provided by the counterparty to the independent third-party custodian 
are not treated as customer property as that term is defined in 11 
U.S.C. 741 or customer property as defined in 15 U.S.C. 78lll(4) in a 
liquidation of the broker or dealer.
    (B) Counterparty that elects to have no segregation. A broker or 
dealer registered under section 15F(b) of the Act as a security-based 
swap dealer must obtain an agreement from a counterparty that is an 
affiliate of the broker or dealer that affirmatively chooses not to 
require segregation of funds or other property pursuant to section 3E(f) 
of the Act (15 U.S.C. 78c-5(f)) in which the counterparty agrees to 
subordinate all of its claims against the broker or dealer to the claims 
of customers (including PAB customers) and security-based swap customers 
of the broker or dealer.

[37 FR 25226, Nov. 29, 1972; 38 FR 6277, Mar. 8, 1973, as amended at 42 
FR 23790, May 10, 1977; 44 FR 1975, Jan. 9, 1979; 45 FR 37688, June 4, 
1980; 47 FR 21775, May 20, 1982; 47 FR 23920, June 2, 1982; 50 FR 41340, 
Oct. 10, 1985; 52 FR 30333, Aug. 14, 1987; 63 FR 59400, Nov. 3, 1998; 67 
FR 58299, Sept. 13, 2002; 68 FR 12783, Mar. 17, 2003; 78 FR 51902, Aug. 
21, 2013; 84 FR 44047, Aug. 22, 2019]



Sec.  240.15c3-3a  Exhibit A--Formula for determination of customer and 
PAB account reserve requirements of brokers and dealers under
Sec. 240.15c3-3.

[[Page 468]]



----------------------------------------------------------------------------------------------------------------
                                                                                    Credits           Debits
----------------------------------------------------------------------------------------------------------------
1. Free credit balances and other credit balances in customers' security                   XXX
 accounts. (See Note A).......................................................
2. Monies borrowed collateralized by securities carried for the accounts of                XXX
 customers (See Note B).......................................................
3. Monies payable against customers' securities loaned (See Note C)...........             XXX
4. Customers' securities failed to receive (See Note D).......................             XXX
5. Credit balances in firm accounts which are attributable to principal sales              XXX
 to customers.................................................................
6. Market value of stock dividends, stock splits and similar distributions                 XXX
 receivable outstanding over 30 calendar days.................................
7. Market value of short security count differences over 30 calendar days old.             XXX
8. Market value of short securities and credits (not to be offset by longs or              XXX
 by debits) in all suspense accounts over 30 calendar days....................
9. Market value of securities which are in transfer in excess of 40 calendar               XXX
 days and have not been confirmed to be in transfer by the transfer agent or
 the issuer during the 40 days................................................
10. Debit balances in customers' cash and margin accounts excluding unsecured   ...............             XXX
 accounts and accounts doubtful of collection. (See Note E)...................
11. Securities borrowed to effectuate short sales by customers and securities   ...............             XXX
 borrowed to make delivery on customers' securities failed to deliver.........
12. Failed to deliver of customers' securities not older than 30 calendar days  ...............             XXX
13. Margin required and on deposit with the Options Clearing Corporation for    ...............             XXX
 all option contracts written or purchased in customer accounts. (See Note F).
14. Margin required and on deposit with a clearing agency registered with the   ...............             XXX
 Commission under section 17A of the Act (15 U.S.C. 78q-1) or a derivatives
 clearing organization registered with the Commodity Futures Trading
 Commission under section 5b of the Commodity Exchange Act (7 U.S.C. 7a-1)
 related to the following types of positions written, purchased or sold in
 customer accounts: (1) security futures products and (2) futures contracts
 (and options thereon) carried in a securities account pursuant to an SRO
 portfolio margining rule (See Note G)........................................
    Total credits.............................................................  ...............
    Total debits..............................................................  ...............
15. Excess of total credits (sum of items 1-9) over total debits (sum of items  ...............             XXX
 10-14) required to be on deposit in the ``Reserve Bank Account'' (Sec.
 240.15c3-3(e)). If the computation is made monthly as permitted by this
 section, the deposit must be not less than 105% of the excess of total
 credits over total debits....................................................
----------------------------------------------------------------------------------------------------------------

      Notes Regarding the Customer Reserve Bank Account Computation

    Note A. Item 1 must include all outstanding drafts payable to 
customers which have been applied against free credit balances or other 
credit balances and must also include checks drawn in excess of bank 
balances per the records of the broker or dealer.
    Note B. Item 2 must include the amount of options-related or 
security futures product-related Letters of Credit obtained by a member 
of a registered clearing agency or a derivatives clearing organization 
which are collateralized by customers' securities, to the extent of the 
member's margin requirement at the registered clearing agency or 
derivatives clearing organization. Item 2 must also include the amount 
of Letters of Credit which are collateralized by customers' securities 
and related to other futures contracts (and options thereon) carried in 
a securities account pursuant to an SRO portfolio margining rule.
    Note C. Item 3 must include in addition to monies payable against 
customers' securities loaned the amount by which the market value of 
securities loaned exceeds the collateral value received from the lending 
of such securities.
    Note D. Item 4 must include in addition to customers' securities 
failed to receive the amount by which the market value of securities 
failed to receive and outstanding more than thirty (30) calendar days 
exceeds their contract value.
    Note E. (1) Debit balances in margin accounts must be reduced by the 
amount by which a specific security (other than an exempted security) 
which is collateral for margin accounts exceeds in aggregate value 15 
percent of the aggregate value of all securities which collateralize all 
margin accounts receivable; provided, however, the required reduction 
must not be in excess of the amounts of the debit balance required to be 
excluded because of this concentration rule. A specified security is 
deemed to be collateral for a margin

[[Page 469]]

account only to the extent it represents in value not more than 140 
percent of the customer debit balance in a margin account.
    (2) Debit balances in special omnibus accounts, maintained in 
compliance with the requirements of Section 7(f) of Regulation T (12 CFR 
220.7(f)) or similar accounts carried on behalf of another broker or 
dealer, must be reduced by any deficits in such accounts (or if a 
credit, such credit must be increased) less any calls for margin, mark 
to the market, or other required deposits which are outstanding 5 
business days or less.
    (3) Debit balances in customers' cash and margin accounts included 
in the formula under Item 10 must be reduced by an amount equal to 1 
percent of their aggregate value.
    (4) Debit balances in cash and margin accounts of household members 
and other persons related to principals of a broker or dealer and debit 
balances in cash and margin accounts of affiliated persons of a broker 
or dealer must be excluded from the Reserve Formula, unless the broker 
or dealer can demonstrate that such debit balances are directly related 
to credit items in the formula.
    (5) Debit balances in margin accounts (other than omnibus accounts) 
must be reduced by the amount by which any single customer's debit 
balance exceeds 25% (to the extent such amount is greater than $50,000) 
of the broker-dealer's tentative net capital (i.e., net capital prior to 
securities haircuts) unless the broker or dealer can demonstrate that 
the debit balance is directly related to credit items in the Reserve 
Formula. Related accounts (e.g., the separate accounts of an individual, 
accounts under common control or subject to cross guarantees) will be 
deemed to be a single customer's accounts for purposes of this 
provision.
    If the registered national securities exchange or the registered 
national securities association having responsibility for examining the 
broker or dealer (``designated examining authority'') is satisfied, 
after taking into account the circumstances of the concentrated account 
including the quality, diversity, and marketability of the collateral 
securing the debit balances or margin accounts subject to this 
provision, that the concentration of debit balances is appropriate, then 
such designated examining authority may grant a partial or plenary 
exception from this provision. The debit balance may be included in the 
reserve formula computation for five business days from the day the 
request is made.
    (6) Debit balances in joint accounts, custodian accounts, 
participation in hedge funds or limited partnerships or similar type 
accounts or arrangements that include both assets of a person or persons 
who would be excluded from the definition of customer (``noncustomer'') 
and assets of a person or persons who would be included in the 
definition of customer must be included in the Reserve Formula in the 
following manner: If the percentage ownership of the non-customer is 
less than 5 percent then the entire debit balance shall be included in 
the formula; if such percentage ownership is between 5 percent and 50 
percent then the portion of the debit balance attributable to the non-
customer must be excluded from the formula unless the broker or dealer 
can demonstrate that the debit balance is directly related to credit 
items in the formula; or if such percentage ownership is greater than 50 
percent, then the entire debit balance must be excluded from the formula 
unless the broker or dealer can demonstrate that the debit balance is 
directly related to credit items in the formula.
    Note F. Item 13 must include the amount of margin required and on 
deposit with the Options Clearing Corporation to the extent such margin 
is represented by cash, proprietary qualified securities and letters of 
credit collateralized by customers' securities.
    Note G. (a) Item 14 must include the amount of margin required and 
on deposit with a clearing agency registered with the Commission under 
section 17A of the Act (15 U.S.C. 78q-1) or a derivatives clearing 
organization registered with the Commodity Futures Trading Commission 
under section 5b of the Commodity Exchange Act (7 U.S.C. 7a-1) for 
customer accounts to the extent that the margin is represented by cash, 
proprietary qualified securities, and letters of credit collateralized 
by customers' securities.

[[Page 470]]

    (b) Item 14 will apply only if the broker or dealer has the margin 
related to security futures products, or futures (and options thereon) 
carried in a securities account pursuant to an approved SRO portfolio 
margining program on deposit with:
    (1) A registered clearing agency or derivatives clearing 
organization that:
    (i) Maintains security deposits from clearing members in connection 
with regulated options or futures transactions and assessment power over 
member firms that equal a combined total of at least $2 billion, at 
least $500 million of which must be in the form of security deposits. 
For the purposes of this Note G, the term ``security deposits'' refers 
to a general fund, other than margin deposits or their equivalent, that 
consists of cash or securities held by a registered clearing agency or 
derivative clearing organization; or
    (ii) Maintains at least $3 billion in margin deposits; or
    (iii) Does not meet the requirements of paragraphs (b)(1)(i) through 
(b)(1)(iii) of this Note G, if the Commission has determined, upon a 
written request for exemption by or for the benefit of the broker or 
dealer, that the broker or dealer may utilize such a registered clearing 
agency or derivatives clearing organization. The Commission may, in its 
sole discretion, grant such an exemption subject to such conditions as 
are appropriate under the circumstances, if the Commission determines 
that such conditional or unconditional exemption is necessary or 
appropriate in the public interest, and is consistent with the 
protection of investors; and
    (2) A registered clearing agency or derivatives clearing 
organization that, if it holds funds or securities deposited as margin 
for security futures products or futures in a portfolio margin account 
in a bank, as defined in section 3(a)(6) of the Act (15 U.S.C. 
78c(a)(6)), obtains and preserves written notification from the bank at 
which it holds such funds and securities or at which such funds and 
securities are held on its behalf. The written notification will state 
that all funds and/or securities deposited with the bank as margin 
(including customer security futures products and futures in a portfolio 
margin account), or held by the bank and pledged to such registered 
clearing agency or derivatives clearing agency as margin, are being held 
by the bank for the exclusive benefit of clearing members of the 
registered clearing agency or derivatives clearing organization (subject 
to the interest of such registered clearing agency or derivatives 
clearing organization therein), and are being kept separate from any 
other accounts maintained by the registered clearing agency or 
derivatives clearing organization with the bank. The written 
notification also will provide that such funds and/or securities will at 
no time be used directly or indirectly as security for a loan to the 
registered clearing agency or derivatives clearing organization by the 
bank, and will be subject to no right, charge, security interest, lien, 
or claim of any kind in favor of the bank or any person claiming through 
the bank. This provision, however, will not prohibit a registered 
clearing agency or derivatives clearing organization from pledging 
customer funds or securities as collateral to a bank for any purpose 
that the rules of the Commission or the registered clearing agency or 
derivatives clearing organization otherwise permit; and
    (3) A registered clearing agency or derivatives clearing 
organization establishes, documents, and maintains:
    (i) Safeguards in the handling, transfer, and delivery of cash and 
securities;
    (ii) Fidelity bond coverage for its employees and agents who handle 
customer funds or securities. In the case of agents of a registered 
clearing agency or derivatives clearing organization, the agent may 
provide the fidelity bond coverage; and
    (iii) Provisions for periodic examination by independent public 
accountants; and
    (iv) A derivatives clearing organization that, if it is not 
otherwise registered with the Commission, has provided the Commission 
with a written undertaking, in a form acceptable to the Commission, 
executed by a duly authorized person at the derivatives clearing 
organization, to the effect that, with respect to the clearance and

[[Page 471]]

settlement of the customer security futures products and futures in a 
portfolio margin account of the broker or dealer, the derivatives 
clearing organization will permit the Commission to examine the books 
and records of the derivatives clearing organization for compliance with 
the requirements set forth in Sec.  240.15c3-3a, Note G (b)(1) through 
(3).
    (c) Item 14 will apply only if a broker or dealer determines, at 
least annually, that the registered clearing agency or derivatives 
clearing organization with which the broker or dealer has on deposit 
margin related to securities future products or futures in a portfolio 
margin account meets the conditions of this Note G.

        Notes Regarding the PAB Reserve Bank Account Computation

    Note 1. Broker-dealers should use the formula in Exhibit A for the 
purposes of computing the PAB reserve requirement, except that 
references to ``accounts,'' ``customer accounts, or ``customers'' will 
be treated as references to PAB accounts.
    Note 2. Any credit (including a credit applied to reduce a debit) 
that is included in the computation required by Sec.  240.15c3-3 with 
respect to customer accounts (the ``customer reserve computation'') may 
not be included as a credit in the computation required by Sec.  
240.15c3-3 with respect to PAB accounts (the ``PAB reserve 
computation'').
    Note 3. Note E(1) to Sec.  240.15c3-3a does not apply to the PAB 
reserve computation.
    Note 4. Note E(3) to Sec.  240.15c3-3a which reduces debit balances 
by 1% does not apply to the PAB reserve computation.
    Note 5. Interest receivable, floor brokerage, and commissions 
receivable of another broker or dealer from the broker or dealer 
(excluding clearing deposits) that are otherwise allowable assets under 
Sec.  240.15c3-1 need not be included in the PAB reserve computation, 
provided the amounts have been clearly identified as payables on the 
books of the broker or dealer. Commissions receivable and other 
receivables of another broker or dealer from the broker or dealer that 
are otherwise non-allowable assets under Sec.  240.15c3-1 and clearing 
deposits of another broker or dealer may be included as ``credit 
balances'' for purposes of the PAB reserve computation, provided the 
commissions receivable and other receivables are subject to immediate 
cash payment to the other broker or dealer and the clearing deposit is 
subject to payment within 30 days.
    Note 6. Credits included in the PAB reserve computation that result 
from the use of securities held for a PAB account (``PAB securities'') 
that are pledged to meet intra-day margin calls in a cross-margin 
account established between the Options Clearing Corporation and any 
regulated derivatives clearing organization may be reduced to the extent 
that the excess margin held by the other clearing corporation in the 
cross-margin relationship is used the following business day to replace 
the PAB securities that were previously pledged. In addition, balances 
resulting from a portfolio margin account that are segregated pursuant 
to Commodity Futures Trading Commission regulations need not be included 
in the PAB Reserve Bank Account computation.
    Note 7. Deposits received prior to a transaction pending settlement 
which are $5 million or greater for any single transaction or $10 
million in aggregate may be excluded as credits from the PAB reserve 
computation if such balances are placed and maintained in a separate PAB 
Reserve Bank Account by 12 p.m. Eastern Time on the following business 
day. Thereafter, the money representing any such deposits may be 
withdrawn to complete the related transactions without performing a new 
PAB reserve computation.
    Note 8. A credit balance resulting from a PAB reserve computation 
may be reduced by the amount that items representing such credits are 
swept into money market funds or mutual funds of an investment company 
registered under the Investment Company Act of 1940 on or prior to 10 
a.m. Eastern Time on the deposit date provided that the credits swept 
into any such fund are not subject to any right, charge, security 
interest, lien, or claim of any kind in favor of the investment company 
or the broker or dealer. Any

[[Page 472]]

credits that have been swept into money market funds or mutual funds 
must be maintained in the name of a particular broker or for the benefit 
of another broker.
    Note 9. Clearing deposits required to be maintained at registered 
clearing agencies may be included as debits in the PAB reserve 
computation to the extent the percentage of the deposit, which is based 
upon the clearing agency's aggregate deposit requirements (e.g., dollar 
trading volume), that relates to the proprietary business of other 
brokers and dealers can be identified.
    Note 10. A broker or dealer that clears PAB accounts through an 
affiliate or third party clearing broker must include these PAB account 
balances and the omnibus PAB account balance in its PAB reserve 
computation.

[78 FR 51904, Aug. 21, 2013, as amended at 79 FR 1550, Jan. 8, 2014]



Sec.  240.15c3-3b  Exhibit B--Formula for determination of security-based
swap customer reserve requirements of brokers and dealers under 
Sec.  240.15c3-3.

------------------------------------------------------------------------
                                              Credits         Debits
------------------------------------------------------------------------
1. Free credit balances and other credit            $___
 balances in the accounts carried for
 security-based swap customers (See Note
 A).....................................
2. Monies borrowed collateralized by                $___
 securities in accounts carried for
 security-based swap customers (See Note
 B).....................................
3. Monies payable against security-based            $___
 swap customers' securities loaned (See
 Note C)................................
4. Security-based swap customers'                   $___
 securities failed to receive (See Note
 D).....................................
5. Credit balances in firm accounts                 $___
 which are attributable to principal
 sales to security-based swap customers.
6. Market value of stock dividends,                 $___
 stock splits and similar distributions
 receivable outstanding over 30 calendar
 days...................................
7. Market value of short security count             $___
 differences over 30 calendar days old..
8. Market value of short securities and             $___
 credits (not to be offset by longs or
 by debits) in all suspense accounts
 over 30 calendar days..................
9. Market value of securities which are             $___
 in transfer in excess of 40 calendar
 days and have not been confirmed to be
 in transfer by the transfer agent or
 the issuer during the 40 days..........
10. Debit balances in accounts carried    ..............            $___
 for security-based swap customers,
 excluding unsecured accounts and
 accounts doubtful of collection (See
 Note E)................................
11. Securities borrowed to effectuate     ..............            $___
 short sales by security-based swap
 customers and securities borrowed to
 make delivery on security-based swap
 customers' securities failed to deliver
12. Failed to deliver of security-based   ..............            $___
 swap customers' securities not older
 than 30 calendar days..................
13. Margin required and on deposit with   ..............            $___
 the Options Clearing Corporation for
 all option contracts written or
 purchased in accounts carried for
 security-based swap customers (See Note
 F).....................................
14. Margin related to security futures    ..............            $___
 products written, purchased or sold in
 accounts carried for security-based
 swap customers required and on deposit
 in a qualified clearing agency account
 at a clearing agency registered with
 the Commission under section 17A of the
 Act (15 U.S.C. 78q-1) or a derivatives
 clearing organization registered with
 the Commodity Futures Trading
 Commission under section 5b of the
 Commodity Exchange Act (7 U.S.C. 7a-1)
 (See Note G)...........................
15. Margin related to cleared security-   ..............            $___
 based swap transactions in accounts
 carried for security-based swap
 customers required and on deposit in a
 qualified clearing agency account at a
 clearing agency registered with the
 Commission pursuant to section 17A of
 the Act (15 U.S.C. 78q-1)..............
16. Margin related to non-cleared         ..............            $___
 security-based swap transactions in
 accounts carried for security-based
 swap customers required and held in a
 qualified registered security-based
 swap dealer account at a security-based
 swap dealer or at a third-party
 custodial account......................
                                         -------------------------------
    Total Credits.......................            $___
    1Total Debits.......................  ..............            $___
    Excess of Credits over Debits.......            $___
------------------------------------------------------------------------
Note A. Item 1 must include all outstanding drafts payable to security-
  based swap customers which have been applied against free credit
  balances or other credit balances and must also include checks drawn
  in excess of bank balances per the records of the broker or dealer.
Note B. Item 2 must include the amount of options-related or security
  futures product-related Letters of Credit obtained by a member of a
  registered clearing agency or a derivatives clearing organization
  which are collateralized by security-based swap customers' securities,
  to the extent of the member's margin requirement at the registered
  clearing agency or derivatives clearing organization.
Note C. Item 3 must include in addition to monies payable against
  security-based swap customers' securities loaned the amount by which
  the market value of securities loaned exceeds the collateral value
  received from the lending of such securities.
Note D. Item 4 must include in addition to security-based swap
  customers' securities failed to receive the amount by which the market
  value of securities failed to receive and outstanding more than thirty
  (30) calendar days exceeds their contract value.

[[Page 473]]

 
Note E. (1) Debit balances in accounts carried for security-based swap
  customers must be reduced by the amount by which a specific security
  (other than an exempted security) which is collateral for margin
  requirements exceeds in aggregate value 15 percent of the aggregate
  value of all securities which collateralize all accounts receivable;
  provided, however, the required reduction must not be in excess of the
  amount of the debit balance required to be excluded because of this
  concentration rule. A specified security is deemed to be collateral
  for an account only to the extent it is not an excess margin security.
(2) Debit balances in special omnibus accounts, maintained in compliance
  with the requirements of section 4(b) of Regulation T under the Act
  (12 CFR 220.4(b)) or similar accounts carried on behalf of a security-
  based swap dealer, must be reduced by any deficits in such accounts
  (or if a credit, such credit must be increased) less any calls for
  margin, marks to the market, or other required deposits which are
  outstanding 5 business days or less.
(3) Debit balances in security-based swap customers' accounts included
  in the formula under item 10 must be reduced by an amount equal to 1
  percent of their aggregate value.
(4) Debit balances in accounts of household members and other persons
  related to principals of a broker or dealer and debit balances in
  accounts of affiliated persons of a broker or dealer must be excluded
  from the reserve formula, unless the broker or dealer can demonstrate
  that such debit balances are directly related to credit items in the
  formula.
(5) Debit balances in accounts (other than omnibus accounts) must be
  reduced by the amount by which any single security-based swap
  customer's debit balance exceeds 25 percent (to the extent such amount
  is greater than $50,000) of the broker's or dealer's tentative net
  capital (i.e., net capital prior to securities haircuts) unless the
  broker or dealer can demonstrate that the debit balance is directly
  related to credit items in the Reserve Formula. Related accounts
  (e.g., the separate accounts of an individual, accounts
  under common control or subject to cross guarantees) will be deemed to
  be a single security-based swap customer's account for purposes of
  this provision.
If the registered national securities exchange or the registered
  national securities association having responsibility for examining
  the broker or dealer (``designated examining authority'') is
  satisfied, after taking into account the circumstances of the
  concentrated account including the quality, diversity, and
  marketability of the collateral securing the debit balances in
  accounts subject to this provision, that the concentration of debit
  balances is appropriate, then such designated examining authority may,
  by order, grant a partial or plenary exception from this provision.
  The debit balance may be included in the reserve formula computation
  for five business days from the day the request is made.
(6) Debit balances of joint accounts, custodian accounts, participations
  in hedge funds or limited partnerships or similar type accounts or
  arrangements that include both assets of a person who would be
  excluded from the definition of security-based swap customer (``non-
  security-based swap customer'') and assets of a person or persons
  includible in the definition of security-based swap customer must be
  included in the Reserve Formula in the following manner: if the
  percentage ownership of the non-security-based swap customer is less
  than 5 percent then the entire debit balance shall be included in the
  formula; if such percentage ownership is between 5 percent and 50
  percent then the portion of the debit balance attributable to the non-
  security-based swap customer must be excluded from the formula unless
  the broker or dealer can demonstrate that the debit balance is
  directly related to credit items in the formula; if such percentage
  ownership is greater than 50 percent, then the entire debit balance
  must be excluded from the formula unless the broker or dealer can
  demonstrate that the debit balance is directly related to credit items
  in the formula.
Note F. Item 13 must include the amount of margin required and on
  deposit with Options Clearing Corporation to the extent such margin is
  represented by cash, proprietary qualified securities, and letters of
  credit collateralized by security-based swap customers' securities.
Note G. (a) Item 14 must include the amount of margin required and on
  deposit with a clearing agency registered with the Commission under
  section 17A of the Act (15 U.S.C. 78q-1) or a derivatives clearing
  organization registered with the Commodity Futures Trading Commission
  under section 5b of the Commodity Exchange Act (7 U.S.C. 7a-1) for
  security-based swap customer accounts to the extent that the margin is
  represented by cash, proprietary qualified securities, and letters of
  credit collateralized by security-based swap customers' securities.
(b) Item 14 will apply only if the broker or dealer has the margin
  related to security futures products on deposit with:
(1) A registered clearing agency or derivatives clearing organization
  that:
(i) Maintains security deposits from clearing members in connection with
  regulated options or futures transactions and assessment power over
  member firms that equal a combined total of at least $2 billion, at
  least $500 million of which must be in the form of security deposits.
  For purposes of this Note G, the term ``security deposits'' refers to
  a general fund, other than margin deposits or their equivalent, that
  consists of cash or securities held by a registered clearing agency or
  derivative clearing organization;
(ii) Maintains at least $3 billion in margin deposits; or
(iii) Does not meet the requirements of paragraphs (b)(1)(i) through
  (b)(1)(ii) of this Note G, if the Commission has determined, upon a
  written request for exemption by or for the benefit of the broker or
  dealer, that the broker or dealer may utilize such a registered
  clearing agency or derivatives clearing organization. The Commission
  may, in its sole discretion, grant such an exemption subject to such
  conditions as are appropriate under the circumstances, if the
  Commission determines that such conditional or unconditional exemption
  is necessary or appropriate in the public interest, and is consistent
  with the protection of investors; and
(2) A registered clearing agency or derivatives clearing organization
  that, if it holds funds or securities deposited as margin for security
  futures products in a bank, as defined in section 3(a)(6) of the Act
  (15 U.S.C. 78c(a)(6)), obtains and preserves written notification from
  the bank at which it holds such funds and securities or at which such
  funds and securities are held on its behalf. The written notification
  will state that all funds and/or securities deposited with the bank as
  margin (including security-based swap customer security futures
  products margin), or held by the bank and pledged to such registered
  clearing agency or derivatives clearing agency as margin, are being
  held by the bank for the exclusive benefit of clearing members of the
  registered clearing agency or derivatives clearing organization
  (subject to the interest of such registered clearing agency or
  derivatives clearing organization therein), and are being kept
  separate from any other accounts maintained by the registered clearing
  agency or derivatives clearing organization with the bank. The written
  notification also will provide that such funds and/or securities will
  at no time be used directly or indirectly as security for a loan to
  the registered clearing agency or derivatives clearing organization by
  the bank, and will be subject to no right, charge, security interest,
  lien, or claim of any kind in favor of the bank or any person claiming
  through the bank. This provision, however, will not prohibit a
  registered clearing agency or derivatives clearing organization from
  pledging security-based swap customer funds or securities as
  collateral to a bank for any purpose that the rules of the Commission
  or the registered clearing agency or derivatives clearing organization
  otherwise permit; and
(3) A registered clearing agency or derivatives clearing organization
  that establishes, documents, and maintains:
(i) Safeguards in the handling, transfer, and delivery of cash and
  securities;
(ii) Fidelity bond coverage for its employees and agents who handle
  security-based swap customer funds or securities. In the case of
  agents of a registered clearing agency or derivatives clearing
  organization, the agent may provide the fidelity bond coverage; and
(iii) Provisions for periodic examination by independent public
  accountants; and
(4) A derivatives clearing organization that, if it is not otherwise
  registered with the Commission, has provided the Commission with a
  written undertaking, in a form acceptable to the Commission, executed
  by a duly authorized person at the derivatives clearing organization,
  to the effect that, with respect to the clearance and settlement of
  the security-based swap customer security futures products of the
  broker or dealer, the derivatives clearing organization will permit
  the Commission to examine the books and records of the derivatives
  clearing organization for compliance with the requirements set forth
  in Sec.   240.15c3-3a, Note G. (b)(1) through (3).
(c) Item 14 will apply only if a broker or dealer determines, at least
  annually, that the registered clearing agency or derivatives clearing
  organization with which the broker or dealer has on deposit margin
  related to security futures products meets the conditions of this Note
  G.


[[Page 474]]


[84 FR 44050, Aug. 22, 2019]



Sec.  240.15c3-4  Internal risk management control systems for OTC
derivatives dealers.

    (a) An OTC derivatives dealer shall establish, document, and 
maintain a system of internal risk management controls to assist it in 
managing the risks associated with its business activities, including 
market, credit, leverage, liquidity, legal, and operational risks.
    (b) An OTC derivatives dealer shall consider the following when 
adopting its internal control system guidelines, policies, and 
procedures:
    (1) The ownership and governance structure of the OTC derivatives 
dealer;
    (2) The composition of the governing body of the OTC derivatives 
dealer;
    (3) The management philosophy of the OTC derivatives dealer;
    (4) The scope and nature of established risk management guidelines;
    (5) The scope and nature of the permissible OTC derivatives 
activities;
    (6) The sophistication and experience of relevant trading, risk 
management, and internal audit personnel;
    (7) The sophistication and functionality of information and 
reporting systems; and
    (8) The scope and frequency of monitoring, reporting, and auditing 
activities.
    (c) An OTC derivatives dealer's internal risk management control 
system shall include the following elements:
    (1) A risk control unit that reports directly to senior management 
and is independent from business trading units;
    (2) Separation of duties between personnel responsible for entering 
into a transaction and those responsible for recording the transaction 
in the books and records of the OTC derivatives dealer;
    (3) Periodic reviews (which may be performed by internal audit 
staff) and annual reviews (which must be conducted by independent 
certified public accountants) of the OTC derivatives dealer's risk 
management systems;
    (4) Definitions of risk, risk monitoring, and risk management; and
    (5) Written guidelines, approved by the OTC derivatives dealer's 
governing body, that include and discuss the following:
    (i) The OTC derivatives dealer's consideration of the elements in 
paragraph (b) of this section;
    (ii) The scope, and the procedures for determining the scope, of 
authorized activities or any nonquantitative limitation on the scope of 
authorized activities;
    (iii) Quantitative guidelines for managing the OTC derivatives 
dealer's overall risk exposure;
    (iv) The type, scope, and frequency of reporting by management on 
risk exposures;
    (v) The procedures for and the timing of the governing body's 
periodic review of the risk monitoring and risk management written 
guidelines, systems, and processes;
    (vi) The process for monitoring risk independent of the business or 
trading units whose activities create the risks being monitored;
    (vii) The performance of the risk management function by persons 
independent from or senior to the business or trading units whose 
activities create the risks;
    (viii) The authority and resources of the groups or persons 
performing the risk monitoring and risk management functions;
    (ix) The appropriate response by management when internal risk 
management guidelines have been exceeded;
    (x) The procedures to monitor and address the risk that an OTC 
derivatives transaction contract will be unenforceable;
    (xi) The procedures requiring the documentation of the principal 
terms of OTC derivatives transactions and other relevant information 
regarding such transactions;
    (xii) The procedures authorizing specified employees to commit the 
OTC derivatives dealer to particular types of transactions;
    (xiii) The procedures to prevent the OTC derivatives dealer from 
engaging in any securities transaction that is not permitted under Sec.  
240.15a-1; and
    (xiv) The procedures to prevent the OTC derivatives dealer from 
improperly relying on the exceptions to

[[Page 475]]

Sec.  240.15a-1(c) and Sec.  240.15a-1(d), including the procedures to 
determine whether a counterparty is acting in the capacity of principal 
or agent.
    (d) Management must periodically review, in accordance with written 
procedures, the OTC derivatives dealer's business activities for 
consistency with risk management guidelines including that:
    (1) Risks arising from the OTC derivatives dealer's OTC derivatives 
activities are consistent with prescribed guidelines;
    (2) Risk exposure guidelines for each business unit are appropriate 
for the business unit;
    (3) The data necessary to conduct the risk monitoring and risk 
management function as well as the valuation process over the OTC 
derivatives dealer's portfolio of products is accessible on a timely 
basis and information systems are available to capture, monitor, 
analyze, and report relevant data;
    (4) Procedures are in place to enable management to take action when 
internal risk management guidelines have been exceeded;
    (5) Procedures are in place to monitor and address the risk that an 
OTC derivatives transaction contract will be unenforceable;
    (6) Procedures are in place to identify and address any deficiencies 
in the operating systems and to contain the extent of losses arising 
from unidentified deficiencies;
    (7) Procedures are in place to authorize specified employees to 
commit the OTC derivatives dealer to particular types of transactions, 
to specify any quantitative limits on such authority, and to provide for 
the oversight of their exercise of such authority;
    (8) Procedures are in place to prevent the OTC derivatives dealer 
from engaging in any securities transaction that is not permitted under 
Sec.  240.15a-1;
    (9) Procedures are in place to prevent the OTC derivatives dealer 
from improperly relying on the exceptions to Sec.  240.15a-1(c) and 
Sec.  240.15a-1(d), including procedures to determine whether a 
counterparty is acting in the capacity of principal or agent;
    (10) Procedures are in place to provide for adequate documentation 
of the principal terms of OTC derivatives transactions and other 
relevant information regarding such transactions;
    (11) Personnel resources with appropriate expertise are committed to 
implementing the risk monitoring and risk management systems and 
processes; and
    (12) Procedures are in place for the periodic internal and external 
review of the risk monitoring and risk management functions.

[63 FR 59400, Nov. 3, 1998]



Sec.  240.15c3-5  Risk management controls for brokers or dealers with
market access.

    (a) For the purpose of this section:
    (1) The term market access shall mean:
    (i) Access to trading in securities on an exchange or alternative 
trading system as a result of being a member or subscriber of the 
exchange or alternative trading system, respectively; or
    (ii) Access to trading in securities on an alternative trading 
system provided by a broker-dealer operator of an alternative trading 
system to a non-broker-dealer.
    (2) The term regulatory requirements shall mean all federal 
securities laws, rules and regulations, and rules of self-regulatory 
organizations, that are applicable in connection with market access.
    (b) A broker or dealer with market access, or that provides a 
customer or any other person with access to an exchange or alternative 
trading system through use of its market participant identifier or 
otherwise, shall establish, document, and maintain a system of risk 
management controls and supervisory procedures reasonably designed to 
manage the financial, regulatory, and other risks of this business 
activity. Such broker or dealer shall preserve a copy of its supervisory 
procedures and a written description of its risk management controls as 
part of its books and records in a manner consistent with Sec.  240.17a-
4(e)(7). A broker-dealer that routes orders on behalf of an exchange or 
alternative trading system for the purpose of accessing other trading 
centers with protected quotations in compliance with Rule 611 of 
Regulation NMS (Sec.  242.611) for NMS

[[Page 476]]

stocks, or in compliance with a national market system plan for listed 
options, shall not be required to comply with this rule with regard to 
such routing services, except with regard to paragraph (c)(1)(ii) of 
this section.
    (c) The risk management controls and supervisory procedures required 
by paragraph (b) of this section shall include the following elements:
    (1) Financial risk management controls and supervisory procedures. 
The risk management controls and supervisory procedures shall be 
reasonably designed to systematically limit the financial exposure of 
the broker or dealer that could arise as a result of market access, 
including being reasonably designed to:
    (i) Prevent the entry of orders that exceed appropriate pre-set 
credit or capital thresholds in the aggregate for each customer and the 
broker or dealer and, where appropriate, more finely-tuned by sector, 
security, or otherwise by rejecting orders if such orders would exceed 
the applicable credit or capital thresholds; and
    (ii) Prevent the entry of erroneous orders, by rejecting orders that 
exceed appropriate price or size parameters, on an order-by-order basis 
or over a short period of time, or that indicate duplicative orders.
    (2) Regulatory risk management controls and supervisory procedures. 
The risk management controls and supervisory procedures shall be 
reasonably designed to ensure compliance with all regulatory 
requirements, including being reasonably designed to:
    (i) Prevent the entry of orders unless there has been compliance 
with all regulatory requirements that must be satisfied on a pre-order 
entry basis;
    (ii) Prevent the entry of orders for securities for a broker or 
dealer, customer, or other person if such person is restricted from 
trading those securities;
    (iii) Restrict access to trading systems and technology that provide 
market access to persons and accounts pre-approved and authorized by the 
broker or dealer; and
    (iv) Assure that appropriate surveillance personnel receive 
immediate post-trade execution reports that result from market access.
    (d) The financial and regulatory risk management controls and 
supervisory procedures described in paragraph (c) of this section shall 
be under the direct and exclusive control of the broker or dealer that 
is subject to paragraph (b) of this section.
    (1) Notwithstanding the foregoing, a broker or dealer that is 
subject to paragraph (b) of this section may reasonably allocate, by 
written contract, after a thorough due diligence review, control over 
specific regulatory risk management controls and supervisory procedures 
described in paragraph (c)(2) of this section to a customer that is a 
registered broker or dealer, provided that such broker or dealer subject 
to paragraph (b) of this section has a reasonable basis for determining 
that such customer, based on its position in the transaction and 
relationship with an ultimate customer, has better access than the 
broker or dealer to that ultimate customer and its trading information 
such that it can more effectively implement the specified controls or 
procedures.
    (2) Any allocation of control pursuant to paragraph (d)(1) of this 
section shall not relieve a broker or dealer that is subject to 
paragraph (b) of this section from any obligation under this section, 
including the overall responsibility to establish, document, and 
maintain a system of risk management controls and supervisory procedures 
reasonably designed to manage the financial, regulatory, and other risks 
of market access.
    (e) A broker or dealer that is subject to paragraph (b) of this 
section shall establish, document, and maintain a system for regularly 
reviewing the effectiveness of the risk management controls and 
supervisory procedures required by paragraphs (b) and (c) of this 
section and for promptly addressing any issues.
    (1) Among other things, the broker or dealer shall review, no less 
frequently than annually, the business activity of the broker or dealer 
in connection with market access to assure the overall effectiveness of 
such risk management controls and supervisory procedures. Such review 
shall be conducted in accordance with written procedures and shall be 
documented. The broker or

[[Page 477]]

dealer shall preserve a copy of such written procedures, and 
documentation of each such review, as part of its books and records in a 
manner consistent with Sec.  240.17a-4(e)(7) and Sec.  240.17a-4(b), 
respectively.
    (2) The Chief Executive Officer (or equivalent officer) of the 
broker or dealer shall, on an annual basis, certify that such risk 
management controls and supervisory procedures comply with paragraphs 
(b) and (c) of this section, and that the broker or dealer conducted 
such review, and such certifications shall be preserved by the broker or 
dealer as part of its books and records in a manner consistent with 
Sec.  240.17a-4(b).
    (f) The Commission, by order, may exempt from the provisions of this 
section, either unconditionally or on specified terms and conditions, 
any broker or dealer, if the Commission determines that such exemption 
is necessary or appropriate in the public interest consistent with the 
protection of investors.

[75 FR 69825, Nov. 15, 2010]



Sec.  240.15c6-1  Settlement cycle.

    (a) Except as provided in paragraphs (b), (c), and (d) of this 
section, a broker or dealer shall not effect or enter into a contract 
for the purchase or sale of a security (other than an exempted security, 
government security, municipal security, commercial paper, bankers' 
acceptances, or commercial bills) that provides for payment of funds and 
delivery of securities later than the second business day after the date 
of the contract unless otherwise expressly agreed to by the parties at 
the time of the transaction.
    (b) Paragraphs (a) and (c) of this section shall not apply to 
contracts:
    (1) For the purchase or sale of limited partnership interests that 
are not listed on an exchange or for which quotations are not 
disseminated through an automated quotation system of a registered 
securities association;
    (2) For the purchase or sale of securities that the Commission may 
from time to time, taking into account then existing market practices, 
exempt by order from the requirements of paragraph (a) of this section, 
either unconditionally or on specified terms and conditions, if the 
Commission determines that such exemption is consistent with the public 
interest and the protection of investors.
    (c) Paragraph (a) of this section shall not apply to contracts for 
the sale for cash of securities that are priced after 4:30 p.m. Eastern 
time on the date such securities are priced and that are sold by an 
issuer to an underwriter pursuant to a firm commitment underwritten 
offering registered under the Securities Act of 1933 or sold to an 
initial purchaser by a broker-dealer participating in such offering 
provided that a broker or dealer shall not effect or enter into a 
contract for the purchase or sale of such securities that provides for 
payment of funds and delivery of securities later than the fourth 
business day after the date of the contract unless otherwise expressly 
agreed to by the parties at the time of the transaction.
    (d) For purposes of paragraphs (a) and (c) of this section, the 
parties to a contract shall be deemed to have expressly agreed to an 
alternate date for payment of funds and delivery of securities at the 
time of the transaction for a contract for the sale for cash of 
securities pursuant to a firm commitment offering if the managing 
underwriter and the issuer have agreed to such date for all securities 
sold pursuant to such offering and the parties to the contract have not 
expressly agreed to another date for payment of funds and delivery of 
securities at the time of the transaction.

[58 FR 52903, Oct. 13, 1993, as amended at 60 FR 26622, May 17, 1995; 82 
FR 15601, Mar. 29, 2017]

 Regulation 15D: Reports of Registrants Under the Securities Act of 1933

                             Annual Reports



Sec.  240.15d-1  Requirement of annual reports.

    Every registrant under the Securities Act of 1933 shall file an 
annual report, on the appropriate form authorized or prescribed 
therefor, for the fiscal year in which the registration statement under 
the Securities Act of 1933 became

[[Page 478]]

effective and for each fiscal year thereafter, unless the registrant is 
exempt from such filing by section 15(d) of the Act or rules thereunder. 
Annual reports shall be filed within the period specified in the 
appropriate report form.

[47 FR 17052, Apr. 21, 1982, as amended at 61 FR 49960, Sept. 24, 1996]



Sec.  240.15d-2  Special financial report.

    (a) If the registration statement under the Securities Act of 1933 
did not contain certified financial statements for the registrant's last 
full fiscal year (or for the life of the registrant if less than a full 
fiscal year) preceding the fiscal year in which the registration 
statement became effective, the registrant shall, within 90 days after 
the effective date of the registration statement, file a special report 
furnishing certified financial statements for such last full fiscal year 
or other period, as the case may be, meeting the requirements of the 
form appropriate for annual reports of the registrant. If the registrant 
is a foreign private issuer as defined in Sec.  230.405 of this chapter, 
then the special financial report shall be filed on the appropriate form 
for annual reports of the registrant and shall be filed by the later of 
90 days after the date on which the registration statement became 
effective, or four months following the end of the registrant's latest 
full fiscal year.
    (b) The report shall be filed under cover of the facing sheet of the 
form appropriate for annual reports of the registrant, shall indicate on 
the facing sheet that it contains only financial statements for the 
fiscal year in question, and shall be signed in accordance with the 
requirements of the annual report form.

[13 FR 9326, Dec. 31, 1948, as amended at 36 FR 1891, Feb. 3, 1971; 58 
FR 60306, Nov. 15, 1993; 73 FR 58324, Oct. 6, 2008; 83 FR 50222, Oct. 4, 
2018]



Sec.  240.15d-3  Reports for depositary shares registered on Form F-6.

    Annual and other reports are not required with respect to Depositary 
Shares registered on Form F-6 (Sec.  230.36 of this chapter). The 
exemption in this section does not apply to any deposited securities 
registered on any other form under the Securities Act of 1933.

[62 FR 39768, July 24, 1997]



Sec.  240.15d-4  Reporting by Form 40-F registrants.

    A registrant that is eligible to use Forms 40-F and 6-K and files 
reports in accordance therewith shall be deemed to satisfy the 
requirements of Regulation 15D (Sec. Sec.  240.15d-1 through 240.15d-21 
of this chapter).

[56 FR 30075, July 1, 1991]



Sec.  240.15d-5  Reporting by successor issuers.

    (a) Where in connection with a succession by merger, consolidation, 
exchange of securities, acquisition of assets or otherwise, securities 
of any issuer that is not required to file reports pursuant to section 
15(d) (15 U.S.C. 78o(d)) of the Act are issued to the holders of any 
class of securities of another issuer that is required to file such 
reports, the duty to file reports pursuant to such section shall be 
deemed to have been assumed by the issuer of the class of securities so 
issued. The successor issuer shall, after the consummation of the 
succession, file reports in accordance with section 15(d) of the Act (15 
U.S.C. 78o(d)) and the rules and regulations thereunder, unless that 
issuer is exempt from filing such reports or the duty to file such 
reports is suspended under section 15(d) of the Act (15 U.S.C. 78o(d)).
    (b) An issuer that is deemed to be a successor issuer according to 
paragraph (a) of this section shall file reports on the same forms as 
the predecessor issuer except as follows:
    (1) An issuer that is not a foreign issuer shall not be eligible to 
file on Form 20-F (Sec.  240.220f of this chapter).
    (2) A foreign private issuer shall be eligible to file on Form 20-F.
    (c) The provisions of paragraph (a) of this section shall not apply 
to an issuer of securities in connection with a succession that was 
registered on Form F-8 (Sec.  239.38 of this chapter), Form F-10 (Sec.  
239.40 of this chapter) or Form F-80 (Sec.  239.41 of this chapter).

[36 FR 3805, Feb. 27, 1971, as amended at 48 FR 46740, Oct. 14, 1983; 56 
FR 30075, July 1, 1991; 62 FR 39768, July 24, 1997]

[[Page 479]]



Sec.  240.15d-6  Suspension of duty to file reports.

    If the duty of an issuer to file reports pursuant to section 15(d) 
of the Act as to any fiscal year is suspended as provided in section 
15(d) of the Act, such issuer shall, within 30 days after the beginning 
of the first fiscal year, file a notice on Form 15 informing the 
Commission of such suspension unless Form 15 has already been filed 
pursuant to Rule 12h-3. If the suspension resulted from the issuer's 
merger into, or consolidation with, another issuer or issuers, the 
notice shall be filed by the successor issuer.

(Secs. 12(g)(4), 12(h), 13(a), 15(d), 23(a), 48 Stat. 892, 894, 895, 
901; sec. 203(a), 49 Stat. 704; secs. 3, 8, 49 Stat. 1377, 1379; secs. 
3, 4, 6, 78 Stat. 565-568, 569, 570-574; sec. 18, 89 Stat. 155; sec. 
204, 91 Stat. 1500; 15 U.S.C. 78l(g)(4), 78l(h), 78m(a), 78o(d), 78w(a))

[49 FR 12690, Mar. 30, 1984]

                              Other Reports



Sec.  240.15d-10  Transition reports.

    (a) Every issuer that changes its fiscal closing date shall file a 
report covering the resulting transition period between the closing date 
of its most recent fiscal year and the opening date of its new fiscal 
year; Provided, however, that an issuer shall file an annual report for 
any fiscal year that ended before the date on which the issuer 
determined to change its fiscal year end. In no event shall the 
transition report cover a period of 12 or more months.
    (b) The report pursuant to this section shall be filed for the 
transition period not more than the number of days specified in 
paragraph (j) of this section after either the close of the transition 
period or the date of the determination to change the fiscal closing 
date, whichever is later. The report shall be filed on the form 
appropriate for annual reports of the issuer, shall cover the period 
from the close of the last fiscal year end and shall indicate clearly 
the period covered. The financial statements for the transition period 
filed therewith shall be audited. Financial statements, which may be 
unaudited, shall be filed for the comparable period of the prior year, 
or a footnote, which may be unaudited, shall state for the comparable 
period of the prior year, revenues, gross profits, income taxes, income 
or loss from continuing operations and net income or loss. The effects 
of any discontinued operations as classified under the provisions of 
generally accepted accounting principles also shall be shown, if 
applicable. Per share data based upon such income or loss and net income 
or loss shall be presented in conformity with applicable accounting 
standards. Where called for by the time span to be covered, the 
comparable period financial statements or footnote shall be included in 
subsequent filings.
    (c) If the transition period covers a period of less than six 
months, in lieu of the report required by paragraph (b) of this section, 
a report may be filed for the transition period on Form 10-Q (Sec.  
249.308 of this chapter) not more than the number of days specified in 
paragraph (j) of this section after either the close of the transition 
period or the date of the determination to change the fiscal closing 
date, whichever is later. The report on Form 10-Q shall cover the period 
from the close of the last fiscal year end and shall indicate clearly 
the period covered. The financial statements filed therewith need not be 
audited but, if they are not audited, the issuer shall file with the 
first annual report for the newly adopted fiscal year separate audited 
statements of income and cash flows covering the transition period. The 
notes to financial statements for the transition period included in such 
first annual report may be integrated with the notes to financial 
statements for the full fiscal period. A separate audited balance sheet 
as of the end of the transition period shall be filed in the annual 
report only if the audited balance sheet as of the end of the fiscal 
year before the transition period is not filed. Schedules need not be 
filed in transition reports on Form 10-Q.
    (d) Notwithstanding the foregoing in paragraphs (a), (b), and (c) of 
this section, if the transition period covers a period of one month or 
less, the issuer need not file a separate transition report if either:
    (1) The first report required to be filed by the issuer for the 
newly adopted fiscal year after the date of the determination to change 
the fiscal year

[[Page 480]]

end is an annual report, and that report covers the transition period as 
well as the fiscal year; or
    (2)(i) The issuer files with the first annual report for the newly 
adopted fiscal year separate audited statements of income and cash flows 
covering the transition period; and
    (ii) The first report required to be filed by the issuer for the 
newly adopted fiscal year after the date of the determination to change 
the fiscal year end is a quarterly report on Form 10-Q; and
    (iii) Information on the transition period is included in the 
issuer's quarterly report on Form 10-Q for the first quarterly period 
(except the fourth quarter) of the newly adopted fiscal year that ends 
after the date of the determination to change the fiscal year. The 
information covering the transition period required by Part II and Item 
2 of Part I may be combined with the information regarding the quarter. 
However, the financial statements required by Part I, which may be 
unaudited, shall be furnished separately for the transition period.
    (e) Every issuer required to file quarterly reports on Form 10-Q 
pursuant to Sec.  240.15d-13 that changes its fiscal year end shall:
    (1) File a quarterly report on Form 10-Q within the time period 
specified in General Instruction A.1. to that form for any quarterly 
period (except the fourth quarter) of the old fiscal year that ends 
before the date on which the issuer determined to change its fiscal year 
end, except that the issuer need not file such quarterly report if the 
date on which the quarterly period ends also is the date on which the 
transition period ends;
    (2) File a quarterly report on Form 10-Q within the time specified 
in General Instruction A.1 to that form for each quarterly period of the 
old fiscal year within the transition period. In lieu of a quarterly 
report for any quarter of the old fiscal year within the transition 
period, the issuer may file a quarterly report on Form 10-Q for any 
period of three months within the transition period that coincides with 
a quarter of the newly adopted fiscal year if the quarterly report is 
filed within the number of days specified in paragraph (j) of this 
section after the end of such three month period, provided the issuer 
thereafter continues filing quarterly reports on the basis of the 
quarters of the newly adopted fiscal year;
    (3) Commence filing quarterly reports for the quarters of the new 
fiscal year no later than the quarterly report for the first quarter of 
the new fiscal year that ends after the date on which the issuer 
determined to change the fiscal year end; and
    (4) Unless such information is or will be included in the transition 
report, or the first annual report on Form 10-K for the newly adopted 
fiscal year, include in the initial quarterly report on Form 10-Q for 
the newly adopted fiscal year information on any period beginning on the 
first day after the period covered by the issuer's final quarterly 
report on Form 10-Q or annual report on Form 10-K for the old fiscal 
year. The information covering such period required by Part II and Item 
2 of Part I may be combined with the information regarding the quarter. 
However, the financial statements required by Part I, which may be 
unaudited, shall be furnished separately for such period.

    Note to paragraphs (c) and (e): If it is not practicable or cannot 
be cost-justified to furnish in a transition report on Form 10-Q or a 
quarterly report for the newly adopted fiscal year financial statements 
for corresponding periods of the prior year where required, financial 
statements may be furnished for the quarters of the preceding fiscal 
year that most nearly are comparable if the issuer furnishes an adequate 
discussion of seasonal and other factors that could affect the 
comparability of information or trends reflected, an assessment of the 
comparability of the data, and a representation as to the reason 
recasting has not been undertaken.

    (f) Every successor issuer that has a different fiscal year from 
that of its predecessor(s) shall file a transition report pursuant to 
this section, containing the required information about each 
predecessor, for the transition period, if any, between the close of the 
fiscal year covered by the last annual report of each predecessor and 
the date of succession. The report shall be filed for the transition 
period on the form appropriate for annual reports of the issuer not more 
than the number of

[[Page 481]]

days specified in paragraph (j) of this section after the date of the 
succession, with financial statements in conformity with the 
requirements set forth in paragraph (b) of this section. If the 
transition period covers a period of less than six months, in lieu of a 
transition report on the form appropriate for the issuer's annual 
reports, the report may be filed for the transition period on Form 10-Q 
not more than the number of days specified in paragraph (j) of this 
section after the date of the succession, with financial statements in 
conformity with the requirements set forth in paragraph (c) of this 
section. Notwithstanding the foregoing, if the transition period covers 
a period of one month or less, the successor issuer need not file a 
separate transition report if the information is reported by the 
successor issuer in conformity with the requirements set forth in 
paragraph (d) of this section.
    (g)(1) Paragraphs (a) through (f) of this section shall not apply to 
foreign private issuers.
    (2) Every foreign private issuer that changes its fiscal closing 
date shall file a report covering the resulting transition period 
between the closing date of its most recent year and the opening date of 
its new fiscal year. In no event shall a transition report cover a 
period longer than 12 months.
    (3) The report for the transition period shall be filed on Form 20-F 
(Sec.  249.220f of this chapter) responding to all items to which such 
issuer is required to respond when Form 20-F is used as an annual 
report. The financial statements for the transition period filed 
therewith shall be audited. The report shall be filed within four months 
after either the close of the transition period or the date on which the 
issuer made the determination to change the fiscal closing date, 
whichever is later.
    (4) If the transition period covers a period of six or fewer months, 
in lieu of the report required by paragraph (g)(3) of this section, a 
report for the transition period may be filed on Form 20-F responding to 
Items 5, 8.A.7., 13, 14, and 17 or 18 within three months after either 
the close of the transition period or the date on which the issuer made 
the determination to change the fiscal closing date, whichever is later. 
The financial statements required by either Item 17 or Item 18 shall be 
furnished for the transition period. Such financial statements may be 
unaudited and condensed as permitted in Article 10 of Regulation S-X 
(Sec.  210.10-01 of this chapter), but if the financial statements are 
unaudited and condensed, the issuer shall file with the first annual 
report for the newly adopted fiscal year separate audited statements of 
income and cash flows covering the transition period.
    (5) Notwithstanding the foregoing in paragraphs (g)(2), (g)(3), and 
(g)(4) of this section, if the transition period covers a period of one 
month or less, a foreign private issuer need not file a separate 
transition report if the first annual report for the newly adopted 
fiscal year covers the transition period as well as the fiscal year.
    (h) The provisions of this rule shall not apply to investment 
companies required to file reports pursuant to Rule 30a-1 (Sec.  
270.30a-1 of this chapter) under the Investment Company Act of 1940 (15 
U.S.C. 80a-1 et seq.).
    (i) No filing fee shall be required for a transition report filed 
pursuant to this section.
    (j)(1) For transition reports to be filed on the form appropriate 
for annual reports of the issuer, the number of days shall be:
    (i) 60 days (75 days for fiscal years ending before December 15, 
2006) for large accelerated filers (as defined in Sec.  240.12b-2);
    (ii) 75 days for accelerated filers (as defined in Sec.  240.12b-2); 
and
    (iii) 90 days for all other issuers; and
    (2) For transition reports to be filed on Form 10-Q (Sec.  249.308 
of this chapter), the number of days shall be:
    (i) 40 days for large accelerated filers and accelerated filers (as 
defined in Sec.  240.12b-2); and
    (ii) 45 days for all other issuers.
    (k)(1) Paragraphs (a) through (g) of this section shall not apply to 
asset-backed issuers.
    (2) Every asset-backed issuer that changes its fiscal closing date 
shall file a report covering the resulting transition period between the 
closing date of its most recent fiscal year and the opening date of its 
new fiscal year. In

[[Page 482]]

no event shall a transition report cover a period longer than 12 months.
    (3) The report for the transition period shall be filed on Form 10-K 
(Sec.  249.310 of this chapter) responding to all items to which such 
asset-backed issuer is required to respond pursuant to General 
Instruction J. of Form 10-K. Such report shall be filed within 90 days 
after the later of either the close of the transition period or the date 
on which the issuer made the determination to change the fiscal closing 
date.
    (4) Notwithstanding the foregoing in paragraphs (k)(2) and (k)(3) of 
this section, if the transition period covers a period of one month or 
less, an asset-backed issuer need not file a separate transition report 
if the first annual report for the newly adopted fiscal year covers the 
transition period as well as the fiscal year.
    (5) Any obligation of the asset-backed issuer to file distribution 
reports pursuant to Sec.  240.15d-17 will continue to apply regardless 
of a change in the asset-backed issuer's fiscal closing date.

    Note 1: In addition to the report or reports required to be filed 
pursuant to this section, every issuer, except a foreign private issuer 
or an investment company required to file reports pursuant to Sec.  
270.30b1-1 of this chapter, that changes its fiscal closing date is 
required to file a Form 8-K (Sec.  249.308 of this chapter) report that 
includes the information required by Item 5.03 of Form 8-K within the 
period specified in General Instruction B.1. to that form.
    Note 2: The report or reports to be filed pursuant to this section 
must include the certification required by Sec.  240.15d-14.

[54 FR 10318, Mar. 13, 1989, as amended at 56 FR 30075, July 1, 1991; 64 
FR 53912, Oct. 5, 1999; 67 FR 57289, Sept. 9, 2002; 67 FR 58505, Sept. 
16, 2002; 69 FR 15618, Mar. 25, 2004; 69 FR 68236, Nov. 23, 2004; 70 FR 
1622, Jan. 7, 2005; 70 FR 76642, Dec. 27, 2005; 73 FR 978, Jan. 4, 2008; 
73 FR 58324, Oct. 6, 2008; 81 FR 82020, Nov. 18, 2016; 83 FR 50222, Oct. 
4, 2018]



Sec.  240.15d-11  Current reports on Form 8-K (Sec.  249.308 of this
chapter).

    (a) Except as provided in paragraph (b) of this section, every 
registrant subject to Sec.  240.15d-1 shall file a current report on 
Form 8-K within the period specified in that form unless substantially 
the same information as that required by Form 8-K has been previously 
reported by the registrant.
    (b) This section shall not apply to foreign governments, foreign 
private issuers required to make reports on Form 6-K (17 CFR 249.306) 
pursuant to Sec.  240.15d-16, issuers of American Depositary Receipts 
for securities of any foreign issuer, or investment companies required 
to file reports pursuant to Sec.  270.30a-1 of this chapter under the 
Investment Company Act of 1940, except where such an investment company 
is required to file:
    (1) Notice of a blackout period pursuant to Sec.  245.104 of this 
chapter;
    (2) Disclosure pursuant to Instruction 2 to Sec.  240.14a-11(b)(1) 
of information concerning outstanding shares and voting; or
    (3) Disclosure pursuant to Instruction 2 to Sec.  240.14a-11(b)(10) 
of the date by which a nominating shareholder or nominating shareholder 
group must submit the notice required pursuant to Sec.  240.14a-
11(b)(10).
    (c) No failure to file a report on Form 8-K that is required solely 
pursuant to Item 1.01, 1.02, 2.03, 2.04, 2.05, 2.06, 4.02(a), 5.02(e) or 
6.03 of Form 8-K shall be deemed to be a violation of 15 U.S.C. 78j(b) 
and Sec.  240.10b--5.

[42 FR 4429, Jan. 25, 1977, as amended at 50 FR 27939, July 9, 1985; 68 
FR 4355, Jan. 28, 2002; 69 FR 15618, Mar. 25, 2004; 70 FR 1622, Jan. 7, 
2005; 71 FR 53263, Sept. 8, 2006; 75 FR 56792, Sept. 16, 2010; 81 FR 
82020, Nov. 18, 2016]



Sec.  240.15d-13  Quarterly reports on Form 10-Q (Sec.  249.308 of this
chapter).

    (a) Except as provided in paragraphs (b) and (c) of this section, 
every issuer that has securities registered pursuant to the Securities 
Act and is required to file annual reports pursuant to section 15(d) of 
the Act on Form 10-K (Sec.  249.310 of this chapter) shall file a 
quarterly report on Form 10-Q (Sec.  249.308 of this chapter) within the 
period specified in General Instruction A.1 to that form for each of the 
first three quarters of each fiscal year of the issuer, commencing with 
the first fiscal quarter following the most recent fiscal year for which 
full financial statements were included in the registration statement, 
or, if the registration statement included financial statements for an 
interim period after the most recent

[[Page 483]]

fiscal year end meeting the requirements of Article 10 of Regulation S-
X, or Rule 8-03 of Regulation S-X for smaller reporting companies, for 
the first fiscal quarter after the quarter reported upon in the 
registration statement. The first quarterly report of the issuer shall 
be filed either within 45 days after the effective date of the 
registration statement or on or before the date on which such report 
would have been required to be filed if the issuer had been required to 
file reports on Form 10-Q as of its last fiscal quarter, whichever is 
later.
    (b) The provisions of this rule shall not apply to the following 
issuers:
    (1) Investment companies required to file reports pursuant to Sec.  
270.30a-1;
    (2) Foreign private issuers required to file reports pursuant to 
Sec.  240.15d-16; and
    (3) Asset-backed issuers required to file reports pursuant to Sec.  
240.15d-17.
    (c) Part I of the quarterly reports on Form 10-Q need not be filed 
by:
    (1) Mutual life insurance companies; or
    (2) Mining companies not in the production stage but engaged 
primarily in the exploration for the development of mineral deposits 
other than oil, gas or coal, if all of the following conditions are met:
    (i) The registrant has not been in production during the current 
fiscal year or the two years immediately prior thereto; except that 
being in production for an aggregate period of not more than eight 
months over the three-year period shall not be a violation of this 
condition.
    (ii) Receipts from the sale of mineral products or from the 
operations of mineral producing properties by the registrant and its 
subsidiaries combined have not exceeded $500,000 in any of the most 
recent six years and have not aggregated more than $1,500,000 in the 
most recent six fiscal years.
    (d) Notwithstanding the foregoing provisions of this section, the 
financial information required by Part I of Form 10-Q shall not be 
deemed to be ``filed'' for the purpose of section 18 of the Act or 
otherwise subject to the liabilities of that section of the Act, but 
shall be subject to all other provisions of the Act.
    (e) Notwithstanding the foregoing provisions of this section, the 
financial information required by Part I of Form 10-Q, or financial 
information submitted in lieu thereof pursuant to paragraph (d) of this 
section, shall not be deemed to be ``filed'' for the purpose of section 
18 of the Act or otherwise subject to the liabilities of that section of 
the Act, but shall be subject to all other provisions of the Act.

[42 FR 24065, May 12, 1977, as amended at 46 FR 63255, Dec. 31, 1981; 50 
FR 27939, July 9, 1985; 54 FR 10319, Mar. 13, 1989, 61 FR 30403, June 
14, 1996; 70 FR 1622, Jan. 7, 2005; 73 FR 978, Jan. 4, 2008; 81 FR 
82020, Nov. 18, 2016]



Sec.  240.15d-14  Certification of disclosure in annual and quarterly
reports.

    (a) Each report, including transition reports, filed on Form 10-Q, 
Form 10-K, Form 20-F or Form 40-F (Sec.  249.308a, Sec.  249.310, Sec.  
249.220f or Sec.  249.240f of this chapter) under section 15(d) of the 
Act (15 U.S.C. 78o(d)), other than a report filed by an Asset-Backed 
Issuer (as defined in Sec.  229.1101 of this chapter) or a report on 
Form 20-F filed under Sec.  240.15d-19, must include certifications in 
the form specified in the applicable exhibit filing requirements of such 
report, and such certifications must be filed as an exhibit to such 
report. Each principal executive and principal financial officer of the 
issuer, or persons performing similar functions, at the time of filing 
of the report must sign a certification. The principal executive and 
principal financial officers of an issuer may omit the portion of the 
introductory language in paragraph 4 as well as language in paragraph 
4(b) of the certification that refers to the certifying officers' 
responsibility for designing, establishing and maintaining internal 
control over financial reporting for the issuer until the issuer becomes 
subject to the internal control over financial reporting requirements in 
Sec.  240.13a-15 or Sec.  240.15d-15.
    (b) Each periodic report containing financial statements filed by an 
issuer pursuant to section 15(d) of the Act (15 U.S.C. 78o(d)) must be 
accompanied by the certifications required by Section 1350 of Chapter 63 
of Title 18 of the United States Code (18 U.S.C. 1350) and such 
certifications must be furnished as an exhibit to such report as 
specified

[[Page 484]]

in the applicable exhibit requirements for such report. Each principal 
executive and principal financial officer of the issuer (or equivalent 
thereof) must sign a certification. This requirement may be satisfied by 
a single certification signed by an issuer's principal executive and 
principal financial officers.
    (c) A person required to provide a certification specified in 
paragraph (a), (b) or (d) of this section may not have the certification 
signed on his or her behalf pursuant to a power of attorney or other 
form of confirming authority.
    (d) Each annual report and transition report filed on Form 10-K 
(Sec.  249.310 of this chapter) by an asset-backed issuer under section 
15(d) of the Act (15 U.S.C. 78o(d)) must include a certification in the 
form specified in the applicable exhibit filing requirements of such 
report and such certification must be filed as an exhibit to such 
report. Terms used in paragraphs (d) and (e) of this section have the 
same meaning as in Item 1101 of Regulation AB (Sec.  229.1101 of this 
chapter).
    (e) With respect to asset-backed issuers, the certification required 
by paragraph (d) of this section must be signed by either:
    (1) The senior officer in charge of securitization of the depositor 
if the depositor is signing the report; or
    (2) The senior officer in charge of the servicing function of the 
servicer if the servicer is signing the report on behalf of the issuing 
entity. If multiple servicers are involved in servicing the pool assets, 
the senior officer in charge of the servicing function of the master 
servicer (or entity performing the equivalent function) must sign if a 
representative of the servicer is to sign the report on behalf of the 
issuing entity.
    (f) The certification requirements of this section do not apply to 
an Interactive Data File, as defined in Sec.  232.11 of this chapter 
(Rule 11 of Regulation S-T).

[67 FR 57289, Sept. 9, 2002, as amended at 68 FR 36666, June 18, 2003; 
70 FR 1622, Jan. 7, 2005; 70 FR 6572, Feb. 8, 2005; 70 FR 42247, July 
21, 2005; 71 FR 76596, Dec. 21, 2006; 73 FR 979, Jan. 4, 2008; 74 FR 
6819, Feb. 10, 2009; 83 FR 40878, Aug. 16, 2018]



Sec.  240.15d-15  Controls and procedures.

    (a) Every issuer that files reports under section 15(d) of the Act 
(15 U.S.C. 78o(d)), other than an Asset Backed Issuer (as defined in 
Sec.  229.1101 of this chapter), a small business investment company 
registered on Form N-5 (Sec. Sec.  239.24 and 274.5 of this chapter), or 
a unit investment trust as defined in section 4(2) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-4(2)), must maintain disclosure 
controls and procedures (as defined in paragraph (e) of this section) 
and, if the issuer either had been required to file an annual report 
pursuant to section 13(a) or 15(d) of the Act (15 U.S.C. 78m(a) or 
78o(d)) for the prior fiscal year or had filed an annual report with the 
Commission for the prior fiscal year, internal control over financial 
reporting (as defined in paragraph (f) of this section).
    (b) Each such issuer's management must evaluate, with the 
participation of the issuer's principal executive and principal 
financial officers, or persons performing similar functions, the 
effectiveness of the issuer's disclosure controls and procedures, as of 
the end of each fiscal quarter, except that management must perform this 
evaluation:
    (1) In the case of a foreign private issuer (as defined in Sec.  
240.3b-4) as of the end of each fiscal year; and
    (2) In the case of an investment company registered under section 8 
of the Investment Company Act of 1940 (15 U.S.C. 80a-8), within the 90-
day period prior to the filing date of each report requiring 
certification under Sec.  270.30a-2 of this chapter.
    (c) The management of each such issuer, that either had been 
required to file an annual report pursuant to section 13(a) or 15(d) of 
the Act (15 U.S.C. 78m(a) or 78o(d)) for the prior fiscal year or 
previously had filed an annual report with the Commission for the prior 
fiscal year, other than an investment company registered under section 8 
of the Investment Company Act of 1940, must evaluate, with the 
participation of the issuer's principal executive and principal 
financial officers, or persons performing similar functions, the 
effectiveness, as of the end of each fiscal year, of the issuer's 
internal control over financial reporting. The framework on which 
management's

[[Page 485]]

evaluation of the issuer's internal control over financial reporting is 
based must be a suitable, recognized control framework that is 
established by a body or group that has followed due-process procedures, 
including the broad distribution of the framework for public comment. 
Although there are many different ways to conduct an evaluation of the 
effectiveness of internal control over financial reporting to meet the 
requirements of this paragraph, an evaluation that is conducted in 
accordance with the interpretive guidance issued by the Commission in 
Release No. 34-55929 will satisfy the evaluation required by this 
paragraph.
    (d) The management of each such issuer that previously either had 
been required to file an annual report pursuant to section 13(a) or 
15(d) of the Act (15 U.S.C. 78m(a) or 78o(d)) for the prior fiscal year 
or previously had filed an annual report with the Commission for the 
prior fiscal year, other than an investment company registered under 
section 8 of the Investment Company Act of 1940 (15 U.S.C. 80a-8), must 
evaluate, with the participation of the issuer's principal executive and 
principal financial officers, or persons performing similar functions, 
any change in the issuer's internal control over financial reporting, 
that occurred during each of the issuer's fiscal quarters, or fiscal 
year in the case of a foreign private issuer, that has materially 
affected, or is reasonably likely to materially affect, the issuer's 
internal control over financial reporting.
    (e) For purposes of this section, the term disclosure controls and 
procedures means controls and other procedures of an issuer that are 
designed to ensure that information required to be disclosed by the 
issuer in the reports that it files or submits under the Act (15 U.S.C. 
78a et seq.) is recorded, processed, summarized and reported, within the 
time periods specified in the Commission's rules and forms. Disclosure 
controls and procedures include, without limitation, controls and 
procedures designed to ensure that information required to be disclosed 
by an issuer in the reports that it files or submits under the Act is 
accumulated and communicated to the issuer's management, including its 
principal executive and principal financial officers, or persons 
performing similar functions, as appropriate to allow timely decisions 
regarding required disclosure.
    (f) The term internal control over financial reporting is defined as 
a process designed by, or under the supervision of, the issuer's 
principal executive and principal financial officers, or persons 
performing similar functions, and effected by the issuer's board of 
directors, management and other personnel, to provide reasonable 
assurance regarding the reliability of financial reporting and the 
preparation of financial statements for external purposes in accordance 
with generally accepted accounting principles and includes those 
policies and procedures that:
    (1) Pertain to the maintenance of records that in reasonable detail 
accurately and fairly reflect the transactions and dispositions of the 
assets of the issuer;
    (2) Provide reasonable assurance that transactions are recorded as 
necessary to permit preparation of financial statements in accordance 
with generally accepted accounting principles, and that receipts and 
expenditures of the issuer are being made only in accordance with 
authorizations of management and directors of the issuer; and
    (3) Provide reasonable assurance regarding prevention or timely 
detection of unauthorized acquisition, use or disposition of the 
issuer's assets that could have a material effect on the financial 
statements.

[68 FR 36667, June 18, 2003, as amended at 70 FR 1622, Jan. 7, 2005; 71 
FR 76596, Dec. 21, 2006; 72 FR 35322, June 27, 2007]



Sec.  240.15d-16  Reports of foreign private issuers on Form 6-K
[17 CFR 249.306].

    (a) Every foreign private issuer which is subject to Rule 15d-1 [17 
CFR 240.15d-1] shall make reports on Form 6-K, except that this rule 
shall not apply to:
    (1) Investment companies required to file reports pursuant to Sec.  
270.30a-1 of this chapter;
    (2) Issuers of American depositary receipts for securities of any 
foreign issuer; and
    (3) Asset-backed issuers, as defined in Sec.  229.1101 of this 
chapter.

[[Page 486]]

    (b) Such reports shall be transmitted promptly after the information 
required by Form 6-K is made public by the issuer, by the country of its 
domicile or under the laws of which it was incorporated or organized or 
by a foreign securities exchange with which the issuer has filed the 
information.
    (c) Reports furnished pursuant to this rule shall not be deemed to 
be ``filed'' for the purpose of section 18 of the Act or otherwise 
subject to the liabilities of that section.

[32 FR 7849, May 30, 1967, as amended at 44 FR 70137, Dec. 6, 1979; 47 
FR 54781, Dec. 6, 1982; 50 FR 27939, July 9, 1985; 56 FR 30075, July 1, 
1991; 70 FR 1622, Jan. 7, 2005; 81 FR 82020, Nov. 18, 2016]



Sec.  240.15d-17  Reports of asset-backed issuers on Form 10-D 
(Sec.  249.312 of this chapter).

    Every asset-backed issuer subject to Sec.  240.15d-1 shall make 
reports on Form 10-D (Sec.  249.312 of this chapter). Such reports shall 
be filed within the period specified in Form 10-D.

[70 FR 1622, Jan. 7, 2005]



Sec.  240.15d-18  Compliance with servicing criteria for asset-backed 
securities.

    (a) This section applies to every class of asset-backed securities 
subject to the reporting requirements of section 15(d) of the Act (15 
U.S.C. 78o(d)). Terms used in this section have the same meaning as in 
Item 1101 of Regulation AB (Sec.  229.1101 of this chapter).
    (b) Reports on assessments of compliance with servicing criteria for 
asset-backed securities required. With regard to a class of asset-backed 
securities subject to the reporting requirements of section 15(d) of the 
Act, the annual report on Form 10-K (Sec.  249.308 of this chapter) for 
such class must include from each party participating in the servicing 
function a report regarding its assessment of compliance with the 
servicing criteria specified in paragraph (d) of Item 1122 of Regulation 
AB (Sec.  229.1122(d) of this chapter), as of and for the period ending 
the end of each fiscal year, with respect to asset-backed securities 
transactions taken as a whole involving the party participating in the 
servicing function and that are backed by the same asset type backing 
the class of asset-backed securities (including the asset-backed 
securities transaction that is to be the subject of the report on Form 
10-K for that fiscal year).
    (c) Attestation reports on assessments of compliance with servicing 
criteria for asset-backed securities required. With respect to each 
report included pursuant to paragraph (b) of this section, the annual 
report on Form 10-K must also include a report by a registered public 
accounting firm that attests to, and reports on, the assessment made by 
the asserting party. The attestation report on assessment of compliance 
with servicing criteria for asset-backed securities must be made in 
accordance with standards for attestation engagements issued or adopted 
by the Public Company Accounting Oversight Board.

    Note to Sec.  240.15d-18: If multiple parties are participating in 
the servicing function, a separate assessment report and attestation 
report must be included for each party participating in the servicing 
function. A party participating in the servicing function means any 
entity (e.g., master servicer, primary servicers, trustees) that is 
performing activities that address the criteria in paragraph (d) of Item 
1122 of Regulation AB (Sec.  229.1122(d) of this chapter), unless such 
entity's activities relate only to 5% or less of the pool assets.

[70 FR 1622, Jan. 7, 2005]



Sec.  240.15d-19  Reports by shell companies on Form 20-F.

    Every foreign private issuer that was a shell company, other than a 
business combination related shell company, immediately before a 
transaction that causes it to cease to be a shell company shall, within 
four business days of completion of that transaction, file a report on 
Form 20-F (Sec.  249.220f of this chapter) containing the information 
that would be required if the issuer were filing a form for registration 
of securities on Form 20-F to register under the Act all classes of the 
issuer's securities subject to the reporting requirements of section 13 
(15 U.S.C. 78m) or section 15(d) (15 U.S.C. 78o(d)) of the Act upon 
consummation of the transaction, with such information reflecting the 
registrant and its securities upon consummation of the transaction.

[70 FR 42247, July 21, 2005]

[[Page 487]]



Sec.  240.15d-20  Plain English presentation of specified information.

    (a) Any information included or incorporated by reference in a 
report filed under section 15(d) of the Act (15 U.S.C. 78o(d)) that is 
required to be disclosed pursuant to Item 402, 403, 404 or 407 of 
Regulation S-K (Sec.  229.402, Sec.  229.403, Sec.  229.404 or Sec.  
229.407 of this chapter) must be presented in a clear, concise and 
understandable manner. You must prepare the disclosure using the 
following standards:
    (1) Present information in clear, concise sections, paragraphs and 
sentences;
    (2) Use short sentences;
    (3) Use definite, concrete, everyday words;
    (4) Use the active voice;
    (5) Avoid multiple negatives;
    (6) Use descriptive headings and subheadings;
    (7) Use a tabular presentation or bullet lists for complex material, 
wherever possible;
    (8) Avoid legal jargon and highly technical business and other 
terminology;
    (9) Avoid frequent reliance on glossaries or defined terms as the 
primary means of explaining information. Define terms in a glossary or 
other section of the document only if the meaning is unclear from the 
context. Use a glossary only if it facilitates understanding of the 
disclosure; and
    (10) In designing the presentation of the information you may 
include pictures, logos, charts, graphs and other design elements so 
long as the design is not misleading and the required information is 
clear. You are encouraged to use tables, schedules, charts and graphic 
illustrations that present relevant data in an understandable manner, so 
long as such presentations are consistent with applicable disclosure 
requirements and consistent with other information in the document. You 
must draw graphs and charts to scale. Any information you provide must 
not be misleading.
    (b) [Reserved]

    Note to Sec.  240.15d-20: In drafting the disclosure to comply with 
this section, you should avoid the following:
    1. Legalistic or overly complex presentations that make the 
substance of the disclosure difficult to understand;
    2. Vague ``boilerplate'' explanations that are imprecise and readily 
subject to different interpretations;
    3. Complex information copied directly from legal documents without 
any clear and concise explanation of the provision(s); and
    4. Disclosure repeated in different sections of the document that 
increases the size of the document but does not enhance the quality of 
the information.

[71 FR 53263, Sept. 8, 2006, as amended at 73 FR 979, Jan. 4, 2008]

       Exemption of Certain Issuers From Section 15(d) of the Act



Sec.  240.15d-21  Reports for employee stock purchase, savings and 
similar plans.

    (a) Separate annual and other reports need not be filed pursuant to 
section 15(d) of the Act with respect to any employee stock purchase, 
savings or similar plan: Provided,
    (1) The issuer of the stock or other securities offered to employees 
through their participation in the plan files annual reports on Form 10-
K (Sec.  249.310 of this chapter); and
    (2) Such issuer furnishes, as a part of its annual report on such 
form or as an amendment thereto, the financial statements required by 
Form 11-K (Sec.  249.311 of this chapter) with respect to the plan.
    (b) If the procedure permitted by this Rule is followed, the 
financial statements required by Form 11-K with respect to the plan 
shall be filed within 120 days after the end of the fiscal year of the 
plan, either as a part of or as an amendment to the annual report of the 
issuer for its last fiscal year, provided that if the fiscal year of the 
plan ends within 62 days prior to the end of the fiscal year of the 
issuer, such information, financial statements and exhibits may be 
furnished as a part of the issuer's next annual report. If a plan 
subject to the Employee Retirement Income Security Act of 1974 uses the 
procedure permitted by this Rule, the financial statements required by 
Form 11-K shall be filed within 180 days after the plan's fiscal year 
end.

[27 FR 7871, Aug. 9, 1962, as amended at 55 FR 23929, June 13, 1990; 73 
FR 979, Jan. 4, 2008]

[[Page 488]]



Sec.  240.15d-22  Reporting regarding asset-backed securities under
section 15(d) of the Act.

    (a) With respect to an offering of asset-backed securities 
registered pursuant to Sec.  230.415(a)(1)(vii) or Sec.  
230.415(a)(1)(xii) of this chapter:
    (1) Annual and other reports need not be filed pursuant to section 
15(d) of the Act (15 U.S.C. 78o(d)) regarding any class of securities to 
which such registration statement relates until the first bona fide sale 
in a takedown of securities under the registration statement; and
    (2) The starting and suspension dates for any reporting obligation 
under section 15(d) of the Act (15 U.S.C. 78o(d)) with respect to a 
takedown of any class of asset-backed securities are determined 
separately for each takedown of securities under the registration 
statement.
    (b) The duty to file annual and other reports pursuant to section 
15(d) of the Act (15 U.S.C. 78o(d)) regarding any class of asset-backed 
securities is suspended:
    (1) As to any semi-annual fiscal period, if, at the beginning of the 
semi-annual fiscal period, other than a period in the fiscal year within 
which the registration statement became effective, or, for offerings 
conducted pursuant to Sec.  230.415(a)(1)(vii) or Sec.  
230.415(a)(1)(xii), the takedown for the offering occurred, there are no 
asset-backed securities of such class that were sold in a registered 
transaction held by non-affiliates of the depositor and a certification 
on Form 15 (17 CFR 249.323) has been filed; or
    (2) When there are no asset-backed securities of such class that 
were sold in a registered transaction still outstanding, immediately 
upon filing with the Commission a certification on Form 15 (17 CFR 
249.323) if the issuer of such class has filed all reports required by 
Section 13(a), without regard to Rule 12b-25 (17 CFR 249.322), for the 
shorter of its most recent three fiscal years and the portion of the 
current year preceding the date of filing Form 15, or the period since 
the issuer became subject to such reporting obligation. If the 
certification on Form 15 is subsequently withdrawn or denied, the issuer 
shall, within 60 days, file with the Commission all reports which would 
have been required if such certification had not been filed.

    Note 1 to paragraph (b): Securities held of record by a broker, 
dealer, bank or nominee for any of them for the accounts of customers 
shall be considered as held by the separate accounts for which the 
securities are held.
    Note 2 to paragraph (b): An issuer may not suspend reporting if the 
issuer and its affiliates acquire and resell securities as part of a 
plan or scheme to evade the reporting obligations of Section 15(d).

    (c) This section does not affect any other reporting obligation 
applicable with respect to any classes of securities from additional 
takedowns under the same or different registration statements or any 
reporting obligation that may be applicable pursuant to section 12 of 
the Act (15 U.S.C. 78l).

[76 FR 52555, Aug. 23, 2011, as amended at 79 FR 57344, Sept. 24, 2014]



Sec.  240.15d-23  Reporting regarding certain securities underlying
asset-backed securities under section 15(d) of the Act.

    (a) Regarding a class of asset-backed securities, if the asset pool 
for the asset-backed securities includes a pool asset representing an 
interest in or the right to the payments or cash flows of another asset 
pool, then no separate annual and other reports need be filed pursuant 
to section 15(d) of the Act (15 U.S.C. 78o(d)) because of the separate 
registration of the distribution of the pool asset under the Securities 
Act (15 U.S.C. 77a et seq.), if the following conditions are met:
    (1) Both the issuing entity for the asset-backed securities and the 
entity that issued the pool asset were established under the direction 
of the same sponsor and depositor;
    (2) The pool asset was created solely to satisfy legal requirements 
or otherwise facilitate the structuring of the asset-backed securities 
transaction;
    (3) The pool asset is not part of a scheme to avoid the registration 
or reporting requirements of the Act;
    (4) The pool asset is held by the issuing entity and is a part of 
the asset pool for the asset-backed securities; and

[[Page 489]]

    (5) The offering of the asset-backed securities and the offering of 
the pool asset were both registered under the Securities Act (15 U.S.C. 
77a et seq.).
    (b) Paragraph (a) of this section does not affect any reporting 
obligation applicable with respect to the asset-backed securities or any 
other reporting obligation that may be applicable with respect to the 
pool asset or any other securities by the issuer of that pool asset 
pursuant to section 12 or 15(d) of the Act (15 U.S.C. 78l or 78o(d)).
    (c) This section does not affect any obligation to provide 
information regarding the pool asset or the asset pool underlying the 
pool asset in a filing with respect to the asset-backed securities. See 
Item 1100(d) of Regulation AB (Sec.  229.1100(d) of this chapter).
    (d) Terms used in this section have the same meaning as in Item 1101 
of Regulation AB (Sec.  229.1101 of this chapter).

[70 FR 1623, Jan. 7, 2005]



Sec.  240.15g-1  Exemptions for certain transactions.

    The following transactions shall be exempt from 17 CFR 240.15g-2, 17 
CFR 240.15g-3, 17 CFR 240.15g-4, 17 CFR 240.15g-5, and 17 CFR 240.15g-6:
    (a) Transactions by a broker or dealer:
    (1) Whose commissions, commission equivalents, mark-ups, and mark-
downs from transactions in penny stocks during each of the immediately 
preceding three months and during eleven or more of the preceding twelve 
months, or during the immediately preceding six months, did not exceed 
five percent of its total commissions, commission equivalents, mark-ups, 
and mark-downs from transactions in securities during those months; and
    (2) Who has not been a market maker in the penny stock that is the 
subject of the transaction in the immediately preceding twelve months.

    Note: Prior to April 28, 1993, commissions, commission equivalents, 
mark-ups, and mark-downs from transactions in designated securities, as 
defined in 17 CFR 240.15c2-6(d)(2) as of April 15, 1992, may be 
considered to be commissions, commission equivalents, mark-ups, and 
mark-downs from transactions in penny stocks for purposes of paragraph 
(a)(1) of this section.

    (b) Transactions in which the customer is an institutional 
accredited investor, as defined in 17 CFR 230.501(a)(1), (2), (3), (7), 
(8), (9), (12), or (13).

    Note 1 to paragraph (b): Though the definition of ``family client'' 
from rule 501(a)(13) includes both natural persons and institutions, 
only family clients that are institutions may be considered 
institutional accredited investors.

    (c) Transactions that meet the requirements of Regulation D (17 CFR 
230.500 et seq.), or transactions with an issuer not involving any 
public offering pursuant to section 4(a)(2) of the Securities Act of 
1933.
    (d) Transactions in which the customer is the issuer, or a director, 
officer, general partner, or direct or indirect beneficial owner of more 
than five percent of any class of equity security of the issuer, of the 
penny stock that is the subject of the transaction.
    (e) Transactions that are not recommended by the broker or dealer.
    (f) Any other transaction or class of transactions or persons or 
class of persons that, upon prior written request or upon its own 
motion, the Commission conditionally or unconditionally exempts by order 
as consistent with the public interest and the protection of investors.

[57 FR 18032, Apr. 28, 1992, as amended at 77 FR 18685, Mar. 28, 2012; 
85 FR 64278, Oct. 9, 2020]



Sec.  240.15g-2  Penny stock disclosure document relating to the penny
stock market.

    (a) It shall be unlawful for a broker or dealer to effect a 
transaction in any penny stock for or with the account of a customer 
unless, prior to effecting such transaction, the broker or dealer has 
furnished to the customer a document containing the information set 
forth in Schedule 15G, Sec.  240.15g-100, and has obtained from the 
customer a signed and dated acknowledgment of receipt of the document.
    (b) Regardless of the form of acknowledgment used to satisfy the 
requirements of paragraph (a) of this section, it shall be unlawful for 
a broker or dealer to effect a transaction in any penny stock for or 
with the account of a customer less than two business days

[[Page 490]]

after the broker or dealer sends such document.
    (c) The broker or dealer shall preserve, as part of its records, a 
copy of the written acknowledgment required by paragraph (a) of this 
section for the period specified in 17 CFR 240.17a-4(b) of this chapter.
    (d) Upon request of the customer, the broker or dealer shall furnish 
the customer with a copy of the information set forth on the 
Commission's Web site at http://www.sec.gov/investor/pubs/
microcapstock.htm.

[58 FR 37417, July 12, 1993, as amended at 70 FR 40632, July 13, 2005]



Sec.  240.15g-3  Broker or dealer disclosure of quotations and other
information relating to the penny stock market.

    (a) Requirement. It shall be unlawful for a broker or dealer to 
effect a transaction in any penny stock with or for the account of a 
customer unless such broker or dealer discloses to such customer, within 
the time periods and in the manner required by paragraph (b) of this 
section, the following information:
    (1) The inside bid quotation and the inside offer quotation for the 
penny stock.
    (2) If paragraph (a)(1) of this section does not apply because of 
the absence of an inside bid quotation and an inside offer quotation:
    (i) With respect to a transaction effected with or for a customer on 
a principal basis (other than as provided in paragraph (a)(2)(ii) of 
this section):
    (A) The dealer shall disclose its offer price for the security:
    (1) If during the previous five days the dealer has effected no 
fewer than three bona fide sales to other dealers consistently at its 
offer price for the security current at the time of those sales, and
    (2) If the dealer reasonably believes in good faith at the time of 
the transaction with the customer that its offer price accurately 
reflects the price at which it is willing to sell one or more round lots 
to another dealer. For purposes of paragraph (a)(2)(i)(A) of this 
section, ``consistently'' shall constitute, at a minimum, seventy-five 
percent of the dealer's bona fide interdealer sales during the previous 
five-day period, and, if the dealer has effected only three bona fide 
inter-dealer sales during such period, all three of such sales.
    (B) The dealer shall disclose its bid price for the security:
    (1) If during the previous five days the dealer has effected no 
fewer than three bona fide purchases from other dealers consistently at 
its bid price for the security current at the time of those purchases, 
and
    (2) If the dealer reasonably believes in good faith at the time of 
the transaction with the customer that its bid price accurately reflects 
the price at which it is willing to buy one or more round lots from 
another dealer. For purposes of paragraph (a)(2)(i)(B) of this section, 
``consistently'' shall constitute, at a minimum, seventy-five percent of 
the dealer's bona fide interdealer purchases during the previous five-
day period, and, if the dealer has effected only three bona fide inter-
dealer purchases during such period, all three of such purchases.
    (C) If the dealer's bid or offer prices to the customer do not 
satisfy the criteria of paragraphs (a)(2)(i)(A) or (a)(2)(i)(B) of this 
section, the dealer shall disclose to the customer:
    (1) That it has not effected inter-dealer purchases or sales of the 
penny stock consistently at its bid or offer price, and
    (2) The price at which it last purchased the penny stock from, or 
sold the penny stock to, respectively, another dealer in a bona fide 
transaction.
    (ii) With respect to transactions effected by a broker or dealer 
with or for the account of the customer:
    (A) On an agency basis or
    (B) On a basis other than as a market maker in the security, where, 
after having received an order from the customer to purchase a penny 
stock, the dealer effects the purchase from another person to offset a 
contemporaneous sale of the penny stock to such customer, or, after 
having received an order from the customer to sell the penny stock, the 
dealer effects the sale to another person to offset a contemporaneous 
purchase from such customer, the broker or dealer shall disclose the 
best independent interdealer bid and offer prices for the penny stock

[[Page 491]]

that the broker or dealer obtains through reasonable diligence. A 
broker-dealer shall be deemed to have exercised reasonable diligence if 
it obtains quotations from three market makers in the security (or all 
known market makers if there are fewer than three).
    (3) With respect to bid or offer prices and transaction prices 
disclosed pursuant to paragraph (a) of this section, the broker or 
dealer shall disclose the number of shares to which the bid and offer 
prices apply.
    (b) Timing. (1) The information described in paragraph (a) of this 
section:
    (i) Shall be provided to the customer orally or in writing prior to 
effecting any transaction with or for the customer for the purchase or 
sale of such penny stock; and
    (ii) Shall be given or sent to the customer in writing, at or prior 
to the time that any written confirmation of the transaction is given or 
sent to the customer pursuant to 17 CFR 240.10b-10 of this chapter.
    (2) A broker or dealer, at the time of making the disclosure 
pursuant to paragraph (b)(1)(i) of this section, shall make and preserve 
as part of its records, a record of such disclosure for the period 
specified in 17 CFR 240.17a-4(b).
    (c) Definitions. For purposes of this section:
    (1) The term bid price shall mean the price most recently 
communicated by the dealer to another broker or dealer at which the 
dealer is willing to purchase one or more round lots of the penny stock, 
and shall not include indications of interest.
    (2) The term offer price shall mean the price most recently 
communicated by the dealer to another broker or dealer at which the 
dealer is willing to sell one or more round lots of the penny stock, and 
shall not include indications of interest.
    (3) The term inside bid quotation for a security shall mean the 
highest bid quotation for the security displayed by a market maker in 
the security on a Qualifying Electronic Quotation System, at any time in 
which at least two market makers are contemporaneously displaying on 
such system bid and offer quotations for the security at specified 
prices.
    (4) The term inside offer quotation for a security shall mean the 
lowest offer quotation for the security displayed by a market maker in 
the security on a Qualifying Electronic Quotation System, at any time in 
which at least two market makers are contemporaneously displaying on 
such system bid and offer quotations for the security at specified 
prices.
    (5) The term Qualifying Electronic Quotation System shall mean an 
automated interdealer quotation system that has the characteristics set 
forth in section 17B(b)(2) of the Act, or such other automated 
interdealer quotation system designated by the Commission for purposes 
of this section.

[57 FR 18033, Apr. 28, 1992]



Sec.  240.15g-4  Disclosure of compensation to brokers or dealers.

    Preliminary Note: Brokers and dealers may wish to refer to 
Securities Exchange Act Release No. 30608 (April 20, 1992) for a 
discussion of the procedures for computing compensation in active and 
competitive markets, inactive and competitive markets, and dominated and 
controlled markets.

    (a) Disclosure requirement. It shall be unlawful for any broker or 
dealer to effect a transaction in any penny stock for or with the 
account of a customer unless such broker or dealer discloses to such 
customer, within the time periods and in the manner required by 
paragraph (b) of this section, the aggregate amount of any compensation 
received by such broker or dealer in connection with such transaction.
    (b) Timing. (1) The information described in paragraph (a) of this 
section:
    (i) Shall be provided to the customer orally or in writing prior to 
effecting any transaction with or for the customer for the purchase or 
sale of such penny stock; and
    (ii) Shall be given or sent to the customer in writing, at or prior 
to the time that any written confirmation of the transaction is given or 
sent to the customer pursuant to 17 CFR 240.10b-10.
    (2) A broker or dealer, at the time of making the disclosure 
pursuant to paragraph (b)(1)(i) of this section, shall make and preserve 
as part of its

[[Page 492]]

records, a record of such disclosure for the period specified in 17 CFR 
240.17a-4(b).
    (c) Definition of compensation. For purposes of this section, 
compensation means, with respect to a transaction in a penny stock:
    (1) If a broker is acting as agent for a customer, the amount of any 
remuneration received or to be received by it from such customer in 
connection with such transaction;
    (2) If, after having received a buy order from a customer, a dealer 
other than a market maker purchased the penny stock as principal from 
another person to offset a contemporaneous sale to such customer or, 
after having received a sell order from a customer, sold the penny stock 
as principal to another person to offset a contemporaneous purchase from 
such customer, the difference between the price to the customer and such 
contemporaneous purchase or sale price; or
    (3) If the dealer otherwise is acting as principal for its own 
account, the difference between the price to the customer and the 
prevailing market price.
    (d) Active and competitive market. For purposes of this section 
only, a market may be deemed to be ``active and competitive'' in 
determining the prevailing market price with respect to a transaction by 
a market maker in a penny stock if the aggregate number of transactions 
effected by such market maker in the penny stock in the five business 
days preceding such transaction is less than twenty percent of the 
aggregate number of all transactions in the penny stock reported on a 
Qualifying Electronic Quotation System (as defined in 17 CFR 240.15g-
3(c)(5)) during such five-day period. No presumption shall arise that a 
market is not ``active and competitive'' solely by reason of a market 
maker not meeting the conditions specified in this paragraph.

[57 FR 18034, Apr. 28, 1992]



Sec.  240.15g-5  Disclosure of compensation of associated persons in 
connection with penny stock transactions.

    (a) General. It shall be unlawful for a broker or dealer to effect a 
transaction in any penny stock for or with the account of a customer 
unless the broker or dealer discloses to such customer, within the time 
periods and in the manner required by paragraph (b) of this section, the 
aggregate amount of cash compensation that any associated person of the 
broker or dealer who is a natural person and has communicated with the 
customer concerning the transaction at or prior to receipt of the 
customer's transaction order, other than any person whose function is 
solely clerical or ministerial, has received or will receive from any 
source in connection with the transaction and that is determined at or 
prior to the time of the transaction, including separate disclosure, if 
applicable, of the source and amount of such compensation that is not 
paid by the broker or dealer.
    (b) Timing. (1) The information described in paragraph (a) of this 
section:
    (i) Shall be provided to the customer orally or in writing prior to 
effecting any transaction with or for the customer for the purchase or 
sale of such penny stock; and
    (ii) Shall be given or sent to the customer in writing, at or prior 
to the time that any written confirmation of the transaction is given or 
sent to the customer pursuant to 17 CFR 240.10b-10.
    (2) A broker or dealer, at the time of making the disclosure 
pursuant to paragraph (b)(1)(i) of this section, shall make and preserve 
as part of its records, a record of such disclosure for the period 
specified in 17 CFR 240.17a-4(b).
    (c) Contingent compensation arrangements. Where a portion or all of 
the cash or other compensation that the associated person may receive in 
connection with the transaction may be determined and paid following the 
transaction based on aggregate sales volume levels or other 
contingencies, the written disclosure required by paragraph (b)(1)(ii) 
of this section shall state that fact and describe the basis upon which 
such compensation is determined.

[57 FR 18034, Apr. 28, 1992]



Sec.  240.15g-6  Account statements for penny stock customers.

    (a) Requirement. It shall be unlawful for any broker or dealer that 
has effected the sale to any customer, other than in a transaction that 
is exempt

[[Page 493]]

pursuant to 17 CFR 240.15g-1, of any security that is a penny stock on 
the last trading day of any calendar month, or any successor of such 
broker or dealer, to fail to give or send to such customer a written 
statement containing the information described in paragraphs (c) and (d) 
of this section with respect to each such month in which such security 
is held for the customer's account with the broker or dealer, within ten 
days following the end of such month.
    (b) Exemptions. A broker or dealer shall be exempted from the 
requirement of paragraph (a) of this section under either of the 
following circumstances:
    (1) If the broker or dealer does not effect any transactions in 
penny stocks for or with the account of the customer during a period of 
six consecutive calendar months, then the broker or dealer shall not be 
required to provide monthly statements for each quarterly period that is 
immediately subsequent to such six-month period and in which the broker 
or dealer does not effect any transaction in penny stocks for or with 
the account of the customer, provided that the broker or dealer gives or 
sends to the customer written statements containing the information 
described in paragraphs (d) and (e) of this section on a quarterly 
basis, within ten days following the end of each such quarterly period.
    (2) If, on all but five or fewer trading days of any quarterly 
period, a security has a price of five dollars or more, the broker or 
dealer shall not be required to provide a monthly statement covering the 
security for subsequent quarterly periods, until the end of any such 
subsequent quarterly period on the last trading day of which the price 
of the security is less than five dollars.
    (c) Price determinations. For purposes of paragraphs (a) and (b) of 
this section, the price of a security on any trading day shall be 
determined at the close of business in accordance with the provisions of 
17 CFR 240.3a51-1(d)(1).
    (d) Market and price information. The statement required by 
paragraph (a) of this section shall contain at least the following 
information with respect to each penny stock covered by paragraph (a) of 
this section, as of the last trading day of the period to which the 
statement relates:
    (1) The identity and number of shares or units of each such security 
held for the customer's account; and
    (2) The estimated market value of the security, to the extent that 
such estimated market value can be determined in accordance with the 
following provisions:
    (i) The highest inside bid quotation for the security on the last 
trading day of the period to which the statement relates, multiplied by 
the number of shares or units of the security held for the customer's 
account; or
    (ii) If paragraph (d)(2)(i) of this section is not applicable 
because of the absence of an inside bid quotation, and if the broker or 
dealer furnishing the statement has effected at least ten separate 
Qualifying Purchases in the security during the last five trading days 
of the period to which the statement relates, the weighted average price 
per share paid by the broker or dealer in all Qualifying Purchases 
effected during such five-day period, multiplied by the number of shares 
or units of the security held for the customer's account; or
    (iii) If neither of paragraphs (d)(2)(i) nor (d)(2)(ii) of this 
section is applicable, a statement that there is ``no estimated market 
value'' with respect to the security.
    (e) Legend. In addition to the information required by paragraph (d) 
of this section, the written statement required by paragraph (a) of this 
section shall include a conspicuous legend that is identified with the 
penny stocks described in the statement and that contains the following 
language:

    If this statement contains an estimated value, you should be aware 
that this value may be based on a limited number of trades or quotes. 
Therefore, you may not be able to sell these securities at a price equal 
or near to the value shown. However, the broker-dealer furnishing this 
statement may not refuse to accept your order to sell these securities. 
Also, the amount you receive from a sale generally will be reduced by 
the amount of any commissions or similar charges. If an estimated value 
is not shown for a security, a value could not be determined because of 
a lack of information.

    (f) Preservation of records. Any broker or dealer subject to this 
section shall

[[Page 494]]

preserve, as part of its records, copies of the written statements 
required by paragraph (a) of this section and keep such records for the 
periods specified in 17 CFR 240.17a-4(b).
    (g) Definitions. For purposes of this section:
    (1) The term Quarterly period shall mean any period of three 
consecutive full calendar months.
    (2) The inside bid quotation for a security shall mean the highest 
bid quotation for the security displayed by a market maker in the 
security on a Qualifying Electronic Quotation System, at any time in 
which at least two market makers are contemporaneously displaying on 
such system bid and offer quotations for the security at specified 
prices.
    (3) The term Qualifying Electronic Quotation System shall mean an 
automated interdealer quotation system that has the characteristics set 
forth in section 17B(b)(2) of the Act, or such other automated 
interdealer quotation system designated by the Commission for purposes 
of this section.
    (4) The term Qualifying Purchases shall mean bona fide purchases by 
a broker or dealer of a penny stock for its own account, each of which 
involves at least 100 shares, but excluding any block purchase involving 
more than one percent of the outstanding shares or units of the 
security.

[57 FR 18034, Apr. 28, 1992]



Sec.  240.15g-8  Sales of escrowed securities of blank check companies.

    As a means reasonably designed to prevent fraudulent, deceptive, or 
manipulative acts or practices, it shall be unlawful for any person to 
sell or offer to sell any security that is deposited and held in an 
escrow or trust account pursuant to Rule 419 under the Securities Act of 
1933 (17 CFR 230.419), or any interest in or related to such security, 
other than pursuant to a qualified domestic relations order as defined 
by the Internal Revenue Code of 1986, as amended (26 U.S.C. 1 et seq.), 
or Title I of the Employee Retirement Income Security Act (29 U.S.C. 
1001 et seq.), or the rules thereunder.

[57 FR 18045, Apr. 28, 1992]



Sec.  240.15g-9  Sales practice requirements for certain low-priced
securities.

    (a) As a means reasonably designed to prevent fraudulent, deceptive, 
or manipulative acts or practices, it shall be unlawful for a broker or 
dealer to sell a penny stock to, or to effect the purchase of a penny 
stock by, any person unless:
    (1) The transaction is exempt under paragraph (c) of this section; 
or
    (2) Prior to the transaction:
    (i) The broker or dealer has approved the person's account for 
transactions in penny stocks in accordance with the procedures set forth 
in paragraph (b) of this section; and
    (ii)(A) The broker or dealer has received from the person an 
agreement to the transaction setting forth the identity and quantity of 
the penny stock to be purchased; and
    (B) Regardless of the form of agreement used to satisfy the 
requirements of paragraph (a)(2)(ii)(A) of this section, it shall be 
unlawful for such broker or dealer to sell a penny stock to, or to 
effect the purchase of a penny stock by, for or with the account of a 
customer less than two business days after the broker or dealer sends 
such agreement.
    (b) In order to approve a person's account for transactions in penny 
stocks, the broker or dealer must:
    (1) Obtain from the person information concerning the person's 
financial situation, investment experience, and investment objectives;
    (2) Reasonably determine, based on the information required by 
paragraph (b)(1) of this section and any other information known by the 
broker-dealer, that transactions in penny stocks are suitable for the 
person, and that the person (or the person's independent adviser in 
these transactions) has sufficient knowledge and experience in financial 
matters that the person (or the person's independent adviser in these 
transactions) reasonably may be expected to be capable of evaluating the 
risks of transactions in penny stocks;
    (3) Deliver to the person a written statement:

[[Page 495]]

    (i) Setting forth the basis on which the broker or dealer made the 
determination required by paragraph (b)(2) of this section;
    (ii) Stating in a highlighted format that it is unlawful for the 
broker or dealer to effect a transaction in a penny stock subject to the 
provisions of paragraph (a)(2) of this section unless the broker or 
dealer has received, prior to the transaction, a written agreement to 
the transaction from the person; and
    (iii) Stating in a highlighted format immediately preceding the 
customer signature line that:
    (A) The broker or dealer is required by this section to provide the 
person with the written statement; and
    (B) The person should not sign and return the written statement to 
the broker or dealer if it does not accurately reflect the person's 
financial situation, investment experience, and investment objectives; 
and
    (4)(i) Obtain from the person a signed and dated copy of the 
statement required by paragraph (b)(3) of this section; and
    (ii) Regardless of the form of statement used to satisfy the 
requirements of paragraph (b)(4)(i) of this section, it shall be 
unlawful for such broker or dealer to sell a penny stock to, or to 
effect the purchase of a penny stock by, for or with the account of a 
customer less than two business days after the broker or dealer sends 
such statement.
    (c) For purposes of this section, the following transactions shall 
be exempt:
    (1) Transactions that are exempt under 17 CFR 240.15g-1 (a), (b), 
(d), (e), and (f).
    (2) Transactions that meet the requirements of 17 CFR 230.506 
(including, where applicable, the requirements of 17 CFR 230.501 through 
230.503, and 17 CFR 230.507 through 230.508), or transactions with an 
issuer not involving any public offering pursuant to section 4(a)(2) of 
the Securities Act of 1933.
    (3) Transactions in which the purchaser is an established customer 
of the broker or dealer.
    (d) For purposes of this section:
    (1) The term penny stock shall have the same meaning as in 17 CFR 
240.3a51-1.
    (2) The term established customer shall mean any person for whom the 
broker or dealer, or a clearing broker on behalf of such broker or 
dealer, carries an account, and who in such account:
    (i) Has effected a securities transaction, or made a deposit of 
funds or securities, more than one year previously; or
    (ii) Has made three purchases of penny stocks that occurred on 
separate days and involved different issuers.

[54 FR 35481, Aug. 28, 1989. Redesignated and amended at 58 FR 37417, 
July 12, 1993; 70 FR 40632, July 13, 2005; 81 FR 83553, Nov. 21, 2016]



Sec.  240.15g-100  Schedule 15G--Information to be included in the document
distributed pursuant to 17 CFR 240.15g-2.

                   SECURITIES AND EXCHANGE COMMISSION

                          Washington, DC 20549

                              SCHEDULE 15G

                Under the Securities Exchange Act of 1934

                      Instructions to Schedule 15G

    A. Schedule 15G (Schedule) may be provided to customers in its 
entirety either on paper or electronically. It may also be provided to 
customers electronically through a link to the SEC's Web site.
    1. If the Schedule is sent in paper form, the format and typeface of 
the Schedule must be reproduced exactly as presented. For example, words 
that are capitalized must remain capitalized, and words that are 
underlined or bold must remain underlined or bold. The typeface must be 
clear and easy to read. The Schedule may be reproduced either by 
photocopy or by printing.
    2. If the Schedule is sent electronically, the e-mail containing the 
Schedule must have as a subject line ``Important Information on Penny 
Stocks.'' The Schedule reproduced in the text of the e-mail must be 
clear, easy-to-read type presented in a manner reasonably calculated to 
draw the customer's attention to the language in the document, 
especially words that are capitalized, underlined or in bold.

[[Page 496]]

    3. If the Schedule is sent electronically using a hyperlink to the 
SEC Web site, the e-mail containing the hyperlink must have as a subject 
line: ``Important Information on Penny Stocks.'' Immediately before the 
hyperlink, the text of the e-mail must reproduce the following statement 
in clear, easy-to-read type presented in a manner reasonably calculated 
to draw the customer's attention to the words: ``We are required by the 
U.S. Securities and Exchange Commission to give you the following 
disclosure statement: http://www.sec.gov/investor/schedule15g.htm. It 
explains some of the risks of investing in penny stocks. Please read it 
carefully before you agree to purchase or sell a penny stock.''
    B. Regardless of how the Schedule is provided to the customer, the 
communication must also provide the name, address, telephone number and 
e-mail address of the broker. E-mail messages may also include any 
privacy or confidentiality information that the broker routinely 
includes in e-mail messages sent to customers. No other information may 
be included in these communications, other than instructions on how to 
provide a signed and dated acknowledgement of receipt of the Schedule.
    C. The document entitled ``Important Information on Penny Stocks'' 
must be distributed as Schedule 15G and must be no more than two pages 
in length if provided in paper form.
    D. The disclosures made through the Schedule are in addition to any 
other disclosures that are required under the Federal securities laws.
    E. Recipients of the document must not be charged any fee for the 
document.
    F. The content of the Schedule is as follows:
     [next page]

                  Important Information on Penny Stocks

    The U.S. Securities and Exchange Commission (SEC) requires your 
broker to give this statement to you, and to obtain your signature to 
show that you have received it, before your first trade in a penny 
stock. This statement contains important information--and you should 
read it carefully before you sign it, and before you decide to purchase 
or sell a penny stock.
    In addition to obtaining your signature, the SEC requires your 
broker to wait at least two business days after sending you this 
statement before executing your first trade to give you time to 
carefully consider your trade.

                     Penny Stocks Can Be Very Risky

    Penny stocks are low-priced shares of small companies. Penny stocks 
may trade infrequently--which means that it may be difficult to sell 
penny stock shares once you have them. Because it may also be difficult 
to find quotations for penny stocks, they may be impossible to 
accurately price. Investors in penny stock should be prepared for the 
possibility that they may lose their whole investment.
    While penny stocks generally trade over-the-counter, they may also 
trade on U.S. securities exchanges, facilities of U.S. exchanges, or 
foreign exchanges. You should learn about the market in which the penny 
stock trades to determine how much demand there is for this stock and 
how difficult it will be to sell. Be especially careful if your broker 
is offering to sell you newly issued penny stock that has no established 
trading market.
    The securities you are considering have not been approved or 
disapproved by the SEC. Moreover, the SEC has not passed upon the 
fairness or the merits of this transaction nor upon the accuracy or 
adequacy of the information contained in any prospectus or any other 
information provided by an issuer or a broker or dealer.

                       Information You Should Get

    In addition to this statement, your broker is required to give you a 
statement of your financial situation and investment goals explaining 
why his or her firm has determined that penny stocks are a suitable 
investment for you. In addition, your broker is required to obtain your 
agreement to the proposed penny stock transaction.
    Before you buy penny stock, Federal law requires your salesperson to 
tell you the ``offer'' and the ``bid'' on the stock, and the 
``compensation'' the salesperson and the firm receive for the

[[Page 497]]

trade. The firm also must send a confirmation of these prices to you 
after the trade. You will need this price information to determine what 
profit or loss, if any, you will have when you sell your stock.
    The offer price is the wholesale price at which the dealer is 
willing to sell stock to other dealers. The bid price is the wholesale 
price at which the dealer is willing to buy the stock from other 
dealers. In its trade with you, the dealer may add a retail charge to 
these wholesale prices as compensation (called a ``markup'' or 
``markdown'').
    The difference between the bid and the offer price is the dealer's 
``spread.'' A spread that is large compared with the purchase price can 
make a resale of a stock very costly. To be profitable when you sell, 
the bid price of your stock must rise above the amount of this spread 
and the compensation charged by both your selling and purchasing 
dealers. Remember that if the dealer has no bid price, you may not be 
able to sell the stock after you buy it, and may lose your whole 
investment.
    After you buy penny stock, your brokerage firm must send you a 
monthly account statement that gives an estimate of the value of each 
penny stock in your account, if there is enough information to make an 
estimate. If the firm has not bought or sold any penny stocks for your 
account for six months, it can provide these statements every three 
months.
    Additional information about low-priced securities--including penny 
stocks--is available on the SEC's Web site at http://www.sec.gov/
investor/pubs/microcapstock.htm. In addition, your broker will send you 
a copy of this information upon request. The SEC encourages you to learn 
all you can before making this investment.

           Brokers' Duties and Customers' Rights and Remedies

    Remember that your salesperson is not an impartial advisor--he or 
she is being paid to sell you stock. Do not rely only on the 
salesperson, but seek outside advice before you buy any stock. You can 
get the disciplinary history of a salesperson or firm from NASD at 1-
800-289-9999 or contact NASD via the Internet at http://www.nasd.com. 
You can also get additional information from your state securities 
official. The North American Securities Administrators Association, Inc. 
can give you contact information for your state. You can reach NASAA at 
(202) 737-0900 or via the Internet at http://www.nasaa.org.
    If you have problems with a salesperson, contact the firm's 
compliance officer. You can also contact the securities regulators 
listed above. Finally, if you are a victim of fraud, you may have rights 
and remedies under state and Federal law. In addition to the regulators 
listed above, you also may contact the SEC with complaints at (800) SEC-
0330 or via the Internet at [email protected].

[70 FR 40632, July 13, 2005]



Sec.  240.15l-1  Regulation best interest.

    (a) Best interest obligation. (1) A broker, dealer, or a natural 
person who is an associated person of a broker or dealer, when making a 
recommendation of any securities transaction or investment strategy 
involving securities (including account recommendations) to a retail 
customer, shall act in the best interest of the retail customer at the 
time the recommendation is made, without placing the financial or other 
interest of the broker, dealer, or natural person who is an associated 
person of a broker or dealer making the recommendation ahead of the 
interest of the retail customer.
    (2) The best interest obligation in paragraph (a)(1) of this section 
shall be satisfied if:
    (i) Disclosure obligation. The broker, dealer, or natural person who 
is an associated person of a broker or dealer, prior to or at the time 
of the recommendation, provides the retail customer, in writing, full 
and fair disclosure of:
    (A) All material facts relating to the scope and terms of the 
relationship with the retail customer, including:
    (1) That the broker, dealer, or such natural person is acting as a 
broker, dealer, or an associated person of a broker or dealer with 
respect to the recommendation;
    (2) The material fees and costs that apply to the retail customer's 
transactions, holdings, and accounts; and

[[Page 498]]

    (3) The type and scope of services provided to the retail customer, 
including any material limitations on the securities or investment 
strategies involving securities that may be recommended to the retail 
customer; and
    (B) All material facts relating to conflicts of interest that are 
associated with the recommendation.
    (ii) Care obligation. The broker, dealer, or natural person who is 
an associated person of a broker or dealer, in making the 
recommendation, exercises reasonable diligence, care, and skill to:
    (A) Understand the potential risks, rewards, and costs associated 
with the recommendation, and have a reasonable basis to believe that the 
recommendation could be in the best interest of at least some retail 
customers;
    (B) Have a reasonable basis to believe that the recommendation is in 
the best interest of a particular retail customer based on that retail 
customer's investment profile and the potential risks, rewards, and 
costs associated with the recommendation and does not place the 
financial or other interest of the broker, dealer, or such natural 
person ahead of the interest of the retail customer;
    (C) Have a reasonable basis to believe that a series of recommended 
transactions, even if in the retail customer's best interest when viewed 
in isolation, is not excessive and is in the retail customer's best 
interest when taken together in light of the retail customer's 
investment profile and does not place the financial or other interest of 
the broker, dealer, or such natural person making the series of 
recommendations ahead of the interest of the retail customer.
    (iii) Conflict of interest obligation. The broker or dealer 
establishes, maintains, and enforces written policies and procedures 
reasonably designed to:
    (A) Identify and at a minimum disclose, in accordance with paragraph 
(a)(2)(i) of this section, or eliminate, all conflicts of interest 
associated with such recommendations;
    (B) Identify and mitigate any conflicts of interest associated with 
such recommendations that create an incentive for a natural person who 
is an associated person of a broker or dealer to place the interest of 
the broker, dealer, or such natural person ahead of the interest of the 
retail customer;
    (C)(1) Identify and disclose any material limitations placed on the 
securities or investment strategies involving securities that may be 
recommended to a retail customer and any conflicts of interest 
associated with such limitations, in accordance with subparagraph 
(a)(2)(i), and
    (2) Prevent such limitations and associated conflicts of interest 
from causing the broker, dealer, or a natural person who is an 
associated person of the broker or dealer to make recommendations that 
place the interest of the broker, dealer, or such natural person ahead 
of the interest of the retail customer; and
    (D) Identify and eliminate any sales contests, sales quotas, 
bonuses, and non-cash compensation that are based on the sales of 
specific securities or specific types of securities within a limited 
period of time.
    (iv) Compliance obligation. In addition to the policies and 
procedures required by paragraph (a)(2)(iii) of this section, the broker 
or dealer establishes, maintains, and enforces written policies and 
procedures reasonably designed to achieve compliance with Regulation 
Best Interest.
    (b) Definitions. Unless otherwise provided, all terms used in this 
rule shall have the same meaning as in the Securities Exchange Act of 
1934. In addition, the following definitions shall apply for purposes of 
this section:
    (1) Retail customer means a natural person, or the legal 
representative of such natural person, who:
    (i) Receives a recommendation of any securities transaction or 
investment strategy involving securities from a broker, dealer, or a 
natural person who is an associated person of a broker or dealer; and
    (ii) Uses the recommendation primarily for personal, family, or 
household purposes.
    (2) Retail customer investment profile includes, but is not limited 
to, the retail customer's age, other investments, financial situation 
and needs, tax status, investment objectives, investment experience, 
investment time horizon, liquidity needs, risk tolerance, and any

[[Page 499]]

other information the retail customer may disclose to the broker, 
dealer, or a natural person who is an associated person of a broker or 
dealer in connection with a recommendation.
    (3) Conflict of interest means an interest that might incline a 
broker, dealer, or a natural person who is an associated person of a 
broker or dealer --consciously or unconsciously--to make a 
recommendation that is not disinterested.

[84 FR 33491, July 12, 2019]

             National and Affiliated Securities Associations



Sec.  240.15Aa-1  Registration of a national or an affiliated securities
association.

    Any application for registration of an association as a national, or 
as an affiliated, securities association shall be made in triplicate on 
Form X-15AA-1 accompanied by three copies of the exhibits prescribed by 
the Commission to be filed in connection therewith.

(Sec. 15A, 52 Stat. 1070; 15 U.S.C. 78o-3)

[13 FR 8209, Dec. 22, 1948. Redesignated at 30 FR 11851, Sept. 16, 1965]



Sec.  240.15Aj-1  Amendments and supplements to registration statements
of securities associations.

    Every association applying for registration or registered as a 
national securities association or as an affiliated securities 
association shall keep its registration statement up-to-date in the 
manner prescribed below:
    (a) Amendments. Promptly after the discovery of any inaccuracy in 
the registration statement or in any amendment or supplement thereto the 
association shall file with the Commission an amendment correcting such 
inaccuracy.
    (b) Current supplements. Promptly after any change which renders no 
longer accurate any information contained or incorporated in the 
registration statement or in any amendment or supplement thereto the 
association shall file with the Commission a current supplement setting 
forth such change, except that:
    (1) Supplements setting forth changes in the information called for 
in Exhibit C need not be filed until 10 days after the calendar month in 
which the changes occur.
    (2) No current supplements need be filed with respect to changes in 
the information called for in Exhibit B.
    (3) If changes in the information called for in items (1) and (2) of 
Exhibit C are reported in any record which is published at least once a 
month by the association and promptly filed in triplicate with the 
Commission, no current supplement need be filed with respect thereto.
    (c) Annual supplements. (1) Promptly after March 1 of each year, the 
association shall file with the Commission an annual consolidated 
supplement as of such date on Form X-15AJ-2 (Sec.  249.803) except that:
    (i) If the securities association publishes or cooperates in the 
publication of the information required in Items 6(a) and 6(b) of Form 
X-15AJ-2 on an annual or more frequent basis, in lieu of filing such an 
item the securities association may:
    (A) Identify the publication in which such information is available, 
the name, address, and telephone number of the person from whom such 
publication may be obtained, and the price thereof; and
    (B) Certify to the accuracy of such information as of its date.
    (ii) Promptly after March 1, 1995, and every three years thereafter 
each association shall file complete Exhibit A to Form X-15AJ-2. The 
information contained in this exhibit shall be up to date as of the 
latest practicable date within 3 months of the date on which these 
exhibits are filed. If the association publishes or cooperates in the 
publication of the information required in this exhibit on an annual or 
more frequent basis, in lieu of filing such exhibit the association may:
    (A) Identify the publication in which such information is available, 
the name, address, and telephone number of the person from whom such 
publication may be obtained, and the price thereof; and
    (B) Certify to the accuracy of such information as of its date. If a 
securities association keeps the information required in this exhibit up 
to date and makes it available to the Commission and the public upon 
request, in lieu of

[[Page 500]]

filing such an exhibit a securities association may certify that the 
information is kept up to date and is available to the Commission and 
the public upon request.
    (2) Promptly after the close of each fiscal year of the association, 
it shall file with the Commission a supplement setting forth its balance 
sheet as of the close of such year and its income and expense statement 
for such year.
    (d) Filing, dating, etc. Each amendment or supplement shall be filed 
in triplicate, at least one of which must be signed and attested, in the 
same manner as required in the case of the original registration 
statement, and must conform to the requirements of Form X-15Aj-1, except 
that the annual consolidated supplement shall be filed on Form X-15Aj-2. 
All amendments and supplements shall be dated and numbered in order of 
filing. One amendment or supplement may include any number of changes. 
In addition to the formal filing of amendments and supplements above 
described, each association shall send to the Commission three copies of 
any notices, reports, circulars, loose-leaf insertions, riders, new 
additions, lists or other records of changes covered by amendments or 
supplements when, as and if such records are made available to members 
of the association.

(Sec. 15A, 52 Stat. 1070; 15 U.S.C. 78o-3)

[13 FR 8209, Dec. 22, 1948, as amended at 18 FR 6259, Oct. 1, 1953. 
Redesignated at 30 FR 11851, Sept. 16, 1965; 59 FR 66700, Dec. 28, 1994]



Sec.  240.15Al2-1  [Reserved]



Sec.  240.15Ba1-1  Definitions.

    As used in the rules and regulations prescribed by the Commission 
pursuant to section 15B of the Act (15 U.S.C. 78o-4) in Sec. Sec.  
240.15Ba1-1 through 240.15Ba1-8 and 240.15Bc4-1:
    (a) Guaranteed investment contract has the same meaning as in 
section 15B(e)(2) of the Act (15 U.S.C. 78o-4(e)(2)); provided, however, 
that the contract relates to investments of proceeds of municipal 
securities or municipal escrow investments.
    (b) Investment strategies has the same meaning as in section 
15B(e)(3) of the Act (15 U.S.C. 78o-4(e)(3)), and includes plans or 
programs for the investment of proceeds of municipal securities that are 
not municipal derivatives or guaranteed investment contracts, and the 
recommendation of and brokerage of municipal escrow investments.
    (c) Managing agent means any person, including a trustee, who 
directs or manages, or who participates in directing or managing, the 
affairs of any unincorporated organization or association other than a 
partnership.
    (d)(1) Municipal advisor.
    (i) In general. Except as otherwise provided in paragraphs (d)(2) 
and (d)(3) of this section, the term municipal advisor has the same 
meaning as in section 15B(e)(4) of the Act (15 U.S.C. 78o-4(e)(4)). 
Under section 15B(e)(4)(A) of the Act (15 U.S.C. 78o-4(e)(4)(A)), the 
term municipal advisor means a person (who is not a municipal entity or 
an employee of a municipal entity) that provides advice to or on behalf 
of a municipal entity or obligated person with respect to municipal 
financial products or the issuance of municipal securities, including 
advice with respect to the structure, timing, terms, and other similar 
matters concerning such financial products or issues; or undertakes a 
solicitation of a municipal entity or an obligated person. Under section 
15B(e)(4)(C) of the Act (15 U.S.C. 78o-4(e)(4)(C)) and paragraph (d)(2) 
of this section, a municipal advisor does not include a person that 
engages in specified excluded activities.
    (ii) Advice standard. For purposes of the municipal advisor 
definition under paragraph (d)(1)(i) of this section, advice excludes, 
among other things, the provision of general information that does not 
involve a recommendation regarding municipal financial products or the 
issuance of municipal securities (including with respect to the 
structure, timing, terms and other similar matters concerning such 
financial products or issues).
    (iii) Certain types of municipal advisors. Under section 
15B(e)(4)(B) of the Act (15 U.S.C. 78o-4(e)(4)(B)), municipal advisors 
include, without limitation, financial advisors, guaranteed investment 
contract brokers, third-party marketers, placement agents, solicitors, 
finders, and swap advisors, to the extent that such persons otherwise

[[Page 501]]

meet the requirements of the municipal advisor definition in this 
paragraph (d)(1).
    (2) Exclusions from municipal advisor definition. Pursuant to 
section 15B(e)(4)(C) of the Act (15 U.S.C. 78o-4(e)(4)(C)), the term 
municipal advisor excludes the following persons with respect to the 
specified excluded activities:
    (i) Serving as an underwriter. A broker, dealer, or municipal 
securities dealer serving as an underwriter of a particular issuance of 
municipal securities to the extent that the broker, dealer, or municipal 
securities dealer engages in activities that are within the scope of an 
underwriting of such issuance of municipal securities.
    (ii) Registered investment advisers--In general. Any investment 
adviser registered under the Investment Advisers Act of 1940 (15 U.S.C. 
80b-1 et seq.) or any person associated with such registered investment 
adviser to the extent that such registered investment adviser or such 
person is providing investment advice in such capacity. Solely for 
purposes of this paragraph (d)(2)(ii), investment advice does not 
include advice concerning whether and how to issue municipal securities, 
advice concerning the structure, timing, and terms of an issuance of 
municipal securities and other similar matters, advice concerning 
municipal derivatives, or a solicitation of a municipal entity or 
obligated person.
    (iii) Registered commodity trading advisors. Any commodity trading 
advisor registered under the Commodity Exchange Act (7 U.S.C. 1 et 
seq.), or person associated with a registered commodity trading advisor, 
to the extent that such registered commodity trading advisor or such 
person is providing advice that is related to swaps (as defined in 
Section 1a(47) of the Commodity Exchange Act (7 U.S.C. 1a(47)) and 
section 3(a)(69) of the Act (15 U.S.C. 78c(a)(69)), and any rules and 
regulations thereunder).
    (iv) Attorneys. Any attorney to the extent that the attorney is 
offering legal advice or providing services that are of a traditional 
legal nature with respect to the issuance of municipal securities or 
municipal financial products to a client of such attorney that is a 
municipal entity, obligated person, or other participant in the 
transaction. To the extent an attorney represents himself or herself as 
a financial advisor or financial expert regarding the issuance of 
municipal securities or municipal financial products, however, the 
attorney is not excluded with respect to such financial activities under 
this paragraph (d)(2)(iv).
    (v) Engineers. Any engineer to the extent that the engineer is 
providing engineering advice.
    (3) Exemptions from municipal advisor definition. The Commission 
exempts the following persons from the definition of municipal advisor 
to the extent they are engaging in the specified activities:
    (i) Accountants. Any accountant to the extent that the accountant is 
providing audit or other attest services, preparing financial 
statements, or issuing letters for underwriters for, or on behalf of, a 
municipal entity or obligated person.
    (ii) Public officials and employees. (A) Any person serving as a 
member of a governing body, an advisory board, or a committee of, or 
acting in a similar official capacity with respect to, or as an official 
of, a municipal entity or obligated person to the extent that such 
person is acting within the scope of such person's official capacity.
    (B) Any employee of a municipal entity or obligated person to the 
extent that such person is acting within the scope of such person's 
employment.
    (iii) Banks. Any bank, as defined in section 3(a)(6) of the Act (15 
U.S.C. 78c(a)(6)), to the extent the bank provides advice with respect 
to the following:
    (A) Any investments that are held in a deposit account, savings 
account, certificate of deposit, or other deposit instrument issued by a 
bank;
    (B) Any extension of credit by a bank to a municipal entity or 
obligated person, including the issuance of a letter of credit, the 
making of a direct loan, or the purchase of a municipal security by the 
bank for its own account;
    (C) Any funds held in a sweep account that meets the requirements of 
section 3(a)(4)(B)(v) of the Act (15 U.S.C. 78c(a)(4)(B)(v)); or

[[Page 502]]

    (D) Any investment made by a bank acting in the capacity of an 
indenture trustee or similar capacity.
    (iv) Responses to requests for proposals or qualifications. Any 
person providing a response in writing or orally to a request for 
proposals or qualifications from a municipal entity or obligated person 
for services in connection with a municipal financial product or the 
issuance of municipal securities; provided, however, that such person 
does not receive separate direct or indirect compensation for advice 
provided as part of such response.
    (v) Swap dealers. (A) A swap dealer (as defined in Section 1a(49) of 
the Commodity Exchange Act (7 U.S.C. 1a(49)) and the rules and 
regulations thereunder) registered under the Commodity Exchange Act or 
associated person of the swap dealer recommending a municipal derivative 
or a trading strategy that involves a municipal derivative, so long as 
the registered swap dealer or associated person is not acting as an 
advisor to the municipal entity or obligated person with respect to the 
municipal derivative or trading strategy pursuant to Section 4s(h)(4) of 
the Commodity Exchange Act and the rules and regulations thereunder.
    (B) For purposes of determining whether a swap dealer is acting as 
an advisor in this paragraph (d)(3)(v), the municipal entity or 
obligated person involved in the transaction will be treated as a 
special entity under Section 4s(h)(2) of the Commodity Exchange Act and 
the rules and regulations thereunder (even if such municipal entity or 
obligated person does not satisfy the definition of special entity under 
those provisions).
    (vi) Participation by an independent registered municipal advisor. 
Any person engaging in municipal advisory activities in a circumstance 
in which a municipal entity or obligated person is otherwise represented 
by an independent registered municipal advisor with respect to the same 
aspects of a municipal financial product or an issuance of municipal 
securities, provided that the following requirements are met:
    (A) Independent registered municipal advisor. An independent 
registered municipal advisor is providing advice with respect to the 
same aspects of the municipal financial product or issuance of municipal 
securities. For purposes of this paragraph (d)(3)(vi), the term 
independent registered municipal advisor means a municipal advisor 
registered pursuant to section 15B of the Act (15 U.S.C. 78o-4) and the 
rules and regulations thereunder and that is not, and within at least 
the past two years was not, associated (as defined in section 15B(e)(7) 
(15 U.S.C. 78o-4(e)(7)) of the Act) with the person seeking to rely on 
this paragraph (d)(3)(vi).
    (B) Required representation. A person seeking to rely on this 
paragraph (d)(3)(vi) receives from the municipal entity or obligated 
person a representation in writing that it is represented by, and will 
rely on the advice of, an independent registered municipal advisor, 
provided that the person receiving such representation has a reasonable 
basis for relying on the representation.
    (C) Required disclosures. (1) With respect to a municipal entity, 
such person discloses in writing to the municipal entity that, by 
obtaining such representation from the municipal entity, such person is 
not a municipal advisor and is not subject to the fiduciary duty set 
forth in section 15B(c)(1) of the Act (15 U.S.C. 78o-4(c)(1)) with 
respect to the municipal financial product or issuance of municipal 
securities, and provides a copy of such disclosure to the independent 
registered municipal advisor.
    (2) With respect to an obligated person, such person discloses in 
writing to the obligated person that, by obtaining such representation 
from the obligated person, such person is not a municipal advisor with 
respect to the municipal financial product or issuance of municipal 
securities, and provides a copy of such disclosure to the independent 
registered municipal advisor.
    (3) Each such disclosure must be made at a time and in a manner 
reasonably designed to allow the municipal entity or obligated person to 
assess the material incentives and conflicts of interest that such 
person may have in connection with the municipal advisory activities.
    (vii) Persons that provide advice on certain investment strategies. 
A person that

[[Page 503]]

provides advice with respect to investment strategies that are not plans 
or programs for the investment of the proceeds of municipal securities 
or the recommendation of and brokerage of municipal escrow investments.
    (viii) Certain solicitations. A person that undertakes a 
solicitation of a municipal entity or obligated person for the purpose 
of obtaining or retaining an engagement by a municipal entity or by an 
obligated person of a broker, dealer, municipal securities dealer, or 
municipal advisor for or in connection with municipal financial products 
that are investment strategies to the extent that those investment 
strategies are not plans or programs for the investment of the proceeds 
of municipal securities or the recommendation of and brokerage of 
municipal escrow investments.
    (4) Special rule for separately identifiable departments or 
divisions of banks for municipal advisory purposes. If a bank engages in 
municipal advisory activities through a separately identifiable 
department or division that meets the requirements of this paragraph 
(d)(4), the determination of whether those municipal advisory activities 
cause any person to be a municipal advisor may be made separately for 
such department or division. In such event, that department or division, 
rather than the bank itself, shall be deemed to be the municipal 
advisor.
    (i) Separately identifiable department or division. For purposes of 
this paragraph (d)(4), a separately identifiable department or division 
of a bank is that unit of the bank which conducts all of the municipal 
advisory activities of the bank, provided that the following 
requirements are met:
    (A) Supervision. Such unit is under the direct supervision of an 
officer or officers designated by the board of directors of the bank as 
responsible for the day-to-day conduct of the bank's municipal advisory 
activities, including the supervision of all bank employees engaged in 
the performance of such activities.
    (B) Separate records. All of the records relating to the bank's 
municipal advisory activities are separately maintained in, or 
extractable from, such unit's own facilities or the facilities of the 
bank, and such records are so maintained or otherwise accessible as to 
permit independent examination thereof and enforcement of applicable 
provisions of the Act, the rules and regulations thereunder, and the 
rules of the Municipal Securities Rulemaking Board relating to municipal 
advisors.
    (ii) [Reserved]
    (e) Municipal advisory activities means the following activities 
specified in section 15B(e)(4)(A) of the Act (15 U.S.C. 78o-4(e)(4)(A)) 
and paragraph (d)(1) of this section that, absent the availability of an 
exclusion under paragraph (d)(2) of this section or an exemption under 
paragraph (d)(3) of this section, would cause a person to be a municipal 
advisor:
    (1) Providing advice to or on behalf of a municipal entity or 
obligated person with respect to municipal financial products or the 
issuance of municipal securities, including advice with respect to the 
structure, timing, terms, and other similar matters concerning such 
financial products or issues; or
    (2) Solicitation of a municipal entity or an obligated person.
    (f) Municipal derivatives means any swap (as defined in Section 
1a(47) of the Commodity Exchange Act (7 U.S.C. 1a(47)) and section 
3(a)(69) of the Act (15 U.S.C. 78c(a)(69)), including any rules and 
regulations thereunder) or security-based swap (as defined in section 
3(a)(68) of the Act (15 U.S.C. 78c(a)(68)), including any rules and 
regulations thereunder) to which:
    (1) A municipal entity is a counterparty; or
    (2) An obligated person, acting in such capacity, is a counterparty.
    (g) Municipal entity means any State, political subdivision of a 
State, or municipal corporate instrumentality of a State or of a 
political subdivision of a State, including:
    (1) Any agency, authority, or instrumentality of the State, 
political subdivision, or municipal corporate instrumentality;
    (2) Any plan, program, or pool of assets sponsored or established by 
the State, political subdivision, or municipal corporate instrumentality 
or any agency, authority, or instrumentality thereof; and

[[Page 504]]

    (3) Any other issuer of municipal securities.
    (h) Municipal escrow investments. (1) In general. Except as 
otherwise provided in paragraph (h)(2) of this section, municipal escrow 
investments means proceeds of municipal securities and any other funds 
of a municipal entity that are deposited in an escrow account to pay the 
principal of, premium, if any, and interest on one or more issues of 
municipal securities.
    (2) Reasonable reliance on representations. In determining whether 
or not funds to be invested or reinvested constitute municipal escrow 
investments for purposes of this section, a person may rely on 
representations in writing made by a knowledgeable official of the 
municipal entity or obligated person whose funds are to be invested or 
reinvested regarding the nature of such investments, provided that the 
person seeking to rely on such representations has a reasonable basis 
for such reliance.
    (i) Municipal financial product has the same meaning as in section 
15B(e)(5) of the Act (15 U.S.C. 78o-4(e)(5)).
    (j) Non-resident means:
    (1) In the case of an individual, one who resides in or has his 
principal office and place of business in any place not subject to the 
jurisdiction of the United States;
    (2) In the case of a corporation, one incorporated in or having its 
principal office and place of business in any place not subject to the 
jurisdiction of the United States; or
    (3) In the case of a partnership or other unincorporated 
organization or association, one having its principal office and place 
of business in any place not subject to the jurisdiction of the United 
States.
    (k) Obligated person has the same meaning as in section 15B(e)(10) 
of the Act (15 U.S.C. 78o-4(e)(10)); provided, however, that the term 
obligated person shall not include:
    (1) A person who provides municipal bond insurance, letters of 
credit, or other liquidity facilities;
    (2) A person whose financial information or operating data is not 
material to a municipal securities offering, without reference to any 
municipal bond insurance, letter of credit, liquidity facility, or other 
credit enhancement; or
    (3) The federal government.
    (l) Principal office and place of business means the executive 
office of the municipal advisor from which the officers, partners, or 
managers of the municipal advisor direct, control, and coordinate the 
activities of the municipal advisor.
    (m)(1) Proceeds of municipal securities--In general. Except as 
otherwise provided in paragraphs (m)(2) and (m)(3) of this section, 
proceeds of municipal securities means monies derived by a municipal 
entity from the sale of municipal securities, investment income derived 
from the investment or reinvestment of such monies, and any monies of a 
municipal entity or obligated person held in funds under legal documents 
for the municipal securities that are reasonably expected to be used as 
security or a source of payment for the payment of the debt service on 
the municipal securities, including reserves, sinking funds, and pledged 
funds created for such purpose, and the investment income derived from 
the investment or reinvestment of monies in such funds. When such monies 
are spent to carry out the authorized purposes of municipal securities, 
they cease to be proceeds of municipal securities.
    (2) Exception for Section 529 college savings plans. Solely for 
purposes of this paragraph (m), monies derived from a municipal security 
issued by an education trust established by a State under Section 529(b) 
of the Internal Revenue Code (26 U.S.C. 529(b)) are not proceeds of 
municipal securities.
    (3) Reasonable reliance on representations. In determining whether 
or not funds to be invested constitute proceeds of municipal securities 
for purposes of this section, a person may rely on representations in 
writing made by a knowledgeable official of the municipal entity or 
obligated person whose funds are to be invested regarding the nature of 
such funds, provided that the person seeking to rely on such 
representations has a reasonable basis for such reliance.
    (n) Solicitation of a municipal entity or obligated person has the 
same meaning as in section 15B(e)(9) of the Act (15

[[Page 505]]

U.S.C. 78o-4(e)(9)); provided, however, that a solicitation does not 
include:
    (1) Advertising by a broker, dealer, municipal securities dealer, 
municipal advisor, or investment adviser; or
    (2) Solicitation of an obligated person, if such obligated person is 
not acting in the capacity of an obligated person or the solicitation of 
the obligated person is not in connection with the issuance of municipal 
securities or with respect to municipal financial products.

[78 FR 67633, Nov. 12, 2013]



Sec.  240.15Ba1-2  Registration of municipal advisors and information
regarding certain natural persons.

    (a) Form MA. A person applying for registration with the Commission 
as a municipal advisor pursuant to section 15B of the Act (15 U.S.C. 
78o-4) must complete Form MA (17 CFR 249.1300) in accordance with the 
instructions in the Form and file the Form electronically with the 
Commission.
    (b) Form MA-I. (1) A person applying for registration or registered 
with the Commission as a municipal advisor pursuant to section 15B of 
the Act (15 U.S.C. 78o-4) must complete Form MA-I (17 CFR 249.1310) with 
respect to each natural person who is a person associated with the 
municipal advisor (as defined in section 15B(e)(7) of the Act (15 U.S.C. 
78o-4(e)(7))) and engaged in municipal advisory activities on its behalf 
in accordance with the instructions in the Form and file the Form 
electronically with the Commission.
    (2) A natural person applying for registration with the Commission 
as a municipal advisor pursuant to section 15B of the Act (15 U.S.C. 
78o-4), in addition to completing and filing Form MA pursuant to 
paragraph (a) of this section, must complete Form MA-I (17 CFR 249.1310) 
in accordance with the instructions in the Form and file the Form 
electronically with the Commission.
    (c) When filed. Each Form MA (17 CFR 249.1300) shall be considered 
filed with the Commission upon submission of a completed Form MA, 
together with all additional required documents, including all required 
filings of Form MA-I (17 CFR 249.1310), to the Commission's Electronic 
Data Gathering, Analysis, and Retrieval system.
    (d) Form MA and Form MA-I are reports. Each Form MA (17 CFR 
249.1300) and Form MA-I (17 CFR 249.1310) required to be filed under 
this section shall constitute a report within the meaning of sections 
15B(c), 17(a), 18(a), 32(a) of the Act (15 U.S.C. 78o-4(c), 78q(a), 
78r(a), 78ff(a)) and other applicable provisions of the Act.

[78 FR 67633, Nov. 12, 2013]



Sec.  240.15Ba1-3  Exemption of certain natural persons from registration
under section 15B(a)(1)(B) of the Act.

    A natural person municipal advisor shall be exempt from section 
15B(a)(1)(B) of the Act (15 U.S.C. 78o-4(a)(1)(B)) if he or she:
    (a) Is an associated person of an advisor that is registered with 
the Commission pursuant to section 15B(a)(2) of the Act (15 U.S.C. 78o-
4(a)(2)) and the rules and regulations thereunder; and
    (b) Engages in municipal advisory activities solely on behalf of a 
registered municipal advisor.

[78 FR 67633, Nov. 12, 2013]



Sec.  240.15Ba1-4  Withdrawal from municipal advisor registration.

    (a) Form MA-W. Notice of withdrawal from registration as a municipal 
advisor shall be filed on Form MA-W (17 CFR 249.1320) in accordance with 
the instructions to the Form.
    (b) Electronic filing. Any notice of withdrawal on Form MA-W (17 CFR 
249.1320) must be filed electronically.
    (c) Effective date. A notice of withdrawal from registration shall 
become effective for all matters on the 60th day after the filing 
thereof, within such longer period of time as to which the municipal 
advisor consents or which the Commission by order may determine as 
necessary or appropriate in the public interest or for the protection of 
investors, or within such shorter period of time as the Commission may 
determine. If a notice of withdrawal from registration is filed at any 
time subsequent to the date of the issuance of a Commission order 
instituting proceedings pursuant to section 15B(c) of the Act (15 U.S.C. 
78o-4(c)) to

[[Page 506]]

censure, place limitations on the activities, functions or operations 
of, or suspend or revoke the registration of, the municipal advisor, or 
if prior to the effective date of the notice of withdrawal pursuant to 
this paragraph (c), the Commission institutes such a proceeding or a 
proceeding to impose terms or conditions upon such withdrawal, the 
notice of withdrawal shall not become effective pursuant to this 
paragraph (c) except at such time and upon such terms and conditions as 
the Commission deems necessary or appropriate in the public interest or 
for the protection of investors.
    (d) Form MA-W is a report. Each Form MA-W (17 CFR 249.1320) required 
to be filed under this section shall constitute a report within the 
meaning of sections 15B(c), 17(a), 18(a), 32(a) of the Act (15 U.S.C. 
78o-4(c), 78q(a), 78r(a), 78ff(a)) and other applicable provisions of 
the Act.

[78 FR 67633, Nov. 12, 2013]



Sec.  240.15Ba1-5  Amendments to Form MA and Form MA-I.

    (a) When amendment is required--Form MA. A registered municipal 
advisor shall promptly amend the information contained in its Form MA 
(17 CFR 249.1300):
    (1) At least annually, within 90 days of the end of a municipal 
advisor's fiscal year, or of the end of the calendar year for a sole 
proprietor; and
    (2) More frequently, if required by the General Instructions (17 CFR 
249.1300), as applicable.
    (b) When amendment is required--Form MA-I. A registered municipal 
advisor shall promptly amend the information contained in Form MA-I (17 
CFR 249.1310) by filing an amended Form MA-I whenever the information 
contained in the Form MA-I becomes inaccurate for any reason.
    (c) Electronic filing of amendments. A registered municipal advisor 
shall file all amendments to Form MA (17 CFR 249.1300) and Form MA-I (17 
CFR 249.1310) electronically.
    (d) Amendments to Form MA and Form MA-I are reports. Each amendment 
required to be filed under this section shall constitute a report within 
the meaning of sections 15B(c), 17(a), 18(a), 32(a) of the Act (15 
U.S.C. 78o-4(c), 78q(a), 78r(a), 78ff(a)) and other applicable 
provisions of the Act.

[78 FR 67633, Nov. 12, 2013]



Sec.  240.15Ba1-6  Consent to service of process to be filed by
non-resident municipal advisors; legal opinion to be provided by
non-resident municipal advisors.

    (a)(1) Each non-resident municipal advisor applying for registration 
pursuant to section 15B(a) of the Act (15 U.S.C. 78o-4(a)) shall, at the 
time of filing of the municipal advisor's application on Form MA (17 CFR 
249.1300), file with the Commission a written irrevocable consent and 
power of attorney on Form MA-NR (17 CFR 249.1330) to appoint an agent in 
the United States, other than a Commission member, official, or 
employee, upon whom may be served any process, pleadings, or other 
papers in any action brought against the non-resident municipal advisor 
to enforce this chapter.
    (2) Each municipal advisor applying for registration pursuant to or 
registered under section 15B of the Act (15 U.S.C. 78o-4) shall, at the 
time of filing the relevant Form MA (17 CFR 249.1300) or Form MA-I (17 
CFR 249.1310), file with the Commission a written irrevocable consent 
and power of attorney on Form MA-NR (17 CFR 249.1330) to appoint an 
agent in the United States, other than a Commission member, official, or 
employee, upon whom may be served any process, pleadings, or other 
papers in any action brought against the municipal advisor's non-
resident general partner or non-resident managing agent, or non-resident 
natural persons who are persons associated with the municipal advisor 
(as defined in section 15B(e)(7) of the Act (15 U.S.C. 78o-4(e)(7))) and 
engaged in municipal advisory activities on its behalf, to enforce this 
chapter.
    (b) The registered municipal advisor shall communicate promptly to 
the Commission by filing a new Form MA-NR (17 CFR 249.1330) any change 
to the name or address of the agent for service of process of each such 
non-resident municipal advisor, general partner, managing agent, or 
natural persons who are persons associated with the municipal advisor 
(as defined in section 15B(e)(7) of the Act (15 U.S.C. 78o-

[[Page 507]]

4(e)(7))) and engaged in municipal advisory activities on its behalf.
    (c)(1) Each registered non-resident municipal advisor must promptly 
appoint a successor agent for service of process and file a new Form MA-
NR (17 CFR 249.1330) if the non-resident municipal advisor discharges 
its identified agent for service of process or if its agent for service 
of process is unwilling or unable to accept service on behalf of the 
non-resident municipal advisor.
    (2) Each registered municipal advisor must require each of its non-
resident general partners or non-resident managing agents, or non-
resident natural persons who are persons associated with the municipal 
advisor (as defined in section 15B(e)(7) of the Act (15 U.S.C. 78o-
4(e)(7))) and engaged in municipal advisory activities on its behalf, to 
promptly appoint a successor agent for service of process and the 
registered municipal advisor must file a new Form MA-NR (17 CFR 
249.1330) if such non-resident general partner, managing agent, or 
associated person discharges the identified agent for service of process 
or if the agent for service of process is unwilling or unable to accept 
service on behalf such person.
    (d) Each non-resident municipal advisor applying for registration 
pursuant to section 15B(a) of the Act (15 U.S.C. 78o-4(a)) shall provide 
an opinion of counsel on Form MA (17 CFR 249.1300) that the municipal 
advisor can, as a matter of law, provide the Commission with access to 
the books and records of the municipal advisor as required by law and 
that the municipal advisor can, as a matter of law, submit to inspection 
and examination by the Commission.
    (e) Form MA-NR (17 CFR 249.1330) must be filed electronically.

[78 FR 67633, Nov. 12, 2013]



Sec.  240.15Ba1-7  Registration of successor to municipal advisor.

    (a) In the event that a municipal advisor succeeds to and continues 
the business of a municipal advisor registered pursuant to section 
15B(a) of the Act (15 U.S.C. 78o-4(a)), the registration of the 
predecessor shall be deemed to remain effective as the registration of 
the successor if the successor, within 30 days after the succession, 
files an application for registration on Form MA (17 CFR 249.1300), and 
the predecessor files a notice of withdrawal from registration on Form 
MA-W (17 CFR 249.1320); provided, however, that the registration of the 
predecessor municipal advisor will cease to be effective as the 
registration of the successor municipal advisor 45 days after the 
application for registration on Form MA is filed by the successor.
    (b) Notwithstanding paragraph (a) of this section, if a municipal 
advisor succeeds to and continues the business of a registered 
predecessor municipal advisor, and the succession is based solely on a 
change in the predecessor's date or state of incorporation, form of 
organization, or composition of a partnership, the successor may, within 
30 days after the succession, amend the registration of the predecessor 
municipal advisor on Form MA (17 CFR 249.1300) to reflect these changes. 
This amendment shall be deemed an application for registration filed by 
the predecessor and adopted by the successor.

[78 FR 67633, Nov. 12, 2013]



Sec.  240.15Ba1-8  Books and records to be made and maintained by
municipal advisors.

    (a) Every person registered or required to be registered under 
section 15B of the Act (15 U.S.C. 78o-4) and the rules and regulations 
thereunder shall make and keep true, accurate, and current the following 
books and records relating to its municipal advisory activities:
    (1) Originals or copies of all written communications received, and 
originals or copies of all written communications sent, by such 
municipal advisor (including inter-office memoranda and communications) 
relating to municipal advisory activities, regardless of the format of 
such communications;
    (2) All check books, bank statements, general ledgers, cancelled 
checks and cash reconciliations of the municipal advisor;
    (3) A copy of each version of the municipal advisor's policies and 
procedures, if any, that:
    (i) Are in effect; or
    (ii) At any time within the last five years were in effect, not 
including those in effect prior to July 1, 2014;

[[Page 508]]

    (4) A copy of any document created by the municipal advisor that was 
material to making a recommendation to a municipal entity or obligated 
person or that memorializes the basis for that recommendation;
    (5) All written agreements (or copies thereof) entered into by the 
municipal advisor with any municipal entity, employee of a municipal 
entity, or an obligated person or otherwise relating to the business of 
such municipal advisor as such;
    (6) A record of the names of persons who are currently, or within 
the past five years were, associated with the municipal advisor, not 
including persons associated with the municipal advisor prior to July 1, 
2014;
    (7) Books and records containing a list or other record of:
    (i) The names, titles, and business and residence addresses of all 
persons associated with the municipal advisor;
    (ii) All municipal entities or obligated persons with which the 
municipal advisor is engaging or has engaged in municipal advisory 
activities in the past five years, not including those prior to July 1, 
2014;
    (iii) The name and business address of each person to whom the 
municipal advisor provides or agrees to provide, directly or indirectly, 
payment to solicit a municipal entity, an employee of a municipal 
entity, or an obligated person on its behalf; and
    (iv) The name and business address of each person that provides or 
agrees to provide, directly or indirectly, payment to the municipal 
advisor to solicit a municipal entity, an employee of a municipal 
entity, or an obligated person on its behalf; and
    (8) Written consents to service of process from each natural person 
who is a person associated with the municipal advisor and engages in 
municipal advisory activities solely on behalf of such municipal 
advisor.
    (b)(1) All books and records required to be made under this section 
shall be maintained and preserved for a period of not less than five 
years, the first two years in an easily accessible place.
    (2) Partnership articles and any amendments thereto, articles of 
incorporation, charters, minute books, and stock certificate books of 
the municipal advisor and of any predecessor, excluding those that were 
only in effect prior to July 1, 2014, shall be maintained in the 
principal office of the municipal advisor and preserved until at least 
three years after termination of the business or withdrawal from 
registration as a municipal advisor.
    (c) A municipal advisor subject to paragraph (a) of this section, 
before ceasing to conduct or discontinuing business as a municipal 
advisor, shall arrange for and be responsible for the preservation of 
the books and records required to be maintained and preserved under this 
section for the remainder of the period specified in this section, and 
shall notify the Commission in writing, at its principal office in 
Washington, DC, of the exact address where such books and records will 
be maintained during such period.
    (d) Electronic storage permitted. (1) General. The records required 
to be maintained and preserved pursuant to this part may be maintained 
and preserved for the required time on:
    (i) Electronic storage media, including any digital storage medium 
or system that meets the terms of this section; or
    (ii) Paper documents.
    (2) General requirements. The municipal advisor must:
    (i) Arrange and index the records in a way that permits easy 
location, access, and retrieval of any particular record;
    (ii) Provide promptly any of the following that the Commission (by 
its staff or other representatives) may request:
    (A) A legible, true, and complete copy of the record in the medium 
and format in which it is stored;
    (B) A legible, true, and complete printout of the record; and
    (C) Means to access, view, and print the records; and
    (iii) Separately store, for the time required for preservation of 
the record, a duplicate copy of the record on any medium allowed by this 
section.
    (3) Special requirements for electronic storage media. In the case 
of records on electronic storage media, the municipal advisor must 
establish and maintain procedures:
    (i) To maintain and preserve the records, so as to reasonably 
safeguard

[[Page 509]]

them from loss, alteration, or destruction;
    (ii) To limit access to the records to properly authorized personnel 
and the Commission (including its staff and other representatives); and
    (iii) To reasonably ensure that any reproduction of a non-electronic 
record on electronic storage media is complete, true, and legible when 
retrieved.
    (e)(1) Any book or other record made, kept, maintained, and 
preserved in compliance with Sec. Sec.  240.17a-3 and 240.17a-4, rules 
of the Municipal Securities Rulemaking Board, or Sec.  275.204-2 under 
the Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.), which is 
substantially the same as a book or other record required to be made, 
kept, maintained, and preserved under this section, shall satisfy the 
requirements of this section.
    (2) A record made and kept pursuant to any provision of paragraph 
(a) of this section that contains all the information required under any 
other provision of paragraph (a) of this section, need not be maintained 
in duplicate in order to meet the requirements of the other provisions 
of paragraph (a) of this section.
    (f)(1) Except as provided in paragraph (f)(3) of this section, each 
non-resident municipal advisor registered or applying for registration 
pursuant to section 15B of the Act (15 U.S.C. 78o-4) and the rules and 
regulations thereunder shall keep, maintain, and preserve, at a place 
within the United States designated in a notice from such municipal 
advisor as provided in paragraph (f)(2) of this section, true, correct, 
complete, and current copies of books and records that such municipal 
advisor is required to make, keep current, maintain or preserve pursuant 
to any provisions of any rule or regulation of the Commission adopted 
under the Act.
    (2) Except as provided in paragraph (f)(3) of this section, each 
non-resident municipal advisor subject to paragraph (f)(1) of this 
section shall furnish to the Commission a written notice specifying the 
address of the place within the United States where the copies of the 
books and records required to be kept, maintained, and preserved by such 
municipal advisor pursuant to paragraph (f)(1) of this section are 
located. Each non-resident municipal advisor registered or applying for 
registration when this paragraph becomes effective shall file such 
notice within 30 calendar days after this paragraph becomes effective. 
Each non-resident municipal advisor that files an application for 
registration after this paragraph becomes effective shall file such 
notice with such application for registration.
    (3) Notwithstanding the provisions of paragraphs (f)(1) and (2) of 
this section, a non-resident municipal advisor need not keep, maintain, 
or preserve within the United States copies of the books and records 
referred to in paragraphs (f)(1) and (2) of this section, if:
    (i) Such non-resident municipal advisor files with the Commission, 
at the time or within the period provided by paragraph (f)(2) of this 
section, a written undertaking, in a form acceptable to the Commission 
and signed by a duly authorized person, to furnish to the Commission, 
upon demand, at the Commission's principal office in Washington, DC, or 
at any Regional Office of the Commission designated in such demand, 
true, correct, complete, and current copies of any or all of the books 
and records which such municipal advisor is required to make, keep 
current, maintain, or preserve pursuant to any provision of any rule or 
regulation of the Commission adopted under the Act, or any part of such 
books and records that may be specified in such demand. Such undertaking 
shall be in substantially the following form:

    The undersigned hereby undertakes to furnish at its own expense to 
the Securities and Exchange Commission at the Commission's principal 
office in Washington, DC or at any Regional Office of the Commission 
specified in a demand for copies of books and records made by or on 
behalf of the Commission, true, correct, complete, and current copies of 
any or all, or any part, of the books and records that the undersigned 
is required to make, keep current, maintain, or preserve pursuant to any 
provision of any rule or regulation of the Securities and Exchange 
Commission under the Securities Exchange Act of 1934. This undertaking 
shall be suspended during any period when the undersigned is making, 
keeping current, maintaining, and preserving copies of all of said books 
and records at a place within the United States in compliance with 17 
CFR 240.15Ba1-7(f)(1) and (2). This undertaking shall be binding

[[Page 510]]

upon the undersigned and the heirs, successors and assigns of the 
undersigned, and the written irrevocable consents and powers of attorney 
of the undersigned, its general partners, and managing agents filed with 
the Securities and Exchange Commission shall extend to and cover any 
action to enforce the same.


and
    (ii) Such non-resident municipal advisor furnishes to the 
Commission, at such municipal advisor's own expense 14 calendar days 
after written demand therefor forwarded to such municipal advisor by 
registered mail at such municipal advisor's last address of record filed 
with the Commission and signed by the Secretary of the Commission or 
such person as the Commission may authorize to act in its behalf, true, 
correct, complete, and current copies of any or all books and records 
which such municipal advisor is required to make, keep current, 
maintain, or preserve pursuant to any provision of any rule or 
regulation of the Commission adopted under the Act, or any part of such 
books and records that may be specified in said written demand. Such 
copies shall be furnished to the Commission at the Commission's 
principal office in Washington, DC, or at any Regional Office of the 
Commission which may be specified in said written demand.

[78 FR 67633, Nov. 12, 2013, as amended at 79 FR 2779, Jan. 16, 2014]



Sec.  240.15Ba2-1  Application for registration of municipal securities
dealers which are banks or separately identifiable departments or 
divisions of banks.

    (a) An application for registration, pursuant to Section 15B(a) of 
the Act, of a municipal securities dealer which is a bank (as defined in 
section 3(a)(6) of the Act) or a separately identifiable department or 
division of a bank (as defined by the Municipal Securities Rulemaking 
Board), shall be filed with the Commission on Form MSD (Sec.  249.950 of 
this chapter), in accordance with the instructions contained therein.
    (b) If the information contained in any application for registration 
pursuant to paragraph (a) of this section, or in any amendment to such 
application, is or becomes inaccurate for any reason, applicant shall 
promptly file an amendment on Form MSD (Sec.  249.950 of this chapter) 
correcting such information.
    (c) Every amendment filed pursuant to this rule shall constitute a 
``report'' within the meaning of sections 17 and 32(a) of the Act (15 
U.S.C. 78q and 78ff (a)).

[40 FR 49776, Oct. 24, 1975]



Sec.  240.15Ba2-2  Application for registration of non-bank municipal
securities dealers whose business is exclusively intrastate.

    (a) An application for registration, pursuant to section 15B(a) of 
the Act, of a municipal securities dealer who is not subject to the 
requirements of Sec.  240.15Ba2-1, that is filed on or after January 25, 
1993, shall be filed with the Central Registration Depository (operated 
by the Financial Industry Regulatory Authority, Inc.) on Form BD in 
accordance with the instructions contained therein.
    (b) Every applicant shall file with its application for registration 
a statement that such applicant is filing for registration as an 
intrastate dealer in accordance with the requirements of this section. 
Such statement shall be deemed a part of the application for 
registration.
    (c) If the information contained in any application for registration 
filed pursuant to paragraph (a) of this section, or in any amendment to 
such application, is or becomes inaccurate for any reason, the dealer 
shall promptly file with the Central Registration Depository an 
amendment on Form BD correcting such information.
    (d) Every application or amendment filed with the Central 
Registration Depository pursuant to this section shall constitute a 
``report'' filed with the Commission within the meaning of Sections 
15(b), 15B(c), 17(a), 18(a), 32(a) (15 U.S.C. 78o(b), 78o-4(c), 78q(a), 
78r(a), 78ff(a)) and other applicable provisions of the Act.

[58 FR 14, Jan. 4, 1993, as amended at 64 FR 25148, May 10, 1999; 64 FR 
37594, July 12, 1999; 64 FR 42596, Aug. 5, 1999; 73 FR 4692, Jan. 28, 
2008]

[[Page 511]]



Sec.  240.15Ba2-4  Registration of successor to registered municipal
securities dealer.

    (a) In the event that a municipal securities dealer succeeds to and 
continues the business of a registered municipal securities dealer, the 
registration of the predecessor shall be deemed to remain effective as 
the registration of the successor if the successor, within 30 days after 
such succession, files an application for registration on Form MSD, in 
the case of a municipal securities dealer that is a bank or a separately 
identifiable department or division of a bank, or Form BD, in the case 
of any other municipal securities dealer, and the predecessor files a 
notice of withdrawal from registration on Form MSDW or Form BDW, as the 
case may be; Provided, however, That the registration of the predecessor 
dealer will cease to be effective as the registration of the successor 
dealer 45 days after the application for registration on Form MSD or 
Form BD is filed by such successor.
    (b) Notwithstanding paragraph (a) of this section, if a municipal 
securities dealer succeeds to and continues the business of a registered 
predecessor municipal securities dealer, and the succession is based 
solely on a change in the predecessor's date or state of incorporation, 
form of organization, or composition of a partnership, the successor 
may, within 30 days after the succession, amend the registration of the 
predecessor dealer on Form MSD, in the case of a predecessor municipal 
securities dealer that is a bank or a separately identifiable department 
or division of a bank, or on Form BD, in the case of any other municipal 
securities dealer, to reflect these changes. This amendment shall be 
deemed an application for registration filed by the predecessor and 
adopted by the successor.

[58 FR 10, Jan. 4, 1993]



Sec.  240.15Ba2-5  Registration of fiduciaries.

    The registration of a municipal securities dealer shall be deemed to 
be the registration of any executor, administrator, guardian, 
conservator, assignee for the benefit of creditors, receiver, trustee in 
insolvency or bankruptcy, or other fiduciary, appointed or qualified by 
order, judgment, or decree of a court of competent jurisdiction to 
continue the business of such registered municipal securities dealer, 
provided that such fiduciary files with the Commission, within 30 days 
after entering upon the performance of his duties, a statement setting 
forth as to such fiduciary substantially the information required by 
Form MSD, if the municipal securities dealer is a bank or a separately 
identifiable department of a bank, or Form BD, if the municipal 
securities dealer is other than a bank or a separately identifiable 
department or division of a bank.

[41 FR 28948, July 14, 1976]



Sec.  240.15Ba2-6  [Reserved]



Sec.  240.15Bc3-1  Withdrawal from registration of municipal securities
dealers.

    (a) Notice of withdrawal from registration as a municipal securities 
dealer pursuant to Section 15B(c) (15 U.S.C. 78o-4(c)) shall be filed on 
Form MSDW (17 CFR 249.1110), in the case of a municipal securities 
dealer which is a bank or a separately identifiable department or 
division of a bank, or Form BDW (17 CFR 249.501a), in the case of any 
other municipal securities dealer, in accordance with the instructions 
contained therein. Prior to filing a notice of withdrawal from 
registration on Form MSDW (17 CFR 249.1110) or Form BDW (17 CFR 
249.501a), a municipal securities dealer shall amend Form MSD (17 CFR 
249.1100) in accordance with Sec.  240.15Ba2-1(b) or amend Form BD (17 
CFR 249.501) in accordance with Sec.  240.15Ba2-2(c) to update any 
inaccurate information.
    (b) Every notice of withdrawal from registration as a municipal 
securities dealer that is filed on Form BDW (17 CFR 249.501a) shall be 
filed with the Central Registration Depository (operated by the 
Financial Industry Regulatory Authority, Inc.) in accordance with 
applicable filing requirements. Every notice of withdrawal of Form MSDW 
(17 CFR 249.1110) shall be filed with the Commission.
    (c) A notice of withdrawal from registration filed by a municipal 
securities dealer pursuant to Section 15B(c)

[[Page 512]]

(15 U.S.C. 78o-4(c)) shall become effective for all matters on the 60th 
day after the filing thereof with the Commission, within such longer 
period of time as to which such municipal securities dealer consents or 
which the Commission by order may determine as necessary or appropriate 
in the public interest or for the protection of investors, or within 
such shorter period of time as the Commission may determine. If a notice 
of withdrawal from registration is filed with the Commission at any time 
subsequent to the date of the issuance of a Commission order instituting 
proceedings pursuant to Section 15B(c) (15 U.S.C. 78o-4(c)) to censure, 
place limitations on the activities, functions or operations of, or 
suspend or revoke the registration of, such municipal securities dealer, 
or if prior to the effective date of the notice of withdrawal pursuant 
to this paragraph (c), the Commission institutes such a proceeding or a 
proceeding to impose terms or conditions upon such withdrawal, the 
notice of withdrawal shall not become effective pursuant to this 
paragraph (c) except at such time and upon such terms and conditions as 
the Commission deems necessary or appropriate in the public interest or 
for the protection of investors.
    (d) Every notice of withdrawal filed with the Central Registration 
Depository pursuant to this section shall constitute a ``report'' filed 
with the Commission within the meaning of Sections 15B(c), 17(a), 18(a), 
32(a) (15 U.S.C. 78o-4(c), 78q(a), 78r(a), 78ff(a)) and other applicable 
provisions of the Act.
    (e) The Commission, by order, may exempt any broker or dealer from 
the filing requirements provided in Form BDW (17 CFR 249.501a) under 
conditions that differ from the filing instructions contained in Form 
BDW.

[64 FR 25148, May 10, 1999, as amended at 64 FR 42596, Aug. 5, 1999; 73 
FR 4692, Jan. 28, 2008]



Sec.  240.15Bc4-1  Persons associated with municipal advisors.

    A person associated, seeking to become associated, or, at the time 
of the alleged misconduct, associated or seeking to become associated 
with a municipal advisor, shall be subject to a Commission order that 
censures or places limitations on the activities or functions of such 
person, or suspends for a period not exceeding twelve months or bars 
such person from being associated with a broker, dealer, investment 
adviser, municipal securities dealer, municipal advisor, transfer agent, 
or nationally recognized statistical rating organization, if the 
Commission finds, on the record after notice and opportunity for 
hearing, that such censure, placing of limitations, suspension, or bar 
is in the public interest and that such person has committed any act, or 
is subject to an order or finding, enumerated in subparagraph (A), (D), 
(E), (H), or (G) of paragraph (4) of section 15(b) of the Act (15 U.S.C. 
78o(b)(4)(A), 78o(b)(4)(D), 78o(b)(4)(E), 78o(b)(4)(H), 78o(b)(4)(G)), 
has been convicted of any offense specified in subparagraph (B) of such 
paragraph (4) (15 U.S.C. 78o(b)(4)(B)) within 10 years of the 
commencement of the proceedings under section 15B(c)(4) (15 U.S.C. 78o-
4(c)(4)), or is enjoined from any action, conduct, or practice specified 
in subparagraph (C) of such paragraph (4) (15 U.S.C. 78o(b)(4)(C)). It 
shall be unlawful for any person as to whom an order entered pursuant to 
section 15B(c)(4) of the Act (15 U.S.C. 78o-4(c)(4)) or section 
15B(c)(5) of the Act (15 U.S.C. 78o-4(c)(5)) suspending or barring him 
from being associated with a municipal advisor is in effect willfully to 
become, or to be, associated with a municipal advisor without the 
consent of the Commission, and it shall be unlawful for any municipal 
advisor to permit such a person to become, or remain, a person 
associated with it without the consent of the Commission, if such 
municipal advisor knew, or, in the exercise of reasonable care should 
have known, of such order.

[78 FR 67638, Nov. 12, 2013]



Sec.  240.15Bc7-1  Availability of examination reports.

    (a) Upon written request, copies of any report of an examination of 
a municipal securities dealer made by the Commission or furnished to it 
by an appropriate regulatory agency pursuant to section 17(c)(3) of the 
Act or by a registered securities association pursuant to section 
15B(c)(7)(B) of the Act

[[Page 513]]

shall be made available to the Municipal Securities Rulemaking Board 
(the ``Board'') by the Commission subject to the following limitations:
    (1) The Board shall establish by rule and shall maintain adequate 
procedures for ensuring the confidentiality of any information made 
available to it by the Commission pursuant to section 15B(c)(7)(B) of 
the Act;
    (2) Information made available to the Board shall not identify any 
municipal securities broker, municipal securities dealer, or associated 
person that is the subject of a non-public examination report.
    (b) If information to be made available to the Board is furnished to 
the Commission on a separate form prepared by an appropriate regulatory 
agency other than the Commission or by a registered securities 
association, that form, rather than a copy of any report of an 
examination, will be made available to the Board, provided that the 
conditions set forth in this paragraph are satisfied. Within sixty days 
of every six month period ending May 31 and November 30, each 
appropriate regulatory agency or registered securities association 
making available information on a separate form shall furnish to the 
Commission two copies of a form containing the information set forth in 
paragraphs (b)(1) through (b)(8) of this section. The Commission shall 
make one copy of the form promptly available to the Board. Copies of any 
forms furnished pursuant to this paragraph shall not identify any 
municipal securities broker, municipal securities dealer, or associated 
person that is the subject of an examination from which information was 
derived for the form; however, the Commission may obtain for its own 
use, upon request, the identity of any such examinee or the full 
examination reports. Furnished forms shall include the following 
information:
    (1) The report period.
    (2)(i) With respect to a registered securities association, the 
number of examinations that formed the basis of the report and, of these 
examinations, the number that were routine, special, and financial/
operational.
    (ii) With respect to an appropriate regulatory agency that is a bank 
agency, the number of examinations that formed the basis of the report 
and, of these examinations, the number that were routine, special, and 
financial/operational. The number of examinations that formed the basis 
of the report of bank dealers and the number of examinations of 
separately identifiable departments or divisions of banks effecting 
municipal securities transactions.
    (3) Indications of the violations of each Board rule found in 
examinations that formed the basis for the report.
    (4) Copies of public notices issued during the report period of any 
formal actions and non-public information regarding any actions taken on 
violations of Board rules.
    (5) Any comments concerning any questionable practices relating to 
municipal securities activities, whether or not covered by provisions of 
the Act and the rules and regulations thereunder, including the rules of 
the Board.
    (6) Descriptions of any significant or recurring customer complaints 
relating to municipal securities activities received by the appropriate 
regulatory agency or registered securities association during the report 
period or by municipal securities dealers during the 12 month period 
preceding the examination.
    (7) Description of any novel issues or interpretations arising under 
the Board's rules.
    (8) Description of any changes to existing Board rules or additional 
rules that would improve the regulatory scheme for municipal securities 
professionals or assist in the enforcement of the Board's rules.
    (c) Copies of any report of an examination of a municipal securities 
broker or municipal securities dealer made by the Commission or 
furnished to it pursuant to section 15B(c)(7)(B) or 17(c)(3) of the Act, 
or separate forms made available to the Commission pursuant to paragraph 
(b) of this section, will be maintained in a non-public file.

[50 FR 48556, Nov. 26, 1985]

[[Page 514]]

Registration of Government Securities Brokers and Government Securities 
                                 Dealers

    Source: Sections 240.15.Ca1-1 through 240.15Cc1-1 appear at 52 FR 
16839, May 6, 1987, unless otherwise noted.



Sec.  240.15Ca1-1  Notice of government securities broker-dealer
activities.

    (a) Every government securities broker or government securities 
dealer that is a broker or dealer registered pursuant to section 15 or 
15B of the Act (other than a financial institution as defined in section 
3(a)(46) of the Act) shall file with the Commission written notice on 
Form BD (Sec.  249.501 of this chapter) in accordance with the 
instructions contained therein that it is a government securities broker 
or government securities dealer. After July 25, 1987, every broker or 
dealer subject to this paragraph shall file notice that it is a 
government securities broker or government securities dealer prior to or 
on the date it begins acting as a government securities broker or 
government securities dealer.
    (b) Every government securities broker or government securities 
dealer required to file notice under paragraph (a) of this section shall 
file with the Commission written notice on Form BD in accordance with 
the instructions contained therein when it ceases to be a government 
securities broker or government securities dealer. Notice shall be filed 
within 30 days after the date the broker or dealer has ceased acting as 
a government securities broker or a government securities dealer.
    (c) Any notice required pursuant to this section shall be considered 
filed with the Commission if it is filed with the Central Registration 
Depository (operated by the Financial Industry Regulatory Authority, 
Inc.) in accordance with applicable filing requirements.

[52 FR 16839, May 6, 1987, as amended at 58 FR 14, Jan. 4, 1993; 64 FR 
25148, May 10, 1999; 73 FR 4693, Jan. 28, 2008]



Sec.  240.15Ca2-1  Application for registration as a government 
securities broker or government securities dealer.

    (a) An application for registration pursuant to Section 15C(a)(1)(A) 
of the Act, of a government securities broker or government securities 
dealer that is filed on or after January 25, 1993, shall be filed with 
the Central Registration Depository (operated by the Financial Industry 
Regulatory Authority, Inc.) on Form BD in accordance with the 
instructions contained therein.
    (b) Every application or amendment filed pursuant to this section 
shall constitute a ``report'' filed with the Commission within the 
meaning of Sections 15, 15C, 17(a), 18, 32(a), and other applicable 
provisions of the Act.

[58 FR 15, Jan. 4, 1993, as amended at 64 FR 37594, July 12, 1999; 64 FR 
42596, Aug. 5, 1999; 73 FR 4693, Jan. 28, 2008]



Sec.  240.15Ca2-2  [Reserved]



Sec.  240.15Ca2-3  Registration of successor to registered government
securities broker or government securities dealer.

    (a) In the event that a government securities broker or government 
securities dealer succeeds to and continues the business of a government 
securities broker or government securities dealer registered pursuant to 
section 15C(a)(1)(A) of the Act, the registration of the predecessor 
shall be deemed to remain effective as the registration of the successor 
if the successor, within 30 days after such succession, files an 
application for registration on Form BD, and the predecessor files a 
notice of withdrawal from registration on Form BDW; Provided, however, 
That the registration of the predecessor government securities broker or 
government securities dealer will cease to be effective as the 
registration of the successor government securities broker or government 
securities dealer 45 days after the application for registration on Form 
BD is filed by such successor.
    (b) Notwithstanding paragraph (a) of this section, if a government 
securities broker or government securities dealer succeeds to and 
continues the business of a predecessor government securities broker or 
government securities dealer

[[Page 515]]

that is registered pursuant to section 15C(a)(1)(A) of the Act, and the 
succession is based solely on a change in the predecessor's date or 
state of incorporation, form of organization, or composition of a 
partnership, the successor may, within 30 days after the succession, 
amend the registration of the predecessor broker or dealer on Form BD to 
reflect these changes. This amendment shall be deemed an application for 
registration filed by the predecessor and adopted by the successor.

[58 FR 11, Jan. 4, 1993]



Sec.  240.15Ca2-4  Registration of fiduciaries.

    The registration of a government securities broker or government 
securities dealer pursuant to section 15C of the Act shall be deemed to 
be the registration of any executor, administrator, guardian, 
conservator, assignee for the benefit of creditors, receiver, trustee in 
insolvency or bankruptcy, or other fiduciary, appointed or qualified by 
order, judgment, or decree of a court of competent jurisdiction to 
continue the business of such registered government securities broker or 
government securities dealer, provided that such fiduciary files with 
the Commission, no more than 30 days after entering upon the performance 
of its duties, a statement setting forth as to such fiduciary 
substantially the information required by Form BD.



Sec.  240.15Ca2-5  Consent to service of process to be furnished by
non-resident government securities brokers or government securities 
dealers and by non-resident general partners or managing agents of 
government securities brokers or government securities dealers.

    (a) Each non-resident government securities broker or government 
securities dealer applying for registration pursuant to section 
15C(a)(1)(A) of the Act, each non-resident general partner of a 
government securities broker or government securities dealer partnership 
that is applying for such registration, and each non-resident managing 
agent of any other unincorporated government securities broker or 
government securities dealer that is applying for registration, shall 
furnish to the Commission, in a form acceptable to the Commission, a 
written irrevocable consent and power of attorney that--
    (1) Designates the Securities and Exchange Commission as an agent of 
such government securities broker or government securities dealer upon 
whom may be served any process, pleadings, or other papers in any civil 
suit or action brought in any appropriate court in any place subject to 
the jurisdiction of the United States, with respect to any cause of 
action,
    (i) That accrues during the period beginning when such government 
securities broker or government securities dealer becomes registered 
pursuant to section 15C(a)(1)(A) of the Act and ending either when such 
registration is cancelled or revoked, or when a notice filed by such 
government securities broker or government securities dealer to withdraw 
from such registration becomes effective, whichever is earlier,
    (ii) That arises out of any activity, in any place subject to the 
jurisdiction of the United States, occurring in connection with the 
conduct of the business of such government securities broker or 
government securities dealer, and
    (iii) That is founded, directly or indirectly, upon the Securities 
Act of 1933, the Securities Exchange Act of 1934, the Trust Indenture 
Act of 1939, the Investment Company Act of 1940, the Investment Advisers 
Act of 1940, or any rule or regulation under any of those Acts, and
    (2) Stipulates and agrees that any such civil suit or action may be 
commenced against such government securities broker or government 
securities dealer by the service of process upon the Commission and the 
forwarding of a copy thereof as provided in paragraph (c) of this 
section and that the service as aforesaid of any such process, 
pleadings, or other papers upon the Commission shall be taken and held 
in all courts to be as valid and binding as if due process service 
thereof had been made.
    (b) Each government securities broker or government securities 
dealer registered pursuant to section 15C(a)(1)(A) of the Act that 
becomes a non-resident government securities

[[Page 516]]

broker or government securities dealer, and each general partner or 
managing agent of an unincorporated government securities broker or 
government securities dealer registered or applying for registration 
pursuant to section 15C(a)(1)(A) of the Act who becomes a non-resident 
after such registration or filing of an application for such 
registration, shall furnish such consent and power of attorney no more 
than 30 days thereafter.
    (c) Service of any process, pleadings, or other papers on the 
Commission under this rule shall be made by delivering the requisite 
number of copies thereof to the Secretary of the Commission or to such 
other person as the Commission may authorize to act in its behalf. 
Whenever any process, pleadings, or other papers as aforesaid are served 
upon the Commission, it shall promptly forward a copy thereof by 
registered or certified mail to the appropriate defendants at their last 
address of record filed with the Commission; but any failure by the 
Commission to forward such a copy shall have no effect on the validity 
of the service made upon the Commission. The Commission shall be 
furnished a sufficient number of copies for such purpose, and one copy 
for its file.
    (d) For purposes of this rule the following definitions shall apply:
    (1) The term managing agent shall mean any person, including a 
trustee, who directs or manages or who participates in the directing or 
managing of the affairs of any unincorporated organization or 
association that is not a partnership.
    (2) The term non-resident government securities broker or government 
securities dealer shall mean (i) in the case of an individual, one who 
is domiciled in or has his principal place of business in any place not 
subject to the jurisdiction of the United States, (ii) in the case of a 
corporation, one incorporated in or having its principal place of 
business in any place not subject to the jurisdiction of the United 
States; (iii) in the case of a partnership or other unincorporated 
organization or association, one having its principal place of business 
in any place not subject to the jurisdiction of the United States.
    (3) A general partner or managing agent of a government securities 
broker or government securities dealer shall be deemed to be a non-
resident if he is domiciled in any place not subject to the jurisdiction 
of the United States.



Sec.  240.15Cc1-1  Withdrawal from registration of government securities
brokers or government securities dealers.

    (a) Notice of withdrawal from registration as a government 
securities broker or government securities dealer pursuant to Section 
15C(a)(1)(A) of the Act (15 U.S.C. 78o-5(a)(1)(A)) shall be filed on 
Form BDW (17 CFR 249.501a) in accordance with the instructions contained 
therein. Every notice of withdrawal from registration as a government 
securities broker or dealer shall be filed with the Central Registration 
Depository (operated by the Financial Industry Regulatory Authority, 
Inc.) in accordance with applicable filing requirements. Prior to filing 
a notice of withdrawal from registration on Form BDW (17 CFR 249.501a), 
a government securities broker or government securities dealer shall 
amend Form BD (17 CFR 249.501) in accordance with 17 CFR 400.5(a) to 
update any inaccurate information.
    (b) A notice of withdrawal from registration filed by a government 
securities broker or government securities dealer shall become effective 
for all matters on the 60th day after the filing thereof with the 
Commission, within such longer period of time as to which such 
government securities broker or government securities dealer consents or 
the Commission by order may determine as necessary or appropriate in the 
public interest or for the protection of investors, or within such 
shorter period of time as the Commission may determine. If a notice of 
withdrawal from registration is filed with the Commission at any time 
subsequent to the date of the issuance of a Commission order instituting 
proceedings pursuant to Section 15C(c) (15 U.S.C. 78o-5(c)) to censure, 
place limitations on the activities, functions or operations of, or 
suspend or revoke the registration of such government securities broker 
or government securities dealer, or if

[[Page 517]]

prior to the effective date of the notice of withdrawal pursuant to this 
paragraph (b), the Commission institutes such a proceeding or a 
proceeding to impose terms or conditions upon such withdrawal, the 
notice of withdrawal shall not become effective pursuant to this 
paragraph (b) except at such time and upon such terms and conditions as 
the Commission deems necessary or appropriate in the public interest or 
for the protection of investors.
    (c) Every notice of withdrawal filed with the Central Registration 
Depository pursuant to this section shall constitute a ``report'' filed 
with the Commission within the meaning of Sections 15(b), 15C(c), 17(a), 
18(a), 32(a) (15 U.S.C. 78o(b), 78o-5(c), 78q(a), 78r(a), 78ff(a)) and 
other applicable provisions of the Act.
    (d) The Commission, by order, may exempt any broker or dealer from 
the filing requirements provided in Form BDW (17 CFR 249.501a) under 
conditions that differ from the filing instructions contained in Form 
BDW.

[64 FR 25148, May 10, 1999, as amended at 64 FR 42596, Aug. 5, 1999; 73 
FR 4693, Jan. 28, 2008]

  Registration and Regulation of Security-based Swap Dealers and Major 
                    Security-based Swap Participants

    Source: Sections 240.15Fb1-1 through 240.15Fb6-2 appear at 80 FR 
49013, Aug. 14, 2015, unless otherwise noted.



Sec.  240.15Fb1-1.  Signatures.

    (a) Required signatures to, or within, any electronic submission 
(including, without limitation, signatories within the forms and 
certifications required by Sec. Sec.  240.15Fb2-1, 240.15Fb2-4, and 
240.15Fb6-2) must be in typed form rather than manual format. Signatures 
in an HTML, XML or XBRL document that are not required may, but are not 
required to, be presented in a graphic or image file within the 
electronic filing. When used in connection with an electronic filing, 
the term ``signature'' means an electronic entry in the form of a 
magnetic impulse or other form of computer data compilation of any 
letters or series of letters or characters comprising a name, executed, 
adopted or authorized as a signature.
    (b) Each signatory to an electronic filing (including, without 
limitation, each signatory to the forms and certifications required by 
Sec. Sec.  240.15Fb2-1, 240.15Fb2-4, and 240.15Fb6-2) shall manually or 
electronically sign a signature page or other document authenticating, 
acknowledging, or otherwise adopting his or her signature that appears 
in typed form within the electronic filing (``authentication 
document''). Such authentication document shall be executed before or at 
the time the electronic filing is made. The requirements set forth in 
Sec.  232.302(b) must be met with regards to the use of an 
electronically signed authentication document pursuant to this paragraph 
(b). Upon request, the security-based swap dealer or major security-
based swap participant shall furnish to the Commission or its staff a 
copy of any or all documents retained pursuant to this paragraph (b).
    (c) A person required to provide a signature on an electronic 
submission (including, without limitation, each signatory to the forms 
and certifications required by Sec. Sec.  240.15Fb2-1, 240.15Fb2-4, and 
240.15Fb6-2) may not have the form or certification signed on his or her 
behalf pursuant to a power of attorney or other form of confirming 
authority.
    (d) Each manually or electronically signed signature page or other 
document authenticating, acknowledging, or otherwise adopting his or her 
signature that appears in typed form within the electronic filing 
(``authentication document'')--
    (1) On Schedule F to Form SBSE (Sec.  249.1600 of this chapter), 
SBSE-A (Sec.  249.1600a of this chapter), or SBSE-BD (Sec.  249.1600b of 
this chapter), as appropriate, shall be retained by the filer until at 
least three years after the form or certification has been replaced or 
is no longer effective;
    (2) On Form SBSE-C (Sec.  249.1600c of this chapter) shall be 
retained by the filer until at least three years after the Form was 
filed with the Commission.

[80 FR 49013, Aug. 14, 2015, as amended at 85 FR 78229, Dec. 4, 2020]

[[Page 518]]



Sec.  240.15Fb2-1  Registration of security-based swap dealers and major
security-based swap participants.

    (a) Application. An application for registration of a security-based 
swap dealer or a major security-based swap participant that is filed 
pursuant to Section 15F(b) of the Securities Exchange Act of 1934 (15 
U.S.C. 78o-10(b)) shall be filed on Form SBSE (Sec.  249.1600 of this 
chapter) or Form SBSE-A (Sec.  249.1600a of this chapter) or Form SBSE-
BD (Sec.  249.1600b of this chapter), as appropriate, in accordance with 
paragraph (c) and the instructions to the forms. Applicants shall also 
file as part of their application the required certifications on Form 
SBSE-C (Sec.  249.1600c of this chapter).
    (b) Senior Officer Certification. A senior officer shall certify on 
Form SBSE-C (Sec.  249.1600c of this chapter) that;
    (1) After due inquiry, he or she has reasonably determined that the 
security-based swap dealer or major security-based swap participant has 
developed and implemented written policies and procedures reasonably 
designed to prevent violation of federal securities laws and the rules 
thereunder, and
    (2) He or she has documented the process by which he or she reached 
such determination.
    (c) Filing--(1) Electronic filing. Every application for 
registration of a security-based swap dealer or major security-based 
swap participant and any additional registration documents shall be 
filed electronically with the Commission through the Commission's EDGAR 
system.
    (2) Filing date. An application of a security-based swap dealer or a 
major security-based swap participant submitted pursuant to paragraph 
(a) of this section shall be considered filed when an applicant has 
submitted a complete Form SBSE-C (Sec.  249.1600c of this chapter) and a 
complete Form SBSE (Sec.  249.1600 of this chapter), Form SBSE-A (Sec.  
249.1600a of this chapter), or Form SBSE-BD (Sec.  249.1600b of this 
chapter), as appropriate, and all required additional documents 
electronically with the Commission.
    (d) Conditional registration. (1) An applicant that has submitted a 
complete Form SBSE-C (Sec.  249.1600c of this chapter) and a complete 
Form SBSE (Sec.  249.1600 of this chapter) or Form SBSE-A (Sec.  
249.1600a of this chapter) or Form SBSE-BD (Sec.  249.1600b of this 
chapter), as applicable, in accordance with paragraph (c) within the 
time periods set forth in Sec.  240.3a67-8 (if the person is a major 
security-based swap participant) or Sec.  240.3a71-2(b) (if the person 
is a security-based swap dealer), and has not withdrawn its registration 
shall be conditionally registered.
    (2) Notwithstanding paragraph (d)(1) of this section, an applicant 
that is a nonresident security-based swap dealer or nonresident major 
security-based swap participant (each as defined in Sec.  240.15Fb2-
4(a)) that is unable to provide the certification and opinion of counsel 
required by Sec.  240.15Fb2-4(c)(1) shall instead provide a conditional 
certification and opinion of counsel as discussed in paragraph (d)(3) of 
this section, and upon the provision of such conditional certification 
and opinion of counsel, shall be conditionally registered, if the 
nonresident applicant submits a Form SBSE-C (Sec.  249.1600c of this 
chapter) and a Form SBSE (Sec.  249.1600 of this chapter), SBSE-A (Sec.  
249.1600a of this chapter) or SBSE-BD (Sec.  249.1600b of this chapter), 
as applicable, in accordance with paragraph (c) of this section within 
the time periods set forth in Sec.  240.3a67-8 (if the person is a major 
security-based swap participant) or Sec.  240.3a71-2(b) (if the person 
is a security-based swap dealer), that is complete in all respects but 
for the failure to provide the certification and the opinion of counsel 
required by Sec.  240.15Fb2-4(c)(1), and has not withdrawn from 
registration.
    (3) For purposes of this section, a conditional certification and 
opinion of counsel means a certification as required by Sec.  240.15Fb2-
4(c)(1)(i) and an opinion of counsel as required by Sec.  240.15Fb2-
4(c)(1)(ii) that identify, and are conditioned upon, the occurrence of a 
future action that would provide the Commission with adequate assurances 
of prompt access to the books and records of the nonresident security-
based swap dealer or nonresident major security-based swap participant, 
and the ability of the nonresident security-based swap dealer or 
nonresident major

[[Page 519]]

security-based swap participant to submit to onsite inspection and 
examination by the Commission. Such future action could include:
    (i) Entry by the Commission and the foreign financial regulatory 
authority of the jurisdiction(s) in which the nonresident security-based 
swap dealer or nonresident major security-based swap participant 
maintains the books and records that are addressed by the certification 
and opinion of counsel required by Sec.  240.15Fb2-4(c)(1) into a 
memorandum of understanding, agreement, protocol, or other regulatory 
arrangement providing the Commission with adequate assurances of:
    (A) Prompt access to the books and records of the nonresident 
security-based swap dealer or nonresident major security-based swap 
participant; and
    (B) The ability of the nonresident security-based swap dealer or 
nonresident major security-based swap participant to submit to onsite 
inspection or examination by the Commission; or
    (ii) Issuance by the Commission of an order granting substituted 
compliance in accordance with Sec.  240.3a71-6 to the jurisdiction(s) in 
which the nonresident security-based swap dealer or nonresident major 
security-based swap participant maintains the books and records that are 
addressed by the certification and opinion of counsel required by Sec.  
240.15Fb2-4(c)(1); or
    (iii) Any other action that would provide the Commission with the 
assurances required by Sec.  240.15Fb2-4(c)(1)(i) and by Sec.  
240.15Fb2-4(c)(1)(ii).
    (e) Commission Decision. (1) The Commission may deny or grant 
ongoing registration to a security-based swap dealer or major security-
based swap participant based on a security-based swap dealer's or major 
security-based swap participant's application, filed pursuant to 
paragraph (a) of this section. The Commission will grant ongoing 
registration if it finds that the requirements of section 15F(b) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78o-10(b)) are satisfied. The 
Commission may institute proceedings to determine whether ongoing 
registration should be denied if it does not or cannot make such finding 
or if the applicant is subject to a statutory disqualification (as 
described in sections 3(a)(39)(A) through (F) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78c(a)(39)(A)-(F)), or the Commission is aware of 
inaccurate statements in the application. Such proceedings shall include 
notice of the grounds for denial under consideration and opportunity for 
hearing. At the conclusion of such proceedings, the Commission shall 
grant or deny such registration.
    (2) If an applicant that is a nonresident security-based swap dealer 
or nonresident major security-based swap participant has become 
conditionally registered in reliance on paragraph (d)(2) of this 
section, the applicant will remain conditionally registered until the 
Commission acts to grant or deny ongoing registration in accordance with 
(e)(1) of this section. If none of the future actions in paragraph 
(d)(3) that are included in an applicant's conditional certification and 
opinion of counsel occurs within 24 months of the compliance date for 
Sec.  240.15Fb2-1, and there is not otherwise a basis that would provide 
the Commission with the assurances required by Sec.  240.15Fb2-
4(c)(1)(i) and by Sec.  240.15Fb2-4(c)(1)(ii), the Commission may 
institute proceedings thereafter to determine whether ongoing 
registration should be denied, in accordance with paragraph (e)(1) of 
this section.

[80 FR 49013, Aug. 14, 2015, as amended at 85 FR 6352, Feb. 4, 2020]



Sec.  240.15Fb2-3  Amendments to Form SBSE, Form SBSE-A, and
Form SBSE-BD.

    If a security-based swap dealer or a major security-based swap 
participant finds that the information contained in its Form SBSE (Sec.  
249.1600 of this chapter), Form SBSE-A (Sec.  249.1600a of this 
chapter), or Form SBSE-BD (Sec.  249.1600b of this chapter), as 
appropriate, or in any amendment thereto, is or has become inaccurate 
for any reason, the security-based swap dealer or a major security-based 
swap participant shall promptly file an amendment electronically with 
the Commission through the Commission's EDGAR system on the appropriate 
Form to correct such information.

[[Page 520]]



Sec.  240.15Fb2-4  Nonresident security-based swap dealers and major
security-based swap participants.

    (a) Definition. For purposes of this section, the terms nonresident 
security-based swap dealer and nonresident major security-based swap 
participant shall mean:
    (1) In the case of an individual, one who resides, or has his or her 
principal place of business, in any place not in the United States;
    (2) In the case of a corporation, one incorporated in or having its 
principal place of business in any place not in the United States; or
    (3) In the case of a partnership or other unincorporated 
organization or association, one having its principal place of business 
in any place not in the United States.
    (b) Power of attorney. (1) Each nonresident security-based swap 
dealer and nonresident major security-based swap participant registered 
or applying for registration pursuant to Section 15F(b) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78o-10(b)) shall obtain a 
written irrevocable consent and power of attorney appointing an agent in 
the United States, other than the Commission or a Commission member, 
official or employee, upon whom may be served any process, pleadings, or 
other papers in any action brought against the nonresident security-
based swap dealer or nonresident major security-based swap participant 
to enforce the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.). 
This consent and power of attorney must be signed by the nonresident 
security-based swap dealer or nonresident major security-based swap 
participant and the named agent(s) for service of process.
    (2) Each nonresident security-based swap dealer and nonresident 
major security-based swap participant registered or applying for 
registration pursuant to section 15F(b) of the Securities Exchange Act 
of 1934 (15 U.S.C. 78o-10(b)) shall, at the time of filing its 
application on Form SBSE (Sec.  249.1600 of this chapter), Form SBSE-A 
(Sec.  249.1600a of this chapter), or Form SBSE-BD (Sec.  249.1600b of 
this chapter), as appropriate, furnish to the Commission the name and 
address of its United States agent for service of process on Schedule F 
to the appropriate form.
    (3) Any change of a nonresident security-based swap dealer's and 
nonresident major security-based swap participant's agent for service of 
process and any change of name or address of a nonresident security-
based swap dealer's and nonresident major security-based swap 
participant's existing agent for service of process shall be 
communicated promptly to the Commission through amendment of the 
Schedule F of Form SBSE (Sec.  249.1600 of this chapter), Form SBSE-A 
(Sec.  249.1600a of this chapter), or Form SBSE-BD (Sec.  249.1600b of 
this chapter), as appropriate.
    (4) Each nonresident security-based swap dealer and nonresident 
major security-based swap participant must promptly appoint a successor 
agent for service of process, consistent with the process described in 
paragraph (b)(1), if the nonresident security-based swap dealer and 
nonresident major security-based swap participant discharges its 
identified agent for service of process or if its agent for service of 
process is unwilling or unable to accept service on behalf of the 
nonresident security-based swap dealer or nonresident major security-
based swap participant.
    (5) Each nonresident security-based swap dealer and nonresident 
major security-based swap participant must maintain, as part of its 
books and records, the agreement identified in paragraphs (b)(1) and 
(b)(4) of this section for at least three years after the agreement is 
terminated.
    (c) Access to books and records--(1) Certification and opinion of 
counsel. Each nonresident security-based swap dealer and nonresident 
major security-based swap participant applying for registration pursuant 
to Section 15F(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-
10(b) shall:
    (i) Certify on Schedule F of Form SBSE (Sec.  249.1600 of this 
chapter), Form SBSE-A (Sec.  249.1600a of this chapter), or Form SBSE-BD 
(Sec.  249.1600b of this chapter), as appropriate, that the nonresident 
security-based swap dealer and nonresident major security-based swap 
participant can, as a matter of law, and will provide the Commission 
with prompt access to the books and records

[[Page 521]]

of such nonresident security-based swap dealer and nonresident major 
security-based swap participant, and can, as a matter of law, and will 
submit to onsite inspection and examination by the Commission; and
    (ii) Provide an opinion of counsel that the nonresident security-
based swap dealer and nonresident major security-based swap participant 
can, as a matter of law, provide the Commission with prompt access to 
the books and records of such nonresident security-based swap dealer and 
nonresident major security-based swap participant, and can, as a matter 
of law, submit to onsite inspection and examination by the Commission.
    (2) Amendments. Each nonresident security-based swap dealer and 
nonresident major security-based swap participant shall re-certify, on 
Schedule F to Form SBSE (Sec.  249.1600 of this chapter), Form SBSE-A 
(Sec.  249.1600a of this chapter), or Form SBSE-BD (Sec.  249.1600b of 
this chapter), as applicable, within 90 days after any changes in the 
legal or regulatory framework that would impact the nonresident 
security-based swap dealer's or nonresident major security-based swap 
participant's ability to provide, or the manner in which it provides the 
Commission with prompt access to its books and records, or would impact 
the Commission's ability to inspect and examine the nonresident 
security-based swap dealer or nonresident major security-based swap 
participant. The re-certification shall be accompanied by a revised 
opinion of counsel describing how, as a matter of law, the nonresident 
security-based swap dealer or nonresident major security-based swap 
participant will continue to meet its obligations to provide the 
Commission with prompt access to its books and records and to be subject 
to Commission inspection and examination under the new regulatory 
regime.



Sec.  240.15Fb2-5  Registration of successor to registered security-based
swap dealer or a major security-based swap participant.

    (a) In the event that a security-based swap dealer or major 
security-based swap participant succeeds to and continues the business 
of a security-based swap dealer or major security-based swap participant 
registered pursuant to Section 15F(b) of the Securities Exchange Act of 
1934 (15 U.S.C. 78o-10(b)), the registration of the predecessor shall be 
deemed to remain effective as the registration of the successor if the 
successor, within 30 days after such succession, files an application 
for registration in accordance with Sec.  240.15Fb2-1, and the 
predecessor files a notice of withdrawal from registration on Form SBSE-
W (Sec.  249.1601 of this chapter).
    (b) Notwithstanding paragraph (a) of this section, if a security-
based swap dealer or major security-based swap participant succeeds to 
and continues the business of a registered predecessor security-based 
swap dealer or major security-based swap participant, and the succession 
is based solely on a change in the predecessor's date or state of 
incorporation, form of organization, or composition of a partnership, 
the successor may, within 30 days after the succession, amend the 
registration of the predecessor security-based swap dealer or major 
security-based swap participant on Form SBSE (Sec.  249.1600 of this 
chapter), Form SBSE-A (Sec.  249.1600a of this chapter), or Form SBSE-BD 
(Sec.  249.1600b of this chapter), as appropriate, to reflect these 
changes. This amendment shall be deemed an application for registration 
filed by the predecessor and adopted by the successor.



Sec.  240.15Fb2-6  Registration of fiduciaries.

    The registration of a security-based swap dealer or a major 
security-based swap participant shall be deemed to be the registration 
of any executor, administrator, guardian, conservator, assignee for the 
benefit of creditors, receiver, trustee in insolvency or bankruptcy, or 
other fiduciary, appointed or qualified by order, judgment, or decree of 
a court of competent jurisdiction to continue the business of such 
registered security-based swap dealer or a major security-based swap 
participant; Provided, that such fiduciary files with the Commission, 
within 30 days after entering upon the performance of his or her duties, 
an amended Form SBSE (Sec.  249.1600 of this chapter), Form SBSE-

[[Page 522]]

A (Sec.  249.1600a of this chapter), or Form SBSE-BD (Sec.  249.1600b of 
this chapter), as appropriate, indicating the fiduciary's position with 
respect to management of the firm and, as an additional document, a copy 
of the order, judgment, decree, or other document appointing the 
fiduciary.



Sec.  240.15Fb3-1  Duration of registration.

    (a) General. A person registered as a security-based swap dealer or 
major security-based swap participant in accordance with Sec.  
240.15Fb2-1 will continue to be so registered until the effective date 
of any cancellation, revocation or withdrawal of such registration.
    (b) Conditional registration. Notwithstanding paragraph (a) of this 
section, conditional registration shall expire on the date the 
registrant withdraws from registration or the Commission grants or 
denies the person's ongoing registration in accordance with Sec.  
240.15Fb2-1(e).



Sec.  240.15Fb3-2  Withdrawal from registration.

    (a) Notice of withdrawal from registration as a security-based swap 
dealer or major security-based swap participant pursuant to Section 
15F(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-10(b)) 
shall be filed on Form SBSE-W (Sec.  249.1601 of this chapter) in 
accordance with the instructions contained therein. Every notice of 
withdrawal from registration as a security-based swap dealer or major 
security-based swap participant shall be filed electronically with the 
Commission through the Commission's EDGAR system. Prior to filing a 
notice of withdrawal from registration on Form SBSE-W, a security-based 
swap dealer or major security-based swap participant shall amend its 
Form SBSE (Sec.  249.1600 of this chapter), Form SBSE-A (Sec.  249.1600a 
of this chapter) or Form SBSE-BD (Sec.  249.1600b of this chapter), as 
appropriate, in accordance with Sec.  240.15Fb2-3(a) to update any 
inaccurate information.
    (b) A notice of withdrawal from registration filed by a security-
based swap dealer or major security-based swap participant pursuant to 
Section 15F(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-
10(b)) shall become effective for all matters (except as provided in 
this paragraph (b)) on the 60th day after the filing thereof with the 
Commission or its designee, within such longer period of time as to 
which such security-based swap dealer or major security-based swap 
participant consents or which the Commission by order may determine as 
necessary or appropriate in the public interest or for the protection of 
investors, or within such shorter period of time as the Commission may 
determine. If a notice of withdrawal from registration is filed with the 
Commission at any time subsequent to the date of the issuance of a 
Commission order instituting proceedings to censure, place limitations 
on the activities, functions or operations of, or suspend or revoke the 
registration of, such security-based swap dealer or major security-based 
swap participant, or if prior to the effective date of the notice of 
withdrawal pursuant to this paragraph (b), the Commission institutes 
such a proceeding or a proceeding to impose terms or conditions upon 
such withdrawal, the notice of withdrawal shall not become effective 
pursuant to this paragraph (b) except at such time and upon such terms 
and conditions as the Commission deems necessary or appropriate in the 
public interest or for the protection of investors.



Sec.  240.15Fb3-3  Cancellation and revocation of registration.

    (a) Cancellation. If the Commission finds that any person registered 
pursuant to Sec.  240.15Fb2-1 is no longer in existence or has ceased to 
do business as a security-based swap dealer or major security-based swap 
participant, the Commission shall by order cancel the registration of 
such person.
    (b) Revocation. The Commission, by order, shall censure, place 
limitations on the activities, functions, or operations of, or revoke 
the registration of any security-based swap dealer or major security-
based swap participant that has registered with the Commission if it 
makes a finding as specified in Section 15F(l)(2) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78o-10(l)(2)).

[[Page 523]]



Sec.  240.15Fb6-1  [Reserved]



Sec.  240.15Fb6-2  Associated person certification.

    (a) Certification. No registered security-based swap dealer or major 
security-based swap participant shall act as a security-based swap 
dealer or major security-based swap participant unless it has certified 
electronically on Form SBSE-C (Section 249.1600c of this chapter) that 
it neither knows, nor in the exercise of reasonable care should have 
known, that any person associated with such security-based swap dealer 
or major security-based swap participant who effects or is involved in 
effecting security-based swaps on behalf of the security-based swap 
dealer or major security-based swap participant is subject to a 
statutory disqualification, as described in Sections 3(a)(39)(A) through 
(F) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(39)(A)-
(F)), unless otherwise specifically provided by rule, regulation or 
order of the Commission.
    (b) To support the certification required by paragraph (a) of this 
section, the security-based swap dealer's or major security-based swap 
participant's Chief Compliance Officer, or his or her designee, shall 
review and sign the questionnaire or application for employment, which 
the security-based swap dealer or major security-based swap participant 
is required to obtain pursuant to the relevant recordkeeping rule 
applicable to such security-based swap dealer or major security-based 
swap participant, executed by each associated person who is a natural 
person and who effects or is involved in effecting security based swaps 
on the security-based swap dealer's or major security-based swap 
participant's behalf. The questionnaire or application shall serve as a 
basis for a background check of the associated person to verify that the 
person is not subject to statutory disqualification.



Sec.  240.15Fh-1  Scope and reliance on representations.

    (a) Scope. Sections 240.15Fh-1 through 240.15Fh-6, and 240.15Fk-1 
are not intended to limit, or restrict, the applicability of other 
provisions of the federal securities laws, including but not limited to 
section 17(a) of the Securities Act of 1933 and sections 9 and 10(b) of 
the Act, and rules and regulations thereunder, or other applicable laws 
and rules and regulations. Sections 240.15Fh-1 through 240.15Fh-6, and 
240.15Fk-1 apply, as relevant, in connection with entering into 
security-based swaps and continue to apply, as appropriate, over the 
term of executed security-based swaps. Sections 240.15Fh-3(a) through 
240.15Fh-3(f), 240.15Fh-4(b) and 240.15Fh-5 are not applicable to 
security-based swaps that security-based swap dealers or major security-
based swap participants enter into with their majority-owned affiliates. 
For these purposes the counterparties to a security-based swap are 
majority-owned affiliates if one counterparty directly or indirectly 
owns a majority interest in the other, or if a third party directly or 
indirectly owns a majority interest in both counterparties to the 
security-based swap, where ``majority interest'' is the right to vote or 
direct the vote of a majority of a class of voting securities of an 
entity, the power to sell or direct the sale of a majority of a class of 
voting securities of an entity, or the right to receive upon dissolution 
or the contribution of a majority of the capital of a partnership.
    (b) Reliance on representations. A security-based swap dealer or 
major security-based swap participant may rely on written 
representations from the counterparty or its representative to satisfy 
its due diligence requirements under Sec.  240.15Fh, unless it has 
information that would cause a reasonable person to question the 
accuracy of the representation.

[81 FR 30144, May 13, 2016]



Sec.  240.15Fh-2  Definitions.

    As used in Sec. Sec.  240.15Fh-1 through 240.15Fh-6:
    (a) Act as an advisor to a special entity. A security-based swap 
dealer acts as an advisor to a special entity when it recommends a 
security-based swap or a trading strategy that involves the use of a 
security-based swap to the special entity, unless:
    (1) With respect to a special entity as defined in Sec.  240.15Fh-
2(d)(3):

[[Page 524]]

    (i) The special entity represents in writing that it has a fiduciary 
as defined in section 3 of the Employee Retirement Income Security Act 
of 1974 (29 U.S.C. 1002) that is responsible for representing the 
special entity in connection with the security-based swap;
    (ii) The fiduciary represents in writing that it acknowledges that 
the security-based swap dealer is not acting as an advisor; and
    (iii) The special entity represents in writing:
    (A) That it will comply in good faith with written policies and 
procedures reasonably designed to ensure that any recommendation the 
special entity receives from the security-based swap dealer involving a 
security-based swap transaction is evaluated by a fiduciary before the 
transaction is entered into; or
    (B) That any recommendation the special entity receives from the 
security-based swap dealer involving a security-based swap transaction 
will be evaluated by a fiduciary before the transaction is entered into.
    (2) With respect to any special entity:
    (i) The special entity represents in writing that:
    (A) It acknowledges that the security-based swap dealer is not 
acting as an advisor; and
    (B) The special entity will rely on advice from a qualified 
independent representative as defined in Sec.  240.15Fh-5(a); and
    (ii) The security-based swap dealer discloses to the special entity 
that it is not undertaking to act in the best interest of the special 
entity, as otherwise required by section 15F(h)(4) of the Act.
    (b) Eligible contract participant means any person as defined in 
section 3(a)(65) of the Act and the rules and regulations thereunder and 
in section 1a of the Commodity Exchange Act (7 U.S.C. 1a) and the rules 
and regulations thereunder.
    (c) Security-based swap dealer or major security-based swap 
participant includes, where relevant, an associated person of the 
security-based swap dealer or major security-based swap participant.
    (d) Special entity means:
    (1) A Federal agency;
    (2) A State, State agency, city, county, municipality, other 
political subdivision of a State, or any instrumentality, department, or 
a corporation of or established by a State or political subdivision of a 
State;
    (3) Any employee benefit plan, subject to Title I of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1002);
    (4) Any employee benefit plan defined in section 3 of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1002) and not 
otherwise defined as a special entity, unless such employee benefit plan 
elects not to be a special entity by notifying a security-based swap 
dealer or major security-based swap participant of its election prior to 
entering into a security-based swap with the particular security-based 
swap dealer or major security-based swap participant;
    (5) Any governmental plan, as defined in section 3(32) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002(32)); or
    (6) Any endowment, including an endowment that is an organization 
described in section 501(c)(3) of the Internal Revenue Code of 1986.
    (e) A person is subject to a statutory disqualification for purposes 
of Sec.  240.15Fh-5 if that person would be subject to a statutory 
disqualification, as described in section 3(a)(39)(A)-(F) of the Act.

[81 FR 30144, May 13, 2016]



Sec.  240.15Fh-3  Business conduct requirements.

    (a) Counterparty status--(1) Eligible contract participant. A 
security-based swap dealer or a major security-based swap participant 
shall verify that a counterparty meets the eligibility standards for an 
eligible contract participant before entering into a security-based swap 
with that counterparty, provided that the requirements of this paragraph 
(a)(1) shall not apply to a transaction executed on a registered 
national securities exchange.
    (2) Special entity. A security-based swap dealer or a major 
security-based swap participant shall verify whether a counterparty is a 
special entity before entering into a security-based swap

[[Page 525]]

with that counterparty, unless the transaction is executed on a 
registered or exempt security-based swap execution facility or 
registered national securities exchange, and the security-based swap 
dealer or major security-based swap participant does not know the 
identity of the counterparty at a reasonably sufficient time prior to 
execution of the transaction to permit the security-based swap dealer or 
major security-based swap participant to comply with the obligations of 
paragraph (a) of this section.
    (3) Special entity election. In verifying the special entity status 
of a counterparty pursuant to Sec.  240.15Fh-3(a)(2), a security-based 
swap dealer or major security-based swap participant shall verify 
whether a counterparty is eligible to elect not to be a special entity 
under Sec.  240.15Fh-2(d)(4) and, if so, notify such counterparty of its 
right to make such an election.
    (b) Disclosure. At a reasonably sufficient time prior to entering 
into a security-based swap, a security-based swap dealer or major 
security-based swap participant shall disclose to a counterparty, other 
than a security-based swap dealer, major security-based swap 
participant, swap dealer or major swap participant, material information 
concerning the security-based swap in a manner reasonably designed to 
allow the counterparty to assess the material risks and characteristics 
and material incentives or conflicts of interest, as described below, so 
long as the identity of the counterparty is known to the security-based 
swap dealer or major security-based swap participant at a reasonably 
sufficient time prior to execution of the transaction to permit the 
security-based swap dealer or major security-based swap participant to 
comply with the obligations of paragraph (b) of this section.
    (1) Material risks and characteristics means the material risks and 
characteristics of the particular security-based swap, which may 
include:
    (i) Market, credit, liquidity, foreign currency, legal, operational, 
and any other applicable risks; and
    (ii) The material economic terms of the security-based swap, the 
terms relating to the operation of the security-based swap, and the 
rights and obligations of the parties during the term of the security-
based swap.
    (2) Material incentives or conflicts of interest means any material 
incentives or conflicts of interest that the security-based swap dealer 
or major security-based swap participant may have in connection with the 
security-based swap, including any compensation or other incentives from 
any source other than the counterparty in connection with the security-
based swap to be entered into with the counterparty.
    (3) Record. The security-based swap dealer or major security-based 
swap participant shall make a written record of the non-written 
disclosures made pursuant to this paragraph (b), and provide a written 
version of these disclosures to its counterparties in a timely manner, 
but in any case no later than the delivery of the trade acknowledgement 
of the particular transaction pursuant to Sec.  240.15Fi-1.
    (c) Daily mark. A security-based swap dealer or major security-based 
swap participant shall disclose the daily mark to the counterparty, 
other than a security-based swap dealer, major security-based swap 
participant, swap dealer or major swap participant, which shall be:
    (1) For a cleared security-based swap, upon request of the 
counterparty, the daily mark that the security-based swap dealer or 
major security-based swap participant receives from the appropriate 
clearing agency;
    (2) For an uncleared security-based swap, the midpoint between the 
bid and offer, or the calculated equivalent thereof, as of the close of 
business, unless the parties agree in writing otherwise to a different 
time, on each business day during the term of the security-based swap. 
The daily mark may be based on market quotations for comparable 
security-based swaps, mathematical models or a combination thereof. The 
security-based swap dealer or major security-based swap participant 
shall also disclose its data sources and a description of the 
methodology and assumptions used to prepare the daily mark, and promptly 
disclose any material changes to such data sources, methodology and 
assumptions during the term of the security-based swap; and

[[Page 526]]

    (3) The security-based swap dealer or major security-based swap 
participant shall provide the daily mark without charge to the 
counterparty and without restrictions on the internal use of the daily 
mark by the counterparty.
    (d) Disclosure regarding clearing rights. A security-based swap 
dealer or major security-based swap participant shall disclose the 
following information to a counterparty, other than a security-based 
swap dealer, major security-based swap participant, swap dealer or major 
swap participant, so long as the identity of the counterparty is known 
to the security-based swap dealer or major security-based swap 
participant at a reasonably sufficient time prior to execution of the 
transaction to permit the security-based swap dealer or major security-
based swap participant to comply with the obligations of paragraph (d) 
of this section:
    (1) For security-based swaps subject to clearing requirement. Before 
entering into a security-based swap subject to the clearing requirement 
under section 3C(a) of the Act, a security-based swap dealer or major 
security-based swap participant shall:
    (i) Disclose to the counterparty the names of the clearing agencies 
that accept the security-based swap for clearing, and through which of 
those clearing agencies the security-based swap dealer or major 
security-based swap participant is authorized or permitted, directly or 
through a designated clearing member, to clear the security-based swap; 
and
    (ii) Notify the counterparty that it shall have the sole right to 
select which of the clearing agencies described in paragraph (d)(1)(i) 
of this section shall be used to clear the security-based swap subject 
to section 3C(g)(5) of the Act.
    (2) For security-based swaps not subject to clearing requirement. 
Before entering into a security-based swap not subject to the clearing 
requirement under section 3C(a) of the Act, a security-based swap dealer 
or major security-based swap participant shall:
    (i) Determine whether the security-based swap is accepted for 
clearing by one or more clearing agencies;
    (ii) Disclose to the counterparty the names of the clearing agencies 
that accept the security-based swap for clearing, and whether the 
security-based swap dealer or major security-based swap participant is 
authorized or permitted, directly or through a designated clearing 
member, to clear the security-based swap through such clearing agencies; 
and
    (iii) Notify the counterparty that it may elect to require clearing 
of the security-based swap and shall have the sole right to select the 
clearing agency at which the security-based swap will be cleared, 
provided it is a clearing agency at which the security-based swap dealer 
or major security-based swap participant is authorized or permitted, 
directly or through a designated clearing member, to clear the security-
based swap.
    (3) Record. The security-based swap dealer or major security-based 
swap participant shall make a written record of the non-written 
disclosures made pursuant to this paragraph (d), and provide a written 
version of these disclosures to its counterparties in a timely manner, 
but in any case no later than the delivery of the trade acknowledgement 
of the particular transaction pursuant to Sec.  240.15Fi-1.
    (e) Know your counterparty. Each security-based swap dealer shall 
establish, maintain and enforce written policies and procedures 
reasonably designed to obtain and retain a record of the essential facts 
concerning each counterparty whose identity is known to the security-
based swap dealer that are necessary for conducting business with such 
counterparty. For purposes of paragraph (e) of this section, the 
essential facts concerning a counterparty are:
    (1) Facts required to comply with applicable laws, regulations and 
rules;
    (2) Facts required to implement the security-based swap dealer's 
credit and operational risk management policies in connection with 
transactions entered into with such counterparty; and
    (3) Information regarding the authority of any person acting for 
such counterparty.
    (f) Recommendations of security-based swaps or trading strategies. 
(1) A security-based swap dealer that recommends a security-based swap 
or trading strategy involving a security-

[[Page 527]]

based swap to a counterparty, other than a security-based swap dealer, 
major security-based swap participant, swap dealer, or major swap 
participant, must:
    (i) Undertake reasonable diligence to understand the potential risks 
and rewards associated with the recommended security-based swap or 
trading strategy involving a security-based swap; and
    (ii) Have a reasonable basis to believe that a recommended security-
based swap or trading strategy involving a security-based swap is 
suitable for the counterparty. To establish a reasonable basis for a 
recommendation, a security-based swap dealer must have or obtain 
relevant information regarding the counterparty, including the 
counterparty's investment profile, trading objectives, and its ability 
to absorb potential losses associated with the recommended security-
based swap or trading strategy involving a security-based swap.
    (2) A security-based swap dealer may also fulfill its obligations 
under paragraph (f)(1)(ii) of this section with respect to an 
institutional counterparty, if:
    (i) The security-based swap dealer reasonably determines that the 
counterparty, or an agent to which the counterparty has delegated 
decision-making authority, is capable of independently evaluating 
investment risks with regard to the relevant security-based swap or 
trading strategy involving a security-based swap;
    (ii) The counterparty or its agent affirmatively represents in 
writing that it is exercising independent judgment in evaluating the 
recommendations of the security-based swap dealer with regard to the 
relevant security-based swap or trading strategy involving a security-
based swap; and
    (iii) The security-based swap dealer discloses that it is acting in 
its capacity as a counterparty, and is not undertaking to assess the 
suitability of the security-based swap or trading strategy for the 
counterparty.
    (3) A security-based swap dealer will be deemed to have satisfied 
its obligations under paragraph (f)(2)(i) of this section if it receives 
written representations, as provided in Sec.  240.15Fh-1(b), that:
    (i) In the case of a counterparty that is not a special entity, the 
counterparty has complied in good faith with written policies and 
procedures that are reasonably designed to ensure that the persons 
responsible for evaluating the recommendation and making trading 
decisions on behalf of the counterparty are capable of doing so; or
    (ii) In the case of a counterparty that is a special entity, satisfy 
the terms of the safe harbor in Sec.  240.15Fh-5(b).
    (4) For purposes of paragraph (f)(2) of this section, an 
institutional counterparty is a counterparty that is an eligible 
contract participant as defined in clauses (A)(i), (ii), (iii), (iv), 
(viii), (ix) or (x), or clause (B)(ii) (other than a person described in 
clause (A)(v)) of section 1a(18) of the Commodity Exchange Act (7 U.S.C. 
1(a)(18)) and the rules and regulations thereunder, or any person 
(whether a natural person, corporation, partnership, trust or otherwise) 
with total assets of at least $50 million.
    (g) Fair and balanced communications. A security-based swap dealer 
or major security-based swap participant shall communicate with 
counterparties in a fair and balanced manner based on principles of fair 
dealing and good faith. In particular:
    (1) Communications must provide a sound basis for evaluating the 
facts with regard to any particular security-based swap or trading 
strategy involving a security-based swap;
    (2) Communications may not imply that past performance will recur or 
make any exaggerated or unwarranted claim, opinion or forecast; and
    (3) Any statement referring to the potential opportunities or 
advantages presented by a security-based swap shall be balanced by an 
equally detailed statement of the corresponding risks.
    (h) Supervision--(1) In general. A security-based swap dealer or 
major security-based swap participant shall establish and maintain a 
system to supervise, and shall diligently supervise, its business and 
the activities of its associated persons. Such a system shall be

[[Page 528]]

reasonably designed to prevent violations of the provisions of 
applicable federal securities laws and the rules and regulations 
thereunder relating to its business as a security-based swap dealer or 
major security-based swap participant, respectively.
    (2) Minimum requirements. The system required by paragraph (h)(1) of 
this section shall, at a minimum, provide for:
    (i) The designation of at least one person with authority to carry 
out the supervisory responsibilities of the security-based swap dealer 
or major security-based swap participant for each type of business in 
which it engages for which registration as a security-based swap dealer 
or major security-based swap participant is required;
    (ii) The use of reasonable efforts to determine that all supervisors 
are qualified, either by virtue of experience or training, to carry out 
their assigned responsibilities; and
    (iii) Establishment, maintenance and enforcement of written policies 
and procedures addressing the supervision of the types of security-based 
swap business in which the security-based swap dealer or major security-
based swap participant is engaged and the activities of its associated 
persons that are reasonably designed to prevent violations of applicable 
federal securities laws and the rules and regulations thereunder, and 
that include, at a minimum:
    (A) Procedures for the review by a supervisor of transactions for 
which registration as a security-based swap dealer or major security-
based swap participant is required;
    (B) Procedures for the review by a supervisor of incoming and 
outgoing written (including electronic) correspondence with 
counterparties or potential counterparties and internal written 
communications relating to the security-based swap dealer's or major 
security-based swap participant's business involving security-based 
swaps;
    (C) Procedures for a periodic review, at least annually, of the 
security-based swap business in which the security-based swap dealer or 
major security-based swap participant engages that is reasonably 
designed to assist in detecting and preventing violations of applicable 
federal securities laws and the rules and regulations thereunder;
    (D) Procedures to conduct a reasonable investigation regarding the 
good character, business repute, qualifications, and experience of any 
person prior to that person's association with the security-based swap 
dealer or major security-based swap participant;
    (E) Procedures to consider whether to permit an associated person to 
establish or maintain a securities or commodities account or a trading 
relationship in the name of, or for the benefit of such associated 
person, at another security-based swap dealer, broker, dealer, 
investment adviser, or other financial institution; and if permitted, 
procedures to supervise the trading at the other security-based swap 
dealer, broker, dealer, investment adviser, or financial institution;
    (F) A description of the supervisory system, including the titles, 
qualifications and locations of supervisory persons and the 
responsibilities of each supervisory person with respect to the types of 
business in which the security-based swap dealer or major security-based 
swap participant is engaged;
    (G) Procedures prohibiting an associated person who performs a 
supervisory function from supervising his or her own activities or 
reporting to, or having his or her compensation or continued employment 
determined by, a person or persons he or she is supervising; provided, 
however, that if the security-based swap dealer or major security-based 
swap participant determines, with respect to any of its supervisory 
personnel, that compliance with this requirement is not possible because 
of the firm's size or a supervisory person's position within the firm, 
the security-based swap dealer or major security-based swap participant 
must document the factors used to reach such determination and how the 
supervisory arrangement with respect to such supervisory personnel 
otherwise complies with paragraph (h)(1) of this section, and include a 
summary of such determination in the annual compliance report prepared 
by the security-based swap dealer's or major security-based swap 
participant's chief compliance officer pursuant to Sec.  240.15Fk-1(c);

[[Page 529]]

    (H) Procedures reasonably designed to prevent the supervisory system 
required by paragraph (h)(1) of this section from being compromised due 
to the conflicts of interest that may be present with respect to the 
associated person being supervised, including the position of such 
person, the revenue such person generates for the security-based swap 
dealer or major security-based swap participant, or any compensation 
that the associated person conducting the supervision may derive from 
the associated person being supervised; and
    (I) Procedures reasonably designed, taking into consideration the 
nature of such security-based swap dealer's or major security-based swap 
participant's business, to comply with the duties set forth in section 
15F(j) of the Act.
    (3) Failure to supervise. A security-based swap dealer or major 
security-based swap participant or an associated person of a security-
based swap dealer or major security-based swap participant shall not be 
deemed to have failed to diligently supervise any other person, if such 
other person is not subject to his or her supervision, or if:
    (i) The security-based swap dealer or major security-based swap 
participant has established and maintained written policies and 
procedures as required in Sec.  240.15Fh-3(h)(2)(iii), and a documented 
system for applying those policies and procedures, that would reasonably 
be expected to prevent and detect, insofar as practicable, any violation 
of the federal securities laws and the rules and regulations thereunder 
relating to security-based swaps; and
    (ii) The security-based swap dealer or major security-based swap 
participant, or associated person of the security-based swap dealer or 
major security-based swap participant, has reasonably discharged the 
duties and obligations required by such written policies and procedures 
and documented system and did not have a reasonable basis to believe 
that such written policies and procedures and documented system were not 
being followed.
    (4) Maintenance of written supervisory procedures. A security-based 
swap dealer or major security-based swap participant shall:
    (i) Promptly amend its written supervisory procedures as appropriate 
when material changes occur in applicable securities laws or rules or 
regulations thereunder, and when material changes occur in its business 
or supervisory system; and
    (ii) Promptly communicate any material amendments to its supervisory 
procedures to all associated persons to whom such amendments are 
relevant based on their activities and responsibilities.

[81 FR 30144, May 13, 2016]



Sec.  240.15Fh-4  Antifraud provisions for security-based swap dealers
and major security-based swap participants; special requirements for 
security-based swap dealers acting as advisors to special entities.

    (a) Antifraud provisions. It shall be unlawful for a security-based 
swap dealer or major security-based swap participant:
    (1) To employ any device, scheme, or artifice to defraud any special 
entity or prospective customer who is a special entity;
    (2) To engage in any transaction, practice, or course of business 
that operates as a fraud or deceit on any special entity or prospective 
customer who is a special entity; or
    (3) To engage in any act, practice, or course of business that is 
fraudulent, deceptive, or manipulative.
    (b) Special requirements for security-based swap dealers acting as 
advisors to special entities. A security-based swap dealer that acts as 
an advisor to a special entity regarding a security-based swap shall 
comply with the following requirements:
    (1) Duty. The security-based swap dealer shall have a duty to make a 
reasonable determination that any security-based swap or trading 
strategy involving a security-based swap recommended by the security-
based swap dealer is in the best interests of the special entity.
    (2) Reasonable efforts. The security-based swap dealer shall make 
reasonable efforts to obtain such information that the security-based 
swap dealer considers necessary to make a reasonable determination that 
a security-

[[Page 530]]

based swap or trading strategy involving a security-based swap is in the 
best interests of the special entity. This information shall include, 
but not be limited to:
    (i) The authority of the special entity to enter into a security-
based swap;
    (ii) The financial status of the special entity, as well as future 
funding needs;
    (iii) The tax status of the special entity;
    (iv) The hedging, investment, financing or other objectives of the 
special entity;
    (v) The experience of the special entity with respect to entering 
into security-based swaps, generally, and security-based swaps of the 
type and complexity being recommended;
    (vi) Whether the special entity has the financial capability to 
withstand changes in market conditions during the term of the security-
based swap; and
    (vii) Such other information as is relevant to the particular facts 
and circumstances of the special entity, market conditions and the type 
of security-based swap or trading strategy involving a security-based 
swap being recommended.
    (3) Exception. The requirements of this paragraph (b) shall not 
apply with respect to a security-based swap if:
    (i) The transaction is executed on a registered or exempt security-
based swap execution facility or registered national securities 
exchange; and
    (ii) The security-based swap dealer does not know the identity of 
the counterparty at a reasonably sufficient time prior to execution of 
the transaction to permit the security-based swap dealer to comply with 
the obligations of paragraph (b) of this section.

[81 FR 30144, May 13, 2016]



Sec.  240.15Fh-5  Special requirements for security-based swap dealers
and major security-based swap participants acting as counterparties to
special entities.

    (a)(1) A security-based swap dealer or major security-based swap 
participant that offers to enter into or enters into a security-based 
swap with a special entity, other than a special entity defined in Sec.  
240.15Fh-2(d)(3), must have a reasonable basis to believe that the 
special entity has a qualified independent representative. For these 
purposes, a qualified independent representative is a representative 
that:
    (i) Has sufficient knowledge to evaluate the transaction and risks;
    (ii) Is not subject to a statutory disqualification;
    (iii) Undertakes a duty to act in the best interests of the special 
entity;
    (iv) Makes appropriate and timely disclosures to the special entity 
of material information concerning the security-based swap;
    (v) Evaluates, consistent with any guidelines provided by the 
special entity, the fair pricing and the appropriateness of the 
security-based swap;
    (vi) In the case of a special entity defined in Sec. Sec.  240.15Fh-
2(d)(2) or (5), is a person that is subject to rules of the Commission, 
the Commodity Futures Trading Commission or a self-regulatory 
organization subject to the jurisdiction of the Commission or the 
Commodity Futures Trading Commission prohibiting it from engaging in 
specified activities if certain political contributions have been made, 
provided that this paragraph (a)(1)(vi) shall not apply if the 
independent representative is an employee of the special entity; and
    (vii) Is independent of the security-based swap dealer or major 
security-based swap participant.
    (A) A representative of a special entity is independent of a 
security-based swap dealer or major security-based swap participant if 
the representative does not have a relationship with the security-based 
swap dealer or major security-based swap participant, whether 
compensatory or otherwise, that reasonably could affect the independent 
judgment or decision-making of the representative.
    (B) A representative of a special entity will be deemed to be 
independent of a security-based swap dealer or major security-based swap 
participant if:
    (1) The representative is not and, within one year of representing 
the special entity in connection with the security-based swap, was not 
an associated person of the security-based swap dealer or major 
security-based swap participant;

[[Page 531]]

    (2) The representative provides timely disclosures to the special 
entity of all material conflicts of interest that could reasonably 
affect the judgment or decision making of the representative with 
respect to its obligations to the special entity and complies with 
policies and procedures reasonably designed to manage and mitigate such 
material conflicts of interest; and
    (3) The security-based swap dealer or major security-based swap 
participant did not refer, recommend, or introduce the representative to 
the special entity within one year of the representative's 
representation of the special entity in connection with the security-
based swap.
    (2) A security-based swap dealer or major security-based swap 
participant that offers to enter into or enters into a security-based 
swap with a special entity as defined in Sec.  240.15Fh-2(d)(3) must 
have a reasonable basis to believe that the special entity has a 
representative that is a fiduciary as defined in section 3 of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002).
    (b) Safe harbor. (1) A security-based swap dealer or major security-
based swap participant shall be deemed to have a reasonable basis to 
believe that the special entity, other than a special entity defined in 
Sec.  240.15Fh-2(d)(3), has a representative that satisfies the 
applicable requirements of paragraph (a)(1) of this section, provided 
that:
    (i) The special entity represents in writing to the security-based 
swap dealer or major security-based swap participant that it has 
complied in good faith with written policies and procedures reasonably 
designed to ensure that it has selected a representative that satisfies 
the applicable requirements of paragraph (a)(1) of this section, and 
that such policies and procedures provide for ongoing monitoring of the 
performance of such representative consistent with the requirements of 
paragraph (a)(1) of this section; and
    (ii) The representative represents in writing to the special entity 
and security-based swap dealer or major security-based swap participant 
that the representative:
    (A) Has policies and procedures reasonably designed to ensure that 
it satisfies the applicable requirements of paragraph (a)(1) of this 
section;
    (B) Meets the independence test in paragraph (a)(1)(vii) of this 
section; has the knowledge required under paragraph (a)(1)(i) of this 
section; is not subject to a statutory disqualification under paragraph 
(a)(1)(ii) of this section; undertakes a duty to act in the best 
interests of the special entity as required under paragraph (a)(1)(iii) 
of this section; and is subject to the requirements regarding political 
contributions, as applicable, under paragraph (a)(1)(vi) of this 
section; and
    (C) Is legally obligated to comply with the applicable requirements 
of paragraph (a)(1) of this section by agreement, condition of 
employment, law, rule, regulation, or other enforceable duty.
    (2) A security-based swap dealer or major security-based swap 
participant shall be deemed to have a reasonable basis to believe that a 
special entity defined in Sec.  240.15Fh-2(d)(3) of this section has a 
representative that satisfies the applicable requirements in paragraph 
(a)(2) of this section, provided that the special entity provides in 
writing to the security-based swap dealer or major security-based swap 
participant the representative's name and contact information, and 
represents in writing that the representative is a fiduciary as defined 
in section 3 of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1002).
    (c) Before initiation of a security-based swap with a special 
entity, a security-based swap dealer shall disclose to the special 
entity in writing the capacity in which the security-based swap dealer 
is acting in connection with the security-based swap and, if the 
security-based swap dealer engages in business with the counterparty in 
more than one capacity, the security-based swap dealer shall disclose 
the material differences between such capacities and any other financial 
transaction or service involving the counterparty.
    (d) The requirements of this section shall not apply with respect to 
a security-based swap if:
    (1) The transaction is executed on a registered or exempt security-
based

[[Page 532]]

swap execution facility or registered national securities exchange; and
    (2) The security-based swap dealer or major security-based swap 
participant does not know the identity of the counterparty at a 
reasonably sufficient time prior to execution of the transaction to 
permit the security-based swap dealer or major security-based swap 
participant to comply with the obligations of paragraphs (a) through (c) 
of this section.

[81 FR 30144, May 13, 2016]



Sec.  240.15Fh-6  Political contributions by certain security-based
swap dealers.

    (a) Definitions. For the purposes of this section:
    (1) The term contribution means any gift, subscription, loan, 
advance, or deposit of money or anything of value made:
    (i) For the purpose of influencing any election for federal, state 
or local office;
    (ii) For payment of debt incurred in connection with any such 
election; or
    (iii) For transition or inaugural expenses incurred by the 
successful candidate for state or local office.
    (2) The term covered associate means:
    (i) Any general partner, managing member or executive officer, or 
other person with a similar status or function;
    (ii) Any employee who solicits a municipal entity to enter into a 
security-based swap with the security-based swap dealer and any person 
who supervises, directly or indirectly, such employee; and
    (iii) A political action committee controlled by the security-based 
swap dealer or by a person described in paragraphs (a)(2)(i) and (ii) of 
this section.
    (3) The term executive officer of a security-based swap dealer 
means:
    (i) The president;
    (ii) Any vice president in charge of a principal business unit, 
division or function (such as sales, administration or finance);
    (iii) Any other officer of the security-based swap dealer who 
performs a policy-making function; or
    (iv) Any other person who performs similar policy-making functions 
for the security-based swap dealer.
    (4) The term municipal entity is defined in section 15B(e)(8) of the 
Act.
    (5) The term official of a municipal entity means any person 
(including any election committee for such person) who was, at the time 
of the contribution, an incumbent, candidate or successful candidate for 
elective office of a municipal entity, if the office:
    (i) Is directly or indirectly responsible for, or can influence the 
outcome of, the selection of a security-based swap dealer by a municipal 
entity; or
    (ii) Has authority to appoint any person who is directly or 
indirectly responsible for, or can influence the outcome of, the 
selection of a security-based swap dealer by a municipal entity.
    (6) The term payment means any gift, subscription, loan, advance, or 
deposit of money or anything of value.
    (7) The term regulated person means:
    (i) A person that is subject to rules of the Commission, the 
Commodity Futures Trading Commission or a self-regulatory organization 
subject to the jurisdiction of the Commission or the Commodity Futures 
Trading Commission prohibiting it from engaging in specified activities 
if certain political contributions have been made, or its officers or 
employees;
    (ii) A general partner, managing member or executive officer of such 
person, or other individual with a similar status or function; or
    (iii) An employee of such person who solicits a municipal entity for 
the security-based swap dealer and any person who supervises, directly 
or indirectly, such employee.
    (8) The term solicit means a direct or indirect communication by any 
person with a municipal entity for the purpose of obtaining or retaining 
an engagement related to a security-based swap.
    (b) Prohibitions and exceptions. (1) It shall be unlawful for a 
security-based swap dealer to offer to enter into, or enter into, a 
security-based swap, or a trading strategy involving a security-based 
swap, with a municipal entity within two years after any contribution to 
an official of such municipal entity was made by the security-based swap 
dealer, or by any covered associate of the security-based swap dealer.

[[Page 533]]

    (2) The prohibition in paragraph (b)(1) of this section does not 
apply:
    (i) If the only contributions made by the security-based swap dealer 
to an official of such municipal entity were made by a covered 
associate, if a natural person:
    (A) To officials for whom the covered associate was entitled to vote 
at the time of the contributions, if the contributions in the aggregate 
do not exceed $350 to any one official per election; or
    (B) To officials for whom the covered associate was not entitled to 
vote at the time of the contributions, if the contributions in the 
aggregate do not exceed $150 to any one official, per election;
    (ii) To a security-based swap dealer as a result of a contribution 
made by a natural person more than six months prior to becoming a 
covered associate of the security-based swap dealer, however, this 
exclusion shall not apply if the natural person, after becoming a 
covered associate, solicits the municipal entity on behalf of the 
security-based swap dealer to offer to enter into, or to enter into, 
security-based swap, or a trading strategy involving a security-based 
swap; or
    (iii) With respect to a security-based swap that is executed on a 
registered national securities exchange or registered or exempt 
security-based swap execution facility where the security-based swap 
dealer does not know the identity of the counterparty to the transaction 
at a reasonably sufficient time prior to execution of the transaction to 
permit the security-based swap dealer to comply with the obligations of 
paragraph (b)(1) of this section.
    (3) No security-based swap dealer or any covered associate of the 
security-based swap dealer shall:
    (i) Provide or agree to provide, directly or indirectly, payment to 
any person to solicit a municipal entity to offer to enter into, or to 
enter into, a security-based swap or any trading strategy involving a 
security-based swap with that security-based swap dealer unless such 
person is a regulated person; or
    (ii) Coordinate, or solicit any person or political action committee 
to make, any:
    (A) Contribution to an official of a municipal entity with which the 
security-based swap dealer is offering to enter into, or has entered 
into, a security-based swap or a trading strategy involving a security-
based swap; or
    (B) Payment to a political party of a state or locality with which 
the security-based swap dealer is offering to enter into, or has entered 
into, a security-based swap or a trading strategy involving a security-
based swap.
    (c) Circumvention of rule. No security-based swap dealer shall, 
directly or indirectly, through or by any other person or means, do any 
act that would result in a violation of paragraph (a) or (b) of this 
section.
    (d) Requests for exemption. The Commission, upon application, may 
conditionally or unconditionally exempt a security-based swap dealer 
from the prohibition under paragraph (b)(1) of this section. In 
determining whether to grant an exemption, the Commission will consider, 
among other factors:
    (1) Whether the exemption is necessary or appropriate in the public 
interest and consistent with the protection of investors and the 
purposes of the Act;
    (2) Whether the security-based swap dealer:
    (i) Before the contribution resulting in the prohibition was made, 
adopted and implemented policies and procedures reasonably designed to 
prevent violations of this section;
    (ii) Prior to or at the time the contribution which resulted in such 
prohibition was made, had no actual knowledge of the contribution; and
    (iii) After learning of the contribution:
    (A) Has taken all available steps to cause the contributor involved 
in making the contribution which resulted in such prohibition to obtain 
a return of the contribution; and
    (B) Has taken such other remedial or preventive measures as may be 
appropriate under the circumstances;
    (3) Whether, at the time of the contribution, the contributor was a 
covered associate or otherwise an employee of the security-based swap 
dealer, or was seeking such employment;

[[Page 534]]

    (4) The timing and amount of the contribution which resulted in the 
prohibition;
    (5) The nature of the election (e.g., federal, state or local); and
    (6) The contributor's apparent intent or motive in making the 
contribution that resulted in the prohibition, as evidenced by the facts 
and circumstances surrounding the contribution.
    (e) Prohibitions inapplicable. (1) The prohibitions under paragraph 
(b) of this section shall not apply to a contribution made by a covered 
associate of the security-based swap dealer if:
    (i) The security-based swap dealer discovered the contribution 
within 120 calendar days of the date of such contribution;
    (ii) The contribution did not exceed $350; and
    (iii) The covered associate obtained a return of the contribution 
within 60 calendar days of the date of discovery of the contribution by 
the security-based swap dealer.
    (2) A security-based swap dealer that has more than 50 covered 
associates may not rely on paragraph (e)(1) of this section more than 
three times in any 12-month period, while a security-based swap dealer 
that has 50 or fewer covered associates may not rely on paragraph (e)(1) 
of this section more than twice in any 12-month period.
    (3) A security-based swap dealer may not rely on paragraph (e)(1) of 
this section more than once for any covered associate, regardless of the 
time between contributions.

[81 FR 30144, May 13, 2016]



Sec.  240.15Fi-1  Definitions.

    For the purposes of Sec. Sec.  240.15Fi-1 through 240.15Fi-5:
    (a) The term bilateral portfolio compression exercise means an 
exercise by which two security-based swap counterparties wholly 
terminate or change the notional value of some or all of the security-
based swaps submitted by the counterparties for inclusion in the 
portfolio compression exercise and, depending on the methodology 
employed, replace the terminated security-based swaps with other 
security-based swaps whose combined notional value (or some other 
measure of risk) is less than the combined notional value (or some other 
measure of risk) of the terminated security-based swaps in the exercise.
    (b) The term business day means any day other than a Saturday, 
Sunday, or legal holiday.
    (c) Solely for purposes of Sec.  240.15Fi-2, the term clearing 
agency means a clearing agency as defined in section 3(a)(23) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(23)) that is 
registered pursuant to section 17A of the Securities Exchange Act of 
1934 (15 U.S.C. 78q-1) and provides central counterparty services for 
security-based swap transactions.
    (d) The term clearing transaction means a security-based swap that 
has a clearing agency as a direct counterparty.
    (e) The term day of execution means the calendar day of the 
counterparty to the security-based swap transaction that ends the 
latest, provided that if a security-based swap transaction is:
    (1) Entered into after 4:00 p.m. in the place of a counterparty; or
    (2) Entered into on a day that is not a business day in the place of 
a counterparty, then such security-based swap transaction shall be 
deemed to have been entered into by that counterparty on the immediately 
succeeding business day of that counterparty, and the day of execution 
shall be determined with reference to such business day.
    (f) The term execution means the point at which the counterparties 
become irrevocably bound to a transaction under applicable law.
    (g) The term financial counterparty means a counterparty that is not 
a security-based swap dealer or a major security-based swap participant 
and that is one of the following:
    (1) A swap dealer;
    (2) A major swap participant;
    (3) A commodity pool as defined in section 1a(10) of the Commodity 
Exchange Act (7 U.S.C. 1a(10));
    (4) A private fund as defined in section 202(a)(29) of the 
Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a));
    (5) An employee benefit plan as defined in paragraphs (3) and (32) 
of section 3 of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1002); and

[[Page 535]]

    (6) A person predominantly engaged in activities that are in the 
business of banking, or in activities that are financial in nature, as 
defined in section 4(k) of the Bank Holding Company Act of 1956 (12 
U.S.C. 1843k).
    (h) The term fully offsetting security-based swaps means security-
based swaps of equivalent terms where no net cash flow would be owed to 
either counterparty after the offset of payment obligations thereunder.
    (i) The term material terms means each term that is required to be 
reported to a registered security-based swap data repository or the 
Commission pursuant to Sec.  242.901 of this chapter; provided, however, 
that such definition does not include any term that is not relevant to 
the ongoing rights and obligations of the parties and the valuation of 
the security-based swap.
    (j) The term multilateral portfolio compression exercise means an 
exercise by which multiple security-based swap counterparties wholly 
terminate or change the notional value of some or all of the security-
based swaps submitted by the counterparties for inclusion in the 
portfolio compression exercise and, depending on the methodology 
employed, replace the terminated security-based swaps with other 
security-based swaps whose combined notional value (or some other 
measure of risk) is less than the combined notional value (or some other 
measure of risk) of the terminated security-based swaps in the exercise.
    (k) The term national securities exchange means an exchange as 
defined in section 3(a)(1) of the Securities Exchange Act of 1934 (15 
U.S.C. 78c(a)(1)) that is registered pursuant to section 6 of the 
Securities Exchange Act of 1934 (15 U.S.C. 78f).
    (l) The term portfolio reconciliation means any process by which the 
counterparties to one or more security-based swaps:
    (1) Exchange the material terms of all security-based swaps in the 
security-based swap portfolio between the counterparties;
    (2) Exchange each counterparty's valuation of each security-based 
swap in the security-based swap portfolio between the counterparties as 
of the close of business on the immediately preceding business day; and
    (3) Resolve any discrepancy in valuations or material terms.
    (m) The term prudential regulator has the meaning given to the term 
in section 3(a)(74) of the Act (15 U.S.C. 78c(a)(74)) and includes the 
Board of Governors of the Federal Reserve System, the Office of the 
Comptroller of the Currency, the Federal Deposit Insurance Corporation, 
the Farm Credit Association, and the Federal Housing Finance Agency, as 
applicable to the security-based swap dealer or major security-based 
swap participant.
    (n) The term security-based swap execution facility means a 
security-based swap execution facility as defined in section 3(a)(77) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(77)) that is 
registered pursuant to section 3D of the Securities Exchange Act of 1934 
(15 U.S.C. 78c-4).
    (o) The term security-based swap portfolio means all security-based 
swaps currently in effect between a particular security-based swap 
dealer or major security-based swap participant and a particular 
counterparty.
    (p) The term trade acknowledgment means a written or electronic 
record of a security-based swap transaction sent by one counterparty of 
the security-based swap transaction to the other.
    (q) The term valuation means the current market value or net present 
value of a security-based swap.
    (r) The term verification means the process by which a trade 
acknowledgment has been manually, electronically, or by some other 
legally equivalent means, signed by the receiving counterparty.

[85 FR 6412, Feb. 4, 2020]



Sec.  240.15Fi-2  Acknowledgment and verification of security-based swap
transactions.

    (a) Trade acknowledgment requirement. In any transaction in which a 
security-based swap dealer or major security-based swap participant 
purchases from or sells to any counterparty a security-based swap, a 
trade acknowledgment must be provided by:
    (1) The security-based swap dealer, if the transaction is between a 
security-

[[Page 536]]

based swap dealer and a major security-based swap participant;
    (2) The security-based swap dealer or major security-based swap 
participant, if only one counterparty in the transaction is a security-
based swap dealer or major security-based swap participant; or
    (3) The counterparty that the counterparties have agreed will 
provide the trade acknowledgment in any transaction other than one 
described by paragraph (a)(1) or (a)(2) of this section.
    (b) Prescribed time. Any trade acknowledgment required by paragraph 
(a) of this section must be provided promptly, but in any event by the 
end of the first business day following the day of execution.
    (c) Form and content of trade acknowledgment. Any trade 
acknowledgment required by paragraph (a) of this section must be 
provided through electronic means that provide reasonable assurance of 
delivery and a record of transmittal, and must disclose all the terms of 
the security-based swap transaction.
    (d) Trade verification. (1) A security-based swap dealer or major 
security-based swap participant must establish, maintain, and enforce 
written policies and procedures that are reasonably designed to obtain 
prompt verification of the terms of a trade acknowledgment provided 
pursuant to paragraph (a) of this section.
    (2) A security-based swap dealer or major security-based swap 
participant must promptly verify the accuracy of, or dispute with its 
counterparty, the terms of a trade acknowledgment it receives pursuant 
to paragraph (a) of this section.
    (e) Exception for clearing transactions. A security-based swap 
dealer or major security-based swap participant is excepted from the 
requirements of this section with respect to any clearing transaction.
    (f) Exception for transactions executed on a security-based swap 
execution facility or national securities exchange or accepted for 
clearing by a clearing agency.
    (1) A security-based swap dealer or major security-based swap 
participant is excepted from the requirements of this subsection with 
respect to any security-based swap transaction executed on a security-
based swap execution facility or national securities exchange, provided 
that the rules, procedures or processes of the security-based swap 
execution facility or national securities exchange provide for the 
acknowledgment and verification of all terms of the security-based swap 
transaction no later than the time required by paragraphs (b) and (d)(2) 
of this section.
    (2) A security-based swap dealer or major security-based swap 
participant is excepted from the requirements of this subsection with 
respect to any security-based swap transaction that is submitted for 
clearing to a clearing agency, provided that:
    (i) The security-based swap transaction is submitted for clearing as 
soon as technologically practicable, but in any event no later than the 
time established for providing a trade acknowledgment under paragraph 
(b) of this section; and
    (ii) The rules, procedures or processes of the clearing agency 
provide for the acknowledgment and verification of all terms of the 
security-based swap transaction prior to or at the same time that the 
security-based swap transaction is accepted for clearing.
    (3) If a security-based swap dealer or major security-based swap 
participant receives notice that a security-based swap transaction has 
not been acknowledged and verified pursuant to the rules, procedures or 
processes of a security-based swap execution facility or a national 
securities exchange, or accepted for clearing by a clearing agency, the 
security-based swap dealer or major security-based swap participant 
shall comply with the requirements of this section with respect to such 
security-based swap transaction as if such security-based swap 
transaction were executed at the time the security-based swap dealer or 
major security-based swap participant receives such notice.
    (g) Exemption from Sec.  240.10b-10. A security-based swap dealer or 
major security-based swap participant that is also a broker or dealer, 
is purchasing from or selling to any counterparty, and that complies 
with paragraph (a) or

[[Page 537]]

(d)(2) of this section with respect to the security-based swap 
transaction, is exempt from the requirements of Sec.  240.10b-10 with 
respect to the security-based swap transaction.

[81 FR 39844, June 17, 2016]



Sec.  240.15Fi-3  Security-based swap portfolio reconciliation.

    (a) Security-based swaps with security-based swap dealers or major 
security-based swap participants. Each security-based swap dealer and 
major security-based swap participant shall engage in portfolio 
reconciliation as follows for all security-based swaps in which its 
counterparty is also a security-based swap dealer or major security-
based swap participant.
    (1) Each security-based swap dealer or major security-based swap 
participant shall agree in writing with each of its counterparties on 
the terms of the portfolio reconciliation including, if applicable, 
agreement on the selection of any third party service provider who may 
be performing the portfolio reconciliation.
    (2) The portfolio reconciliation may be performed on a bilateral 
basis by the counterparties or by a third party selected by the 
counterparties in accordance with paragraph (a)(1) of this section.
    (3) The portfolio reconciliation shall be performed no less 
frequently than:
    (i) Once each business day for each security-based swap portfolio 
that includes 500 or more security-based swaps;
    (ii) Once each week for each security-based swap portfolio that 
includes more than 50 but fewer than 500 security-based swaps on any 
business day during the week; and
    (iii) Once each calendar quarter for each security-based swap 
portfolio that includes no more than 50 security-based swaps at any time 
during the calendar quarter.
    (4) Each security-based swap dealer and major security-based swap 
participant shall resolve immediately any discrepancy in a material term 
of a security-based swap identified as part of a portfolio 
reconciliation or otherwise.
    (5) Each security-based swap dealer and major security-based swap 
participant shall establish, maintain, and follow written policies and 
procedures reasonably designed to resolve any discrepancy in a valuation 
identified as part of a portfolio reconciliation or otherwise as soon as 
possible, but in any event within five business days after the date on 
which the discrepancy is first identified, provided that the security-
based swap dealer and major security-based swap participant establishes, 
maintains, and follows written policies and procedures reasonably 
designed to identify how the security-based swap dealer or major 
security-based swap participant will comply with any variation margin 
requirements under section 15F(e) of the Act (15 U.S.C. 78o-10(e)) and 
Sec.  240.18a-3 (and any subsequent regulations promulgated pursuant to 
section 15F(e) of the Act (15 U.S.C. 78o-10(e))) pending resolution of 
the discrepancy in valuation. For purposes of this paragraph (a)(5), a 
difference between the lower valuation and the higher valuation of less 
than 10 percent of the higher valuation need not be deemed a 
discrepancy.
    (b) Security-based swaps with entities other than security-based 
swap dealers or major security-based swap participants. Each security-
based swap dealer and major security-based swap participant shall 
establish, maintain, and follow written policies and procedures 
reasonably designed to ensure that it engages in portfolio 
reconciliation for all security-based swaps in which its counterparty is 
neither a security-based swap dealer nor a major security-based swap 
participant as follows.
    (1) Each security-based swap dealer or major security-based swap 
participant shall agree in writing with each of its counterparties on 
the terms of the portfolio reconciliation including, if applicable, 
agreement on the selection of any third party service provider who may 
be performing the reconciliation.
    (2) The portfolio reconciliation may be performed on a bilateral 
basis by the counterparties or by one or more third parties selected by 
the counterparties in accordance with paragraph (b)(1) of this section.
    (3) The portfolio reconciliation will be required to be performed no 
less frequently than:
    (i) Once each calendar quarter for each security-based swap 
portfolio that

[[Page 538]]

includes more than 100 security-based swaps at any time during the 
calendar quarter; and
    (ii) Once annually for each security-based swap portfolio that 
includes no more than 100 security-based swaps at any time during the 
calendar year.
    (4) Each security-based swap dealer or major security-based swap 
participant shall establish, maintain, and follow written procedures 
reasonably designed to resolve any discrepancies in the valuation or 
material terms of each security-based swap identified as part of a 
portfolio reconciliation or otherwise with a counterparty that is 
neither a security-based swap dealer nor major security-based swap 
participant in a timely fashion. For purposes of this paragraph (b)(4), 
a difference between the lower valuation and the higher valuation of 
less than 10 percent of the higher valuation need not be deemed a 
discrepancy.
    (c) Reporting of security-based swap valuation disputes--(1) Notice 
requirement. Each security-based swap dealer and major security-based 
swap participant shall promptly notify the Commission, in a form and 
manner acceptable to the Commission, and any applicable prudential 
regulator of any security-based swap valuation dispute in excess of 
$20,000,000 (or its equivalent in any other currency), at either the 
transaction or portfolio level, if not resolved within:
    (i) Three business days, if the dispute is with a counterparty that 
is a security-based swap dealer or major security-based swap 
participant; or
    (ii) Five business days, if the dispute is with a counterparty that 
is not a security-based swap dealer or major security-based swap 
participant.
    (2) Amendments. Each security-based swap dealer and major security-
based swap participant shall notify the Commission, in a form and manner 
acceptable to the Commission, and any applicable prudential regulator, 
if the amount of any security-based swap valuation dispute that was the 
subject of a previous notice made pursuant to paragraph (c)(1) of this 
section increases or decreases by more than $20,000,000 (or its 
equivalent in any other currency), at either the transaction or 
portfolio level. Such amended notice shall be provided to the Commission 
and any applicable prudential regulator no later than the last business 
day of the calendar month in which the applicable security-based swap 
valuation dispute increases or decreases by the applicable dispute 
amount.
    (d) Reconciliation of cleared security-based swaps. Nothing in this 
section shall apply to any security-based swap that is, directly or 
indirectly, submitted to and cleared by a clearing agency registered 
pursuant to section 17A of the Act (15 U.S.C. 78q-1) or by a clearing 
agency that the Commission has exempted from registration by rule or 
order pursuant to section 17A of the Act (15 U.S.C. 78q-1).

[85 FR 6413, Feb. 4, 2020]



Sec.  240.15Fi-4  Security-based swap portfolio compression.

    (a) Portfolio compression with security-based swap dealers and major 
security-based swap participants--(1) Bilateral offset. Each security-
based swap dealer and major security-based swap participant shall 
establish, maintain, and follow written policies and procedures for 
terminating each fully offsetting security-based swap between a 
security-based swap dealer or major security-based swap participant and 
another security-based swap dealer or major security-based swap 
participant in a timely fashion, when appropriate.
    (2) Bilateral compression. Each security-based swap dealer and major 
security-based swap participant shall establish, maintain, and follow 
written policies and procedures for periodically engaging in bilateral 
portfolio compression exercises, when appropriate, with each 
counterparty that is also a security-based swap dealer or major 
security-based swap participant. Such policies and procedures shall 
address, among other things, the evaluation of bilateral portfolio 
compression exercises that are initiated, offered, or sponsored by any 
third party.
    (3) Multilateral compression. Each security-based swap dealer and 
major security-based swap participant shall establish, maintain, and 
follow written policies and procedures for periodically engaging in 
multilateral portfolio compression exercises, when appropriate,

[[Page 539]]

with each counterparty that is also a security-based swap dealer or 
major security-based swap participant. Such policies and procedures 
shall address, among other things, the evaluation of multilateral 
portfolio compression exercises that are initiated, offered, or 
sponsored by any third party.
    (b) Portfolio compression with counterparties other than security-
based swap dealers and major security-based swap participants. Each 
security-based swap dealer and major security-based swap participant 
shall establish, maintain, and follow written policies and procedures 
for periodically terminating fully offsetting security-based swaps and 
for engaging in bilateral or multilateral portfolio compression 
exercises with respect to security-based swaps in which its counterparty 
is an entity other than a security-based swap dealer or major security-
based swap participant, when appropriate and to the extent requested by 
any such counterparty.
    (c) Portfolio compression of cleared security-based swaps. Nothing 
in this section shall apply to any security-based swap that is, directly 
or indirectly, submitted to and cleared by a clearing agency registered 
pursuant to section 17A of the Act (15 U.S.C. 78q-1) or by a clearing 
agency that the Commission has exempted from registration by rule or 
order pursuant to section 17A of the Act (15 U.S.C. 78q-1).

[85 FR 6414, Feb. 4, 2020]



Sec.  240.15Fi-5  Security-based swap trading relationship documentation.

    (a) Scope--(1) Applicability. The requirements of this section shall 
not apply to:
    (i) Security-based swaps executed prior to the date on which a 
security-based swap dealer or major security-based swap participant is 
required to be in compliance with this section;
    (ii) Any security-based swap that is, directly or indirectly, 
submitted to and cleared by a clearing agency registered pursuant to 
section 17A of the Act (15 U.S.C. 78q-1) or by a clearing agency that 
the Commission has exempted from registration by rule or order pursuant 
to section 17A of the Act (15 U.S.C. 78q-1); and
    (iii) Security-based swaps executed anonymously on a national 
securities exchange or a security-based swap execution facility, 
Provided that:
    (A) Such security-based swaps are intended to be cleared and are 
actually submitted for clearing to a clearing agency;
    (B) All terms of such security-based swaps conform to the rules of 
the clearing agency; and
    (C) Upon acceptance of such security-based swap by the clearing 
agency:
    (1) The original security-based swap is extinguished;
    (2) The original security-based swap is replaced by equal and 
opposite security-based swaps with the clearing agency; and
    (3) All terms of the security-based swap shall conform to the 
product specifications of the cleared security-based swap established 
under the clearing agency's rules; and Provided further, That if a 
security-based swap dealer or major security-based swap participant 
receives notice that a security-based swap transaction has not been 
accepted for clearing by a clearing agency, the security-based swap 
dealer or major security-based swap participant shall be required to 
comply with the requirements of this section in all respects promptly 
after receipt of such notice.
    (2) Policies and procedures. Each security-based swap dealer and 
major security-based swap participant shall establish, maintain, and 
follow written policies and procedures reasonably designed to ensure 
that the security-based swap dealer or major security-based swap 
participant executes written security-based swap trading relationship 
documentation with its counterparty that complies with the requirements 
of this section. The policies and procedures shall be approved in 
writing by a senior officer of the security-based swap dealer or major 
security-based swap participant, and a record of the approval shall be 
retained. Other than trade acknowledgements and verifications of 
security-based swap transactions under Sec.  240.15Fi-2, the security-
based swap trading relationship documentation shall be executed prior 
to, or contemporaneously with, executing a security-based swap with any 
counterparty.

[[Page 540]]

    (b) Security-based swap trading relationship documentation. (1) The 
security-based swap trading relationship documentation shall be in 
writing and shall include all terms governing the trading relationship 
between the security-based swap dealer or major security-based swap 
participant and its counterparty, including, without limitation, terms 
addressing payment obligations, netting of payments, events of default 
or other termination events, calculation and netting of obligations upon 
termination, transfer of rights and obligations, governing law, 
valuation, and dispute resolution.
    (2) The security-based swap trading relationship documentation shall 
include all trade acknowledgements and verifications of security-based 
swap transactions under Sec.  240.15Fi-2.
    (3) The security-based swap trading relationship documentation shall 
include credit support arrangements, which shall contain, in accordance 
with applicable requirements under Commission regulations or regulations 
adopted by prudential regulators and without limitation, the following:
    (i) Initial and variation margin requirements, if any;
    (ii) Types of assets that may be used as margin and asset valuation 
haircuts, if any;
    (iii) Investment and re-hypothecation terms for assets used as 
margin for uncleared security-based swaps, if any; and
    (iv) Custodial arrangements for margin assets, including whether 
margin assets are to be segregated with an independent third party, in 
accordance with the notice requirement in section 3E(f)(1)(A) of the Act 
(15 U.S.C. 78c-5(f)(1)(A)) (and either Sec.  240.15c3-3(p)(4)(i) or 
Sec.  240.18a-4(d)(1) thereunder, as applicable), if any.
    (4)(i) The security-based swap trading relationship documentation 
between security-based swap dealers, between major security-based swap 
participants, between a security-based swap dealer and major security-
based swap participant, between a security-based swap dealer or major 
security-based swap participant and a financial counterparty, and, if 
requested by any other counterparty, between a security-based swap 
dealer or major security-based swap participant and such counterparty, 
shall include written documentation in which the parties agree on the 
process, which may include any agreed upon methods, procedures, rules, 
and inputs, for determining the value of each security-based swap at any 
time from execution to the termination, maturity, or expiration of such 
security-based swap for the purposes of complying with the margin 
requirements under section 15F(e) of the Act (15 U.S.C. 78o-10(e)) and 
Sec.  240.18a-3 (and any subsequent regulations promulgated pursuant to 
section 15F(e) of the Act (15 U.S.C. 78o-10(e))), and the risk 
management requirements under section 15F(j) of the Act (15 U.S.C. 78o-
10(j)) of the Act and Sec.  240.15Fh-3(h)(2)(iii)(I) (and any subsequent 
regulations promulgated pursuant to section 15F(j) of the Act (15 U.S.C. 
78o-10(j))). To the maximum extent practicable, the valuation of each 
security-based swap shall be based on recently executed transactions, 
valuations provided by independent third parties, or other objective 
criteria.
    (ii) Such documentation shall include either:
    (A) Alternative methods for determining the value of the security-
based swap for the purposes of complying with this paragraph (b)(4) in 
the event of the unavailability or other failure of any input required 
to value the security-based swap for such purposes; or
    (B) A valuation dispute resolution process by which the value of the 
security-based swap shall be determined for the purposes of complying 
with this paragraph (b)(4).
    (iii) A security-based swap dealer or major security-based swap 
participant is not required to disclose to the counterparty 
confidential, proprietary information about any model it may use to 
value a security-based swap.
    (iv) The parties may agree on changes or procedures for modifying or 
amending the documentation at any time.
    (5) The security-based swap trading relationship documentation of a 
security-based swap dealer or major security-based swap participant 
shall include the following:

[[Page 541]]

    (i) A statement of whether the security-based swap dealer or major 
security-based swap participant is an insured depository institution (as 
defined in 12 U.S.C. 1813) or a financial company (as defined in section 
201(a)(11) of the Dodd-Frank Act, 12 U.S.C. 5381(a)(11));
    (ii) A statement of whether the counterparty is an insured 
depository institution or financial company;
    (iii) A statement that in the event either the security-based swap 
dealer or major security-based swap participant or its counterparty 
becomes a covered financial company (as defined in section 201(a)(8) of 
the Dodd-Frank Wall Street Reform and Consumer Protection Act, 12 U.S.C. 
5381(a)(8)) or is an insured depository institution for which the 
Federal Deposit Insurance Corporation (FDIC) has been appointed as a 
receiver (the ``covered party''), certain limitations under Title II of 
the Dodd-Frank Act or the Federal Deposit Insurance Act may apply to the 
right of the non-covered party to terminate, liquidate, or net any 
security-based swap by reason of the appointment of the FDIC as 
receiver, notwithstanding the agreement of the parties in the security-
based swap trading relationship documentation, and that the FDIC may 
have certain rights to transfer security-based swaps of the covered 
party under section 210(c)(9)(A) of the Dodd-Frank Wall Street Reform 
and Consumer Protection Act, 12 U.S.C. 5390(c)(9)(A), or 12 U.S.C. 
1821(e)(9)(A); and
    (iv) An agreement between the security-based swap dealer or major 
security-based swap participant and its counterparty to provide notice 
if either it or its counterparty becomes or ceases to be an insured 
depository institution or a financial company.
    (6) The security-based swap trading relationship documentation of 
each security-based swap dealer and major security-based swap 
participant shall contain a notice that, upon acceptance of a security-
based swap by a clearing agency:
    (i) The original security-based swap is extinguished;
    (ii) The original security-based swap is replaced by equal and 
opposite security-based swaps with the clearing agency; and
    (iii) All terms of the security-based swap shall conform to the 
product specifications of the cleared security-based swap established 
under the clearing agency's rules.
    (c) Audit of security-based swap trading relationship documentation. 
Each security-based swap dealer and major security-based swap 
participant shall have an independent auditor conduct periodic audits 
sufficient to identify any material weakness in its documentation 
policies and procedures required by this section. A record of the 
results of each audit shall be retained.

[85 FR 6414, Feb. 4, 2020]



Sec.  240.15Fk-1  Designation of chief compliance officer for 
security-based swap dealers and major security-based swap participants.

    (a) In general. A security-based swap dealer and major security-
based swap participant shall designate an individual to serve as a chief 
compliance officer on its registration form.
    (b) Duties. The chief compliance officer shall:
    (1) Report directly to the board of directors or to the senior 
officer of the security-based swap dealer or major security-based swap 
participant; and
    (2) Take reasonable steps to ensure that the registrant establishes, 
maintains and reviews written policies and procedures reasonably 
designed to achieve compliance with the Act and the rules and 
regulations thereunder relating to its business as a security-based swap 
dealer or major security-based swap participant by:
    (i) Reviewing the compliance of the security-based swap dealer or 
major security-based swap participant with respect to the security-based 
swap dealer and major security-based swap participant requirements 
described in section 15F of the Act, and the rules and regulations 
thereunder, where the review shall involve preparing the registrant's 
annual assessment of its written policies and procedures reasonably 
designed to achieve compliance with section 15F of the Act, and the 
rules and regulations thereunder, by the security-based swap dealer or 
major security-based swap participant;

[[Page 542]]

    (ii) Taking reasonable steps to ensure that the registrant 
establishes, maintains and reviews policies and procedures reasonably 
designed to remediate non-compliance issues identified by the chief 
compliance officer through any means, including any:
    (A) Compliance office review;
    (B) Look-back;
    (C) Internal or external audit finding;
    (D) Self-reporting to the Commission and other appropriate 
authorities; or
    (E) Complaint that can be validated; and
    (iii) Taking reasonable steps to ensure that the registrant 
establishes and follows procedures reasonably designed for the handling, 
management response, remediation, retesting, and resolution of non-
compliance issues;
    (3) In consultation with the board of directors or the senior 
officer of the security-based swap dealer or major security-based swap 
participant, take reasonable steps to resolve any material conflicts of 
interest that may arise; and
    (4) Administer each policy and procedure that is required to be 
established pursuant to section 15F of the Act and the rules and 
regulations thereunder.
    (c) Annual reports--(1) In general. The chief compliance officer 
shall annually prepare and sign a compliance report that contains a 
description of the written policies and procedures of the security-based 
swap dealer or major security-based swap participant described in 
paragraph (b) of this section (including the code of ethics and conflict 
of interest policies).
    (2) Requirements. (i) Each compliance report shall also contain, at 
a minimum, a description of:
    (A) The security-based swap dealer or major security-based swap 
participant's assessment of the effectiveness of its policies and 
procedures relating to its business as a security-based swap dealer or 
major security-based participant;
    (B) Any material changes to the registrant's policies and procedures 
since the date of the preceding compliance report;
    (C) Any areas for improvement, and recommended potential or 
prospective changes or improvements to its compliance program and 
resources devoted to compliance;
    (D) Any material non-compliance matters identified; and
    (E) The financial, managerial, operational, and staffing resources 
set aside for compliance with the Act and the rules and regulations 
thereunder relating to its business as a security-based swap dealer or 
major security-based swap participant, including any material 
deficiencies in such resources.
    (ii) A compliance report under paragraph (c)(1) of this section also 
shall:
    (A) Be submitted to the Commission within 30 days following the 
deadline for filing the security-based swap dealer's or major security-
based swap participant's annual financial report with the Commission 
pursuant to section 15F of the Act and rules and regulations thereunder;
    (B) Be submitted to the board of directors and audit committee (or 
equivalent bodies) and the senior officer of the security-based swap 
dealer or major security-based swap participant prior to submission to 
the Commission;
    (C) Be discussed in one or more meetings conducted by the senior 
officer with the chief compliance officer(s) in the preceding 12 months, 
the subject of which addresses the obligations in this section; and
    (D) Include a certification by the chief compliance officer or 
senior officer that, to the best of his or her knowledge and reasonable 
belief and under penalty of law, the information contained in the 
compliance report is accurate and complete in all material respects.
    (iii) Extensions of time. A security-based swap dealer or major 
security-based swap participant may request from the Commission an 
extension of time to submit its compliance report, provided the 
registrant's failure to timely submit the report could not be eliminated 
by the registrant without unreasonable effort or expense. Extensions of 
the deadline will be granted at the discretion of the Commission.

[[Page 543]]

    (iv) Incorporation by reference. A security-based swap dealer or 
major security-based swap participant may incorporate by reference 
sections of a compliance report that have been submitted within the 
current or immediately preceding reporting period to the Commission.
    (v) Amendments. A security-based swap dealer or major security-based 
swap participant shall promptly submit an amended compliance report if 
material errors or omissions in the report are identified. An amendment 
must contain the certification required under paragraph (c)(2)(ii)(D) of 
this section.
    (d) Compensation and removal. The compensation and removal of the 
chief compliance officer shall require the approval of a majority of the 
board of directors of the security-based swap dealer or major security-
based swap participant.
    (e) Definitions. For purposes of this section, references to:
    (1) The board or board of directors shall include a body performing 
a function similar to the board of directors.
    (2) The senior officer shall include the chief executive officer or 
other equivalent officer.
    (3) Complaint that can be validated shall include any written 
complaint by a counterparty involving the security-based swap dealer or 
major security-based swap participant or associated person of a 
security-based swap dealer or major security-based swap participant that 
can be supported upon reasonable investigation.
    (4) A material non-compliance matter means any non-compliance matter 
about which the board of directors of the security-based swap dealer or 
major security-based swap participant would reasonably need to know to 
oversee the compliance of the security-based swap dealer or major 
security-based swap participant, and that involves, without limitation:
    (i) A violation of the federal securities laws relating to its 
business as a security-based swap dealer or major security-based swap 
participant by the firm or its officers, directors, employees or agents;
    (ii) A violation of the policies and procedures relating to its 
business as a security-based swap dealer or major security-based swap 
participant by the firm or its officers, directors, employees or agents; 
or
    (iii) A weakness in the design or implementation of the policies and 
procedures relating to its business as a security-based swap dealer or 
major security-based swap participant.

[81 FR 30144, May 13, 2016]



Sec.  240.15Ga-1  Repurchases and replacements relating to asset-backed
securities.

    (a) General. With respect to any asset-backed security (as that term 
is defined in Section 3(a)(79) of the Securities Exchange Act of 1934 
(15 U.S.C. 78c(a)(79)) for which the underlying transaction agreements 
contain a covenant to repurchase or replace an underlying asset for 
breach of a representation or warranty, a securitizer (as that term is 
defined in Section 15G(a) of the Securities Exchange Act of 1934) shall 
disclose fulfilled and unfulfilled repurchase requests across all trusts 
by providing the information required in paragraph (a)(1) of this 
section concerning all assets securitized by the securitizer that were 
the subject of a demand to repurchase or replace for breach of the 
representations and warranties concerning the pool assets for all asset-
backed securities held by non-affiliates of the securitizer during the 
reporting period.

[[Page 544]]

[GRAPHIC] [TIFF OMITTED] TR26JA11.005

    (1) The table shall:
    (i) Disclose the asset class and group the issuing entities by asset 
class (column (a)).
    (ii) Disclose the name of the issuing entity (as that term is 
defined in Item 1101(f) of Regulation AB (17 CFR

[[Page 545]]

229.1101(f)) of the asset-backed securities. List the issuing entities 
in order of the date of formation (column (a)).

    Instruction to paragraph (a)(1)(ii): Include all issuing entities 
with outstanding asset-backed securities during the reporting period.

    (iii) For each named issuing entity, indicate by check mark whether 
the transaction was registered under the Securities Act of 1933 (column 
(b)) and disclose the CIK number of the issuing entity (column (a)).
    (iv) Disclose the name of the originator of the underlying assets 
(column (c)).

    Instruction to paragraph (a)(1)(iv): Include all originators that 
originated assets in the asset pool for each issuing entity.

    (v) Disclose the number, outstanding principal balance and 
percentage by principal balance of assets at the time of securitization 
(columns (d) through (f)).
    (vi) Disclose the number, outstanding principal balance and 
percentage by principal balance of assets that were subject of a demand 
to repurchase or replace for breach of representations and warranties 
(columns (g) through (i)).
    (vii) Disclose the number, outstanding principal balance and 
percentage by principal balance of assets that were repurchased or 
replaced for breach of representations and warranties (columns (j) 
through (l)).
    (viii) Disclose the number, outstanding principal balance and 
percentage by principal balance of assets that are pending repurchase or 
replacement for breach of representations and warranties due to the 
expiration of a cure period (columns (m) through (o)).
    (ix) Disclose the number, outstanding principal balance and 
percentage by principal balance of assets that are pending repurchase or 
replacement for breach of representations and warranties because the 
demand is currently in dispute (columns (p) through (r)).
    (x) Disclose the number, outstanding principal balance and 
percentage by principal balance of assets that were not repurchased or 
replaced because the demand was withdrawn (columns (s) through (u)).
    (xi) Disclose the number, outstanding principal balance and 
percentage by principal balance of assets that were not repurchased or 
replaced because the demand was rejected (columns (v) through (x)).

    Instruction to paragraphs (a)(1)(vi) through (xi): For purposes of 
these (a)(1)(vi) through (xi) the outstanding principal balance shall be 
the principal balance as of the reporting period end date and the 
percentage by principal balance shall be the outstanding principal 
balance of an asset divided by the outstanding principal balance of the 
asset pool as of the reporting period end date.

    (xii) Provide totals by asset class, issuing entity and for all 
issuing entities for columns that require number of assets and principal 
amounts (columns (d), (e), (g), (h), (j), (k), (m), (n) (p), (q), (s), 
(t), (v) and (w)).

    Instruction 1 to paragraph (a)(1): The table should include any 
activity during the reporting period, including activity related to 
assets subject to demands made prior to the beginning of the reporting 
period.
    Instruction 2 to paragraph (a)(1): Indicate by footnote and provide 
narrative disclosure in order to further explain the information 
presented in the table, as appropriate.

    (2) If any of the information required by this paragraph (a) is 
unknown and not available to the securitizer without unreasonable effort 
or expense, such information may be omitted, provided the securitizer 
provides the information it possesses or can acquire without 
unreasonable effort or expense, and the securitizer includes a statement 
showing that unreasonable effort or expense would be involved in 
obtaining the omitted information. Further, if a securitizer requested 
and was unable to obtain all information with respect to investor 
demands upon a trustee that occurred prior to July 22, 2010, so state by 
footnote. In this case, also state that the disclosures do not contain 
investor demands upon a trustee made prior to July 22, 2010.
    (b) In the case of multiple affiliated securitizers for a single 
asset-backed securities transaction, if one securitizer has filed all 
the disclosures required in order to meet the obligations under 
paragraph (a) of this section, other affiliated securitizers shall not 
be required to separately provide

[[Page 546]]

and file the same disclosures related to the same asset-backed security.
    (c) The disclosures in paragraph (a) of this section shall be 
provided by a securitizer:
    (1) For the three year period ended December 31, 2011, by any 
securitizer that issued an asset-backed security during the period, or 
organized and initiated an asset-backed securities transaction during 
the period, by securitizing an asset, either directly or indirectly, 
including through an affiliate, in each case, if the underlying 
transaction agreements provide a covenant to repurchase or replace an 
underlying asset for breach of a representation or warranty and the 
securitizer has asset-backed securities, containing such a covenant, 
outstanding and held by non-affiliates as of the end of the three year 
period. If a securitizer has no activity to report, it shall indicate by 
checking the appropriate box on Form ABS-15G (17 CFR 249.1400). The 
requirement of this paragraph (c)(1) applies to all issuances of asset-
backed securities whether or not publicly registered under the 
provisions of the Securities Act of 1933. The disclosures required by 
this paragraph (c)(1) shall be filed no later than February 14, 2012.

    Instruction to paragraph (c)(1): For demands made prior to January 
1, 2009, the disclosure should include any related activity subsequent 
to January 1, 2009 associated with such demand.

    (2) For each calendar quarter, by any securitizer that issued an 
asset-backed security during the period, or organized and initiated an 
asset-backed securities transaction by securitizing an asset, either 
directly or indirectly, including through an affiliate, or had 
outstanding asset-backed securities held by non-affiliates during the 
period, in each case, if the underlying transaction agreements provide a 
covenant to repurchase or replace an underlying asset for breach of a 
representation or warranty. The disclosures required by this paragraph 
(c)(2) shall be filed no later than 45 calendar days after the end of 
such calendar quarter:
    (i) Except that, a securitizer may suspend its duty to provide 
periodic quarterly disclosures if no activity occurred during the 
initial filing period in paragraph (c)(1) of this section or during a 
calendar quarter that is required to be reported under paragraph (a) of 
this section. A securitizer shall indicate that it has no activity to 
report by checking the appropriate box on Form ABS-15G (17 CFR 
249.1400). Thereafter, a periodic quarterly report required by this 
paragraph (c)(2) will only be required if a change in the demand, 
repurchase or replacement activity occurs that is required to be 
reported under paragraph (a) of this section during a calendar quarter; 
and
    (ii) Except that, annually, any securitizer that has suspended its 
duty to provide quarterly disclosures pursuant to paragraph (c)(2)(i) of 
this section must confirm that no activity occurred during the previous 
calendar year by checking the appropriate box on Form ABS-15G (17 CFR 
249.1400). The confirmation required by this paragraph (c)(2)(ii) shall 
be filed no later than 45 days after each calendar year.
    (3) Except that, if a securitizer has no asset-backed securities 
outstanding held by non-affiliates, the duty under paragraph (c)(2) of 
this section to file periodically the disclosures required by paragraph 
(a) of this section shall be terminated immediately upon filing a notice 
on Form ABS-15G (17 CFR 249.1400).

[76 FR 4511, Jan. 26, 2011, as amended at 76 FR 54375, Sept. 1, 2011; 79 
FR 57344, Sept. 24, 2014]



Sec.  240.15Ga-2  Findings and conclusions of third-party due diligence
reports.

    (a) The issuer or underwriter of an offering of any asset-backed 
security (as that term is defined in Section 3(a)(79) of the Act (15 
U.S.C. 78c(a)(79))) that is to be rated by a nationally recognized 
statistical rating organization must furnish Form ABS-15G (Sec.  
249.1400 of this chapter) to the Commission containing the findings and 
conclusions of any third-party due diligence report obtained by the 
issuer or underwriter at least five business days prior to the first 
sale in the offering.
    Instruction to paragraph (a): Disclosure of the findings and 
conclusions includes, but is not limited to, disclosure of the criteria 
against which the loans were evaluated, and how the evaluated loans 
compared to those criteria along with the basis for including any loans

[[Page 547]]

not meeting those criteria. This disclosure is only required for an 
initial rating and does not need to be furnished in connection with any 
subsequent rating actions. For purposes of this rule, the date of first 
sale is the date on which the first investor is irrevocably 
contractually committed to invest, which, depending on the terms and 
conditions of the contract, could be the date on which the issuer 
receives the investor's subscription agreement or check.
    (b) In the case where the issuer and one or more underwriters have 
obtained the same third-party due diligence report related to a 
particular asset-backed securities transaction, if any one such party 
has furnished all the disclosures required in order to meet the 
obligations under paragraph (a) of this section, the other party or 
parties are not required to separately furnish the same disclosures 
related to such third-party due diligence report.
    (c) If the disclosure required by this rule has been made in the 
prospectus (including an attribution to the third-party that provided 
the third-party due diligence report), the issuer or underwriter may 
refer to that section of the prospectus in Form ABS-15G rather than 
providing the findings and conclusions itself directly in Form ABS-15G.
    (d) For purposes of paragraphs (a) and (b) of this section, issuer 
is defined in Rule 17g-10(d)(2) (Sec.  240.17g-10(d)(2) of this chapter) 
and third-party due diligence report means any report containing 
findings and conclusions of any due diligence services as defined in 
Rule 17g-10(d)(1) (Sec.  240.17g-10(d)(1) of this chapter) performed by 
a third party.
    (e) The requirements of this rule would not apply to an offering of 
an asset-backed security if certain conditions are met, including:
    (1) The offering is not required to be, and is not, registered under 
the Securities Act of 1933;
    (2) The issuer of the rated security is not a U.S. person (as 
defined in Sec.  230.902(k)); and
    (3) All offers and sales of the security by any issuer, sponsor, or 
underwriter linked to the security will occur outside the United States 
(as that phrase is used in Sec. Sec.  230.901 through 230.905 
(Regulation S)).
    (f) The requirements of this rule would not apply to an offering of 
an asset-backed security if certain conditions are met, including:
    (1) The issuer of the rated security is a municipal issuer; and
    (2) The offering is not required to be, and is not, registered under 
the Securities Act of 1933.
    (g) For purposes of paragraph (f) of this section, a municipal 
issuer is an issuer (as that term is defined in Rule 17g-10(d)(2) (Sec.  
240.17g-10(d)(2) of this chapter)) that is any State or Territory of the 
United States, the District of Columbia, any political subdivision of 
any State, Territory or the District of Columbia, or any public 
instrumentality of one or more States, Territories or the District of 
Columbia.
    (h) An offering of an asset-backed security that is exempted from 
the requirements of this rule pursuant to paragraph (f) of this section 
remains subject to the requirements of Section 15E(s)(4)(A) of the Act 
(15 U.S.C. 78o-7(s)(4)(A)), which requires that the issuer or 
underwriter of any asset-backed security shall make publicly available 
the findings and conclusions of any third-party due diligence report 
obtained by the issuer or underwriter.

[79 FR 55261, Sept. 15, 2014; 79 FR 61576, Oct. 14, 2014, as amended at 
84 84 FR 40258, Sept. 13, 2019]



Sec.  240.16a-1  Definition of terms.

    Terms defined in this rule shall apply solely to section 16 of the 
Act and the rules thereunder. These terms shall not be limited to 
section 16(a) of the Act but also shall apply to all other subsections 
under section 16 of the Act.
    (a) The term beneficial owner shall have the following applications:
    (1) Solely for purposes of determining whether a person is a 
beneficial owner of more than ten percent of any class of equity 
securities registered pursuant to section 12 of the Act, the term 
``beneficial owner'' shall mean any person who is deemed a beneficial 
owner pursuant to section 13(d) of the Act and the rules thereunder; 
provided, however, that the following institutions or persons shall not 
be deemed the beneficial owner of securities of such class held for the 
benefit of third parties or in customer or fiduciary accounts in the

[[Page 548]]

ordinary course of business (or in the case of an employee benefit plan 
specified in paragraph (a)(1)(vi) of this section, of securities of such 
class allocated to plan participants where participants have voting 
power) as long as such shares are acquired by such institutions or 
persons without the purpose or effect of changing or influencing control 
of the issuer or engaging in any arrangement subject to Rule 13d-3(b) 
(Sec.  240.13d-3(b)):
    (i) A broker or dealer registered under section 15 of the Act (15 
U.S.C. 78o);
    (ii) A bank as defined in section 3(a)(6) of the Act (15 U.S.C. 
78c);
    (iii) An insurance company as defined in section 3(a)(19) of the Act 
(15 U.S.C. 78c);
    (iv) An investment company registered under section 8 of the 
Investment Company Act of 1940 (15 U.S.C. 80a-8);
    (v) Any person registered as an investment adviser under Section 203 
of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3) or under the 
laws of any state;
    (vi) An employee benefit plan as defined in Section 3(3) of the 
Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. 
1001 et seq. (``ERISA'') that is subject to the provisions of ERISA, or 
any such plan that is not subject to ERISA that is maintained primarily 
for the benefit of the employees of a state or local government or 
instrumentality, or an endowment fund;
    (vii) A parent holding company or control person, provided the 
aggregate amount held directly by the parent or control person, and 
directly and indirectly by their subsidiaries or affiliates that are not 
persons specified in Sec.  240.16a-1 (a)(1)(i) through (x), does not 
exceed one percent of the securities of the subject class;
    (viii) A savings association as defined in Section 3(b) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813);
    (ix) A church plan that is excluded from the definition of an 
investment company under section 3(c)(14) of the Investment Company Act 
of 1940 (15 U.S.C. 80a-30;
    (x) A non-U.S. institution that is the functional equivalent of any 
of the institutions listed in paragraphs (a)(1)(i) through (ix) of this 
section, so long as the non-U.S. institution is subject to a regulatory 
scheme that is substantially comparable to the regulatory scheme 
applicable to the equivalent U.S. institution and the non-U.S. 
institution is eligible to file a Schedule 13G pursuant to Sec.  
240.13d-1(b)(1)(ii)(J); and
    (xi) A group, provided that all the members are persons specified in 
Sec.  240.16a-1 (a)(1)(i) through (x).

    Note to paragraph (a): Pursuant to this section, a person deemed a 
beneficial owner of more than ten percent of any class of equity 
securities registered under section 12 of the Act would file a Form 3 
(Sec.  249.103), but the securities holdings disclosed on Form 3, and 
changes in beneficial ownership reported on subsequent Forms 4 (Sec.  
249.104) or 5 (Sec.  249.105), would be determined by the definition of 
``beneficial owner'' in paragraph (a)(2) of this section.

    (2) Other than for purposes of determining whether a person is a 
beneficial owner of more than ten percent of any class of equity 
securities registered under Section 12 of the Act, the term beneficial 
owner shall mean any person who, directly or indirectly, through any 
contract, arrangement, understanding, relationship or otherwise, has or 
shares a direct or indirect pecuniary interest in the equity securities, 
subject to the following:
    (i) The term pecuniary interest in any class of equity securities 
shall mean the opportunity, directly or indirectly, to profit or share 
in any profit derived from a transaction in the subject securities.
    (ii) The term indirect pecuniary interest in any class of equity 
securities shall include, but not be limited to:
    (A) Securities held by members of a person's immediate family 
sharing the same household; provided, however, that the presumption of 
such beneficial ownership may be rebutted; see also Sec.  240.16a-
1(a)(4);
    (B) A general partner's proportionate interest in the portfolio 
securities held by a general or limited partnership. The general 
partner's proportionate interest, as evidenced by the partnership 
agreement in effect at the time of the transaction and the partnership's 
most recent financial statements, shall be the greater of:

[[Page 549]]

    (1) The general partner's share of the partnership's profits, 
including profits attributed to any limited partnership interests held 
by the general partner and any other interests in profits that arise 
from the purchase and sale of the partnership's portfolio securities; or
    (2) The general partner's share of the partnership capital account, 
including the share attributable to any limited partnership interest 
held by the general partner.
    (C) A performance-related fee, other than an asset-based fee, 
received by any broker, dealer, bank, insurance company, investment 
company, investment adviser, investment manager, trustee or person or 
entity performing a similar function; provided, however, that no 
pecuniary interest shall be present where:
    (1) The performance-related fee, regardless of when payable, is 
calculated based upon net capital gains and/or net capital appreciation 
generated from the portfolio or from the fiduciary's overall performance 
over a period of one year or more; and
    (2) Equity securities of the issuer do not account for more than ten 
percent of the market value of the portfolio. A right to a 
nonperformance-related fee alone shall not represent a pecuniary 
interest in the securities;
    (D) A person's right to dividends that is separated or separable 
from the underlying securities. Otherwise, a right to dividends alone 
shall not represent a pecuniary interest in the securities;
    (E) A person's interest in securities held by a trust, as specified 
in Sec.  240.16a-8(b); and
    (F) A person's right to acquire equity securities through the 
exercise or conversion of any derivative security, whether or not 
presently exercisable.
    (iii) A shareholder shall not be deemed to have a pecuniary interest 
in the portfolio securities held by a corporation or similar entity in 
which the person owns securities if the shareholder is not a controlling 
shareholder of the entity and does not have or share investment control 
over the entity's portfolio.
    (3) Where more than one person subject to section 16 of the Act is 
deemed to be a beneficial owner of the same equity securities, all such 
persons must report as beneficial owners of the securities, either 
separately or jointly, as provided in Sec.  240.16a-3(j). In such cases, 
the amount of short-swing profit recoverable shall not be increased 
above the amount recoverable if there were only one beneficial owner.
    (4) Any person filing a statement pursuant to section 16(a) of the 
Act may state that the filing shall not be deemed an admission that such 
person is, for purposes of section 16 of the Act or otherwise, the 
beneficial owner of any equity securities covered by the statement.
    (5) The following interests are deemed not to confer beneficial 
ownership for purposes of section 16 of the Act:
    (i) Interests in portfolio securities held by any investment company 
registered under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et 
seq.); and
    (ii) Interests in securities comprising part of a broad-based, 
publicly traded market basket or index of stocks, approved for trading 
by the appropriate federal governmental authority.
    (b) The term call equivalent position shall mean a derivative 
security position that increases in value as the value of the underlying 
equity increases, including, but not limited to, a long convertible 
security, a long call option, and a short put option position.
    (c) The term derivative securities shall mean any option, warrant, 
convertible security, stock appreciation right, or similar right with an 
exercise or conversion privilege at a price related to an equity 
security, or similar securities with a value derived from the value of 
an equity security, but shall not include:
    (1) Rights of a pledgee of securities to sell the pledged 
securities;
    (2) Rights of all holders of a class of securities of an issuer to 
receive securities pro rata, or obligations to dispose of securities, as 
a result of a merger, exchange offer, or consolidation involving the 
issuer of the securities;
    (3) Rights or obligations to surrender a security, or have a 
security withheld, upon the receipt or exercise of a derivative security 
or the receipt or vesting of equity securities, in order to satisfy

[[Page 550]]

the exercise price or the tax withholding consequences of receipt, 
exercise or vesting;
    (4) Interests in broad-based index options, broad-based index 
futures, and broad-based publicly traded market baskets of stocks 
approved for trading by the appropriate federal governmental authority;
    (5) Interests or rights to participate in employee benefit plans of 
the issuer;
    (6) Rights with an exercise or conversion privilege at a price that 
is not fixed; or
    (7) Options granted to an underwriter in a registered public 
offering for the purpose of satisfying over-allotments in such offering.
    (d) The term equity security of such issuer shall mean any equity 
security or derivative security relating to an issuer, whether or not 
issued by that issuer.
    (e) The term immediate family shall mean any child, stepchild, 
grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-
law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or 
sister-in-law, and shall include adoptive relationships.
    (f) The term ``officer'' shall mean an issuer's president, principal 
financial officer, principal accounting officer (or, if there is no such 
accounting officer, the controller), any vice-president of the issuer in 
charge of a principal business unit, division or function (such as 
sales, administration or finance), any other officer who performs a 
policy-making function, or any other person who performs similar policy-
making functions for the issuer. Officers of the issuer's parent(s) or 
subsidiaries shall be deemed officers of the issuer if they perform such 
policy-making functions for the issuer. In addition, when the issuer is 
a limited partnership, officers or employees of the general partner(s) 
who perform policy-making functions for the limited partnership are 
deemed officers of the limited partnership. When the issuer is a trust, 
officers or employees of the trustee(s) who perform policy-making 
functions for the trust are deemed officers of the trust.

    Note: ``Policy-making function'' is not intended to include policy-
making functions that are not significant. If pursuant to Item 401(b) of 
Regulation S-K (Sec.  229.401(b)) the issuer identifies a person as an 
``executive officer,'' it is presumed that the Board of Directors has 
made that judgment and that the persons so identified are the officers 
for purposes of Section 16 of the Act, as are such other persons 
enumerated in this paragraph (f) but not in Item 401(b).

    (g) The term portfolio securities shall mean all securities owned by 
an entity, other than securities issued by the entity.
    (h) The term put equivalent position shall mean a derivative 
security position that increases in value as the value of the underlying 
equity decreases, including, but not limited to, a long put option and a 
short call option position.

[56 FR 7265, Feb. 21, 1991, as amended at 56 FR 19927, May 1, 1991; 61 
FR 30391, June 14, 1996; 63 FR 2868, Jan. 16, 1998; 73 FR 60093, Oct. 9, 
2008; 76 FR 71876, Nov. 21, 2011]



Sec.  240.16a-2  Persons and transactions subject to section 16.

    Any person who is the beneficial owner, directly or indirectly, of 
more than ten percent of any class of equity securities (``ten percent 
beneficial owner'') registered pursuant to section 12 of the Act (15 
U.S.C. 78l), any director or officer of the issuer of such securities, 
and any person specified in section 30(h) of the Investment Company Act 
of 1940 (15 U.S.C. 80a-29(h)), including any person specified in Sec.  
240.16a-8, shall be subject to the provisions of section 16 of the Act 
(15 U.S.C. 78p). The rules under section 16 of the Act apply to any 
class of equity securities of an issuer whether or not registered under 
section 12 of the Act. The rules under section 16 of the Act also apply 
to non-equity securities as provided by the Investment Company Act of 
1940. With respect to transactions by persons subject to section 16 of 
the Act:
    (a) A transaction(s) carried out by a director or officer in the six 
months prior to the director or officer becoming subject to section 16 
of the Act shall be subject to section 16 of the Act and reported on the 
first required Form 4 only if the transaction(s) occurred within six 
months of the transaction giving rise to the Form 4 filing obligation 
and the director or officer became subject to section 16 of the Act 
solely as a result of the issuer registering a

[[Page 551]]

class of equity securities pursuant to section 12 of the Act.
    (b) A transaction(s) following the cessation of director or officer 
status shall be subject to section 16 of the Act only if:
    (1) Executed within a period of less than six months of an opposite 
transaction subject to section 16(b) of the Act that occurred while that 
person was a director or officer; and
    (2) Not otherwise exempted from section 16(b) of the Act pursuant to 
the provisions of this chapter.

    Note to paragraph (b): For purposes of this paragraph, an 
acquisition and a disposition each shall be an opposite transaction with 
respect to the other.

    (c) The transaction that results in a person becoming a ten percent 
beneficial owner is not subject to section 16 of the Act unless the 
person otherwise is subject to section 16 of the Act. A ten percent 
beneficial owner not otherwise subject to section 16 of the Act must 
report only those transactions conducted while the beneficial owner of 
more than ten percent of a class of equity securities of the issuer 
registered pursuant to section 12 of the Act.
    (d)(1) Transactions by a person or entity shall be exempt from the 
provisions of section 16 of the Act for the 12 months following 
appointment and qualification, to the extent such person or entity is 
acting as:
    (i) Executor or administrator of the estate of a decedent;
    (ii) Guardian or member of a committee for an incompetent;
    (iii) Receiver, trustee in bankruptcy, assignee for the benefit of 
creditors, conservator, liquidating agent, or other similar person duly 
authorized by law to administer the estate or assets of another person; 
or
    (iv) Fiduciary in a similar capacity.
    (2) Transactions by such person or entity acting in a capacity 
specified in paragraph (d)(1) of this section after the period specified 
in that paragraph shall be subject to section 16 of the Act only where 
the estate, trust or other entity is a beneficial owner of more than ten 
percent of any class of equity security registered pursuant to section 
12 of the Act.

[56 FR 7265, Feb. 21, 1991, as amended at 61 FR 30392, June 14, 1996; 67 
FR 43535, June 28, 2002; 76 FR 71877, Nov. 21, 2011]



Sec.  240.16a-3  Reporting transactions and holdings.

    (a) Initial statements of beneficial ownership of equity securities 
required by section 16(a) of the Act shall be filed on Form 3. 
Statements of changes in beneficial ownership required by that section 
shall be filed on Form 4. Annual statements shall be filed on Form 5. At 
the election of the reporting person, any transaction required to be 
reported on Form 5 may be reported on an earlier filed Form 4. All such 
statements shall be prepared and filed in accordance with the 
requirements of the applicable form.
    (b) A person filing statements pursuant to section 16(a) of the Act 
with respect to any class of equity securities registered pursuant to 
section 12 of the Act need not file an additional statement on Form 3:
    (1) When an additional class of equity securities of the same issuer 
becomes registered pursuant to section 12 of the Act; or
    (2) When such person assumes a different or an additional 
relationship to the same issuer (for example, when an officer becomes a 
director).
    (c) Any issuer that has equity securities listed on more than one 
national securities exchange may designate one exchange as the only 
exchange with which reports pursuant to section 16(a) of the Act need be 
filed. Such designation shall be made in writing and shall be filed with 
the Commission and with each national securities exchange on which any 
equity security of the issuer is listed at the time of such election. 
The reporting person's obligation to file reports with each national 
securities exchange on which any equity security of the issuer is listed 
shall be satisfied by filing with the exchange so designated.
    (d) Any person required to file a statement with respect to 
securities of a single issuer under both section 16(a) of the Act (15 
U.S.C. 78p(a)) and section 30(h) of the Investment Company Act of 1940 
(15 U.S.C. 80a-29(h)) may file a

[[Page 552]]

single statement containing the required information, which will be 
deemed to be filed under both Acts.
    (e) [Reserved]
    (f)(1) A Form 5 shall be filed by every person who at any time 
during the issuer's fiscal year was subject to section 16 of the Act 
with respect to such issuer, except as provided in paragraph (f)(2) of 
this section. The Form shall be filed within 45 days after the issuer's 
fiscal year end, and shall disclose the following holdings and 
transactions not reported previously on Forms 3, 4 or 5:
    (i) All transactions during the most recent fiscal year that were 
exempt from section 16(b) of the Act, except:
    (A) Exercises and conversions of derivative securities exempt under 
either Sec.  240.16b-3 or Sec.  240.16b-6(b), and any transaction exempt 
under Sec.  240.16b-3(d), Sec.  240.16b-3(e), or Sec.  240.16b-3(f) 
(these are required to be reported on Form 4);
    (B) Transactions exempt from section 16(b) of the Act pursuant to 
Sec.  240.16b-3(c), which shall be exempt from section 16(a) of the Act; 
and
    (C) Transactions exempt from section 16(a) of the Act pursuant to 
another rule;
    (ii) Transactions that constituted small acquisitions pursuant to 
Sec.  240.16a-6(a);
    (iii) All holdings and transactions that should have been reported 
during the most recent fiscal year, but were not; and
    (iv) With respect to the first Form 5 requirement for a reporting 
person, all holdings and transactions that should have been reported in 
each of the issuer's last two fiscal years but were not, based on the 
reporting person's reasonable belief in good faith in the completeness 
and accuracy of the information.
    (2) Notwithstanding the above, no Form 5 shall be required where all 
transactions otherwise required to be reported on the Form 5 have been 
reported before the due date of the Form 5.

    Persons no longer subject to section 16 of the Act, but who were 
subject to the Section at any time during the issuer's fiscal year, must 
file a Form 5 unless paragraph (f)(2) is satisfied. See also Sec.  
240.16a-2(b) regarding the reporting obligations of persons ceasing to 
be officers or directors.

    (g)(1) A Form 4 must be filed to report: All transactions not exempt 
from section 16(b) of the Act; All transactions exempt from section 
16(b) of the Act pursuant to Sec.  240.16b-3(d), Sec.  240.16b-3(e), or 
Sec.  240.16b-3(f); and all exercises and conversions of derivative 
securities, regardless of whether exempt from section 16(b) of the Act. 
Form 4 must be filed before the end of the second business day following 
the day on which the subject transaction has been executed.
    (2) Solely for purposes of section 16(a)(2)(C) of the Act and 
paragraph (g)(1) of this section, the date on which the executing 
broker, dealer or plan administrator notifies the reporting person of 
the execution of the transaction is deemed the date of execution for a 
transaction where the following conditions are satisfied:
    (i) the transaction is pursuant to a contract, instruction or 
written plan for the purchase or sale of equity securities of the issuer 
(as defined in Sec.  16a-1(d)) that satisfies the affirmative defense 
conditions of Sec.  240.10b5-1(c) of this chapter; and
    (ii) the reporting person does not select the date of execution.
    (3) Solely for purposes of section 16(a)(2)(C) of the Act and 
paragraph (g)(1) of this section, the date on which the plan 
administrator notifies the reporting person that the transaction has 
been executed is deemed the date of execution for a discretionary 
transaction (as defined in Sec.  16b-3(b)(1)) for which the reporting 
person does not select the date of execution.
    (4) In the case of the transactions described in paragraphs (g)(2) 
and (g)(3) of this section, if the notification date is later than the 
third business day following the trade date of the transaction, the date 
of execution is deemed to be the third business day following the trade 
date of the transaction.
    (5) At the option of the reporting person, transactions that are 
reportable on Form 5 may be reported on Form 4, so long as the Form 4 is 
filed no later than the due date of the Form 5 on which the transaction 
is otherwise required to be reported.
    (h) The date of filing with the Commission shall be the date of 
receipt by the Commission.

[[Page 553]]

    (i) Signatures. Where Section 16 of the Act, or the rules or forms 
thereunder, require a document filed with or furnished to the Commission 
to be signed, such document shall be manually signed, or signed using 
either typed signatures or duplicated or facsimile versions of manual 
signatures. Where typed, duplicated, or facsimile signatures are used, 
each signatory to the filing shall manually or electronically sign a 
signature page or other document authenticating, acknowledging, or 
otherwise adopting his or her signature that appears in the filing 
(``authentication document''). Such authentication document shall be 
executed before or at the time the filing is made and shall be retained 
by the filer for a period of five years. The requirements set forth in 
Sec.  232.302(b) must be met with regards to the use of an 
electronically signed authentication document pursuant to this paragraph 
(i). Upon request, the filer shall furnish to the Commission or its 
staff a copy of any or all documents retained pursuant to this section.
    (j) Where more than one person subject to section 16 of the Act is 
deemed to be a beneficial owner of the same equity securities, all such 
persons must report as beneficial owners of the securities, either 
separately or jointly. Where persons in a group are deemed to be 
beneficial owners of equity securities pursuant to Sec.  240.16a-1(a)(1) 
due to the aggregation of holdings, a single Form 3, 4 or 5 may be filed 
on behalf of all persons in the group. Joint and group filings must 
include all required information for each beneficial owner, and such 
filings must be signed by each beneficial owner, or on behalf of such 
owner by an authorized person.
    (k) Any issuer that maintains a corporate Web site shall post on 
that Web site by the end of the business day after filing any Form 3, 4 
or 5 filed under section 16(a) of the Act as to the equity securities of 
that issuer. Each such form shall remain accessible on such issuer's Web 
site for at least a 12-month period. In the case of an issuer that is an 
investment company and that does not maintain its own Web site, if any 
of the issuer's investment adviser, sponsor, depositor, trustee, 
administrator, principal underwriter, or any affiliated person of the 
investment company maintains a Web site that includes the name of the 
issuer, the issuer shall comply with the posting requirements by posting 
the forms on one such Web site.

[56 FR 7265, Feb. 21, 1991, as amended at 60 FR 26622, May 17, 1995; 61 
FR 30392, 30404, June 14, 1996; 67 FR 43535, June 28, 2002; 67 FR 56467, 
Sept. 3, 2002; 68 FR 25799, May 13, 2003; 76 FR 71877, Nov. 21, 2011; 84 
FR 12728, Apr. 2, 2019; 85 FR 78230, Dec. 4, 2020]



Sec.  240.16a-4  Derivative securities.

    (a) For purposes of section 16 of the Act, both derivative 
securities and the underlying securities to which they relate shall be 
deemed to be the same class of equity securities, except that the 
acquisition or disposition of any derivative security shall be 
separately reported.
    (b) The exercise or conversion of a call equivalent position shall 
be reported on Form 4 and treated for reporting purposes as:
    (1) A purchase of the underlying security; and
    (2) A closing of the derivative security position.
    (c) The exercise or conversion of a put equivalent position shall be 
reported on Form 4 and treated for reporting purposes as:
    (1) A sale of the underlying security; and
    (2) A closing of the derivative security position.
    (d) The disposition or closing of a long derivative security 
position, as a result of cancellation or expiration, shall be exempt 
from section 16(a) of the Act if exempt from section 16(b) of the Act 
pursuant to Sec.  240.16b-6(d).

    Note to Sec.  240.16a-4: A purchase or sale resulting from an 
exercise or conversion of a derivative security may be exempt from 
section 16(b) of the Act pursuant to Sec.  240.16b-3 or Sec.  240.16b-
6(b).

[56 FR 7265, Feb. 21, 1991, as amended at 56 FR 19927, May 1, 1991; 61 
FR 30392, June 14, 1996]



Sec.  240.16a-5  Odd-lot dealers.

    Transactions by an odd-lot dealer (a) in odd-lots as reasonably 
necessary to carry on odd-lot transactions, or (b) in round lots to 
offset odd-lot transactions previously or simultaneously

[[Page 554]]

executed or reasonably anticipated in the usual course of business, 
shall be exempt from the provisions of section 16(a) of the Act with 
respect to participation by such odd-lot dealer in such transaction.



Sec.  240.16a-6  Small acquisitions.

    (a) Any acquisition of an equity security or the right to acquire 
such securities, other than an acquisition from the issuer (including an 
employee benefit plan sponsored by the issuer), not exceeding $10,000 in 
market value shall be reported on Form 5, subject to the following 
conditions:
    (1) Such acquisition, when aggregated with other acquisitions of 
securities of the same class (including securities underlying derivative 
securities, but excluding acquisitions exempted by rule from section 
16(b) or previously reported on Form 4 or Form 5) within the prior six 
months, does not exceed a total of $10,000 in market value; and
    (2) The person making the acquisition does not within six months 
thereafter make any disposition, other than by a transaction exempt from 
section 16(b) of the Act.
    (b) If an acquisition no longer qualifies for the reporting deferral 
in paragraph (a) of this section, all such acquisitions that have not 
yet been reported must be reported on Form 4 before the end of the 
second business day following the day on which the conditions of 
paragraph (a) of this section are no longer met.

[56 FR 7265, Feb. 21, 1991, as amended at 61 FR 30392, June 14, 1996; 67 
FR 56467, Sept. 3, 2002]



Sec.  240.16a-7  Transactions effected in connection with a distribution.

    (a) Any purchase and sale, or sale and purchase, of a security that 
is made in connection with the distribution of a substantial block of 
securities shall be exempt from the provisions of section 16(a) of the 
Act, to the extent specified in this rule, subject to the following 
conditions:
    (1) The person effecting the transaction is engaged in the business 
of distributing securities and is participating in good faith, in the 
ordinary course of such business, in the distribution of such block of 
securities; and
    (2) The security involved in the transaction is:
    (i) Part of such block of securities and is acquired by the person 
effecting the transaction, with a view to distribution thereof, from the 
issuer or other person on whose behalf such securities are being 
distributed or from a person who is participating in good faith in the 
distribution of such block of securities; or
    (ii) A security purchased in good faith by or for the account of the 
person effecting the transaction for the purpose of stabilizing the 
market price of securities of the class being distributed or to cover an 
over-allotment or other short position created in connection with such 
distribution.
    (b) Each person participating in the transaction must qualify on an 
individual basis for an exemption pursuant to this section.



Sec.  240.16a-8  Trusts.

    (a) Persons subject to section 16--(1) Trusts. A trust shall be 
subject to section 16 of the Act with respect to securities of the 
issuer if the trust is a beneficial owner, pursuant to Sec.  240.16a-
1(a)(1), of more than ten percent of any class of equity securities of 
the issuer registered pursuant to section 12 of the Act (``ten percent 
beneficial owner'').
    (2) Trustees, beneficiaries, and settlors. In determining whether a 
trustee, beneficiary, or settlor is a ten percent beneficial owner with 
respect to the issuer:
    (i) Such persons shall be deemed the beneficial owner of the 
issuer's securities held by the trust, to the extent specified by Sec.  
240.16a-1(a)(1); and
    (ii) Settlors shall be deemed the beneficial owner of the issuer's 
securities held by the trust where they have the power to revoke the 
trust without the consent of another person.
    (b) Trust Holdings and Transactions. Holdings and transactions in 
the issuer's securities held by a trust shall be reported by the trustee 
on behalf of the trust, if the trust is subject to section 16 of the 
Act, except as provided below. Holdings and transactions in the issuer's 
securities held by a trust (whether or not subject to section 16 of the 
Act) may be reportable by other parties as follows:

[[Page 555]]

    (1) Trusts. The trust need not report holdings and transactions in 
the issuer's securities held by the trust in an employee benefit plan 
subject to the Employee Retirement Income Security Act over which no 
trustee exercises investment control.
    (2) Trustees. If, as provided by Sec.  240.16a-1(a)(2), a trustee 
subject to section 16 of the Act has a pecuniary interest in any holding 
or transaction in the issuer's securities held by the trust, such 
holding or transaction shall be attributed to the trustee and shall be 
reported by the trustee in the trustee's individual capacity, as well as 
on behalf of the trust. With respect to performance fees and holdings of 
the trustee's immediate family, trustees shall be deemed to have a 
pecuniary interest in the trust holdings and transactions in the 
following circumstances:
    (i) A performance fee is received that does not meet the proviso of 
Sec.  240.16a-1(a)(2)(ii)(C); or
    (ii) At least one beneficiary of the trust is a member of the 
trustee's immediate family. The pecuniary interest of the immediate 
family member(s) shall be attributed to and reported by the trustee.
    (3) Beneficiaries. A beneficiary subject to section 16 of the Act 
shall have or share reporting obligations with respect to transactions 
in the issuer's securities held by the trust, if the beneficiary is a 
beneficial owner of the securities pursuant to Sec.  240.16a-1(a)(2), as 
follows:
    (i) If a beneficiary shares investment control with the trustee with 
respect to a trust transaction, the transaction shall be attributed to 
and reported by both the beneficiary and the trust;
    (ii) If a beneficiary has investment control with respect to a trust 
transaction without consultation with the trustee, the transaction shall 
be attributed to and reported by the beneficiary only; and
    (iii) In making a determination as to whether a beneficiary is the 
beneficial owner of the securities pursuant to Sec.  240.16a-1(a)(2), 
beneficiaries shall be deemed to have a pecuniary interest in the 
issuer's securities held by the trust to the extent of their pro rata 
interest in the trust where the trustee does not exercise exclusive 
investment control.

    Note to paragraph (b)(3): Transactions and holdings attributed to a 
trust beneficiary may be reported by the trustee on behalf of the 
beneficiary, provided that the report is signed by the beneficiary or 
other authorized person. Where the transactions and holdings are 
attributed both to the trustee and trust beneficiary, a joint report may 
be filed in accordance with Sec.  240.16a-3(j).

    (4) Settlors. If a settlor subject to section 16 of the Act reserves 
the right to revoke the trust without the consent of another person, the 
trust holdings and transactions shall be attributed to and reported by 
the settlor instead of the trust; Provided, however, That if the settlor 
does not exercise or share investment control over the issuer's 
securities held by the trust, the trust holdings and transactions shall 
be attributed to and reported by the trust instead of the settlor.
    (c) Remainder interests. Remainder interests in a trust are deemed 
not to confer beneficial ownership for purposes of section 16 of the 
Act, provided that the persons with the remainder interests have no 
power, directly or indirectly, to exercise or share investment control 
over the trust.
    (d) A trust, trustee, beneficiary or settlor becoming subject to 
section 16(a) of the Act pursuant to this rule also shall be subject to 
sections 16(b) and 16(c) of the Act.

[56 FR 7265, Feb. 21, 1991, as amended at 56 FR 19927, May 1, 1991; 61 
FR 30392, June 14, 1996; 67 FR 56467, Sept. 3, 2002]



Sec.  240.16a-9  Stock splits, stock dividends, and pro rata rights.

    The following shall be exempt from section 16 of the Act:
    (a) The increase or decrease in the number of securities held as a 
result of a stock split or stock dividend applying equally to all 
securities of a class, including a stock dividend in which equity 
securities of a different issuer are distributed; and
    (b) The acquisition of rights, such as shareholder or pre-emptive 
rights, pursuant to a pro rata grant to all holders of the same class of 
equity securities registered under section 12 of the Act.

    Note: The exercise or sale of a pro rata right shall be reported 
pursuant to Sec.  240.16a-

[[Page 556]]

4 and the exercise shall be eligible for exemption from section 16(b) of 
the Act pursuant to Sec.  240.16b-6(b).

[56 FR 7265, Feb. 21, 1991, as amended at 61 FR 30393, June 14, 1996]



Sec.  240.16a-10  Exemptions under section 16(a).

    Except as provided in Sec.  240.16a-6, any transaction exempted from 
the requirements of section 16(a) of the Act, insofar as it is otherwise 
subject to the provisions of section 16(b), shall be likewise exempt 
from section 16(b) of the Act.



Sec.  240.16a-11  Dividend or interest reinvestment plans.

    Any acquisition of securities resulting from the reinvestment of 
dividends or interest on securities of the same issuer shall be exempt 
from section 16 of the Act if the acquisition is made pursuant to a plan 
providing for the regular reinvestment of dividends or interest and the 
plan provides for broad-based participation, does not discriminate in 
favor of employees of the issuer, and operates on substantially the same 
terms for all plan participants.

[61 FR 30393, June 14, 1996]



Sec.  240.16a-12  Domestic relations orders.

    The acquisition or disposition of equity securities pursuant to a 
domestic relations order, as defined in the Internal Revenue Code or 
Title I of the Employee Retirement Income Security Act, or the rules 
thereunder, shall be exempt from section 16 of the Act.

[61 FR 30393, June 14, 1996]



Sec.  240.16a-13  Change in form of beneficial ownership.

    A transaction, other than the exercise or conversion of a derivative 
security or deposit into or withdrawal from a voting trust, that effects 
only a change in the form of beneficial ownership without changing a 
person's pecuniary interest in the subject equity securities shall be 
exempt from section 16 of the Act.

[61 FR 30393, June 14, 1996]

          Exemption of Certain Transactions From Section 16(b)

    Source: Sections 240.16b-1 through 240.16b-8 appear at 56 FR 7270, 
Feb. 21, 1991, unless otherwise noted.



Sec.  240.16b-1  Transactions approved by a regulatory authority.

    Any purchase and sale, or sale and purchase, of a security shall be 
exempt from section 16(b) of the Act, if the transaction is effected by 
an investment company registered under the Investment Company Act of 
1940 (15 U.S.C. 80a-1 et seq.) and both the purchase and sale of such 
security have been exempted from the provisions of section 17(a) (15 
U.S.C. 80a-17(a)) of the Investment Company Act of 1940, by rule or 
order of the Commission.

[56 FR 7270, Feb. 21, 1991, as amended at 61 FR 30404, June 14, 1996; 76 
FR 71877, Nov. 21, 2011]



Sec.  240.16b-2  [Reserved]



Sec.  240.16b-3  Transactions between an issuer and its officers or directors.

    (a) General. A transaction between the issuer (including an employee 
benefit plan sponsored by the issuer) and an officer or director of the 
issuer that involves issuer equity securities shall be exempt from 
section 16(b) of the Act if the transaction satisfies the applicable 
conditions set forth in this section.
    (b) Definitions--(1) A Discretionary Transaction shall mean a 
transaction pursuant to an employee benefit plan that:
    (i) Is at the volition of a plan participant;
    (ii) Is not made in connection with the participant's death, 
disability, retirement or termination of employment;
    (iii) Is not required to be made available to a plan participant 
pursuant to a provision of the Internal Revenue Code; and
    (iv) Results in either an intra-plan transfer involving an issuer 
equity securities fund, or a cash distribution funded by a volitional 
disposition of an issuer equity security.
    (2) An Excess Benefit Plan shall mean an employee benefit plan that 
is operated in conjunction with a Qualified

[[Page 557]]

Plan, and provides only the benefits or contributions that would be 
provided under a Qualified Plan but for any benefit or contribution 
limitations set forth in the Internal Revenue Code of 1986, or any 
successor provisions thereof.
    (3)(i) A Non-Employee Director shall mean a director who:
    (A) Is not currently an officer (as defined in Sec.  240.16a-1(f)) 
of the issuer or a parent or subsidiary of the issuer, or otherwise 
currently employed by the issuer or a parent or subsidiary of the 
issuer;
    (B) Does not receive compensation, either directly or indirectly, 
from the issuer or a parent or subsidiary of the issuer, for services 
rendered as a consultant or in any capacity other than as a director, 
except for an amount that does not exceed the dollar amount for which 
disclosure would be required pursuant to Sec.  229.404(a) of this 
chapter; and
    (C) Does not possess an interest in any other transaction for which 
disclosure would be required pursuant to Sec.  229.404(a) of this 
chapter.
    (ii) Notwithstanding paragraph (b)(3)(i) of this section, a Non-
Employee Director of a closed-end investment company shall mean a 
director who is not an ``interested person'' of the issuer, as that term 
is defined in Section 2(a)(19) of the Investment Company Act of 1940.
    (4) A Qualified Plan shall mean an employee benefit plan that 
satisfies the coverage and participation requirements of sections 410 
and 401(a)(26) of the Internal Revenue Code of 1986, or any successor 
provisions thereof.
    (5) A Stock Purchase Plan shall mean an employee benefit plan that 
satisfies the coverage and participation requirements of sections 
423(b)(3) and 423(b)(5), or section 410, of the Internal Revenue Code of 
1986, or any successor provisions thereof.
    (c) Tax-conditioned plans. Any transaction (other than a 
Discretionary Transaction) pursuant to a Qualified Plan, an Excess 
Benefit Plan, or a Stock Purchase Plan shall be exempt without 
condition.
    (d) Acquisitions from the issuer. Any transaction, other than a 
Discretionary Transaction, involving an acquisition from the issuer 
(including without limitation a grant or award), whether or not intended 
for a compensatory or other particular purpose, shall be exempt if:
    (1) The transaction is approved by the board of directors of the 
issuer, or a committee of the board of directors that is composed solely 
of two or more Non-Employee Directors;
    (2) The transaction is approved or ratified, in compliance with 
section 14 of the Act, by either: the affirmative votes of the holders 
of a majority of the securities of the issuer present, or represented, 
and entitled to vote at a meeting duly held in accordance with the 
applicable laws of the state or other jurisdiction in which the issuer 
is incorporated; or the written consent of the holders of a majority of 
the securities of the issuer entitled to vote; provided that such 
ratification occurs no later than the date of the next annual meeting of 
shareholders; or
    (3) The issuer equity securities so acquired are held by the officer 
or director for a period of six months following the date of such 
acquisition, provided that this condition shall be satisfied with 
respect to a derivative security if at least six months elapse from the 
date of acquisition of the derivative security to the date of 
disposition of the derivative security (other than upon exercise or 
conversion) or its underlying equity security.
    (e) Dispositions to the issuer. Any transaction, other than a 
Discretionary Transaction, involving the disposition to the issuer of 
issuer equity securities, whether or not intended for a compensatory or 
other particular purpose, shall be exempt, provided that the terms of 
such disposition are approved in advance in the manner prescribed by 
either paragraph (d)(1) or paragraph (d)(2) of this section.
    (f) Discretionary Transactions. A Discretionary Transaction shall be 
exempt only if effected pursuant to an election made at least six months 
following the date of the most recent election, with respect to any plan 
of the issuer, that effected a Discretionary Transaction that was:
    (1) An acquisition, if the transaction to be exempted would be a 
disposition; or

[[Page 558]]

    (2) A disposition, if the transaction to be exempted would be an 
acquisition.

                        Notes to Sec.  240.16b-3

    Note (1): The exercise or conversion of a derivative security that 
does not satisfy the conditions of this section is eligible for 
exemption from section 16(b) of the Act to the extent that the 
conditions of Sec.  240.16b-6(b) are satisfied.
    Note (2): Section 16(a) reporting requirements applicable to 
transactions exempt pursuant to this section are set forth in Sec.  
240.16a-3(f) and (g) and Sec.  240.16a-4.
    Note (3): The approval conditions of paragraphs (d)(1), (d)(2) and 
(e) of this section require the approval of each specific transaction, 
and are not satisfied by approval of a plan in its entirety except for 
the approval of a plan pursuant to which the terms and conditions of 
each transaction are fixed in advance, such as a formula plan. Where the 
terms of a subsequent transaction (such as the exercise price of an 
option, or the provision of an exercise or tax withholding right) are 
provided for in a transaction as initially approved pursuant to 
paragraphs (d)(1), (d)(2) or (e), such subsequent transaction shall not 
require further specific approval.
    Note (4): For purposes of determining a director's status under 
those portions of paragraph (b)(3)(i) that reference Sec.  229.404(a) of 
this chapter, an issuer may rely on the disclosure provided under Sec.  
229.404(a) of this chapter for the issuer's most recent fiscal year 
contained in the most recent filing in which disclosure required under 
Sec.  229.404(a) is presented. Where a transaction disclosed in that 
filing was terminated before the director's proposed service as a Non-
Employee Director, that transaction will not bar such service. The 
issuer must believe in good faith that any current or contemplated 
transaction in which the director participates will not be required to 
be disclosed under Sec.  229.404(a) of this chapter, based on 
information readily available to the issuer and the director at the time 
such director proposes to act as a Non-Employee Director. At such time 
as the issuer believes in good faith, based on readily available 
information, that a current or contemplated transaction with a director 
will be required to be disclosed under Sec.  229.404(a) in a future 
filing, the director no longer is eligible to serve as a Non-Employee 
Director; provided, however, that this determination does not result in 
retroactive loss of a Rule 16b-3 exemption for a transaction previously 
approved by the director while serving as a Non-Employee Director 
consistent with this note. In making the determinations specified in 
this Note, the issuer may rely on information it obtains from the 
director, for example, pursuant to a response to an inquiry.

[61 FR 30393, June 14, 1996, as amended at 70 FR 46089, Aug. 9, 2005; 71 
FR 53263, Sept. 8, 2006]



Sec.  240.16b-4  [Reserved]



Sec.  240.16b-5  Bona fide gifts and inheritance.

    Both the acquisition and the disposition of equity securities shall 
be exempt from the operation of section 16(b) of the Act if they are: 
(a) Bona fide gifts; or (b) transfers of securities by will or the laws 
of descent and distribution.



Sec.  240.16b-6  Derivative securities.

    (a) The establishment of or increase in a call equivalent position 
or liquidation of or decrease in a put equivalent position shall be 
deemed a purchase of the underlying security for purposes of section 
16(b) of the Act, and the establishment of or increase in a put 
equivalent position or liquidation of or decrease in a call equivalent 
position shall be deemed a sale of the underlying securities for 
purposes of section 16(b) of the Act: Provided, however, That if the 
increase or decrease occurs as a result of the fixing of the exercise 
price of a right initially issued without a fixed price, where the date 
the price is fixed is not known in advance and is outside the control of 
the recipient, the increase or decrease shall be exempt from section 
16(b) of the Act with respect to any offsetting transaction within the 
six months prior to the date the price is fixed.
    (b) The closing of a derivative security position as a result of its 
exercise or conversion shall be exempt from the operation of section 
16(b) of the Act, and the acquisition of underlying securities at a 
fixed exercise price due to the exercise or conversion of a call 
equivalent position or the disposition of underlying securities at a 
fixed exercise price due to the exercise of a put equivalent position 
shall be exempt from the operation of section 16(b) of the Act: 
Provided, however, That the acquisition of underlying securities from 
the exercise of an out-of-the-money option, warrant, or right shall not 
be exempt unless the exercise is necessary

[[Page 559]]

to comport with the sequential exercise provisions of the Internal 
Revenue Code (26 U.S.C. 422A).

    Note to paragraph (b): The exercise or conversion of a derivative 
security that does not satisfy the conditions of this section is 
eligible for exemption from section 16(b) of the Act to the extent that 
the conditions of Sec.  240.16b-3 are satisfied.

    (c) In determining the short-swing profit recoverable pursuant to 
section 16(b) of the Act from transactions involving the purchase and 
sale or sale and purchase of derivative and other securities, the 
following rules apply:
    (1) Short-swing profits in transactions involving the purchase and 
sale or sale and purchase of derivative securities that have identical 
characteristics (e.g., purchases and sales of call options of the same 
strike price and expiration date, or purchases and sales of the same 
series of convertible debentures) shall be measured by the actual prices 
paid or received in the short-swing transactions.
    (2) Short-swing profits in transactions involving the purchase and 
sale or sale and purchase of derivative securities having different 
characteristics but related to the same underlying security (e.g., the 
purchase of a call option and the sale of a convertible debenture) or 
derivative securities and underlying securities shall not exceed the 
difference in price of the underlying security on the date of purchase 
or sale and the date of sale or purchase. Such profits may be measured 
by calculating the short-swing profits that would have been realized had 
the subject transactions involved purchases and sales solely of the 
derivative security that was purchased or solely of the derivative 
security that was sold, valued as of the time of the matching purchase 
or sale, and calculated for the lesser of the number of underlying 
securities actually purchased or sold.
    (d) Upon cancellation or expiration of an option within six months 
of the writing of the option, any profit derived from writing the option 
shall be recoverable under section 16(b) of the Act. The profit shall 
not exceed the premium received for writing the option. The disposition 
or closing of a long derivative security position, as a result of 
cancellation or expiration, shall be exempt from section 16(b) of the 
Act where no value is received from the cancellation or expiration.

[56 FR 7270, Feb. 21, 1991, as amended at 61 FR 30394, June 14, 1996]



Sec.  240.16b-7  Mergers, reclassifications, and consolidations.

    (a) The following transactions shall be exempt from the provisions 
of section 16(b) of the Act:
    (1) The acquisition of a security of a company, pursuant to a 
merger, reclassification or consolidation, in exchange for a security of 
a company that before the merger, reclassification or consolidation, 
owned 85 percent or more of either:
    (i) The equity securities of all other companies involved in the 
merger, reclassification or consolidation, or in the case of a 
consolidation, the resulting company; or
    (ii) The combined assets of all the companies involved in the 
merger, reclassification or consolidation, computed according to their 
book values before the merger, reclassification or consolidation as 
determined by reference to their most recent available financial 
statements for a 12 month period before the merger, reclassification or 
consolidation, or such shorter time as the company has been in 
existence.
    (2) The disposition of a security, pursuant to a merger, 
reclassification or consolidation, of a company that before the merger, 
reclassification or consolidation, owned 85 percent or more of either:
    (i) The equity securities of all other companies involved in the 
merger, reclassification or consolidation or, in the case of a 
consolidation, the resulting company; or
    (ii) The combined assets of all the companies undergoing merger, 
reclassification or consolidation, computed according to their book 
values before the merger, reclassification or consolidation as 
determined by reference to their most recent available financial 
statements for a 12 month period before the merger, reclassification or 
consolidation.
    (b) A merger within the meaning of this section shall include the 
sale or purchase of substantially all the assets of one company by 
another in exchange

[[Page 560]]

for equity securities which are then distributed to the security holders 
of the company that sold its assets.
    (c) The exemption provided by this section applies to any securities 
transaction that satisfies the conditions specified in this section and 
is not conditioned on the transaction satisfying any other conditions.
    (d) Notwithstanding the foregoing, if a person subject to section 16 
of the Act makes any non-exempt purchase of a security in any company 
involved in the merger, reclassification or consolidation and any non-
exempt sale of a security in any company involved in the merger, 
reclassification or consolidation within any period of less than six 
months during which the merger, reclassification or consolidation took 
place, the exemption provided by this section shall be unavailable to 
the extent of such purchase and sale.

[70 FR 46089, Aug. 9, 2005]



Sec.  240.16b-8  Voting trusts.

    Any acquisition or disposition of an equity security or certificate 
representing equity securities involved in the deposit or withdrawal 
from a voting trust or deposit agreement shall be exempt from section 
16(b) of the Act if substantially all of the assets held under the 
voting trust or deposit agreement immediately after the deposit or 
immediately prior to the withdrawal consisted of equity securities of 
the same class as the security deposited or withdrawn: Provided, 
however, That this exemption shall not apply if there is a non-exempt 
purchase or sale of an equity security of the class deposited within six 
months (including the date of withdrawal or deposit) of a non-exempt 
sale or purchase, respectively, of any certificate representing such 
equity security (other than the actual deposit or withdrawal).

          Exemption of Certain Transactions From Section 16(c)

    Source: Sections 240.16c-1 through 240.16c-4 appear at 56 FR 7273, 
Feb. 21, 1991, unless otherwise noted.



Sec.  240.16c-1  Brokers.

    Any transaction shall be exempt from section 16(c) of the Act to the 
extent necessary to render lawful the execution by a broker of an order 
for an account in which the broker has no direct or indirect interest.



Sec.  240.16c-2  Transactions effected in connection with a distribution.

    Any transaction shall be exempt from section 16(c) of the Act to the 
extent necessary to render lawful any sale made by or on behalf of a 
dealer in connection with a distribution of a substantial block of 
securities, where the sale is represented by an over-allotment in which 
the dealer is participating as a member of an underwriting group, or the 
dealer or a person acting on the dealer's behalf intends in good faith 
to offset such sale with a security to be acquired by or on behalf of 
the dealer as a participant in an underwriting, selling, or soliciting-
dealer group of which the dealer is a member at the time of the sale, 
whether or not the security to be acquired is subject to a prior 
offering to existing security holders or some other class of persons.



Sec.  240.16c-3  Exemption of sales of securities to be acquired.

    (a) Whenever any person is entitled, incident to ownership of an 
issued security and without the payment of consideration, to receive 
another security ``when issued'' or ``when distributed,'' the sale of 
the security to be acquired shall be exempt from the operation of 
section 16(c) of the Act: Provided, That:
    (1) The sale is made subject to the same conditions as those 
attaching to the right of acquisition;
    (2) Such person exercises reasonable diligence to deliver such 
security to the purchaser promptly after the right of acquisition 
matures; and
    (3) Such person reports the sale on the appropriate form for 
reporting transactions by persons subject to section 16(a) of the Act.
    (b) This section shall not exempt transactions involving both a sale 
of the issued security and a sale of a security ``when issued'' or 
``when distributed'' if the combined transactions result in a sale of 
more securities than the aggregate of issued securities owned by the 
seller plus those to be received for the other security ``when issued'' 
or ``when distributed.''

[[Page 561]]



Sec.  240.16c-4  Derivative securities.

    Establishing or increasing a put equivalent position shall be exempt 
from section 16(c) of the Act, so long as the amount of securities 
underlying the put equivalent position does not exceed the amount of 
underlying securities otherwise owned.

                         Arbitrage Transactions



Sec.  240.16e-1  Arbitrage transactions under section 16.

    It shall be unlawful for any director or officer of an issuer of an 
equity security which is registered pursuant to section 12 of the Act to 
effect any foreign or domestic arbitrage transaction in any equity 
security of such issuer, whether registered or not, unless he shall 
include such transaction in the statements required by section 16(a) and 
shall account to such issuer for the profits arising from such 
transaction, as provided in section 16(b). The provision of section 
16(c) shall not apply to such arbitrage transactions. The provisions of 
section 16 shall not apply to any bona fide foreign or domestic 
arbitrage transaction insofar as it is effected by any person other than 
such director or officer of the issuer of such security.

(Secs. 4, 12, 13, 15, 16, 19, 24, 48 Stat. 77, 892, 894, 895, 896, 85, 
as amended, 901; 15 U.S.C. 77d, 78l, 78m, 78o, 78p, 77s, 78x)

[30 FR 2025, Feb. 13, 1965]

  Preservation of Records and Reports of Certain Stabilizing Activities



Sec.  240.17a-1  Recordkeeping rule for national securities exchanges,
national securities associations, registered clearing agencies and 
the Municipal Securities Rulemaking Board.

    (a) Every national securities exchange, national securities 
association, registered clearing agency and the Municipal Securities 
Rulemaking Board shall keep and preserve at least one copy of all 
documents, including all correspondence, memoranda, papers, books, 
notices, accounts, and other such records as shall be made or received 
by it in the course of its business as such and in the conduct of its 
self-regulatory activity.
    (b) Every national securities exchange, national securities 
association, registered clearing agency and the Municipal Securities 
Rulemaking Board shall keep all such documents for a period of not less 
than five years, the first two years in an easily accessible place, 
subject to the destruction and disposition provisions of Rule 17a-6.
    (c) Every national securities exchange, registered securities 
association, registered clearing agency and the Municipal Securities 
Rulemaking Board shall, upon request of any representative of the 
Commission, promptly furnish to the possession of such representative 
copies of any documents required to be kept and preserved by it pursuant 
to paragraphs (a) and (b) of this section.

[45 FR 79426, Dec. 1, 1980]



Sec.  240.17a-2  Recordkeeping requirements relating to stabilizing 
activities.

    (a) Scope of section. This section shall apply to any person who 
effects any purchase of a security subject to Sec.  242.104 of this 
chapter for the purpose of, or who participates in a syndicate or group 
that engages in, ``stabilizing,'' as defined in Sec.  242.100 of this 
chapter, the price of any security; or effects a purchase that is a 
``syndicate covering transaction,'' as defined in Sec.  242.100 of this 
chapter; or imposes a ``penalty bid,'' as defined in Sec.  242.100 of 
this chapter:
    (1) With respect to which a registration statement has been, or is 
to be, filed pursuant to the Securities Act of 1933 (15 U.S.C. 77a et 
seq.); or
    (2) Which is being, or is to be, offered pursuant to an exemption 
from registration under Regulation A (Sec. Sec.  230.251 through 230.263 
of this chapter) adopted under the Securities Act of 1933 (15 U.S.C. 77a 
et seq.); or
    (3) Which is being, or is to be, otherwise offered, if the aggregate 
offering price of the securities being offered exceeds $5,000,000.
    (b) Definitions. For purposes of this section, the following 
definitions shall apply:

[[Page 562]]

    (1) The term manager shall mean the person stabilizing or effecting 
syndicate covering transactions or imposing a penalty bid for its sole 
account or for the account of a syndicate or group in which it is a 
participant, and who, by contract or otherwise, deals with the issuer, 
organizes the selling effort, receives some benefit from the 
underwriting that is not shared by other underwriters, or represents any 
other underwriters in such matters as maintaining the records of the 
distribution and arranging for allotments of the securities offered.
    (2) The term exempted security means an exempted security as defined 
in section 3(a)(12) of the Act, including securities issued, or 
guaranteed both as to principal and interest, by the International Bank 
for Reconstruction and Development.
    (c) Records relating to stabilizing, syndicate covering 
transactions, and penalty bids required to be maintained by manager. Any 
person subject to this section who acts as a manager and stabilizes or 
effects syndicate covering transactions or imposes a penalty bid shall:
    (1) Promptly record and maintain the following separately 
retrievable information, for a period of not less than three years, the 
first two years in an easily accessible place; Provided, however, That 
if the information is in a record required to be made pursuant to Sec.  
240.17a-3 or Sec.  240.17a-4, or otherwise preserved, such information 
need not be maintained in a separate file if the person can sort 
promptly and retrieve the information as if it had been kept in a 
separate file as a record made pursuant to, and preserves the 
information in accordance with the time periods specified in, this 
paragraph (c)(1):
    (i) The name and class of any security stabilized or any security in 
which syndicate covering transactions have been effected or a penalty 
bid has been imposed;
    (ii) The price, date, and time at which each stabilizing purchase or 
syndicate covering transaction was effected by the manager or by any 
participant in the syndicate or group, and whether any penalties were 
assessed;
    (iii) The names and the addresses of the members of the syndicate or 
group;
    (iv) Their respective commitments, or, in the case of a standby or 
contingent underwriting, the percentage participation of each member of 
the syndicate or group therein; and
    (v) The dates when any penalty bid was in effect.
    (2) Promptly furnish to each of the members of the syndicate or 
group the name and class of any security being stabilized, and the date 
and time at which the first stabilizing purchase was effected by the 
manager or by any participant in the syndicate or group; and
    (3) Promptly notify each of the members of such syndicate or group 
of the date and time when stabilizing was terminated.
    (d) Notification to manager. Any person who has a participation in a 
syndicate account but who is not a manager of such account, and who 
effects one or more stabilizing purchases or syndicate covering 
transactions for its sole account or for the account of a syndicate or 
group, shall within three business days following such purchase notify 
the manager of the price, date, and time at which such stabilizing 
purchase or syndicate covering transaction was effected, and shall in 
addition notify the manager of the date and time when such stabilizing 
purchase or syndicate covering transaction was terminated. The manager 
shall maintain such notifications in a separate file, together with the 
information required by paragraph (c)(1) of this section, for a period 
of not less than three years, the first two years in an easily 
accessible place.

(Secs. 9(a)(6), 10(b), 17(a) and 23(a) of the Act, 15 U.S.C. 78i(a)(6), 
78j(b), 78q(a) and 78w(a))

[48 FR 41378, Sept. 15, 1983, as amended at 62 FR 544, Jan. 3, 1997]



Sec.  240.17a-3  Records to be made by certain exchange members, brokers
and dealers.

    This section applies to the following types of entities: A member of 
a national securities exchange who transacts a business in securities 
directly with others than members of a national securities exchange; a 
broker or dealer who transacts a business in securities through the 
medium of a member of a national securities exchange; a

[[Page 563]]

broker or dealer, including an OTC derivatives dealer as that term is 
defined in Sec.  240.3b-12, registered pursuant to section 15 of the Act 
(15 U.S.C. 78o); a security-based swap dealer registered pursuant to 
section 15F of the Act (15 U.S.C. 78o-10) that is also a broker or 
dealer, including an OTC derivatives dealer, registered pursuant to 
section 15 of the Act; and a major security-based swap participant 
registered pursuant to section 15F of the Act that is also a broker or 
dealer, including an OTC derivatives dealer, registered pursuant to 
section 15 of the Act. Section 240.18a-5 (rather than this section) 
applies to the following types of entities: A security-based swap dealer 
registered pursuant to section 15F of the Act that is not also a broker 
or dealer, including an OTC derivatives dealer, registered pursuant to 
section 15 of the Act; and a major security-based swap participant 
registered pursuant to section 15F of the Act that is not also a broker 
or dealer, including an OTC derivatives dealer, registered pursuant to 
section 15 of the Act.
    (a) Every member of a national securities exchange who transacts a 
business in securities directly with others than members of a national 
securities exchange, every broker or dealer who transacts a business in 
securities through the medium of any such member, and every broker or 
dealer registered pursuant to section 15 of the Act (15 U.S.C. 78o) must 
make and keep current the following books and records relating to its 
business:
    (1) Blotters (or other records of original entry) containing an 
itemized daily record of all purchases and sales of securities 
(including security-based swaps), all receipts and deliveries of 
securities (including certificate numbers), all receipts and 
disbursements of cash and all other debits and credits. Such records 
must show the account for which each such purchase or sale was effected, 
the name and amount of securities, the unit and aggregate purchase or 
sale price, if any (including the financial terms for security-based 
swaps), the trade date, and the name or other designation of the person 
from whom such securities were purchased or received or to whom sold or 
delivered. For security-based swaps, such records must also show, for 
each transaction, the type of security-based swap, the reference 
security, index, or obligor, the date and time of execution, the 
effective date, the scheduled termination date, the notional amount(s) 
and the currenc(ies) in which the notional amount(s) is expressed, the 
unique transaction identifier, and the counterparty's unique 
identification code.
    (2) Ledgers (or other records) reflecting all assets and 
liabilities, income and expense and capital accounts.
    (3) Ledger accounts (or other records) itemizing separately as to 
each cash, margin, or security-based swap account of every customer and 
of such member, broker or dealer and partners thereof, all purchases, 
sales, receipts and deliveries of securities (including security-based 
swaps) and commodities for such account, and all other debits and 
credits to such account; and, in addition, for a security-based swap, 
the type of security-based swap, the reference security, index, or 
obligor, the date and time of execution, the effective date, the 
scheduled termination date, the notional amount(s) and the currenc(ies) 
in which the notional amount(s) is expressed, the unique transaction 
identifier, and the counterparty's unique identification code.
    (4) Ledgers (or other records) reflecting the following:
    (i) Securities in transfer;
    (ii) Dividends and interest received;
    (iii) Securities borrowed and securities loaned;
    (iv) Moneys borrowed and moneys loaned (together with a record of 
the collateral therefor and any substitutions in such collateral);
    (v) Securities failed to receive and failed to deliver;
    (vi) All long and all short securities record differences arising 
from the examination, count, verification, and comparison pursuant to 
Sec. Sec.  240.17a-5, 240.17a-12, 240.17a-13, and 240.18a-7, as 
applicable (by date of examination, count, verification, and comparison 
showing for each security the number of long or short count 
differences); and
    (vii) Repurchase and reverse repurchase agreements.
    (5) A securities record or ledger reflecting separately for each:

[[Page 564]]

    (i) Security, other than a security-based swap, as of the clearance 
dates all ``long'' or ``short'' positions (including securities in 
safekeeping and securities that are the subjects of repurchase or 
reverse repurchase agreements) carried by such member, broker or dealer 
for its account or for the account of its customers or partners, or 
others, and showing the location of all securities long and the 
offsetting position to all securities short, including long security 
count differences and short security count differences classified by the 
date of the physical count and verification in which they were 
discovered, and in all cases the name or designation of the account in 
which each position is carried.
    (ii) Security-based swap, the reference security, index, or obligor, 
the unique transaction identifier, the counterparty's unique 
identification code, whether it is a ``bought'' or ``sold'' position in 
the security-based swap, whether the security-based swap is cleared or 
not cleared, and if cleared, identification of the clearing agency where 
the security-based swap is cleared.
    (6)(i) A memorandum of each brokerage order, and of any other 
instruction, given or received for the purchase or sale of a security, 
except for the purchase or sale of a security-based swap, whether 
executed or unexecuted.
    (A) The memorandum must show the terms and conditions of the order 
or instructions and of any modification or cancellation thereof, the 
account for which entered, the time the order was received, the time of 
entry, the price at which executed, the identity of each associated 
person, if any, responsible for the account, the identity of any other 
person who entered or accepted the order on behalf of the customer, or, 
if a customer entered the order on an electronic system, a notation of 
that entry; and, to the extent feasible, the time of execution or 
cancellation. The memorandum need not show the identity of any person, 
other than the associated person responsible for the account, who may 
have entered or accepted the order if the order is entered into an 
electronic system that generates the memorandum and if that system is 
not capable of receiving an entry of the identity of any person other 
than the responsible associated person; in that circumstance, the 
member, broker or dealer must produce upon request by a representative 
of a securities regulatory authority a separate record which identifies 
each other person. An order entered pursuant to the exercise of 
discretionary authority by the member, broker or dealer, or associated 
person thereof, must be so designated. The term instruction must include 
instructions between partners and employees of a member, broker or 
dealer. The term time of entry means the time when the member, broker or 
dealer transmits the order or instruction for execution.
    (B) The memorandum need not be made as to a purchase, sale or 
redemption of a security on a subscription way basis directly from or to 
the issuer, if the member, broker or dealer maintains a copy of the 
customer's or non-customer's subscription agreement regarding a 
purchase, or a copy of any other document required by the issuer 
regarding a sale or redemption.
    (ii) A memorandum of each brokerage order, and of any other 
instruction, given or received for the purchase or sale of a security-
based swap, whether executed or unexecuted. The memorandum must show the 
terms and conditions of the order or instructions and of any 
modification or cancellation thereof; the account for which entered; the 
time the order was received; the time of entry; the price at which 
executed; the identity of each associated person, if any, responsible 
for the account; the identity of any other person who entered or 
accepted the order on behalf of the customer, or, if a customer entered 
the order on an electronic system, a notation of that entry; and, to the 
extent feasible, the time of cancellation, if applicable. The memorandum 
also must include the type of the security-based swap, the reference 
security, index, or obligor, the date and time of execution, the 
effective date, the scheduled termination, the notional amount(s) and 
the currenc(ies) in which the notional amount(s) is expressed, the 
unique transaction identifier, and the counterparty's unique 
identification code. An order entered pursuant to the exercise

[[Page 565]]

of discretionary authority must be so designated.
    (7)(i) A memorandum of each purchase or sale of a security, other 
than for the purchase or sale of a security-based swap, for the account 
of the member, broker or dealer showing the price and, to the extent 
feasible, the time of execution; and, in addition, where the purchase or 
sale is with a customer other than a broker or dealer, a memorandum of 
each order received, showing the time of receipt; the terms and 
conditions of the order and of any modification thereof; the account for 
which it was entered; the identity of each associated person, if any, 
responsible for the account; the identity of any other person who 
entered or accepted the order on behalf of the customer, or, if a 
customer entered the order on an electronic system, a notation of that 
entry. The memorandum need not show the identity of any person other 
than the associated person responsible for the account who may have 
entered the order if the order is entered into an electronic system that 
generates the memorandum and if that system is not capable of receiving 
an entry of the identity of any person other than the responsible 
associated person. In the circumstance in the preceding sentence, the 
member, broker or dealer must produce upon request by a representative 
of a securities regulatory authority a separate record that identifies 
each other person. An order with a customer other than a member, broker 
or dealer entered pursuant to the exercise of discretionary authority by 
the member, broker or dealer, or associated person thereof, must be so 
designated.
    (ii) A memorandum of each purchase or sale of a security-based swap 
for the account of the member, broker or dealer showing the price; and, 
in addition, where the purchase or sale is with a customer other than a 
broker or dealer, a memorandum of each order received, showing the time 
of receipt; the terms and conditions of the order and of any 
modification thereof; the account for which it was entered; the identity 
of any other person who entered or accepted the order on behalf of the 
customer, or, if a customer entered the order on an electronic system, a 
notation of that entry. The memorandum must also include the type of 
security-based swap, the reference security, index, or obligor, the date 
and time of execution, the effective date, the scheduled termination 
date, the notional amount(s) and the currenc(ies) in which the notional 
amount(s) is expressed, the unique transaction identifier, and the 
counterparty's unique identification code. An order entered pursuant to 
the exercise of discretionary authority must be so designated.
    (8)(i) With respect to a security other than a security-based swap, 
copies of confirmations of all purchases and sales of securities, 
including all repurchase and reverse repurchase agreements, and copies 
of notices of all other debits and credits for securities, cash and 
other items for the account of customers and partners of such member, 
broker or dealer.
    (ii) With respect to a security-based swap, copies of the security-
based swap trade acknowledgment and verification made in compliance with 
Sec.  240.15Fi-2.
    (9) A record with respect to each cash, margin, and security-based 
swap account with such member, broker or dealer indicating, as 
applicable:
    (i) The name and address of the beneficial owner of such account;
    (ii) Except with respect to exempt employee benefit plan securities 
as defined in Sec.  240.14a-1(d), but only to the extent such securities 
are held by employee benefit plans established by the issuer of the 
securities, whether or not the beneficial owner of securities registered 
in the name of such members, brokers or dealers, or a registered 
clearing agency or its nominee objects to disclosure of his or her 
identity, address, and securities positions to issuers;
    (iii) In the case of a margin account, the signature of such owner; 
provided that, in the case of a joint account or an account of a 
corporation, such records are required only in respect of the person or 
persons authorized to transact business for such account; and
    (iv) For each security-based swap account, a record of the unique 
identification code of such counterparty, the name and address of such

[[Page 566]]

counterparty, and a record of the authorization of each person the 
counterparty has granted authority to transact business in the security-
based swap account.
    (10) A record of all puts, calls, spreads, straddles, and other 
options in which such member, broker or dealer has any direct or 
indirect interest or which such member, broker or dealer, has granted or 
guaranteed, containing, at least, an identification of the security, and 
the number of units involved. An OTC derivatives dealer must also keep a 
record of all eligible OTC derivative instruments as defined in Sec.  
240.3b-13 in which the OTC derivatives dealer has any direct or indirect 
interest or which it has written or guaranteed, containing, at a 
minimum, an identification of the security or other instrument, the 
number of units involved, and the identity of the counterparty.
    (11) A record of the proof of money balances of all ledger accounts 
in the form of trial balances and a record of the computation of 
aggregate indebtedness and net capital, as of the trial balance date, 
pursuant to Sec.  240.15c3-1 or Sec.  240.18a-1, as applicable. The 
computation need not be made by any member, broker or dealer 
unconditionally exempt from Sec.  240.15c3-1 pursuant to Sec.  240.15c3-
1(b)(1) or (3). Such trial balances and computations must be prepared 
currently at least once a month.
    (12)(i) A questionnaire or application for employment executed by 
each associated person as that term is defined in paragraph (g)(4) of 
this section of the member, broker or dealer, which questionnaire or 
application must be approved in writing by an authorized representative 
of the member, broker or dealer and must contain at least the following 
information with respect to the associated person:
    (A) The associated person's name, address, social security number, 
and the starting date of the associated person's employment or other 
association with the member, broker or dealer;
    (B) The associated person's date of birth;
    (C) A complete, consecutive statement of all the associated person's 
business connections for at least the preceding ten years, including 
whether the employment was part-time or full-time;
    (D) A record of any denial of membership or registration, and of any 
disciplinary action taken, or sanction imposed, upon the associated 
person by any federal or state agency, or by any national securities 
exchange or national securities association, including any finding that 
the associated person was a cause of any disciplinary action or had 
violated any law;
    (E) A record of any denial, suspension, expulsion, or revocation of 
membership or registration of any member, broker or dealer with which 
the associated person was associated in any capacity when such action 
was taken;
    (F) A record of any permanent or temporary injunction entered 
against the associated person, or any member, broker, dealer, security-
based swap dealer or major security-based swap participant with which 
the associated person was associated in any capacity at the time such 
injunction was entered;
    (G) A record of any arrest or indictment for any felony, or any 
misdemeanor pertaining to securities, commodities, banking, insurance or 
real estate (including, but not limited to, acting or being associated 
with a broker or dealer, investment company, investment adviser, futures 
sponsor, bank, or savings and loan association), fraud, false statements 
or omissions, wrongful taking of property or bribery, forgery, 
counterfeiting, or extortion, and the disposition of the foregoing; and
    (H) A record of any other name or names by which the associated 
person has been known or which the associated person has used.
    (I) Provided, however, that if such associated person has been 
registered as a registered representative of such member, broker or 
dealer with, or the associated person's employment has been approved by 
a registered national securities association or a registered national 
securities exchange, then retention of a full, correct, and complete 
copy of any and all applications for such registration or approval will 
be deemed to satisfy the requirements of this paragraph (a)(12)(i).

[[Page 567]]

    (ii) A record listing every associated person of the member, broker 
or dealer which shows, for each associated person, every office of the 
member, broker or dealer, where the associated person regularly conducts 
the business of handling funds or securities or effecting any 
transactions in, or inducing or attempting to induce the purchase or 
sale of any security for the member, broker or dealer and the Central 
Registration Depository number, if any, and every internal 
identification number or code assigned to that person by the member, 
broker or dealer.
    (13) Records required to be maintained pursuant to paragraph (d) of 
Sec.  240.17f-2.
    (14) Copies of all Forms X-17F-1A filed pursuant to Sec.  240.17f-1, 
all agreements between reporting institutions regarding registration or 
other aspects of Sec.  240.17f-1, and all confirmations or other 
information received from the Commission or its designee as a result of 
inquiry.
    (15) Records required to be maintained pursuant to paragraph (e) of 
Sec.  240.17f-2.
    (16)(i) The following records regarding any internal broker-dealer 
system of which such a broker or dealer is the sponsor:
    (A) A record of the broker's or dealer's customers that have access 
to an internal broker-dealer system sponsored by such broker or dealer 
(identifying any affiliations between such customers and the broker or 
dealer);
    (B) Daily summaries of trading in the internal broker-dealer system, 
including:
    (1) Securities for which transactions have been executed through use 
of such system; and
    (2) Transaction volume (separately stated for trading occurring 
during hours when consolidated trade reporting facilities are and are 
not in operation):
    (i) With respect to equity securities, stated in number of trades, 
number of shares, and total U.S. dollar value;
    (ii) With respect to debt securities, stated in total settlement 
value in U.S. dollars; and
    (iii) With respect to other securities, stated in number of trades, 
number of units of securities, and in dollar value, or other appropriate 
commonly used measure of value of such securities; and
    (C) Time-sequenced records of each transaction effected through the 
internal broker-dealer system, including date and time executed, price, 
size, security traded, counterparty identification information, and 
method of execution (if internal broker-dealer system allows alternative 
means or locations for execution, such as routing to another market, 
matching with limit orders, or executing against the quotations of the 
broker or dealer sponsoring the system).
    (ii) For purposes of paragraph (a) of this section, the term:
    (A) Internal broker-dealer system means any facility, other than a 
national securities exchange, an exchange exempt from registration based 
on limited volume, or an alternative trading system as defined in 
Regulation ATS, Sec. Sec.  242.300 through 242.303 of this chapter, that 
provides a mechanism, automated in full or in part, for collecting, 
receiving, disseminating, or displaying system orders and facilitating 
agreement to the basic terms of a purchase or sale of a security between 
a customer and the sponsor, or between two customers of the sponsor, 
through use of the internal broker-dealer system or through the broker 
or dealer sponsor of such system;
    (B) Sponsor means any broker or dealer that organizes, operates, 
administers, or otherwise directly controls an internal broker-dealer 
trading system or, if the operator of the internal broker-dealer system 
is not a registered broker or dealer, any broker or dealer that, 
pursuant to contract, affiliation, or other agreement with the system 
operator, is involved on a regular basis with executing transactions in 
connection with use of the internal broker-dealer system, other than 
solely for its own account or as a customer with access to the internal 
broker-dealer system; and
    (C) System order means any order or other communication or 
indication submitted by any customer with access to the internal broker-
dealer system for entry into a trading system announcing an interest in 
purchasing or selling a security. The term ``system

[[Page 568]]

order'' does not include inquiries or indications of interest that are 
not entered into the internal broker-dealer system.
    (17) For each account with a natural person as a customer or owner:
    (i)(A) An account record including the customer's or owner's name, 
tax identification number, address, telephone number, date of birth, 
employment status (including occupation and whether the customer is an 
associated person of a member, broker or dealer), annual income, net 
worth (excluding value of primary residence), and the account's 
investment objectives. In the case of a joint account, the account 
record must include personal information for each joint owner who is a 
natural person; however, financial information for the individual joint 
owners may be combined. The account record must indicate whether it has 
been signed by the associated person responsible for the account, if 
any, and approved or accepted by a principal of the member, broker or 
dealer. For accounts in existence on the effective date of this section, 
the member, broker or dealer must obtain this information within three 
years of the effective date of the section.
    (B) A record indicating that:
    (1) The member, broker or dealer has furnished to each customer or 
owner within three years of the effective date of this section, and to 
each customer or owner who opened an account after the effective date of 
this section within thirty days of the opening of the account, and 
thereafter at intervals no greater than thirty-six months, a copy of the 
account record or an alternate document with all information required by 
paragraph (a)(17)(i)(A) of this section. The member, broker or dealer 
may elect to send this notification with the next statement mailed to 
the customer or owner after the opening of the account. The member, 
broker or dealer may choose to exclude any tax identification number and 
date of birth from the account record or alternative document furnished 
to the customer or owner. The member, broker or dealer must include with 
the account record or alternative document provided to each customer or 
owner an explanation of any terms regarding investment objectives. The 
account record or alternate document furnished to the customer or owner 
must include or be accompanied by prominent statements that the customer 
or owner should mark any corrections and return the account record or 
alternate document to the member, broker or dealer, and that the 
customer or owner should notify the member, broker or dealer of any 
future changes to information contained in the account record.
    (2) For each account record updated to reflect a change in the name 
or address of the customer or owner, the member, broker or dealer 
furnished a notification of that change to the customer's old address, 
or to each joint owner, and the associated person, if any, responsible 
for that account, on or before the 30th day after the date the member, 
broker or dealer received notice of the change.
    (3) For each change in the account's investment objectives the 
member, broker or dealer has furnished to each customer or owner, and 
the associated person, if any, responsible for that account a copy of 
the updated customer account record or alternative document with all 
information required to be furnished by paragraph (a)(17)(i)(B)(1) of 
this section, on or before the 30th day after the date the member, 
broker or dealer received notice of any change, or, if the account was 
updated for some reason other than the firm receiving notice of a 
change, after the date the account record was updated. The member, 
broker or dealer may elect to send this notification with the next 
statement scheduled to be mailed to the customer or owner.
    (C) For purposes of this paragraph (a)(17), the neglect, refusal, or 
inability of a customer or owner to provide or update any account record 
information required under paragraph (a)(17)(i)(A) of this section will 
excuse the member, broker or dealer from obtaining that required 
information.
    (D) The account record requirements in paragraph (a)(17)(i)(A) of 
this section will only apply to accounts for which the member, broker or 
dealer is, or has within the past 36 months been, required to make a 
suitability determination under the federal securities

[[Page 569]]

laws or under the requirements of a self-regulatory organization of 
which it is a member. Additionally, the furnishing requirement in 
paragraph (a)(17)(i)(B)(1) of this section will not be applicable to an 
account for which, within the last 36 months, the member, broker or 
dealer has not been required to make a suitability determination under 
the federal securities laws or under the requirements of a self-
regulatory organization of which it is a member. This paragraph 
(a)(17)(i)(D) does not relieve a member, broker or dealer from any 
obligation arising from the rules of a self-regulatory organization of 
which it is a member regarding the collection of information from a 
customer or owner.
    (ii) If an account is a discretionary account, a record containing 
the dated signature of each customer or owner granting the authority and 
the dated signature of each natural person to whom discretionary 
authority was granted.
    (iii) A record for each account indicating that each customer or 
owner was furnished with a copy of each written agreement entered into 
on or after the effective date of this paragraph pertaining to that 
account and that, if requested by the customer or owner, the customer or 
owner was furnished with a fully executed copy of each agreement.
    (18) A record:
    (i) As to each associated person of each written customer complaint 
received by the member, broker or dealer concerning that associated 
person. The record must include the complainant's name, address, and 
account number; the date the complaint was received; the name of any 
other associated person identified in the complaint; a description of 
the nature of the complaint; and the disposition of the complaint. 
Instead of the record, a member, broker or dealer may maintain a copy of 
each original complaint in a separate file by the associated person 
named in the complaint along with a record of the disposition of the 
complaint.
    (ii) Indicating that each customer of the member, broker or dealer 
has been provided with a notice containing the address and telephone 
number of the department of the member, broker or dealer to which any 
complaints as to the account may be directed.
    (19) A record:
    (i) As to each associated person listing each purchase and sale of a 
security attributable, for compensation purposes, to that associated 
person. The record must include the amount of compensation if monetary 
and a description of the compensation if non-monetary. In lieu of making 
this record, a member, broker or dealer may elect to produce the 
required information promptly upon request of a representative of a 
securities regulatory authority.
    (ii) Of all agreements pertaining to the relationship between each 
associated person and the member, broker or dealer including a summary 
of each associated person's compensation arrangement or plan with the 
member, broker or dealer, including commission and concession schedules 
and, to the extent that compensation is based on factors other than 
remuneration per trade, the method by which the compensation is 
determined.
    (20) A record, which need not be separate from the advertisements, 
sales literature, or communications, documenting that the member, broker 
or dealer has complied with, or adopted policies and procedures 
reasonably designed to establish compliance with, applicable federal 
requirements and rules of a self-regulatory organization of which the 
member, broker or dealer is a member which require that advertisements, 
sales literature, or any other communications with the public by a 
member, broker or dealer or its associated persons be approved by a 
principal.
    (21) A record for each office listing, by name or title, each person 
at that office who, without delay, can explain the types of records the 
firm maintains at that office and the information contained in those 
records.
    (22) A record listing each principal of a member, broker or dealer 
responsible for establishing policies and procedures that are reasonably 
designed to ensure compliance with any applicable federal requirements 
or rules of a self-regulatory organization of which the member, broker 
or dealer is a member that

[[Page 570]]

require acceptance or approval of a record by a principal.
    (23) A record documenting the credit, market, and liquidity risk 
management controls established and maintained by the broker or dealer 
to assist it in analyzing and managing the risks associated with its 
business activities, Provided, that the records required by this 
paragraph (a)(23) need only be made if the broker or dealer has more 
than:
    (i) $1,000,000 in aggregate credit items as computed under Sec.  
240.15c3-3a; or
    (ii) $20,000,000 in capital, which includes debt subordinated in 
accordance with Sec.  240.15c3-1d.
    (24) A record of the date that each Form CRS was provided to each 
retail investor, including any Form CRS provided before such retail 
investor opens an account.
    (25) A record of the daily calculation of the current exposure and, 
if applicable, the initial margin amount for each account of a 
counterparty required under Sec.  240.18a-3(c).
    (26) A record of compliance with possession or control requirements 
under Sec.  240.15c3-3(p)(2).
    (27) A record of the reserve computation required under Sec.  
240.15c3-3(p)(3).
    (28) A record of each security-based swap transaction that is not 
verified under Sec.  240.15Fi-2 within five business days of execution 
that includes, at a minimum, the unique transaction identifier and the 
counterparty's unique identification code.
    (29) A record documenting that the broker or dealer has complied 
with the business conduct standards as required under Sec.  240.15Fh-6.
    (30) A record documenting that the broker or dealer has complied 
with the business conduct standards as required under Sec. Sec.  
240.15Fh-1 through 240.15Fh-5 and 240.15Fk-1.
    (31)(i) A record of each security-based swap portfolio 
reconciliation, whether conducted pursuant to Sec.  240.15Fi-3 or 
otherwise, including the dates of the security-based swap portfolio 
reconciliation, the number of portfolio reconciliation discrepancies, 
the number of security-based swap valuation disputes (including the 
time-to-resolution of each valuation dispute and the age of outstanding 
valuation disputes, categorized by transaction and counterparty), and 
the name of the third-party entity performing the security-based swap 
portfolio reconciliation, if any.
    (ii) A copy of each notification required to be provided to the 
Commission pursuant to Sec.  240.15Fi-3(c).
    (iii) A record of each bilateral offset and each bilateral portfolio 
compression exercise or multilateral portfolio compression exercise in 
which it participates, whether conducted pursuant to Sec.  240.15Fi-4 or 
otherwise, including the dates of the offset or compression, the 
security-based swaps included in the offset or compression, the identity 
of the counterparties participating in the offset or compression, the 
results of the compression, and the name of the third-party entity 
performing the offset or compression, if any.
    (32)-(34) [Reserved]
    (35) For each retail customer to whom a recommendation of any 
securities transaction or investment strategy involving securities is or 
will be provided:
    (i) A record of all information collected from and provided to the 
retail customer pursuant to Sec.  240.15l-1, as well as the identity of 
each natural person who is an associated person, if any, responsible for 
the account.
    (ii) For purposes of this paragraph (a)(35), the neglect, refusal, 
or inability of the retail customer to provide or update any information 
described in paragraph (a)(35)(i) of this section shall excuse the 
broker, dealer, or associated person from obtaining that required 
information.
    (b) A broker or dealer may comply with the recordkeeping 
requirements of the Commodity Exchange Act and chapter I of this title 
applicable to swap dealers and major swap participants in lieu of 
complying with paragraphs (a)(1), (3), and (5) of this section solely 
with respect to required information regarding security-based swap 
transactions and positions if:
    (1) The broker or dealer is registered as a security-based swap 
dealer or major security-based swap participant pursuant to section 15F 
of the Act (15 U.S.C. 78o-10);

[[Page 571]]

    (2) The broker or dealer is registered as a swap dealer or major 
swap participant pursuant to section 4s of the Commodity Exchange Act 
and chapter I of this title;
    (3) The broker or dealer is subject to 17 CFR 23.201, 23.202, 
23.402, and 23.501 with respect to its swap-related books and records;
    (4) The broker or dealer preserves all of the data elements 
necessary to create the records required by paragraphs (a)(1), (3), and 
(5) of this section as they pertain to security-based swap and swap 
transactions and positions;
    (5) The broker or dealer upon request furnishes promptly to 
representatives of the Commission the records required by paragraphs 
(a)(1), (3), and (5) of this section as well as the records required by 
17 CFR 23.201, 23.202, 23.402, and 23.501 as they pertain to security-
based swap and swap transactions and positions in the format applicable 
to that category of record as set forth in this section; and
    (6) The broker or dealer provides notice of its intent to utilize 
this paragraph (b) by notifying in writing the Commission, both at the 
principal office of the Commission in Washington, DC, and at the 
regional office of the Commission for the region in which the registrant 
has its principal place of business, as well as by notifying in writing 
the registrant's designated examining authority.
    (c) A member of a national securities exchange, or a broker or 
dealer registered pursuant to section 15 of the Act (15 U.S.C. 78o), 
that introduces accounts on a fully-disclosed basis, is not required to 
make or keep such records of transactions cleared for such member, 
broker or dealer as are made and kept by a clearing broker or dealer 
pursuant to the requirements of this section and Sec.  240.17a-4. 
Nothing in this paragraph (c) will be deemed to relieve such member, 
broker or dealer from the responsibility that such books and records be 
accurately maintained and preserved as specified in this section and 
Sec.  240.17a-4.
    (d) For purposes of transactions in municipal securities by 
municipal securities brokers and municipal securities dealers, 
compliance with Rule G-8 of the Municipal Securities Rulemaking Board or 
any successor rule will be deemed to be in compliance with this section.
    (e) The provisions of this section will not apply to security 
futures product transactions and positions in a futures account (as that 
term is defined in Sec.  240.15c3-3(a)(15)); provided, that the 
Commodity Futures Trading Commission's recordkeeping rules apply to 
those transactions and positions.
    (f) Every member, broker or dealer must make and keep current, as to 
each office, the books and records described in paragraphs (a)(1), (6), 
(7), (12), and (17), (a)(18)(i), and (a)(19) through (22) of this 
section.
    (g) When used in this section:
    (1) The term office means any location where one or more associated 
persons regularly conduct the business of handling funds or securities 
or effecting any transactions in, or inducing or attempting to induce 
the purchase or sale of, any security.
    (2) The term principal means any individual registered with a 
registered national securities association as a principal or branch 
manager of a member, broker or dealer or any other person who has been 
delegated supervisory responsibility over associated persons by the 
member, broker or dealer.
    (3) The term securities regulatory authority means the Commission, 
any self-regulatory organization, or any securities commission (or any 
agency or office performing like functions) of the States.
    (4) The term associated person means a ``person associated with a 
broker or dealer'' or ``person associated with a security-based swap 
dealer or major security-based swap participant'' as defined in sections 
3(a)(18) and (70) of the Act (15 U.S.C. 78c(a)(18) and (70)) 
respectively, but does not include persons whose functions are solely 
clerical or ministerial.

    Cross Reference: For interpretative release applicable to Sec.  
240.17a-3, see No. 3040 in tabulation, part 241 of this chapter.

[13 FR 8212, Dec. 22, 1948]

    Editorial Note: For Federal Register citations affecting Sec.  
240.17a-3, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.govinfo.gov.

[[Page 572]]



Sec.  240.17a-4  Records to be preserved by certain exchange members,
brokers and dealers.

    This section applies to the following types of entities: A member of 
a national securities exchange who transacts a business in securities 
directly with others than members of a national securities exchange; a 
broker or dealer who transacts a business in securities through the 
medium of a member of a national securities exchange; a broker or 
dealer, including an OTC derivatives dealer as that term is defined in 
Sec.  240.3b-12, registered pursuant to section 15 of the Act (15 U.S.C. 
78o); a security-based swap dealer registered pursuant to section 15F of 
the Act (15 U.S.C. 78o-10) that is also a broker or dealer, including an 
OTC derivatives dealer, registered pursuant to section 15 of the Act; 
and a major security-based swap participant registered pursuant to 
section 15F of the Act that is also a broker or dealer, including an OTC 
derivatives dealer, registered pursuant to section 15 of the Act. 
Section 240.18a-6 (rather than this section) applies to the following 
types of entities: A security-based swap dealer registered pursuant to 
section 15F of the Act that is not also a broker or dealer, including an 
OTC derivatives dealer, registered pursuant to section 15 of the Act; 
and a major security-based swap participant registered pursuant to 
section 15F of the Act that is not also a broker or dealer, including an 
OTC derivatives dealer, registered pursuant to section 15 of the Act.
    (a) Every member, broker or dealer subject to Sec.  240.17a-3 must 
preserve for a period of not less than 6 years, the first two years in 
an easily accessible place, all records required to be made pursuant to 
Sec.  240.17a-3(a)(1) through (3), (5), and (21) and (22), and analogous 
records created pursuant to Sec.  240.17a-3(d).
    (b) Every member, broker or dealer subject to Sec.  240.17a-3 must 
preserve for a period of not less than three years, the first two years 
in an easily accessible place:
    (1) All records required to be made pursuant to Sec.  240.17a-
3(a)(4), (6) through (11), (16), (18) through (20), and (25) through 
(31), and analogous records created pursuant to Sec.  240.17a-3(e).
    (2) All check books, bank statements, cancelled checks and cash 
reconciliations.
    (3) All bills receivable or payable (or copies thereof), paid or 
unpaid, relating to the member, broker or dealer's business as such.
    (4) Originals of all communications received and copies of all 
communications sent (and any approvals thereof) by the member, broker or 
dealer (including inter-office memoranda and communications) relating to 
its business as such, including all communications which are subject to 
rules of a self-regulatory organization of which the member, broker or 
dealer is a member regarding communications with the public. As used in 
this paragraph (b)(4), the term communications includes sales scripts 
and recordings of telephone calls required to be maintained pursuant to 
section 15F(g)(1) of the Act (15 U.S.C. 78o-10(g)(1)).
    (5) All trial balances, computations of aggregate indebtedness and 
net capital (and working papers in connection therewith), financial 
statements, branch office reconciliations, and internal audit working 
papers, relating to the member, broker or dealer's business as such.
    (6) All guarantees of accounts and all powers of attorney and other 
evidence of the granting of any discretionary authority given in respect 
of any account, and copies of resolutions empowering an agent to act on 
behalf of a corporation.
    (7) All written agreements (or copies thereof) entered into by such 
member, broker or dealer relating to its business as such, including 
agreements with respect to any account. Written agreements with respect 
to a security-based swap customer or non-customer, including governing 
documents or any document establishing the terms and conditions of the 
customer's or non-customer's security-based swaps must be maintained 
with the customer's or non-customer's account records.
    (8) Records which contain the following information in support of 
amounts included in the report prepared as of the fiscal year end on 
Part II or IIA of Form X-17A-5 (Sec.  249.617 of this chapter), as 
applicable, and in the annual financial statements filed with

[[Page 573]]

the Commission required by Sec.  240.17a-5(d), Sec.  240.17a-12(b), or 
Sec.  240.18a-7(c), as applicable:
    (i) Money balance and position, long or short, including 
description, quantity, price, and valuation of each security including 
contractual commitments in customers' accounts, in cash and fully 
secured accounts, partly secured accounts, unsecured accounts, and in 
securities accounts payable to customers;
    (ii) Money balance and position, long or short, including 
description, quantity, price and valuation of each security including 
contractual commitments in non-customers' accounts, in cash and fully 
secured accounts, partly secured and unsecured accounts, and in 
securities accounts payable to non-customers;
    (iii) Position, long or short, including description, quantity, 
price and valuation of each security including contractual commitments 
included in the Computation of Net Capital as commitments, securities 
owned, securities owned not readily marketable, and other investments 
owned not readily marketable;
    (iv) Amount of secured demand note, description of collateral 
securing such secured demand note including quantity, price and 
valuation of each security and cash balance securing such secured demand 
note;
    (v) Description of futures commodity contracts or swaps, contract 
value on trade date, market value, gain or loss, and liquidating equity 
or deficit in customers' and non-customers' accounts;
    (vi) Description of futures commodity contracts or swaps, contract 
value on trade date, market value, gain or loss, and liquidating equity 
or deficit in trading and investment accounts;
    (vii) Description, money balance, quantity, price, and valuation of 
each spot commodity, and swap position or commitments in customers' and 
non-customers' accounts;
    (viii) Description, money balance, quantity, price, and valuation of 
each spot commodity, and swap position or commitments in trading and 
investment accounts;
    (ix) Number of shares, description of security, exercise price, cost 
and market value of put and call options including short out of the 
money options having no market or exercise value, showing listed and 
unlisted put and call options separately;
    (x) Quantity, price, and valuation of each security underlying the 
haircut for undue concentration made in the Computation for Net Capital;
    (xi) Description, quantity, price and valuation of each security and 
commodity position or contractual commitment, long or short, in each 
joint account in which the broker or dealer has an interest, including 
each participant's interest and margin deposit;
    (xii) Description, settlement date, contract amount, quantity, 
market price, and valuation for each aged failed to deliver requiring a 
charge in the Computation of Net Capital pursuant to Sec.  240.15c3-1 or 
Sec.  240.18a-1, as applicable;
    (xiii) Detail relating to information for possession or control 
requirements under Sec.  240.15c3-3 or Sec.  240.18a-4, as applicable 
and reported in Part II or IIA of Form X-17A-5 (Sec.  249.617 of this 
chapter), as applicable;
    (xiv) Detail relating to information for security-based swap 
possession or control requirements under Sec.  240.15c3-3 or Sec.  
240.18a-4, as applicable, and reported in Part II or IIA of Form X-17A-5 
(Sec.  249.617 of this chapter);
    (xv) Detail of all items, not otherwise substantiated, which are 
charged or credited in the Computation of Net Capital pursuant to Sec.  
240.15c3-1 or Sec.  240.18a-1, as applicable, such as cash margin 
deficiencies, deductions related to securities values and undue 
concentration, aged securities differences, and insurance claims 
receivable;
    (xvi) Detail relating to the calculation of the risk margin amount 
pursuant to Sec.  240.15c3-1(c)(17) or Sec.  240.18a-1(c)(6), as 
applicable; and
    (xvii) Other schedules which are specifically prescribed by the 
Commission as necessary to support information reported as required by 
Sec. Sec.  240.17a-5, 240.17a-12, and 240.18a-7, as applicable.
    (9) The records required to be made pursuant to Sec.  240.15c3-
3(d)(5) and (o) or Sec.  240.18a-4, as applicable.
    (10) The records required to be made pursuant to Sec.  240.15c3-4 
and the results

[[Page 574]]

of the periodic reviews conducted pursuant to Sec.  240.15c3-4(d).
    (11) All notices relating to an internal broker-dealer system 
provided to the customers of the broker or dealer that sponsors such 
internal broker-dealer system, as defined in paragraph (a)(16)(ii)(A) of 
Sec.  240.17a-3. Notices, whether written or communicated through the 
internal broker-dealer trading system or other automated means, must be 
preserved under this paragraph (b)(11) if they are provided to all 
customers with access to an internal broker-dealer system, or to one or 
more classes of customers. Examples of notices to be preserved under 
this paragraph (b)(11) include, but are not limited to, notices 
addressing hours of system operations, system malfunctions, changes to 
system procedures, maintenance of hardware and software, and 
instructions pertaining to access to the internal broker-dealer system.
    (12) The records required to be made pursuant to Sec.  240.15c3-
1e(c)(4)(vi) or Sec.  240.18a-1(e)(2)(iii)(F)(2), as applicable.
    (13) The written policies and procedures the broker-dealer 
establishes, documents, maintains, and enforces to assess 
creditworthiness for the purpose of Sec.  240.15c3-1(c)(2)(vi)(E), 
(c)(2)(vi)(F)(1) and (2), and (c)(2)(vi)(H) or Sec.  240.18a-
1(c)(1)(vi)(2), as applicable.
    (14) A copy of information required to be reported under Sec. Sec.  
242.901 through 242.909 of this chapter (Regulation SBSR).
    (15) Copies of documents, communications, disclosures, and notices 
related to business conduct standards as required under Sec. Sec.  
240.15Fh-1 through 240.15Fh-6 and 240.15Fk-1.
    (16) Copies of documents used to make a reasonable determination 
with respect to special entities, including information relating to the 
financial status, the tax status, the investment or financing objectives 
of the special entity as required under section 15F(h)(4)(C) and (5)(A) 
of the Act (15 U.S.C. 78o-10(h)(4)(C) and (5)(A)).
    (c) Every member, broker or dealer subject to Sec.  240.17a-3 must 
preserve for a period of not less than six years after the closing of 
any customer's account any account cards or records which relate to the 
terms and conditions with respect to the opening and maintenance of the 
account.
    (d) Every member, broker or dealer subject to Sec.  240.17a-3 must 
preserve during the life of the enterprise and of any successor 
enterprise all partnership articles or, in the case of a corporation, 
all articles of incorporation or charter, minute books, and stock 
certificate books (or, in the case of any other form of legal entity, 
all records such as articles of organization or formation, and minute 
books used for a purpose similar to those records required for 
corporations or partnerships), all Forms BD (Sec.  249.501 of this 
chapter), all Forms BDW (Sec.  249.501a of this chapter), all Forms 
SBSE-BD (Sec.  249.1600b of this chapter), all Forms SBSE-C (Sec.  
249.1600c of this chapter), all Forms SBSE-W (Sec.  249.1601 of this 
chapter), all amendments to these forms, and all licenses or other 
documentation showing the registration of the member, broker or dealer 
with any securities regulatory authority or the Commodity Futures 
Trading Commission.
    (e) Every member, broker or dealer subject to Sec.  240.17a-3 must 
maintain and preserve in an easily accessible place:
    (1) All records required under Sec.  240.17a-3(a)(12) until at least 
three years after the associated person's employment and any other 
connection with the member, broker or dealer has terminated.
    (2) All records required under Sec.  240.17a-3(a)(13) until at least 
three years after the termination of employment or association of those 
persons required by Sec.  240.17f-2 to be fingerprinted.
    (3) All records required pursuant to Sec.  240.17a-3(a)(15) during 
the life of the enterprise.
    (4) All records required pursuant to Sec.  240.17a-3(a)(14) for 
three years.
    (5) All account record information required pursuant to Sec.  
240.17a-3(a)(17) and all records required pursuant to Sec.  240.17a-
3(a)(35), in each case until at least six years after the earlier of the 
date the account was closed or the date on which the information was 
collected, provided, replaced, or updated.
    (6) Each report which a securities regulatory authority or the 
Commodity Futures Trading Commission

[[Page 575]]

has requested or required the member, broker or dealer to make and 
furnish to it pursuant to an order or settlement, and each securities 
regulatory authority, Commodity Futures Trading Commission, or 
prudential regulator examination report until three years after the date 
of the report.
    (7) Each compliance, supervisory, and procedures manual, including 
any updates, modifications, and revisions to the manual, describing the 
policies and practices of the member, broker or dealer with respect to 
compliance with applicable laws and rules, and supervision of the 
activities of each natural person associated with the member, broker or 
dealer until three years after the termination of the use of the manual.
    (8) All reports produced to review for unusual activity in customer 
accounts until eighteen months after the date the report was generated. 
In lieu of maintaining the reports, a member, broker or dealer may 
produce promptly the reports upon request by a representative of a 
securities regulatory authority. If a report was generated in a computer 
system that has been changed in the most recent eighteen month period in 
a manner such that the report cannot be reproduced using historical data 
in the same format as it was originally generated, the report may be 
produced by using the historical data in the current system, but must be 
accompanied by a record explaining each system change which affected the 
reports. If a report is generated in a computer system that has been 
changed in the most recent eighteen month period in a manner such that 
the report cannot be reproduced in any format using historical data, the 
member, broker or dealer must promptly produce upon request a record of 
the parameters that were used to generate the report at the time 
specified by a representative of a securities regulatory authority, 
including a record of the frequency with which the reports were 
generated.
    (9) All records required pursuant to Sec.  240.17a-3(a)(23) until 
three years after the termination of the use of the risk management 
controls documented therein.
    (10) All records required pursuant to Sec.  240.17a-3(a)(24), as 
well as a copy of each Form CRS, until at least six years after such 
record or Form CRS is created.
    (11) The written policies and procedures required pursuant to 
Sec. Sec.  240.15Fi-3, 240.15Fi-4, and 240.15Fi-5 until three years 
after termination of the use of the policies and procedures.
    (12)(i) Each written agreement with counterparties on the terms of 
portfolio reconciliation with those counterparties as required to be 
created under Sec.  240.15Fi-3(a)(1) and (b)(1) until three years after 
the termination of the agreement and all transactions governed thereby.
    (ii) Security-based swap trading relationship documentation with 
counterparties required to be created under Sec.  240.15Fi-5 until three 
years after the termination of such documentation and all transactions 
governed thereby.
    (iii) A record of the results of each audit required to be performed 
pursuant to Sec.  240.15Fi-5(c) until three years after the conclusion 
of the audit.
    (f) The records required to be maintained and preserved pursuant to 
Sec. Sec.  240.17a-3 and 240.17a-4 may be immediately produced or 
reproduced on ``micrographic media'' (as defined in this section) or by 
means of ``electronic storage media'' (as defined in this section) that 
meet the conditions set forth in this section and be maintained and 
preserved for the required time in that form.
    (1) For purposes of this section:
    (i) The term micrographic media means microfilm or microfiche, or 
any similar medium; and
    (ii) The term electronic storage media means any digital storage 
medium or system and, in the case of both paragraphs (f)(1)(i) and 
(f)(1)(ii) of this section, that meets the applicable conditions set 
forth in this paragraph (f).
    (2) If electronic storage media is used by a member, broker, or 
dealer, it must comply with the following requirements:
    (i) The member, broker, or dealer must notify its examining 
authority designated pursuant to section 17(d) of the Act (15 U.S.C. 
78q(d)) prior to employing electronic storage media. If employing any 
electronic storage

[[Page 576]]

media other than optical disk technology (including CD-ROM), the member, 
broker, or dealer must notify its designated examining authority at 
least 90 days prior to employing such storage media. In either case, the 
member, broker, or dealer must provide its own representation or one 
from the storage medium vendor or other third party with appropriate 
expertise that the selected storage media meets the conditions set forth 
in this paragraph (f)(2).
    (ii) The electronic storage media must:
    (A) Preserve the records exclusively in a non-rewriteable, non-
erasable format;
    (B) Verify automatically the quality and accuracy of the storage 
media recording process;
    (C) Serialize the original and, if applicable, duplicate units of 
storage media, and time-date for the required period of retention the 
information placed on such electronic storage media; and
    (D) Have the capacity to readily download indexes and records 
preserved on the electronic storage media to any medium acceptable under 
this paragraph (f) as required by the Commission or the self-regulatory 
organizations of which the member, broker, or dealer is a member.
    (3) If a member, broker, or dealer uses micrographic media or 
electronic storage media, it must:
    (i) At all times have available, for examination by the staffs of 
the Commission and self-regulatory organizations of which it is a 
member, facilities for immediate, easily readable projection or 
production of micrographic media or electronic storage media images and 
for producing easily readable images.
    (ii) Be ready at all times to provide, and immediately provide, any 
facsimile enlargement which the staffs of the Commission, any self-
regulatory organization of which it is a member, or any State securities 
regulator having jurisdiction over the member, broker or dealer may 
request.
    (iii) Store separately from the original, a duplicate copy of the 
record stored on any medium acceptable under Sec.  240.17a-4 for the 
time required.
    (iv) Organize and index accurately all information maintained on 
both original and any duplicate storage media.
    (A) At all times, a member, broker, or dealer must be able to have 
such indexes available for examination by the staffs of the Commission 
and the self- regulatory organizations of which the broker or dealer is 
a member.
    (B) Each index must be duplicated and the duplicate copies must be 
stored separately from the original copy of the index.
    (C) Original and duplicate indexes must be preserved for the time 
required for the indexed records.
    (v) The member, broker, or dealer must have in place an audit system 
providing for accountability regarding inputting of records required to 
be maintained and preserved pursuant to Sec. Sec.  240.17a-3 and 
240.17a-4 to electronic storage media and inputting of any changes made 
to every original and duplicate record maintained and preserved thereby.
    (A) At all times, a member, broker, or dealer must be able to have 
the results of such audit system available for examination by the staffs 
of the Commission and the self-regulatory organizations of which the 
broker or dealer is a member.
    (B) The audit results must be preserved for the time required for 
the audited records.
    (vi) The member, broker, or dealer must maintain, keep current, and 
provide promptly upon request by the staffs of the Commission or any 
self-regulatory organization of which the member, broker, or broker-
dealer is a member all information necessary to access records and 
indexes stored on the electronic storage media; or place in escrow and 
keep current a copy of the physical and logical file format of the 
electronic storage media, the field format of all different information 
types written on the electronic storage media and the source code, 
together with the appropriate documentation and information necessary to 
access records and indexes.
    (vii) For every member, broker or dealer exclusively using 
electronic storage media for some or all of its record preservation 
under this section,

[[Page 577]]

at least one third party (the undersigned), who has access to and the 
ability to download information from the member's, broker's or dealer's 
electronic storage media to any acceptable medium under this section, 
must file with the designated examining authority for the member, broker 
or dealer the following undertakings with respect to such records:

    The undersigned hereby undertakes to furnish promptly to the U.S. 
Securities and Exchange Commission (``Commission''), its designees or 
representatives, any self-regulatory organization of which it is a 
member, or any State securities regulator having jurisdiction over the 
member, broker or dealer, upon reasonable request, such information as 
deemed necessary by the staffs of the Commission, any self-regulatory 
organization of which it is a member, or any State securities regulator 
having jurisdiction over the member, broker or dealer to download 
information kept on the member's, broker's or dealer's electronic 
storage media to any medium acceptable under Sec.  240.17a-4. 
Furthermore, the undersigned hereby undertakes to take reasonable steps 
to provide access to information contained on the member's, broker's or 
dealer's electronic storage media, including, as appropriate, 
arrangements for the downloading of any record required to be maintained 
and preserved by the member, broker or dealer pursuant to Sec. Sec.  
240.17a-3 and 240.17a-4 in a format acceptable to the staffs of the 
Commission, any self-regulatory organization of which it is a member, or 
any State securities regulator having jurisdiction over the member, 
broker or dealer. Such arrangements will provide specifically that in 
the event of a failure on the part of a member, broker or dealer to 
download the record into a readable format and after reasonable notice 
to the broker or dealer, upon being provided with the appropriate 
electronic storage medium, the undersigned will undertake to do so, as 
the staffs of the Commission, any self-regulatory organization of which 
it is a member, or any State securities regulator having jurisdiction 
over the member, broker or dealer may request.

    (g) If a person who has been subject to Sec.  240.17a-3 ceases to 
transact a business in securities directly with others than members of a 
national securities exchange, or ceases to transact a business in 
securities through the medium of a member of a national securities 
exchange, or ceases to be registered pursuant to section 15 of the Act 
(15 U.S.C. 78o) such person must, for the remainder of the periods of 
time specified in this section, continue to preserve the records which 
it theretofore preserved pursuant to this section.
    (h) For purposes of transactions in municipal securities by 
municipal securities brokers and municipal securities dealers, 
compliance with Rule G-9 of the Municipal Securities Rulemaking Board or 
any successor rule will be deemed to be in compliance with this section.
    (i)(1) If the records required to be maintained and preserved 
pursuant to the provisions of Sec. Sec.  240.17a-3 and 240.17a-4 are 
prepared or maintained by an outside service bureau, depository, bank 
which does not operate pursuant to Sec.  240.17a-3(b)(2), or other 
recordkeeping service on behalf of the member, broker or dealer required 
to maintain and preserve such records, such outside entity must file 
with the Commission a written undertaking in form acceptable to the 
Commission, signed by a duly authorized person, to the effect that such 
records are the property of the member, broker or dealer required to 
maintain and preserve such records and will be surrendered promptly on 
request of the member, broker or dealer and including the following 
provision:

    With respect to any books and records maintained or preserved on 
behalf of [BD], the undersigned hereby undertakes to permit examination 
of such books and records at any time or from time to time during 
business hours by representatives or designees of the Securities and 
Exchange Commission, and to promptly furnish to said Commission or its 
designee true, correct, complete and current hard copy of any or all or 
any part of such books and records.

    (2) Agreement with an outside entity will not relieve such member, 
broker or dealer from the responsibility to prepare and maintain records 
as specified in this section or in Sec.  240.17a-3.
    (j) Every member, broker and dealer subject to this section must 
furnish promptly to a representative of the Commission legible, true, 
complete, and current copies of those records of the member, broker or 
dealer that are required to be preserved under this section, or any 
other records of the member, broker or dealer subject to examination 
under section 17(b) of the Act (15 U.S.C. 78q(b)) that are requested by 
the representative of the Commission.

[[Page 578]]

    (k) Exchanges of futures for physical. (1) Except as provided in 
paragraph (k)(2) of this section, upon request of any designee or 
representative of the Commission or of any self-regulatory organization 
of which it is a member, every member, broker or dealer subject to this 
section must request and obtain from its customers documentation 
regarding an exchange of security futures products for physical 
securities, including documentation of underlying cash transactions and 
exchanges. Upon receipt of such documentation, the member, broker or 
dealer must promptly provide that documentation to the requesting 
designee or representative.
    (2) This paragraph (k) does not apply to an underlying cash 
transaction(s) or exchange(s) that was effected through a member, broker 
or dealer registered with the Commission and is of a type required to be 
recorded pursuant to Sec.  240.17a-3.
    (l) Records for the most recent two year period required to be made 
pursuant to Sec.  240.17a-3(e) and paragraphs (b)(4) and (e)(7) of this 
section which relate to an office shall be maintained at the office to 
which they relate. If an office is a private residence where only one 
associated person (or multiple associated persons who reside at that 
location and are members of the same immediate family) regularly 
conducts business, and it is not held out to the public as an office nor 
are funds or securities of any customer of the member, broker or dealer 
handled there, the member, broker or dealer need not maintain records at 
that office, but the records must be maintained at another location 
within the same State as the member, broker or dealer may select. Rather 
than maintain the records at each office, the member, broker or dealer 
may choose to produce the records promptly at the request of a 
representative of a securities regulatory authority at the office to 
which they relate or at another location agreed to by the 
representative.
    (m) When used in this section:
    (1) The term office has the meaning set forth in Sec.  240.17a-
3(g)(1).
    (2) The term principal has the meaning set forth in Sec.  240.17a-
3(g)(2).
    (3) The term securities regulatory authority has the meaning set 
forth in Sec.  240.17a-3(g)(3).
    (4) The term associated person has the meaning set forth in Sec.  
240.17a-3(g)(4).
    (5) The term business as such includes security-based swap activity.

    Cross Reference: For interpretative releases applicable to Sec.  
240.17a-4, see No. 3040 and No. 8024 in tabulation, part 241 of this 
chapter.

[13 FR 8212, Dec. 22, 1948]

    Editorial Note: For Federal Register citations affecting Sec.  
240.17a-4, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.govinfo.gov.



Sec.  240.17a-5  Reports to be made by certain brokers and dealers.

    This section applies to the following types of entities: Except as 
provided in this introductory text, a broker or dealer, including an OTC 
derivatives dealer as that term is defined in Sec.  240.3b-12 registered 
pursuant to section 15 of the Act (15 U.S.C. 78o); a broker or dealer, 
other than an OTC derivatives dealer, registered pursuant to section 15 
of the Act that is also a security-based swap dealer registered pursuant 
to section 15F of the Act (15 U.S.C. 78o-10); and a broker or dealer, 
including an OTC derivatives dealer, registered pursuant to section 15 
of the Act that is also a major-security-based swap participant 
registered pursuant to section 15F of the Act. Section 240.18a-7 (rather 
than this section) applies to the following types of entities: A 
security-based swap dealer registered pursuant to section 15F of the Act 
that is not also a broker or dealer, other than an OTC derivatives 
dealer, registered pursuant to section 15 of the Act; a security-based 
swap dealer registered pursuant to section 15F of the Act that is also 
an OTC derivatives dealer; and a major security-based swap participant 
registered pursuant to section 15F of the Act that is not also a broker 
or dealer, including an OTC derivatives dealer, registered pursuant to 
section 15 of the Act.
    (a) Monthly and quarterly reports. (1)(i) Every broker or dealer 
subject to this paragraph (a) who clears transactions or carries 
customer accounts must file with the Commission Part I

[[Page 579]]

of Form X-17A-5 (Sec.  249.617 of this chapter) within 10 business days 
after the end of each month.
    (ii) Every broker or dealer subject to this paragraph (a) who clears 
transactions or carries customer accounts and every broker or dealer 
that is registered as a security-based swap dealer or major security-
based swap participant under section 15F of the Act (15 U.S.C. 78o-10) 
must file with the Commission an executed Part II of Form X-17A-5 (Sec.  
249.617 of this chapter) within 17 business days after the end of the 
calendar quarter and within 17 business days after the end of the fiscal 
year of the broker or dealer where that date is not the end of a 
calendar quarter. Certain of such brokers or dealers must file with the 
Commission an executed Part IIA in lieu thereof if the nature of their 
business is limited as described in the instructions to Part II of Form 
X-17A-5 (Sec.  249.617 of this chapter).
    (iii) Every broker or dealer that neither clears transactions nor 
carries customer accounts and that is not registered as a security-based 
swap dealer or major security-based swap participant under section 15F 
of the Act (15 U.S.C. 78o-10) must file with the Commission an executed 
Part IIA of Form X-17A-5 (Sec.  249.617 of this chapter) within 17 
business days after the end of each calendar quarter and within 17 
business days after the end of the fiscal year of the broker or dealer 
where that date is not the end of a calendar quarter.
    (iv) Upon receiving written notice from the Commission or the 
examining authority designated pursuant to section 17(d) of the Act (15 
U.S.C. 78q(d)) (``designated examining authority''), a broker or dealer 
who receives such notice must file with the Commission on a monthly 
basis, or at such times as will be specified, an executed Part II or 
Part IIA of Form X-17A-5 (Sec.  249.617 of this chapter), and such other 
financial or operational information as will be required by the 
Commission or the designated examining authority.
    (2) The reports provided for in this paragraph (a) that must be 
filed with the Commission will be considered filed when received at the 
Commission's principal office in Washington, DC, and the regional office 
of the Commission for the region in which the broker or dealer has its 
principal place of business. All reports filed pursuant to this 
paragraph (a) will be deemed to be confidential.
    (3) The provisions of paragraph (a)(1) of this section will not 
apply to a member of a national securities exchange or a registered 
national securities association if said exchange or association 
maintains records containing the information required by Part I, Part 
II, or Part IIA of Form X-17A-5 (Sec.  249.617 of this chapter), as to 
such member, and transmits to the Commission a copy of the applicable 
parts of Form X-17A-5 (Sec.  249.617 of this chapter) as to such member, 
pursuant to a plan, the procedures and provisions of which have been 
submitted to and declared effective by the Commission. Any such plan 
filed by a national securities exchange or a registered national 
securities association may provide that when a member is also a member 
of one or more national securities exchanges, or of one or more national 
securities exchanges and a registered national securities association, 
the information required to be submitted with respect to any such member 
may be submitted by only one specified national securities exchange or 
registered national securities association. For the purposes of this 
section, a plan filed with the Commission by a national securities 
exchange or a registered national securities association will not become 
effective unless the Commission, having due regard for the fulfillment 
of the Commission's duties and responsibilities under the provisions of 
the Act, declares the plan to be effective. Further, the Commission, in 
declaring any such plan effective, may impose such terms and conditions 
relating to the provisions of the plan and the period of its 
effectiveness as may be deemed necessary or appropriate in the public 
interest, for the protection of investors, or to carry out the 
Commission's duties and responsibilities under the Act.
    (4) Every broker or dealer subject to this paragraph (a) must file 
Form Custody (Sec.  249.639 of this chapter) with its designated 
examining authority within 17 business days after the end of each 
calendar quarter and within 17 business days after the end of the fiscal 
year of

[[Page 580]]

the broker or dealer where that date is not the end of a calendar 
quarter. The designated examining authority must maintain the 
information obtained through the filing of Form Custody and must 
promptly transmit that information to the Commission at such time as it 
transmits the applicable part of Form X-17A-5 (Sec.  249.617 of this 
chapter) as required in paragraph (a)(2) of this section.
    (5) Broker-dealers that have been authorized by the Commission to 
compute net capital pursuant to Sec.  240.15c3-1e must file the 
following additional reports with the Commission:
    (i) For each product for which the broker or dealer calculates a 
deduction for market risk other than in accordance with Sec.  240.15c3-
1e(b)(1) or (3), the product category and the amount of the deduction 
for market risk within 17 business days after the end of the month;
    (ii) A graph reflecting, for each business line, the daily intra-
month value at risk within 17 business days after the end of the month;
    (iii) The aggregate value at risk for the broker or dealer within 17 
business days after the end of the month;
    (iv) For each product for which the broker or dealer uses scenario 
analysis, the product category and the deduction for market risk within 
17 business days after the end of the month;
    (v) Credit risk information on derivatives exposures within 17 
business days after the end of the month, including:
    (A) Overall current exposure;
    (B) Current exposure (including commitments) listed by counterparty 
for the 15 largest exposures;
    (C) The ten largest commitments listed by counterparty;
    (D) The broker's or dealer's maximum potential exposure listed by 
counterparty for the 15 largest exposures;
    (E) The broker's or dealer's aggregate maximum potential exposure;
    (F) A summary report reflecting the broker's or dealer's current and 
maximum potential exposures by credit rating category; and
    (G) A summary report reflecting the broker's or dealer's current 
exposure for each of the top ten countries to which the broker or dealer 
is exposed (by residence of the main operating group of the 
counterparty);
    (vi) Regular risk reports supplied to the broker's or dealer's 
senior management in the format described in the application, within 17 
business days after the end of the month;
    (vii) [Reserved]
    (viii) A report identifying the number of business days for which 
the actual daily net trading loss exceeded the corresponding daily VaR 
within 17 business days after the end of each calendar quarter; and
    (ix) The results of backtesting of all internal models used to 
compute allowable capital, including VaR and credit risk models, 
indicating the number of backtesting exceptions within 17 business days 
after the end of the calendar quarter.
    (6) Upon written application by a broker or dealer to its designated 
examining authority, the designated examining authority may extend the 
time for filing the information required by this paragraph (a). The 
designated examining authority for the broker or dealer will maintain, 
in the manner prescribed in Sec.  240.17a-1, a record of each extension 
granted.
    (b) Report filed upon termination of membership interest. (1) If a 
broker or dealer holding any membership interest in a national 
securities exchange or registered national securities association ceases 
to be a member in good standing of such exchange or association, such 
broker or dealer must, within two business days after such event, file 
with the Commission Part II or Part IIA of Form X-17A-5 (Sec.  249.617 
of this chapter) as determined by the standards set forth in paragraphs 
(a)(1)(ii) through (iv) of this section as of the date of such event. 
The report must be filed at the Commission's principal office in 
Washington, DC, and with the regional office of the Commission for the 
region in which the broker or dealer has its principal place of 
business; provided, however, that such report need not be made or filed 
if the Commission, upon written request or upon its own motion, exempts 
such broker or dealer, either unconditionally or on specified terms and 
conditions, from such requirement; provided, further, that the 
Commission may,

[[Page 581]]

upon request of the broker or dealer, grant extensions of time for 
filing the report specified herein for good cause shown.
    (2) The broker or dealer must attach to the report required by 
paragraph (b)(1) of this section an oath or affirmation that to the best 
knowledge and belief of the person making the oath or affirmation the 
information contained in the report is true and correct. The oath or 
affirmation must be made before a person duly authorized to administer 
such oaths or affirmations. If the broker or dealer is a sole 
proprietorship, the oath or affirmation must be made by the proprietor; 
if a partnership, by a general partner; if a corporation, by a duly 
authorized officer; or if a limited liability company or limited 
liability partnership, by the chief executive officer, chief financial 
officer, manager, managing member, or those members vested with 
management authority for the limited liability company or limited 
liability partnership.
    (3) For the purposes of this paragraph (b) ``membership interest'' 
will include the following: full membership, allied membership, 
associated membership, floor privileges, and any other interest that 
entitles a broker or dealer to the exercise of any privilege on an 
exchange or with an association.
    (4) For the purposes of this paragraph (b), any broker or dealer 
will be deemed to have ceased to be a member in good standing of such 
exchange or association when the broker or dealer has resigned, 
withdrawn, or been suspended or expelled from a membership interest in 
such exchange or association, or has directly or through any associated 
person sold or entered into an agreement for the sale of a membership 
interest which would on consummation thereof result in the termination 
of the broker's or dealer's membership interest in such exchange or 
association.
    (5) Whenever any national securities exchange or registered national 
securities association takes any action which causes any broker or 
dealer which is a member of such exchange or association to cease to be 
a member in good standing of such exchange or association or when such 
exchange or association learns of any action by such member of any other 
person which causes such broker or dealer to cease to be a member in 
good standing of such exchange or association, such exchange or 
association will report such action promptly to the Commission, 
furnishing information as to the circumstances surrounding the event, 
and will send a copy of such notification to the broker or dealer and 
notify such broker or dealer of its responsibilities under this 
paragraph (b).
    (c) Customer Statements--(1) Who must furnish the statements. Every 
broker or dealer must file with the Commission at its principal office 
in Washington, DC, with the regional office of the Commission for the 
region in which the broker or dealer has its principal place of 
business, and with each national securities exchange and registered 
national securities association of which it is a member, and must send 
to its customers the statements prescribed by paragraphs (c) (2) and (3) 
of this section, except as provided in paragraph (c)(5) of this section 
or if the activities of such broker or dealer are limited to any one or 
combination of the following and are conducted in the manner prescribed 
herein:
    (i) As introducing broker or dealer, the forwarding of all the 
transactions of customers of the introducing broker or dealer to a 
clearing broker or dealer on a fully disclosed basis: Provided, That 
such clearing broker or dealer reflects such transactions on its books 
and records in accounts it carries in the names of such customers and 
that the introducing broker or dealer does not hold funds or securities 
for, or owe funds or securities to, customers other than funds and 
securities promptly forwarded to the clearing broker or dealer or to 
customers;
    (ii) The prompt forwarding of subscriptions for securities to the 
issuer, underwriter or other distributor of such securities and of 
receiving checks, drafts, notes, or other evidences of indebtedness 
payable solely to the issuer, underwriter or other distributor who 
delivers the security directly to the subscriber or to a custodian bank, 
if the broker or dealer does not otherwise hold funds or securities for, 
or owe money or securities to, customers;

[[Page 582]]

    (iii) The sale and redemption of redeemable shares of registered 
investment companies or the solicitation of share accounts of savings 
and loan associations and otherwise qualified to maintain net capital of 
no less than what is required under Sec.  240.15c3-1(a)(2)(iv) or the 
offering to extend any credit to or participate in arranging a loan for 
a customer to purchase insurance in connection with the sale of 
redeemable shares of registered investment companies; or
    (iv) Conduct which would exempt the broker or dealer from the 
provisions of Sec.  240.17a-13 by reason of the provisions of paragraph 
(a) of that section.
    (2) Audited statements to be furnished. Audited statements must be 
furnished within 105 days after the end of the fiscal year of the broker 
or dealer. The statements may be furnished 30 days after that time limit 
has expired if the broker or dealer sends them with the next mailing of 
the broker's or dealer's quarterly customer statements of account. In 
that case, the broker or dealer must include a statement in that mailing 
of the amount of the broker's or dealer's net capital and its required 
net capital in accordance with Sec.  240.15c3-1, as of a fiscal month 
end that is within the 75-day period immediately preceding the date the 
statements are sent to customers. The audited statements must include 
the following:
    (i) A Statement of Financial Condition with appropriate notes 
prepared in accordance with U.S. generally accepted accounting 
principles which must be audited if the financial statements furnished 
in accordance with paragraph (d) of this section are required to be 
certified;
    (ii) A footnote containing a statement of the amount of the broker's 
or dealer's net capital and its required net capital, computed in 
accordance with Sec.  240.15c3-1. Such statement must include summary 
financial statements of subsidiaries consolidated pursuant to Appendix C 
of Sec.  240.15c3-1, where material, and the effect thereof on the net 
capital and required net capital of the broker or dealer;
    (iii) A statement indicating that the Statement of Financial 
Condition of the most recent financial report of the broker or dealer 
under paragraph (d)(1)(i)(A) of this section is available for 
examination at the principal office of the broker or dealer and at the 
regional office of the Commission for the region in which the broker or 
dealer has its principal place of business; and
    (iv) If, in connection with the most recent annual reports required 
under paragraph (d) of this section, the report of the independent 
public accountant required under paragraph (d)(1)(i)(C) of this section 
covering the report of the broker or dealer required under paragraph 
(d)(1)(i)(B)(1) of this section identifies one or more material 
weaknesses, a statement by the broker or dealer that one or more 
material weaknesses have been identified and that a copy of the report 
of the independent public accountant required under paragraph 
(d)(1)(i)(C) of this section is currently available for the customer's 
inspection at the principal office of the Commission in Washington, DC, 
and the regional office of the Commission for the region in which the 
broker or dealer has its principal place of business.
    (3) Unaudited statements to be furnished. Unaudited statements dated 
6 months after the date of the audited statements required to be 
furnished by paragraphs (c)(1) and (2) of this section must be furnished 
within 65 days after the date of the unaudited statements. The unaudited 
statements may be furnished 70 days after that time limit has expired if 
the broker or dealer sends them with the next mailing of the broker's or 
dealer's quarterly customer statements of account. In that case, the 
broker or dealer must include a statement in that mailing of the amount 
of the broker's or dealer's net capital and its required net capital in 
accordance with Sec.  240.15c3-1, as of a fiscal month end that is 
within the 75-day period immediately preceding the date the statements 
are sent to customers. The unaudited statements must contain the 
information specified in paragraphs (c)(2)(i) and (ii) of this section.
    (4) Definition of ``customer.'' For purposes of this paragraph (c), 
the term customer includes any person other than:
    (i) Another broker or dealer who is exempted by paragraph (c)(1) of 
this section;

[[Page 583]]

    (ii) A general, special or limited partner or director or officer of 
a broker or dealer; or
    (iii) Any person to the extent that such person has a claim for 
property or funds which by contract, agreement or understanding, or by 
operation of law, is part of the capital of the broker or dealer or is 
subordinated to the claims of creditors of the broker or dealer, for or 
with whom a broker or dealer has effected a securities transaction in a 
particular month, which month must be either the month preceding the 
balance sheet date or the month following the balance sheet date in 
which the statement is sent.
    (iv) The term ``customer'' also includes any person for whom the 
broker or dealer holds securities for safekeeping or as collateral or 
for whom the broker or dealer carries a free credit balance in the month 
in which customers are determined for purposes of this paragraph (c).
    (5) Exemption from sending certain financial information to 
customers. A broker or dealer is not required to send to its customers 
the statements prescribed by paragraphs (c)(2) and (c)(3) of this 
section if the following conditions are met:
    (i) The broker or dealer semi-annually sends its customers, at the 
times it otherwise is required to send its customers the statements 
prescribed by paragraphs (c)(2) and (c)(3) of this section, a financial 
disclosure statement that includes:
    (A) The amount of the broker's or dealer's net capital and its 
required net capital in accordance with Sec.  240.15c3-1, as of the date 
of the statements prescribed by paragraphs (c)(2) and (c)(3) of this 
section;
    (B) To the extent required under paragraph (c)(2)(ii) of this 
section, a description of the effect on the broker's or dealer's net 
capital and required net capital of the consolidation of the assets and 
liabilities of subsidiaries or affiliates consolidated pursuant to 
Appendix C of Sec.  240.15c3-1; and
    (C) Any statements otherwise required by paragraphs (c)(2)(iii) and 
(iv) of this section.
    (ii) The financial disclosure statement is given prominence in the 
materials delivered to customers of the broker or dealer and includes an 
appropriate caption stating that customers may obtain the statements 
prescribed by paragraphs (c)(2) and (c)(3) of this section, at no cost, 
by:
    (A) Accessing the broker's or dealer's Website at the specified 
Internet Uniform Resource Locator (URL); or
    (B) Calling the broker's or dealer's specified toll-free telephone 
number.
    (iii) Not later than 90 days after the date of the audited 
statements prescribed by paragraph (c)(2) of this section and not later 
than 75 days after the date of the unaudited statements prescribed by 
paragraph (c)(3) of this section, the broker or dealer publishes the 
statements on its Website, accessible by hyperlinks in either textual or 
button format, which are separate, prominent links, are clearly visible, 
and are placed in each of the following locations:
    (A) On the broker's or dealer's Website home page; and
    (B) On each page at which a customer can enter or log on to the 
broker's or dealer's Website; and
    (C) If the Websites for two or more brokers or dealers can be 
accessed from the same home page, on the home page of the Website of 
each broker or dealer.
    (iv) The broker or dealer maintains a toll-free telephone number 
that customers can call to request a copy of the statements prescribed 
by paragraphs (c)(2) and (c)(3) of this section.
    (v) If a customer requests a copy of the statements prescribed by 
paragraphs (c)(2) and (c)(3) of this section, the broker or dealer sends 
it promptly at no cost to the customer.
    (d) Annual reports. (1)(i) Except as provided in paragraphs 
(d)(1)(iii) and (iv) of this section, every broker or dealer registered 
under section 15 of the Act (15 U.S.C. 78o) must file annually:
    (A) A financial report as described in paragraph (d)(2) of this 
section; and
    (B)(1) If the broker or dealer did not claim it was exempt from 
Sec.  240.15c3-3 throughout the most recent fiscal year or the broker or 
dealer is subject to Sec.  240.15c3-3(p), a compliance report as 
described in paragraph (d)(3) of this section executed by the person who 
makes the oath or affirmation under paragraph (e)(2) of this section; or

[[Page 584]]

    (2) If the broker or dealer did claim it was exempt from Sec.  
240.15c3-3 throughout the most recent fiscal year and the broker or 
dealer is not subject to Sec.  240.15c3-3(p), an exemption report as 
described in paragraph (d)(4) of this section executed by the person who 
makes the oath or affirmation under paragraph (e)(2) of this section;
    (C) Except as provided in paragraph (e)(1)(i) of this section, a 
report prepared by an independent public accountant, under the 
engagement provisions in paragraph (g) of this section, covering each 
report required to be filed under paragraphs (d)(1)(i)(A) and (B) of 
this section.
    (ii) The reports required to be filed under this paragraph (d) must 
be as of the same fiscal year end each year, unless a change is approved 
in writing by the designated examining authority for the broker or 
dealer under paragraph (n) of this section. A copy of the written 
approval must be sent to the Commission's principal office in 
Washington, DC, and the regional office of the Commission for the region 
in which the broker or dealer has its principal place of business.
    (iii) A broker or dealer succeeding to and continuing the business 
of another broker or dealer need not file the reports under this 
paragraph (d) as of a date in the fiscal year in which the succession 
occurs if the predecessor broker or dealer has filed reports in 
compliance with this paragraph (d) as of a date in such fiscal year.
    (iv) A broker or dealer that is a member of a national securities 
exchange, has transacted a business in securities solely with or for 
other members of a national securities exchange, and has not carried any 
margin account, credit balance, or security for any person who is 
defined as a customer in paragraph (c)(4) of this section, is not 
required to file reports under this paragraph (d).
    (2) Financial report. The financial report must contain:
    (i) A Statement of Financial Condition, a Statement of Income, a 
Statement of Cash Flows, a Statement of Changes in Stockholders' or 
Partners' or Sole Proprietor's Equity, and a Statement of Changes in 
Liabilities Subordinated to Claims of General Creditors. The statements 
must be prepared in accordance with U.S. generally accepted accounting 
principles and must be in a format that is consistent with the 
statements contained in Part II or Part IIA of Form X-17A-5 (Sec.  
249.617 of this chapter), as applicable. If the Statement of Financial 
Condition filed in accordance with instructions to Part II or Part IIA 
of Form X-17A-5 (Sec.  249.617 of this chapter), as applicable, is not 
consolidated, a summary of financial data, including the assets, 
liabilities, and net worth or stockholders' equity, for subsidiaries not 
consolidated in the applicable Part II or Part IIA as filed by the 
broker or dealer must be included in the notes to the financial 
statements reported on by the independent public accountant.
    (ii) Supporting schedules that include, from Part II or Part IIA of 
Form X-17A-5 (Sec.  249.617 of this chapter), a Computation of Net 
Capital under Sec.  240.15c3-1, a Computation for Determination of 
Customer Reserve Requirements under Sec.  240.15c3-3a (Exhibit A of 
Sec.  240.15c3-3), a Computation for Determination of PAB Requirements 
under Exhibit A of Sec.  240.15c3-3, a Computation for Determination of 
Security-Based Swap Customer Reserve Requirements under Sec.  240.15c3-
3b (Exhibit B of Sec.  240.15c3-3), Information Relating to the 
Possession or Control Requirements for Customers under Sec.  240.15c3-3, 
and Information Relating to the Possession or Control Requirements for 
Security-Based Swap Customers under Sec.  240.15c3-3, as applicable.
    (iii) If any of the Computation of Net Capital under Sec.  240.15c3-
1, the Computation for Determination of Customer Reserve Requirements 
Under Exhibit A of Sec.  240.15c3-3, or the Computation for 
Determination of Security-Based Swap Customer Reserve Requirements under 
Exhibit B of Sec.  240.15c3-3, as applicable, in the financial report is 
materially different from the corresponding computation in the most 
recent Part II or Part IIA of Form X-17A-5 (Sec.  249.617 of this 
chapter), as applicable, filed by the broker or dealer pursuant to 
paragraph (a) of this section, a reconciliation, including appropriate 
explanations, between the computation in the financial report and the 
computation in the most recent Part II or Part IIA of Form X-17A-5, as 
applicable,

[[Page 585]]

filed by the broker or dealer. If no material differences exist, a 
statement so indicating must be included in the financial report.
    (3) Compliance report. (i) The compliance report must contain:
    (A) Statements as to whether:
    (1) The broker or dealer has established and maintained Internal 
Control Over Compliance as that term is defined in paragraph (d)(3)(ii) 
of this section;
    (2) The Internal Control Over Compliance of the broker or dealer was 
effective during the most recent fiscal year;
    (3) The Internal Control Over Compliance of the broker or dealer was 
effective as of the end of the most recent fiscal year;
    (4) The broker or dealer was in compliance with Sec. Sec.  240.15c3-
1, 240.15c3-3(e) and, if applicable, 240.15c3-3(p)(3) as of the end of 
the most recent fiscal year; and
    (5) The information the broker or dealer used to state whether it 
was in compliance with Sec. Sec.  240.15c3-1, 240.15c3-3(e) and, if 
applicable, 240.15c3-3(p)(3) was derived from the books and records of 
the broker or dealer.
    (B) If applicable, a description of each identified material 
weakness in the Internal Control Over Compliance of the broker or dealer 
during the most recent fiscal year.
    (C) If applicable, a description of an instance of non-compliance 
with Sec.  240.15c3-1, Sec.  240.15c3-3(e), or, if applicable, Sec.  
240.15c3-3(p)(3) as of the end of the most recent fiscal year.
    (ii) The term Internal Control Over Compliance means internal 
controls that have the objective of providing the broker or dealer with 
reasonable assurance that non-compliance with Sec.  240.15c3-1, Sec.  
240.15c3-3, Sec.  240.17a-13, or any rule of the designated examining 
authority of the broker or dealer that requires account statements to be 
sent to the customers of the broker or dealer (an ``Account Statement 
Rule'') will be prevented or detected on a timely basis.
    (iii) The broker or dealer is not permitted to conclude that its 
Internal Control Over Compliance was effective during the most recent 
fiscal year if there were one or more material weaknesses in its 
Internal Control Over Compliance during the most recent fiscal year. The 
broker or dealer is not permitted to conclude that its Internal Control 
Over Compliance was effective as of the end of the most recent fiscal 
year if there were one or more material weaknesses in its internal 
control as of the end of the most recent fiscal year. A material 
weakness is a deficiency, or a combination of deficiencies, in Internal 
Control Over Compliance such that there is a reasonable possibility that 
non-compliance with Sec.  240.15c3-1, Sec.  240.15c3-3(e), or Sec.  
240.15c3-3(p)(3) will not be prevented or detected on a timely basis or 
that non-compliance to a material extent with Sec.  240.15c3-3, except 
for paragraph (e), Sec.  240.15c3-3(p), except for paragraph (p)(3), 
Sec.  240.17a-13, or any Account Statement Rule will not be prevented or 
detected on a timely basis. A deficiency in Internal Control Over 
Compliance exists when the design or operation of a control does not 
allow the management or employees of the broker or dealer, in the normal 
course of performing their assigned functions, to prevent or detect on a 
timely basis non-compliance with Sec.  240.15c3-1, Sec.  240.15c3-3, or 
Sec.  240.17a-13, or any Account Statement Rule.
    (4) Exemption report. The exemption report must contain the 
following statements made to the best knowledge and belief of the broker 
or dealer:
    (i) A statement that identifies the provisions in Sec.  240.15c3-
3(k) under which the broker or dealer claimed an exemption from Sec.  
240.15c3-3;
    (ii) A statement that the broker or dealer met the identified 
exemption provisions in Sec.  240.15c3-3(k) throughout the most recent 
fiscal year without exception or that it met the identified exemption 
provisions in Sec.  240.15c3-3(k) throughout the most recent fiscal year 
except as described under paragraph (d)(4)(iii) of this section; and
    (iii) If applicable, a statement that identifies each exception 
during the most recent fiscal year in meeting the identified exemption 
provisions in Sec.  240.15c3-3(k) and that briefly describes the nature 
of each exception and the approximate date(s) on which the exception 
existed.
    (5) The annual reports must be filed not more than sixty (60) 
calendar days after the end of the fiscal year of the broker or dealer.

[[Page 586]]

    (6) Filing of annual reports. The annual reports must be filed with 
the Commission at the regional office of the Commission for the region 
in which the broker or dealer has its principal place of business and to 
the Commission's principal office in Washington, DC, or the annual 
reports may be filed with the Commission electronically in accordance 
with directions provided on the Commission's website. The annual reports 
must also be filed at the principal office of the designated examining 
authority for the broker or dealer and with the Securities Investor 
Protection Corporation (``SIPC'') if the broker or dealer is a member of 
SIPC. Copies of the reports must be provided to all self-regulatory 
organizations of which the broker or dealer is a member, unless the 
self-regulatory organization by rule waives the requirement in this 
paragraph (d)(6).
    (e) Nature and form of reports. The annual reportsfiled pursuant to 
paragraph (d) of this section must be prepared and filed in accordance 
with the following requirements:
    (1)(i) The broker or dealer is not required to engage an independent 
public accountant to provide the reports required under paragraph 
(d)(1)(i)(C) of this section if, since the date of the registration of 
the broker or dealer under section 15 of the Act (15 U.S.C. 78o) or of 
the previous annual reports filed under paragraph (d) of this section:
    (A) The securities business of the broker or dealer has been limited 
to acting as broker (agent) for a single issuer in soliciting 
subscriptions for securities of that issuer, the broker has promptly 
transmitted to the issuer all funds and promptly delivered to the 
subscriber all securities received in connection with the transaction, 
and the broker has not otherwise held funds or securities for or owed 
money or securities to customers; or
    (B) The securities business of the broker or dealer has been limited 
to buying and selling evidences of indebtedness secured by mortgage, 
deed of trust, or other lien upon real estate or leasehold interests, 
and the broker or dealer has not carried any margin account, credit 
balance, or security for any securities customer.
    (ii) A broker or dealer that files an annual report under paragraph 
(d) of this section that is not covered by a report prepared by an 
independent public accountant must include in the oath or affirmation 
required by paragraph (e)(2) of this section a statement of the facts 
and circumstances relied upon as a basis for exemption from the 
requirement that the annual report filed under paragraph (d) of this 
section be covered by reports prepared by an independent public 
accountant.
    (2) The broker or dealer must attach to the financial report an oath 
or affirmation that, to the best knowledge and belief of the person 
making the oath or affirmation:
    (i) The financial report is true and correct; and
    (ii) Neither the broker or dealer, nor any partner, officer, 
director, or equivalent person, as the case may be, has any proprietary 
interest in any account classified solely as that of a customer. The 
oath or affirmation must be made before a person duly authorized to 
administer such oaths or affirmations. If the broker or dealer is a sole 
proprietorship, the oath or affirmation must be made by the proprietor; 
if a partnership, by a general partner; if a corporation, by a duly 
authorized officer; or if a limited liability company or limited 
liability partnership, by the chief executive officer, chief financial 
officer, manager, managing member, or those members vested with 
management authority for the limited liability company or limited 
liability partnership.
    (3) The annual reports filed under paragraph (d) of this section are 
not confidential, except that, if the Statement of Financial Condition 
in a format that is consistent with Part II or Part IIA of Form X-17A-5 
(Sec.  249.617 of this chapter) is bound separately from the balance of 
the annual reports filed under paragraph (d) of this section, and each 
page of the balance of the annual reports is stamped ``confidential,'' 
then the balance of the annual reports will be deemed confidential to 
the extent permitted by law. However, the annual reports, including the 
confidential portions, will be available for official use by any 
official or employee of the U.S.

[[Page 587]]

or any State, by national securities exchanges and registered national 
securities associations of which the broker or dealer filing such a 
report is a member, by the Public Company Accounting Oversight Board, 
and by any other person if the Commission authorizes disclosure of the 
annual reports to that person as being in the public interest. Nothing 
contained in this paragraph (e)(3) may be construed to be in derogation 
of the rules of any registered national securities association or 
national securities exchange that give to customers of a broker or 
dealer the right, upon request to the broker or dealer, to obtain 
information relative to its financial condition.
    (4) The broker or dealer must file with SIPC a report on the SIPC 
annual general assessment reconciliation or exclusion from membership 
forms that contains such information and is in such format as determined 
by SIPC by rule and approved by the Commission.
    (f)(1) Qualifications of independent public accountant. The 
independent public accountant must be qualified and independent in 
accordance with Sec.  210.2-01 of this chapter and the independent 
public accountant must be registered with the Public Company Accounting 
Oversight Board if required by the Sarbanes-Oxley Act of 2002.
    (2) Statement regarding independent public accountant. (i) Every 
broker or dealer that is required to file annual reports under paragraph 
(d) of this section must file no later than December 10 of each year (or 
30 calendar days after the effective date of its registration as a 
broker or dealer, if earlier) a statement as prescribed in paragraph 
(f)(2)(ii) of this section with the Commission's principal office in 
Washington, DC, the regional office of the Commission for the region in 
which its principal place of business is located, and the principal 
office of the designated examining authority for the broker or dealer. 
The statement must be dated no later than December 1 (or 20 calendar 
days after the effective date of its registration as a broker or dealer, 
if earlier). If the engagement of an independent public accountant is of 
a continuing nature, providing for successive engagements, no further 
filing is required. If the engagement is for a single year, or if the 
most recent engagement has been terminated or amended, a new statement 
must be filed by the required date.
    (ii) The statement must be headed ``Statement regarding independent 
public accountant under Rule 17a-5(f)(2)'' and must contain the 
following information and representations:
    (A) Name, address, telephone number, and registration number of the 
broker or dealer.
    (B) Name, address, and telephone number of the independent public 
accountant.
    (C) The date of the fiscal year of the annual reports of the broker 
or dealer covered by the engagement.
    (D) Whether the engagement is for a single year or is of a 
continuing nature.
    (E) A representation that the independent public accountant has 
undertaken the items enumerated in paragraphs (g)(1) and (2) of this 
section.
    (F) Except as provided in paragraph (f)(2)(iii) of this section, a 
representation that the broker or dealer agrees to allow representatives 
of the Commission or its designated examining authority, if requested in 
writing for purposes of an examination of the broker or dealer, to 
review the audit documentation associated with the reports of the 
independent public accountant filed under paragraph (d)(1)(i)(C) of this 
section. For purposes of this paragraph, ``audit documentation'' has the 
meaning provided in standards of the Public Company Accounting Oversight 
Board. The Commission anticipates that, if requested, it will accord 
confidential treatment to all documents it may obtain from an 
independent public accountant under this paragraph to the extent 
permitted by law.
    (G) Except as provided in paragraph (f)(2)(iii) of this section, a 
representation that the broker or dealer agrees to allow the independent 
public accountant to discuss with representatives of the Commission and 
its designated examining authority, if requested in writing for purposes 
of an examination of the broker or dealer, the findings associated with 
the reports of the independent public accountant filed under paragraph 
(d)(1)(i)(C) of this section.

[[Page 588]]

    (iii) If a broker or dealer neither clears transactions nor carries 
customer accounts, the broker or dealer is not required to include the 
representations in paragraphs (f)(2)(ii)(F) and (G) of this section.
    (iv) Any broker or dealer that is not required to file reports 
prepared by an independent public accountant under paragraph 
(d)(1)(i)(C) of this section must file a statement required under 
paragraph (f)(2)(i) of this section indicating the date as of which the 
unaudited reports will be prepared.
    (3) Replacement of accountant. A broker or dealer must file a notice 
that must be received by the Commission's principal office in 
Washington, DC, the regional office of the Commission for the region in 
which its principal place of business is located, and the principal 
office of the designated examining authority for the broker or dealer 
not more than 15 business days after:
    (i) The broker or dealer has notified the independent public 
accountant that provided the reports the broker or dealer filed under 
paragraph (d)(1)(i)(C) of this section for the most recent fiscal year 
that the independent public accountant's services will not be used in 
future engagements; or
    (ii) The broker or dealer has notified an independent public 
accountant that was engaged to provide the reports required under 
paragraph (d)(1)(i)(C) of this section that the engagement has been 
terminated; or
    (iii) An independent public accountant has notified the broker or 
dealer that the independent public accountant would not continue under 
an engagement to provide the reports required under paragraph 
(d)(1)(i)(C) of this section; or
    (iv) A new independent public accountant has been engaged to provide 
the reports required under paragraph (d)(1)(i)(C) of this section 
without any notice of termination having been given to or by the 
previously engaged independent public accountant.
    (v) The notice must include:
    (A) The date of notification of the termination of the engagement or 
of the engagement of the new independent public accountant, as 
applicable; and
    (B) The details of any issues arising during the 24 months (or the 
period of the engagement, if less than 24 months) preceding the 
termination or new engagement relating to any matter of accounting 
principles or practices, financial statement disclosure, auditing scope 
or procedure, or compliance with applicable rules of the Commission, 
which issues, if not resolved to the satisfaction of the former 
independent public accountant, would have caused the independent public 
accountant to make reference to them in the report of the independent 
public accountant. The issues required to be reported include both those 
resolved to the former independent public accountant's satisfaction and 
those not resolved to the former accountant's satisfaction. Issues 
contemplated by this section are those that occur at the decision-making 
level--that is, between principal financial officers of the broker or 
dealer and personnel of the accounting firm responsible for rendering 
its report. The notice must also state whether the accountant's report 
filed under paragraph (d)(1)(i)(C) of this section for any of the past 
two fiscal years contained an adverse opinion or a disclaimer of opinion 
or was qualified as to uncertainties, audit scope, or accounting 
principles, and must describe the nature of each such adverse opinion, 
disclaimer of opinion, or qualification. The broker or dealer must also 
request the former independent public accountant to furnish the broker 
or dealer with a letter addressed to the Commission stating whether the 
independent public accountant agrees with the statements contained in 
the notice of the broker or dealer and, if not, stating the respects in 
which the independent public accountant does not agree. The broker or 
dealer must file three copies of the notice and the accountant's letter, 
one copy of which must be manually signed by the sole proprietor, a 
general partner, or a duly authorized corporate, limited liability 
company, or limited liability partnership officer or member, as 
appropriate, and by the independent public accountant, respectively.
    (g) Engagement of independent public accountant. The independent 
public accountant engaged by the broker or dealer to provide the reports 
required

[[Page 589]]

under paragraph (d)(1)(i)(C) of this section must, as part of the 
engagement, undertake the following, as applicable:
    (1) To prepare an independent public accountant's report based on an 
examination of the financial report required to be filed by the broker 
or dealer under paragraph (d)(1)(i)(A) of this section in accordance 
with standards of the Public Company Accounting Oversight Board; and
    (2)(i) To prepare an independent public accountant's report based on 
an examination of the statements required under paragraphs 
(d)(3)(i)(A)(2) through (5) of this section in the compliance report 
required to be filed by the broker or dealer under paragraph 
(d)(1)(i)(B)(1) of this section in accordance with standards of the 
Public Company Accounting Oversight Board; or
    (ii) To prepare an independent public accountant's report based on a 
review of the statements required under paragraphs (d)(4)(i) through 
(iii) of this section in the exemption report required to be filed by 
the broker or dealer under paragraph (d)(1)(i)(B)(2) of this section in 
accordance with standards of the Public Company Accounting Oversight 
Board.
    (h) Notification of non-compliance or material weakness. If, during 
the course of preparing the independent public accountant's reports 
required under paragraph (d)(1)(i)(C) of this section, the independent 
public accountant determines that the broker or dealer is not in 
compliance with Sec.  240.15c3-1, Sec.  240.15c3-3, or Sec.  240.17a-13 
or any rule of the designated examining authority of the broker or 
dealer that requires account statements to be sent to the customers of 
the broker or dealer, as applicable, or the independent public 
accountant determines that any material weaknesses (as defined in 
paragraph (d)(3)(iii) of this section) exist, the independent public 
accountant must immediately notify the chief financial officer of the 
broker or dealer of the nature of the non-compliance or material 
weakness. If the notice from the accountant concerns an instance of non-
compliance that would require a broker or dealer to provide a 
notification under Sec.  240.15c3-1, Sec.  240.15c3-3, or Sec.  240.17a-
11, or if the notice concerns a material weakness, the broker or dealer 
must provide a notification in accordance with Sec.  240.15c3-1, Sec.  
240.15c3-3, or Sec.  240.17a-11, as applicable, and provide a copy of 
the notification to the independent public accountant. If the 
independent public accountant does not receive the notification within 
one business day, or if the independent public accountant does not agree 
with the statements in the notification, then the independent public 
accountant must notify the Commission and the designated examining 
authority within one business day. The report from the accountant must, 
if the broker or dealer failed to file a notification, describe any 
instances of non-compliance that required a notification under Sec.  
240.15c3-1, Sec.  240.15c3-3, or Sec.  240.17a-11, or any material 
weaknesses. If the broker or dealer filed a notification, the report 
from the accountant must detail the aspects of the notification of the 
broker or dealer with which the accountant does not agree.

    Note 1 to paragraph (h): The attention of the broker or dealer and 
the independent public accountant is called to the fact that under Sec.  
240.17a-11(a)(1), among other things, a broker or dealer whose net 
capital declines below the minimum required pursuant to Sec.  240.15c3-1 
must give notice of such deficiency that same day in accordance with 
Sec.  240.17a-11(h) and the notice must specify the broker or dealer's 
net capital requirement and its current amount of net capital. The 
attention of the broker or dealer and accountant also is called to the 
fact that under Sec.  240.15c3-3(i), if a broker or dealer fails to make 
a reserve bank account or special reserve account deposit, as required 
by Sec.  240.15c3-3, the broker or dealer must immediately notify the 
Commission and the regulatory authority for the broker or dealer, which 
examines such broker or dealer as to financial responsibility and must 
promptly thereafter confirm such notification in writing.

    (i) Reports of the independent public accountant required under 
paragraph (d)(1)(i)(C) of this section--(1) Technical requirements. The 
independent public accountant's reports must:
    (i) Be dated;
    (ii) Be signed manually;
    (iii) Indicate the city and state where issued; and
    (iv) Identify without detailed enumeration the items covered by the 
reports.

[[Page 590]]

    (2) Representations. The independent public accountant's reports 
must:
    (i) State whether the examinations or review, as applicable, were 
made in accordance with standards of the Public Company Accounting 
Oversight Board;
    (ii) Identify any examination and, if applicable, review procedures 
deemed necessary by the independent public accountant under the 
circumstances of the particular case that have been omitted and the 
reason for their omission.
    (iii) Nothing in this section may be construed to imply authority 
for the omission of any procedure that independent public accountants 
would ordinarily employ in the course of an examination or review made 
for the purpose of expressing the opinions or conclusions required under 
this section.
    (3) Opinion or conclusion to be expressed. The independent public 
accountant's reports must state clearly:
    (i) The opinion of the independent public accountant with respect to 
the financial report required under paragraph (d)(1)(i)(A) of this 
section and the accounting principles and practices reflected in that 
report;
    (ii) The opinion of the independent public accountant with respect 
to the financial report required under paragraph (d)(1)(i)(A) of this 
section, as to the consistency of the application of the accounting 
principles, or as to any changes in those principles, that have a 
material effect on the financial statements; and
    (iii)(A) The opinion of the independent public accountant with 
respect to the statements required under paragraphs (d)(3)(i)(A)(2) 
through (5) of this section in the compliance report required under 
paragraph (d)(1)(i)(B)(1) of this section; or
    (B) The conclusion of the independent public accountant with respect 
to the statements required under paragraphs (d)(4)(i) through (iii) of 
this section in the exemption report required under paragraph 
(d)(1)(i)(B)(2) of this section.
    (4) Exceptions. Any matters to which the independent public 
accountant takes exception must be clearly identified, the exceptions 
must be specifically and clearly stated, and, to the extent practicable, 
the effect of each such exception on any related items contained in the 
annual reports required under paragraph (d) of this section must be 
given.
    (j) [Reserved]
    (k) Supplemental reports. Each broker or dealer that computes 
certain of its capital charges in accordance with Sec.  240.15c3-1e must 
file concurrently with the annual audit report a supplemental report on 
management controls, which must be prepared by a registered public 
accounting firm (as that term is defined in section 2(a)(12) of the 
Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201 et seq.)). The supplemental 
report must indicate the results of the accountant's review of the 
internal risk management control system established and documented by 
the broker or dealer in accordance with Sec.  240.15c3-4. This review 
must be conducted in accordance with procedures agreed upon by the 
broker or dealer and the registered public accounting firm conducting 
the review. The agreed upon procedures are to be performed and the 
report is to be prepared in accordance with the rules promulgated by the 
Public Company Accounting Oversight Board. The purpose of the review is 
to confirm that the broker or dealer has established, documented, and is 
in compliance with the internal risk management controls established in 
accordance with Sec.  240.15c3-4. Before commencement of the review and 
no later than December 10 of each year, the broker or dealer must file a 
statement with the Division of Trading and Markets, Office of Financial 
Responsibility, at the Commission's principal office in Washington, DC 
that includes:
    (1) A description of the agreed-upon procedures agreed to by the 
broker or dealer and the registered public accounting firm; and
    (2) A notice describing changes in those agreed-upon procedures, if 
any. If there are no changes, the broker or dealer should so indicate.
    (l) Use of certain statements filed with the Securities and Exchange 
Commission. At the request of any broker or dealer who is an investment 
company registered under the Investment Company Act of 1940, or a 
sponsor or depositor of such a registered investment company

[[Page 591]]

who effects transactions in securities only with, or on behalf of, such 
registered investment company, the Commission will accept the financial 
statements filed pursuant to section 13 or 15(d) of the Act or section 
30 of the Investment Company Act of 1940 and the rules and regulations 
promulgated thereunder as a filing pursuant to paragraph (d) of this 
section. Such a filing must be deemed to satisfy the requirements of 
this section for any calendar year in which such financial statements 
are filed, provided that the statements so filed meet the requirements 
of the other rules under which they are filed with respect to time of 
filing and content.
    (m) Extentions and exemptions. (1) A broker's or dealer's designated 
examining authority may extend the period under paragraph (d) of this 
section for filing annual reports. The designated examining authority 
for the broker or dealer must maintain, in the manner prescribed in 
Sec.  240.17a-1, a record of each extension granted.
    (2) Any ``bank'' as defined in section 3(a)(6) of the Act (15 U.S.C. 
78c) and any ``insurance company'' as defined in section 3(a)(19) of the 
Act (15 U.S.C. 78c) registered as a broker or dealer to sell variable 
contracts but exempt from Sec.  240.15c3-1 shall be exempt from the 
provisions of this section.
    (3) On written request of any national securities exchange, 
registered national securities association, broker or dealer, or on its 
own motion, the Commission may grant an extension of time or an 
exemption from any of the requirements of this section either 
unconditionally or on specified terms and conditions.
    (4) The provisions of Sec.  240.17a-5 will not apply to a broker or 
dealer registered pursuant to section 15(b)(11)(A) of the Act (15 U.S.C. 
78o(b)(11)(A)) that is not a member of either a national securities 
exchange pursuant to section 6(a) of the Act (15 U.S.C. 78f(a)) or a 
national securities association registered pursuant to section 15A(a) of 
the Act (15 U.S.C. 78o-3(a)).
    (n) Notification of change of fiscal year. (1) In the event any 
broker or dealer finds it necessary to change its fiscal year, it must 
file, with the Commission's principal office in Washington, DC, the 
regional office of the Commission for the region in which the broker or 
dealer has its principal place of business and the principal office of 
the designated examining authority for such broker or dealer, a notice 
of such change.
    (2) Such notice must contain a detailed explanation of the reasons 
for the change. Any change in the filing period for the annual report 
must be approved in writing by the designated examining authority of the 
broker or dealer
    (o) Filing requirements. For purposes of filing requirements as 
described in this section, filing will be deemed to have been 
accomplished upon receipt at the Commission's principal office in 
Washington, DC, with duplicate originals simultaneously filed at the 
locations prescribed in the particular paragraph of this section which 
is applicable.
    (p) Compliance with Sec.  240.17a-12. An OTC derivatives dealer may 
comply with Sec.  240.17a-5 by complying with the provisions of Sec.  
240.17a-12.

    Cross Reference: For interpretative release applicable to Sec.  
240.17a-5, see No. 51 in tabulation, part 211 of this chapter.

[40 FR 59713, Dec. 30, 1975]

    Editorial Note: For Federal Register citations affecting Sec.  
240.17a-5, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.govinfo.gov.



Sec.  240.17a-6  Right of national securities exchange, national 
securities association, registered clearing agency or the Municipal
Securities Rulemaking Board to destroy or dispose of documents.

    (a) Any document kept by or on file with a national securities 
exchange, national securities association, registered clearing agency or 
the Municipal Securities Rulemaking Board pursuant to the Act or any 
rule or regulation thereunder may be destroyed or otherwise disposed of 
by such exchange, association, clearing agency or the Municipal 
Securities Rulemaking Board at the end of five years or at such earlier 
date as is specified in a plan for the destruction or disposition of any 
such documents if such plan has been filed with the Commission by such

[[Page 592]]

exchange, association, clearing agency or the Municipal Securities 
Rulemaking Board and has been declared effective by the Commission.
    (b) Such plan may provide that any such document may be transferred 
to microfilm or other recording medium after such time as specified in 
the plan and thereafter be maintained and preserved in that form. If a 
national securities exchange, association, clearing agency or the 
Municipal Securities Rulemaking Board uses microfilm or other recording 
medium it shall:
    (1) Be ready at all times to provide, and immediately provide, 
easily readable projection of the microfilm or other recording medium 
and easily readable hard copy thereof;
    (2) Provide indexes permitting the immediate location of any such 
document on the microfilm or other recording medium; and
    (3) In the case of microfilm, store a duplicate copy of the 
microfilm separately from the original microfilm for the time required.
    (c) For the purposes of this rule a plan filed with the Commission 
by a national securities exchange, association, clearing agency or the 
Municipal Securities Rulemaking Board shall not become effective unless 
the Commission, having due regard for the public interest and for the 
protection of investors, declares the plan to be effective. The 
Commission in its declaration may limit the applications, reports, and 
documents as to which it shall apply, and may impose any other terms and 
conditions to the plan and to the period of its effectiveness which it 
deems necessary or appropriate in the public interest or for the 
protection of investors.

[45 FR 79426, Dec. 1, 1980]



Sec.  240.17a-7  Records of non-resident brokers and dealers.

    (a)(1) Except as provided in paragraphs (b) and (c) of this section, 
each non-resident broker or dealer registered or applying for 
registration pursuant to section 15 of the Securities Exchange Act of 
1934, as amended, shall keep, maintain, and preserve, at a place within 
the United States designated in a notice from him as provided in 
paragraph (a)(2) of this section, true, correct, complete and current 
copies of the books and records which he is required to make, keep 
current, maintain or preserve pursuant to any provision of any rule or 
regulation of the Commission adopted under the act.
    (2) Except as provided in paragraph (b) of this section, each non-
resident broker or dealer subject to this section shall furnish to the 
Commission a written notice specifying the address of the place within 
the United States where the copies of the books and records required to 
be kept and preserved by him pursuant to paragraph (a)(1) of this 
section are located. Each non-resident broker or dealer registered or 
applying for registration when this section becomes effective shall file 
such notice within 30 days after such rule becomes effective. Each non-
resident broker or dealer who files an application for registration 
after this section becomes effective shall file such notice with such 
application for registration.
    (b) Notwithstanding the provisions of paragraph (a) of this section, 
a non-resident broker or dealer subject to this section need not keep or 
preserve within the United States copies of the books and records 
referred to in said paragraph (a) of this section, if:
    (1) Such broker or dealer files with the Commission, at the time or 
within the period provided by paragraph (a)(2) of this section, a 
written undertaking in form acceptable to the Commission and signed by a 
person thereunto duly authorized, to furnish to the Commission, upon 
demand, at its principal office in Washington, DC, or at any Regional 
Office of the Commission designated in such demand, true, correct, 
complete and current copies of any or all of the books and records which 
he is required to make, keep current, maintain, or preserve pursuant to 
any provision of any rule or regulation of the Commission adopted under 
the act, or any part of such books and records which may be specified in 
such demand. Such undertaking shall be in substantially the following 
form:

    The undersigned hereby undertakes to furnish at his own expense to 
the Securities and Exchange Commission at its principal office in 
Washington, DC, or at any Regional Office of said Commission specified 
in a demand for

[[Page 593]]

copies of books and records made by or on behalf of said Commission, 
true, correct, complete, and current copies of any or all, or any part, 
of the books and records which the undersigned is required to make, keep 
current or preserve pursuant to any provision of any rule or regulation 
of the Securities and Exchange Commission under the Securities Exchange 
Act of 1934. This undertaking shall be suspended during any period when 
the undersigned is making, keeping current, and preserving copies of all 
of said books and records at a place within the United States in 
compliance with Sec.  240.17a-7 (Rule X-17A-7) under the Securities 
Exchange Act of 1934. This undertaking shall be binding upon the 
undersigned and the heirs, successors and assigns of the undersigned, 
and the written irrevocable consents and powers of attorney of the 
undersigned, its general partners and managing agents filed with the 
Securities and Exchange Commission shall extend to and cover any action 
to enforce same.


and
    (2) Such broker or dealer furnishes to the Commission at his own 
expense within 14 days after written demand therefor forwarded to him by 
registered mail at his last address of record filed with the Commission 
and signed by the Secretary of the Commission or such other person as 
the Commission may authorize to act in its behalf, true, correct, 
complete and current copies of any or all books and records which such 
broker or dealer is required to make, keep current or preserve pursuant 
to any provision of any rule or regulation of the Commission adopted 
under the act, or any part of such books and records which may be 
specified in said written demand. Such copies shall be furnished to the 
Commission at its principal office in Washington, DC, or at any Regional 
Office of the Commission which may be specified in said written demand.
    (c) The provisions of this section shall not apply to a broker or 
dealer registered pursuant to section 15(b)(11)(A) of the Act (15 U.S.C. 
78o(b)(11)(A)) that is not a member of either a national securities 
exchange pursuant to section 6(a) of the Act (15 U.S.C. 78f(a)) or a 
national securities association registered pursuant to section 15A(a) of 
the Act (15 U.S.C. 78o-3(a)).
    (d) For purposes of this section the following definitions shall 
apply:
    (1) The term broker shall have the meaning set out in section 
3(a)(4) of the Securities Exchange Act of 1934;
    (2) The term dealer shall have the meaning set out in section 
3(a)(5) of the Securities Exchange Act of 1934;
    (3) The term non-resident broker or dealer shall mean (i) in the 
case of an individual, one who resides in or has his principal place of 
business in any place not subject to the jurisdiction of the United 
States; (ii) in the case of a corporation, one incorporated in or having 
its principal place of business in any place not subject to the 
jurisdiction of the United States; (iii) in the case of a partnership of 
other unincorporated organization or association, one having its 
principal place of business in any place not subject to the jurisdiction 
of the United States.

[21 FR 5524, July 24, 1956, as amended at 59 FR 5945, Feb. 9, 1994; 67 
FR 58300, Sept. 13, 2002; 73 FR 32228, June 5, 2008]



Sec.  240.17a-8  Financial recordkeeping and reporting of currency and 
foreign transactions.

    Every registered broker or dealer who is subject to the requirements 
of the Currency and Foreign Transactions Reporting Act of 1970 shall 
comply with the reporting, recordkeeping and record retention 
requirements of chapter X of title 31 of the Code of Federal 
Regulations. Where chapter X of title 31 of the Code of Federal 
Regulations and Sec.  240.17a-4 of this chapter require the same records 
or reports to be preserved for different periods of time, such records 
or reports shall be preserved for the longer period of time.

[46 FR 61455, Dec. 17, 1981, as amended at 76 FR 11328, Mar. 2, 2011]



Sec.  240.17a-9T  Records to be made and retained by certain exchange
members, brokers and dealers.

    This section applies to every member, broker or dealer registered 
pursuant to Section 15 of the Act, (15 U.S.C. 78o), that is required to 
maintain, as of December 29, December 30 and December 31, 1999, minimum 
net capital of $250,000 pursuant to Sec.  240.15c3-1(a)(2)(i).
    (a) You must make before January 1, 2000, for each of December 29, 
December

[[Page 594]]

30 and December 31, 1999, separate copies of the blotters pursuant to 
Sec.  240.17a-3(a)(1).
    (b) You must make before January 1, 2000, as of the close of 
business for each of December 29, December 30 and December 31, 1999, a 
separate copy of the securities record or ledger pursuant to Sec.  
240.17a-3(a)(5).
    (c) You must preserve these records for a period of not less than 
one year.
    (d) The provisions of Sec.  240.17a-4(i) shall apply as if part of 
this Sec.  240.17a-9T.
    (e) You may preserve these records in any format that is acceptable 
and in compliance with the conditions described in Sec.  240.17a-4(f).
    (f) You must furnish promptly to a representative of the Commission 
such legible, true and complete copies of those records, as may be 
requested.
    (g) This temporary section will expire on July 1, 2001.

[64 FR 42029, Aug. 3, 1999]



Sec.  240.17a-10  Report on revenue and expenses.

    (a)(1) Every broker or dealer exempted from the filing requirements 
of paragraph (a) of Sec.  240.17a-5 shall, not later than 17 business 
days after the close of each calendar year, file the Facing Page, a 
Statement of Income (Loss) and balance sheet from Part IIA of Form X-
17A-5 (Sec.  249.617 of this chapter) and Schedule I of Form X-17A-5 
(Sec.  249.617 of this chapter) for such calendar year.
    (2) Every broker or dealer subject to the filing requirements of 
paragraph (a) of Sec.  240.17a-5 shall submit Schedule I of Form X-17A-5 
(Sec.  249.617 of this chapter) with its Form X-17A-5 (Sec.  249.617 of 
this chapter) for the calendar quarter ending December 31 of each year.
    (b) The provisions of paragraph (a) of this section shall not apply 
to a member of a national securities exchange or a registered national 
securities association which maintains records containing the 
information required by Form X-17A-5 (Sec.  249.617 of this chapter) as 
to each of its members, and which transmits to the Commission a copy of 
the record as to each such member, pursuant to a plan the procedures and 
provisions of which have been submitted to and declared effective by the 
Commission. Any such plan filed by a national securities exchange or a 
registered national securities association may provide that when a 
member is also a member of one or more national securities exchanges, or 
of one or more national securities exchanges and a registered national 
securities association, the information required to be submitted with 
respect to any such member may be transmitted by only one specified 
national securities exchange or registered national securities 
association. For the purpose of this section, a plan filed with the 
Commission by a national securities exchange or a registered national 
securities association shall not become effective unless the Commission, 
having due regard for the public interest, for the protection of 
investors, and for the fulfillment of the Commission's functions under 
the provisions of the Act, declares the plan to be effective. Further, 
the Commission, in declaring any such plan effective, may impose such 
terms and conditions relating to the provisions of the plan and the 
period of its effectiveness as may be deemed necessary or appropriate in 
the public interest, for the protection of investors, or to carry out 
the Commission's duties under the Act.
    (c) Individual reports filed by, or on behalf of, brokers, dealers, 
or members of national securities exchanges pursuant to this section are 
to be considered nonpublic information, except in cases where the 
Commission determines that it is in the public interest to direct 
otherwise.
    (d) In the event any broker or dealer finds that it cannot file the 
annual report required by paragraph (a) of this section within the time 
specified without undue hardship, it may file with the Commission's 
principal office in Washington, DC, prior to the date upon which the 
report is due, an application for an extension of time to a specified 
date which shall not be later than 60 days after the close of the 
calendar year for which the report is to be made. The application shall 
state the reasons for the requested extension and shall

[[Page 595]]

contain an agreement to file the report on or before the specified date.

(Sec. 17, 48 Stat. 897; 15 U.S.C. 78q)

[33 FR 10390, July 20, 1968, as amended at 35 FR 3804, Feb. 27, 1970; 35 
FR 7644, May 16, 1970; 37 FR 13615, July 12, 1972; 40 FR 59717, Dec. 30, 
1975; 42 FR 23789, May 10, 1977; 46 FR 60193, Dec. 9, 1981]



Sec.  240.17a-11  Notification provisions for brokers and dealers.

    This section applies to the following types of entities: Except as 
provided in this introductory text, a broker or dealer, including an OTC 
derivatives dealer as that term is defined in Sec.  240.3b-12, 
registered pursuant to section 15 of the Act (15 U.S.C. 78o); a broker 
or dealer, other than an OTC derivatives dealer, registered pursuant to 
section 15 of the Act that is also a security-based swap dealer 
registered pursuant to section 15F of the Act (15 U.S.C. 78o-10); and a 
broker or dealer, including an OTC derivatives dealer, registered 
pursuant to section 15 of the Act that is also a major-security-based 
swap participant registered pursuant to section 15F of the Act. Section 
240.18a-8 (rather than this section) applies to the following types of 
entities: A security-based swap dealer registered pursuant to section 
15F of the Act that is not also a broker or dealer, other than an OTC 
derivatives dealer, registered pursuant to section 15 of the Act; a 
security-based swap dealer registered pursuant to section 15F of the Act 
that is also an OTC derivatives dealer; and a major security-based swap 
participant registered pursuant to section 15F of the Act that is not 
also a broker or dealer, including an OTC derivatives dealer, registered 
pursuant to section 15 of the Act.
    (a)(1) Every broker or dealer whose net capital declines below the 
minimum amount required pursuant to Sec.  240.15c3-1, or is insolvent as 
that term is defined in Sec.  240.15c3-1(c)(16), must give notice of 
such deficiency that same day in accordance with paragraph (h) of this 
section. The notice must specify the broker or dealer's net capital 
requirement and its current amount of net capital. If a broker or dealer 
is informed by its designated examining authority or the Commission that 
it is, or has been, in violation of Sec.  240.15c3-1 and the broker or 
dealer has not given notice of the capital deficiency under this 
section, the broker or dealer, even if it does not agree that it is, or 
has been, in violation of Sec.  240.15c3-1, must give notice of the 
claimed deficiency, which notice may specify the broker's or dealer's 
reasons for its disagreement.
    (2) In addition to the requirements of paragraph (b)(1) of this 
section, an OTC derivatives dealer or broker or dealer permitted to 
compute net capital pursuant to the alternative method of Sec.  
240.15c3-1e must also provide notice if its tentative net capital falls 
below the minimum amount required pursuant to Sec.  240.15c3-1. The 
notice must specify the tentative net capital requirements, and current 
amount of net capital and tentative net capital, of the OTC derivatives 
dealer or the broker or dealer permitted to compute net capital pursuant 
to the alternative method of Sec.  240.15c3-1e.
    (b) Every broker or dealer must send notice promptly (but within 24 
hours) after the occurrence of the events specified in paragraphs (b)(1) 
through (5) of this section in accordance with paragraph (h) of this 
section:
    (1) If a computation made by a broker or dealer subject to the 
aggregate indebtedness standard of Sec.  240.15c3-1 shows that its 
aggregate indebtedness is in excess of 1,200 percent of its net capital; 
or
    (2) If a computation made by a broker or dealer, which has elected 
the alternative standard of Sec.  240.15c3-1, shows that its net capital 
is less than 5 percent of aggregate debit items computed in accordance 
with Sec.  240.15c3-3a Exhibit A: Formula for Determination Reserve 
Requirement of Brokers and Dealers under Sec.  240.15c3-3; or
    (3) If a computation made by a broker or dealer pursuant to Sec.  
240.15c3-1 shows that its total net capital is less than 120 percent of 
the broker's or dealer's required minimum net capital, or if a 
computation made by an OTC derivatives dealer pursuant to Sec.  
240.15c3-1 shows that its total tentative net capital is less than 120 
percent of the dealer's required minimum tentative net capital.
    (4) The occurrence of the fourth and each subsequent backtesting 
exception

[[Page 596]]

under Sec.  240.15c3-1f(e)(1)(iv) during any 250 business day 
measurement period.
    (5) If a computation made by a broker or dealer pursuant to Sec.  
240.15c3-1 shows that the total amount of money payable against all 
securities loaned or subject to a repurchase agreement or the total 
contract value of all securities borrowed or subject to a reverse 
repurchase agreement is in excess of 2500 percent of its tentative net 
capital; provided, however, that for purposes of this leverage test 
transactions involving government securities, as defined in section 
3(a)(42) of the Act (15 U.S.C. 78c(a)(42)), must be excluded from the 
calculation; provided further, however, that a broker or dealer will not 
be required to send the notice required by this paragraph (c)(5) if it 
reports monthly its securities lending and borrowing and repurchase and 
reverse repurchase activity (including the total amount of money payable 
against securities loaned or subject to a repurchase agreement and the 
total contract value of securities borrowed or subject to a reverse 
repurchase agreement) to its designated examining authority in a form 
acceptable to its designated examining authority.
    (c) Every broker or dealer that fails to make and keep current the 
books and records required by Sec.  240.17a-3, must give notice of this 
fact that same day in accordance with paragraph (h) of this section, 
specifying the books and records which have not been made or which are 
not current. The broker or dealer must also transmit a report in 
accordance with paragraph (h) of this section within 48 hours of the 
notice stating what the broker or dealer has done or is doing to correct 
the situation.
    (d) Whenever any broker or dealer discovers, or is notified by an 
independent public accountant under Sec.  240.17a-12(i)(2), of the 
existence of any material inadequacy as defined in Sec.  240.17a-
12(h)(2), or whenever any broker or dealer discovers, or is notified by 
an independent public accountant under Sec.  240.17a-5(h), of the 
existence of any material weakness as defined in Sec.  240.17a-
5(d)(3)(iii), the broker or dealer must:
    (1) Give notice, in accordance with paragraph (h) of this section, 
of the material inadequacy or material weakness within 24 hours of the 
discovery or notification of the material inadequacy or material 
weakness; and
    (2) Transmit a report in accordance with paragraph (h) of this 
section, within 48 hours of the notice stating what the broker or dealer 
has done or is doing to correct the situation.
    (e) [Reserved]
    (f) If a broker-dealer fails to make in its special reserve account 
for the exclusive benefit of security-based swap customers a deposit, as 
required by Sec.  240.15c3-3(p), the broker-dealer must give immediate 
notice in writing in accordance with paragraph (h) of this section.
    (g) Every national securities exchange or national securities 
association that learns that a broker or dealer has failed to send 
notice or transmit a report as required by this section, even after 
being advised by the securities exchange or the national securities 
association to send notice or transmit a report, must immediately give 
notice of such failure in accordance with paragraph (h) of this section.
    (h) Every notice or report required to be given or transmitted by 
this section must be given or transmitted to the principal office of the 
Commission in Washington DC and the regional office of the Commission 
for the region in which the broker or dealer has its principal place of 
business, or to an email address provided on the Commission's website, 
and to the designated examining authority of which such broker or dealer 
is a member, and to the Commodity Futures Trading Commission (CFTC) if 
the broker or dealer is registered as a futures commission merchant with 
the CFTC. The report required by paragraph (c) or (d)(2) of this section 
may be transmitted by overnight delivery.
    (i) Other notice provisions relating to the Commission's financial 
responsibility or reporting rules are contained in Sec. Sec.  240.15c3-
1, 240.15c3-1d, 240.15c3-3, 240.17a-5, and 240.17a-12.
    (j) The provisions of this section will not apply to a broker or 
dealer registered pursuant to section 15(b)(11)(A) of the Act (15 U.S.C. 
78o(b)(11)(A)) that is not a member of either a national securities 
exchange pursuant to section

[[Page 597]]

6(a) of the Act (15 U.S.C. 78f(a)) or a national securities association 
registered pursuant to section 15A(a) of the Act (15 U.S.C. 78o-3(a)).

[58 FR 37657, July 13, 1993, as amended at 59 FR 5945, Feb. 9, 1994; 63 
FR 59401, Nov. 3, 1998; 67 FR 58300, Sept. 13, 2002; 69 FR 34472, June 
21, 2004; 73 FR 32228, June 5, 2008; 78 FR 51907, Aug. 21, 2013; 78 FR 
51933, Aug. 21, 2013; 84 FR 68655, Dec. 16, 2019]



Sec.  240.17a-12  Reports to be made by certain OTC derivatives dealers.

    (a) Filing of quarterly reports. (1) This paragraph (a) shall apply 
to every OTC derivatives dealer registered pursuant to Section 15 of the 
Act (15 U.S.C. 78o).
    (i) Every OTC derivatives dealer shall file Part II of Form X-17A-5 
(Sec.  249.617 of this chapter) within 17 business days after the end of 
each calendar quarter and within 17 business days after the date 
selected for the annual audit of financial statements where said date is 
other than the end of the calendar quarter.
    (ii) Upon receiving from the Commission written notice that 
additional reporting is required, an OTC derivatives dealer shall file 
monthly, or at such times as shall be specified, Part II of Form X-17A-5 
(Sec.  249.617 of this chapter) and such other financial or operational 
information as shall be required by the Commission.
    (2) The reports provided for in this paragraph (a) shall be 
considered filed when received at the Commission's principal office in 
Washington, DC. All reports filed pursuant to this paragraph (a) shall 
be deemed to be confidential.
    (3) Upon written application by an OTC derivatives dealer to the 
Commission, the Commission may extend the time for filing the 
information required by this paragraph (a). The written application 
shall be filed with the Commission at its principal office in Washington 
DC.
    (b) Annual filing of audited financial statements. (1)(i) Every OTC 
derivatives dealer registered pursuant to Section 15 of the Act (15 
U.S.C. 78o) shall file annually, on a calendar or fiscal year basis, a 
report which shall be audited by a certified public accountant. Reports 
filed pursuant to this paragraph (b) shall be as of the same fixed or 
determinable date each year, unless a change is approved in writing by 
the Commission.
    (ii) An OTC derivatives dealer succeeding to and continuing the 
business of another OTC derivatives dealer need not file a report under 
this paragraph (b) as of a date in the fiscal or calendar year in which 
the succession occurs if the predecessor OTC derivatives dealer has 
filed a report in compliance with this paragraph (b) as of a date in 
such fiscal or calendar year.
    (2) The annual audit report shall contain a Statement of Financial 
Condition (in a format and on a basis which is consistent with the total 
reported on the Statement of Financial Condition contained in Form X-
17A-5 (Sec.  249.617 of this chapter), Part II, a Statement of Income, a 
Statement of Cash Flows, a Statement of Changes in Stockholders' or 
Partners' or Sole Proprietor's Equity, and a Statement of Changes in 
Liabilities Subordinated to Claims of General Creditors. Such statements 
shall be in a format which is consistent with such statements as 
contained in Form X-17A-5 (Sec.  249.617 of this chapter), Part II. If 
the Statement of Financial Condition filed in accordance with 
instructions to Form X-17A-5 (Sec.  249.617 of this chapter), Part II, 
is not consolidated, a summary of financial data for subsidiaries not 
consolidated in the Part II Statement of Financial Condition as filed by 
the OTC derivatives dealer shall be included in the notes to the 
consolidated statement of financial condition reported on by the 
certified public accountant. The summary financial data shall include 
the assets, liabilities, and net worth or stockholders' equity of the 
unconsolidated subsidiaries.

    Note 1 to paragraph (b)(2). If there is other comprehensive income 
in the period(s) presented, the financial report must contain a 
Statement of Comprehensive Income (as defined in Sec.  210.1-02 of 
Regulation S-X of this chapter) in place of a Statement of Income.

    (3) Supporting schedules shall include, from Part II of Form X-17A-5 
(Sec.  249.617 of this chapter), a Computation of Net Capital under 
Sec.  240.15c3-1.
    (4) A reconciliation, including appropriate explanations, of the 
Computation of Net Capital under Sec.  240.15c3-1 contained in the audit 
report with the

[[Page 598]]

broker's or dealer's corresponding unaudited most recent Part II filing 
shall be filed with the report when material differences exist. If no 
material differences exist, a statement so indicating shall be filed.
    (5) The annual audit report shall be filed not more than sixty days 
after the date of the financial statements.
    (6) Two copies of the annual audit report shall be filed at the 
Commission's principal office in Washington, DC.
    (c) Nature and form of reports. The financial statements filed 
pursuant to paragraph (b) of this section shall be prepared and filed in 
accordance with the following requirements:
    (1) An audit shall be conducted by a certified public accountant who 
shall be in fact independent as defined in paragraph (f) of this 
section, and it shall give an opinion covering the statements filed 
pursuant to paragraph (b) of this section.
    (2) Attached to the report shall be an oath or affirmation that, to 
the best knowledge and belief of the person making such oath or 
affirmation, the financial statements and schedules are true and correct 
and neither the OTC derivatives dealer, nor any partner, officer, or 
director, as the case may be, has any significant interest in any 
counterparty or in any account classified solely as that of a 
counterparty. The oath or affirmation shall be made before a person duly 
authorized to administer such oaths or affirmations. If the OTC 
derivatives dealer is a sole proprietorship, the oath or affirmation 
shall be made by the proprietor; if a partnership, by a general partner; 
or if a corporation, by a duly authorized officer.
    (3) All of the statements filed pursuant to paragraph (b) of this 
section shall be confidential except that they shall be available for 
use by any official or employee of the United States or by any other 
person to whom the Commission authorizes disclosure of such information 
as being in the public interest.
    (d) Qualification of accountants. The Commission will not recognize 
any person as a certified public accountant who is not duly registered 
and in good standing as such under the laws of the State of his 
principal office.
    (e) Designation of accountant. (1) Every OTC derivatives dealer 
shall file no later than December 10 of each year with the Commission's 
principal office in Washington, DC a statement indicating the existence 
of an agreement, dated no later than December 1 of that year, with a 
certified public accountant covering a contractual commitment to conduct 
the OTC derivatives dealer's annual audit during the following calendar 
year.
    (2) If the agreement is of a continuing nature, providing for 
successive yearly audits, no further filing is required. If the 
agreement is for a single audit, or if the continuing agreement 
previously filed has been terminated or amended, a new statement must be 
filed by the required date.
    (3) The statement shall be headed ``Notice pursuant to Sec.  
240.17a-12(e)'' and shall contain the following information:
    (i) Name, address, telephone number, and registration number of the 
OTC derivatives dealer;
    (ii) Name, address, and telephone number of the certified public 
accounting firm; and
    (iii) The audit date of the OTC derivatives dealer for the year 
covered by the agreement.
    (4) Notwithstanding the date of filing specified in paragraph (e)(1) 
of this section, every OTC derivatives dealer shall file the notice 
provided for in paragraph (e) of this section within 30 days following 
the effective date of registration as an OTC derivatives dealer.
    (f) Independence of accountant. A certified public accountant shall 
be independent in accordance with the provisions of Sec.  210.2-01(b) 
and (c) of this chapter.
    (g) Replacement of accountant. (1) An OTC derivatives dealer shall 
file a notice that must be received by the Commission's principal office 
in Washington, DC not more than 15 business days after:
    (i) The OTC derivatives dealer has notified the certified public 
accountant whose opinion covered the most recent financial statements 
filed under paragraph (b) of this section that the certified public 
accountant's services will not be utilized in future engagements; or

[[Page 599]]

    (ii) The OTC derivatives dealer has notified a certified public 
accountant who was engaged to give an opinion covering the financial 
statements to be filed under paragraph (b) of this section that the 
engagement has been terminated; or
    (iii) A certified public accountant has notified the OTC derivatives 
dealer that it will not continue under an engagement or give an opinion 
covering the financial statements to be filed under paragraph (b) of 
this section; or
    (iv) A new certified public accountant has been engaged to give an 
opinion covering the financial statements to be filed under paragraph 
(b) of this section without any notice of termination having been given 
to or by the previously engaged certified public accountant.
    (2) Such notice shall state the date of notification of the 
termination of the engagement of the former certified public accountant 
or the engagement of the new certified public accountant, as applicable, 
and the details of any disagreements existing during the 24 months (or 
the period of the engagement, if less) preceding such termination or new 
engagement relating to any matter of accounting principles or practices, 
financial statement disclosure, auditing scope or procedure, or 
compliance with applicable rules of the Commission, which disagreements, 
if not resolved to the satisfaction of the former certified public 
accountant, would have caused the former certified public accountant to 
make reference to them in connection with the report on the subject 
matter of the disagreements. The disagreements required to be reported 
in response to the preceding sentence include both those resolved to the 
former certified public accountant's satisfaction and those not resolved 
to the former certified public accountant's satisfaction. Disagreements 
contemplated by this section are those that occur at the decision-making 
level (i.e., between principal financial officers of the OTC derivatives 
dealer and personnel of the certified public accounting firm responsible 
for rendering its report). The notice shall also state whether the 
certified public accountant's report on the financial statements for any 
of the past two years contained an adverse opinion or a disclaimer of 
opinion or was qualified as to uncertainties, audit scope, or accounting 
principles, and describe the nature of each such adverse opinion, 
disclaimer of opinion, or qualification. The OTC derivatives dealer 
shall also request the former certified public accountant to furnish the 
OTC derivatives dealer with a letter addressed to the Commission stating 
whether the former certified public accountant agrees with the 
statements contained in the notice of the OTC derivatives dealer and, if 
not, stating the respects in which the former certified public 
accountant does not agree. The OTC derivatives dealer shall file three 
copies of the notice and the certified public accountant's letter, one 
copy of which shall be manually signed by the sole proprietor, or a 
general partner or a duly authorized corporate officer, as appropriate, 
and by the certified public accountant.
    (h) Audit objectives. (1) The audit shall be made in accordance with 
U.S. Generally Accepted Auditing Standards and shall include a review of 
the accounting system, the internal accounting controls, and procedures 
for safeguarding securities including appropriate tests thereof for the 
period since the date of the prior audited financial statements. The 
audit shall include all procedures necessary under the circumstances to 
enable the certified public accountant to express an opinion on the 
statement of financial condition, results of operations, cash flows, and 
the Computation of Net Capital under Sec.  240.15c3-1. The scope of the 
audit and review of the accounting system, the internal accounting 
controls, and procedures for safeguarding securities shall be sufficient 
to provide reasonable assurance that any material inadequacies existing 
at the date of the examination in the following are disclosed:
    (i) The accounting system;
    (ii) The internal accounting controls; and
    (iii) The procedures for safeguarding securities.
    (2) A material inadequacy in the accounting system, internal 
accounting controls, procedures for safeguarding

[[Page 600]]

securities, and practices and procedures referred to in paragraph (h) 
(1) of this section that must be reported under these audit objectives 
includes any condition which has contributed substantially to or, if 
appropriate corrective action is not taken, could reasonably be expected 
to:
    (i) Inhibit an OTC derivatives dealer from promptly completing 
securities transactions or promptly discharging its responsibilities to 
counterparties, other brokers and dealers, or creditors;
    (ii) Result in material financial loss;
    (iii) Result in material misstatements of the OTC derivatives 
dealer's financial statements; or
    (iv) Result in violations of the Commission's recordkeeping or 
financial responsibility rules to an extent that could reasonably be 
expected to result in the conditions described in paragraphs (h)(2)(i), 
(ii), or (iii) of this section.
    (i) Extent and timing of audit procedures. (1) The extent and timing 
of audit procedures are matters for the certified public accountant to 
determine on the basis of its review and evaluation of existing internal 
controls and other audit procedures performed in accordance with U.S. 
Generally Accepted Auditing Standards and the audit objectives set forth 
in paragraph (h) of this section.
    (2) If, during the course of the audit or interim work, the 
certified public accountant determines that any material inadequacies 
exist in the accounting system, internal accounting controls, procedures 
for safeguarding securities, or as otherwise defined in paragraph (h)(2) 
of this section, then the certified public accountant shall call it to 
the attention of the chief financial officer of the OTC derivatives 
dealer, who shall inform the Commission by telegraphic or facsimile 
notice within 24 hours thereafter as set forth in Sec.  240.17a-11(e) 
and (g). The OTC derivatives dealer shall also furnish the certified 
public accountant with a copy of said notice to the Commission by 
telegram or facsimile within the same 24 hour period. If the certified 
public accountant fails to receive such notice from the OTC derivatives 
dealer within that 24 hour period, or if the certified public accountant 
disagrees with the statements contained in the notice of the OTC 
derivatives dealer, the certified public accountant shall inform the 
Commission by report of material inadequacy within 24 hours thereafter 
as set forth in Sec.  240.17a-11(g). Such report from the certified 
public accountant shall, if the OTC derivatives dealer failed to file a 
notice, describe any material inadequacies found to exist. If the OTC 
derivatives dealer filed a notice, the certified public accountant shall 
file a report detailing the aspects, if any, of the OTC derivatives 
dealer's notice with which the certified public accountant does not 
agree.
    (j) Accountant's report, general provisions--(1) Technical 
requirements. The certified public accountant's report shall be dated; 
be signed manually; indicate the city and state where issued; and 
identify without detailed enumeration the financial statements and 
schedules covered by the report.
    (2) Representations as to the audit. The certified public 
accountant's report shall state that the audit was made in accordance 
with U.S. Generally Accepted Auditing Standards; state whether the 
certified public accountant reviewed the procedures followed for 
safeguarding securities; and designate any auditing procedures deemed 
necessary by the certified public accountant under the circumstances of 
the particular case that have been omitted, and the reason for their 
omission. Nothing in this section shall be construed to imply authority 
for the omission of any procedure which certified public accountants 
would ordinarily employ in the course of an audit made for the purpose 
of expressing the opinions required under this section.
    (3) Opinion to be expressed. The certified public accountant's 
report shall state clearly the opinion of the certified public 
accountant:
    (i) In respect of the financial statements and schedules covered by 
the report and the accounting principles and practices reflected 
therein; and
    (ii) As to the consistency of the application of the accounting 
principles, or as to any changes in such principles which have a 
material effect on the financial statements.
    (4) Exceptions. Any matters to which the certified public accountant 
takes

[[Page 601]]

exception shall be clearly identified, explained, and, to the extent 
practicable, the effect of each such exception on the related financial 
statements shall be provided.
    (5) Definitions. For the purpose of this section, the terms audit 
(or examination), accountant's report, and certified shall have the 
meanings given in Sec.  210.1-02 of this chapter.
    (k) Accountant's report on material inadequacies and reportable 
conditions. The OTC derivatives dealer shall file concurrently with the 
annual audit report a supplemental report by the certified public 
accountant describing any material inadequacies or any matter that would 
be deemed to be a reportable condition under U.S. Generally Accepted 
Auditing Standards that are unresolved as of the date of the certified 
public accountant's report. The report shall also describe any material 
inadequacies found to have existed since the date of the previous audit. 
The supplemental report shall indicate any corrective action taken or 
proposed by the OTC derivatives dealer with regard to any identified 
material inadequacies or reportable conditions. If the audit did not 
disclose any material inadequacies or reportable conditions, the 
supplemental report shall so state.
    (l) Accountant's report on management controls. (1) The OTC 
derivatives dealer shall file concurrently with the annual audit report 
a supplemental report by the certified public accountant indicating the 
results of the certified public accountant's review of the OTC 
derivatives dealer's internal risk management control system with 
respect to the requirements of Sec.  240.15c3-4. This review shall be 
conducted in accordance with procedures agreed to by the OTC derivatives 
dealer and the certified public accountant conducting the review. The 
purpose of the review is to confirm that the OTC derivatives dealer has 
established, documented, and maintained an internal risk management 
control system in accordance with Sec.  240.15c3-4, and is in compliance 
with that internal risk management control system.
    (2) The agreed-upon procedures are to be performed, and the report 
is to be prepared, in accordance with U.S. Generally Accepted 
Attestation Standards.
    (3) Prior to the commencement of the initial review, every OTC 
derivatives dealer shall file the procedures to be performed pursuant to 
paragraph (l)(1) of this section with the Commission's principal office 
in Washington, DC. Prior to the commencement of any subsequent review, 
every OTC derivatives dealer shall file with the Commission's principal 
office in Washington, DC a notice of changes to the agreed-upon 
procedures.
    (m) Accountant's report on inventory pricing and modeling. (1) The 
OTC derivatives dealer shall file concurrently with the annual audit 
report a supplemental report by the certified public accountant 
indicating the results of the certified public accountant's review of 
the broker's or dealer's inventory pricing and modeling procedures. This 
review shall be conducted in accordance with procedures agreed to by the 
OTC derivatives dealer and by the certified public accountant conducting 
the review. The purpose of the review is to confirm that the pricing and 
modeling procedures relied upon by the OTC derivatives dealer conform to 
the procedures submitted to the Commission as part of its OTC 
derivatives dealer application, and that the procedures comply with the 
qualitative and quantitative standards set forth in Sec.  240.15c3-1f.
    (2) The agreed-upon procedures are to be performed and the report is 
to be prepared in accordance with U.S. Generally Accepted Attestation 
Standards.
    (3) Every OTC derivatives dealer shall file prior to the 
commencement of the initial review, the procedures to be performed 
pursuant to paragraph (m)(1) of this section with the Commission's 
principal office in Washington, DC. Prior to the commencement of each 
subsequent review, every OTC derivatives dealer shall file with the 
Commission's principal office in Washington, DC notice of changes in the 
agreed-upon procedures.
    (n) Extensions and exemptions. Upon the written request of the OTC 
derivatives dealer, or on its own motion, the Commission may grant an 
extension of time or an exemption from any of the requirements of this 
section either unconditionally or on specified terms and conditions.

[[Page 602]]

    (o) Notification of change of fiscal year. (1) In the event any OTC 
derivatives dealer finds it necessary to change its fiscal year, it must 
file a notice of such change with the Commission's principal office in 
Washington, DC.
    (2) Such notice shall contain a detailed explanation of the reasons 
for the change. Any change in the filing period for the audit report 
must be approved by the Commission.
    (p) Filing requirements. For purposes of filing requirements as 
described in Sec.  240.17a-12, these filings shall be deemed to have 
been accomplished upon receipt at the Commission's principal office in 
Washington, DC.

[63 FR 59401, Nov. 3, 1998, as amended at 69 FR 34494, June 21, 2004; 83 
FR 50223, Oct. 4, 2018; 84 FR 68656, Dec. 16, 2019]



Sec.  240.17a-13  Quarterly security counts to be made by certain 
exchange members, brokers, and dealers.

    (a) This section shall apply to every member of a national 
securities exchange who transacts a business in securities directly with 
or for others than members of a national securities exchange, every 
broker or dealer (other than a member) who transacts a business in 
securities through the medium of any member of a national securities 
exchange, and every broker or dealer registered pursuant to section 15 
of the Act; except that a broker or dealer meeting all of the following 
conditions shall be exempt from the provisions of this section:
    (1) His dealer transactions (as principal for his own account) are 
limited to the purchase, sale, and redemption of redeemable shares of 
registered investment companies or of interests or participations in an 
insurance company separate account, whether or not registered as an 
investment company; except that a broker or dealer transacting business 
as a sole proprietor may also effect occasional transactions in other 
securities for his own account with or through another registered 
broker-dealer;
    (2) His transactions as broker (agent) are limited to:
    (i) The sale and redemption of redeemable securities of registered 
investment companies or of interests or participations in an insurance 
company separate account, whether or not registered as an investment 
company;
    (ii) The solicitation of share accounts for savings and loan 
associations insured by an instrumentality of the United States; and
    (iii) The sale of securities for the account of a customer to obtain 
funds for immediate reinvestment in redeemable securities of registered 
investment companies; and
    (3) He promptly transmits all funds and delivers all securities 
received in connection with his activities as a broker or dealer, and 
does not otherwise hold funds or securities for, or owe money or 
securities to, customers.

Notwithstanding the foregoing, this rule shall not apply to any 
insurance company which is a registered broker-dealer, and which 
otherwise meets all of the conditions in paragraphs (a)(1), (2), and (3) 
of this section, solely by reason of its participation in transactions 
that are a part of the business of insurance, including the purchasing, 
selling, or holding of securities for or on behalf of such company's 
general and separate accounts.
    (b) Any member, broker, or dealer who is subject to the provisions 
of this rule shall at least once in each calendar quarter-year:
    (1) Physically examine and count all securities held including 
securities that are the subjects of repurchase or reverse repurchase 
agreements;
    (2) Account for all securities in transfer, in transit, pledged, 
loaned, borrowed, deposited, failed to receive, failed to deliver, 
subject to repurchase or reverse repurchase agreements or otherwise 
subject to his control or direction but not in his physical possession 
by examination and comparison of the supporting detail records with the 
appropriate ledger control accounts;
    (3) Verify all securities in transfer, in transit, pledge, loaned, 
borrowed, deposited, failed to receive, failed to deliver, subject to 
repurchase or reverse repurchase agreements or otherwise subject to his 
control or direction but not in his physical possession, where such 
securities have been in said status for longer than thirty days;
    (4) Compare the results of the count and verification with his 
records; and

[[Page 603]]

    (5) Record on the books and records of the member, broker, or dealer 
all unresolved differences setting forth the security involved and date 
of comparison in a security count difference account no later than 7 
business days after the date of each required quarterly security 
examination, count, and verification in accordance with the requirements 
provided in paragraph (c) of this section. Provided, however, That no 
examination, count, verification, and comparison for the purpose of this 
section shall be within 2 months of or more than 4 months following a 
prior examination, count, verification, and comparison made hereunder.
    (c) The examination, count, verification, and comparison may be made 
either as of a date certain or on a cyclical basis covering the entire 
list of securities. In either case the recordation shall be effected 
within 7 business days subsequent to the examination, count, 
verification, and comparison of a particular security. In the event that 
an examination, count, verification, and comparison is made on a 
cyclical basis, it shall not extend over more than 1 calendar quarter-
year, and no security shall be examined, counted, verified, or compared 
for the purpose of this rule less than 2 months or more than 4 months 
after a prior examination, count, verification, and comparison.
    (d) The examination, count, verification, and comparison shall be 
made or supervised by persons whose regular duties do not require them 
to have direct responsibility for the proper care and protection of the 
securities or the making or preservation of the subject records.
    (e) The provisions of this section shall not apply to a broker or 
dealer registered pursuant to section 15(b)(11)(A) of the Act (15 U.S.C. 
78o(b)(11)(A)) that is not a member of either a national securities 
exchange pursuant to section 6(a) of the Act (15 U.S.C. 78f(a)) or a 
national securities association registered pursuant to section 15A(a) of 
the Act (15 U.S.C. 78o-3(a)).
    (f) The Commission may, upon written request, exempt from the 
provisions of this section, either unconditionally or on specified terms 
and conditions, any member, broker, or dealer who satisfies the 
Commission that it is not necessary in the public interest and for the 
protection of investors to subject the particular member, broker, or 
dealer to certain or all of the provisions of this section, because of 
the special nature of his business, the safeguards he has established 
for the protection of customers' funds and securities, or such other 
reason as the Commission deems appropriate.

[36 FR 21179, Nov. 4, 1971, as amended at 42 FR 23790, May 10, 1977; 52 
FR 22299, June 11, 1987; 67 FR 58300, Sept. 13, 2002]



Sec.  240.17a-14  Form CRS, for preparation, filing and delivery of
Form CRS.

    (a) Scope of section. This section shall apply to every broker or 
dealer registered with the Commission pursuant to section 15 of the Act 
that offers services to a retail investor.
    (b) Form CRS. You must:
    (1) Prepare Form CRS 17 CFR 249.640, by following the instructions 
in the form.
    (2) File your current Form CRS electronically with the Commission 
through the Central Registration Depository (``Web CRD[supreg]'') 
operated by the Financial Industry Regulatory Authority, Inc., and 
thereafter, file an amended Form CRS in accordance with the instructions 
in Form CRS.
    (3) Amend your Form CRS as required by the instructions in the form.
    (c) Delivery of Form CRS. You must:
    (1) Deliver to each retail investor your current Form CRS before or 
at the earliest of:
    (i) A recommendation of an account type, a securities transaction; 
or an investment strategy involving securities;
    (ii) Placing an order for the retail investor; or
    (iii) The opening of a brokerage account for the retail investor.
    (2) Deliver to each retail investor who is an existing customer your 
current Form CRS before or at the time you:
    (i) Open a new account that is different from the retail investor's 
existing account(s);
    (ii) Recommend that the retail investor roll over assets from a 
retirement

[[Page 604]]

account into a new or existing account or investment; or
    (iii) Recommend or provide a new brokerage service or investment 
that does not necessarily involve the opening of a new account and would 
not be held in an existing account.
    (3) Post the current Form CRS prominently on your public website, if 
you have one, in a location and format that is easily accessible for 
retail investors.
    (4) Communicate any changes made to Form CRS to each retail investor 
who is an existing customer within 60 days after the amendments are 
required to be made and without charge. The communication can be made by 
delivering the amended Form CRS or by communicating the information 
through another disclosure that is delivered to the retail investor.
    (5) Deliver a current Form CRS to each retail investor within 30 
days upon request.
    (d) Other disclosure obligations. Delivering a Form CRS in 
compliance with this section does not relieve you of any other 
disclosure obligations arising under the federal securities laws and 
regulations or other laws or regulations (including the rules of a self-
regulatory organization).
    (e) Definitions. For purposes of this section:
    (1) Current Form CRS means the most recent version of the Form CRS.
    (2) Retail investor means a natural person, or the legal 
representative of such natural person, who seeks to receive or receives 
services primarily for personal, family or household purposes.
    (f) Transition rule. (1) If you are registered with the Commission 
prior to June 30, 2020, pursuant to Section 15 of the Act, you must file 
your initial Form CRS with the Commission in accordance with section 
(b)(2) of this section, beginning on May 1, 2020, and by no later than 
June 30, 2020.
    (2) On or after June 30, 2020, if you file an application for 
registration with the Commission or have an application for registration 
pending with the Commission as a broker or dealer pursuant to Section 15 
of the Act, you must begin to comply with this section by the date on 
which your registration application becomes effective pursuant to 
Section 15 of the Act, including by filing your Form CRS in accordance 
with paragraph (b)(2) of this section.
    (3) Within 30 days after the date by which you are first required by 
paragraph (f) of this section to electronically file your initial Form 
CRS with the Commission, you must deliver to each of your existing 
customers who is a retail investor your current Form CRS.
    (4) As of the date by which you are first required to electronically 
file your Form CRS with the Commission pursuant to this section, you 
must begin using your Form CRS as required to comply with paragraph (c) 
of this rule.

[84 FR 33629, July 12, 2019]



Sec.  240.17a-18  [Reserved]



Sec.  240.17a-19  Form X-17A-19 Report by national securities exchanges
and registered national securities associations of changes in the membership
status of any of their members.

    Every national securities exchange and every registered national 
securities association shall file with the Commission at its principal 
office in Washington, DC, and with the Securities Investor Protection 
Corporation such information as is required by Sec.  249.635 of this 
chapter on Form X-17A-19 within 5 business days of the occurrence of the 
initiation of the membership of any person or the suspension or 
termination of the membership of any member. Nothing in this section 
shall be deemed to relieve a national securities exchange or a 
registered national securities association of its responsibilities under 
Sec.  240.17a-5(b)(5) except that, to the extent a national securities 
exchange or a registered national securities association promptly files 
a report on Form X-17A-19 including therewith, inter alia, information 
sufficient to satisfy the requirements of Sec.  240.17a-5(b)(5), it 
shall not be required to file a report pursuant to Sec.  240.17a-5(b). 
Upon the occurrence of the events described in this paragraph, every 
national securities exchange and every

[[Page 605]]

registered national securities association shall notify in writing such 
member of its responsibilities under Sec.  240.17a-5(b).

[45 FR 39841, June 12, 1980]



Sec.  240.17a-21  Reports of the Municipal Securities Rulemaking Board.

    (a) Annual Report of the Municipal Securities Rulemaking Board. The 
Municipal Securities Rulemaking Board shall file annual reports with the 
Commission as follows:
    (1) Prior to October 1, 1976, the Municipal Securities Rulemaking 
Board shall file with the Commission an annual report for the period 
from its formation until June 30, 1976 and shall include whatever 
information, data and recommendations it considers advisable with regard 
to matters within its jurisdiction.
    (2) Prior to December 1, 1977, the Municipal Securities Rulemaking 
Board shall file with the Commission an annual report for the period 
from July 1, 1976 until September 30, 1977 and shall include whatever 
information, data and recommendations it considers advisable with regard 
to matters within its jurisdiction.
    (3) Prior to December 1 of each year beginning in 1978, the 
Municipal Securities Rulemaking Board shall file with the Commission an 
annual report for the twelve months immediately preceding October 1 of 
that year and shall include whatever information, data and 
recommendations it considers advisable with regard to matters within its 
jurisdiction.
    (4) The Municipal Securities Rulemaking Board shall include in its 
annual report a statement and an analysis of its expenses and operations 
including:
    (i) A balance sheet as of the end of the period covered by the 
report and a statement of revenues and expenses for the Board for that 
period;
    (ii) The rules of the Board including any written interpretations of 
the rules or staff interpretive letters, except that this information 
may be included in the annual report once every three years and shall be 
up to date as of the latest practicable date within 3 months of the date 
on which this information is filed. If the Board publishes or cooperates 
in the publication of this information on an annual or more frequent 
basis, in lieu of including such information in the annual report the 
Board may:
    (A) Identify the publication in which such information is available, 
the name, address, and telephone number of the person from whom such 
publication may be obtained, and the price thereof; and
    (B) Certify to the accuracy of such information as of its date. If 
the Board keeps this information up to date and makes it available to 
the Commission and the public upon request, in lieu of filing such 
information the Board may certify that the information is kept up to 
date and is available to the Commission and the public upon request;
    (iii) The following information concerning members of the Board:
    (A) Name;
    (B) Dates of commencement and termination of present term of office;
    (C) Length of time each member has held such office;
    (D) Name of principal organization with which connected;
    (E) Title; and
    (F) City wherein the principal office of such organization is 
located;
    (iv) Address of the Board, the name and address of each person 
authorized to receive notices on behalf of the Board from the 
Commission, and the name and address of counsel to the Board, if any; 
and
    (v) A list, including addresses, as of the latest practicable date, 
alphabetically arranged, of all municipal securities brokers and 
municipal securities dealers which have paid to the Board fees and 
charges to defray the costs and expenses of operating the Board.
    (5) Within 10 days after the discovery of any material inaccuracy in 
its annual report or in any amendment thereto the Municipal Securities 
Rulemaking Board shall file with the Commission an amendment correcting 
such inaccuracy.
    (b) Supplemental reports of the Municipal Securities Rulemaking 
Board. The Municipal Securities Rulemaking Board shall file supplemental 
reports to the Commission as follows:

[[Page 606]]

    (1) Within 10 days after issuing or making generally available to 
municipal securities brokers and municipal securities dealers any 
materials (including notices, circulars, bulletins, lists, periodicals, 
etc.), the Municipal Securities Rulemaking Board shall file with the 
Commission three copies of such material (unless such material is filed 
with the Commission pursuant to Rule 19b-4).
    (2) Within 10 days after any action is taken which renders no longer 
accurate any of the information required by paragraphs (a)(3) (iii), 
(iv), (v), and (vi) of this section to be contained in the annual report 
of the Municipal Securities Rulemaking Board (except action reported to 
the Commission pursuant to Rule 19b-4), the Board shall file with the 
Commission written notification in triplicate setting forth the nature 
of such action and the effective date thereof. Such notice may be filed 
either in the form of a letter or in the form of a notice made generally 
available to municipal securities brokers and municipal securities 
dealers.

[41 FR 36200, Aug. 27, 1976, as amended at 59 FR 66701, Dec. 28, 1994]



Sec.  240.17a-22  Supplemental material of registered clearing agencies.

    Within ten days after issuing, or making generally available, to its 
participants or to other entities with whom it has a significant 
relationship, such as pledgees, transfer agents, or self-regulatory 
organizations, any material (including, for example, manuals, notices, 
circulars, bulletins, lists, or periodicals), a registered clearing 
agency shall file three copies of such material with the Commission. A 
registered clearing agency for which the Commission is not the 
appropriate regulatory agency shall at the same time file one copy of 
such material with its appropriate regulatory agency.

[45 FR 73914, Nov. 7, 1980]



Sec.  240.17a-25  Electronic submission of securities transaction
information by exchange members, brokers, and dealers.

    (a) Every member, broker, or dealer subject to Sec.  240.17a-3 
shall, upon request, electronically submit to the Commission the 
securities transaction information as required in this section:
    (1) If the transaction was a proprietary transaction effected or 
caused to be effected by the member, broker, or dealer for any account 
in which such member, broker, or dealer, or person associated with the 
member, broker, or dealer, is directly or indirectly interested, such 
member, broker or dealer shall submit the following information:
    (i) Clearing house number, or alpha symbol of the member, broker, or 
dealer submitting the information;
    (ii) Clearing house number(s), or alpha symbol(s) of the member(s), 
broker(s) or dealer(s) on the opposite side of the transaction;
    (iii) Identifying symbol assigned to the security;
    (iv) Date transaction was executed;
    (v) Number of shares, or quantity of bonds or options contracts, for 
each specific transaction; whether each transaction was a purchase, 
sale, or short sale; and, if an options contract, whether open long or 
short or close long or short;
    (vi) Transaction price;
    (vii) Account number; and
    (viii) The identity of the exchange or other market where the 
transaction was executed.
    (2) If the transaction was effected or caused to be effected by the 
member, broker, or dealer for any customer account, such member, broker, 
or dealer shall submit the following information:
    (i) Information contained in paragraphs (a)(1)(i) through 
(a)(1)(viii) of this section;
    (ii) Customer name, address(es), branch office number, registered 
representative number, whether the order was solicited or unsolicited, 
date account opened, and the customer's tax identification number(s); 
and
    (iii) If the transaction was effected for a customer of another 
member, broker, or dealer, whether the other member, broker, or dealer 
was acting as principal or agent on the transaction.
    (b) In addition to the information in paragraph (a) of this section, 
a member, broker, or dealer shall, upon request, electronically submit 
to the Commission the following securities

[[Page 607]]

transaction information for transactions involving entities that trade 
using multiple accounts:
    (1)(i) If part or all of an account's transactions at the reporting 
member, broker, or dealer have been transferred or otherwise forwarded 
to one or more accounts at another member, broker, or dealer, an 
identifier for this type of transaction; and
    (ii) If part or all of an account's transactions at the reporting 
member, broker, or dealer have been transferred or otherwise received 
from one or more other members, brokers, or dealers, an identifier for 
this type of transaction.
    (2)(i) If part or all of an account's transactions at the reporting 
member, broker, or dealer have been transferred or otherwise received 
from another account at the reporting member, broker, or dealer, an 
identifier for this type of transaction; and
    (ii) If part or all of an account's transactions at the reporting 
member, broker, or dealer have been transferred or otherwise forwarded 
to one or more other accounts at the reporting member, broker, or 
dealer, an identifier for this type of transaction.
    (3) If an account's transaction was processed by a depository 
institution, the identifier assigned to the account by the depository 
institution.
    (c) Every member, broker, or dealer shall, upon request, submit to 
the Commission and, keep current, information containing the full name, 
title, address, telephone number(s), facsimile number(s), and 
electronic-mail address(es) for each person designated by the member, 
broker, or dealer as responsible for processing securities transaction 
information requests from the Commission.
    (d) The member, broker, or dealer should comply with the format for 
the electronic submission of the securities transaction information 
described in paragraphs (a) and (b) of this section as specified by the 
member, broker, or dealer's designated self-regulatory organization 
under Sec.  240.17d-1, unless otherwise specified by Commission rule.

[66 FR 35843, July 9, 2001]



Sec.  240.17d-1  Examination for compliance with applicable financial
responsibility rules.

    (a) Where a member of SIPC is a member of more than one self-
regulatory organization, the Commission shall designate by written 
notice to one of such organizations responsibility for examining such 
member for compliance with applicable financial responsibility rules. In 
making such designations the Commission shall take into consideration 
the regulatory capabilities and procedures of the self-regulatory 
organizations, availability of staff, convenience of location, 
unnecessary regulatory duplication, and such other factors as the 
Commission may consider germane to the protection of investors, the 
cooperation and coordination among self-regulatory organizations, and 
the development of a national market system and a national system for 
the clearance and settlement of securities transactions.
    (b) Upon designation of responsibility pursuant to paragraph (a) of 
this section, all other self-regulatory organizations of which such 
person is a member shall be relieved of such responsibility to the 
extent specified.
    (c) After the Commission has acted pursuant to paragraphs (a) and 
(b) of this section, any self-regulatory organization relieved of 
responsibility with respect to a member may notify customers of, and 
persons doing business with, such member of the limited nature of its 
responsibility for such member's compliance with applicable financial 
responsibility rules.

[41 FR 18809, May 7, 1976]



Sec.  240.17d-2  Program for allocation of regulatory responsibility.

    (a) Any two or more self-regulatory organizations may file with the 
Commission within ninety (90) days of the effective date of this rule, 
and thereafter as changes in designation are necessary or appropriate, a 
plan for allocating among the self-regulatory organizations the 
responsibility to receive regulatory reports from persons who are 
members or participants of more than one of such self-regulatory 
organizations to examine such persons for compliance, or to enforce 
compliance

[[Page 608]]

by such persons, with specified provisions of the Securities Exchange 
Act of 1934, the rules and regulations thereunder, and the rules of such 
self-regulatory organizations, or to carry out other specified 
regulatory functions with respect to such persons.
    (b) Any plan filed hereunder may contain provisions for the 
allocation among the parties of expenses reasonably incurred by the 
self-regulatory organization having regulatory responsibilities under 
the plan.
    (c) After appropriate notice and opportunity for comment, the 
Commission may, by written notice, declare such a plan, or any part of 
the plan, effective if it finds the plan, or any part thereof, necessary 
or appropriate in the public interest and for the protection of 
investors, to foster cooperation and coordination among self-regulatory 
organizations, or to remove impediments to and foster the development of 
the national market system and a national system for the clearance and 
settlement of securities transactions and in conformity with the factors 
set forth in section 17(d) of the Securities Exchange Act of 1934.
    (d) Upon the effectiveness of such a plan or part thereof, any self-
regulatory organization which is a party to the plan shall be relieved 
of responsibility as to any person for whom such responsibility is 
allocated under the plan to another self-regulatory organization to the 
extent of such allocation.
    (e) Nothing herein shall preclude any self-regulatory organization 
from entering into more than one plan filed hereunder.
    (f) After the Commission has declared a plan or part thereof 
effective pursuant to paragraph (c) of this section or acted pursuant to 
paragraph (g) of this section, a self-regulatory organization relieved 
of responsibility may notify customers of, and persons doing business 
with, such member or participant of the limited nature of its 
responsibility for such member's or participant's acts, practices, and 
course of business.
    (g) In the event that plans declared effective pursuant to paragraph 
(c) of this section do not provide for all members or participants or do 
not allocate all regulatory responsibilities, the Commission may, after 
due consideration of the factors enumerated in section 17(d)(1) and 
notice and opportunity for comment, designate one or more of the self-
regulatory organizations responsible for specified regulatory 
responsibilities with respect to such members or participants.

[41 FR 49093, Nov. 8, 1976]



Sec.  240.17f-1  Requirements for reporting and inquiry with respect
to missing, lost, counterfeit or stolen securities.

    (a) Definitions. For purposes of this section:
    (1) The term reporting institution shall include every national 
securities exchange, member thereof, registered securities association, 
broker, dealer, municipal securities dealer, government securities 
broker, government securities dealer, registered transfer agent, 
registered clearing agency, participant therein, member of the Federal 
Reserve System and bank whose deposits are insured by the Federal 
Deposit Insurance Corporation;
    (2) The term uncertificated security shall mean a security not 
represented by an instrument and the transfer of which is registered 
upon books maintained for that purpose by or on behalf of the issuer;
    (3) The term global certificate securities issue shall mean a 
securities issue for which a single master certificate representing the 
entire issue is registered in the nominee name of a registered clearing 
agency and for which beneficial owners cannot receive negotiable 
securities certificates;
    (4) The term customer shall mean any person with whom the reporting 
institution has entered into at least one prior securities-related 
transaction; and
    (5) The term securities-related transaction shall mean a purpose, 
sale or pledge of investment securities, or a custodial arrangement for 
investment securities.
    (6) The term securities certificate means any physical instrument 
that represents or purports to represent ownership in a security that 
was printed by or on behalf of the issuer thereof and shall include any 
such instrument that is or was:
    (i) Printed but not issued;

[[Page 609]]

    (ii) Issued and outstanding, including treasury securities;
    (iii) Cancelled, which for this purpose means either or both of the 
procedures set forth in Sec.  240.17Ad-19(a)(1); or
    (iv) Counterfeit or reasonably believed to be counterfeit.
    (7) The term issuer shall include an issuer's:
    (i) Transfer agent(s), paying agent(s), tender agent(s), and 
person(s) providing similar services; and
    (ii) Corporate predecessor(s) and successor(s).
    (8) The term missing shall include any securities certificate that:
    (i) Cannot be located or accounted for, but is not believed to be 
lost or stolen; or
    (ii) A transfer agent claims or believes was destroyed in any manner 
other than by the transfer agent's own certificate destruction 
procedures as provided in Sec.  240.17Ad-19.
    (b) Every reporting institution shall register with the Commission 
or its designee in accordance with instructions issued by the Commission 
except:
    (1) A member of a national securities exchange who effects 
securities transactions through the trading facilities of the exchange 
and has not received or held customer securities within the last six 
months;
    (2) A reporting institution that, within the last six months, 
limited its securities activities exclusively to uncertificated 
securities, global securities issues or any securities issue for which 
neither record nor beneficial owners can obtain a negotiable securities 
certificate; or
    (3) A reporting institution whose business activities, within the 
last six months, did not involve the handling of securities 
certificates.
    (c) Reporting requirements--(1) Stolen securities. (i) Every 
reporting institution shall report to the Commission or its designee, 
and to a registered transfer agent for the issue, the discovery of the 
theft or loss of any securities certificates where there is substantial 
basis for believing that criminal activity was involved. Such report 
shall be made within one business day of the discovery and, if the 
certificate numbers of the securities cannot be ascertained at that 
time, they shall be reported as soon thereafter as possible.
    (ii) Every reporting institution shall promptly report to the 
Federal Bureau of Investigation upon the discovery of the theft or loss 
of any securities certificate where there is substantial basis for 
believing that criminal activity was involved.
    (2) Missing or lost securities. Every reporting institution shall 
report to the Commission or its designee, and to a registered transfer 
agent for the issue, the discovery of the loss of any securities 
certificate where criminal actions are not suspected when the securities 
certificate has been missing or lost for a period of two business days. 
Such report shall be made within one business day of the end of such 
period except that:
    (i) Securities certificates lost, missing, or stolen while in 
transit to customers, transfer agents, banks, brokers or dealers shall 
be reported by the delivering institution by the later of two business 
days after notice of non-receipt or as soon after such notice as the 
certificate numbers of the securities can be ascertained.
    (ii) Where a shipment of retired securities certificates is in 
transit between any transfer agents, banks, brokers, dealers, or other 
reporting institutions, with no affiliation existing between such 
entities, and the delivering institution fails to receive notice of 
receipt or non-receipt of the certificates, the delivering institution 
shall act to determine the facts. In the event of non-delivery where the 
certificates are not recovered by the delivering institution, the 
delivering institution shall report the certificates as lost, stolen, or 
missing to the Commission or its designee within a reasonable time under 
the circumstances but in any event within twenty business days from the 
date of shipment.
    (iii) Securities certificates considered lost or missing as a result 
of securities counts or verifications required by rule, regulation or 
otherwise (e.g., dividend record date verification made as a result of 
firm policy or internal audit function report) shall be reported by the 
later of ten business days after completion of such securities count or 
verification or as soon after such count

[[Page 610]]

or verification as the certificate numbers of the securities can be 
ascertained.
    (iv) Securities certificates not received during the completion of 
delivery, deposit or withdrawal shall be reported in the following 
manner:
    (A) Where delivery of the securities certificates is through a 
clearing agency, the delivering institution shall supply to the 
receiving institution the certificate number of the security within two 
business days from the date of request from the receiving institution. 
The receiving institution shall report within one business day of 
notification of the certificate number;
    (B) Where the delivery of securities certificates is in person and 
where the delivering institution has a receipt, the delivering 
institution shall supply the receiving institution the certificate 
numbers of the securities within two business days from the date of 
request from the receiving institution. The receiving institution shall 
report within one business day of notification of the certificate 
number;
    (C) Where the delivery of securities certificates is in person and 
where the delivering institution has no receipt, the delivering 
institution shall report within two business days of notification of 
non-receipt by the receiving institution; or
    (D) Where delivery of securities certificates is made by mail or via 
draft, if payment is not received within ten business days, the 
delivering institution shall confirm with the receiving institution the 
failure to receive such delivery; if confirmation shows non-receipt, the 
delivering institution shall report within two business days of such 
confirmation.
    (3) Counterfeit securities. Every reporting institution shall report 
the discovery of any counterfeit securities certificate to the 
Commission or its designee, to a registered transfer agent for the 
issue, and to the Federal Bureau of Investigation within one business 
day of such discovery.
    (4) Transfer agent reporting obligations. Every transfer agent shall 
make the reports required above only if it receives notification of the 
loss, theft or counterfeiting from a non-reporting institution or if it 
receives notification other than on a Form X-17F-1A or if the 
certificate was in its possession at the time of the loss.
    (5) Recovery. Every reporting institution that originally reported a 
lost, missing or stolen securities certificate pursuant to this Section 
shall report recovery of that securities certificate to the Commission 
or its designee and to a registered transfer agent for the issue within 
one business day of such recovery or finding. Every reporting 
institution that originally made a report in which criminality was 
indicated also shall notify the Federal Bureau of Investigation that the 
securities certificate has been recovered.
    (6) Information to be reported. All reports made pursuant to this 
Section shall include, if applicable or available, the following 
information with respect to each securities certificate:
    (i) Issuer;
    (ii) Type of security and series;
    (iii) Date of issue;
    (iv) Maturity date;
    (v) Denomination;
    (vi) Interest rate;
    (vii) Certificate number, including alphabetical prefix or suffix;
    (viii) Name in which registered;
    (ix) Distinguishing characteristics, if counterfeit;
    (x) Date of discovery of loss or recovery;
    (xi) CUSIP number;
    (xii) Financial Industry Numbering System (``FINS'') Number; and
    (xiii) Type of loss.
    (7) Forms. Reporting institutions shall make all reports to the 
Commission or its designee and to a registered transfer agent for the 
issue pursuant to this section on Form X-17F-1A. Reporting institutions 
shall make reports to the Federal Bureau of Investigation pursuant to 
this Section on Form X-17F-1A, unless the reporting institution is a 
member of the Federal Reserve System or a bank whose deposits are 
insured by the Federal Deposit Insurance Corporation, in which case 
reports may be made on the form required by the institution's 
appropriate regulatory agency for reports to the Federal Bureau of 
Investigation.
    (d) Required inquiries. (1) Every reporting institution (except a 
reporting institution that, acting in its capacity

[[Page 611]]

as transfer agent, paying agent, exchange agent or tender agent for an 
equity issue, or registrar for a bond or other debt issue, compares all 
transactions against a shareholder or bondholder list and a current list 
of stop transfers) shall inquire of the Commission or its designee with 
respect to every securities certificate which comes into its possession 
or keeping, whether by pledge, transfer or otherwise, to ascertain 
whether such securities certificate has been reported as missing, lost, 
counterfeit or stolen, unless:
    (i) The securities certificate is received directly from the issuer 
or issuing agent at issuance;
    (ii) The securities certificate is received from another reporting 
institution or from a Federal Reserve Bank or Branch;
    (iii) The securities certificate is received from a customer of the 
reporting institution; and
    (A) Is registered in the name of such customer or its nominee; or
    (B) Was previously sold to such customer, as verified by the 
internal records of the reporting institution;
    (iv) The securities certificate is received as part of a transaction 
which has an aggregate face value of $10,000 or less in the case of 
bonds, or market value of $10,000 or less in the case of stocks; or
    (v) The securities certificate is received directly from a drop 
which is affiliated with a reporting institution for the purposes of 
receiving or delivering certificates on behalf of the reporting 
institution.
    (2) Form of inquiry. Inquiries shall be made in such manner as 
prescribed by the Commission or its designee.
    (3) A reporting institution shall make required inquiries by the end 
of the fifth business day after a securities certificate comes into its 
possession or keeping, provided that such inquiries shall be made before 
the certificate is sold, used as collateral, or sent to another 
reporting institution.
    (e) Permissive reports and inquiries. Every reporting insitution may 
report to or inquire of the Commission or its designee with respect to 
any securities certificate not otherwise required by this section to be 
the subject of a report or inquiry. The Commission on written request or 
upon its own motion may permit reports to and inquiries of the system by 
any other person or entity upon such terms and conditions as it deems 
appropriate and necessary in the public interest and for the protection 
of investors.
    (f) Exemptions. The following types of securities are not subject to 
paragraphs (c) and (d) of this section:
    (1) Security issues not assigned CUSIP numbers;
    (2) Bond coupons;
    (3) Uncertificated securities;
    (4) Global securities issues; and
    (5) Any securities issue for which neither record nor beneficial 
owners can obtain a negotiable securities certificates.
    (g) Recordkeeping. Every reporting institution shall maintain and 
preserve in an easily accessible place for three years copies of all 
Forms X-17F-1A filed pursuant to this section, all agreements between 
reporting institutions regarding registration or other aspects of this 
section, and all confirmations or other information received from the 
Commission or its designee as a result of inquiry.

(Secs. 2, 17, and 23, 15 U.S.C. 78b, 78q, 78w)

[44 FR 31503, May 31, 1979; 45 FR 14022, Mar. 3, 1980, as amended at 53 
FR 37289, Sept. 26, 1988; 53 FR 40721, Oct. 18, 1988; 68 FR 74400, Dec. 
23, 2003]



Sec.  240.17f-2  Fingerprinting of securities industry personnel.

    (a) Exemptions for the fingerprinting requirement. Except as 
otherwise provided in paragraph (a)(1) or (2) of this section, every 
member of a national securities exchange, broker, dealer, registered 
transfer agent and registered clearing agency shall require that each of 
its partners, directors, officers and employees be fingerprinted and 
shall submit, or cause to be submitted, the fingerprints of such persons 
to the Attorney General of the United States or its designee for 
identification and appropriate processing.
    (1) Permissive exemptions. Every member of a national securities 
exchange, broker, dealer, registered transfer agent and registered 
clearing agency may claim one or more of the exemptions in paragraph 
(a)(1) (i), (ii), (iii) or

[[Page 612]]

(iv) of this section; Provided, That all the requirements of paragraph 
(e) of this section are also satisfied.
    (i) Member of a national securities exchange, broker, dealer or 
registered clearing agency. Every person who is a partner, director, 
officer or employee of a member of a national securities exchange, 
broker, dealer, or registered clearing agency shall be exempt if that 
person:
    (A) Is not engaged in the sale of securities;
    (B) Does not regularly have access to the keeping, handling or 
processing of (1) securities, (2) monies, or (3) the original books and 
records relating to the securities or the monies; and
    (C) Does not have direct supervisory responsibility over persons 
engaged in the activities referred to in paragraphs (a)(1)(i) (A) and 
(B) of this section.
    (ii) Registered transfer agents. Every person who is a partner, 
director, officer or employee of a registered transfer agent shall be 
exempt if that person:
    (A) Is not engaged in transfer agent functions (as defined in 
section 3(a)(25) of the Securities Exchange Act of 1934) or activities 
incidental thereto; or
    (B) Meets the conditions in paragraphs (a)(1)(i) (B) and (C) of this 
section.
    (iii) Registered broker-dealers engaged in sales of certain 
securities. Every partner, director, officer and employee of a 
registered broker or dealer who satisfies paragraph (a)(1)(i)(B) of this 
section shall be exempt if that broker or dealer:
    (A) Is engaged exclusively in the sale of shares of registered open-
end management investment companies, variable contracts, or interests in 
limited partnerships, unit investment trusts or real estate investment 
trusts; Provided, That those securities ordinarily are not evidenced by 
certificates;
    (B) Is current in its continuing obligation under Sec. Sec.  
240.15b1-1 and 15b3-1(b) to update Item 10 of Form BD to disclose the 
existence of any statutory disqualification set forth in sections 
3(a)(39), 15(b)(4) and 15(b)(6) of the Securities Exchange Act of 1934;
    (C) Has insurance or bonding indemnifying it for losses to customers 
caused by the fraudulent or criminal acts of any of its partners, 
directors, officers or employees for whom an exemption is being claimed 
under paragraph (a)(1)(iii) of this section; and
    (D) Is subject to the jurisdiction of a state insurance department 
with respect to its sale of variable contracts.
    (iv) Illegible fingerprint cards. Every person who is a partner, 
director, officer or employee shall be exempt if that member of a 
national securities exchange, broker, dealer, registered transfer agent 
or registered clearing agency, on at least three occasions:
    (A) Attempts in good faith to obtain from such person a complete set 
of fingerprints acceptable to the Attorney General or its designee for 
identification and appropriate processing by requiring that person to be 
fingerprinted, by having that person's fingerprints rolled by a person 
competent to do so and by submitting the fingerprint cards for that 
person to the Attorney General of the United States or its designee in 
accordance with proper procedures;
    (B) Has that person's fingerprint cards returned to it by the 
Attorney General of the United States or its designee without that 
person's fingerprints having been identified because the fingerprints 
were illegible; and
    (C) Retains the returned fingerprint cards and any other required 
records in accordance with paragraph (d) of this section and Sec. Sec.  
240.17a-3(a)(13), 17a-4(e)(2) and 240.17Ad-7(e)(1) under the Securities 
Exchange Act of 1934.
    (2) Other exemptions by application to the Commission. The 
Commission, upon specified terms, conditions and periods, may grant 
exemptions to any class of partners, directors, officers or employees of 
any member of a national securities exchange, broker, dealer, registered 
transfer agent or registered clearing agency, if the Commission finds 
that such action is not inconsistent with the public interest or the 
protection of investors.
    (b) Fingerprinting pursuant to other law. Every member of a national 
securities exchange, broker, dealer, registered transfer agent and 
registered clearing agency may satisfy the fingerprinting requirement of 
section 17(f)(2) of the Securities Exchange Act of 1934 as to any 
partner, director, officer or employee, if:

[[Page 613]]

    (1) The person, in connection with his or her present employment 
with such organization, has been fingerprinted pursuant to any other 
law, statute, rule or regulation of any state or federal government or 
agency thereof;
    (2) The fingerprint cards for that person are submitted, or are 
caused to be submitted, to the Attorney General of the United States or 
its designee for identification and appropriate processing, and the 
Attorney General or its designee has processed those fingerprint cards; 
and
    (3) The processed fingerprint cards or any substitute records, 
together with any information received from the Attorney General or its 
designee, are maintained in accordance with paragraph (d) of this 
section.
    (c) Fingerprinting plans of self-regulatory organizations. The 
fingerprinting requirement of section 17(f)(2) of the Securities 
Exchange Act of 1934 may be satisfied by submitting appropriate and 
complete fingerprint cards to a registered national securities exchange 
or to a registered national securities association which, pursuant to a 
plan filed with, and declared effective by, the Commission, forwards 
such fingerprint cards to the Attorney General of the United States or 
its designee for identification and appropriate processing. Any plan 
filed by a registered national securities exchange or a registered 
national securities association shall not become effective, unless 
declared effective by the Commission as not inconsistent with the public 
interest or the protection of investors; and, in declaring any such plan 
effective, the Commission may impose any terms and conditions relating 
to the provisions of the plan and the period of its effectiveness as it 
may deem necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the purposes of 
the Securities Exchange Act of 1934.
    (d) Record maintenance--(1) Maintenance of processed fingerprint 
cards and other related information. Every member of a national 
securities exchange, broker, dealer, registered transfer agent and 
registered clearing agency shall maintain the processed fingerprint card 
or any substitute record when such card is not returned after 
processing, together with any information received from the Attorney 
General or its designee, for every person required to be fingerprinted 
under section 17(f)(2) of the Securities Exchange Act of 1934 and for 
persons who have complied with this section pursuant to paragraph (b) or 
(c) of this section. Every substitute record shall state the name of the 
person whose fingerprint card was submitted to the Attorney General of 
the United States, the name of the member of a national securities 
exchange, broker, dealer, registered transfer agent or registered 
clearing agency that submitted the fingerprint card, the name of the 
person or organization that rolled the fingerprints, the date on which 
the fingerprints were rolled, and the date the fingerprint card was 
submitted to the Attorney General of the United States. The processed 
fingerprint card and every other substitute record containing the 
information required by this paragraph, together with any information 
received from the Attorney General of the United States, shall be kept 
in an easily accessible place at the organization's principal office and 
shall be made available upon request to the Commission, the appropriate 
regulatory agency (if not the Commission) or other designated examining 
authority. The organization's principal office must provide to the 
regional, branch or satellite office actually employing the person 
written evidence that the person's fingerprints have been processed by 
the FBI, and must provide to that office a copy of any criminal history 
record information received from the FBI. All fingerprint cards, records 
and information required to be maintained under this paragraph shall be 
retained for a period of not less than three years after termination of 
that person's employment or relationship with the organization.
    (2) Record maintenance by designated examining authorities. The 
records required to be maintained and preserved by a member of a 
national securities exchange, broker, or dealer pursuant to the 
requirements of paragraph (d)(1) of this section may be maintained and 
preserved on behalf of that member, broker, or dealer by a self-
regulatory

[[Page 614]]

organization that is also the designated examining authority for that 
member, broker or dealer, Provided That the self-regulatory organization 
has filed in accordance with Sec.  240.17f-2(c) a fingerprinting plan or 
amendments to an existing plan concerning the storage and maintenance of 
records and that plan, as amended, has been declared effective by the 
Commission, and Provided Further That:
    (i) Such records are subject at any time, or from time to time, to 
reasonable periodic, special or other examinations by representatives of 
the Commission; and
    (ii) The self-regulatory organization furnishes to the Commission, 
upon demand, at either the principal office or at the regional office 
complete, correct and current hard copies of any and all such records.
    (3) Reproduction of records on microfilm. The records required to be 
maintained pursuant to paragraph (d)(1) of this section may be produced 
or reproduced on microfilm and preserved in that form. If such microfilm 
substitution for hard copy is made by a member of a national securities 
exchange, broker, dealer, registered transfer agent or registered 
clearing agency, or by a self-regulatory organization maintaining and 
storing records pursuant to paragraph (d)(2) of this section, it shall 
at all times:
    (i) Have available for examination by the Commission, the 
appropriate regulatory agency (if not the Commission) or other 
designated examining authority, facilities for the immediate, easily 
readable projection of the microfilm and for the production of easily 
readable and legible facsimile enlargements;
    (ii) File and index the films in such a manner as to permit the 
immediate location and retrieval of any particular record;
    (iii) Be ready to provide, and immediately provide, any facsimile 
enlargement which the Commission, the appropriate regulatory agency (if 
not the Commission) or other designated examining authority by their 
examiners or other representatives may request; and
    (iv) For the period for which the microfilm records are required to 
be maintained, store separately from the original microfilm records a 
copy of the microfilm records.
    (e) Notice requirement. Every member of a national securities 
exchange, broker, dealer, registered transfer agent and registered 
clearing agency that claims one or more of the exemptions in paragraph 
(a)(1) of this section shall make and keep current a statement entitled 
``Notice Pursuant to Rule 17f-2'' containing the information specified 
in paragraph (e)(1) of this section.
    (1) Contents of statement. The Notice required by paragraph (e) of 
this section shall:
    (i) State the name of the organization and state whether it is a 
member of a national securities exchange, broker, dealer, registered 
transfer agent, or registered clearing agency;
    (ii) Identify by division, department, class, or name and position 
within the organization all persons who are claimed to have satisfied 
the fingerprinting requirement of section 17(f)(2) of the Securities 
Exchange Act of 1934 pursuant to paragraph (b) of this section;
    (iii) Identify by division, department, class, title or position 
within the organization all persons claimed to be exempt under 
paragraphs (a)(1)(i) through (iii) of this section, and identify by name 
all persons claimed to be exempt under paragraph (a)(1)(iv). Persons 
identified under this paragraph (e)(1)(iii) shall be exempt from the 
requirement of section 17(f)(2) of the Securities Exchange Act of 1934 
unless notified to the contrary by the Commission;
    (iv) Describe, in generic terms, the nature of the duties of the 
person or classes of persons, and the nature of the functions and 
operations of the divisions and departments, identified as exempt in 
paragraph (e)(1)(iii) of this section; and
    (v) Describe the security measures utilized to ensure that only 
those persons who have been fingerprinted in accordance with the 
fingerprinting requirement of section 17(f)(2) of the Securities 
Exchange Act of 1934 or who are exempt under paragraph (a)(1)(iv)

[[Page 615]]

of this section have access to the keeping, handling or processing of 
securities or monies or the original books and records relating thereto.
    (2) Record maintenance. A copy of the Notice required to be made and 
kept current under paragraph (e) of this section shall be kept in an 
easily accessible place at the organization's principal office and at 
the office employing the persons for whom exemptions are claimed and 
shall be made available upon request for inspection by the Commission, 
appropriate regulatory agency (if not the Commission) or other 
designated examining authority.
    (3) Exemption from the notice requirement. A registered transfer 
agent that performs transfer agent functions only on behalf of itself as 
an issuer and that receives fewer than 500 items for transfer and fewer 
than 500 items for processing during any six consecutive months shall be 
exempt from the notice requirement of paragraph (c) of this section.

[47 FR 54060, Dec. 1, 1982]

         Nationally Recognized Statistical Rating Organizations

    Source: 72 FR 33620, June 18, 2007, unless otherwise noted.



Sec.  240.17g-1  Application for registration as a nationally recognized
statistical rating organization.

    (a) Initial application. A credit rating agency applying to the 
Commission to be registered under section 15E of the Act (15 U.S.C. 78o-
7) as a nationally recognized statistical rating organization must file 
with the Commission two paper copies of an initial application on Form 
NRSRO (Sec.  249b.300 of this chapter) that follows all applicable 
instructions for the Form.
    (b) Application to register for an additional class of credit 
ratings. A nationally recognized statistical rating organization 
applying to register for an additional class of the credit ratings 
described in section 3(a)(62)(B) of the Act (15 U.S.C. 78c(a)(62)(B)) 
must file with the Commission two paper copies of an application to add 
a class of credit ratings on Form NRSRO that follows all applicable 
instructions for the Form. The application will be subject to the 
requirements of section 15E(a)(2) of the Act (15 U.S.C. 78o-7(a)(2)).
    (c) Supplementing an application prior to final action by the 
Commission. An applicant must promptly file with the Commission two 
paper copies of a written notice if information submitted to the 
Commission in an initial application to be registered as a nationally 
recognized statistical rating organization or in an application to 
register for an additional class of credit ratings is found to be or 
becomes materially inaccurate prior to the date of a Commission order 
granting or denying the application. The notice must identify the 
information that was found to be materially inaccurate. The applicant 
also must promptly file with the Commission two paper copies of an 
application supplement on Form NRSRO that follows all applicable 
instructions for the Form.
    (d) Withdrawing an application. An applicant may withdraw an initial 
application to be registered as a nationally recognized statistical 
rating organization or an application to register for an additional 
class of credit ratings prior to the date of a Commission order granting 
or denying the application. To withdraw the application, the applicant 
must furnish the Commission with two paper copies of a written notice of 
withdrawal executed by a duly authorized person.
    (e) Update of registration. A nationally recognized statistical 
rating organization amending materially inaccurate information in its 
application for registration pursuant to section 15E(b)(1) of the Act 
(15 U.S.C. 78o-7(b)(1)) must promptly file with the Commission an update 
of its registration on Form NRSRO that follows all applicable 
instructions for the Form. A Form NRSRO and the information and 
documents in Exhibits 2 through 9 to Form NRSRO, as applicable, filed 
under this paragraph must be filed electronically with the Commission on 
EDGAR as a PDF document in the format required by the EDGAR Filer 
Manual, as defined in Rule 11 of Regulation S-T (Sec.  232.11 of this 
chapter).
    (f) Annual certification. A nationally recognized statistical rating 
organization amending its application for registration pursuant to 
section 15E(b)(2)

[[Page 616]]

of the Act (15 U.S.C. 78o-7(b)(2)) must file with the Commission an 
annual certification on Form NRSRO that follows all applicable 
instructions for the Form not later than 90 days after the end of each 
calendar year. A Form NRSRO and the information and documents in 
Exhibits 1 through 9 to Form NRSRO filed under this paragraph must be 
filed electronically with the Commission on EDGAR as a PDF document in 
the format required by the EDGAR Filer Manual, as defined in Rule 11 of 
Regulation S-T.
    (g) Withdrawal from registration. A nationally recognized 
statistical rating organization withdrawing from registration pursuant 
to section 15E(e)(1) of the Act (15 U.S.C. 78o-7(e)(1)) must furnish the 
Commission with a notice of withdrawal from registration on Form NRSRO 
that follows all applicable instructions for the Form. The withdrawal 
from registration will become effective 45 calendar days after the 
notice is furnished to the Commission upon such terms and conditions as 
the Commission may establish as necessary in the public interest or for 
the protection of investors. A Form NRSRO furnished under this paragraph 
must be furnished electronically with the Commission on EDGAR as a PDF 
document in the format required by the EDGAR Filer Manual, as defined in 
Rule 11 of Regulation S-T.
    (h) Filing or furnishing Form NRSRO. A Form NRSRO filed or 
furnished, as applicable, under any paragraph of this section will be 
considered filed with or furnished to the Commission on the date the 
Commission receives a complete and properly executed Form NRSRO that 
follows all applicable instructions for the Form. Information filed or 
furnished, as applicable, on a confidential basis and for which 
confidential treatment has been requested pursuant to applicable 
Commission rules will be accorded confidential treatment to the extent 
permitted by law.
    (i) Public availability of Form NRSRO. A nationally recognized 
statistical rating organization must make its current Form NRSRO and 
information and documents in Exhibits 1 through 9 to Form NRSRO publicly 
and freely available on an easily accessible portion of its corporate 
Internet Web site within 10 business days after the date of the 
Commission order granting an initial application for registration as a 
nationally recognized statistical rating organization or an application 
to register for an additional class of credit ratings and within 10 
business days after filing with or furnishing to, as applicable, the 
Commission a Form NRSRO under paragraph (e), (f), or (g) of this 
section. In addition, a nationally recognized statistical rating 
organization must make its most recently filed Exhibit 1 to Form NRSRO 
freely available in writing to any individual who requests a copy of the 
Exhibit.

[13 FR 8178, Dec. 22, 1948, as amended at 79 FR 55262, Sept. 15, 2014]



Sec.  240.17g-2  Records to be made and retained by nationally
recognized statistical rating organizations.

    (a) Records required to be made and retained. A nationally 
recognized statistical rating organization must make and retain the 
following books and records, which must be complete and current:
    (1) Records of original entry into the accounting system of the 
nationally recognized statistical rating organization and records 
reflecting entries to and balances in all general ledger accounts of the 
nationally recognized statistical rating organization for each fiscal 
year.
    (2) Records with respect to each current credit rating of the 
nationally recognized statistical rating organization indicating (as 
applicable):
    (i) The identity of any credit analyst(s) that participated in 
determining the credit rating;
    (ii) The identity of the person(s) that approved the credit rating 
before it was issued;
    (iii) If a quantitative model was a substantial component in the 
process of determining the credit rating of a security or money market 
instrument issued by an asset pool or as part of any asset-backed 
securities transaction, a record of the rationale for any material 
difference between the credit rating implied by the model and the final 
credit rating issued; and
    (iv) Whether the credit rating was solicited or unsolicited.

[[Page 617]]

    (3) An account record for each person (for example, an obligor, 
issuer, underwriter, or other user) that has paid the nationally 
recognized statistical rating organization for the issuance or 
maintenance of a credit rating indicating:
    (i) The identity and address of the person; and
    (ii) The credit rating(s) determined or maintained for the person.
    (4) An account record for each subscriber to the credit ratings and/
or credit analysis reports of the nationally recognized statistical 
rating organization indicating the identity and address of the 
subscriber.
    (5) A record listing the general types of services and products 
offered by the nationally recognized statistical rating organization.
    (6) A record documenting the established procedures and 
methodologies used by the nationally recognized statistical rating 
organization to determine credit ratings.
    (7) A record that lists each security and money market instrument 
and its corresponding credit rating issued by an asset pool or as part 
of any asset-backed securities transaction where the nationally 
recognized statistical rating organization, in determining the credit 
rating for the security or money market instrument, treats assets within 
such pool or as a part of such transaction that are not subject to a 
credit rating of the nationally recognized statistical rating 
organization by any or a combination of the following methods:
    (i) Determining credit ratings for the unrated assets;
    (ii) Performing credit assessments or determining private credit 
ratings for the unrated assets;
    (iii) Determining credit ratings or private credit ratings, or 
performing credit assessments for the unrated assets by taking into 
consideration the internal credit analysis of another person; or
    (iv) Determining credit ratings or private credit ratings, or 
performing credit assessments for the unrated assets by taking into 
consideration (but not necessarily adopting) the credit ratings of 
another nationally recognized statistical rating organization.
    (8) For each outstanding credit rating, a record showing all rating 
actions and the date of such actions from the initial credit rating to 
the current credit rating identified by the name of the rated security 
or obligor and, if applicable, the CUSIP of the rated security or the 
Central Index Key (CIK) number of the rated obligor.
    (9) A record documenting the policies and procedures the nationally 
recognized statistical rating organization is required to establish, 
maintain, and enforce pursuant to section 15E(h)(4)(A) of the Act (15 
U.S.C. 78o-7(h)(4)(A)) and Sec.  240.17g-8(c).
    (b) Records required to be retained. A nationally recognized 
statistical rating organization must retain the following books and 
records (excluding drafts of documents) that relate to its business as a 
credit rating agency:
    (1) Significant records (for example, bank statements, invoices, and 
trial balances) underlying the information included in the annual 
financial reports the nationally recognized statistical rating 
organization filed with or furnished to, as applicable, the Commission 
pursuant to Sec.  240.17g-3.
    (2) Internal records, including nonpublic information and work 
papers, used to form the basis of a credit rating issued by the 
nationally recognized statistical rating organization.
    (3) Credit analysis reports, credit assessment reports, and private 
credit rating reports of the nationally recognized statistical rating 
organization and internal records, including nonpublic information and 
work papers, used to form the basis for the opinions expressed in these 
reports.
    (4) Compliance reports and compliance exception reports.
    (5) Internal audit plans, internal audit reports, documents relating 
to internal audit follow-up measures, and all records identified by the 
internal auditors of the nationally recognized statistical rating 
organization as necessary to perform the audit of an activity that 
relates to its business as a credit rating agency.
    (6) Marketing materials of the nationally recognized statistical 
rating organization that are published or otherwise made available to 
persons that are not associated with the nationally recognized 
statistical rating organization.

[[Page 618]]

    (7) External and internal communications, including electronic 
communications, received and sent by the nationally recognized 
statistical rating organization and its employees that relate to 
initiating, determining, maintaining, monitoring, changing,, or 
withdrawing a credit rating.
    (8) Any written communications received from persons not associated 
with the nationally recognized statistical rating organization that 
contain complaints about the performance of a credit analyst in 
initiating, determining, maintaining, monitoring, changing, or 
withdrawing a credit rating.
    (9) Internal documents that contain information, analysis, or 
statistics that were used to develop a procedure or methodology to treat 
the credit ratings of another nationally recognized statistical rating 
organization for the purpose of determining a credit rating for a 
security or money market instrument issued by an asset pool or part of 
any asset-backed securities transaction.
    (10) For each security or money market instrument identified in the 
record required to be made and retained under paragraph (a)(7) of this 
section, any document that contains a description of how assets within 
such pool or as a part of such transaction not rated by the nationally 
recognized statistical rating organization but rated by another 
nationally recognized statistical rating organization were treated for 
the purpose of determining the credit rating of the security or money 
market instrument.
    (11) Forms NRSRO (including Exhibits and accompanying information 
and documents) the nationally recognized statistical rating organization 
filed with or furnished to, as applicable, the Commission.
    (12) The internal control structure the nationally recognized 
statistical rating organization is required to establish, maintain, 
enforce, and document pursuant to section 15E(c)(3)(A) of the Act (15 
U.S.C. 78o-7(c)(3)(A)).
    (13) The policies and procedures the nationally recognized 
statistical rating organization is required to establish, maintain, 
enforce, and document pursuant to Sec.  240.17g-8(a).
    (14) The policies and procedures the nationally recognized 
statistical rating organization is required to establish, maintain, 
enforce, and document pursuant to Sec.  240.17g-8(b).
    (15) The standards of training, experience, and competence for 
credit analysts the nationally recognized statistical rating 
organization is required to establish, maintain, enforce, and document 
pursuant to Sec.  240.17g-9.
    (c) Record retention periods. The records required to be retained 
pursuant to paragraphs (a) and (b) of this section must be retained for 
three years after the date the record is made or received, except that a 
record identified in paragraph (a)(9), (b)(12), (b)(13), (b)(14), or 
(b)(15) of this section must be retained until three years after the 
date the record is replaced with an updated record.
    (d) Manner of retention. An original, or a true and complete copy of 
the original, of each record required to be retained pursuant to 
paragraphs (a) and (b) of this section must be maintained in a manner 
that, for the applicable retention period specified in paragraph (c) of 
this section, makes the original record or copy easily accessible to the 
principal office of the nationally recognized statistical rating 
organization and to any other office that conducted activities causing 
the record to be made or received.
    (e) Third-party record custodian. The records required to be 
retained pursuant to paragraphs (a) and (b) of this section may be made 
or retained by a third-party record custodian, provided the nationally 
recognized statistical rating organization furnishes the Commission at 
its principal office in Washington, DC with a written undertaking of the 
custodian executed by a duly authorized person. The undertaking must be 
in substantially the following form:

    The undersigned acknowledges that books and records it has made or 
is retaining for [the nationally recognized statistical rating 
organization] are the exclusive property of [the nationally recognized 
statistical rating organization]. The undersigned undertakes that upon 
the request of [the nationally recognized statistical rating 
organization] it will promptly provide the books and records to [the 
nationally recognized statistical rating organization] or the U.S. 
Securities and Exchange Commission (``Commission'') or its

[[Page 619]]

representatives and that upon the request of the Commission it will 
promptly permit examination by the Commission or its representatives of 
the records at any time or from time to time during business hours and 
promptly furnish to the Commission or its representatives a true and 
complete copy of any or all or any part of such books and records.


A nationally recognized statistical rating organization that engages a 
third-party record custodian remains responsible for complying with 
every provision of this section.

    (f) A nationally recognized statistical rating organization must 
promptly furnish the Commission or its representatives with legible, 
complete, and current copies, and, if specifically requested, English 
translations of those records of the nationally recognized statistical 
rating organization required to be retained pursuant to paragraphs (a) 
and (b) this section, or any other records of the nationally recognized 
statistical rating organization subject to examination under section 
17(b) of the Act (15 U.S.C. 78q(b)) that are requested by the Commission 
or its representatives.

[72 FR 33620, June 18, 2007, as amended at 74 FR 6482, Feb. 9, 2009; 74 
FR 63863, Dec. 4, 2009; 79 FR 55263, Nov. 14, 2014]



Sec.  240.17g-3  Annual financial and other reports to be filed or 
furnished by nationally recognized statistical rating organizations.

    (a) A nationally recognized statistical rating organization must 
annually, not more than 90 calendar days after the end of its fiscal 
year (as indicated on its current Form NRSRO):
    (1) File with the Commission a financial report, as of the end of 
the fiscal year, containing audited financial statements of the 
nationally recognized statistical rating organization or audited 
consolidated financial statements of its parent if the nationally 
recognized statistical rating organization is a separately identifiable 
division or department of the parent. The audited financial statements 
must:
    (i) Include a balance sheet, an income statement (or a statement of 
comprehensive income, as defined in Sec.  210.1-02 of Regulation S-X of 
this chapter, if required by the applicable generally accepted 
accounting principles noted in paragraph (a)(1)(ii) of this section) and 
statement of cash flows, and a statement of changes in ownership equity;
    (ii) Be prepared in accordance with generally accepted accounting 
principles in the jurisdiction in which the nationally recognized 
statistical rating organization or its parent is incorporated, 
organized, or has its principal office; and
    (iii) Be certified by an accountant who is qualified and independent 
in accordance with paragraphs (a), (b), and (c)(1), (2), (3), (4), (5) 
and (8) of Sec.  210.2-01 of this chapter. The accountant must give an 
opinion on the financial statements in accordance with paragraphs (a) 
through (d) of Sec.  210.2-02 of this chapter.
    (2) File with the Commission a financial report, as of the end of 
the fiscal year, containing, if applicable, unaudited consolidating 
financial statements of the parent of the nationally recognized 
statistical rating organization that include the nationally recognized 
statistical rating organization.

    Note to paragraph (a)(2): This financial report must be filed only 
if the audited financial statements provided pursuant to paragraph 
(a)(1) of this section are consolidated financial statements of the 
parent of the nationally recognized statistical rating organization.

    (3) File with the Commission an unaudited financial report, as of 
the end of the fiscal year, providing information concerning the revenue 
of the nationally recognized statistical rating organization in each of 
the following categories (as applicable) for the fiscal year:
    (i) Revenue from determining and maintaining credit ratings;
    (ii) Revenue from subscribers;
    (iii) Revenue from granting licenses or rights to publish credit 
ratings; and
    (iv) Revenue from all other services and products (include 
descriptions of any major sources of revenue).
    (4) File with the Commission an unaudited financial report, as of 
the end of the fiscal year, providing the total aggregate and median 
annual compensation of the credit analysts of

[[Page 620]]

the nationally recognized statistical rating organization for the fiscal 
year.

    Note to paragraph (a)(4): In calculating total and median annual 
compensation, the nationally recognized statistical rating organization 
may exclude deferred compensation, provided such exclusion is noted in 
the report.

    (5) File with the Commission an unaudited financial report, as of 
the end of the fiscal year, listing the 20 largest issuers and 
subscribers that used credit rating services provided by the nationally 
recognized statistical rating organization by amount of net revenue 
attributable to the issuer or subscriber during the fiscal year. 
Additionally, include on the list any obligor or underwriter that used 
the credit rating services provided by the nationally recognized 
statistical rating organization if the net revenue attributable to the 
obligor or underwriter during the fiscal year equaled or exceeded the 
net revenue attributable to the 20th largest issuer or subscriber. 
Include the net revenue amount for each person on the list.

    Note to paragraph (a)(5): A person is deemed to have ``used the 
credit rating services'' of the nationally recognized statistical rating 
organization if the person is any of the following: an obligor that is 
rated by the nationally recognized statistical rating organization 
(regardless of whether the obligor paid for the credit rating); an 
issuer that has securities or money market instruments subject to a 
credit rating of the nationally recognized statistical rating 
organization (regardless of whether the issuer paid for the credit 
rating); any other person that has paid the nationally recognized 
statistical rating organization to determine a credit rating with 
respect to a specific obligor, security, or money market instrument; or 
a subscriber to the credit ratings, credit ratings data, or credit 
analysis of the nationally recognized statistical rating organization. 
In calculating net revenue attributable to a person, the nationally 
recognized statistical rating organization should include all revenue 
earned by the nationally recognized statistical rating organization for 
any type of service or product, regardless of whether related to credit 
rating services, and net of any rebates and allowances paid or owed to 
the person by the nationally recognized statistical rating organization.

    (6) Furnish the Commission with an unaudited report, as of the end 
of the fiscal year, of the number of credit ratings actions (upgrades, 
downgrades, placements on credit watch, and withdrawals) taken during 
the fiscal year in each class of credit ratings identified in section 
3(a)(62)(B) of the Act (15 U.S.C. 78c(a)(62)(B)) for which the 
nationally recognized statistical rating organization is registered with 
the Commission.

    Note to paragraph (a)(6): A nationally recognized statistical rating 
organization registered in the class of credit ratings described in 
section 3(a)(62)(B)(iv) of the Act (15 U.S.C. 78c(a)(62)(B)(iv)) must 
include credit ratings actions taken on credit ratings of any security 
or money market instrument issued by an asset pool or as part of any 
asset-backed securities transaction for purposes of reporting the number 
of credit ratings actions in this class.

    (7)(i) File with the Commission an unaudited report containing an 
assessment by management of the effectiveness during the fiscal year of 
the internal control structure governing the implementation of and 
adherence to policies, procedures, and methodologies for determining 
credit ratings the nationally recognized statistical rating organization 
is required to establish, maintain, enforce, and document pursuant to 
section 15E(c)(3)(A) of the Act (15 U.S.C. 78o-7(c)(3)(A)) that 
includes:
    (A) A description of the responsibility of management in 
establishing and maintaining an effective internal control structure;
    (B) A description of each material weakness in the internal control 
structure identified during the fiscal year, if any, and a description, 
if applicable, of how each identified material weakness was addressed; 
and
    (C) A statement as to whether the internal control structure was 
effective as of the end of the fiscal year.
    (ii) Management is not permitted to conclude that the internal 
control structure of the nationally recognized statistical rating 
organization was effective as of the end of the fiscal year if there 
were one or more material weaknesses in the internal control structure 
as of the end of the fiscal year.
    (iii) For purposes of this paragraph (a)(7), a deficiency in the 
internal control structure exists when the design or operation of a 
control does not allow

[[Page 621]]

management or employees, in the normal course of performing their 
assigned functions, to prevent or detect a failure of the nationally 
recognized statistical rating organization to:
    (A) Implement a policy, procedure, or methodology for determining 
credit ratings in accordance with the policies and procedures of the 
nationally recognized statistical rating organization; or
    (B) Adhere to an implemented policy, procedure, or methodology for 
determining credit ratings.
    (iv) For purposes of this paragraph (a)(7), a material weakness 
exists if a deficiency, or a combination of deficiencies, in the design 
or operation of the internal control structure creates a reasonable 
possibility that a failure identified in paragraph (a)(7)(iii) of this 
section that is material will not be prevented or detected on a timely 
basis.
    (8) File with the Commission an unaudited annual report on the 
compliance of the nationally recognized statistical rating organization 
with the securities laws and the policies and procedures of the 
nationally recognized statistical rating organization pursuant to 
section 15E(j)(5)(B) of the Act (15 U.S.C. 78o-7(j)(5)(B)).
    (b)(1) The nationally recognized statistical rating organization 
must attach to the reports filed or furnished, as applicable, pursuant 
to paragraphs (a)(1) through (6) of this section a signed statement by a 
duly authorized person associated with the nationally recognized 
statistical rating organization stating that the person has 
responsibility for the reports and, to the best knowledge of the person, 
the reports fairly present, in all material respects, the financial 
condition, results of operations, cash flows, revenues, analyst 
compensation, and credit rating actions of the nationally recognized 
statistical rating organization for the period presented; and
    (2) The nationally recognized statistical rating organization must 
attach to the report filed pursuant to paragraph (a)(7) of this section 
a signed statement by the chief executive officer of the nationally 
recognized statistical rating organization or, if the nationally 
recognized statistical rating organization does not have a chief 
executive officer, an individual performing similar functions, stating 
that the chief executive officer or equivalent individual has 
responsibility for the report and, to the best knowledge of the chief 
executive officer or equivalent individual, the report fairly presents, 
in all material respects: an assessment by management of the 
effectiveness of the internal control structure during the fiscal year 
that includes a description of the responsibility of management in 
establishing and maintaining an effective internal control structure; a 
description of each material weakness in the internal control structure 
identified during the fiscal year, if any, and a description, if 
applicable, of how each identified material weakness was addressed; and 
an assessment by management of the effectiveness of the internal control 
structure as of the end of the fiscal year.
    (c) The Commission may grant an extension of time or an exemption 
with respect to any requirements in this section either unconditionally 
or on specified terms and conditions on the written request of a 
nationally recognized statistical rating organization if the Commission 
finds that such extension or exemption is necessary or appropriate in 
the public interest and consistent with the protection of investors.
    (d) Electronic filing. The reports must be filed with or furnished 
to, as applicable, the Commission electronically on EDGAR as PDF 
documents in the format required by the EDGAR Filer Manual, as defined 
in Rule 11 of Regulation S-T.
    (e) Confidential treatment. Information in a report filed or 
furnished, as applicable, on a confidential basis and for which 
confidential treatment has been requested pursuant to applicable 
Commission rules will be accorded confidential treatment to the extent 
permitted by law. Confidential treatment may be requested by marking 
each page ``Confidential Treatment Requested'' and by complying with 
Commission rules governing confidential treatment.

[72 FR 33620, June 18, 2007, as amended at 74 FR 6482, Feb. 9, 2009; 79 
FR 55263, Sept. 15, 2014; 79 FR 61576, Nov. 14, 2014; 83 FR 50223, Oct. 
4, 2018]

[[Page 622]]



Sec.  240.17g-4  Prevention of misuse of material nonpublic information.

    (a) The written policies and procedures a nationally recognized 
statistical rating organization establishes, maintains, and enforces to 
prevent the misuse of material, nonpublic information pursuant to 
section 15E(g)(1) of the Act (15 U.S.C. 78o-7(g)(1)) must include 
policies and procedures reasonably designed to prevent:
    (1) The inappropriate dissemination within and outside the 
nationally recognized statistical rating organization of material 
nonpublic information obtained in connection with the performance of 
credit rating services;
    (2) A person within the nationally recognized statistical rating 
organization from purchasing, selling, or otherwise benefiting from any 
transaction in securities or money market instruments when the person is 
aware of material nonpublic information obtained in connection with the 
performance of credit rating services that affects the securities or 
money market instruments; and
    (3) The inappropriate dissemination within and outside the 
nationally recognized statistical rating organization of a pending 
credit rating action before issuing the credit rating on the Internet or 
through another readily accessible means.
    (b) For the purposes of this section, the term person within a 
nationally recognized statistical rating organization means a nationally 
recognized statistical rating organization, its credit rating affiliates 
identified on Form NRSRO, and any partner, officer, director, branch 
manager, and employee of the nationally recognized statistical rating 
organization or its credit rating affiliates (or any person occupying a 
similar status or performing similar functions).



Sec.  240.17g-5  Conflicts of interest.

    (a) A person within a nationally recognized statistical rating 
organization is prohibited from having a conflict of interest relating 
to the issuance or maintenance of a credit rating identified in 
paragraph (b) of this section, unless:
    (1) The nationally recognized statistical rating organization has 
disclosed the type of conflict of interest in Exhibit 6 to Form NRSRO in 
accordance with section 15E(a)(1)(B)(vi) of the Act (15 U.S.C. 78o-
7(a)(1)(B)(vi)) and Sec.  240.17g-1;
    (2) The nationally recognized statistical rating organization has 
established and is maintaining and enforcing written policies and 
procedures to address and manage conflicts of interest in accordance 
with section 15E(h) of the Act (15 U.S.C. 78o-7(h)); and
    (3) In the case of the conflict of interest identified in paragraph 
(b)(9) of this section relating to issuing or maintaining a credit 
rating for a security or money market instrument issued by an asset pool 
or as part of any asset-backed securities transaction, the nationally 
recognized statistical rating organization:
    (i) Maintains on a password-protected Internet Web site a list of 
each such security or money market instrument for which it is currently 
in the process of determining an initial credit rating in chronological 
order and identifying the type of security or money market instrument, 
the name of the issuer, the date the rating process was initiated, and 
the Internet Web site address where the issuer, sponsor, or underwriter 
of the security or money market instrument represents that the 
information described in paragraphs (a)(3)(iii)(C) through (E) of this 
section can be accessed;
    (ii) Provides free and unlimited access to such password-protected 
Internet Web site during the applicable calendar year to any nationally 
recognized statistical rating organization that provides it with a copy 
of the certification described in paragraph (e) of this section that 
covers that calendar year, provided that such certification indicates 
that the nationally recognized statistical rating organization providing 
the certification either:
    (A) Determined and maintained credit ratings for at least 10% of the 
issued securities and money market instruments for which it accessed 
information pursuant to 17 CFR 240.17g-5(a)(3)(iii) in the calendar year 
prior to the year covered by the certification, if it accessed such 
information for 10 or more issued securities or money market 
instruments; or

[[Page 623]]

    (B) Has not accessed information pursuant to 17 CFR 240.17g-5(a)(3) 
10 or more times during the most recently ended calendar year; and
    (iii) Obtains from the issuer, sponsor, or underwriter of each such 
security or money market instrument a written representation that can 
reasonably be relied upon that the issuer, sponsor, or underwriter will:
    (A) Maintain the information described in paragraphs (a)(3)(iii)(C) 
through (E) of this section available at an identified password-
protected Internet Web site that presents the information in a manner 
indicating which information currently should be relied on to determine 
or monitor the credit rating;
    (B) Provide access to such password-protected Internet Web site 
during the applicable calendar year to any nationally recognized 
statistical rating organization that provides it with a copy of the 
certification described in paragraph (e) of this section that covers 
that calendar year, provided that such certification indicates that the 
nationally recognized statistical rating organization providing the 
certification either:
    (1) Determined and maintained credit ratings for at least 10% of the 
issued securities and money market instruments for which it accessed 
information pursuant to 17 CFR 240.17g-5(a)(3)(iii) in the calendar year 
prior to the year covered by the certification, if it accessed such 
information for 10 or more issued securities or money market 
instruments; or
    (2) Has not accessed information pursuant to 17 CFR 240.17g-5(a)(3) 
10 or more times during the most recently ended calendar year.
    (C) Post on such password-protected Internet Web site all 
information the issuer, sponsor, or underwriter provides to the 
nationally recognized statistical rating organization, or contracts with 
a third party to provide to the nationally recognized statistical rating 
organization, for the purpose of determining the initial credit rating 
for the security or money market instrument, including information about 
the characteristics of the assets underlying or referenced by the 
security or money market instrument, and the legal structure of the 
security or money market instrument, at the same time such information 
is provided to the nationally recognized statistical rating 
organization; and
    (D) Post on such password-protected Internet Web site all 
information the issuer, sponsor, or underwriter provides to the 
nationally recognized statistical rating organization, or contracts with 
a third party to provide to the nationally recognized statistical rating 
organization, for the purpose of undertaking credit rating surveillance 
on the security or money market instrument, including information about 
the characteristics and performance of the assets underlying or 
referenced by the security or money market instrument at the same time 
such information is provided to the nationally recognized statistical 
rating organization.
    (E) Post on such password-protected Internet Web site, promptly 
after receipt, any executed Form ABS Due Diligence-15E (Sec.  249b.500 
of this chapter) containing information about the security or money 
market instrument delivered by a person employed to provide third-party 
due diligence services with respect to the security or money market 
instrument.
    (iv) The provisions of paragraphs (a)(3)(i) through (iii) of this 
section will not apply to a nationally recognized statistical rating 
organization when issuing or maintaining a credit rating for a security 
or money market instrument issued by an asset pool or as part of any 
asset-backed securities transaction, if:
    (A) The issuer of the security or money market instrument is not a 
U.S. person (as defined in Sec.  230.902(k) of this chapter); and
    (B) The nationally recognized statistical rating organization has a 
reasonable basis to conclude that all offers and sales of the security 
or money market instrument by any issuer, sponsor, or underwriter linked 
to the security or money market instrument will occur outside the United 
States (as that phrase is used in Sec. Sec.  230.901 through 230.905 
(Regulation S) of this chapter).
    (b) Conflicts of interest. For purposes of this section, each of the 
following is a conflict of interest:

[[Page 624]]

    (1) Being paid by issuers or underwriters to determine credit 
ratings with respect to securities or money market instruments they 
issue or underwrite.
    (2) Being paid by obligors to determine credit ratings with respect 
to the obligors.
    (3) Being paid for services in addition to determining credit 
ratings by issuers, underwriters, or obligors that have paid the 
nationally recognized statistical rating organization to determine a 
credit rating.
    (4) Being paid by persons for subscriptions to receive or access the 
credit ratings of the nationally recognized statistical rating 
organization and/or for other services offered by the nationally 
recognized statistical rating organization where such persons may use 
the credit ratings of the nationally recognized statistical rating 
organization to comply with, and obtain benefits or relief under, 
statutes and regulations using the term nationally recognized 
statistical rating organization.
    (5) Being paid by persons for subscriptions to receive or access the 
credit ratings of the nationally recognized statistical rating 
organization and/or for other services offered by the nationally 
recognized statistical rating organization where such persons also may 
own investments or have entered into transactions that could be 
favorably or adversely impacted by a credit rating issued by the 
nationally recognized statistical rating organization.
    (6) Allowing persons within the nationally recognized statistical 
rating organization to directly own securities or money market 
instruments of, or having other direct ownership interests in, issuers 
or obligors subject to a credit rating determined by the nationally 
recognized statistical rating organization.
    (7) Allowing persons within the nationally recognized statistical 
rating organization to have a business relationship that is more than an 
arms length ordinary course of business relationship with issuers or 
obligors subject to a credit rating determined by the nationally 
recognized statistical rating organization.
    (8) Having a person associated with the nationally recognized 
statistical rating organization that is a broker or dealer engaged in 
the business of underwriting securities or money market instruments.
    (9) Issuing or maintaining a credit rating for a security or money 
market instrument issued by an asset pool or as part of any asset-backed 
securities transaction that was paid for by the issuer, sponsor, or 
underwriter of the security or money market instrument;
    (10) Any other type of conflict of interest relating to the issuance 
of credit ratings by the nationally recognized statistical rating 
organization that is material to the nationally recognized statistical 
rating organization and that is identified by the nationally recognized 
statistical rating organization in Exhibit 6 to Form NRSRO in accordance 
with section 15E(a)(1)(B)(vi) of the Act (15 U.S.C. 78o-7(a)(1)(B)(vi)) 
and Sec.  240.17g-1.
    (c) Prohibited conflicts. A nationally recognized statistical rating 
organization is prohibited from having the following conflicts of 
interest relating to the issuance or maintenance of a credit rating as a 
credit rating agency:
    (1) The nationally recognized statistical rating organization issues 
or maintains a credit rating solicited by a person that, in the most 
recently ended fiscal year, provided the nationally recognized 
statistical rating organization with net revenue (as reported under 
Sec.  240.17g-3) equaling or exceeding 10% of the total net revenue of 
the nationally recognized statistical rating organization for the fiscal 
year;
    (2) The nationally recognized statistical rating organization issues 
or maintains a credit rating with respect to a person (excluding a 
sovereign nation or an agency of a sovereign nation) where the 
nationally recognized statistical rating organization, a credit analyst 
that participated in determining the credit rating, or a person 
responsible for approving the credit rating, directly owns securities 
of, or has any other direct ownership interest in, the person that is 
subject to the credit rating;
    (3) The nationally recognized statistical rating organization issues 
or maintains a credit rating with respect

[[Page 625]]

to a person associated with the nationally recognized statistical rating 
organization;
    (4) The nationally recognized statistical rating organization issues 
or maintains a credit rating where a credit analyst who participated in 
determining the credit rating, or a person responsible for approving the 
credit rating, is an officer or director of the person that is subject 
to the credit rating;
    (5) The nationally recognized statistical rating organization issues 
or maintains a credit rating with respect to an obligor or security 
where the nationally recognized statistical rating organization or a 
person associated with the nationally recognized statistical rating 
organization made recommendations to the obligor or the issuer, 
underwriter, or sponsor of the security about the corporate or legal 
structure, assets, liabilities, or activities of the obligor or issuer 
of the security;
    (6) The nationally recognized statistical rating organization issues 
or maintains a credit rating where the fee paid for the rating was 
negotiated, discussed, or arranged by a person within the nationally 
recognized statistical rating organization who has responsibility for 
participating in determining credit ratings or for developing or 
approving procedures or methodologies used for determining credit 
ratings, including qualitative and quantitative models;
    (7) The nationally recognized statistical rating organization issues 
or maintains a credit rating where a credit analyst who participated in 
determining or monitoring the credit rating, or a person responsible for 
approving the credit rating received gifts, including entertainment, 
from the obligor being rated, or from the issuer, underwriter, or 
sponsor of the securities being rated, other than items provided in the 
context of normal business activities such as meetings that have an 
aggregate value of no more than $25; or
    (8) The nationally recognized statistical rating organization issues 
or maintains a credit rating where a person within the nationally 
recognized statistical rating organization who participates in 
determining or monitoring the credit rating, or developing or approving 
procedures or methodologies used for determining the credit rating, 
including qualitative and quantitative models, also:
    (i) Participates in sales or marketing of a product or service of 
the nationally recognized statistical rating organization or a product 
or service of an affiliate of the nationally recognized statistical 
rating organization; or
    (ii) Is influenced by sales or marketing considerations.
    (d) For the purposes of this section, the term person within a 
nationally recognized statistical rating organization means a nationally 
recognized statistical rating organization, its credit rating affiliates 
identified on Form NRSRO, and any partner, officer, director, branch 
manager, and employee of the nationally recognized statistical rating 
organization or its credit rating affiliates (or any person occupying a 
similar status or performing similar functions).
    (e) Certification. In order to access a password-protected Internet 
Web site described in paragraph (a)(3) of this section, a nationally 
recognized statistical rating organization must furnish to the 
Commission, for each calendar year for which it is requesting a 
password, the following certification, signed by a person duly 
authorized by the certifying entity:

    The undersigned hereby certifies that it will access the Internet 
Web sites described in 17 CFR 240.17g-5(a)(3) solely for the purpose of 
determining or monitoring credit ratings. Further, the undersigned 
certifies that it will keep the information it accesses pursuant to 17 
CFR 240.17g-5(a)(3) confidential and treat it as material nonpublic 
information subject to its written policies and procedures established, 
maintained, and enforced pursuant to section 15E(g)(1) of the Act (15 
U.S.C. 78o-7(g)(1)) and 17 CFR 240.17g-4. Further, the undersigned 
certifies that it will determine and maintain credit ratings for at 
least 10% of the issued securities and money market instruments for 
which it accesses information pursuant to 17 CFR 240.17g-5(a)(3)(iii), 
if it accesses such information for 10 or more issued securities or 
money market instruments in the calendar year covered by the 
certification. Further, the undersigned certifies one of the following 
as applicable: (1) In the most recent calendar year during which it 
accessed information

[[Page 626]]

pursuant to 17 CFR 240.17g-5(a)(3), the undersigned accessed information 
for [Insert Number] issued securities and money market instruments 
through Internet Web sites described in 17 CFR 240.17g-5(a)(3) and 
determined and maintained credit ratings for [Insert Number] of such 
securities and money market instruments; or (2) The undersigned 
previously has not accessed information pursuant to 17 CFR 240.17g-
5(a)(3) 10 or more times during the most recently ended calendar year.
    (f) Upon written application by a nationally recognized statistical 
rating organization, the Commission may exempt, either unconditionally 
or on specified terms and conditions, such nationally recognized 
statistical rating organization from the provisions of paragraph (c)(8) 
of this section if the Commission finds that due to the small size of 
the nationally recognized statistical rating organization it is not 
appropriate to require the separation within the nationally recognized 
statistical rating organization of the production of credit ratings from 
sales and marketing activities and such exemption is in the public 
interest.
    (g) In a proceeding pursuant to section 15E(d)(1) of the Act (15 
U.S.C. 78o-7(d)(1)), the Commission shall suspend or revoke the 
registration of a nationally recognized statistical rating organization 
if the Commission finds, in lieu of a finding specified under sections 
15E(d)(1)(A), (B), (C), (D), (E), or (F) of the Act (15 U.S.C. 78o-
7(d)(1)(A) through (F)), that the nationally recognized statistical 
rating organization has violated a rule issued under section 15E(h) of 
the Act (15 U.S.C. 78o-7(h)) and that the violation affected a credit 
rating.

[72 FR 33620, June 18, 2007, as amended at 74 FR 6482, Feb. 9, 2009; 74 
FR 63864, Dec. 4, 2009; 79 FR 55264, Sept. 15, 2014; 79 FR 61576, Oct. 
14, 2014; 84 FR 40258, Sept. 13, 2019]



Sec.  240.17g-6  Prohibited acts and practices.

    (a) Prohibitions. A nationally recognized statistical rating 
organization is prohibited from engaging in any of the following unfair, 
coercive, or abusive practices:
    (1) Conditioning or threatening to condition the issuance of a 
credit rating on the purchase by an obligor or issuer, or an affiliate 
of the obligor or issuer, of any other services or products, including 
pre-credit rating assessment products, of the nationally recognized 
statistical rating organization or any person associated with the 
nationally recognized statistical rating organization.
    (2) Issuing, or offering or threatening to issue, a credit rating 
that is not determined in accordance with the nationally recognized 
statistical rating organization's established procedures and 
methodologies for determining credit ratings, based on whether the rated 
person, or an affiliate of the rated person, purchases or will purchase 
the credit rating or any other service or product of the nationally 
recognized statistical rating organization or any person associated with 
the nationally recognized statistical rating organization.
    (3) Modifying, or offering or threatening to modify, a credit rating 
in a manner that is contrary to the nationally recognized statistical 
rating organization's established procedures and methodologies for 
modifying credit ratings based on whether the rated person, or an 
affiliate of the rated person, purchases or will purchase the credit 
rating or any other service or product of the nationally recognized 
statistical rating organization or any person associated with the 
nationally recognized statistical rating organization.
    (4) Issuing or threatening to issue a lower credit rating, lowering 
or threatening to lower an existing credit rating, refusing to issue a 
credit rating, or withdrawing or threatening to withdraw a credit 
rating, with respect to securities or money market instruments issued by 
an asset pool or as part of any asset-backed securities transaction, 
unless all or a portion of the assets within such pool or part of such 
transaction also are rated by the nationally recognized statistical 
rating organization, where such practice is engaged in by the nationally 
recognized statistical rating organization for an anticompetitive 
purpose.

[13 FR 8178, Dec. 22, 1948, as amended at 79 FR 55264, Sept. 15, 2014]



Sec.  240.17g-7  Disclosure requirements.

    (a) Disclosures to be made when taking a rating action. Except as 
provided in

[[Page 627]]

paragraph (a)(3) of this section, a nationally recognized statistical 
rating organization must publish the items described in paragraphs 
(a)(1) and (2) of this section, as applicable, when taking a rating 
action with respect to a credit rating assigned to an obligor, security, 
or money market instrument in a class of credit ratings for which the 
nationally recognized statistical rating organization is registered. For 
purposes of this section, the term rating action means any of the 
following: the publication of an expected or preliminary credit rating 
assigned to an obligor, security, or money market instrument before the 
publication of an initial credit rating; an initial credit rating; an 
upgrade or downgrade of an existing credit rating (including a downgrade 
to, or assignment of, default); and an affirmation or withdrawal of an 
existing credit rating if the affirmation or withdrawal is the result of 
a review of the credit rating assigned to the obligor, security, or 
money market instrument by the nationally recognized statistical rating 
organization using applicable procedures and methodologies for 
determining credit ratings. The items described in paragraphs (a)(1) and 
(2) of this section must be published in the same manner as the credit 
rating that is the result or subject of the rating action and made 
available to the same persons who can receive or access the credit 
rating that is the result or subject of the rating action.
    (1) Information disclosure form. A form generated by the nationally 
recognized statistical rating organization that meets the requirements 
of paragraphs (a)(1)(i) through (iii) of this section.
    (i) Format. The form generated by the nationally recognized 
statistical rating organization must be in a format that:
    (A) Organizes the information into numbered items that are 
identified by the type of information being disclosed and a reference to 
the paragraph in this section that specifies the disclosure of the 
information, and are in the order that the paragraphs specifying the 
information to be disclosed are codified in this section;
    Note to paragraph (a)(1)(i)(A): A given item in the form should be 
identified by a title that identifies the type of information and 
references paragraph (a)(1)(ii)(A), (B), (C), (D), (E), (F), (G), (H), 
(I), (J), (K), (L), (M), (N), or (a)(2) of this section based on the 
information being disclosed in the item. For example, the information 
specified in paragraph (a)(1)(ii)(C) of this section should be 
identified with the caption ``Main Assumptions and Principles Used to 
Construct the Rating Methodology used to Determine the Credit Rating as 
required by Paragraph (a)(1)(ii)(C) of Rule 17g-7''). The form must 
organize the items of information in the following order: items 1 
through 14 must contain the information specified in paragraphs 
(a)(1)(ii)(A) through (N) of this section, respectively, and item 15 
must contain the certifications specified in paragraph (a)(2) of this 
section (the information specified in each paragraph comprising a 
separate item). For example, item 3 must contain the information 
specified in paragraph (a)(1)(ii)(C) of this section.
    (B) Is easy to use and helpful for users of credit ratings to 
understand the information contained in the form; and
    (C) Provides the content described in paragraphs (a)(1)(ii)(K) 
through (M) of this section in a manner that is directly comparable 
across types of obligors, securities, and money market instruments.
    (ii) Content. The form generated by the nationally recognized 
statistical rating organization must contain the following information 
about the credit rating:
    (A) The symbol, number, or score in the rating scale used by the 
nationally recognized statistical rating organization to denote credit 
rating categories and notches within categories assigned to the obligor, 
security, or money market instrument that is the subject of the credit 
rating and, as applicable, the identity of the obligor or the identity 
and a description of the security or money market instrument;
    (B) The version of the procedure or methodology used to determine 
the credit rating;
    (C) The main assumptions and principles used in constructing the 
procedures and methodologies used to determine the credit rating, 
including qualitative methodologies and quantitative inputs, and, if the 
credit rating is for a

[[Page 628]]

structured finance product, assumptions about the correlation of 
defaults across the underlying assets;
    (D) The potential limitations of the credit rating, including the 
types of risks excluded from the credit rating that the nationally 
recognized statistical rating organization does not comment on, 
including, as applicable, liquidity, market, and other risks;
    (E) Information on the uncertainty of the credit rating including:
    (1) Information on the reliability, accuracy, and quality of the 
data relied on in determining the credit rating; and
    (2) A statement relating to the extent to which data essential to 
the determination of the credit rating were reliable or limited, 
including:
    (i) Any limits on the scope of historical data; and
    (ii) Any limits on accessibility to certain documents or other types 
of information that would have better informed the credit rating;
    (F) Whether and to what extent the nationally recognized statistical 
rating organization used due diligence services of a third party in 
taking the rating action, and, if the nationally recognized statistical 
rating organization used such services, either:
    (1) A description of the information that the third party reviewed 
in conducting the due diligence services and a summary of the findings 
and conclusions of the third party; or
    (2) A cross-reference to a Form ABS Due Diligence-15E executed by 
the third party that is published with the form, provided the cross-
referenced Form ABS Due Diligence-15E (Sec.  249b.500 of this chapter) 
contains a description of the information that the third party reviewed 
in conducting the due diligence services and a summary of the findings 
and conclusions of the third party;
    (G) If applicable, how servicer or remittance reports were used, and 
with what frequency, to conduct surveillance of the credit rating;
    (H) A description of the types of data about any obligor, issuer, 
security, or money market instrument that were relied upon for the 
purpose of determining the credit rating;
    (I) A statement containing an overall assessment of the quality of 
information available and considered in determining the credit rating 
for the obligor, security, or money market instrument, in relation to 
the quality of information available to the nationally recognized 
statistical rating organization in rating similar obligors, securities, 
or money market instruments;
    (J) Information relating to conflicts of interest of the nationally 
recognized statistical rating organization, which must include:
    (1) As applicable, a statement that the nationally recognized 
statistical rating organization was:
    (i) Paid to determine the credit rating by the obligor being rated 
or the issuer, underwriter, depositor, or sponsor of the security or 
money market instrument being rated;
    (ii) Paid to determine the credit rating by a person other than the 
obligor being rated or the issuer, underwriter, depositor, or sponsor of 
the security or money market instrument being rated; or
    (iii) Not paid to determine the credit rating;
    (2) If applicable, in a statement required under paragraph 
(a)(1)(ii)(J)(1)(i) or (ii) of this section, a statement that the 
nationally recognized statistical rating organization also was paid for 
services other than determining credit ratings during the most recently 
ended fiscal year by the person that paid the nationally recognized 
statistical rating organization to determine the credit rating; and
    (3) If the rating action results from a review conducted pursuant to 
section 15E(h)(4)(A) of the Act (15 U.S.C. 78o-7(h)(4)(A)) and Sec.  
240.17g-8(c), the following information (as applicable):
    (i) If the rating action is a revision of a credit rating pursuant 
to Sec.  240.17g-8(c)(2)(i)(A), an explanation that the reason for the 
action is the discovery that a credit rating assigned to the obligor, 
security, or money market instrument in one or more prior rating actions 
was influenced by a conflict of interest, including a description of the 
nature of the conflict, the date and associated credit rating of each 
prior rating action that the nationally recognized statistical rating 
organization

[[Page 629]]

has determined was influenced by the conflict, and a description of the 
impact the conflict had on the prior rating action or actions; or
    (ii) If the rating action is an affirmation of a credit rating 
pursuant to Sec.  240.17g-8(c)(2)(i)(B), an explanation that the reason 
for the action is the discovery that a credit rating assigned to the 
obligor, security, or money market instrument in one or more prior 
rating actions was influenced by a conflict of interest, including a 
description of the nature of the conflict, an explanation of why no 
rating action was taken to revise the credit rating notwithstanding the 
presence of the conflict, the date and associated credit rating of each 
prior rating action the nationally recognized statistical rating 
organization has determined was influenced by the conflict, and a 
description of the impact the conflict had on the prior rating action or 
actions.
    (K) An explanation or measure of the potential volatility of the 
credit rating, including:
    (1) Any factors that are reasonably likely to lead to a change in 
the credit rating; and
    (2) The magnitude of the change that could occur under different 
market conditions determined by the nationally recognized statistical 
rating organization to be relevant to the rating;
    (L) Information on the content of the credit rating, including:
    (1) If applicable, the historical performance of the credit rating; 
and
    (2) The expected probability of default and the expected loss in the 
event of default;
    (M) Information on the sensitivity of the credit rating to 
assumptions made by the nationally recognized statistical rating 
organization, including:
    (1) Five assumptions made in the ratings process that, without 
accounting for any other factor, would have the greatest impact on the 
credit rating if the assumptions were proven false or inaccurate; 
provided that, if the nationally recognized statistical rating 
organization has made fewer than five such assumptions, it need only 
disclose information on the assumptions that would have an impact on the 
credit rating; and
    (2) An analysis, using specific examples, of how each of the 
assumptions identified in paragraph (a)(1)(ii)(M)(1) of this section 
impacts the credit rating;
    (N)(1) If the credit rating is assigned to an asset-backed security 
as defined in section 3(a)(79) of the Act (15 U.S.C. 78c(a)(79)), 
information on:
    (i) The representations, warranties, and enforcement mechanisms 
available to investors which were disclosed in the prospectus, private 
placement memorandum or other offering documents for the asset-backed 
security and that relate to the asset pool underlying the asset-backed 
security; and
    (ii) How they differ from the representations, warranties, and 
enforcement mechanisms in issuances of similar securities;
    (2) A nationally recognized statistical rating organization must 
include the information required under paragraph (a)(1)(ii)(N)(1) of 
this section only if the rating action is a preliminary credit rating, 
an initial credit rating, or, in the case of a rating action other than 
a preliminary credit rating or initial credit rating, the rating action 
is the first rating action taken after a material change in the 
representations, warranties, or enforcement mechanisms described in 
paragraph (a)(1)(ii)(N)(1) of this section and the rating action 
involves an asset-backed security that was initially rated by the 
nationally recognized statistical rating organization on or after 
September 26, 2011.
    (iii) Attestation. The nationally recognized statistical rating 
organization must attach to the form a signed statement by a person 
within the nationally recognized statistical rating organization stating 
that the person has responsibility for the rating action and, to the 
best knowledge of the person:
    (A) No part of the credit rating was influenced by any other 
business activities;
    (B) The credit rating was based solely upon the merits of the 
obligor, security, or money market instrument being rated; and
    (C) The credit rating was an independent evaluation of the credit 
risk of the obligor, security, or money market instrument.

[[Page 630]]

    (2) Third-party due diligence certification. Any executed Form ABS 
Due Diligence-15E (Sec.  249b.500 of this chapter) containing 
information about the security or money market instrument subject to the 
rating action that is received by the nationally recognized statistical 
rating organization or obtained by the nationally recognized statistical 
rating organization through an Internet Web site maintained by the 
issuer, sponsor, or underwriter of the security or money market 
instrument pursuant to Sec.  240.17g-5(a)(3).
    (3) Exemption. The provisions of paragraphs (a)(1) and (2) of this 
section do not apply to a rating action if:
    (i) The rated obligor or issuer of the rated security or money 
market instrument is not a U.S. person (as defined in Sec.  230.902(k) 
of this chapter); and
    (ii) The nationally recognized statistical rating organization has a 
reasonable basis to conclude that:
    (A) With respect to any security or money market instrument issued 
by a rated obligor, all offers and sales by any issuer, sponsor, or 
underwriter linked to the security or money market instrument will occur 
outside the United States (as that phrase is used in Sec. Sec.  230.901 
through 230.905 (Regulation S) of this chapter); or
    (B) With respect to a rated security or money market instrument, all 
offers and sales by any issuer, sponsor, or underwriter linked to the 
security or money market instrument will occur outside the United States 
(as that phrase is used in Sec. Sec.  230.901 through 230.905 
(Regulation S) of this chapter).
    (b) Disclosure of credit rating histories--(1) Credit ratings 
subject to the disclosure requirement. A nationally recognized 
statistical rating organization must publicly disclose for free on an 
easily accessible portion of its corporate Internet Web site:
    (i) For a class of credit rating in which the nationally recognized 
statistical rating organization is registered with the Commission as of 
the effective date of paragraph (b) of this section, the credit rating 
assigned to each obligor, security, and money market instrument in the 
class that was outstanding as of, or initially determined on or after, 
the date three years prior to the effective date of this rule, and any 
subsequent upgrade or downgrade of the credit rating (including a 
downgrade to, or assignment of, default), and a withdrawal of the credit 
rating; and
    (ii) For a class of credit rating in which the nationally recognized 
statistical rating organization is registered with the Commission after 
the effective date of paragraph (b) of this section, the credit rating 
assigned to each obligor, security, and money market instrument in the 
class that was outstanding as of, or initially determined on or after, 
the date three years prior to the date the nationally recognized 
statistical rating organization is registered in the class, and any 
subsequent upgrade or downgrade of the credit rating (including a 
downgrade to, or assignment of, default), and a withdrawal of the credit 
rating.
    (2) Information. A nationally recognized statistical rating 
organization must include, at a minimum, the following information with 
each credit rating disclosed pursuant to paragraph (b)(1) of this 
section:
    (i) The identity of the nationally recognized statistical rating 
organization disclosing the rating action;
    (ii) The date of the rating action;
    (iii) If the rating action is taken with respect to a credit rating 
of an obligor as an entity, the following identifying information about 
the obligor, as applicable:
    (A) The Legal Entity Identifier issued by a utility endorsed or 
otherwise governed by the Global LEI Regulatory Oversight Committee or 
the Global LEI Foundation (LEI) of the obligor, if available, or, if an 
LEI is not available, the Central Index Key (CIK) number of the obligor, 
if available; and
    (B) The name of the obligor.
    (iv) If the rating action is taken with respect to a credit rating 
of a security or money market instrument, as applicable:
    (A) The LEI of the issuer of the security or money market 
instrument, if available, or, if an LEI is not available, the CIK number 
of the issuer of the security or money market instrument, if available;
    (B) The name of the issuer of the security or money market 
instrument; and

[[Page 631]]

    (C) The CUSIP of the security or money market instrument;
    (v) A classification of the rating action as either:
    (A) An addition to the rating history disclosure because the credit 
rating was outstanding as of the date three years prior to the effective 
date of the requirements in paragraph (b) of this section or because the 
credit rating was outstanding as of the date three years prior to the 
nationally recognized statistical rating organization becoming 
registered in the class of credit ratings;
    (B) An initial credit rating;
    (C) An upgrade of an existing credit rating;
    (D) A downgrade of an existing credit rating, which would include 
classifying the obligor, security, or money market instrument as in 
default, if applicable; or
    (E) A withdrawal of an existing credit rating and, if the 
classification is withdrawal, the nationally recognized statistical 
rating organization also must classify the reason for the withdrawal as 
either:
    (1) The obligor defaulted, or the security or money market 
instrument went into default;
    (2) The obligation subject to the credit rating was extinguished by 
payment in full of all outstanding principal and interest due on the 
obligation according to the terms of the obligation; or
    (3) The credit rating was withdrawn for reasons other than those set 
forth in paragraph (b)(2)(v)(E)(1) or (2) of this section; and
    (vi) The classification of the class or subclass that applies to the 
credit rating as either:
    (A) Financial institutions, brokers, or dealers;
    (B) Insurance companies;
    (C) Corporate issuers; or
    (D) Issuers of structured finance products in one of the following 
subclasses:
    (1) Residential mortgage backed securities (``RMBS'') (for purposes 
of this subclass, RMBS means a securitization primarily of residential 
mortgages);
    (2) Commercial mortgage backed securities (``CMBS'') (for purposes 
of this subclass, CMBS means a securitization primarily of commercial 
mortgages);
    (3) Collateralized loan obligations (``CLOs'') (for purposes of this 
subclass, a CLO means a securitization primarily of commercial loans);
    (4) Collateralized debt obligations (``CDOs'') (for purposes of this 
subclass, a CDO means a securitization primarily of other debt 
instruments such as RMBS, CMBS, CLOs, CDOs, other asset backed 
securities, and corporate bonds);
    (5) Asset-backed commercial paper conduits (``ABCP'') (for purposes 
of this subclass, ABCP means short term notes issued by a structure that 
securitizes a variety of financial assets, such as trade receivables or 
credit card receivables, which secure the notes);
    (6) Other asset-backed securities (``other ABS'') (for purposes of 
this subclass, other ABS means a securitization primarily of auto loans, 
auto leases, floor plans, credit card receivables, student loans, 
consumer loans, or equipment leases); or
    (7) Other structured finance products (``other SFPs'') (for purposes 
of this subclass, other SFPs means any structured finance product not 
identified in paragraphs (b)(2)(iv)(D)(1) through (6)) of this section; 
or
    (E) Issuers of government securities, municipal securities, or 
securities issued by a foreign government in one of the following 
subclasses:
    (1) Sovereign issuers;
    (2) U.S. public finance; or
    (3) International public finance; and
    (vii) The credit rating symbol, number, or score in the applicable 
rating scale of the nationally recognized statistical rating 
organization assigned to the obligor, security, or money market 
instrument as a result of the rating action or, if the credit rating 
remained unchanged as a result of the action, the credit rating symbol, 
number, or score in the applicable rating scale of the nationally 
recognized statistical rating organization assigned to the obligor, 
security, or money market instrument as of the date of the rating action 
(in either case, include a credit rating in a default category, if 
applicable).
    (3) Format and frequency of updating. The information identified in 
paragraph (b)(2) of this section must be disclosed in an interactive 
data file that

[[Page 632]]

uses an XBRL (eXtensible Business Reporting Language) format and the 
List of XBRL Tags for nationally recognized statistical rating 
organizations as published on the Internet Web site of the Commission, 
and must be updated no less frequently than monthly.
    (4) Timing. The nationally recognized statistical rating 
organization must disclose the information required in paragraph (b)(2) 
of this section:
    (i) Within twelve months from the date the rating action is taken, 
if the credit rating subject to the action was paid for by the obligor 
being rated or by the issuer, underwriter, depositor, or sponsor of the 
security being rated; or
    (ii) Within twenty-four months from the date the rating action is 
taken, if the credit rating subject to the action is not a credit rating 
described in paragraph (b)(4)(i) of this section.
    (5) Removal of a credit rating history. The nationally recognized 
statistical rating organization may cease disclosing a rating history of 
an obligor, security, or money market instrument if at least 15 years 
have elapsed since a rating action classified as a withdrawal of a 
credit rating pursuant to paragraph (b)(2)(v)(E) of this section was 
disclosed in the rating history of the obligor, security, or money 
market instrument.

[79 FR 55264, Sept. 15, 2014, as amended at 84 FR 40258, Sept. 13, 2019]



Sec.  240.17g-8  Policies, procedures, and internal controls.

    (a) Policies and procedures with respect to the procedures and 
methodologies used to determine credit ratings. A nationally recognized 
statistical rating organization must establish, maintain, enforce, and 
document policies and procedures reasonably designed to ensure:
    (1) That the procedures and methodologies, including qualitative and 
quantitative data and models, the nationally recognized statistical 
rating organization uses to determine credit ratings are approved by its 
board of directors or a body performing a function similar to that of a 
board of directors.
    (2) That the procedures and methodologies, including qualitative and 
quantitative data and models, the nationally recognized statistical 
rating organization uses to determine credit ratings are developed and 
modified in accordance with the policies and procedures of the 
nationally recognized statistical rating organization.
    (3) That material changes to the procedures and methodologies, 
including changes to qualitative and quantitative data and models, the 
nationally recognized statistical rating organization uses to determine 
credit ratings are:
    (i) Applied consistently to all current and future credit ratings to 
which the changed procedures or methodologies apply; and
    (ii) To the extent that the changes are to surveillance or 
monitoring procedures and methodologies, applied to current credit 
ratings to which the changed procedures or methodologies apply within a 
reasonable period of time, taking into consideration the number of 
credit ratings impacted, the complexity of the procedures and 
methodologies used to determine the credit ratings, and the type of 
obligor, security, or money market instrument being rated.
    (4) That the nationally recognized statistical rating organization 
promptly publishes on an easily accessible portion of its corporate 
Internet Web site:
    (i) Material changes to the procedures and methodologies, including 
to qualitative models or quantitative inputs, the nationally recognized 
statistical rating organization uses to determine credit ratings, the 
reason for the changes, and the likelihood the changes will result in 
changes to any current credit ratings; and
    (ii) Notice of the existence of a significant error identified in a 
procedure or methodology, including a qualitative or quantitative model, 
the nationally recognized statistical rating organization uses to 
determine credit ratings that may result in a change to current credit 
ratings.
    (5) That the nationally recognized statistical rating organization 
discloses the version of a credit rating procedure or methodology, 
including the qualitative methodology or quantitative inputs, used with 
respect to a particular credit rating.

[[Page 633]]

    (b) Policies and procedures with respect to credit rating symbols, 
numbers, or scores. A nationally recognized statistical rating 
organization must establish, maintain, enforce, and document policies 
and procedures that are reasonably designed to:
    (1) Assess the probability that an issuer of a security or money 
market instrument will default, fail to make timely payments, or 
otherwise not make payments to investors in accordance with the terms of 
the security or money market instrument.
    (2) Clearly define each symbol, number, or score in the rating scale 
used by the nationally recognized statistical rating organization to 
denote a credit rating category and notches within a category for each 
class of credit ratings for which the nationally recognized statistical 
rating organization is registered (including subclasses within each 
class) and to include such definitions in Exhibit 1 to Form NRSRO (Sec.  
249b.300 of this chapter).
    (3) Apply any symbol, number, or score defined pursuant to paragraph 
(b)(2) of this section in a manner that is consistent for all types of 
obligors, securities, and money market instruments for which the symbol, 
number, or score is used.
    (c) Policies and procedures with respect to look-back reviews. The 
policies and procedures a nationally recognized statistical rating 
organization is required to establish, maintain, and enforce pursuant to 
section 15E(h)(4)(A) of the Act (15 U.S.C. 78o-7(h)(4)(A)) must address 
instances in which a review conducted pursuant to those policies and 
procedures determines that a conflict of interest influenced a credit 
rating assigned to an obligor, security, or money market instrument by 
including, at a minimum, procedures that are reasonably designed to 
ensure that the nationally recognized statistical rating organization 
will:
    (1) Promptly determine whether the current credit rating assigned to 
the obligor, security, or money market instrument must be revised so 
that it no longer is influenced by a conflict of interest and is solely 
a product of the documented procedures and methodologies the nationally 
recognized statistical rating organization uses to determine credit 
ratings; and
    (2)(i) Promptly publish, based on the determination of whether a 
current credit rating referred to in paragraph (c)(1) of this section 
must be revised (as applicable):
    (A) A revised credit rating, if appropriate, and include with the 
publication of the revised credit rating the information required by 
Sec.  240.17g-7(a)(1)(ii)(J)(3)(i); or
    (B) An affirmation of the credit rating, if appropriate, and include 
with the publication of the affirmation the information required by 
Sec.  240.17g-7(a)(1)(ii)(J)(3)(ii).
    (ii) If the credit rating is not revised or affirmed pursuant to 
paragraph (c)(2)(i) of this section within fifteen calendar days of the 
date of the discovery that the credit rating was influenced by a 
conflict of interest, publish a rating action placing the credit rating 
on watch or review and include with the publication an explanation that 
the reason for the action is the discovery that the credit rating was 
influenced by a conflict of interest.
    (d) Internal control structures. A nationally recognized statistical 
rating organization must take into consideration the factors identified 
in paragraphs (d)(1) through (4) of this section when establishing, 
maintaining, enforcing, and documenting an effective internal control 
structure governing the implementation of and adherence to policies, 
procedures, and methodologies for determining credit ratings pursuant to 
section 15E(c)(3)(A) of the Act.
    (1) With respect to establishing the internal control structure, the 
nationally recognized statistical rating organization must take into 
consideration:
    (i) Controls reasonably designed to ensure that a newly developed 
methodology or proposed update to an in-use methodology for determining 
credit ratings is subject to an appropriate review process (for example, 
by persons who are independent from the persons that developed the 
methodology or methodology update) and to management approval prior to 
the new or updated methodology being employed by the nationally 
recognized statistical rating organization to determine credit ratings;

[[Page 634]]

    (ii) Controls reasonably designed to ensure that a newly developed 
methodology or update to an in-use methodology for determining credit 
ratings is disclosed to the public for consultation prior to the new or 
updated methodology being employed by the nationally recognized 
statistical rating organization to determine credit ratings, that the 
nationally recognized statistical rating organization makes comments 
received as part of the consultation publicly available, and that the 
nationally recognized statistical rating organization considers the 
comments before implementing the methodology;
    (iii) Controls reasonably designed to ensure that in-use 
methodologies for determining credit ratings are periodically reviewed 
(for example, by persons who are independent from the persons who 
developed and/or use the methodology) in order to analyze whether the 
methodology should be updated;
    (iv) Controls reasonably designed to ensure that market participants 
have an opportunity to provide comment on whether in-use methodologies 
for determining credit ratings should be updated, that the nationally 
recognized statistical rating organization makes any such comments 
received publicly available, and that the nationally recognized 
statistical rating organization considers the comments;
    (v) Controls reasonably designed to ensure that newly developed or 
updated quantitative models proposed to be incorporated into a credit 
rating methodology are evaluated and validated prior to being put into 
use;
    (vi) Controls reasonably designed to ensure that quantitative models 
incorporated into in-use credit rating methodologies are periodically 
reviewed and back-tested;
    (vii) Controls reasonably designed to ensure that a nationally 
recognized statistical rating organization engages in analysis before 
commencing the rating of a class of obligors, securities, or money 
market instruments the nationally recognized statistical rating 
organization has not previously rated to determine whether the 
nationally recognized statistical rating organization has sufficient 
competency, access to necessary information, and resources to rate the 
type of obligor, security, or money market instrument;
    (viii) Controls reasonably designed to ensure that a nationally 
recognized statistical rating organization engages in analysis before 
commencing the rating of an ``exotic'' or ``bespoke'' type of obligor, 
security, or money market instrument to review the feasibility of 
determining a credit rating;
    (ix) Controls reasonably designed to ensure that measures (for 
example, statistics) are used to evaluate the performance of credit 
ratings as part of the review of in-use methodologies for determining 
credit ratings to analyze whether the methodologies should be updated or 
the work of the analysts employing the methodologies should be reviewed;
    (x) Controls reasonably designed to ensure that, with respect to 
determining credit ratings, the work and conclusions of the lead credit 
analyst developing an initial credit rating or conducting surveillance 
on an existing credit rating is reviewed by other analysts, supervisors, 
or senior managers before a rating action is formally taken (for 
example, having the work reviewed through a rating committee process);
    (xi) Controls reasonably designed to ensure that a credit analyst 
documents the steps taken in developing an initial credit rating or 
conducting surveillance on an existing credit rating with sufficient 
detail to permit an after-the-fact review or internal audit of the 
rating file to analyze whether the analyst adhered to the nationally 
recognized statistical rating organization's procedures and 
methodologies for determining credit ratings;
    (xii) Controls reasonably designed to ensure that the nationally 
recognized statistical rating organization conducts periodic reviews or 
internal audits of rating files to analyze whether analysts adhere to 
the nationally recognized statistical rating organization's procedures 
and methodologies for determining credit ratings; and
    (xiii) Any other controls necessary to establish an effective 
internal control structure taking into consideration the nature of the 
business of the nationally

[[Page 635]]

recognized statistical rating organization, including its size, 
activities, organizational structure, and business model.
    (2) With respect to maintaining the internal control structure, the 
nationally recognized statistical rating organization must take into 
consideration:
    (i) Controls reasonably designed to ensure that the nationally 
recognized statistical rating organization conducts periodic reviews of 
whether it has devoted sufficient resources to implement and operate the 
documented internal control structure as designed;
    (ii) Controls reasonably designed to ensure that the nationally 
recognized statistical rating organization conducts periodic reviews or 
ongoing monitoring to evaluate the effectiveness of the internal control 
structure and whether it should be updated;
    (iii) Controls reasonably designed to ensure that any identified 
deficiencies in the internal control structure are assessed and 
addressed on a timely basis;
    (iv) Any other controls necessary to maintain an effective internal 
control structure taking into consideration the nature of the business 
of the nationally recognized statistical rating organization, including 
its size, activities, organizational structure, and business model.
    (3) With respect to enforcing the internal control structure, the 
nationally recognized statistical rating organization must take into 
consideration:
    (i) Controls designed to ensure that additional training is provided 
or discipline taken with respect to employees who fail to adhere to 
requirements imposed by the internal control structure;
    (ii) Controls designed to ensure that a process is in place for 
employees to report failures to adhere to the internal control 
structure; and
    (iii) Any other controls necessary to enforce an effective internal 
control structure taking into consideration the nature of the business 
of the nationally recognized statistical rating organization, including 
its size, activities, organizational structure, and business model.
    (4) With respect to documenting the internal control structure, the 
nationally recognized statistical rating organization must take into 
consideration any controls necessary to document an effective internal 
control structure taking into consideration the nature of the business 
of the nationally recognized statistical rating organization, including 
its size, activities, organizational structure, and business model.

[79 FR 55267, Sept. 15, 2014]



Sec.  240.17g-9  Standards of training, experience, and competence for
credit analysts.

    (a) A nationally recognized statistical rating organization must 
establish, maintain, enforce, and document standards of training, 
experience, and competence for the individuals it employs to participate 
in the determination of credit ratings that are reasonably designed to 
achieve the objective that the nationally recognized statistical rating 
organization produces accurate credit ratings in the classes of credit 
ratings for which the nationally recognized statistical rating 
organization is registered.
    (b) The nationally recognized statistical rating organization must 
consider the following when establishing the standards required under 
paragraph (a) of this section:
    (1) If the credit rating procedures and methodologies used by the 
individual involve qualitative analysis, the knowledge necessary to 
effectively evaluate and process the data relevant to the 
creditworthiness of the obligor being rated or the issuer of the 
securities or money market instruments being rated;
    (2) If the credit rating procedures and methodologies used by the 
individual involve quantitative analysis, the technical expertise 
necessary to understand any models and model inputs that are a part of 
the procedures and methodologies;
    (3) The classes and subclasses of credit ratings for which the 
individual participates in determining credit ratings and the factors 
relevant to such classes and subclasses, including the geographic 
location, sector, industry, regulatory and legal framework, and 
underlying assets, applicable to the obligors or issuers in the classes 
and subclasses; and

[[Page 636]]

    (4) The complexity of the obligors, securities, or money market 
instruments for which the individual participates in determining credit 
ratings.
    (c) The nationally recognized statistical rating organization must 
include the following in the standards required under paragraph (a) of 
this section:
    (1) A requirement for periodic testing of the individuals employed 
by the nationally recognized statistical rating organization to 
participate in the determination of credit ratings on their knowledge of 
the procedures and methodologies used by the nationally recognized 
statistical rating organization to determine credit ratings in the 
classes and subclasses of credit ratings for which the individual 
participates in determining credit ratings; and
    (2) A requirement that at least one individual with an appropriate 
level of experience in performing credit analysis, but not less than 
three years, participates in the determination of a credit rating.

[79 FR 55269, Sept. 15, 2014]



Sec.  240.17g-10  Certification of providers of third-party due 
diligence services in connection with asset-backed securities.

    (a) The written certification that a person employed to provide 
third-party due diligence services is required to provide to a 
nationally recognized statistical rating organization pursuant to 
section 15E(s)(4)(B) of the Act (15 U.S.C. 78o-7(s)(4)(B)) must be on 
Form ABS Due Diligence-15E (Sec.  249b.500 of this chapter).
    (b) The written certification must be signed by an individual who is 
duly authorized by the person providing the third-party due diligence 
services to make such a certification.
    (c) A person employed to provide third-party due diligence services 
will be deemed to have satisfied its obligations under section 
15E(s)(4)(B) of the Act (15 U.S.C. 78o-7(s)(4)(B)) if the person 
promptly delivers an executed Form ABS Due Diligence-15E (Sec.  249b.500 
of this chapter) after completion of the due diligence services to:
    (1) A nationally recognized statistical rating organization that 
provided a written request for the Form prior to the completion of the 
due diligence services stating that the services relate to a credit 
rating the nationally recognized statistical rating organization is 
producing;
    (2) A nationally recognized statistical rating organization that 
provides a written request for the Form after the completion of the due 
diligence services stating that the services relate to a credit rating 
the nationally recognized statistical rating organization is producing; 
and
    (3) The issuer or underwriter of the asset-backed security for which 
the due diligence services relate that maintains the Internet Web site 
with respect to the asset-backed security pursuant to Sec.  240.17g-
5(a)(3).
    (d) For purposes of section 15E(s)(4)(B) of the Act (15 U.S.C. 78o-
7(s)(4)(B)) and this section:
    (1) The term due diligence services means a review of the assets 
underlying an asset-backed security, as defined in section 3(a)(79) of 
the Act (15 U.S.C. 78c(a)(79)) for the purpose of making findings with 
respect to:
    (i) The accuracy of the information or data about the assets 
provided, directly or indirectly, by the securitizer or originator of 
the assets;
    (ii) Whether the origination of the assets conformed to, or deviated 
from, stated underwriting or credit extension guidelines, standards, 
criteria, or other requirements;
    (iii) The value of collateral securing the assets;
    (iv) Whether the originator of the assets complied with federal, 
state, or local laws or regulations; or
    (v) Any other factor or characteristic of the assets that would be 
material to the likelihood that the issuer of the asset-backed security 
will pay interest and principal in accordance with applicable terms and 
conditions.
    (2) The term issuer includes a sponsor, as defined in Sec.  229.1101 
of this chapter, or depositor, as defined in Sec.  229.1101 of this 
chapter, that participates in the issuance of an asset-backed security, 
as defined in section 3(a)(79) of the Act (15 U.S.C. 78c(a)(79)).
    (3) The term originator has the same meaning as in section 15G(a)(4) 
of the Act (15 U.S.C. 78o-9(a)(4)).

[[Page 637]]

    (4) The term securitizer has the same meaning as in section 
15G(a)(3) of the Act (15 U.S.C. 78o-9(a)(3)).

[79 FR 55270, Sept. 15, 2014]



Sec.  240.17h-1T  Risk assessment recordkeeping requirements for
associated persons of brokers and dealers.

    (a) Requirement to maintain and preserve information. (1) Every 
broker or dealer registered with the Commission pursuant to section 15 
of the Act, and every municipal securities dealer registered pursuant to 
Section 15B of the Act for which the Commission is the appropriate 
regulatory agency, unless exempt pursuant to paragraph (d) of this 
section, shall maintain and preserve the following information:
    (i) An organizational chart which includes the broker or dealer and 
all its associated persons. Included in the organizational chart shall 
be a designation of which associated persons are Material Associated 
Persons as that term is used in paragraph (a)(2) of this section;
    (ii) Written policies, procedures, or systems concerning the broker 
or dealer's:
    (A) Method(s) for monitoring and controlling financial and 
operational risks to it resulting from the activities of any of its 
associated persons, other than a natural person;
    (B) Financing and capital adequacy, including information regarding 
sources of funding, together with a narrative discussion by management 
of the liquidity of the material assets, the structure of debt capital, 
and sources of alternative funding; and
    (C) Trading positions and risks, such as records regarding reporting 
responsibilities for trading activities, policies relating to 
restrictions or limitations on trading securities and financial 
instruments or products, and a description of the types of reviews 
conducted to monitor existing positions, and limitations or restrictions 
on trading activities.
    (iii) A description of all material pending legal or arbitration 
proceedings involving a Material Associated Person or the broker or 
dealer that are required to be disclosed by the ultimate holding company 
under generally accepted accounting principles on a consolidated basis;
    (iv) Consolidated and consolidating balance sheets, prepared in 
accordance with generally accepted accounting principles, which may be 
unaudited and which shall include the notes to the financial statements, 
as of quarter end for the broker or dealer and its ultimate holding 
company;
    (v) Quarterly consolidated and consolidating income statements and 
consolidated cash flow statements, prepared in accordance with generally 
accepted accounting principles, which may be unaudited and which shall 
include the notes to the financial statements, for the broker or dealer 
and its ultimate holding company;

    Note 1 to paragraph (a)(1)(v). Statements of comprehensive income 
(as defined in Sec.  210.1-02 of Regulation S-X of this chapter) must be 
included in place of income statements, if required by the applicable 
generally accepted accounting principles.

    (vi) The amount as of quarter end, and at month end if greater than 
quarter end, of the aggregate long and short securities and commodities 
positions held by each Material Associated Person, including a separate 
listing of each single unhedged securities or commodities position, 
other than U.S. government or agency securities, that exceeds the 
Materiality Threshold at any month end;
    (vii) The notional or contractual amounts, and in the case of 
options, the value of the underlying instruments, as of quarter end, of 
financial instruments with off-balance sheet risk and financial 
instruments with concentrations of credit risk where the Material 
Associated Person operates a trading book, with a separate entry of each 
commitment where the credit risk (defined as the possibility that a loss 
may occur from the failure of another party to perform according to the 
terms of a contract) with respect to a counterparty exceeds the 
Materiality Threshold at quarter end;
    (viii) The aggregate amount as of quarter end, and the amount at 
month end if greater than quarter end, of all bridge loans and those 
other material unsecured extensions of credit (not including intra-group 
receivables) with an initial or remaining maturity of less

[[Page 638]]

than one year by each Material Associated Person, together with the 
allowance for losses for such transactions, including a specific 
description of any extensions of credit to a single borrower exceeding 
the Materiality Threshold at any month end;
    (ix) The aggregate amount as of quarter end, and the amount at month 
end if greater than quarter end, of commercial paper, secured and other 
unsecured borrowing, bank loans, lines of credit, or any other 
borrowings, and the principal installments of long-term or medium-term 
debt, scheduled to mature within twelve months from the most recent 
fiscal quarter for the broker or dealer and each Material Associated 
Person; and
    (x) Data relating to real estate activities, including mortgage 
loans and investments in real estate, but not including trading 
positions in whole loans, conducted by each Material Associated Person, 
including:
    (A) Real estate loans and investments by type of property, such as 
construction and development, residential, commercial and industrial or 
farmland;
    (B) The geographic distribution, as of quarter end, by type of loan 
or investment where the amount exceeds the Materiality Threshold at 
quarter end;
    (C) The aggregate carrying value of loans which each Material 
Associated Person deems to be not current as to interest or principal, 
together with the Material Associated Person's criteria for the 
determination of which loans are not current, or which are in the 
process of foreclosure or that have been restructured;
    (D) The allowance for losses on loans and on investment real estate 
by type of loan or investment, and the activity in the allowance for 
losses account; and
    (E) Information about risk concentration in the real estate 
investment and loan portfolio, including information about risk 
concentration to a single borrower or location of property if the risk 
concentration exceeds the Materiality Threshold at quarter end.
    (2) The determination of whether an associated person of a broker or 
dealer is a Material Associated Person shall involve consideration of 
all aspects of the activities of, and the relationship between, both 
entities, including without limitation, the following factors:
    (i) The legal relationship between the broker or dealer and the 
associated person;
    (ii) The overall financing requirements of the broker or dealer and 
the associated person, and the degree, if any, to which the broker or 
dealer and the associated person are financially dependent on each 
other;
    (iii) The degree, if any, to which the broker or dealer or its 
customers rely on the associated person for operational support or 
services in connection with the broker's or dealer's business;
    (iv) The level of risk present in the activities of the broker's or 
dealer's associated persons; and
    (v) The extent to which the associated person has the authority or 
the ability to cause a withdrawal of capital from the broker or dealer.
    (3) The information, reports and records required by the provisions 
of this section shall be maintained and preserved in accordance with the 
provisions of Sec.  240.17a-4 and shall be kept for a period of not less 
than three years in an easily accessible place.
    (4) For the purposes of this section and Sec.  240.17h-2T, the term 
``Materiality Threshold'' shall mean the greater of:
    (i) $100 million; or
    (ii) 10 percent of the broker or dealer's tentative net capital 
based on the most recently filed Form X-17A-5 or 10 percent of the 
Material Associated Person's tangible net worth, whichever is greater.
    (b) Special provisions with respect to material associated persons 
subject to the supervision of certain domestic regulators. A broker or 
dealer shall be deemed to be in compliance with the recordkeeping 
requirements of paragraph (a) of this section with respect to a Material 
Associated Person if:
    (1) Such Material Associated Person is subject to examination by, or 
the reporting requirements of, a Federal banking agency and the broker 
or dealer maintains in accordance with the provisions of this section 
copies of all reports submitted by such Material Associated Person with 
the Federal banking agency pursuant to section 5211 of

[[Page 639]]

the Revised Statutes, section 9 of the Federal Reserve Act, section 7(a) 
of the Federal Deposit Insurance Act, section 10(b) of the Home Owners' 
Loan Act, or section 5 of the Bank Holding Company Act of 1956 other 
than the Form FR 2068; or
    (2) If such Material Associated Person is subject to the supervision 
of an insurance commissioner or other similar official or agency of a 
state, and the broker or dealer maintains in accordance with the 
provisions of this section copies of the Annual and Quarterly Statements 
with Schedules and Exhibits prepared by the insurance company on forms 
prescribed by the National Association of Insurance Commissioners; or
    (3) In the event an insurance company is not required to prepare 
Quarterly Statements on forms prescribed by the National Association of 
Insurance Commissioners, the broker or dealer must maintain and preserve 
the records required by paragraph (a) of this section on a quarterly 
basis; or
    (4) In the case of a Material Associated Person that is subject to 
the supervision of the Commodity Futures Trading Commission, the broker 
or dealer maintains in accordance with the provisions of this section 
copies of the reports filed on Forms 1 FR-FCM or 1 FR-IB by such 
Material Associated Person with the Commodity Futures Trading 
Commission.
    (c) Special provisions with respect to material associated persons 
subject to the supervision of a foreign financial regulatory authority. 
A broker or dealer shall be deemed to be in compliance with the 
recordkeeping requirements of paragraph (a) of this section with respect 
to a Material Associated Person if such broker or dealer maintains in 
accordance with the provisions of this section copies of the reports 
filed by such Material Associated Persons with a Foreign Financial 
Regulatory Authority. The broker or dealer shall maintain a copy of the 
original report and a copy translated into the English language. For the 
purposes of this section, the term Foreign Financial Regulatory 
Authority shall have the meaning set forth in section 3(a)(51) of the 
Act.
    (d) Exemptions. (1) The provisions of this section shall not apply 
to any broker or dealer which is exempt from the provisions of Sec.  
240.15c3-3:
    (i) Pursuant to paragraph (k)(1) of Sec.  240.15c3-3; or
    (ii) Pursuant to paragraph (k)(2) of Sec.  240.15c3-3; or
    (iii) If the broker or dealer does not qualify for an exemption from 
the provisions of Sec.  240.15c3-3 and such broker or dealer does not 
hold funds or securities for, or owe money or securities to, customers 
and does not carry the accounts of or for customers; unless
    (iv) In the case of paragraphs (d)(1)(ii) or (d)(1)(iii) of this 
section, the broker or dealer maintains capital including debt 
subordinated in accordance with appendix D of Sec.  240.15c3-1 equal to 
or greater than $20,000,000.
    (2) The provisions of this section shall not apply to any broker or 
dealer which maintains capital including debt subordinated in accordance 
with appendix D of section 240.15c3-1 of less than $250,000, even if the 
broker or dealer hold funds or securities for, or owes money or 
securities to, customers or carries the accounts of or for customers.
    (3) In calculating capital for the purposes of this paragraph, a 
broker or dealer shall include the equity capital and subordinated debt 
of any other registered brokers or dealers that are associated with the 
broker or dealer and are not otherwise exempt from the provisions 
pursuant to paragraph (d)(1)(i) of this section.
    (4) The provisions of this section shall not apply to a broker or 
dealer that computes certain of its capital charges in accordance with 
Sec.  240.15c3-1e if that broker or dealer is affiliated with an 
ultimate holding company that is not an ultimate holding company that 
has a principal regulator, as defined in Sec.  240.15c3-1(c)(13).
    (5) The Commission may, upon written application by a Reporting 
Broker or Dealer, exempt from the provisions of this section, either 
unconditionally or on specified terms and conditions, any brokers or 
dealers associated with such Reporting Broker or Dealer. The term 
``Reporting Broker or Dealer'' shall mean, in the case of a broker or 
dealer that is associated with other

[[Page 640]]

registered brokers or dealers, the broker or dealer which maintains the 
greatest amount of net capital as reported on its most recently fixed 
Form X-17A-5. In granting exemptions under this section, the Commission 
shall consider, among other factors, whether the records and other 
information required to be maintained pursuant to this section 
concerning the Material Associated Persons of the broker or dealer 
associated with the Reporting Broker or Dealer will be available to the 
Commission pursuant to Sec.  240.17h-2T.
    (e) Location of records. A broker or dealer required to maintain 
records concerning a Material Associated Person pursuant to this section 
may maintain those records either at the Material Associated Person or 
at a records storage facility provided that the records are located 
within the boundaries of the United States and the records are kept in 
an easily accessible place, as that term is used in Sec.  240.17a-4. In 
order to operate pursuant to the provisions of this paragraph, the 
Material Associated Person or other entity maintaining the records shall 
file with the Commission a written undertaking in form acceptable to the 
Commission, signed by a duly authorized person, to the effect that the 
records will be treated as if the broker or dealer was maintaining the 
records pursuant to this section and that the entity maintaining the 
records undertakes to permit examination of such records at any time or 
from time to time during business hours by representatives or designees 
of the Commission and to promptly furnish the Commission or its designee 
true, correct, complete and current hard copy of any or all or any part 
of such records. The election to operate pursuant to the provisions of 
this paragraph shall not relieve the broker or dealer required to 
maintain and preserve such records from any of its responsibilities 
under this section or section 240.17h-2T.
    (f) Confidentiality. All information obtained by the Commission 
pursuant to the provisions of this section from a broker or dealer 
concerning a Material Associated Person shall be deemed confidential 
information for the purposes of section 24(b) of the Act.
    (g) Temporary implementation schedule. Every broker or dealer 
subject to the requirements of this section shall maintain and preserve 
the information required by paragraphs (a)(1)(i), (ii), and (iii) of 
this section commencing September 30, 1992. Commencing December 31, 
1992, the provisions of this section shall apply in their entirety.

[57 FR 32168, July 21, 1992, as amended at 58 FR 25774, Apr. 28, 1993; 
69 FR 34472, June 21, 2004; 69 FR 34494, June 21, 2004; 76 FR 50122, 
Aug. 12, 2011; 78 FR 42865, July 18, 2013; 83 FR 50223, Oct. 4, 2018]



Sec.  240.17h-2T  Risk assessment reporting requirements for brokers
and dealers.

    (a) Reporting requirements of risk assessment information required 
to be maintained by section 240.17h-1T. (1) Every broker or dealer 
registered with the Commission pursuant to section 15 of the Act, and 
every municipal securities dealer registered pursuant to section 15B of 
the Act for which the Commission is the appropriate regulatory agency, 
unless exempt pursuant to paragraph (b) of this section, shall file a 
Form 17-H within 60 calendar days after the end of each fiscal quarter. 
The Form 17-H for the fourth fiscal quarter shall be filed within 60 
calendar days of the end of the fiscal year. The cumulative year-end 
financial statements required by section 240.17h-1T may be filed 
separately within 105 calendar days of the end of the fiscal year.
    (2) The reports required to be filed pursuant to paragraph (a)(1) of 
this section shall be considered filed when received at the Commission's 
principal office in Washington, DC.
    (3) For the purposes of this section, the term Material Associated 
Person shall have the meaning used in Sec.  240.17h-1T.
    (b) Exemptions. (1) The provisions of this section shall not apply 
to any broker or dealer which is exempt from the provisions of section 
240.15c3-3:
    (i) Pursuant to paragraph (k)(1) of Sec.  240.15c3-3; or
    (ii) Pursuant to paragraph (k)(2) of Sec.  240.15c3-3; or
    (iii) If the broker or dealer does not qualify for an exemption from 
the provisions of Sec.  240.15c3-3 and such broker

[[Page 641]]

or dealer does not hold funds or securities for, or owe money or 
securities to, customers and does not carry the accounts of or for 
customers; unless
    (iv) In the case of paragraphs (b)(1)(ii) or (b)(1)(iii) of this 
section, the broker or dealer maintains capital including debt 
subordinated in accordance with appendix D of Sec.  240.15c3-1 equal to 
or greater than $20,000,000.
    (2) The provisions of this section shall not apply to any broker or 
dealer which maintains capital including debt subordinated in accordance 
with appendix D of Sec.  240.15c3-1 of less than $250,000, even if the 
broker or dealer hold funds or securities for, or owes money or 
securities to, customers or carries the accounts of or for customers.
    (3) In calculating capital and subordinated debt for the purposes of 
this section, a broker or dealer shall include the equity capital and 
subordinated debt of any other registered brokers or dealers that are 
associated with the broker or dealer and are not otherwise exempt from 
the provisions pursuant to paragraph (b)(1)(i) of this section.
    (4) The provisions of this section shall not apply to a broker or 
dealer that computes certain of its capital charges in accordance with 
Sec.  240.15c3-1e if that broker or dealer is affiliated with an 
ultimate holding company that is not an ultimate holding company that 
has a principal regulator, as defined in Sec.  240.15c3-1(c)(13).
    (5) The Commission may, upon written application by a Reporting 
Broker or Dealer, exempt from the provisions of this section, either 
unconditionally or on specified terms and conditions, any brokers or 
dealers associated with the Reporting Broker or Dealer. The term 
``Reporting Broker or Dealer'' shall mean, in the case of a broker or 
dealer that is associated with other registered brokers or dealers, the 
broker or dealer which maintains the greatest amount of net capital as 
reported on its most recently filed Form X-17A-5. In granting exemptions 
under this section, the Commission shall consider, among other factors, 
whether the records and other information required to be maintained 
pursuant to Sec.  240.17h-1T concerning the Material Associated Persons 
of the broker or dealer associated with the Reporting Broker or Dealer 
will be available to the Commission pursuant to the provisions of this 
section.
    (c) Special provisions with respect to material associated persons 
subject to the supervision of certain domestic regulators. A broker or 
dealer shall be deemed to be in compliance with the reporting 
requirements of paragraph (a) of this section with respect to a Material 
Associated Person if:
    (1) Such Material Associated Person is subject to examination by or 
the reporting requirements of a Federal banking agency and the broker or 
dealer or such Material Associated Person furnishes in accordance with 
paragraph (a) of this section copies of reports filed on Form FR Y-9C, 
Form FR Y-6, Form FR Y-7, and Form FR 2068 by the Material Associated 
Person with the Federal banking agency pursuant to section 5211 of the 
Revised Statutes, section 9 of the Federal Reserve Act, section 7(a) of 
the Federal Deposit Insurance Act, section 10(b) of the Home Owners' 
Loan Act, or section 5 of the Bank Holding Company Act of 1956; or
    (2) If the Material Associated Person is subject to the supervision 
of an insurance commissioner or other similar official agency of a 
state; and
    (i) In the case of a Material Associated Person organized as a 
public stock company, the broker or dealer furnishes in accordance with 
the provisions of this section copies of the filings made by the 
insurance company pursuant to sections 13 or 15 of the Act and the 
Investment Company Act of 1940; or
    (ii) In the case of Material Associated Person organized as a mutual 
insurance company or a non-public stock company, the broker or dealer 
furnishes in accordance with the provisions of this section copies of 
the Annual and Quarterly Statements prepared by the insurance company on 
forms prescribed by the National Association of Insurance Commissioners. 
The Annual Statement furnished to the Commission pursuant to this 
section shall include: The classification (distribution by state) 
section from the schedule of real estate; distribution by state, the 
interest overdue (more than three months), in process of foreclosure, 
and foreclosed properties

[[Page 642]]

transferred to real estate during the year sections from the schedule of 
mortgages; and the quality and maturity distribution of all bonds at 
statement values and by major types of issues section from the schedule 
of bonds and stocks. All other Schedules and Exhibits to such Annual and 
Quarterly Statements shall be maintained at the broker-dealer pursuant 
to the provisions of Sec.  240.17h-1T but not furnished to the 
Commission.
    (iii) In the event an insurance company organized as a stock or 
mutual company is not required to prepare Quarterly Statements, the 
broker or dealer must file with the Commission a Form 17-H in accordance 
with the provisions of this section on a quarterly basis.
    (3) In the case of a Material Associated Person that is subject to 
the supervision of the Commodity Futures Trading Commission, the broker 
or dealer furnishes in accordance with the provisions of this section 
copies of the reports filed by the Material Associated Person with the 
Commodity Futures Trading Commission on Forms 1 FR-FCM or 1 FR-IB.
    (4) No broker or dealer shall be required to furnish to the 
Commission any examination report of any Federal banking agency or any 
supervisory recommendations or analyses contained therein with respect 
to a Material Associated Person that is subject to the regulation of a 
Federal banking agency. All information received by the Commission 
pursuant to this section concerning a Material Associated Person that is 
subject to examination by or the reporting requirements of a Federal 
banking agency shall be deemed confidential for the purposes of section 
24(b) of the Act.
    (5) The furnishing of any information or documents by a broker or 
dealer pursuant to this section shall not constitute an admission for 
any purpose that a Material Associated Person is otherwise subject to 
the Act. Any documents or information furnished to the Commission by a 
broker or dealer pursuant to this rule shall not be deemed to be 
``filed'' for the purposes of the liabilities set forth in section 18 of 
the Act.
    (d) Special provisions with respect to material associated persons 
subject to the supervision of a foreign financial regulatory authority. 
A broker or dealer shall be deemed to be in compliance with the 
reporting requirements of this section with respect to a Material 
Associated Person if such broker or dealer furnishes in accordance with 
the provisions of this section copies of the reports filed by such 
Material Associated Person with a Foreign Financial Regulatory 
Authority. The broker or dealer shall file a copy of the original report 
and a copy translated into the English language. For the purposes of 
this section, the term Foreign Financial Regulatory Authority shall have 
the meaning set forth in section 3(a)(51) of the Act.
    (e) Confidentiality. All information obtained by the Commission 
pursuant to the provisions of this section from a broker or dealer 
concerning a Material Associated Person shall be deemed confidential 
information for the purposes of section 24(b) of the Act.
    (f) Temporary implementation schedule. Every broker or dealer 
subject to the requirements of this section shall file the information 
required by Items 1, 2 and 3 of Form 17-H by October 31, 1992. 
Commencing December 31, 1992, the provisions of this section shall apply 
in their entirety.

[57 FR 32170, July 21, 1992, as amended at 69 FR 34472, June 21, 2004; 
69 FR 34494, June 21, 2004; 78 FR 42865, July 18, 2013]



Sec.  240.17Ab2-1  Registration of clearing agencies.

    (a) An application for registration or for exemption from 
registration as a clearing agency, as defined in section 3(a)(23) of the 
Act, or an amendment to any such application shall be filed with the 
Commission on Form CA-1, in accordance with the instructions thereto.
    (b) Any applicant for registration or for exemption from 
registration as a clearing agency whose application is filed with the 
Commission on or before November 24, 1975, on and in accordance with the 
instructions to Form CA-1, with respect to the clearing agency 
activities described in the application shall, during the period from 
December 1, 1975 until the Commission grants registration, denies 
registration

[[Page 643]]

or grants an exemption from registration, be exempt from the 
registration provisions of section 17A(b) of the Act and the rules and 
regulations thereunder and, unless the Commission shall otherwise 
provide by rule or by order, the provisions of the Act and the rules and 
regulations thereunder which would be applicable to clearing agencies as 
a result of registration under the Act.
    (c)(1) The Commission, upon the request of a clearing agency, may 
grant registration of the clearing agency in accordance with sections 
17A(b) and 19(a)(1) of the Act but exempt the registrant from one or 
more of the requirements as to which the Commission is directed to make 
a determination pursuant to paragraphs (A) through (I) of section 
17A(b)(3) of the Act, provided that any such registration shall be 
effective only for eighteen months from the date the registration is 
made effective (or such longer period as the Commission may provide by 
order).
    (2) In the case of any clearing agency registered in accordance with 
paragraph (c)(1) of this section, not later than nine months from the 
date such registration is made effective the Commission either will 
grant registration in accordance with sections 17A(b) and 19(a)(1) of 
the Act, without exempting the registrant from one or more of the 
requirements as to which the Commission is directed to make a 
determination pursuant to subparagraphs (A) through (I) of section 
17A(b)(3) of the Act, or will institute proceedings in accordance with 
section 19(a)(1)(B) of the Act to determine whether registration should 
be denied at the expiration of the registration granted in accordance 
with paragraph (c)(1) of this section.
    (d) The filing of an amendment to an application for registration or 
for exemption from registration as a clearing agency, which registration 
or exemption has not been granted, or the filing of additional 
information or documents prior to the granting of registration or an 
exemption from registration shall extend to ninety days from the date 
such filing is made (or to such longer period as to which the applicant 
consents) the period within which the Commission shall grant 
registration, institute proceedings to determine whether such 
registration shall be denied, or conditionally or unconditionally exempt 
registrant from the registration and other provisions of section 17A of 
the Act or the rules or regulations thereunder.
    (e) If any information reported at items 1-3 of Form CA-1 is or 
becomes inaccurate, misleading or incomplete for any reason, whether 
before or after registration or an exemption from registration has been 
granted, the registrant shall file promptly an amendment on Form CA-1 
correcting the inaccurate, misleading or incomplete information.
    (f) Every application for registration or for exemption from 
registration as a clearing agency or amendment to, or additional 
information or document filed in connection with, any such application 
shall constitute a ``report'' or ``application'' within the meaning of 
sections 17, 17A, 19 and 32(a) of the Act.

[40 FR 52358, Nov. 10, 1975]



Sec.  240.17Ab2-2  Determinations affecting covered clearing agencies.

    (a) The Commission may, if it deems appropriate, upon application by 
any clearing agency or member of a clearing agency, or on its own 
initiative, determine whether a covered clearing agency is systemically 
important in multiple jurisdictions. In determining whether a covered 
clearing agency is systemically important in multiple jurisdictions, the 
Commission may consider:
    (1) Whether the covered clearing agency is a designated clearing 
agency; and
    (2) Whether the clearing agency has been determined to be 
systemically important by one or more jurisdictions other than the 
United States through a process that includes consideration of whether 
the foreseeable effects of a failure or disruption of the designated 
clearing agency could threaten the stability of each relevant 
jurisdiction's financial system.
    (b) The Commission may, if it deems appropriate, determine whether 
any of the activities of a clearing agency providing central 
counterparty services, in addition to clearing agencies registered with 
the Commission for the purpose of

[[Page 644]]

clearing security-based swaps, have a more complex risk profile. In 
determining whether a clearing agency's activity has a more complex risk 
profile, the Commission may consider whether the clearing agency clears 
financial instruments that are characterized by discrete jump-to-default 
price changes or that are highly correlated with potential participant 
defaults.
    (c) The Commission may, if it deems appropriate, upon application by 
any clearing agency or member of a clearing agency, or on its own 
initiative, determine whether to rescind any determination made pursuant 
to paragraph (a) or (b) of this section. In determining whether to 
rescind any such determination, the Commission may consider a change in 
circumstances such that the covered clearing agency no longer meets the 
criteria supporting the determination in effect.
    (d) The Commission shall publish notice of its intention to consider 
making a determination under paragraph (a), (b), or (c) of this section, 
together with a brief statement of the grounds under consideration 
therefor, and provide at least a 30-day public comment period prior to 
any such determination, giving all interested persons an opportunity to 
submit written data, views, and arguments concerning such proposed 
determination. The Commission may provide the clearing agency subject to 
the proposed determination opportunity for hearing regarding the 
proposed determination.
    (e) Notice of determinations under paragraph (a), (b), or (c) of 
this section shall be given by prompt publication thereof, together with 
a statement of written reasons therefor.
    (f) For purposes of this rule, the terms covered clearing agency, 
designated clearing agency, and systemically important in multiple 
jurisdictions shall have the meanings set forth in Sec.  240.17Ad-22(a).

[81 FR 70901, Oct. 13, 2016]



Sec.  240.17Ac2-1  Application for registration of transfer agents.

    (a) An application for registration, pursuant to section 17A(c) of 
the Act, of a transfer agent for which the Commission is the appropriate 
regulatory agency, as defined in section 3(a)(34)(B) of the Act, shall 
be filed with the Commission on Form TA-1, in accordance with the 
instructions contained therein and shall become effective on the 
thirtieth day following the date on which the application is filed, 
unless the Commission takes affirmative action to accelerate, deny or 
postpone such registration in accord- ance with the provisions of 
section 17A(c) of the Act.
    (b) The filing of any amendment to an application for registration 
as a transfer agent pursuant to paragraph (a) of this section, which 
registration has not become effective, shall postpone the effective date 
of the registration until the thirtieth day following the date on which 
the amendment is filed, unless the Commission takes affirmative action 
to accelerate, deny or postpone the registration in accord- ance with 
the provisions of section 17A(c) of the Act.
    (c) If any of the information reported on Form TA-1 (Sec.  249b.100 
of this chapter) becomes inaccurate, misleading, or incomplete, the 
registrant shall correct the information by filing an amendment within 
sixty days following the date on which the information becomes 
inaccurate, misleading, or incomplete.
    (d) Every registration and amendment filed pursuant to this section 
shall be filed with the Commission electronically in the Commission's 
EDGAR system. Transfer agents should refer to Form TA-1 and the 
instructions to the form (Sec.  249b.100 of this chapter) and to the 
EDGAR Filer Manual (Sec.  232.301 of this chapter) for the technical 
requirements and instructions for electronic filing. Transfer agents 
that have previously filed a Form TA-1 with the Commission must refile 
the information on their Form TA-1, as amended, in electronic format in 
EDGAR as an amended Form TA-1.
    (e) Every registration and amendment filed pursuant to this section 
shall constitute a ``report'' or ``application'' within the meaning of 
sections 17, 17A(c), and 32(a) of the Act.

[40 FR 51184, Nov. 4, 1975, as amended at 51 FR 12127, Apr. 9, 1986; 71 
FR 74708, Dec. 12, 2006]

[[Page 645]]



Sec.  240.17Ac2-2  Annual reporting requirement for registered transfer
agents.

    (a) Every transfer agent registered on December 31 must file a 
report covering the reporting period on Form TA-2 (Sec.  249b.102 of 
this chapter) by March 31 following the end of the reporting period. 
Form TA-2 must be completed in accordance with the instructions 
contained in the Form. A transfer agent may file an amendment to Form 
TA-2 pursuant to the instructions on the form to correct information 
that has become inaccurate, incomplete, or misleading. A transfer agent 
may file an amendment at any time; however, in order to be timely filed, 
all required portions of the form must be completed and filed in 
accordance with this section and the instructions to the form by the 
date the form is required to be filed with the Commission.
    (1) A registered transfer agent that received fewer than 1,000 items 
for transfer in the reporting period and that did not maintain master 
securityholder files for more than 1,000 individual securityholder 
accounts as of December 31 of the reporting period must complete 
Questions 1 through 5, 11, and the signature section of Form TA-2.
    (2) A named transfer agent that engaged a service company to perform 
all of its transfer agent functions during the reporting period must 
complete Questions 1 through 3 and the signature section of Form TA-2.
    (3) A named transfer agent that engaged a service company to perform 
some but not all of its transfer agent functions during the reporting 
period must complete all of Form TA-2 but should enter zero (0) for 
those questions that relate to transfer agent functions performed by the 
service company on behalf of the named transfer agent.
    (b) For purposes of this section, the term reporting period shall 
mean the calendar year ending December 31 for which Form TA-2 is being 
filed. The term named transfer agent shall have the same meaning as 
defined in Sec.  240.17Ad-9(j). The term service company shall have the 
same meaning as defined in Sec.  240.17Ad-9(k).
    (c) Every annual report and amendment filed pursuant to this section 
shall be filed with the Commission electronically in the Commission's 
EDGAR system. Transfer agents should refer to Form TA-2 and the 
instructions to the form (Sec.  249b.102 of this chapter) and the EDGAR 
Filer Manual (Sec.  232.301 of this chapter) for further information 
regarding electronic filing. Every registered transfer agent must file 
an electronic Form TA-1 with the Commission, or an electronic amendment 
to its Form TA-1 if the transfer agent previously filed a paper Form TA-
1 with the Commission, before it may file an electronic Form TA-2 or 
Form TA-W with the Commission.

[65 FR 36610, June 9, 2000, as amended at 71 FR 74708, Dec. 12, 2006]



Sec.  240.17Ac3-1  Withdrawal from registration with the Commission.

    (a) Notice of withdrawal from registration as a transfer agent with 
the Commission pursuant to section 17A(c)(4) of the Act shall be filed 
on Form TA-W in accordance with the instructions contained thereon.
    (b) Except as hereinafter provided, a notice to withdraw from 
registration filed by a transfer agent pursuant to section 17A(c)(4) of 
the Act shall become effective on the sixtieth day after the filing 
thereof with the Commission or within such shorter period of time as the 
Commission may determine. If a notice to withdraw from registration is 
filed with the Commission at any time subsequent to the date of issuance 
of a Commission order instituting proceedings pursuant to section 
17A(c)(3) of the Act, or if prior to the effective date of the notice of 
withdrawal the Commission institutes such a proceeding or a proceeding 
to impose terms and conditions upon such withdrawal, the notice of 
withdrawal shall not become effective except at such time and upon such 
terms and conditions as the Commission deems necessary or appropriate in 
the public interest, for the protection of investors, or in furtherance 
of the purposes of section 17A.
    (c) Every withdrawal from registration filed pursuant to this 
section shall

[[Page 646]]

be filed with the Commission electronically in the Commission's EDGAR 
system. Transfer agents should refer to Form TA-W and the instructions 
to the form (Sec.  249b.101 of this chapter) and the EDGAR Filer Manual 
(Sec.  232.301 of this chapter) for further information regarding 
electronic filing.
    (d) Every notice of withdrawal filed pursuant to this rule shall 
constitute a ``report'' within the meaning of sections 17 and 32(a) of 
the Act.

[42 FR 44984, Sept. 8, 1977, as amended at 71 FR 74709, Dec. 12, 2006]



Sec.  240.17Ad-1  Definitions.

    As used in this section and Sec. Sec.  240.17Ad-2, 240.17Ad-3, 
240.17Ad-4, 240.17Ad-5, 240.17Ad-6, and 240.17Ad-7:
    (a)(1) The term item means:
    (i) A certificate or certificates of the same issue of securities 
covered by one ticket (or, if there is no ticket, presented by one 
presentor) presented for transfer, or an instruction to a transfer agent 
which holds securities registered in the name of the presentor to 
transfer or to make available all or a portion of those securities;
    (ii) Each line on a ``deposit shipment control list'' or a 
``withdrawal shipment control list'' submitted by a registered clearing 
agency; or
    (iii) In the case of an outside registrar, each certificate to be 
countersigned.
    (2) If a ``deposit shipment control list'' or ``withdrawal shipment 
control list'' contains both routine and non-routine transfer 
instructions, a registered transfer agent shall at its option:
    (i) Retain all transfer instructions listed on the shipment control 
list and treat each line on the shipment control list as a routine item; 
or
    (ii) Return promptly to the registered clearing agency a shipment 
control list line containing non-routine transfer instructions (together 
with a copy of the shipment control list, an explanation for the return 
instructions and all routine transfer instructions reflected on the same 
line) and treat each line on the shipment control list that reflects 
retained transfer instructions as a routine item.
    (3) A deposit shipment control list means a list of transfer 
instructions that accompanies certificates to be cancelled and reissued 
in the nominee name of a registered clearing agency.
    (4) A withdrawal shipment control list means a list of instructions 
(either in paper or electronic medium) that:
    (i) Directs issuance of certificates in the names of persons or 
entities other than the registered clearing agency; and
    (ii) Accompanies certificates to be cancelled which are registered 
in the nominee name of a registered clearing agency, or directs the 
transfer agent to reduce certificate or position balances maintained by 
the transfer agent on behalf of a registered clearing agency under that 
clearing agency's transfer agent custody program
    (b) The term outside registrar with respect to a transfer item means 
a transfer agent which performs only the registrar function for the 
certificate or certificates presented for transfer and includes the 
persons performing similar functions with respect to debt issues.
    (c) An item is made available when
    (1) In the case of an item for which the services of an outside 
registrar are not required, or which has been received from an outside 
registrar after processing, the transfer agent dispatches or mails the 
item to, or the item is awaiting pick-up by, the presentor or a person 
designated by the presentor, or
    (2) In the case of an item for which the services of an outside 
registrar are required, the transfer agent dispatches or mails the item 
to, or the item is awaiting pick-up by, the outside registrar, or
    (3) In the case of an item for which an outside registrar has 
completed processing, the outside registrar dispatches or mails the item 
to, or the item is awaiting pick-up by, the presenting transfer agent.
    (d) The transfer of an item is accomplished when, in accordance with 
the presentor's instructions, all acts necessary to cancel the 
certificate or certificates presented for transfer and to issue a new 
certificate or certificates, including the performance of the registrar 
function, are completed and the item is made available to the presentor

[[Page 647]]

by the transfer agent, or when, in accordance with the presentor's 
instructions, a transfer agent which holds securities registered in the 
name of the presentor completes all acts necessary to issue a new 
certificate or certificates representing all or a portion of those 
securities and makes available the new certificate or certificates to 
the presentor or a person designated by the presentor or, with respect 
to those transfers of record ownership to be accomplished without the 
physical issuance of certificates, completes registration of change in 
ownership of all or a portion of those securities.
    (e) The turnaround of an item is completed when transfer is 
accomplished or, when an outside registrar is involved, the transfer 
agent in accordance with the presentor's instructions completes all acts 
necessary to cancel the certificate or certificates presented for 
transfer and to issue a new certificate or certificates, and the item is 
made available to an outside registrar.
    (f) The term process means the accomplishing by an outside registrar 
of all acts necessary to perform the registrar function and to make 
available to the presenting transfer agent the completed certificate or 
certificates or to advise the presenting transfer agent, orally or in 
writing, why performance of the registrar function is delayed or may not 
be completed.
    (g) The receipt of an item or a written inquiry or request occurs 
when the item or written inquiry or request arrives at the premises at 
which the transfer agent performs transfer agent functions, as defined 
in section 3(a)(25) of the Act.
    (h) A business day is any day during which the transfer agent is 
normally open for business and excludes Saturdays, Sundays, and legal 
holidays, or other holidays normally observed by the transfer agent.
    (i) An item is routine if it does not (1) require requisitioning 
certificates of an issue for which the transfer agent, under the terms 
of its agency, does not maintain a supply of certificates; (2) include a 
certificate as to which the transfer agent has received notice of a stop 
order, adverse claim, or any other restriction on transfer; (3) require 
any additional certificates, documentation, instructions, assignments, 
guarantees, endorsements, explanations, or opinions of counsel before 
transfer may be effected; (4) require review of supporting documentation 
other than assignments, endorsements or stock powers, certified 
corporate resolutions, signature, or other common and ordinary 
guarantees, or appropriate tax, or tax waivers; (5) involve a transfer 
in connection with a reorganization, tender offer, exchange, redemption, 
or liquidation; (6) include a warrant, right, or convertible security 
presented for transfer of record ownership within five business days 
before any day upon which exercise or conversion privileges lapse or 
change; (7) include a warrant, right, or convertible security presented 
for exercise or conversion; or (8) include a security of an issue which 
within the previous 15 business days was offered to the public, pursuant 
to a registration statement effective under the Securities Act of 1933, 
in an offering not of a continuing nature.
    (j) The term depository-eligible securities issue means an issue of 
securities that is eligible for deposit at any securities depository 
that is registered with the Commission under the Securities Exchange Act 
of 1934 as a clearing agency.

(Secs. 2, 17, 17A and 23(a) (15 U.S.C. 78b, 78q, 78q-1 and 78w(a)); 
secs. 3, 17A and 23(a), 15 U.S.C. 78c, 78q-1 and 78w(a))

[42 FR 32411, June 24, 1977, as amended at 49 FR 40575, Oct. 17, 1984; 
51 FR 36551, Oct. 14, 1986]



Sec.  240.17Ad-2  Turnaround, processing, and forwarding of items.

    (a) Every registered transfer agent (except when acting as an 
outside registrar) shall turnaround within three business days of 
receipt at least 90 percent of all routine items received for transfer 
during a month. For the purposes of this paragraph, items received at or 
before noon on a business day shall be deemed to have been received at 
noon on that day, and items received after noon on a business day or 
received on a day not a business day shall be deemed to have been 
received at noon on the next business day.
    (b) Every registered transfer agent acting as an outside registrar 
shall process at least 90 percent of all items

[[Page 648]]

received during a month (1) by the opening of business on the next 
business day, in the case of items received at or before noon on a 
business day, and (2) by noon of the next business day, in the case of 
items received after noon on a business day. For the purposes of 
paragraphs (b) and (d) of this section, ``items received'' shall not 
include any item enumerated in Sec.  240.17Ad-1(i) (5), (6), (7), or (8) 
or any item which is not accompanied by a debit or cancelled 
certificate. For the purposes of this paragraph, items received on a day 
not a business day shall be deemed to have been received before noon on 
the next business day.
    (c) Any registered transfer agent which fails to comply with 
paragraph (a) of this section with respect to any month shall, within 
ten business days following the end of such month, file with the 
Commission and the transfer agent's appropriate regulatory agency, if it 
is not the Commission, a written notice in accordance with paragraph (h) 
of this section. Such notice shall state the number of routine items and 
the number of non-routine items received for transfer during the month, 
the number of routine items which the registered transfer agent failed 
to turnaround in accordance with the requirements of paragraph (a) of 
this section, the percentage that such routine items represent of all 
routine items received during the month, the reasons for such failure, 
the steps which have been taken, are being taken or will be taken to 
prevent a future failure and the number of routine items, aged in 
increments of one business day, which as of the close of business on the 
last business day of the month have been in its possession for more than 
four business days and have not been turned around.
    (d) Any registered transfer agent which fails to comply with 
paragraph (b) of this section with respect to any month shall, within 
ten business days following the end of such month, file with the 
Commission and the transfer agent's appropriate regulatory agency, if it 
is not the Commission, a written notice in accordance with paragraph (h) 
of this section. Such notice shall state the number of items received 
for processing during the month, the number of items which the 
registered transfer agent failed to process in accordance with the 
requirements of paragraph (b) of this section, the percentage that such 
items represent of all items received during the month, the reasons for 
such failure and the steps which have been taken, are being taken or 
will be taken to prevent a future failure and the number of items which 
as of the close of business on the last business day of the month have 
been in the transfer agent's possession for more than the time allowed 
for processing and have not been processed.
    (e)(1) Except as provided in paragraph (e)(2) of this section, all 
routine items not turned around within three business days of receipt as 
required by paragraph (a) of this section and all items not processed 
within the periods required by paragraph (b) of this section shall be 
turned around promptly, and all nonroutine items shall receive diligent 
and continuous attention and shall be turned around as soon as possible.
    (2) A transfer agent that is exempt under Sec.  240.17Ad-4(b) and 
that has received 30 days notice of depository-eligibility of an issue 
for which it performs transfer agent functions shall turnaround ninety 
percent of all routine items received during a month within five 
business days of receipt. Such transfer agent shall devote diligent and 
continuous attention to the remaining ten percent of routine items and 
shall turnaround these items as soon as possible.
    (f) A registered transfer agent which receives items at locations 
other than the premises at which it performs transfer agent functions 
shall have appropriate procedures to assure, and shall assure, that 
items are forwarded to such premises promptly.
    (g) A registered transfer agent which receives processed items from 
an outside registrar shall have appropriate procedures to assure, and 
shall assure, that such items are made available promptly to the 
presentor.
    (h) Any notice required by this section or Sec.  240.17Ad-4 shall be 
filed as follows:
    (1) Any notice required to be filed with the Commission shall be 
filed in triplicate with the principal office of the Commission in 
Washington, DC

[[Page 649]]

20549 and, in the case of a registered transfer agent for which the 
Commission is the appropriate regulatory agency, an additional copy 
shall be filed with the regional office of the Commission for the region 
in which the registered transfer agent has its principal office for 
transfer agent activities.
    (2) Any notice required to be filed with the Comptroller of the 
Currency shall be filed with the Office of the Comptroller of the 
Currency, Administrator of National Banks, Washington, DC 20219.
    (3) Any notice required to be filed with the Board of Governors of 
the Federal Reserve System shall be filed with the Board of Governors of 
the Federal Reserve System, Washington, DC 20251 and with the Federal 
Reserve Bank of the district in which the registered transfer agent's 
principal banking operations are conducted.
    (4) Any notice required to be filed with the Federal Deposit 
Insurance Corporation shall be filed with the Federal Deposit Insurance 
Corporation, Washington, DC 20429.

[42 FR 32412, June 24, 1977, as amended at 49 FR 40575, Oct. 17, 1984; 
59 FR 5946, Feb. 9, 1994; 73 FR 32228, June 5, 2008]



Sec.  240.17Ad-3  Limitations on expansion.

    (a) Any registered transfer agent which is required to file any 
notice pursuant to Sec.  240.17Ad-2 (c) or (d) for each of three 
consecutive months shall not from the fifth business day after the end 
of the third such month until the end of the next following period of 
three successive months during which no such notices have been required:
    (1) Initiate the performance of any transfer agent function or 
activity for an issue for which the transfer agent does not perform, or 
is not under agreement to perform, transfer agent functions prior to 
such fifth business day; and
    (2) With respect to an issue for which transfer agent functions are 
being performed on such fifth business day, initiate for that issue the 
performance of an additional transfer agent function or activity which 
the transfer agent does not perform, or is not under agreement to 
perform, prior to such fifth business day.
    (b) Any registered transfer agent which for each of two consecutive 
months fails to turn around at least 75% of all routine items in 
accordance with the requirements of Sec.  240.17Ad-2(a) or to process at 
least 75% of all items in accordance with the requirements of Sec.  
240.17Ad-2(b) shall be subject to the limitations imposed by paragraph 
(a) of this section and further shall, within twenty business days after 
the close of the second such month, send to the chief executive officer 
of each issuer for which such registered transfer agent acts a copy of 
the written notice filed pursuant to Sec.  240.17Ad-2 (c) or (d) with 
respect to the second such month.

(Secs. 2, 17, 17A and 23(a) (15 U.S.C. 78b, 78q, 78q-1 and 78w(a)))

[42 FR 32412, June 24, 1977]



Sec.  240.17Ad-4  Applicability of Sec. Sec.  240.17Ad-2, 240.17Ad-3
and 240.17Ad-6(a) (1) through (7) and (11).

    (a) Sections 240.17Ad-2, 240.17Ad-3 and 240.17Ad-6(a) (1) through 
(7) and (11) shall not apply to interests in limited partnerships, to 
redeemable securities of investment companies registered under section 8 
of the Investment Company Act of 1940, or to interests in dividend 
reinvestment programs.
    (b)(1) For purposes of this section, exempt transfer agent means a 
transfer agent that during any six consecutive months shall have 
received fewer than 500 items for transfer and fewer than 500 items for 
processing.
    (2) Except as provided in paragraph (c) of this section, an exempt 
transfer agent that satisfies the requirements of paragraph (b)(3) shall 
be exempt from the provisions of Sec. Sec.  240.17Ad-2 (a), (b), (c), 
(d) and (h), 240.17Ad-3 and 240.17Ad-6(a) (2) through (7) and (11).
    (3) Within ten business days following the close of the sixth 
consecutive month described in paragraph (b)(1) of this section, an 
exempt transfer agent shall:
    (i) If its appropriate regulatory agency is either the Commission or 
the Office of the Comptroller of the Currency, prepare and maintain in 
its possession a document certifying that the transfer agent qualifies 
as exempt

[[Page 650]]

under paragraph (b)(1) of this section; or
    (ii) If its appropriate regulatory agency is either the Board of 
Governors of the Federal Reserve System or the Federal Deposit Insurance 
Corporation, file with the appropriate regulatory agency a notice 
certifying that it qualifies as exempt under paragraph (b)(1) of this 
section.
    (c) Within five business days following the close of each month, 
every exempt transfer agent shall calculate the number of items which it 
received during the preceding six months. Whenever any exempt transfer 
agent no longer qualifies as such under paragraph (b)(1), within ten 
business days after the end of such month: (1) It shall prepare and 
maintain in its possession a document so stating, if subject to 
paragraph (b)(3)(i) of this section; or (2) it shall file with its 
appropriate regulatory agency a notice to that effect, if subject to 
paragraph (b)(3)(ii) of this section. Thereafter, beginning with the 
first month following the month in which such document is required to be 
prepared or such notice is required to be filed, the registered transfer 
agent no longer shall be exempt under paragraph (b) of this section. Any 
registered transfer agent which has ceased to be an exempt transfer 
agent under this paragraph shall not qualify again for exemption until 
it has conducted its transfer agent operations pursuant to the foregoing 
sections for six consecutive months following the month in which it was 
required to prepare the document or prepare and file the notice 
specified in this paragraph.

(Secs. 2, 17, 17A and 23(a) (15 U.S.C. 78b, 78q, 78q-1 and 78w(a)))

[42 FR 32413, June 24, 1977, as amended at 48 FR 28246, June 21, 1983]



Sec.  240.17Ad-5  Written inquiries and requests.

    (a) When any person makes a written inquiry to a registered transfer 
agent concerning the status of an item presented for transfer during the 
preceding six months by such person or anyone acting on his behalf, 
which inquiry identifies the issue, the number of shares (or principal 
amount of debt securities or number of units if relating to any other 
kind of security) presented, the approximate date of presentment and the 
name in which it is registered, the registered transfer agent shall, 
within five business days following receipt of the inquiry, respond, 
stating whether the item has been received; if received, whether it has 
been transferred; if received and not transferred, the reason for the 
delay and what additional matter, if any, is necessary before transfer 
may be effected; and, if received and transferred, the date and manner 
in which the completed item was made available, the addressee and 
address to which it was made available and the number of any new 
certificate which was registered and the name in which it was 
registered. If a new certificate is dispatched or mailed to the 
presentor within five business days following receipt of an inquiry 
pertaining to that certificate, no further response to the inquiry shall 
be required pursuant to this paragraph.
    (b) When any broker-dealer requests in writing that a registered 
transfer agent acknowledge the transfer instructions and the possession 
of a security presented for transfer by such broker-dealer or revalidate 
a window ticket with respect to such security and the request identifies 
the issue, the number of shares (or principal amount of debt securities 
or number of units if relating to any other kind of security), the 
approximate date of presentment, the certificate number and the name in 
which it is registered, every registered transfer agent shall, within 
five business days following receipt of the request, in writing, confirm 
or deny possession of the security, and, if the registered transfer 
agent has possession, (1) acknowledge the transfer instructions or (2) 
revalidate the window ticket. If a new certificate is dispatched or 
mailed to the presentor within five business days following receipt of a 
request pertaining to that certificate, no further response to the 
inquiry shall be required pursuant to this paragraph.
    (c) When any person, or anyone acting under his authority, requests 
in writing that a transfer agent confirm

[[Page 651]]

possession as of a given date of a certificate presented by such person 
during the 30 days before the date the inquiry is received and the 
request identifies the issue, the number of shares (or principal amount 
of debt securities or number of units if relating to any other kind of 
security), the approximate date of presentment, the certificate number 
and the name in which the certificate was registered, every registered 
transfer agent shall, within ten business days following receipt of the 
request and upon assurance of payment of a reasonable fee if required by 
such transfer agent, make available a written response to such person, 
or anyone acting under his authority, confirming or denying possession 
of such security as of such given date.
    (d) When any person requests in writing a transcript of such 
person's account with respect to a particular issue, either as the 
account appears currently or as it appeared on a specific date not more 
than six months prior to the date the registered transfer agent receives 
the request, every registered transfer agent shall, within twenty 
business days following receipt of the request and upon assurance of 
payment of a reasonable fee if required by such transfer agent, make 
available to such person a transcript, ledger or statement of account in 
sufficient detail to permit reconstruction of such account as of the 
date for which the transcript was requested.
    (e)(1) Response to written inquiries concerning dividend and 
interest payments. A registered transfer agent shall respond, within ten 
business days of receipt, to current claims that contain sufficient 
detail. A registered transfer agent shall respond, within twenty 
business days of receipt, to aged claims that contain sufficient detail. 
The response shall indicate in writing that the inquiry has been 
received, whether the claim requires further research and, if so, a 
reasonable estimate of how long that research may take. If no further 
research is required, the response shall indicate whether that claim is 
being or will be paid and, if not, the reason for not paying the claim. 
A registered transfer agent shall devote diligent attention to 
unresolved inquiries and shall resolve all inquiries as soon as 
possible.
    (2) Misdirected written inquiries concerning dividend and interest 
payments. In the event that a transfer agent is not the dividend 
disbursing or interest paying agent for an issue that is the subject of 
a claim under this section, but performed those or any transfer agent 
services for that issue within the preceding three years, the transfer 
agent shall provide in writing to the inquirer, within ten business days 
of receipt of the inquiry, the name and address of the current dividend 
disbursing or interest paying agent. If the transfer agent did not 
perform those or other transfer agent services for the issue within the 
preceding three years, the transfer agent must respond to the inquiry 
and may respond by returning the inquiry with a statement that the 
transfer agent is not the current dividend disbursing or interest paying 
agent and that it does not know the name and address of the current 
dividend disbursing or interest paying agent.
    (3) As used in this paragraph:
    (i) A current claim means a written inquiry concerning non-payment 
or incorrect payment of dividends or interest, the payment date for 
which occurred within the preceding six months.
    (ii) An aged claim means a written inquiry concerning non-payment or 
incorrect payment of dividends or interest, the payment date for which 
occurred more than six months before the inquiry.
    (iii) Sufficient detail means a written inquiry or request that 
identifies: The issue; the name(s) in which the securities are 
registered; the number of shares (or principal amount of debt securities 
or number of units for any other kind of security) involved; the 
approximate record date(s) or payment date(s) relating to the claim; 
and, with respect to registered broker-dealers, registered clearing 
agencies, or banks, certificate numbers.
    (f) Telephone response. (1) A transfer agent may satisfy the written 
response requirements of this section by a telephone response to the 
inquirer if:
    (i) The telephone response resolves that inquiry; and

[[Page 652]]

    (ii) The inquirer does not request a written response.
    (2) When any person makes a written inquiry or request that would 
qualify under paragraph (e) of this section except that it fails to 
provide sufficient detail as specified in paragraph (e)(3)(iii) of this 
section, a registered transfer agent may telephone the inquirer to 
obtain the necessary additional detail within the time periods specified 
in paragraph (e)(1) of this section. If the transfer agent does not 
receive the additional detail within ten business days, the transfer 
agent immediately shall make a written request for the additional 
information.
    (g)(1) When any person makes a written inquiry or request which 
would qualify under paragraph (a), (b), (c), or (d) of this section 
except that it fails to provide all of the information specified in 
those paragraphs, or requests information which refers to a time earlier 
than the time periods specified in those paragraphs, a registered 
transfer agent shall confirm promptly receipt of the inquiry or request 
and respond to it as soon as possible.
    (2) When any person makes a written inquiry or request which would 
qualify under paragraph (e) of this section except that it fails to 
provide sufficient detail as specified in paragraph (e)(3)(iii) of this 
section, a registered transfer agent must respond to the inquiry within 
the time periods specified in paragraph (e)(1) of this section. A 
registered transfer agent may respond to such an inquiry in accordance 
with paragraph (e)(1) of this section as though sufficient detail had 
been provided, or may return it to the inquirer, requesting the 
additional necessary details.

(Secs. 2, 17, 17A and 23(a) (15 U.S.C. 78b, 78q, 78q-1 and 78w(a)))

[42 FR 32413, June 24, 1977, as amended at 51 FR 5707, Feb. 18, 1986]



Sec.  240.17Ad-6  Recordkeeping.

    (a) Every registered transfer agent shall make and keep current the 
following:
    (1) A receipt, ticket, schedule, log or other record showing the 
business day each routine item and each non-routine item is (i) received 
from the presentor and, if applicable, from the outside registrar and 
(ii) made available to the presentor and, if applicable, to the outside 
registrar;
    (2) A log, tally, journal, schedule or other record showing for each 
month:
    (i) The number of routine items received;
    (ii) The number of routine items received during the month that were 
turned around within three business days of receipt;
    (iii) The number of routine items received during the month that 
were not turned around within three business days of receipt;
    (iv) The number of non-routine items received during the month;
    (v) The number of non-routine items received during the month that 
were turned around;
    (vi) The number of routine items that, as of the close of business 
on the last business day of each month, have been in such registered 
transfer agent's possession for more than four business days, aged in 
increments of one business day (beginning on the fifth business day); 
and
    (vii) The number of non-routine items in such registered transfer 
agent's possession as of the close of business on the last business day 
of each month;
    (3) With respect to items for which the registered transfer agent 
acts as an outside registrar:
    (i) A receipt, ticket, schedule, log or other record showing the 
date and time:
    (A) Each item is (1) received from the presenting transfer agent and 
(2) made available to the presenting transfer agent;
    (B) Each written or oral notice of refusal to perform the registrar 
function is made available to the presenting transfer agent (and the 
substance of the notice); and
    (ii) A log, tally, journal, schedule or other record showing for 
each month:
    (A) The number of items received;
    (B) The number of items processed within the time required by Sec.  
240.17Ad-2(b); and
    (C) The number of items not processed within the time required by 
Sec.  240.17Ad-2(b);
    (4) A record of calculations demonstrating the registered transfer

[[Page 653]]

agent's monitoring of its performance under Sec.  240.17Ad-2 (a) and 
(b);
    (5) A copy of any written notice filed pursuant to Sec.  240.17Ad-2;
    (6) Any written inquiry or request, including those not subject to 
the requirements of Sec.  240.17Ad-5, concerning an item, showing the 
date received; a copy of any written response to an inquiry or request, 
showing the date dispatched or mailed to the presentor; if no response 
to an inquiry or request was made, the date the certificate involved was 
made available to the presentor; or, in the case of an inquiry or 
request under Sec.  240.17Ad-5(a) responded to by telephone, a telephone 
log or memorandum showing the date and substance of any telephone 
response to the inquiry;
    (7) A log, journal, schedule or other record showing the number of 
inquiries subject to Sec.  240.17Ad-5 (a), (b), (c) and (d) received 
during each month but not responded to within the required time frames 
and the number of such inquiries pending as of the close of business on 
the last business day of each month;
    (8) Any document, resolution, contract, appointment or other 
writing, any supporting document, concerning the appointment and the 
termination of such appointment of such registered transfer agent to act 
in any capacity for any issue on behalf of the issuer, on behalf of 
itself as the issuer or on behalf of any person who was engaged by the 
issuer to act on behalf of the issuer;
    (9) Any record of an active (i.e., unreleased) stop order, notice of 
adverse claim or any other restriction on transfer;
    (10) A copy of any transfer journal and registrar journal prepared 
by such registered transfer agent; and
    (11) Any document upon which the transfer agent bases its 
determination that an item received for transfer was received in 
connection with a reorganization, tender offer, exchange, redemption, 
liquidation, conversion or the sale of securities registered pursuant to 
the Securities Act of 1933 and, accordingly, was not routine under Sec.  
240.17Ad-1(i) (5) or (8).
    (b) Every registered transfer agent which, under the terms of its 
agency, maintains securityholder records for an issue or which acts as a 
registrar for an issue shall, with respect to such issue, obtain from 
the issuer or its transfer agent and retain documentation setting forth 
the total number of shares or principal amount of debt securities or 
total number of units if relating to any other kind of security 
authorized and the total issued and outstanding pursuant to issuer 
authorization.
    (c) Every registered transfer agent which, under the terms of its 
agency, maintains securityholder records for an issue shall, with 
respect to such issue, retain each cancelled registered bond, debenture, 
share, warrant or right, other registered evidence of indebtedness, or 
other certificate of ownership and all accompanying documentation, 
except legal papers returned to the presentor.

(Secs. 2, 17, 17A and 23(a) (15 U.S.C. 78b, 78q, 78q-1 and 78w(a)))

[42 FR 32413, June 24, 1977]



Sec.  240.17Ad-7  Record retention.

    (a) The records required by Sec.  240.17Ad-6(a)(1), (3)(i), (6) or 
(11) shall be maintained for a period of not less than two years, the 
first six months in an easily accessible place.
    (b) The records required by Sec.  240.17Ad-6(a) (2), (3)(ii), (4), 
(5) or (7) shall be maintained for a period of not less than two years, 
the first year in an easily accessible place.
    (c) The records required by Sec.  240.17Ad-6(a) (8), (9) and (10) 
and (b) shall be maintained in an easily accessible place during the 
continuance of the transfer agency and shall be maintained for one year 
after termination of the transfer agency.
    (d) The records required by Sec.  240.17Ad-6(c) shall be maintained 
for a period of not less than six years, the first six months in an 
easily accessible place.
    (e) Every registered transfer agent shall maintain in an easily 
accessible place:
    (1) All records required under Sec.  240.17f-2(d) until at least 
three years after the termination of employment of those persons 
required by Sec.  240.17f-2 to be fingerprinted; and

[[Page 654]]

    (2) All records required pursuant to Sec.  240.17f-2(e).
    (f) Subject to the conditions set forth in this section, the records 
required to be maintained pursuant to Sec.  240.17Ad-6 may be retained 
using electronic or micrographic media and may be preserved in those 
formats for the time required by Sec.  240.17Ad-7. Records stored 
electronically or micrographically in accordance with this paragraph may 
serve as a substitute for the hard copy records required to be 
maintained pursuant to Sec.  240.17Ad-6.
    (1) For purposes of this section:
    (i) The term micrographic media means microfilm or microfiche or any 
similar medium.
    (ii) The term electronic storage media means any digital storage 
medium or system.
    (iii) The term ARA means your appropriate regulatory agency as that 
term is defined in 15 U.S.C. 78c(a)(34).
    (2) If you as a registered transfer agent use electronic storage 
media or micrographic media to store your records, you must:
    (i) Have available at all times for examination by the staffs of the 
Commission and of your ARA facilities to project or produce immediately 
easily readable images of such records;
    (ii) Be ready at all times to provide such records that the staffs 
of the Commission and your ARA or their representatives may request;
    (iii) Create an accurate index of such records, store the index with 
those records, and have the index available at all times for examination 
by the staffs of the Commission and your ARA;
    (iv) Have quality assurance procedures to verify the quality and 
accuracy of the electronic or micrographic recording process; and
    (v) Maintain separately from the originals duplicates of the records 
and the index that you store on electronic storage media or micrographic 
media. You may store the duplicates of the indexed records on any medium 
permitted by this section. You must preserve the duplicate records and 
index for the same time that is required by this section for the indexed 
records, and you must have them available at all times for examination 
by the staffs of the Commission and your ARA.
    (3) Any electronic storage media that you use to store your records 
must:
    (i) Ensure the security and integrity of the records by means of 
manual and automated controls that assure the authenticity and quality 
of the electronic facsimile, detect attempts to alter or remove the 
records, and provide means to recover altered, damaged, or lost records 
resulting from any cause;
    (ii) Externally label all removable units of storage media using a 
unique identifier that allows the manual association of that removable 
storage unit with its place and order in the recordkeeping system; and
    (iii) Uniquely identify files and internally label each file with 
its unique name, the date and time of file creation, the date and time 
of last modification or extension, and a file sequence number when the 
file spans more than one volume.
    (4) If you use electronic storage media or micrographic media to 
store your records, you must establish an audit system that accounts for 
the inputting of and any changes to every record that is stored on 
electronic storage media or micrographic media. The results of such 
audit system must:
    (i) Be available at all times for examination by the staffs of the 
Commission and your ARA; and
    (ii) Be preserved for the same time that is required by this section 
for the underlying records.
    (5) If you use electronic storage media or micrographic media to 
store your records, you must:
    (i) Maintain, keep current, and provide promptly upon request by the 
staffs of the Commission and your ARA all information necessary to 
access the records and indexes stored on electronic storage media or 
micrographic media; and
    (ii) Place, or have a third party place on your behalf, in escrow 
with an independent third party and keep current a copy of the physical 
and logical format of the electronic storage or micrographic media, the 
field format of all different information types written on the 
electronic storage media and source code, and the appropriate 
documentation and information necessary

[[Page 655]]

to access records and indexes. The independent escrow agent must file an 
undertaking signed by a duly authorized person with the Commission and 
your ARA stating that:

    ``[Name of Third Party] hereby undertakes to furnish promptly upon 
request to the U.S. Securities and Exchange Commission, its designees, 
or representatives, upon reasonable request, a current copy of the 
physical and logical format of the electronic storage or micrographic 
media, the field format of all different information types written on 
the electronic storage media and source code, and the appropriate 
documentation and information necessary to access the records and 
indexes of [Name of Transfer Agent]'s electronic records management 
system.

    (6) (i) If you use a third party to maintain or preserve some or all 
of the required records using electronic storage media or micrographic 
media, such third party shall file a written undertaking signed by a 
duly authorized person with the Commission and your ARA stating that:

    ``With respect to any books and records maintained or preserved on 
behalf of [Name of Transfer Agent], [Name of Third Party] hereby 
undertakes to permit examination of such books and records at any time 
or from time to time during business hours by representatives or 
designees of the U.S. Securities and Exchange Commission, and to 
promptly furnish to said Commission or its designee true, correct, 
complete, and current hard copies of any or all or any part of such 
books and records.''

    (ii) Agreement with a third party to maintain your records shall not 
relieve you from the responsibility to prepare and maintain records as 
specified in this section or in Sec.  240.17Ad-6.
    (g) If the records required to be maintained and preserved by a 
registered transfer agent pursuant to the requirements of Sec. Sec.  
240.17Ad-6 and 240.17Ad-7 are maintained and preserved on behalf of the 
registered transfer agent by an outside service bureau, other 
recordkeeping service or the issuer, the registered transfer agent shall 
obtain, from such outside service bureau, other recordkeeping service or 
the issuer, an agreement, in writing, to the effect that:
    (1) Such records are subject at any time, or from time to time, to 
reasonable periodic, special, or other examinations by representatives 
of the Commission and the appropriate regulatory agency for such 
registered transfer agent if it is not the Commission; and
    (2) The outside service bureau, recordkeeping service, or issuer 
will furnish to the Commission and the appropriate regulatory agency, 
upon demand, at either the principal office or at any regional office, 
complete, correct and current hard copies of any and all such records.
    (h) When a registered transfer agent ceases to perform transfer 
agent functions for an issue, the responsibility of such transfer agent 
under Sec.  240.17Ad-7 to retain the records required to be made and 
kept current under Sec.  240.17Ad-6(a) (1), (6), (9), (10) and (11), (b) 
and (c) shall end upon the delivery of such records to the successor 
transfer agent.
    (i) The records required by Sec. Sec.  240.17Ad-17(d) and 240.17Ad-
19(c) shall be maintained for a period of not less than three years, the 
first year in an easily accessible place.

[42 FR 32414, June 24, 1977, as amended at 47 FR 54063, Dec. 1, 1982; 62 
FR 52237, Oct. 7, 1997; 66 FR 21659, May 1, 2001; 68 FR 74401, Dec. 23, 
2003; 68 FR 75054, Dec. 29, 2003; 78 FR 4874, Jan. 23, 2013]



Sec.  240.17Ad-8  Securities position listings.

    (a) For purposes of this section, the term securities position 
listing means, with respect to the securities of any issuer held by a 
registered clearing agency in the name of the clearing agency or its 
nominee, a list of those participants in the clearing agency on whose 
behalf the clearing agency holds the issuer's securities and of the 
participants' respective positions in such securities as of a specified 
date.
    (b) Upon request, a registered clearing agency shall furnish a 
securities position listing promptly to each issuer whose securities are 
held in the name of the clearing agency or its nominee. A registered 
clearing agency may charge issuers requesting securities position 
listings a fee designed to recover the reasonable costs of providing the 
securities position listing to the issuer.

(Secs. 2, 17A, and 23(a) (15 U.S.C. 78b, 78q-1, and 78w(a)))

[44 FR 76777, Dec. 28, 1979]

[[Page 656]]



Sec.  240.17Ad-9  Definitions.

    As used in this section and Sec. Sec.  240.17Ad-10, 240.17Ad-11, 
240.17Ad-12 and 240.17Ad-13:
    (a) Certificate detail, with respect to certificated securities, 
includes, at a minimum, all of the following, and with respect to 
uncertificated securities, includes items (2) through (8):
    (1) The certificate number.
    (2) The number of shares for equity securities or the principal 
dollar amount for debt securities;
    (3) The securityholder's registration;
    (4) The address of the registered securityholder;
    (5) The issue date of the security;
    (6) The cancellation date of the security;
    (7) In the case of redeemable securities of investment companies, an 
appropriate description of each debit and credit (i.e., designation 
indicating purchase, redemption, or transfer); and
    (8) Any other identifying information about securities and 
securityholders the transfer agent reasonably deems essential to its 
recordkeeping system for the efficient and effective research of record 
differences.
    (b) Master securityholder file is the official list of individual 
securityholder accounts. With respect to uncertificated securities of 
companies registered under the Investment Company Act of 1940, the 
master securityholder file may consist of multiple, but linked, 
automated files.
    (c) A subsidiary file is any list or record of accounts, 
securityholders, or certificates that evidences debits or credits that 
have not been posted to the master securityholder file.
    (d) A control book is the record or other document that shows the 
total number of shares (in the case of equity securities) or the 
principal dollar amount (in the case of debt securities) authorized and 
issued by the issuer.
    (e) A credit is an addition of appropriate certificate detail to the 
master securityholder file.
    (f) A debit is a cancellation of appropriate certificate detail from 
the master securityholder file.
    (g) A record difference occurs when either:
    (1) The total number of shares or total principal dollar amount of 
securities in the master securityholder file does not equal the number 
of shares or principal dollar amount in the control book; or
    (2) The security transferred or redeemed contains certificate detail 
different from the certificate detail currently on the master 
securityholder file, which difference cannot be immediately resolved.
    (h) A recordkeeping transfer agent is the registered transfer agent 
that maintains and updates the master securityholder file.
    (i) A co-transfer agent is the registered transfer agent that 
transfers securities but does not maintain and update the master 
securityholder file.
    (j) A named transfer agent is the registered transfer agent that is 
engaged by an issuer to perform transfer agent functions for an issue of 
securities but has engaged a service company to perform some or all of 
those functions.
    (k) A service company is the registered transfer agent engaged by a 
named transfer agent to perform transfer agent functions for that named 
transfer agent.
    (l) A file includes automated and manual records.

(Secs. 2, 17(a), 17A(d) and 23(a) thereof, 15 U.S.C. 78b, 78q(a), 78q-
1(d) and 78w(a))

[48 FR 28246, June 21, 1983]



Sec.  240.17Ad-10  Prompt posting of certificate detail to master 
securityholder files, maintenance of accurate securityholder files,
communications between co-transfer agents and recordkeeping transfer
agents, maintenance of current control book, retention of certificate
detail and ``buy-in'' of physical over-issuance.

    (a)(1) Every recordkeeping transfer agent shall promptly and 
accurately post to the master securityholder file debits and credits 
containing minimum and appropriate certificate detail representing every 
security transferred, purchased, redeemed or issued; Provided, however, 
That if a security transferred or redeemed contains certificate detail 
different from that currently posted to the master securityholder file, 
the credit shall be posted to the master securityholder file and the 
debit and related certificate detail

[[Page 657]]

shall be maintained in a subsidiary file until resolved. The 
recordkeeping transfer agent shall exercise diligent and continuous 
attention to resolve the resulting record difference and, once resolved, 
shall post to the master securityholder file the debit maintained in the 
subsidiary file. Postings of certificate detail shall remain on the 
master securityholder file until a debit to a securityholder acount is 
appropriate.
    (2) As used in this paragraph, the term promptly means the following 
number of days after issuance, purchase, transfer, or redemption of a 
security:
    (i) With respect to recordkeeping transfer agents (other than 
transfer agents that perform transfer agent functions with respect to 
redeemable securities issued by investment companies registered under 
section 8 of the Investment Company Act of 1940) that are exempt 
transfer agents under Sec.  240.17Ad-4(b), 30 calendar days;
    (ii) With respect to recordkeeping transfer agents (other than 
transfer agents that perform transfer agent functions with respect to 
redeemable securities issued by investment companies registered under 
section 8 of the Investment Company Act of 1940) that:
    (A) Perform transfer agent functions solely for their own or their 
affiliated companies' securities issues, and
    (B) Employ batch posting systems, ten business days; and
    (iii) With respect to all other recordkeeping transfer agents, five 
business days; Provided, however, That all securities transferred, 
purchased, redeemed or issued prior to record date, but posted 
subsequent thereto, shall be posted as of the record date.
    (3) With respect to posting certificate detail from transfer 
journals received by the recordkeeping transfer agent from a co-transfer 
agent, the time frames set forth in paragraph (a)(2) shall commence upon 
receipt of those journals by the recordkeeping transfer agent.
    (b) Every recordkeeping transfer agent shall maintain and keep 
current an accurate master securityholder file and subsidiary files. If 
such transfer agent has any record difference, its master securityholder 
file and subsidiary files must accurately represent all relevant debits 
and credits until the record difference is resolve. The recordkeeping 
transfer agent shall exercise diligent and continuous attention to 
resolve all record differences.
    (c)(1) Every co-transfer agent shall dispatch or mail promptly to 
the recordkeeping transfer agent a record of debits and credits for 
every security transferred or issued. For the purposes of this 
paragraph, ``promptly'' means within two business days following 
transfer of each security, and, with respect to transfers occurring 
within five business days of record date, daily.
    (2) Within three business days following the end of each month, 
every co-transfer agent shall mail to the recordkeeping transfer agent 
for each issue of securities for which it acts as a co-transfer agent, a 
report setting forth:
    (i) The principal dollar amount of debt securities or the number of 
shares and related market value of equity securities comprising any buy-
in executed by the co-transfer agent during the preceding month pursuant 
to paragraph (g) of this section; and
    (ii) The reason for the buy-in.
    (d) Every co-transfer agent shall respond promptly to all inquiries 
from the recordkeeping transfer agent regarding records required to be 
dispatched or mailed by the co-transfer agent pursuant to Sec.  
240.17Ad-10(c). For the purposes of this paragraph, ``promptly'' means 
within five business days of receipt of an inquiry from a recordkeeping 
transfer agent.
    (e) Every recordkeeping transfer agent shall maintain and keep 
current an accurate control book for each issue of securities. A change 
in the control book shall not be made except upon written authorization 
from a duly authorized agent of the issuer.
    (f) Every recordkeeping transfer agent shall retain a record of all 
certificate detail deleted from the master securityholder file for a 
period of six years from the date of deletion. In lieu of maintaining a 
hard copy, a recordkeeping transfer agent may comply with this paragraph 
by complying with Sec.  240.17Ad-7(f) or Sec.  240.17Ad-7(g).
    (g)(1) A registered transfer agent, in the event of any actual 
physical

[[Page 658]]

overissuance that such transfer agent caused and of which it has 
knowledge, shall, within 60 days of the discovery of such overissuance, 
buy in securities equal to the number of shares in the case of equity 
securities or the principal dollar amount in the case of debt 
securities. During the sixty-day period, the registered transfer agent 
shall devote diligent attention to resolving the overissuance and 
recovering the certificates. This paragraph requires a buy-in only by 
the transfer agent that erroneously issued the certificate(s) giving 
rise to the physical overissuance, and applies only to those physical 
overissuances created by transfers or issuances subsequent to September 
30, 1983.
    (2) If a transfer agent obtains a letter from the party holding the 
overissued certificates that confirms that the overissued certificate(s) 
will be returned to the transfer agent not later than thirty days after 
the expiration of the sixty-day period, the transfer agent need not buy 
in securities by the sixtieth day. If, however, the certificate(s) are 
not returned to the transfer agent within the additional thirty-day 
period, the transfer agent immediately must execute the buy-in in 
accordance with paragraph (g)(1) of this section.
    (3) If the certificates involved are covered by a surety bond 
indemnifying the transfer agent for all expenses incurred as a result of 
actual overissuance, the transfer agent need not buy in the securities. 
The transfer agent, however, shall devote diligent attention to 
resolving the overissuance and recovering the certificates.
    (4) For purposes of this paragraph, discovery of the overissuance 
occurs when the transfer agent identifies the erroneously issued 
certificate(s) and the registered securityholder(s).
    (h) Subsequent to the effective date of this section, registered 
transfer agents that:
    (1) Assume the maintenance and updating of master securityholder 
files from predecessor transfer agents,
    (2) Establish a new master securityholder file for a particular 
issue, or
    (3) Convert from manual to automated systems,

must carry over any existing certificate detail required by this section 
on the master securityholder file.

A recordkeeping transfer agent shall not be required to add certificate 
detail to the master securityholder file respecting certificates issued 
prior to the effective date of this section.

(Secs. 2, 17(a), 17A(d) and 23(a) thereof, 15 U.S.C. 78b, 78q(a), 78q-
1(d) and 78w(a))

[48 FR 28246, June 21, 1983, as amended at 51 FR 5708, Feb. 18, 1986]



Sec.  240.17Ad-11  Reports regarding aged record differences, buy-ins
and failure to post certificate detail to master securityholder and
subsidiary files.

    (a) Definitions. (1) Issuer capitalization means the market value of 
the issuer's authorized and outstanding equity securities or, with 
respect to a municipal securities issuer, the market value of all debt 
issues for which the transfer agent performs recordkeeping functions on 
behalf of that issuer, determined by reference to the control book and 
current market prices.
    (2) An aged record difference is a record difference that has 
existed for more than thirty calendar days.
    (b) Reports to Issuers. (1) Within ten business days following the 
end of each month, every recordkeeping transfer agent shall report the 
information specified in paragraph (d)(1) of this section to the persons 
specified in paragraph (b)(3) of this section, when the aggregate market 
value of aged record differences in all equity securities issues or debt 
securities issues maintained on behalf of a particular issuer exceeds 
the thresholds set forth in the table below.

------------------------------------------------------------------------
                                                 Aggregate market value
                                                     of aged record
                                                   differences exceeds
             Issuer capitalization             -------------------------
                                                 For equity    For debt
                                                 securities   securities
------------------------------------------------------------------------
(1) $5 million or less........................      $50,000     $100,000
(2) Greater than $5 million but less than $50       250,000      500,000
 million......................................
(3) Greater than $50 million but less than          500,000    1,000,000
 $150 million.................................
(4) Greater than $150 million.................    1,000,000    2,000,000
------------------------------------------------------------------------

    (2) Within ten business days following the end of each month (or 
within ten days thereafter in the case of a named transfer agent that 
receives a

[[Page 659]]

report from a service company pursuant to paragraph (b)(3)(i)(C)), every 
recordkeeping transfer agent shall report the information specified in 
paragraph (d)(2) of this section to the persons specified in paragraph 
(b)(3) of this section, with respect to each issue of securities for 
which it acts as recordkeeping transfer agent, concerning any securities 
bought-in pursuant to Sec.  240.17Ad-10(g) or reported as bought-in 
pursuant to Sec.  240.17Ad-10(c) during the preceding month.
    (3) The report shall be sent:
    (i) By every recordkeeping transfer agent (other than a 
recordkeeping transfer agent that performs transfer agent functions 
solely for its own securities):
    (A) To the official performing corporate secretary functions for the 
issuer of the securities for which the aged record difference exists or 
for which the buy-in occurred;
    (B) With respect to an issue of municipal securities, to the chief 
financial officer of the issuer of the securities for which the aged 
record difference exists or for which the buy-in occurred; or
    (C) If it acts as a service company, to the named transfer agent; 
and
    (ii) By every named transfer agent that is engaged by an issuer to 
maintain and update the master securityholder file:
    (A) To the official performing corporate secretary functions for the 
issuer of the securities for which the aged record difference exists or 
for which the buy-in occurred; or
    (B) With respect to an issue of municipal securities, to the chief 
financial officer of the issuer of the securities for which the aged 
record difference exists or for which the buy-in occurred.
    (c) Reports to appropriate regulatory agencies (1) Within ten 
business days following the end of each calendar quarter, every 
recordkeeping transfer agent shall report the information specified in 
paragraph (d)(1) of this section to its appropriate regulatory agency in 
accordance with Sec.  240.17Ad-2(h), when the aggregate market value of 
aged record differences for all issues for which it performs 
recordkeeping functions exceeds the thresholds specified below:
    (i) $300,000 if it is a recordkeeping transfer agent for 5 or fewer 
issues;
    (ii) $500,000 for 6-24 issues;
    (iii) $800,000 for 25-49 issues;
    (iv) $1 million for 50-74 issues;
    (v) $1.2 million for 75-99 issues;
    (vi) $1.4 million for 100-499 issues;
    (vii) $1.6 million for 500-999 issues;
    (viii) $2.6 million for 1,000-1,999 issues; and
    (ix) An additional $1 million for each additional 1,000 issues.
    (2) Within ten business days following the end of each calendar 
quarter, every recordkeeping transfer agent shall report the information 
specified in paragraph (d)(2) of this section to its appropriate 
regulatory agency in accordance with Sec.  240.17Ad-2(h), concerning 
buy-ins of all issues for which it acts as recordkeeping transfer agent, 
when the aggregate market value of all buy-ins executed pursuant to 
Sec.  240.17Ad-10(g) during that calendar quarter exceeds $100,000.
    (3) When the recordkeeping transfer agent has any debits or credits 
for securities transferred, purchased, redeemed or issued that are 
unposted to the master securityholder and/or subsidiary files for more 
than five business days after debits and credits are required to be 
posted to the master securityholder file or subsidiary files pursuant to 
Sec.  240.17Ad-10, it shall immediately report such fact to its 
appropriate regulatory agency in accordance with Sec.  240.17Ad-2(h) and 
shall state in that report what steps have been, and are being, taken to 
correct the situation.
    (d) Content of reports. (1) Each report pursuant to paragraphs 
(b)(1) and (c)(1) of this section shall set forth with respect to each 
issue of securities:
    (i) The principal dollar amount and related market value of debt 
securities or the number of shares and related market value of equity 
securities comprising the aged record difference (including information 
concerning aged record differences existing as of the effective date of 
this section);
    (ii) The reasons for the aged record difference; and
    (iii) The steps being taken or to be taken to resolve the aged 
record difference.

[[Page 660]]

    (2) Each report pursuant to paragraphs (b)(2) and (c)(2) of this 
section shall set forth with respect to each issue of securities:
    (i) The principal dollar amount of debt securities and related 
market value or the number of shares and related market value of equity 
securities comprising any buy-in executed pursuant to Sec.  240.17Ad-
10(g);
    (ii) The party that executed the buy-in; and
    (iii) The reason for the buy-in.
    (e) For purposes of this section, the market value of an issue shall 
be determined as of the last business day on which market value 
information is available during the reporting period.
    (f) A copy of any report required under this section shall be 
retained by the reporting transfer agent for a period of not less than 
three years, the first year in an easily accessible place.

(Secs. 2, 17(a), 17A(d) and 23(a) thereof, 15 U.S.C. 78b, 78q(a), 78q-
1(d) and 78w(a))

[48 FR 28247, June 21, 1983]



Sec.  240.17Ad-12  Safeguarding of funds and securities.

    (a) Any registered transfer agent that has custody or possession of 
any funds or securities related to its transfer agent activities shall 
assure that:
    (1) All such securities are held in safekeeping and are handled, in 
light of all facts and circumstances, in a manner reasonably free from 
risk of theft, loss or destruction (other than by a transfer agent's 
certificate destruction procedures pursuant to Sec.  240.17Ad-19); and
    (2) All such funds are protected, in light of all facts and 
circumstances, against misuse. In evaluating which particular safeguards 
and procedures must be employed, the cost of the various safeguards and 
procedures as well as the nature and degree of potential financial 
exposure are two relevant factors.
    (b) For purposes of this section, the term securities shall have the 
same meaning as the term securities certificate as defined in Sec.  
240.17f-1(a)(6).

(Secs. 2, 17(a), 17A(d) and 23(a) thereof, 15 U.S.C. 78b, 78q(a), 78q-
1(d) and 78w(a))

[48 FR 28248, June 21, 1983, as amended at 68 FR 74401, Dec. 23, 2003]



Sec.  240.17Ad-13  Annual study and evaluation of internal accounting
control.

    (a) Accountant's report. Every registered transfer agent, except as 
provided in paragraph (d) of this section, shall file annually with the 
Commission and the transfer agent's appropriate regulatory agency in 
accordance with Sec.  240.17Ad-2(h), a report specified in paragraph 
(a)(1) of this section prepared by an independent accountant concerning 
the transfer agent's system of internal accounting control and related 
procedures for the transfer of record ownership and the safeguarding of 
related securities and funds. That report shall be filed within 90 
calendar days of the date of the study and evaluation set forth in 
paragraph (a)(1).
    (1) The accountant's report shall:
    (i) State whether the study and evaluation was made in accordance 
with generally accepted auditing standards using the criteria set forth 
in paragraph (a)(3) of this section;
    (ii) Describe any material inadequacies found to exist as of the 
date of the study and evaluation and any corrective action taken, or if 
no material inadequacy existed, the report shall so state;
    (iii) Comment on the current status of any material inadequacy 
described in the immediately preceding report; and
    (iv) Indicate the date of the study and evaluation.
    (2) The study and evaluation of the transfer agent's system of 
internal accounting control for the transfer of record ownership and the 
safeguarding of related securities and funds shall cover the following:
    (i) Transferring securities related to changes of ownership (i.e., 
cancellation of certificates or other instruments evidencing prior 
ownership and issuance of certificates or instruments evidencing current 
ownership);
    (ii) Registering changes of ownership on the books and records of 
the issuer;
    (iii) Transferring record ownership as a result of corporate actions 
(e.g., issuance, retirement, redemption, liquidation, conversion, 
exchange, tender offer or other types of reorganization);
    (iv) Dividend disbursement or interest paying-agent activities;

[[Page 661]]

    (v) Administering dividend reinvestment programs; and
    (vi) Distributing statements respecting initial offerings of 
securities.
    (3) For purposes of this report, the objectives of a transfer 
agent's system of internal accounting control for the transfer of record 
ownership and the safeguarding of related securities and funds should be 
to provide reasonable, but not absolute, assurance that securities and 
funds are safeguarded against loss from unauthorized use or disposition 
and that transfer agent activities are performed promptly and 
accurately. For purposes of this report, a material inadequacy is a 
condition for which the independent accountant believes that the 
prescribed procedures or the degree of compliance with them do not 
reduce to a relatively low level the risk that errors or irregularities, 
in amounts that would have a significant adverse effect on the transfer 
agent's ability promptly and accurately to transfer record ownership and 
safeguard related securities and funds, would occur or not be detected 
within a timely period by employees in the normal course of performing 
their assigned functions. Occurrence of errors or irregularities more 
frequently than in isolated instances may be evidence that the system 
has a material inadequacy. A significant adverse effect on a transfer 
agent's ability promptly and accurately to transfer record ownership and 
safeguard related securities and funds could result from any condition 
or conditions that individually, or taken as a whole, would reasonably 
be expected to:
    (i) Inhibit the transfer agent from promptly and accurately 
discharging its responsibilities under its contractual agreement with 
the issuer;
    (ii) Result in material financial loss to the transfer agent; or
    (iii) Result in a violation of Sec.  240.17Ad-2, 17Ad-10 or 17Ad-
12(a).
    (b) Notice of corrective action. If the accountant's report 
describes any material inadequacy, the transfer agent shall, within 
sixty calendar days after receipt of the report, notify the Commission 
and its appropriate regulatory agency in writing regarding the 
corrective action taken or proposed to be taken.
    (c) Record retention. The accountant's report and any documents 
required by paragraph (b) of this section shall be maintained by the 
transfer agent for at least three years, the first year in an easily 
accessible place.
    (d) Exemptions. The requirements of Sec.  240.17Ad-13 shall not 
apply to registered transfer agents that qualify for exemptions pursuant 
to this paragraph, 17Ad-13(d).
    (1) A registered transfer agent shall be exempt if it performs 
transfer agent functions solely for:
    (i) Its own securities;
    (ii) Securities issued by a subsidiary in which it owns 51% or more 
of the subsidiary's capital stock; and
    (iii) Securities issued by another corporation that owns 51% or more 
of the capital stock of the registered transfer agent.
    (2) A registered transfer agent shall be exempt if it:
    (i) Is an exempt transfer agent pursuant to Sec.  240.17AD-4(b); and
    (ii) In the case of a transfer agent that performs transfer agent 
functions for redeemable securities issued by companies registered under 
section 8 of the Investment Company Act of 1940, maintains master 
securityholder files consisting of fewer than 1000 shareholder accounts, 
in the aggregate, for each of such issues for which it performs transfer 
agent functions.
    (3) A registered transfer agent shall be exempt if it is a bank or 
financial institution subject to regulation by the Board of Governors of 
the Federal Reserve System, the Office of the Comptroller of the 
Currency or the Federal Deposit Insurance Corporation, provided that it 
is not notified to the contrary by its appropriate regulatory agency and 
provided that a report similar in scope to the requirements of Sec.  
240.17Ad-13(a) is prepared for either the bank's board of directors or 
an audit committee of the board of directors.

(Secs. 2, 17(a), 17A(d) and 23(a) thereof, 15 U.S.C. 78b, 78q(a), 78q-
1(d) and 78w(a))

[48 FR 28248, June 21, 1983]



Sec.  240.17Ad-14  Tender agents.

    (a) Establishing book-entry depository accounts. When securities of 
a subject company have been declared eligible by

[[Page 662]]

one or more qualified registered securities depositories for the 
services of those depositories at the time a tender or exchange offer is 
commenced, no registered transfer agent shall act on behalf of the 
bidder as a depositary, in the case of a tender offer, or an exchange 
agent, in the case of an exchange offer, in connection with a tender or 
exchange offer, unless that transfer agent has established, within two 
business days after commencement of the offer, specially designated 
accounts. These accounts shall be maintained throughout the duration of 
the offer, including protection periods, with all qualified registered 
securities depositories holding the subject company's securities, for 
purposes of receiving from depository participants securities being 
tendered to the bidder by book-entry delivery pursuant to transmittal 
letters and other documentation and for purposes of allowing tender 
agents to return to depository participants by book-entry movement 
securities withdrawn from the offer.
    (b) Exclusions. The rule shall not apply to tender or exchange 
offers (1) that are made for a class of securities of a subject company 
that has fewer than (i) 500 security holders of record for that class, 
or (ii) 500,000 shares of that class outstanding; or (2) that are made 
exclusively to security holders of fewer than 100 shares of a class of 
securities.
    (c) Definitions. For purposes of this rule, (1) the terms subject 
company, business day, security holders, and transmittal letter shall be 
given the meanings provided in Sec.  240.14d-1(b); (2) unless the 
context otherwise requires, a tender or exchange offer shall be deemed 
to have commenced as specified in Sec.  240.14d-2; (3) the term bidder 
shall mean any person who makes a tender or exchange offer or on whose 
behalf a tender or exchange offer is made; (4) a qualified registered 
securities depository shall mean a registered clearing agency having 
rules and procedures approved by the Commission pursuant to section 19 
of the Securities Exchange Act of 1934 to enable book-entry delivery of 
the securities of the subject company to, and return of those securities 
from, the transfer agent through the facilities of that securities 
depository; and (5) the term depositary refers to that agent of the 
bidder receiving securities from tendering depository participants and 
paying those participants for shares tendered. The term exchange agent 
refers to the agent performing like functions in connection with an 
exchange offer.
    (d) Exemptions. The Commission may exempt from the provisions of 
this rule, either unconditionally or on specified terms and conditions, 
any registered transfer agent, tender or exchange offer, or class of 
tender or exchange offers, if the Commission determines that an 
exemption is consistent with the public interest, the protection of 
investors, the prompt and accurate clearance and settlement of 
securities transactions, the maintenance of fair and orderly markets, or 
the removal of impediments to a national clearance and settlement 
system.

(Secs. 2, 11A(a)(1)(B), 14(d)(4), 15(c)(3), 15(c)(6), 17A(a), 17A(d)(1), 
and 23(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78b, 78k-
1(a)(1)(B), 78n(d)(4), 78o(c)(3), 78o(c)(6), 78q-1(a), 78q-1(d)(1) and 
78w(a)))

[49 FR 3071, Jan. 25, 1984]



Sec.  240.17Ad-15  Signature guarantees.

    (a) Definitions. For purposes of this section, the following terms 
shall mean:
    (1) Act means the Securities Exchange Act of 1934;
    (2) Eligible Guarantor Institution means:
    (i) Banks (as that term is defined in section 3(a) of the Federal 
Deposit Insurance Act [12 U.S.C. 1813(a)]);
    (ii) Brokers, dealers municipal securities dealers, municipal 
securities brokers, government securities dealers, and government 
securities brokers, as those terms are defined under the Act;
    (iii) Credit unions (as that term is defined in Section 19 (b)(1)(A) 
of the Federal Reserve Act [12 U.S.C. 461(b)]);
    (iv) National securities exchanges, registered securities 
associations, clearing agencies, as those terms are used under the Act; 
and
    (v) Savings associations (as that term is defined in section 3(b) of 
the Federal Deposit Insurance Act [12 U.S.C. 1813(b)]).
    (3) Guarantee means a guarantee of the signature of the person 
endorsing a

[[Page 663]]

certificated security, or originating an instruction to transfer 
ownership of a security or instructions concerning transfer of 
securities.
    (b) Acceptance of signature guarantees. A registered transfer agent 
shall not, directly or indirectly, engage in any activity in connection 
with a guarantee, including the acceptance or rejection of such 
guarantee, that results in the inequitable treatment of any eligible 
guarantor institution or a class of institutions.
    (c) Transfer agent's standards and procedures. Every registered 
transfer agent shall establish:
    (1) Written standards for the acceptance of guarantees of securities 
transfers from eligible guarantor institutions; and
    (2) Procedures, including written guidelines where appropriate, to 
ensure that those standards are used in determining whether to accept or 
reject guarantees from eligible guarantor institutions. Such standards 
and procedures shall not establish terms and conditions (including those 
pertaining to financial condition) that, as written or applied, treat 
different classes of eligible guarantor institutions inequitably, or 
result in the rejection of a guarantee from an eligible guarantor 
institution solely because the guarantor institution is of a particular 
type specified in paragraphs (a)(2)(i)-(a)(2)(v) of this section.
    (d) Rejection of items presented for transfer. (1) No registered 
transfer agent shall reject a request for transfer of a certificated or 
uncertificated security because the certificate, instruction, or 
documents accompanying the certificate or instruction includes an 
unacceptable guarantee, unless the transfer agent determines that the 
guarantor, if it is an eligible guarantor institution, does not satisfy 
the transfer agent's written standards or procedures.
    (2) A registered transfer agent shall notify the guarantor and the 
presentor of the rejection and the reasons for the rejection within two 
business days after rejecting a transfer request because of a 
determination that the guarantor does not satisfy the transfer agent's 
written standards or procedures. Notification to the presentor may be 
accomplished by making the rejected item available to the presentor. 
Notification to the guarantor may be accomplished by telephone, 
facsimile, or ordinary mail.
    (e) Record retention. (1) Every registered transfer agent shall 
maintain a copy of the standards and procedures specified in paragraph 
(c) of this section in an easily accessible place.
    (2) Every registered transfer agent shall make available a copy of 
the standards and procedures specified in paragraph (c) of this section 
to any person requesting a copy of such standards and procedures. The 
registered transfer agent shall respond within three days of a request 
for such standards and procedures by sending the requesting party a copy 
of the requested transfer agent's standards and procedures.
    (3) Every registered transfer agent shall maintain, for a period of 
three years following the date of the rejection, a record of transfers 
rejected, including the reason for the rejection, who the guarantor was 
and whether the guarantor failed to meet the transfer agent's guarantee 
standards.
    (f) Exclusions. Nothing in this section shall prohibit a transfer 
agent from rejecting a request for transfer of a certificated or 
uncertificated security:
    (1) For reasons unrelated to acceptance of the guarantor 
institution;
    (2) Because the person acting on behalf of the guarantor institution 
is not authorized by that institution to act on its behalf, provided 
that the transfer agent maintains a list of people authorized to act on 
behalf of that guarantor institution; or
    (3) Because the eligible guarantor institution of a type specified 
in paragraph (a)(2)(ii) of this section is neither a member of a 
clearing corporation nor maintains net capital of at least $100,000.
    (g) Signature guarantee program. (1) A registered transfer agent 
shall be deemed to comply with paragraph (c) of this section if its 
standards and procedures include:
    (i) Rejecting a request for transfer because the guarantor is 
neither a member of nor a participant in a signature guarantee program; 
or

[[Page 664]]

    (ii) Accepting a guarantee from an eligible guarantor institution 
who, at the time of issuing the guarantee, is a member of or participant 
in a signature guarantee program.
    (2) Within the first six months after revising its standards and 
procedures to include a signature guarantee program, the transfer agent 
shall not reject a request for transfer because the guarantor is neither 
a member of nor participant in a signature guarantee program, unless the 
transfer agent has given that guarantor ninety days written notice of 
the transfer agent's intent to reject transfers with guarantees from 
non-participating or non-member guarantors.
    (3) For purposes of paragraph (g) of this section, the term 
``signature guarantee program,'' means a program, the terms and 
conditions of which the transfer agent reasonably determines:
    (i) To facilitate the equitable treatment of eligible guarantor 
institutions; and
    (ii) To promote the prompt, accurate and safe transfer of securities 
by providing:
    (A) Adequate protection to the transfer agent against risk of 
financial loss in the event persons have no recourse against the 
eligible guarantor institution; and
    (B) Adequate protection to the transfer agent against the issuance 
of unauthorized guarantees.

[57 FR 1095, Jan. 10, 1992]



Sec.  240.17Ad-16  Notice of assumption or termination of transfer 
agent services.

    (a) A registered transfer agent that ceases to perform transfer 
agent services on behalf of an issuer of securities, including a 
registered transfer agent that ceases to perform transfer agent services 
on behalf of an issuer of securities because of a merger or acquisition 
by another transfer agent, shall send written notice of such termination 
to the appropriate qualified registered securities depository on or 
before the later of ten calendar days prior to the effective date of 
such termination or the day the transfer agent is notified of the 
effective date of such termination. Such notice shall include the full 
name, address, telephone number, and Financial Industry Number Standard 
(``FINS'') number of the transfer agent ceasing to perform the transfer 
agent services for the issuer; the issuer's name; the issue or issues 
handled and their CUSIP number(s); and if known, the name, address, and 
telephone number of the transfer agent that thereafter will provide 
transfer services for the issuer. If no successor transfer agent is 
known, the notice shall include the name and address of a contact person 
at the issuer.
    (b) A registered transfer agent that changes its name or address or 
that assumes transfer agent services on behalf of an issuer of 
securities, including a transfer agent that assumes transfer agent 
services on behalf of an issuer of securities because of a merger or 
acquisition of another transfer agent, shall send written notice of such 
to the appropriate qualified registered securities depository on or 
before the later of ten calendar days prior to the effective date of 
such change in status or the day the transfer agent is notified of the 
effective date of such change in status. A notice regarding a change of 
name or address shall include the full name, address, telephone number, 
and FINS number of the transfer agent and the location where 
certificates are received for transfer. A notice regarding the 
assumption of transfer agent services on behalf of an issuer of 
securities, including assumption of transfer agent services resulting 
from the merger or acquisition of another transfer agent, shall include 
the full name, address, telephone number, and FINS number of the 
transfer agent assuming the transfer agent services for the issuer; the 
issuer's name; and the issue or issues handled and their CUSIP 
number(s).
    (c) The notice described in paragraphs (a) and (b) of this section 
shall be delivered by means of secure communication. For purposes of 
this section, secure communication shall include telegraph, overnight 
mail, facsimile, or any other form of secure communication.
    (d)(1) The appropriate qualified registered securities depository 
that receives notices pursuant to paragraphs (a) and (b) of this section 
shall deliver within 24 hours a copy of such notices to each qualified 
registered securities

[[Page 665]]

depository. A qualified registered securities depository that receives 
notice pursuant to this section shall deliver a copy of such notices to 
its own participants within 24 hours.
    (2) A qualified registered securities depository may comply with its 
notice requirements under paragraph (d)(1) of this section by making 
available the notice of all material information from the notice within 
24 hours in a manner set forth in the rules of the qualified registered 
securities depository.
    (3) A qualified registered securities depository shall maintain such 
notices for a period of not less than two years, the first six months in 
an easily accessible place. Such notice shall be made available to the 
Commission or other persons as the Commission may designate by order.
    (4) A registered transfer agent that provides notice pursuant to 
paragraphs (a) and (b) of this section shall maintain such notice for a 
period of not less than two years, the first six months in an easily 
accessible place.
    (e) For purposes of this section, a qualified registered securities 
depository shall mean a clearing agency registered under section 17A of 
the Act (15 U.S.C. 78q-1) that performs clearing agency functions as 
described in section 3(a)(23)(A)(i) of the Act (15 U.S.C. 
78c(a)(23)(A)(i)) and that has rules and procedures concerning its 
responsibility for maintaining, updating, and providing appropriate 
access to the information it receives pursuant to this section.
    (f) For purposes of this section, an appropriate qualified 
registered securities depository shall mean the qualified registered 
securities depository that the Commission so designates by order or, in 
the absence of such designation, the qualified registered securities 
depository that is the largest holder of record of all qualified 
registered securities depositories as of the most recent record date.

[59 FR 63661, Dec. 8, 1994]



Sec.  240.17Ad-17  Lost securityholders and unresponsive payees.

    (a)(1) Every recordkeeping transfer agent whose master 
securityholder file includes accounts of lost securityholders and every 
broker or dealer that has customer security accounts that include 
accounts of lost securityholders shall exercise reasonable care to 
ascertain the correct addresses of such securityholders. In exercising 
reasonable care to ascertain such lost securityholders' correct 
addresses, each such recordkeeping transfer agent and each such broker 
or dealer shall conduct two database searches using at least one 
information database service. The transfer agent, broker, or dealer 
shall search by taxpayer identification number or by name if a search 
based on taxpayer identification number is not reasonably likely to 
locate the securityholder. Such database searches must be conducted 
without charge to a lost securityholder and with the following 
frequency:
    (i) Between three and twelve months of such securityholder becoming 
a lost securityholder; and
    (ii) Between six and twelve months after the first search for such 
lost securityholder by the transfer agent, broker, or dealer.
    (2) A transfer agent, broker, or dealer may not use a search method 
or service to establish contact with lost securityholders that results 
in a charge to a lost securityholder prior to completing the searches 
set forth in paragraph (a)(1) of this section.
    (3) A transfer agent, broker, or dealer need not conduct the 
searches set forth in paragraph (a)(1) of this section for a lost 
securityholder if:
    (i) It has received documentation that such securityholder is 
deceased; or
    (ii) The aggregate value of assets listed in the lost 
securityholder's account, including all dividend, interest, and other 
payments due to the lost securityholder and all securities owned by the 
lost securityholder as recorded in the master securityholder files of 
the transfer agent or in the customer security account records of the 
broker or dealer, is less than $25; or
    (iii) The securityholder is not a natural person.
    (b) For purposes of this section:
    (1) Information data base service means either:
    (i) Any automated data base service that contains addresses from the 
entire

[[Page 666]]

United States geographic area, contains the names of at least 50% of the 
United States adult population, is indexed by taxpayer identification 
number or name, and is updated at least four times a year; or
    (ii) Any service or combination of services which produces results 
comparable to those of the service described in paragraph (b)(1)(i) of 
this section in locating lost securityholders.
    (2) Lost securityholder means a securityholder:
    (i) To whom an item of correspondence that was sent to the 
securityholder at the address contained in the transfer agent's master 
securityholder file or customer security account records of the broker 
or dealer has been returned as undeliverable; provided, however, that if 
such item is re-sent within one month to the lost securityholder, the 
transfer agent, broker, or dealer may deem the securityholder to be a 
lost securityholder as of the day the resent item is returned as 
undeliverable; and
    (ii) For whom the transfer agent, broker, or dealer has not received 
information regarding the securityholder's new address.
    (c)(1) The paying agent, as defined in paragraph (c)(2) of this 
section, shall provide not less than one written notification to each 
unresponsive payee, as defined in paragraph (c)(3) of this section, 
stating that such unresponsive payee has been sent a check that has not 
yet been negotiated. Such notification may be sent with a check or other 
mailing subsequently sent to the unresponsive payee but must be provided 
no later than seven (7) months (or 210 days) after the sending of the 
not yet negotiated check. The paying agent shall not be required to send 
a written notice to an unresponsive payee if such unresponsive payee 
would be considered a lost securityholder by a transfer agent, broker, 
or dealer.
    (2) The term paying agent shall include any issuer, transfer agent, 
broker, dealer, investment adviser, indenture trustee, custodian, or any 
other person that accepts payments from the issuer of a security and 
distributes the payments to the holders of the security.
    (3) A securityholder shall be considered an unresponsive payee if a 
check is sent to the securityholder by the paying agent and the check is 
not negotiated before the earlier of the paying agent's sending the next 
regularly scheduled check or the elapsing of six (6) months (or 180 
days) after the sending of the not yet negotiated check. A 
securityholder shall no longer be considered an unresponsive payee when 
the securityholder negotiates the check or checks that caused the 
securityholder to be considered an unresponsive payee.
    (4) A paying agent shall be excluded from the requirements of 
paragraph (c)(1) of this section where the value of the not yet 
negotiated check is less than $25.
    (5) The requirements of paragraph (c)(1) of this section shall have 
no effect on state escheatment laws.
    (d) Every recordkeeping transfer agent, every broker or dealer that 
has customer security accounts, and every paying agent shall maintain 
records to demonstrate compliance with the requirements set forth in 
this section, which records shall include written procedures that 
describe the transfer agent's, broker's, dealer's, or paying agent's 
methodology for complying with this section, and shall retain such 
records in accordance with Rule 17Ad-7(i) (Sec.  240.17Ad-7(i)).

[62 FR 52237, Oct. 7, 1997; 63 FR 1884, Jan. 12, 1998, as amended at 68 
FR 14316, Mar. 25, 2003; 78 FR 4784, Jan. 23, 2013]



Sec.  240.17Ad-18  Year 2000 Reports to be made by certain transfer agents.

    (a) Each registered non-bank transfer agent must file Part I of Form 
TA-Y2K (Sec.  249.619 of this chapter) with the Commission describing 
the transfer agent's preparation for Year 2000 Problems. Part I of Form 
TA-Y2K shall be filed no later than August 31, 1998, and April 30, 1999. 
Part I of Form TA-Y2K shall reflect the transfer agent's preparation for 
the Year 2000 as of July 15, 1998, and March 15, 1999, respectively.
    (b) Each registered non-bank transfer agent, except for those 
transfer agents that qualify for the exemption in paragraph (d) of Sec.  
240.17Ad-13, must file with the Commission Part II of Form TA-Y2K (Sec.  
249.619 of this chapter) in addition to Part I of Form TA-Y2K. Part II

[[Page 667]]

of Form TA-Y2K report shall address the following topics:
    (1) Whether the board of directors (or similar body) of the transfer 
agent has approved and funded plans for preparing and testing its 
computer systems for Year 2000 Problems;
    (2) Whether the plans of the transfer agent exist in writing and 
address all mission critical computer systems of the transfer agent 
wherever located throughout the world;
    (3) Whether the transfer agent has assigned existing employees, has 
hired new employees, or has engaged third parties to provide assistance 
in addressing Year 2000 Problems; and if so, a description of the work 
that these groups of individuals have performed as of the date of each 
report;
    (4) The current progress on each stage of preparation for potential 
problems caused by Year 2000 Problems. These stages are:
    (i) Awareness of potential Year 2000 Problems;
    (ii) Assessment of what steps the transfer agent must take to 
address Year 2000 Problems;
    (iii) Implementation of the steps needed to address Year 2000 
Problems;
    (iv) Internal testing of software designed to address Year 2000 
Problems, including the number and description of the material 
exceptions resulting from such testing that are unresolved as of the 
reporting date;
    (v) Point-to point or industry-wide testing of software designed to 
address Year 2000 Problems (including testing with other transfer 
agents, other financial institutions, and customers), including the 
number and description of the material exceptions resulting from such 
testing that are unresolved as of the reporting date; and
    (vi) Implementation of tested software that will address Year 2000 
Problems;
    (5) Whether the transfer agent has written contingency plans in the 
event that, after December 31, 1999, it has computer problems caused by 
Year 2000 Problems; and
    (6) What levels of the transfer agent's management are responsible 
for addressing potential problems caused by Year 2000 Problems, 
including a description of the responsibilities for each level of 
management regarding the Year 2000 Problems;
    (7) Any additional material information in both reports concerning 
its management of Year 2000 Problems that could help the Commission 
assess the transfer agent's readiness for the Year 2000.
    (8) Part II of Form TA-Y2K (Sec.  249.619 of this chapter) shall be 
filed no later than August 31, 1998, and April 30, 1999. Part II of Form 
TA-Y2K shall reflect the transfer agent's preparation for the Year 2000 
as of July 15, 1998, and March 15, 1999, respectively.
    (c) Any non-bank transfer agent that registers between the adoption 
of the final rule and December 31, 1999, must file with the Commission 
Part I of Form TA-Y2K (Sec.  249.619 of this chapter) no later than 30 
days after their registration becomes effective. New transfer agents 
whose registration with the Commission becomes effective between January 
1, 1999, and April 30, 1999, would be required to file the second report 
due on April 30, 1999.
    (d) For purposes of this section, the term Year 2000 Problem shall 
include problems arising from:
    (1) Computer software incorrectly reading the date ``01/01/00'' as 
being the year 1900 or another incorrect year;
    (2) Computer software incorrectly identifying a date in the Year 
1999 or any year thereafter;
    (3) Computer software failing to detect that the Year 2000 is a leap 
year; or
    (4) Any other computer software error that is directly or indirectly 
caused by paragraph (d)(1), (2), or (3) of this section.
    (e) For purposes of this section, the term non-bank transfer agent 
means a transfer agent whose:
    (1) Appropriate regulatory agency, as that term is defined by 15 
U.S.C. 78(c)(34)(B), is the Securities and Exchange Commission; and
    (2) Is not a savings association, as defined by Section 3 of the 
Federal Deposit Insurance Act, 12 U.S.C. 1813, which is regulated by the 
Office of Thrift Supervision.
    (f) Nature and form of reports. No later than April 30, 1999, every 
non-bank transfer agent required to file Part II

[[Page 668]]

of Form TA-Y2K (Sec.  249.619 of this chapter) pursuant to paragraph 
(b)(8) of this section shall file with its Form TA-Y2K an original and 
two copies of a report prepared by an independent public accountant 
regarding the non-bank transfer agent's process, as of March 15, 1999, 
for addressing Year 2000 Problems with the Commission's principal office 
in Washington, DC. The independent public accountant's report shall be 
prepared in accordance with standards that have been reviewed by the 
Commission and that have been issued by a national organization that is 
responsible for promulgating authoritative accounting and auditing 
standards.

[63 FR 37693, July 13, 1998, as amended at 63 FR 58635, Nov. 2, 1998]



Sec.  240.17Ad-19  Requirements for cancellation, processing, storage,
transportation, and destruction or other disposition of securities 
certificates.

    (a) Definitions. For purposes of this section:
    (1) The terms cancelled or cancellation means the process in which a 
securities certificate:
    (i) Is physically marked to clearly indicate that it no longer 
represents a claim against the issuer; and
    (ii) Is voided on the records of the transfer agent.
    (2) The term cancelled certificate facility means any location where 
securities certificates are cancelled and thereafter processed, stored, 
transported, destroyed or otherwise disposed of.
    (3) The term certificate number means a unique identification or 
serial number that is assigned and affixed by an issuer or transfer 
agent to each securities certificate.
    (4) The term controlled access means the practice of permitting the 
entry of only authorized personnel to areas where securities 
certificates are cancelled and thereafter processed, stored, 
transported, destroyed or otherwise disposed of.
    (5) The term CUSIP number means the unique identification number 
that is assigned to each securities issue.
    (6) The term destruction means the physical ruination of a 
securities certificate by a transfer agent as part of the certificate 
destruction procedures that make the reconstruction of the certificate 
impossible.
    (7) The term otherwise disposed of means any disposition other than 
by destruction.
    (8) The term securities certificate has the same meaning that it has 
in Sec.  240.17f-1(a)(6).
    (b) Required procedures for the cancellation, storage, 
transportation, destruction, or other disposition of securities 
certificates. Every transfer agent involved in the handling, processing, 
or storage of securities certificates shall establish and implement 
written procedures for the cancellation, storage, transportation, 
destruction, or other disposition of securities certificates. This 
requirement applies to any agent that the transfer agent uses to perform 
any of these activities.
    (c) Written procedures. The written procedures required by paragraph 
(b) of this section at a minimum shall provide that:
    (1) There is controlled access to any cancelled certificate 
facility;
    (2) Each cancelled certificate be marked with the word ``CANCELLED'' 
by stamp or perforation on the face of the certificate unless the 
transfer agent has procedures adopted pursuant to this rule for the 
destruction of cancelled certificates within three business days of 
their cancellation;
    (3) A record that is indexed and retrievable by CUSIP and 
certificate number that contains the CUSIP number, certificate number 
with any prefix or suffix, denomination, registration, issue date, and 
cancellation date of each cancelled certificate;
    (4) A record that is indexed and retrievable by CUSIP and 
certificate number of each destroyed securities certificate or 
securities certificate otherwise disposed of, the records must contain 
for each destroyed or otherwise disposed of certificate the CUSIP 
number, certificate number with any prefix or suffix, denomination, 
registration, issue date, and cancellation date, and additionally for 
any certificate otherwise disposed of a record of how it was disposed 
of, the name and address of the party to whom it was disposed, and the 
date of disposition;

[[Page 669]]

    (5) The physical transportation of cancelled certificates be made in 
a secure manner and that the transfer agent maintain separately a record 
of the CUSIP number and certificate number of each certificate in 
transit;
    (6) Authorized personnel of the transfer agent or its designee 
supervise and witness the intentional destruction of any cancelled 
certificate and retain copies of all records relating to certificates 
which were destroyed; and
    (7) Reports to the Lost and Stolen Securities Program be effected in 
a timely and complete manner, as provided in Sec.  240.17f-1 of any 
cancelled certificate that is lost, stolen, missing, or counterfeit.
    (d) Recordkeeping. Every transfer agent subject to this section 
shall maintain records that demonstrate compliance with the requirements 
set forth in this section and that describe the transfer agent's 
methodology for complying with this section for three years, the first 
year in an easily accessible place.
    (e) Exemptive authority. Upon written application or upon its own 
motion, the Commission may grant an exemption from any of the provisions 
of this section, either unconditionally or on specific terms and 
conditions, to any transfer agent or any class of transfer agents and to 
any securities certificate or any class of securities certificates.

[68 FR 74401, Dec. 23, 2003]



Sec.  240.17Ad-20  Issuer restrictions or prohibitions on ownership by
securities intermediaries.

    (a) Except as provided in paragraph (c) of this section, no 
registered transfer agent shall transfer any equity security registered 
pursuant to section 12 or any equity security that subjects an issuer to 
reporting under section 15(d) of the Act (15 U.S.C. 78l or 15 U.S.C. 
78o(d)) if such security is subject to any restriction or prohibition on 
transfer to or from a securities intermediary in its capacity as such.
    (b) The term securities intermediary means a clearing agency 
registered under section 17A of the Act (15 U.S.C. 78q-1) or a person, 
including a bank, broker, or dealer, that in the ordinary course of its 
business maintains securities accounts for others in its capacity as 
such.
    (c) The provisions of this section shall not apply to any equity 
security issued by a partnership as defined in rule 901(b) of Regulation 
S-K (Sec.  229.901(b) of this chapter).

[70 FR 70862, Dec. 7, 2004]



Sec.  240.17Ad-21T  Operational capability in a Year 2000 environment.

    (a) This section applies to every registered non-bank transfer agent 
that uses computers in the conduct of its business as a transfer agent.
    (b)(1) You have a material Year 2000 problem if, at any time on or 
after August 31, 1999:
    (i) Any of your mission critical computer systems incorrectly 
identifies any date in the Year 1999 or the Year 2000, and
    (ii) The error impairs or, if uncorrected, is likely to impair, any 
of your mission critical systems under your control.
    (2) You will be presumed to have a material Year 2000 problem if, at 
any time on or after August 31, 1999, you:
    (i) Do not have written procedures reasonably designed to identify, 
assess, and remediate any material Year 2000 problems in your mission 
critical systems under your control;
    (ii) Have not verified your Year 2000 remediation efforts through 
reasonable internal testing of your mission critical systems under your 
control and reasonable testing of your external links under your 
control; or
    (iii) Have not remediated all exceptions related to your mission 
critical systems contained in any independent public accountant's report 
prepared on your behalf pursuant to Sec.  240.17Ad-18(f).
    (c) If you have or are presumed to have a material Year 2000 
problem, you must immediately notify the Commission and your issuers of 
the problem. You must send this notice to the Commission by overnight 
delivery to the Division of Market Regulation, U.S. Securities and 
Exchange Commission, 100 F Street, NE., Washington, DC 20549-6628 
Attention: Y2K Compliance.
    (d)(1) If you are a registered non-bank transfer agent that has or 
is presumed to have a material Year 2000

[[Page 670]]

problem, you may not, on or after August 31, 1999, engage in any 
transfer agent function, including:
    (i) Countersigning such securities upon issuance;
    (ii) Monitoring the issuance of such securities with a view to 
preventing unauthorized issuance;
    (iii) Registering the transfer of such securities;
    (iv) Exchanging or converting such securities; or
    (v) Transferring record ownership of securities by bookkeeping entry 
without physical issuance of securities certificates.
    (2) Notwithstanding paragraph (d)(1) of this section, you may 
continue to engage in transfer agent functions:
    (i) Until December 1, 1999, if you have submitted a certificate to 
the Commission in compliance with paragraph (e) of this section; or
    (ii) Solely to the extent necessary to effect an orderly cessation 
or transfer of these functions.
    (e)(1)(i) If you are a registered non-bank transfer agent that has 
or is presumed to have a material Year 2000 problem, you may, in 
addition to providing the Commission the notice required by paragraph 
(c) of this section, provide the Commission and your issuers a 
certificate signed by your chief executive officer (or an individual 
with similar authority) stating:
    (A) You are in the process of remediating your material Year 2000 
problem;
    (B) You have scheduled testing of your affected mission critical 
systems to verify that the material Year 2000 problem has been 
remediated, and specify the testing dates;
    (C) The date by which you anticipate completing remediation of the 
material Year 2000 problem in your mission critical systems; and
    (D) Based on inquiries and to the best of the chief executive 
officer's knowledge, you do not anticipate that the existence of the 
material Year 2000 problem in your mission critical systems will impair 
your ability, depending on the nature of your business, to assure the 
prompt and accurate transfer and processing of securities, the 
maintenance of master securityholder files, or the production and 
retention of required records; and you anticipate that the steps 
referred to in paragraphs (e)(1)(i)(A) through (C) of this section will 
result in remedying the material Year 2000 problem on or before November 
15, 1999.
    (ii) If the information contained in any certificate provided to the 
Commission pursuant to paragraph (e) of this section is or becomes 
misleading or inaccurate for any reason, you must promptly file an 
updated certificate correcting such information. In addition to the 
information contained in the certificate, you may provide the Commission 
with any other information necessary to establish that your mission 
critical systems will not have material Year 2000 problems on or after 
November 15, 1999.
    (2) If you have submitted a certificate pursuant to paragraph (e)(1) 
of this section, you must submit a certificate to the Commission and 
your issuers signed by your chief executive officer (or an individual 
with similar authority) on or before November 15, 1999, stating that, 
based on inquiries and to the best of the chief executive officer's 
knowledge, you have remediated your Year 2000 problem or that you will 
cease operations. This certificate must be sent to the Commission by 
overnight delivery to the Division of Market Regulation, U.S. Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-6628 
Attention: Y2K Compliance.
    (f) Notwithstanding paragraph (d)(2) of this section, you must 
comply with the requirements of paragraph (d)(1) of this section if you 
have been so ordered by the Commission or by a court.
    (g) Beginning August 31, 1999, and ending March 31, 2000, you must 
make backup records for all master securityholder files at the close of 
each business day and must preserve these backup records for a rolling 
five business day period in a manner that will allow for the transfer 
and conversion of the records to a successor transfer agent. If you have 
a material Year 2000 problem, you must preserve for at least one year 
the five day backup records immediately preceding the day the problem 
was discovered. In addition, you must make at the close of business on 
December 27 through 31, 1999, a backup copy for all master

[[Page 671]]

securityholder files and preserve these records for at least one year. 
Such backup records must permit the timely restoration of such systems 
to their condition existing prior to experiencing the material Year 2000 
problem. Copies of the backup records must be kept in an easily 
accessible place but must not be located with or held in the same 
computer system as the primary records, and you must be able to 
immediately produce or reproduce them. You must furnish promptly to a 
representative of the Commission such legible, true, and complete copies 
of those records, as may be requested.
    (h) For the purposes of this section:
    (1) The term mission critical system means any system that is 
necessary, depending on the nature of your business, to assure the 
prompt and accurate transfer and processing of securities, the 
maintenance of master securityholder files, and the production and 
retention of required records as described in paragraph (d) of this 
section;
    (2) The term customer includes an issuer, transfer agent, or other 
person for which you provide transfer agent services;
    (3) The term registered non-bank transfer agent means a transfer 
agent, whose appropriate regulatory agency is the Commission and not the 
Office of the Comptroller of the Currency, the Board of Governors of the 
Federal Reserve System, or the Federal Deposit Insurance Corporation; 
and
    (4) The term master securityholder file has the same definition as 
defined in Sec.  240.17Ad-9(b).
    (i) This temporary section will expire on July 1, 2001.

[64 FR 42029, Aug. 3, 1999, as amended at 73 FR 32228, June 5, 2008]



Sec.  240.17Ad-22  Standards for clearing agencies.

    (a) Definitions. For purposes of this section:
    (1) Backtesting means an ex-post comparison of actual outcomes with 
expected outcomes derived from the use of margin models.
    (2) Central counterparty means a clearing agency that interposes 
itself between the counterparties to securities transactions, acting 
functionally as the buyer to every seller and the seller to every buyer.
    (3) Central securities depository means a clearing agency that is a 
securities depository as described in Section 3(a)(23)(A) of the Act (15 
U.S.C. 78c(a)(23)(A)).
    (4) Clearing agency involved in activities with a more complex risk 
profile means a clearing agency registered with the Commission under 
Section 17A of the Act (15 U.S.C. 78q-1) that:
    (i) Provides central counterparty services for security-based swaps;
    (ii) Has been determined by the Commission to be involved in 
activities with a more complex risk profile at the time of its initial 
registration; or
    (iii) Is subsequently determined by the Commission to be involved in 
activities with a more complex risk profile pursuant to Sec.  240.17Ab2-
2(b).
    (5) Covered clearing agency means a registered clearing agency that 
provides the services of a central counterparty or central securities 
depository.
    (6) Designated clearing agency means a clearing agency registered 
with the Commission under Section 17A of the Exchange Act (15 U.S.C. 
78q-1) that is designated systemically important by the Financial 
Stability Oversight Council pursuant to the Payment, Clearing, and 
Settlement Supervision Act of 2010 (12 U.S.C. 5461 et seq.) and for 
which the Commission is the supervisory agency as defined in Section 
803(8) of the Payment, Clearing, and Settlement Supervision Act of 2010 
(12 U.S.C. 5461 et seq.).
    (7) Financial market utility has the same meaning as defined in 
Section 803(6) of the Payment, Clearing, and Settlement Supervision Act 
of 2010 (12 U.S.C. 5462(6)).
    (8) Link means, for purposes of paragraph (e)(20) of this section, a 
set of contractual and operational arrangements between two or more 
clearing agencies, financial market utilities, or trading markets that 
connect them directly or indirectly for the purposes of participating in 
settlement, cross margining, expanding their services to additional 
instruments or participants, or for any other purposes material to their 
business.

[[Page 672]]

    (9) Model validation means an evaluation of the performance of each 
material risk management model used by a covered clearing agency (and 
the related parameters and assumptions associated with such models), 
including initial margin models, liquidity risk models, and models used 
to generate clearing or guaranty fund requirements, performed by a 
qualified person who is free from influence from the persons responsible 
for the development or operation of the models or policies being 
validated.
    (10) Net capital as used in paragraph (b)(7) of this section means 
net capital as defined in Sec.  240.15c3-1 for broker-dealers or any 
similar risk adjusted capital calculation for all other prospective 
clearing members.
    (11) Normal market conditions as used in paragraphs (b)(1) and (2) 
of this section means conditions in which the expected movement of the 
price of cleared securities would produce changes in a clearing agency's 
exposures to its participants that would be expected to breach margin 
requirements or other risk control mechanisms only one percent of the 
time.
    (12) Participant family means that if a participant directly, or 
indirectly through one or more intermediaries, controls, is controlled 
by, or is under common control with, another participant then the 
affiliated participants shall be collectively deemed to be a single 
participant family for purposes of paragraphs (b)(3), (d)(14), (e)(4), 
and (e)(7) of this section.
    (13) Potential future exposure means the maximum exposure estimated 
to occur at a future point in time with an established single-tailed 
confidence level of at least 99 percent with respect to the estimated 
distribution of future exposure.
    (14) Qualifying liquid resources means, for any covered clearing 
agency, the following, in each relevant currency:
    (i) Cash held either at the central bank of issue or at creditworthy 
commercial banks;
    (ii) Assets that are readily available and convertible into cash 
through prearranged funding arrangements, such as:
    (A) Committed arrangements without material adverse change 
provisions, including:
    (1) Lines of credit;
    (2) Foreign exchange swaps; and
    (3) Repurchase agreements; or
    (B) Other prearranged funding arrangements determined to be highly 
reliable even in extreme but plausible market conditions by the board of 
directors of the covered clearing agency following a review conducted 
for this purpose not less than annually; and
    (iii) Other assets that are readily available and eligible for 
pledging to (or conducting other appropriate forms of transactions with) 
a relevant central bank, if the covered clearing agency has access to 
routine credit at such central bank in a jurisdiction that permits said 
pledges or other transactions by the covered clearing agency.
    (15) Security-based swap means a security-based swap as defined in 
Section 3(a)(68) of the Act (15 U.S.C. 78c(a)(68)).
    (16) Sensitivity analysis means an analysis that involves analyzing 
the sensitivity of a model to its assumptions, parameters, and inputs 
that:
    (i) Considers the impact on the model of both moderate and extreme 
changes in a wide range of inputs, parameters, and assumptions, 
including correlations of price movements or returns if relevant, which 
reflect a variety of historical and hypothetical market conditions;
    (ii) Uses actual portfolios and, where applicable, hypothetical 
portfolios that reflect the characteristics of proprietary positions and 
customer positions;
    (iii) Considers the most volatile relevant periods, where practical, 
that have been experienced by the markets served by the clearing agency; 
and
    (iv) Tests the sensitivity of the model to stressed market 
conditions, including the market conditions that may ensue after the 
default of a member and other extreme but plausible conditions as 
defined in a covered clearing agency's risk policies.
    (17) Stress testing means the estimation of credit or liquidity 
exposures that would result from the realization of potential stress 
scenarios, such as extreme price changes, multiple defaults, or changes 
in other valuation inputs and assumptions.

[[Page 673]]

    (18) Systemically important in multiple jurisdictions means, with 
respect to a covered clearing agency, a covered clearing agency that has 
been determined by the Commission to be systemically important in more 
than one jurisdiction pursuant to Sec.  240.17Ab2-2.
    (19) Transparent means, for the purposes of paragraphs (e)(1), (2), 
and (10) of this section, to the extent consistent with other statutory 
and Commission requirements on confidentiality and disclosure, that 
documentation required under paragraphs (e)(1), (2), and (10) is 
disclosed to the Commission and, as appropriate, to other relevant 
authorities, to clearing members and to customers of clearing members, 
to the owners of the covered clearing agency, and to the public.
    (b) A registered clearing agency that performs central counterparty 
services shall establish, implement, maintain and enforce written 
policies and procedures reasonably designed to:
    (1) Measure its credit exposures to its participants at least once a 
day and limit its exposures to potential losses from defaults by its 
participants under normal market conditions so that the operations of 
the clearing agency would not be disrupted and non-defaulting 
participants would not be exposed to losses that they cannot anticipate 
or control.
    (2) Use margin requirements to limit its credit exposures to 
participants under normal market conditions and use risk-based models 
and parameters to set margin requirements and review such margin 
requirements and the related risk-based models and parameters at least 
monthly.
    (3) Maintain sufficient financial resources to withstand, at a 
minimum, a default by the participant family to which it has the largest 
exposure in extreme but plausible market conditions; provided that a 
registered clearing agency acting as a central counterparty for 
security-based swaps shall maintain additional financial resources 
sufficient to withstand, at a minimum, a default by the two participant 
families to which it has the largest exposures in extreme but plausible 
market conditions, in its capacity as a central counterparty for 
security-based swaps. Such policies and procedures may provide that the 
additional financial resources may be maintained by the security-based 
swap clearing agency generally or in separately maintained funds.
    (4) Provide for an annual model validation consisting of evaluating 
the performance of the clearing agency's margin models and the related 
parameters and assumptions associated with such models by a qualified 
person who is free from influence from the persons responsible for the 
development or operation of the models being validated.
    (5) Provide the opportunity for a person that does not perform any 
dealer or security-based swap dealer services to obtain membership on 
fair and reasonable terms at the clearing agency to clear securities for 
itself or on behalf of other persons.
    (6) Have membership standards that do not require that participants 
maintain a portfolio of any minimum size or that participants maintain a 
minimum transaction volume.
    (7) Provide a person that maintains net capital equal to or greater 
than $50 million with the ability to obtain membership at the clearing 
agency, provided that such persons are able to comply with other 
reasonable membership standards, with any net capital requirements being 
scalable so that they are proportional to the risks posed by the 
participant's activities to the clearing agency; provided, however, that 
the clearing agency may provide for a higher net capital requirement as 
a condition for membership at the clearing agency if the clearing agency 
demonstrates to the Commission that such a requirement is necessary to 
mitigate risks that could not otherwise be effectively managed by other 
measures and the Commission approves the higher net capital requirement 
as part of a rule filing or clearing agency registration application.
    (c) Record of financial resources and annual audited financial 
statements. (1) Each fiscal quarter (based on calculations made as of 
the last business day of the clearing agency's fiscal quarter), or at 
any time upon Commission request, a registered clearing agency that 
performs central counterparty services shall calculate and maintain a 
record, in accordance with Sec.  240.17a-1 of

[[Page 674]]

this chapter, of the financial and qualifying liquid resources necessary 
to meet the requirements, as applicable, of paragraphs (b)(3), (e)(4), 
and (e)(7) of this section, and sufficient documentation to explain the 
methodology it uses to compute such financial resources or qualifying 
liquid resources requirement.
    (2) Within 60 days after the end of its fiscal year, each registered 
clearing agency shall post on its Web site its annual audited financial 
statements. Such financial statements shall:
    (i) Include, for the clearing agency and its subsidiaries, 
consolidated balance sheets as of the end of the two most recent fiscal 
years and statements of income, changes in stockholders' equity and 
other comprehensive income and cash flows for each of the two most 
recent fiscal years;
    (ii) Be prepared in accordance with U.S. generally accepted 
accounting principles, except that for a clearing agency that is a 
corporation or other organization incorporated or organized under the 
laws of any foreign country the consolidated financial statements may be 
prepared in accordance with U.S. generally accepted accounting 
principles or International Financial Reporting Standards as issued by 
the International Accounting Standards Board;
    (iii) Be audited in accordance with standards of the Public Company 
Accounting Oversight Board by a registered public accounting firm that 
is qualified and independent in accordance with 17 CFR 210.2-01; and
    (iv) Include a report of the registered public accounting firm that 
complies with paragraphs (a) through (d) of 17 CFR 210.2-02.
    (d) Each registered clearing agency that is not a covered clearing 
agency shall establish, implement, maintain and enforce written policies 
and procedures reasonably designed to, as applicable:
    (1) Provide for a well-founded, transparent, and enforceable legal 
framework for each aspect of its activities in all relevant 
jurisdictions.
    (2) Require participants to have sufficient financial resources and 
robust operational capacity to meet obligations arising from 
participation in the clearing agency; have procedures in place to 
monitor that participation requirements are met on an ongoing basis; and 
have participation requirements that are objective and publicly 
disclosed, and permit fair and open access.
    (3) Hold assets in a manner that minimizes risk of loss or of delay 
in its access to them; and invest assets in instruments with minimal 
credit, market and liquidity risks.
    (4) Identify sources of operational risk and minimize them through 
the development of appropriate systems, controls, and procedures; 
implement systems that are reliable, resilient and secure, and have 
adequate, scalable capacity; and have business continuity plans that 
allow for timely recovery of operations and fulfillment of a clearing 
agency's obligations.
    (5) Employ money settlement arrangements that eliminate or strictly 
limit the clearing agency's settlement bank risks, that is, its credit 
and liquidity risks from the use of banks to effect money settlements 
with its participants; and require funds transfers to the clearing 
agency to be final when effected.
    (6) Be cost-effective in meeting the requirements of participants 
while maintaining safe and secure operations.
    (7) Evaluate the potential sources of risks that can arise when the 
clearing agency establishes links either cross-border or domestically to 
clear or settle trades, and ensure that the risks are managed prudently 
on an ongoing basis.
    (8) Have governance arrangements that are clear and transparent to 
fulfill the public interest requirements in Section 17A of the Act (15 
U.S.C. 78q-1) applicable to clearing agencies, to support the objectives 
of owners and participants, and to promote the effectiveness of the 
clearing agency's risk management procedures.
    (9) Provide market participants with sufficient information for them 
to identify and evaluate the risks and costs associated with using its 
services.
    (10) Immobilize or dematerialize securities certificates and 
transfer them by book entry to the greatest extent

[[Page 675]]

possible when the clearing agency provides central securities depository 
services.
    (11) Make key aspects of the clearing agency's default procedures 
publicly available and establish default procedures that ensure that the 
clearing agency can take timely action to contain losses and liquidity 
pressures and to continue meeting its obligations in the event of a 
participant default.
    (12) Ensure that final settlement occurs no later than the end of 
the settlement day; and require that intraday or real-time finality be 
provided where necessary to reduce risks.
    (13) Eliminate principal risk by linking securities transfers to 
funds transfers in a way that achieves delivery versus payment.
    (14) Institute risk controls, including collateral requirements and 
limits to cover the clearing agency's credit exposure to each 
participant family exposure fully, that ensure timely settlement in the 
event that the participant with the largest payment obligation is unable 
to settle when the clearing agency provides central securities 
depository services and extends intraday credit to participants.
    (15) State to its participants the clearing agency's obligations 
with respect to physical deliveries and identify and manage the risks 
from these obligations.
    (e) Each covered clearing agency shall establish, implement, 
maintain and enforce written policies and procedures reasonably designed 
to, as applicable:
    (1) Provide for a well-founded, clear, transparent, and enforceable 
legal basis for each aspect of its activities in all relevant 
jurisdictions.
    (2) Provide for governance arrangements that:
    (i) Are clear and transparent;
    (ii) Clearly prioritize the safety and efficiency of the covered 
clearing agency;
    (iii) Support the public interest requirements in Section 17A of the 
Act (15 U.S.C. 78q-1) applicable to clearing agencies, and the 
objectives of owners and participants;
    (iv) Establish that the board of directors and senior management 
have appropriate experience and skills to discharge their duties and 
responsibilities;
    (v) Specify clear and direct lines of responsibility; and
    (vi) Consider the interests of participants' customers, securities 
issuers and holders, and other relevant stakeholders of the covered 
clearing agency.
    (3) Maintain a sound risk management framework for comprehensively 
managing legal, credit, liquidity, operational, general business, 
investment, custody, and other risks that arise in or are borne by the 
covered clearing agency, which:
    (i) Includes risk management policies, procedures, and systems 
designed to identify, measure, monitor, and manage the range of risks 
that arise in or are borne by the covered clearing agency, that are 
subject to review on a specified periodic basis and approved by the 
board of directors annually;
    (ii) Includes plans for the recovery and orderly wind-down of the 
covered clearing agency necessitated by credit losses, liquidity 
shortfalls, losses from general business risk, or any other losses;
    (iii) Provides risk management and internal audit personnel with 
sufficient authority, resources, independence from management, and 
access to the board of directors;
    (iv) Provides risk management and internal audit personnel with a 
direct reporting line to, and oversight by, a risk management committee 
and an independent audit committee of the board of directors, 
respectively; and
    (v) Provides for an independent audit committee.
    (4) Effectively identify, measure, monitor, and manage its credit 
exposures to participants and those arising from its payment, clearing, 
and settlement processes, including by:
    (i) Maintaining sufficient financial resources to cover its credit 
exposure to each participant fully with a high degree of confidence;
    (ii) To the extent not already maintained pursuant to paragraph 
(e)(4)(i) of this section, for a covered clearing agency providing 
central counterparty services that is either systemically important in 
multiple jurisdictions or a clearing agency involved in activities with 
a more complex risk profile,

[[Page 676]]

maintaining additional financial resources at the minimum to enable it 
to cover a wide range of foreseeable stress scenarios that include, but 
are not limited to, the default of the two participant families that 
would potentially cause the largest aggregate credit exposure for the 
covered clearing agency in extreme but plausible market conditions;
    (iii) To the extent not already maintained pursuant to paragraph 
(e)(4)(i) of this section, for a covered clearing agency not subject to 
paragraph (e)(4)(ii) of this section, maintaining additional financial 
resources at the minimum to enable it to cover a wide range of 
foreseeable stress scenarios that include, but are not limited to, the 
default of the participant family that would potentially cause the 
largest aggregate credit exposure for the covered clearing agency in 
extreme but plausible market conditions;
    (iv) Including prefunded financial resources, exclusive of 
assessments for additional guaranty fund contributions or other 
resources that are not prefunded, when calculating the financial 
resources available to meet the standards under paragraphs (e)(4)(i) 
through (iii) of this section, as applicable;
    (v) Maintaining the financial resources required under paragraphs 
(e)(4)(ii) and (iii) of this section, as applicable, in combined or 
separately maintained clearing or guaranty funds;
    (vi) Testing the sufficiency of its total financial resources 
available to meet the minimum financial resource requirements under 
paragraphs (e)(4)(i) through (iii) of this section, as applicable, by:
    (A) Conducting stress testing of its total financial resources once 
each day using standard predetermined parameters and assumptions;
    (B) Conducting a comprehensive analysis on at least a monthly basis 
of the existing stress testing scenarios, models, and underlying 
parameters and assumptions, and considering modifications to ensure they 
are appropriate for determining the covered clearing agency's required 
level of default protection in light of current and evolving market 
conditions;
    (C) Conducting a comprehensive analysis of stress testing scenarios, 
models, and underlying parameters and assumptions more frequently than 
monthly when the products cleared or markets served display high 
volatility or become less liquid, or when the size or concentration of 
positions held by the covered clearing agency's participants increases 
significantly; and
    (D) Reporting the results of its analyses under paragraphs 
(e)(4)(vi)(B) and (C) of this section to appropriate decision makers at 
the covered clearing agency, including but not limited to, its risk 
management committee or board of directors, and using these results to 
evaluate the adequacy of and adjust its margin methodology, model 
parameters, models used to generate clearing or guaranty fund 
requirements, and any other relevant aspects of its credit risk 
management framework, in supporting compliance with the minimum 
financial resources requirements set forth in paragraphs (e)(4)(i) 
through (iii) of this section;
    (vii) Performing a model validation for its credit risk models not 
less than annually or more frequently as may be contemplated by the 
covered clearing agency's risk management framework established pursuant 
to paragraph (e)(3) of this section;
    (viii) Addressing allocation of credit losses the covered clearing 
agency may face if its collateral and other resources are insufficient 
to fully cover its credit exposures, including the repayment of any 
funds the covered clearing agency may borrow from liquidity providers; 
and
    (ix) Describing the covered clearing agency's process to replenish 
any financial resources it may use following a default or other event in 
which use of such resources is contemplated.
    (5) Limit the assets it accepts as collateral to those with low 
credit, liquidity, and market risks, and set and enforce appropriately 
conservative haircuts and concentration limits if the covered clearing 
agency requires collateral to manage its or its participants' credit 
exposure; and require a review of the sufficiency of its collateral 
haircuts and concentration limits to be performed not less than 
annually.

[[Page 677]]

    (6) Cover, if the covered clearing agency provides central 
counterparty services, its credit exposures to its participants by 
establishing a risk-based margin system that, at a minimum:
    (i) Considers, and produces margin levels commensurate with, the 
risks and particular attributes of each relevant product, portfolio, and 
market;
    (ii) Marks participant positions to market and collects margin, 
including variation margin or equivalent charges if relevant, at least 
daily and includes the authority and operational capacity to make 
intraday margin calls in defined circumstances;
    (iii) Calculates margin sufficient to cover its potential future 
exposure to participants in the interval between the last margin 
collection and the close out of positions following a participant 
default;
    (iv) Uses reliable sources of timely price data and uses procedures 
and sound valuation models for addressing circumstances in which pricing 
data are not readily available or reliable;
    (v) Uses an appropriate method for measuring credit exposure that 
accounts for relevant product risk factors and portfolio effects across 
products;
    (vi) Is monitored by management on an ongoing basis and is regularly 
reviewed, tested, and verified by:
    (A) Conducting backtests of its margin model at least once each day 
using standard predetermined parameters and assumptions;
    (B) Conducting a sensitivity analysis of its margin model and a 
review of its parameters and assumptions for backtesting on at least a 
monthly basis, and considering modifications to ensure the backtesting 
practices are appropriate for determining the adequacy of the covered 
clearing agency's margin resources;
    (C) Conducting a sensitivity analysis of its margin model and a 
review of its parameters and assumptions for backtesting more frequently 
than monthly during periods of time when the products cleared or markets 
served display high volatility or become less liquid, or when the size 
or concentration of positions held by the covered clearing agency's 
participants increases or decreases significantly; and
    (D) Reporting the results of its analyses under paragraphs 
(e)(6)(vi)(B) and (C) of this section to appropriate decision makers at 
the covered clearing agency, including but not limited to, its risk 
management committee or board of directors, and using these results to 
evaluate the adequacy of and adjust its margin methodology, model 
parameters, and any other relevant aspects of its credit risk management 
framework; and
    (vii) Requires a model validation for the covered clearing agency's 
margin system and related models to be performed not less than annually, 
or more frequently as may be contemplated by the covered clearing 
agency's risk management framework established pursuant to paragraph 
(e)(3) of this section.
    (7) Effectively measure, monitor, and manage the liquidity risk that 
arises in or is borne by the covered clearing agency, including 
measuring, monitoring, and managing its settlement and funding flows on 
an ongoing and timely basis, and its use of intraday liquidity by, at a 
minimum, doing the following:
    (i) Maintaining sufficient liquid resources at the minimum in all 
relevant currencies to effect same-day and, where appropriate, intraday 
and multiday settlement of payment obligations with a high degree of 
confidence under a wide range of foreseeable stress scenarios that 
includes, but is not limited to, the default of the participant family 
that would generate the largest aggregate payment obligation for the 
covered clearing agency in extreme but plausible market conditions;
    (ii) Holding qualifying liquid resources sufficient to meet the 
minimum liquidity resource requirement under paragraph (e)(7)(i) of this 
section in each relevant currency for which the covered clearing agency 
has payment obligations owed to clearing members;
    (iii) Using the access to accounts and services at a Federal Reserve 
Bank, pursuant to Section 806(a) of the Payment, Clearing, and 
Settlement Supervision Act of 2010 (12 U.S.C. 5465(a)), or other 
relevant central bank, when available and where determined to be 
practical by the board of directors of

[[Page 678]]

the covered clearing agency, to enhance its management of liquidity 
risk;
    (iv) Undertaking due diligence to confirm that it has a reasonable 
basis to believe each of its liquidity providers, whether or not such 
liquidity provider is a clearing member, has:
    (A) Sufficient information to understand and manage the liquidity 
provider's liquidity risks; and
    (B) The capacity to perform as required under its commitments to 
provide liquidity to the covered clearing agency;
    (v) Maintaining and testing with each liquidity provider, to the 
extent practicable, the covered clearing agency's procedures and 
operational capacity for accessing each type of relevant liquidity 
resource under paragraph (e)(7)(i) of this section at least annually;
    (vi) Determining the amount and regularly testing the sufficiency of 
the liquid resources held for purposes of meeting the minimum liquid 
resource requirement under paragraph (e)(7)(i) of this section by, at a 
minimum:
    (A) Conducting stress testing of its liquidity resources at least 
once each day using standard and predetermined parameters and 
assumptions;
    (B) Conducting a comprehensive analysis on at least a monthly basis 
of the existing stress testing scenarios, models, and underlying 
parameters and assumptions used in evaluating liquidity needs and 
resources, and considering modifications to ensure they are appropriate 
for determining the clearing agency's identified liquidity needs and 
resources in light of current and evolving market conditions;
    (C) Conducting a comprehensive analysis of the scenarios, models, 
and underlying parameters and assumptions used in evaluating liquidity 
needs and resources more frequently than monthly when the products 
cleared or markets served display high volatility or become less liquid, 
when the size or concentration of positions held by the clearing 
agency's participants increases significantly, or in other appropriate 
circumstances described in such policies and procedures; and
    (D) Reporting the results of its analyses under paragraphs 
(e)(7)(vi)(B) and (C) of this section to appropriate decision makers at 
the covered clearing agency, including but not limited to, its risk 
management committee or board of directors, and using these results to 
evaluate the adequacy of and adjust its liquidity risk management 
methodology, model parameters, and any other relevant aspects of its 
liquidity risk management framework;
    (vii) Performing a model validation of its liquidity risk models not 
less than annually or more frequently as may be contemplated by the 
covered clearing agency's risk management framework established pursuant 
to paragraph (e)(3) of this section;
    (viii) Addressing foreseeable liquidity shortfalls that would not be 
covered by the covered clearing agency's liquid resources and seek to 
avoid unwinding, revoking, or delaying the same-day settlement of 
payment obligations;
    (ix) Describing the covered clearing agency's process to replenish 
any liquid resources that the clearing agency may employ during a stress 
event; and
    (x) Undertaking an analysis at least once a year that evaluates the 
feasibility of maintaining sufficient liquid resources at a minimum in 
all relevant currencies to effect same-day and, where appropriate, 
intraday and multiday settlement of payment obligations with a high 
degree of confidence under a wide range of foreseeable stress scenarios 
that includes, but is not limited to, the default of the two participant 
families that would potentially cause the largest aggregate payment 
obligation for the covered clearing agency in extreme but plausible 
market conditions if the covered clearing agency provides central 
counterparty services and is either systemically important in multiple 
jurisdictions or a clearing agency involved in activities with a more 
complex risk profile.
    (8) Define the point at which settlement is final to be no later 
than the end of the day on which the payment or obligation is due and, 
where necessary or appropriate, intraday or in real time.
    (9) Conduct its money settlements in central bank money, where 
available and determined to be practical by the

[[Page 679]]

board of directors of the covered clearing agency, and minimize and 
manage credit and liquidity risk arising from conducting its money 
settlements in commercial bank money if central bank money is not used 
by the covered clearing agency.
    (10) Establish and maintain transparent written standards that state 
its obligations with respect to the delivery of physical instruments, 
and establish and maintain operational practices that identify, monitor, 
and manage the risks associated with such physical deliveries.
    (11) When the covered clearing agency provides central securities 
depository services:
    (i) Maintain securities in an immobilized or dematerialized form for 
their transfer by book entry, ensure the integrity of securities issues, 
and minimize and manage the risks associated with the safekeeping and 
transfer of securities;
    (ii) Implement internal auditing and other controls to safeguard the 
rights of securities issuers and holders and prevent the unauthorized 
creation or deletion of securities, and conduct periodic and at least 
daily reconciliation of securities issues it maintains; and
    (iii) Protect assets against custody risk through appropriate rules 
and procedures consistent with relevant laws, rules, and regulations in 
jurisdictions where it operates.
    (12) Eliminate principal risk by conditioning the final settlement 
of one obligation upon the final settlement of the other, regardless of 
whether the covered clearing agency settles on a gross or net basis and 
when finality occurs if the covered clearing agency settles transactions 
that involve the settlement of two linked obligations.
    (13) Ensure the covered clearing agency has the authority and 
operational capacity to take timely action to contain losses and 
liquidity demands and continue to meet its obligations by, at a minimum, 
requiring the covered clearing agency's participants and, when 
practicable, other stakeholders to participate in the testing and review 
of its default procedures, including any close-out procedures, at least 
annually and following material changes thereto.
    (14) Enable, when the covered clearing agency provides central 
counterparty services for security-based swaps or engages in activities 
that the Commission has determined to have a more complex risk profile, 
the segregation and portability of positions of a participant's 
customers and the collateral provided to the covered clearing agency 
with respect to those positions and effectively protect such positions 
and related collateral from the default or insolvency of that 
participant.
    (15) Identify, monitor, and manage the covered clearing agency's 
general business risk and hold sufficient liquid net assets funded by 
equity to cover potential general business losses so that the covered 
clearing agency can continue operations and services as a going concern 
if those losses materialize, including by:
    (i) Determining the amount of liquid net assets funded by equity 
based upon its general business risk profile and the length of time 
required to achieve a recovery or orderly wind-down, as appropriate, of 
its critical operations and services if such action is taken;
    (ii) Holding liquid net assets funded by equity equal to the greater 
of either (x) six months of the covered clearing agency's current 
operating expenses, or (y) the amount determined by the board of 
directors to be sufficient to ensure a recovery or orderly wind-down of 
critical operations and services of the covered clearing agency, as 
contemplated by the plans established under paragraph (e)(3)(ii) of this 
section, and which:
    (A) Shall be in addition to resources held to cover participant 
defaults or other risks covered under the credit risk standard in 
paragraph (b)(3) or paragraphs (e)(4)(i) through (iii) of this section, 
as applicable, and the liquidity risk standard in paragraphs (e)(7)(i) 
and (ii) of this section; and
    (B) Shall be of high quality and sufficiently liquid to allow the 
covered clearing agency to meet its current and projected operating 
expenses under a range of scenarios, including in adverse market 
conditions; and

[[Page 680]]

    (iii) Maintaining a viable plan, approved by the board of directors 
and updated at least annually, for raising additional equity should its 
equity fall close to or below the amount required under paragraph 
(e)(15)(ii) of this section.
    (16) Safeguard the covered clearing agency's own and its 
participants' assets, minimize the risk of loss and delay in access to 
these assets, and invest such assets in instruments with minimal credit, 
market, and liquidity risks.
    (17) Manage the covered clearing agency's operational risks by:
    (i) Identifying the plausible sources of operational risk, both 
internal and external, and mitigating their impact through the use of 
appropriate systems, policies, procedures, and controls;
    (ii) Ensuring that systems have a high degree of security, 
resiliency, operational reliability, and adequate, scalable capacity; 
and
    (iii) Establishing and maintaining a business continuity plan that 
addresses events posing a significant risk of disrupting operations.
    (18) Establish objective, risk-based, and publicly disclosed 
criteria for participation, which permit fair and open access by direct 
and, where relevant, indirect participants and other financial market 
utilities, require participants to have sufficient financial resources 
and robust operational capacity to meet obligations arising from 
participation in the clearing agency, and monitor compliance with such 
participation requirements on an ongoing basis.
    (19) Identify, monitor, and manage the material risks to the covered 
clearing agency arising from arrangements in which firms that are 
indirect participants in the covered clearing agency rely on the 
services provided by direct participants to access the covered clearing 
agency's payment, clearing, or settlement facilities.
    (20) Identify, monitor, and manage risks related to any link the 
covered clearing agency establishes with one or more other clearing 
agencies, financial market utilities, or trading markets.
    (21) Be efficient and effective in meeting the requirements of its 
participants and the markets it serves, and have the covered clearing 
agency's management regularly review the efficiency and effectiveness of 
its:
    (i) Clearing and settlement arrangements;
    (ii) Operating structure, including risk management policies, 
procedures, and systems;
    (iii) Scope of products cleared or settled; and
    (iv) Use of technology and communication procedures.
    (22) Use, or at a minimum accommodate, relevant internationally 
accepted communication procedures and standards in order to facilitate 
efficient payment, clearing, and settlement.
    (23) Provide for the following:
    (i) Publicly disclosing all relevant rules and material procedures, 
including key aspects of its default rules and procedures;
    (ii) Providing sufficient information to enable participants to 
identify and evaluate the risks, fees, and other material costs they 
incur by participating in the covered clearing agency;
    (iii) Publicly disclosing relevant basic data on transaction volume 
and values;
    (iv) A comprehensive public disclosure that describes its material 
rules, policies, and procedures regarding its legal, governance, risk 
management, and operating framework, accurate in all material respects 
at the time of publication, that includes:
    (A) Executive summary. An executive summary of the key points from 
paragraphs (e)(23)(iv)(B), (C), and (D) of this section;
    (B) Summary of material changes since the last update of the 
disclosure. A summary of the material changes since the last update of 
paragraph (e)(23)(iv)(C) or (D) of this section;
    (C) General background on the covered clearing agency. A description 
of:
    (1) The covered clearing agency's function and the markets it 
serves;
    (2) Basic data and performance statistics on the covered clearing 
agency's services and operations, such as basic volume and value 
statistics by product type, average aggregate intraday exposures to its 
participants, and statistics on the covered clearing agency's 
operational reliability; and

[[Page 681]]

    (3) The covered clearing agency's general organization, legal and 
regulatory framework, and system design and operations; and
    (D) Standard-by-standard summary narrative. A comprehensive 
narrative disclosure for each applicable standard set forth in 
paragraphs (e)(1) through (23) of this section with sufficient detail 
and context to enable a reader to understand the covered clearing 
agency's approach to controlling the risks and addressing the 
requirements in each standard; and
    (v) Updating the public disclosure under paragraph (e)(23)(iv) of 
this section every two years, or more frequently following changes to 
its system or the environment in which it operates to the extent 
necessary to ensure statements previously provided under paragraph 
(e)(23)(iv) of this section remain accurate in all material respects.
    (f) For purposes of enforcing the Payment, Clearing, and Settlement 
Supervision Act of 2010 (12 U.S.C. 5461 et seq.), a designated clearing 
agency for which the Commission acts as supervisory agency shall be 
subject to, and the Commission shall have the authority under, the 
provisions of paragraphs (b) through (n) of Section 8 of the Federal 
Deposit Insurance Act (12 U.S.C. 1818) in the same manner and to the 
same extent as if such designated clearing agency were an insured 
depository institution and the Commission were the appropriate Federal 
banking agency for such insured depository institution.

[77 FR 66285, Nov. 2, 2012, as amended at 81 FR 70901, Oct. 13, 2016; 85 
FR 28867, May 14, 2020]



Sec.  240.17Ad-24  Exemption from clearing agency definition for certain 
registered security-based swap dealers, registered security-based swap
execution facilities, and entities engaging in dealing activity in 
          security-based swaps that are eligible for an exception under 
          Sec.  240.3a71-2(a) (or subject to the period set forth in 
          Sec.  240.3a71-2(b)).

    A registered security-based swap dealer, a registered security-based 
swap execution facility, or an entity engaging in dealing activity in 
security-based swaps that is eligible for an exception under Sec.  
240.3a71-2(a) (or subject to the period set forth in Sec.  240.3a71-
2(b)) shall be exempt from inclusion in the term ``clearing agency,'' as 
defined in section 3(a)(23)(A) of the Act, where such registered 
security-based swap dealer, registered security-based swap execution 
facility, or entity engaging in dealing activity in security-based swaps 
that is eligible for an exception under Sec.  240.3a71-2(a) (or subject 
to the period set forth in Sec.  240.3a71-2(b)) would be deemed to be a 
clearing agency solely by reason of:
    (a) Functions performed by such institution as part of customary 
dealing activities or providing facilities for comparison of data 
respecting the terms of settlement of securities transactions effected 
on such registered security-based swap execution facility, respectively; 
or
    (b) Acting on behalf of a clearing agency or participant therein in 
connection with the furnishing by the clearing agency of services to its 
participants or the use of services of the clearing agency by its 
participants.

[86 FR 7643, Feb. 1, 2021]

    Effective Date Note: At 86 FR 7643, Feb. 1, 2021, Sec.  240.17Ad-24 
was added, effective Apr. 2, 2021.

  Capital, Margin and Segregation Requirements for Security-Based Swap 
           Dealers and Major Security-Based Swap Participants



Sec.  240.18a-1  Net capital requirements for security-based swap dealers
for which there is not a prudential regulator.

    Sections 240.18a-1, 240.18a-1a, 240.18a-1b, 240.18a-1c, and 240.18a-
1d apply to a security-based swap dealer registered under section 15F of 
the Act (15 U.S.C. 78o-10), including a security-based swap dealer that 
is an OTC derivatives dealer as that term is defined in Sec.  240.3b-12. 
A security-based swap dealer registered under section 15F of the Act (15 
U.S.C. 78o-10) that is also a broker or dealer registered under section 
15 of the Act (15 U.S.C. 78o), other than an OTC derivatives dealer, is 
subject to the net capital requirements in Sec.  240.15c3-1 and its 
appendices. A security-based swap dealer registered under section 15F of 
the Act that has a prudential regulator

[[Page 682]]

is not subject to Sec.  240.18a-1, 240.18a-1a, 240.18a-1b, 240.18a-1c, 
and 240.18a-1d.
    (a) Minimum requirements. Every registered security-based swap 
dealer must at all times have and maintain net capital no less than the 
greater of the highest minimum requirements applicable to its business 
under paragraph (a)(1) or (2) of this section, and tentative net capital 
no less than the minimum requirement under paragraph (a)(2) of this 
section.
    (1)(i) A security-based swap dealer must at all times maintain net 
capital of not less than the greater of $20 million or:
    (A) Two percent of the risk margin amount; or
    (B) Four percent or less of the risk margin amount if the Commission 
issues an order raising the requirement to four percent or less on or 
after the third anniversary of this section's compliance date; or
    (C) Eight percent or less of the risk margin amount if the 
Commission issues an order raising the requirement to eight percent or 
less on or after the fifth anniversary of this section's compliance date 
and the Commission had previously issued an order raising the 
requirement under paragraph (a)(1)(ii) of this section;
    (ii) If, after considering the capital and leverage levels of 
security-based swap dealers subject to this paragraph (a)(1), as well as 
the risks of their security-based swap positions, the Commission 
determines that it may be appropriate to change the percentage pursuant 
to paragraph (a)(1)(i)(B) or (C) of this section, the Commission will 
publish a notice of the potential change and subsequently will issue an 
order regarding any such change.
    (2) In accordance with paragraph (d) of this section, the Commission 
may approve, in whole or in part, an application or an amendment to an 
application by a security-based swap dealer to calculate net capital 
using the market risk standards of paragraph (d) to compute a deduction 
for market risk on some or all of its positions, instead of the 
provisions of paragraphs (c)(1)(iv), (vi), and (vii) of this section, 
and Sec.  240.18a-1b, and using the credit risk standards of paragraph 
(d) to compute a deduction for credit risk on certain credit exposures 
arising from transactions in derivatives instruments, instead of the 
provisions of paragraphs (c)(1)(iii) and (c)(1)(ix)(A) and (B) of this 
section, subject to any conditions or limitations on the security-based 
swap dealer the Commission may require as necessary or appropriate in 
the public interest or for the protection of investors. A security-based 
swap dealer that has been approved to calculate its net capital under 
paragraph (d) of this section must at all times maintain tentative net 
capital of not less than $100 million and net capital of not less than 
the greater of $20 million or:
    (i)(A) Two percent of the risk margin amount;
    (B) Four percent or less of the risk margin amount if the Commission 
issues an order raising the requirement to four percent or less on or 
after the third anniversary of this section's compliance date; or
    (C) Eight percent or less of the risk margin amount if the 
Commission issues an order raising the requirement to eight percent or 
less on or after the fifth anniversary of this section's compliance date 
and the Commission had previously issued an order raising the 
requirement under paragraph (a)(2)(ii) of this section;
    (ii) If, after considering the capital and leverage levels of 
security-based swap dealers subject to this paragraph (a)(2), as well as 
the risks of their security-based swap positions, the Commission 
determines that it may be appropriate to change the percentage pursuant 
to paragraph (a)(2)(i)(B) or (C) of this section, the Commission will 
publish a notice of the potential change and subsequently will issue an 
order regarding any such change; and
    (b) A security-based swap dealer must at all times maintain net 
capital in addition to the amounts required under paragraph (a)(1) or 
(2) of this section, as applicable, in an amount equal to 10 percent of:
    (1) The excess of the market value of United States Treasury Bills, 
Bonds and Notes subject to reverse repurchase agreements with any one 
party over 105 percent of the contract prices (including accrued 
interest) for reverse

[[Page 683]]

repurchase agreements with that party;
    (2) The excess of the market value of securities issued or 
guaranteed as to principal or interest by an agency of the United States 
or mortgage related securities as defined in section 3(a)(41) of the Act 
subject to reverse repurchase agreements with any one party over 110 
percent of the contract prices (including accrued interest) for reverse 
repurchase agreements with that party; and
    (3) The excess of the market value of other securities subject to 
reverse repurchase agreements with any one party over 120 percent of the 
contract prices (including accrued interest) for reverse repurchase 
agreements with that party.
    (c) Definitions. For purpose of this section:
    (1) Net capital. The term net capital shall be deemed to mean the 
net worth of a security-based swap dealer, adjusted by:
    (i) Adjustments to net worth related to unrealized profit or loss 
and deferred tax provisions.
    (A) Adding unrealized profits (or deducting unrealized losses) in 
the accounts of the security-based swap dealer;
    (B)(1) In determining net worth, all long and all short positions in 
listed options shall be marked to their market value and all long and 
all short securities and commodities positions shall be marked to their 
market value.
    (2) In determining net worth, the value attributed to any unlisted 
option shall be the difference between the option's exercise value and 
the market value of the underlying security. In the case of an unlisted 
call, if the market value of the underlying security is less than the 
exercise value of such call it shall be given no value and in the case 
of an unlisted put if the market value of the underlying security is 
more than the exercise value of the unlisted put it shall be given no 
value.
    (C) Adding to net worth the lesser of any deferred income tax 
liability related to the items in paragraphs (c)(1)(i)(C)(1) through (3) 
of this section, or the sum of paragraphs (c)(1)(i)(C)(1), (2), and (3) 
of this section;
    (1) The aggregate amount resulting from applying to the amount of 
the deductions computed in accordance with paragraphs (c)(1)(vi) and 
(vii) of this section and Appendices A and B, Sec. Sec.  240.18a-1a and 
240.18a-1b, the appropriate Federal and State tax rate(s) applicable to 
any unrealized gain on the asset on which the deduction was computed;
    (2) Any deferred tax liability related to income accrued which is 
directly related to an asset otherwise deducted pursuant to this 
section;
    (3) Any deferred tax liability related to unrealized appreciation in 
value of any asset(s) which has been otherwise deducted from net worth 
in accordance with the provisions of this section; and
    (D) Adding, in the case of future income tax benefits arising as a 
result of unrealized losses, the amount of such benefits not to exceed 
the amount of income tax liabilities accrued on the books and records of 
the security-based swap dealer, but only to the extent such benefits 
could have been applied to reduce accrued tax liabilities on the date of 
the capital computation, had the related unrealized losses been realized 
on that date.
    (E) Adding to net worth any actual tax liability related to income 
accrued which is directly related to an asset otherwise deducted 
pursuant to this section.
    (ii) Subordinated liabilities. Excluding liabilities of the 
security-based swap dealer that are subordinated to the claims of 
creditors pursuant to a satisfactory subordinated loan agreement, as 
defined in Sec.  240.18a-1d.
    (iii) Assets not readily convertible into cash. Deducting fixed 
assets and assets which cannot be readily converted into cash, 
including, among other things:
    (A) Fixed assets and prepaid items. Real estate; furniture and 
fixtures; exchange memberships; prepaid rent, insurance and other 
expenses; goodwill; organization expenses;
    (B) Certain unsecured and partly secured receivables. All unsecured 
advances and loans; deficits in customers' and non-customers' unsecured 
and partly secured notes; deficits in customers' and non-customers' 
unsecured and partly secured accounts after application of calls for 
margin, marks to

[[Page 684]]

the market or other required deposits that are outstanding for more than 
the required time frame to collect the margin, marks to the market, or 
other required deposits; and the market value of stock loaned in excess 
of the value of any collateral received therefore.
    (C) Insurance claims. Insurance claims that, after seven (7) 
business days from the date the loss giving rise to the claim is 
discovered, are not covered by an opinion of outside counsel that the 
claim is valid and is covered by insurance policies presently in effect; 
insurance claims that after twenty (20) business days from the date the 
loss giving rise to the claim is discovered and that are accompanied by 
an opinion of outside counsel described above, have not been 
acknowledged in writing by the insurance carrier as due and payable; and 
insurance claims acknowledged in writing by the carrier as due and 
payable outstanding longer than twenty (20) business days from the date 
they are so acknowledged by the carrier; and
    (D) Other deductions. All other unsecured receivables; all assets 
doubtful of collection less any reserves established therefore; the 
amount by which the market value of securities failed to receive 
outstanding longer than thirty (30) calendar days exceeds the contract 
value of such fails to receive, and the funds on deposit in a 
``segregated trust account'' in accordance with 17 CFR 270.27d-1 under 
the Investment Company Act of 1940, but only to the extent that the 
amount on deposit in such segregated trust account exceeds the amount of 
liability reserves established and maintained for refunds of charges 
required by sections 27(d) and 27(f) of the Investment Company Act of 
1940; Provided, That any amount deposited in the ``special reserve 
account for the exclusive benefit of the security-based swap customers'' 
established pursuant to Sec.  240.18a-4 and clearing deposits shall not 
be so deducted.
    (E) Repurchase agreements. (1) For purposes of this paragraph:
    (i) The term reverse repurchase agreement deficit shall mean the 
difference between the contract price for resale of the securities under 
a reverse repurchase agreement and the market value of those securities 
(if less than the contract price).
    (ii) The term repurchase agreement deficit shall mean the difference 
between the market value of securities subject to the repurchase 
agreement and the contract price for repurchase of the securities (if 
less than the market value of the securities).
    (iii) As used in this paragraph (c)(1)(iii)(E)(1), the term contract 
price shall include accrued interest.
    (iv) Reverse repurchase agreement deficits and the repurchase 
agreement deficits where the counterparty is the Federal Reserve Bank of 
New York shall be disregarded.
    (2)(i) In the case of a reverse repurchase agreement, the deduction 
shall be equal to the reverse repurchase agreement deficit.
    (ii) In determining the required deductions under paragraph 
(c)(1)(iii)(E)(2)(i) of this section, the security-based swap dealer may 
reduce the reverse repurchase agreement deficit by: Any margin or other 
deposits held by the security-based swap dealer on account of the 
reverse repurchase agreement; any excess market value of the securities 
over the contract price for resale of those securities under any other 
reverse repurchase agreement with the same party; the difference between 
the contract price for resale and the market value of securities subject 
to repurchase agreements with the same party (if the market value of 
those securities is less than the contract price); and calls for margin, 
marks to the market, or other required deposits that are outstanding one 
business day or less.
    (3) In the case of repurchase agreements, the deduction shall be:
    (i) The excess of the repurchase agreement deficit over 5 percent of 
the contract price for resale of United States Treasury Bills, Notes and 
Bonds, 10 percent of the contract price for the resale of securities 
issued or guaranteed as to principal or interest by an agency of the 
United States or mortgage related securities as defined in section 
3(a)(41) of the Act and 20 percent of the contract price for the resale 
of other securities; and
    (ii) The excess of the aggregate repurchase agreement deficits with 
any one

[[Page 685]]

party over 25 percent of the security-based swap dealer's net capital 
before the application of paragraphs (c)(1)(vi) and (vii) of this 
section (less any deduction taken with respect to repurchase agreements 
with that party under paragraph (c)(1)(iii)(E)(3)(i) of this section) 
or, if greater; the excess of the aggregate repurchase agreement 
deficits over 300 percent of the security-based swap dealer's net 
capital before the application of paragraphs (c)(1)(vi) and (vii) of 
this section.
    (iii) In determining the required deduction under paragraphs 
(c)(1)(iii)(E)(3)(i) and (ii) of this section, the security-based swap 
dealer may reduce a repurchase agreement by any margin or other deposits 
held by the security-based swap dealer on account of a reverse 
repurchase agreement with the same party to the extent not otherwise 
used to reduce a reverse repurchase agreement deficit; the difference 
between the contract price and the market value of securities subject to 
other repurchase agreements with the same party (if the market value of 
those securities is less than the contract price) not otherwise used to 
reduce a reverse repurchase agreement deficit; and calls for margin, 
marks to the market, or other required deposits that are outstanding one 
business day or less to the extent not otherwise used to reduce a 
reverse repurchase agreement deficit.
    (F) Securities borrowed. One percent of the market value of 
securities borrowed collateralized by an irrevocable letter of credit.
    (G) Affiliate receivables and collateral. Any receivable from an 
affiliate of the security-based swap dealer (not otherwise deducted from 
net worth) and the market value of any collateral given to an affiliate 
(not otherwise deducted from net worth) to secure a liability over the 
amount of the liability of the security-based swap dealer unless the 
books and records of the affiliate are made available for examination 
when requested by the representatives of the Commission in order to 
demonstrate the validity of the receivable or payable. The provisions of 
this subsection shall not apply where the affiliate is a registered 
security-based swap dealer, registered broker or dealer, registered 
government securities broker or dealer, bank as defined in section 
3(a)(6) of the Act, insurance company as defined in section 3(a)(19) of 
the Act, investment company registered under the Investment Company Act 
of 1940, federally insured savings and loan association, or futures 
commission merchant or swap dealer registered pursuant to the Commodity 
Exchange Act.
    (iv) Non-marketable securities. Deducting 100 percent of the 
carrying value in the case of securities or evidence of indebtedness in 
the proprietary or other accounts of the security-based swap dealer, for 
which there is no ready market, as defined in paragraph (c)(4) of this 
section, and securities, in the proprietary or other accounts of the 
security-based swap dealer, that cannot be publicly offered or sold 
because of statutory, regulatory or contractual arrangements or other 
restrictions.
    (v) Deducting from the contract value of each failed to deliver 
contract that is outstanding five business days or longer (21 business 
days or longer in the case of municipal securities) the percentages of 
the market value of the underlying security that would be required by 
application of the deduction required by paragraph (c)(1)(vii) of this 
section. Such deduction, however, shall be increased by any excess of 
the contract price of the failed to deliver contract over the market 
value of the underlying security or reduced by any excess of the market 
value of the underlying security over the contract value of the failed 
to deliver contract, but not to exceed the amount of such deduction. The 
Commission may, upon application of the security-based swap dealer, 
extend for a period up to 5 business days, any period herein specified 
when it is satisfied that the extension is warranted. The Commission 
upon expiration of the extension may extend for one additional period of 
up to 5 business days, any period herein specified when it is satisfied 
that the extension is warranted.
    (vi)(A) Cleared security-based swaps. In the case of a cleared 
security-based swap held in a proprietary account of the security-based 
swap dealer, deducting the amount of the applicable margin requirement 
of the clearing agency

[[Page 686]]

or, if the security-based swap references an equity security, the 
security-based swap dealer may take a deduction using the method 
specified in Sec.  240.18a-1a.
    (B) Non-cleared security-based swaps--(1) Credit default swaps--(i) 
Short positions (selling protection). In the case of a non-cleared 
security-based swap that is a short credit default swap, deducting the 
percentage of the notional amount based upon the current basis point 
spread of the credit default swap and the maturity of the credit default 
swap in accordance with table 1 to Sec.  240.18a-1(c)(1)(vi)(B)(1)(i):

                                                     Table 1 to Sec.   240.18a-1(c)(1)(vi)(B)(1)(i)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                Basis point spread
    Length of time to maturity of credit default swap    -----------------------------------------------------------------------------------------------
                        contract                            100 or less                                                                     700 or more
                                                                (%)        101-300  (%)    301-400  (%)    401-500  (%)    501-699  (%)         (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than 12 months.....................................            1.00            2.00            5.00            7.50           10.00           15.00
12 months but less than 24 months.......................            1.50            3.50            7.50           10.00           12.50           17.50
24 months but less than 36 months.......................            2.00            5.00           10.00           12.50           15.00           20.00
36 months but less than 48 months.......................            3.00            6.00           12.50           15.00           17.50           22.50
48 months but less than 60 months.......................            4.00            7.00           15.00           17.50           20.00           25.00
60 months but less than 72 months.......................            5.50            8.50           17.50           20.00           22.50           27.50
72 months but less than 84 months.......................            7.00           10.00           20.00           22.50           25.00           30.00
84 months but less than 120 months......................            8.50           15.00           22.50           25.00           27.50           40.00
120 months and longer...................................           10.00           20.00           25.00           27.50           30.00           50.00
--------------------------------------------------------------------------------------------------------------------------------------------------------

    (ii) Long positions (purchasing protection). In the case of a non-
cleared security-based swap that is a long credit default swap, 
deducting 50 percent of the deduction that would be required by 
paragraph (c)(1)(vi)(B)(1)(i) of this section if the non-cleared 
security-based swap was a short credit default swap, each such deduction 
not to exceed the current market value of the long position.
    (iii) Long and short credit default swaps. In the case of non-
cleared security-based swaps that are long and short credit default 
swaps referencing the same entity (in the case of non-cleared credit 
default swap security-based swaps referencing a corporate entity) or 
obligation (in the case of non-cleared credit default swap security-
based swaps referencing an asset-backed security), that have the same 
credit events which would trigger payment by the seller of protection, 
that have the same basket of obligations which would determine the 
amount of payment by the seller of protection upon the occurrence of a 
credit event, that are in the same or adjacent spread category, and that 
are in the same or adjacent maturity category and have a maturity date 
within three months of the other maturity category, deducting the 
percentage of the notional amount specified in the higher maturity 
category under paragraph (c)(1)(vi)(B)(1)(i) or (ii) on the excess of 
the long or short position. In the case of non-cleared security-based 
swaps that are long and short credit default swaps referencing corporate 
entities in the same industry sector and the same spread and maturity 
categories prescribed in paragraph (c)(1)(vi)(B)(1)(i) of this section, 
deducting 50 percent of the amount required by paragraph 
(c)(1)(vi)(B)(1)(i) of this section on the short position plus the 
deduction required by paragraph (c)(1)(vi)(B)(1)(ii) of this section on 
the excess long position, if any. For the purposes of this section, the 
security-based swap dealer must use an industry sector classification 
system that is reasonable in terms of grouping types of companies with 
similar business activities and risk characteristics and the security-
based swap dealer must document the industry sector classification 
system used pursuant to this section.

[[Page 687]]

    (iv) Long security and long credit default swap. In the case of a 
non-cleared security-based swap that is a long credit default swap 
referencing a debt security and the security-based swap dealer is long 
the same debt security, deducting 50 percent of the amount specified in 
Sec.  240.15c3-1(c)(2)(vi) or (vii) for the debt security, provided that 
the security-based swap dealer can deliver the debt security to satisfy 
the obligation of the security-based swap dealer on the credit default 
swap.
    (v) Short security and short credit default swap. In the case of a 
non-cleared security-based swap that is a short credit default swap 
referencing a debt security or a corporate entity, and the security-
based swap dealer is short the debt security or a debt security issued 
by the corporate entity, deducting the amount specified in Sec.  
240.15c3-1(c)(2)(vi) or (vii) for the debt security. In the case of a 
non-cleared security-based swap that is a short credit default swap 
referencing an asset-backed security and the security-based swap dealer 
is short the asset-backed security, deducting the amount specified in 
Sec.  240.15c3-1(c)(2)(vi) or (vii) for the asset-backed security.
    (2) All other security-based swaps. In the case of a non-cleared 
security-based swap that is not a credit default swap, deducting the 
amount calculated by multiplying the notional amount of the security-
based swap and the percentage specified in Sec.  240.15c3-1(c)(2)(vi) 
applicable to the reference security. A security-based swap dealer may 
reduce the deduction under this paragraph (c)(1)(vi)(B)(2) by an amount 
equal to any reduction recognized for a comparable long or short 
position in the reference security under Sec.  240.15c3-1(c)(2)(vi) and, 
in the case of a security-based swap referencing an equity security, the 
method specified in Sec.  240.18a-1a.
    (vii) All other securities, money market instruments or options. 
Deducting the percentages specified in Sec.  240.15c3-1(c)(2)(vi) of the 
market value of all securities, money market instruments, and options in 
the proprietary accounts of the security-based swap dealer.
    (viii) Deduction from net worth for certain undermargined accounts. 
Deducting the amount of cash required in the account of each security-
based swap and swap customer to meet the margin requirements of a 
clearing agency, the Commission, derivatives clearing organization, or 
the Commodity Futures Trading Commission, as applicable, after 
application of calls for margin, marks to the market, or other required 
deposits which are outstanding within the required time frame to collect 
the margin, mark to the market, or other required deposits.
    (ix) Deduction from net worth in lieu of collecting collateral for 
non-cleared security-based swap and swap transactions--(A) Security-
based swaps. Deducting the initial margin amount calculated pursuant to 
Sec.  240.18a-3(c)(1)(i)(B) for the account of a counterparty at the 
security-based swap dealer that is subject to a margin exception set 
forth in Sec.  240.18a-3(c)(1)(iii), less the margin value of collateral 
held in the account.
    (B) Swaps. Deducting the initial margin amount calculated pursuant 
to the margin rules of the Commodity Futures Trading Commission in the 
account of a counterparty at the security-based swap dealer that is 
subject to a margin exception in those rules, less the margin value of 
collateral held in the account.
    (C) Treatment of collateral held at a third-party custodian. For the 
purposes of the deductions required pursuant to paragraphs (c)(1)(ix)(A) 
and (B) of this section, collateral held by an independent third-party 
custodian as initial margin may be treated as collateral held in the 
account of the counterparty at the security-based swap dealer if:
    (1) The independent third-party custodian is a bank as defined in 
section 3(a)(6) of the Act or a registered U.S. clearing organization or 
depository that is not affiliated with the counterparty or, if the 
collateral consists of foreign securities or currencies, a supervised 
foreign bank, clearing organization, or depository that is not 
affiliated with the counterparty and that customarily maintains custody 
of such foreign securities or currencies;
    (2) The security-based swap dealer, the independent third-party 
custodian, and the counterparty that delivered

[[Page 688]]

the collateral to the custodian have executed an account control 
agreement governing the terms under which the custodian holds and 
releases collateral pledged by the counterparty as initial margin that 
is a legal, valid, binding, and enforceable agreement under the laws of 
all relevant jurisdictions, including in the event of bankruptcy, 
insolvency, or a similar proceeding of any of the parties to the 
agreement, and that provides the security-based swap dealer with the 
right to access the collateral to satisfy the counterparty's obligations 
to the security-based swap dealer arising from transactions in the 
account of the counterparty; and
    (3) The security-based swap dealer maintains written documentation 
of its analysis that in the event of a legal challenge the relevant 
court or administrative authorities would find the account control 
agreement to be legal, valid, binding, and enforceable under the 
applicable law, including in the event of the receivership, 
conservatorship, insolvency, liquidation, or a similar proceeding of any 
of the parties to the agreement.
    (x)(A) Deducting the market value of all short securities 
differences (which shall include securities positions reflected on the 
securities record which are not susceptible to either count or 
confirmation) unresolved after discovery in accordance with the schedule 
in table 2 to Sec.  240.18a-1(c)(1)(x)(A):

                 Table 2 to Sec.   240.18a-1(c)(1)(x)(A)
------------------------------------------------------------------------
                                                             Number of
                                                           business days
                     Differences \1\                           after
                                                             discovery
------------------------------------------------------------------------
25 percent..............................................               7
50 percent..............................................              14
75 percent..............................................              21
100 percent.............................................              28
------------------------------------------------------------------------
\1\ Percentage of market value of short securities differences.

    (B) Deducting the market value of any long securities differences, 
where such securities have been sold by the security-based swap dealer 
before they are adequately resolved, less any reserves established 
therefor;
    (C) The Commission may extend the periods in paragraph (c)(1)(x)(A) 
of this section for up to 10 business days if it finds that exceptional 
circumstances warrant an extension.
    (2) The term exempted securities shall mean those securities deemed 
exempted securities by section 3(a)(12) of the Act (15 U.S.C. 
78c(a)(12)) and the rules thereunder.
    (3) Customer. The term customer shall mean any person from whom, or 
on whose behalf, a security-based swap dealer has received, acquired or 
holds funds or securities for the account of such person, but shall not 
include a security-based swap dealer, a broker or dealer, a registered 
municipal securities dealer, or a general, special or limited partner or 
director or officer of the security-based swap dealer, or any person to 
the extent that such person has a claim for property or funds which by 
contract, agreement, or understanding, or by operation of law, is part 
of the capital of the security-based swap dealer.
    (4) Ready market. The term ready market shall include a recognized 
established securities market in which there exist independent bona fide 
offers to buy and sell so that a price reasonably related to the last 
sales price or current bona fide competitive bid and offer quotations 
can be determined for a particular security almost instantaneously and 
where payment will be received in settlement of a sale at such price 
within a relatively short time conforming to trade custom.
    (5) The term tentative net capital means the net capital of the 
security-based swap dealer before deducting the haircuts computed 
pursuant to paragraphs (c)(1)(vi) and (vii) of this section and the 
charges on inventory computed pursuant to Sec.  240.18a-1b. However, for 
purposes of paragraph (a)(2) of this section, the term tentative net 
capital means the net capital of the security-based swap dealer before 
deductions for market and credit risk computed pursuant to paragraph (d) 
of this section or paragraphs (c)(1)(vi) and (vii) of this section, if 
applicable, and increased by the balance sheet value (including 
counterparty net exposure) resulting from transactions in derivative 
instruments which would otherwise be deducted pursuant to paragraph 
(c)(1)(iii) of this section. Tentative net capital shall include 
securities for which there is no ready market, as defined in paragraph 
(c)(4) of this section, if the use of

[[Page 689]]

mathematical models has been approved for purposes of calculating 
deductions from net capital for those securities pursuant to paragraph 
(d) of this section.
    (6) The term risk margin amount means the sum of:
    (i) The total initial margin required to be maintained by the 
security-based swap dealer at each clearing agency with respect to 
security-based swap transactions cleared for security-based swap 
customers; and
    (ii) The total initial margin amount calculated by the security-
based swap dealer with respect to non-cleared security-based swaps 
pursuant to Sec.  240.18a-3(c)(1)(i)(B).
    (d) Application to use models to compute deductions for market and 
credit risk. (1) A security-based swap dealer may apply to the 
Commission for authorization to compute deductions for market risk under 
this paragraph (d) in lieu of computing deductions pursuant to 
paragraphs (c)(1)(iv), (vi), and (vii) of this section, and Sec.  
240.18a-1b, and to compute deductions for credit risk pursuant to this 
paragraph (d) on credit exposures arising from transactions in 
derivatives instruments (if this paragraph (d) is used to calculate 
deductions for market risk on these instruments) in lieu of computing 
deductions pursuant to paragraphs (c)(1)(iii) and (c)(1)(ix)(A) and (B) 
of this section:
    (i) A security-based swap dealer shall submit the following 
information to the Commission with its application:
    (A) An executive summary of the information provided to the 
Commission with its application and an identification of the ultimate 
holding company of the security-based swap dealer;
    (B) A comprehensive description of the internal risk management 
control system of the security-based swap dealer and how that system 
satisfies the requirements set forth in Sec.  240.15c3-4;
    (C) A list of the categories of positions that the security-based 
swap dealer holds in its proprietary accounts and a brief description of 
the methods that the security-based swap dealer will use to calculate 
deductions for market and credit risk on those categories of positions;
    (D) A description of the mathematical models to be used to price 
positions and to compute deductions for market risk, including those 
portions of the deductions attributable to specific risk, if applicable, 
and deductions for credit risk; a description of the creation, use, and 
maintenance of the mathematical models; a description of the security-
based swap dealer's internal risk management controls over those models, 
including a description of each category of persons who may input data 
into the models; if a mathematical model incorporates empirical 
correlations across risk categories, a description of the process for 
measuring correlations; a description of the backtesting procedures the 
security-based swap dealer will use to backtest the mathematical models 
used to calculate maximum potential exposure; a description of how each 
mathematical model satisfies the applicable qualitative and quantitative 
requirements set forth in this paragraph (d); and a statement describing 
the extent to which each mathematical model used to compute deductions 
for market risk and credit risk will be used as part of the risk 
analyses and reports presented to senior management;
    (E) If the security-based swap dealer is applying to the Commission 
for approval to use scenario analysis to calculate deductions for market 
risk for certain positions, a list of those types of positions, a 
description of how those deductions will be calculated using scenario 
analysis, and an explanation of why each scenario analysis is 
appropriate to calculate deductions for market risk on those types of 
positions;
    (F) A description of how the security-based swap dealer will 
calculate current exposure;
    (G) A description of how the security-based swap dealer will 
determine internal credit ratings of counterparties and internal credit 
risk weights of counterparties, if applicable;
    (H) For each instance in which a mathematical model to be used by 
the security-based swap dealer to calculate a deduction for market risk 
or to calculate maximum potential exposure for a particular product or 
counterparty differs from the mathematical model used by the ultimate 
holding company to calculate an allowance for market

[[Page 690]]

risk or to calculate maximum potential exposure for that same product or 
counterparty, a description of the difference(s) between the 
mathematical models; and
    (I) Sample risk reports that are provided to management at the 
security-based swap dealer who are responsible for managing the 
security-based swap dealer's risk.
    (ii) [Reserved].
    (2) The application of the security-based swap dealer shall be 
supplemented by other information relating to the internal risk 
management control system, mathematical models, and financial position 
of the security-based swap dealer that the Commission may request to 
complete its review of the application;
    (3) The application shall be considered filed when received at the 
Commission's principal office in Washington, DC. A person who files an 
application pursuant to this section for which it seeks confidential 
treatment may clearly mark each page or segregable portion of each page 
with the words ``Confidential Treatment Requested.'' All information 
submitted in connection with the application will be accorded 
confidential treatment, to the extent permitted by law;
    (4) If any of the information filed with the Commission as part of 
the application of the security-based swap dealer is found to be or 
becomes inaccurate before the Commission approves the application, the 
security-based swap dealer must notify the Commission promptly and 
provide the Commission with a description of the circumstances in which 
the information was found to be or has become inaccurate along with 
updated, accurate information;
    (5)(i) The Commission may approve the application or an amendment to 
the application, in whole or in part, subject to any conditions or 
limitations the Commission may require if the Commission finds the 
approval to be necessary or appropriate in the public interest or for 
the protection of investors, after determining, among other things, 
whether the security-based swap dealer has met the requirements of this 
paragraph (d) and is in compliance with other applicable rules 
promulgated under the Act;
    (ii) The Commission may approve the temporary use of a provisional 
model in whole or in part, subject to any conditions or limitations the 
Commission may require, if:
    (A) The security-based swap dealer has a complete application 
pending under this section;
    (B) The use of the provisional model has been approved by:
    (1) A prudential regulator;
    (2) The Commodity Futures Trading Commission or a futures 
association registered with the Commodity Futures Trading Commission 
under section 17 of the Commodity Exchange Act;
    (3) A foreign financial regulatory authority that administers a 
foreign financial regulatory system with capital requirements that the 
Commission has found are eligible for substituted compliance under Sec.  
240.3a71-6 if the provisional model is used for the purposes of 
calculating net capital;
    (4) A foreign financial regulatory authority that administers a 
foreign financial regulatory system with margin requirements that the 
Commission has found are eligible for substituted compliance under Sec.  
240.3a71-6 if the provisional model is used for the purposes of 
calculating initial margin pursuant to Sec.  240.18a-3; or
    (5) Any other foreign supervisory authority that the Commission 
finds has approved and monitored the use of the provisional model 
through a process comparable to the process set forth in this section.
    (6) A security-based swap dealer shall amend its application to 
calculate certain deductions for market and credit risk under this 
paragraph (d) and submit the amendment to the Commission for approval 
before it may change materially a mathematical model used to calculate 
market or credit risk or before it may change materially its internal 
risk management control system;
    (7) As a condition for the security-based swap dealer to compute 
deductions for market and credit risk under this paragraph (d), the 
security-based swap dealer agrees that:

[[Page 691]]

    (i) It will notify the Commission 45 days before it ceases to 
compute deductions for market and credit risk under this paragraph (d); 
and
    (ii) The Commission may determine by order that the notice will 
become effective after a shorter or longer period of time if the 
security-based swap dealer consents or if the Commission determines that 
a shorter or longer period of time is necessary or appropriate in the 
public interest or for the protection of investors; and
    (8) Notwithstanding paragraph (d)(7) of this section, the 
Commission, by order, may revoke a security-based swap dealer's 
exemption that allows it to use the market risk standards of this 
paragraph (d) to calculate deductions for market risk, and the exemption 
to use the credit risk standards of this paragraph (d) to calculate 
deductions for credit risk on certain credit exposures arising from 
transactions in derivatives instruments if the Commission finds that 
such exemption is no longer necessary or appropriate in the public 
interest or for the protection of investors. In making its finding, the 
Commission will consider the compliance history of the security-based 
swap dealer related to its use of models, the financial and operational 
strength of the security-based swap dealer and its ultimate holding 
company, and the security-based swap dealer's compliance with its 
internal risk management controls.
    (9) To be approved, each value-at-risk (``VaR'') model must meet the 
following minimum qualitative and quantitative requirements:
    (i) Qualitative requirements. (A) The VaR model used to calculate 
market or credit risk for a position must be integrated into the daily 
internal risk management system of the security-based swap dealer;
    (B) The VaR model must be reviewed both periodically and annually. 
The periodic review may be conducted by the security-based swap dealer's 
internal audit staff, but the annual review must be conducted by a 
registered public accounting firm, as that term is defined in section 
2(a)(12) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201 et seq.); and
    (C) For purposes of computing market risk, the security-based swap 
dealer must determine the appropriate multiplication factor as follows:
    (1) Beginning three months after the security-based swap dealer 
begins using the VaR model to calculate market risk, the security-based 
swap dealer must conduct backtesting of the model by comparing its 
actual daily net trading profit or loss with the corresponding VaR 
measure generated by the VaR model, using a 99 percent, one-tailed 
confidence level with price changes equivalent to a one business-day 
movement in rates and prices, for each of the past 250 business days, or 
other period as may be appropriate for the first year of its use;
    (2) On the last business day of each quarter, the security-based 
swap dealer must identify the number of backtesting exceptions of the 
VaR model, that is, the number of business days in the past 250 business 
days, or other period as may be appropriate for the first year of its 
use, for which the actual net trading loss, if any, exceeds the 
corresponding VaR measure; and
    (3) The security-based swap dealer must use the multiplication 
factor indicated in table 3 to Sec.  240.18a-1(d)(9)(i)(C)(3) in 
determining its market risk until it obtains the next quarter's 
backtesting results;

 Table 3 to Sec.   240.18a-1(d)(9)(i)(C)(3)--Multiplication Factor Based
        on the Number of Backtesting Exceptions of the VaR model
------------------------------------------------------------------------
                                                          Multiplication
                  Number of exceptions                        factor
------------------------------------------------------------------------
4 or fewer..............................................            3.00
5.......................................................            3.40
6.......................................................            3.50
7.......................................................            3.65
8.......................................................            3.75
9.......................................................            3.85
10 or more..............................................            4.00
------------------------------------------------------------------------

    (4) For purposes of incorporating specific risk into a VaR model, a 
security-based swap dealer must demonstrate that it has methodologies in 
place to capture liquidity, event, and default risk adequately for each 
position. Furthermore, the models used to calculate deductions for 
specific risk must:
    (i) Explain the historical price variation in the portfolio;

[[Page 692]]

    (ii) Capture concentration (magnitude and changes in composition);
    (iii) Be robust to an adverse environment;
    (iv) Capture name-related basis risk;
    (v) Capture event risk; and
    (vi) Be validated through backtesting.
    (5) For purposes of computing the credit equivalent amount of the 
security-based swap dealer's exposures to a counterparty, the security-
based swap dealer must determine the appropriate multiplication factor 
as follows:
    (i) Beginning three months after it begins using the VaR model to 
calculate maximum potential exposure, the security-based swap dealer 
must conduct backtesting of the model by comparing, for at least 80 
counterparties with widely varying types and sizes of positions with the 
firm, the ten-business day change in its current exposure to the 
counterparty based on its positions held at the beginning of the ten-
business day period with the corresponding ten-business day maximum 
potential exposure for the counterparty generated by the VaR model;
    (ii) As of the last business day of each quarter, the security-based 
swap dealer must identify the number of backtesting exceptions of the 
VaR model, that is, the number of ten-business day periods in the past 
250 business days, or other period as may be appropriate for the first 
year of its use, for which the change in current exposure to a 
counterparty exceeds the corresponding maximum potential exposure; and
    (iii) The security-based swap dealer will propose, as part of its 
application, a schedule of multiplication factors, which must be 
approved by the Commission based on the number of backtesting exceptions 
of the VaR model. The security-based swap dealer must use the 
multiplication factor indicated in the approved schedule in determining 
the credit equivalent amount of its exposures to a counterparty until it 
obtains the next quarter's backtesting results, unless the Commission 
determines, based on, among other relevant factors, a review of the 
security-based swap dealer's internal risk management control system, 
including a review of the VaR model, that a different adjustment or 
other action is appropriate.
    (ii) Quantitative requirements. (A) For purposes of determining 
market risk, the VaR model must use a 99 percent, one-tailed confidence 
level with price changes equivalent to a ten business-day movement in 
rates and prices;
    (B) For purposes of determining maximum potential exposure, the VaR 
model must use a 99 percent, one-tailed confidence level with price 
changes equivalent to a one-year movement in rates and prices; or based 
on a review of the security-based swap dealer's procedures for managing 
collateral and if the collateral is marked to market daily and the 
security-based swap dealer has the ability to call for additional 
collateral daily, the Commission may approve a time horizon of not less 
than ten business days;
    (C) The VaR model must use an effective historical observation 
period of at least one year. The security-based swap dealer must 
consider the effects of market stress in its construction of the model. 
Historical data sets must be updated at least monthly and reassessed 
whenever market prices or volatilities change significantly; and
    (D) The VaR model must take into account and incorporate all 
significant, identifiable market risk factors applicable to positions in 
the accounts of the security-based swap dealer, including:
    (1) Risks arising from the non-linear price characteristics of 
derivatives and the sensitivity of the market value of those positions 
to changes in the volatility of the derivatives' underlying rates and 
prices;
    (2) Empirical correlations with and across risk factors or, 
alternatively, risk factors sufficient to cover all the market risk 
inherent in the positions in the proprietary or other trading accounts 
of the security-based swap dealer, including interest rate risk, equity 
price risk, foreign exchange risk, and commodity price risk;
    (3) Spread risk, where applicable, and segments of the yield curve 
sufficient to capture differences in volatility and imperfect 
correlation of rates along

[[Page 693]]

the yield curve for securities and derivatives that are sensitive to 
different interest rates; and
    (4) Specific risk for individual positions:
    (iii) Additional conditions. As a condition for the security-based 
swap dealer to use this paragraph (d) to calculate certain of its 
capital charges, the Commission may impose additional conditions on the 
security-based swap dealer, which may include, but are not limited to 
restricting the security-based swap dealer's business on a product-
specific, category-specific, or general basis; submitting to the 
Commission a plan to increase the security-based swap dealer's net 
capital or tentative net capital; filing more frequent reports with the 
Commission; modifying the security-based swap dealer's internal risk 
management control procedures; or computing the security-based swap 
dealer's deductions for market and credit risk in accordance with 
paragraphs (c)(1)(iii), (iv), (vi), (vii), and (c)(1)(ix)(A) and (B), as 
appropriate, and Sec.  240.18a-1b, as appropriate. If the Commission 
finds it is necessary or appropriate in the public interest or for the 
protection of investors, the Commission may impose additional conditions 
on the security-based swap dealer, if:
    (A) The security-based swap dealer fails to meet the reporting 
requirements set forth in Sec.  240.18a-7;
    (B) Any event specified in Sec.  240.18a-8 occurs;
    (C) There is a material deficiency in the internal risk management 
control system or in the mathematical models used to price securities or 
to calculate deductions for market and credit risk or allowances for 
market and credit risk, as applicable, of the security-based swap 
dealer;
    (D) The security-based swap dealer fails to comply with this 
paragraph (d); or
    (E) The Commission finds that imposition of other conditions is 
necessary or appropriate in the public interest or for the protection of 
investors.
    (e) Models to compute deductions for market risk and credit risk--
(1) Market risk. A security-based swap dealer whose application, 
including amendments, has been approved under paragraph (d) of this 
section, shall compute a deduction for market risk in an amount equal to 
the sum of the following:
    (i) For positions for which the Commission has approved the 
security-based swap dealer's use of VaR models, the VaR of the positions 
multiplied by the appropriate multiplication factor determined according 
to paragraph (d) of this section, except that the initial multiplication 
factor shall be three, unless the Commission determines, based on a 
review of the security-based swap dealer's application or an amendment 
to the application under paragraph (d) of this section, including a 
review of its internal risk management control system and practices and 
VaR models, that another multiplication factor is appropriate;
    (ii) For positions for which the VaR model does not incorporate 
specific risk, a deduction for specific risk to be determined by the 
Commission based on a review of the security-based swap dealer's 
application or an amendment to the application under paragraph (d) of 
this section and the positions involved;
    (iii) For positions for which the Commission has approved the 
security-based swap dealer's application to use scenario analysis, the 
greatest loss resulting from a range of adverse movements in relevant 
risk factors, prices, or spreads designed to represent a negative 
movement greater than, or equal to, the worst ten-day movement of the 
four years preceding calculation of the greatest loss, or some multiple 
of the greatest loss based on the liquidity of the positions subject to 
scenario analysis. If historical data is insufficient, the deduction 
shall be the largest loss within a three standard deviation movement in 
those risk factors, prices, or spreads over a ten-day period, multiplied 
by an appropriate liquidity adjustment factor. Irrespective of the 
deduction otherwise indicated under scenario analysis, the resulting 
deduction for market risk must be at least $25 per 100 share equivalent 
contract for equity positions, or one-half of one percent of the face 
value of the contract for all other types of contracts, even if the 
scenario analysis indicates a lower

[[Page 694]]

amount. A qualifying scenario must include the following:
    (A) A set of pricing equations for the positions based on, for 
example, arbitrage relations, statistical analysis, historic 
relationships, merger evaluations, or fundamental valuation of an 
offering of securities;
    (B) Auxiliary relationships mapping risk factors to prices; and
    (C) Data demonstrating the effectiveness of the scenario in 
capturing market risk, including specific risk; and
    (iv) For all remaining positions, the deductions specified in Sec.  
240.15c3-1(c)(2)(vi), Sec.  240.15c3-1(c)(2)(vii), and applicable 
appendices to Sec.  240.15c3-1.
    (2) Credit risk. A security-based swap dealer whose application, 
including amendments, has been approved under paragraph (d) of this 
section may compute a deduction for credit risk on transactions in 
derivatives instruments (if this paragraph (e) is used to calculate a 
deduction for market risk on those positions) in an amount equal to the 
sum of the following:
    (i) Counterparty exposure charge. A counterparty exposure charge in 
an amount equal to the sum of the following:
    (A) The net replacement value in the account of each counterparty 
that is insolvent, or in bankruptcy, or that has senior unsecured long-
term debt in default; and
    (B) For a counterparty not otherwise described in paragraph 
(e)(2)(i)(A) of this section, the credit equivalent amount of the 
security-based swap dealer's exposure to the counterparty, as defined in 
paragraph (e)(2)(iii)(A) of this section, multiplied by the credit risk 
weight of the counterparty, as determined in accordance with paragraph 
(e)(2)(iii)(F) of this section, multiplied by eight percent; and
    (ii) Counterparty concentration charge. A concentration charge by 
counterparty in an amount equal to the sum of the following:
    (A) For each counterparty with a credit risk weight of 20 percent or 
less, 5 percent of the amount of the current exposure to the 
counterparty in excess of 5 percent of the tentative net capital of the 
security-based swap dealer;
    (B) For each counterparty with a credit risk weight of greater than 
20 percent but less than 50 percent, 20 percent of the amount of the 
current exposure to the counterparty in excess of 5 percent of the 
tentative net capital of the security-based swap dealer; and
    (C) For each counterparty with a credit risk weight of greater than 
50 percent, 50 percent of the amount of the current exposure to the 
counterparty in excess of 5 percent of the tentative net capital of the 
security-based swap dealer;
    (iii) Terms. (A) The credit equivalent amount of the security-based 
swap dealer's exposure to a counterparty is the sum of the security-
based swap dealer's maximum potential exposure to the counterparty, as 
defined in paragraph (e)(2)(iii)(B) of this section, multiplied by the 
appropriate multiplication factor, and the security-based swap dealer's 
current exposure to the counterparty, as defined in paragraph 
(e)(2)(iii)(C) of this section. The security-based swap dealer must use 
the multiplication factor determined according to paragraph 
(d)(9)(i)(C)(5) of this section, except that the initial multiplication 
factor shall be one, unless the Commission determines, based on a review 
of the security-based swap dealer's application or an amendment to the 
application approved under paragraph (d) of this section, including a 
review of its internal risk management control system and practices and 
VaR models, that another multiplication factor is appropriate;
    (B) The maximum potential exposure is the VaR of the counterparty's 
positions with the security-based swap dealer, after applying netting 
agreements with the counterparty meeting the requirements of paragraph 
(e)(2)(iii)(D) of this section, taking into account the value of 
collateral from the counterparty held by the security-based swap dealer 
in accordance with paragraph (e)(2)(iii)(E) of this section, and taking 
into account the current replacement value of the counterparty's 
positions with the security-based swap dealer;
    (C) The current exposure of the security-based swap dealer to a 
counterparty is the current replacement value of the counterparty's 
positions with the security-based swap

[[Page 695]]

dealer, after applying netting agreements with the counterparty meeting 
the requirements of paragraph (e)(2)(iii)(D) of this section and taking 
into account the value of collateral from the counterparty held by the 
security-based swap dealer in accordance with paragraph (e)(2)(iii)(E) 
of this section;
    (D) Netting agreements. A security-based swap dealer may include the 
effect of a netting agreement that allows the security-based swap dealer 
to net gross receivables from and gross payables to a counterparty upon 
default of the counterparty if:
    (1) The netting agreement is legally enforceable in each relevant 
jurisdiction, including in insolvency proceedings;
    (2) The gross receivables and gross payables that are subject to the 
netting agreement with a counterparty can be determined at any time; and
    (3) For internal risk management purposes, the security-based swap 
dealer monitors and controls its exposure to the counterparty on a net 
basis;
    (E) Collateral. When calculating maximum potential exposure and 
current exposure to a counterparty, the fair market value of collateral 
pledged and held may be taken into account provided:
    (1) The collateral is marked to market each day and is subject to a 
daily margin maintenance requirement;
    (2)(i) The collateral is subject to the security-based swap dealer's 
physical possession or control and may be liquidated promptly by the 
firm without intervention by any other party; or
    (ii) The collateral is held by an independent third-party custodian 
that is a bank as defined in section 3(a)(6) of the Act or a registered 
U.S. clearing organization or depository that is not affiliated with the 
counterparty or, if the collateral consists of foreign securities or 
currencies, a supervised foreign bank, clearing organization, or 
depository that is not affiliated with the counterparty and that 
customarily maintains custody of such foreign securities or currencies;
    (3) The collateral is liquid and transferable;
    (4) The collateral agreement is legally enforceable by the security-
based swap dealer against the counterparty and any other parties to the 
agreement;
    (5) The collateral does not consist of securities issued by the 
counterparty or a party related to the security-based swap dealer or to 
the counterparty;
    (6) The Commission has approved the security-based swap dealer's use 
of a VaR model to calculate deductions for market risk for the type of 
collateral in accordance with paragraph (d) of this section; and
    (7) The collateral is not used in determining the credit rating of 
the counterparty;
    (F) Credit risk weights of counterparties. A security-based swap 
dealer that computes its deductions for credit risk pursuant to this 
paragraph (e)(2) shall apply a credit risk weight for transactions with 
a counterparty of either 20 percent, 50 percent, or 150 percent based on 
an internal credit rating the security-based swap dealer determines for 
the counterparty.
    (1) As part of its initial application or in an amendment, the 
security-based swap dealer may request Commission approval to apply a 
credit risk weight of either 20 percent, 50 percent, or 150 percent 
based on internal calculations of credit ratings, including internal 
estimates of the maturity adjustment. Based on the strength of the 
security-based swap dealer's internal credit risk management system, the 
Commission may approve the application. The security-based swap dealer 
must make and keep current a record of the basis for the credit risk 
weight of each counterparty;
    (2) As part of its initial application or in an amendment, the 
security-based swap dealer may request Commission approval to determine 
credit risk weights based on internal calculations, including internal 
estimates of the maturity adjustment. Based on the strength of the 
security-based swap dealer's internal credit risk management system, the 
Commission may approve the application. The security-based swap dealer 
must make and keep current a record of the basis for the credit risk 
weight of each counterparty; and
    (3) As part of its initial application or in an amendment, the 
security-

[[Page 696]]

based swap dealer may request Commission approval to reduce deductions 
for credit risk through the use of credit derivatives.
    (f) Internal risk management control systems. A security-based swap 
dealer must comply with Sec.  240.15c3-4 as if it were an OTC 
derivatives dealer with respect to all of its business activities, 
except that Sec.  240.15c3-4(c)(5)(xiii) and (xiv) and (d)(8) and (9) 
shall not apply.
    (g) Debt-equity requirements. No security-based swap dealer shall 
permit the total of outstanding principal amounts of its satisfactory 
subordination agreements (other than such agreements which qualify under 
this paragraph (g) as equity capital) to exceed 70 percent of its debt-
equity total, as hereinafter defined, for a period in excess of 90 days 
or for such longer period which the Commission may, upon application of 
the security-based swap dealer, grant in the public interest or for the 
protection of investors. In the case of a corporation, the debt-equity 
total shall be the sum of its outstanding principal amounts of 
satisfactory subordination agreements, par or stated value of capital 
stock, paid in capital in excess of par, retained earnings, unrealized 
profit and loss or other capital accounts. In the case of a partnership, 
the debt-equity total shall be the sum of its outstanding principal 
amounts of satisfactory subordination agreements, capital accounts of 
partners (exclusive of such partners' securities accounts) subject to 
the provisions of paragraph (h) of this section, and unrealized profit 
and loss. Provided, however, that a satisfactory subordinated loan 
agreement entered into by a partner or stockholder which has an initial 
term of at least three years and has a remaining term of not less than 
12 months shall be considered equity for the purposes of this paragraph 
(g) if:
    (1) It does not have any of the provisions for accelerated maturity 
provided for by paragraph (b)(8)(i) or (b)(9)(i) or (ii) of Sec.  
240.18a-1d and is maintained as capital subject to the provisions 
restricting the withdrawal thereof required by paragraph (h) of this 
section; or
    (2) The partnership agreement provides that capital contributed 
pursuant to a satisfactory subordination agreement as defined in Sec.  
240.18a-1d shall in all respects be partnership capital subject to the 
provisions restricting the withdrawal thereof required by paragraph (h) 
of this section.
    (h) Provisions relating to the withdrawal of equity capital--(1) 
Notice provisions relating to limitations on the withdrawal of equity 
capital. No equity capital of the security-based swap dealer or a 
subsidiary or affiliate consolidated pursuant to Sec.  240.18a-1c may be 
withdrawn by action of a stockholder or a partner or by redemption or 
repurchase of shares of stock by any of the consolidated entities or 
through the payment of dividends or any similar distribution, nor may 
any unsecured advance or loan be made to a stockholder, partner, 
employee or affiliate without written notice given in accordance with 
paragraph (h)(1)(iv) of this section:
    (i) Two business days prior to any withdrawals, advances or loans if 
those withdrawals, advances or loans on a net basis exceed in the 
aggregate in any 30 calendar day period, 30 percent of the security-
based swap dealer's excess net capital. A security-based swap dealer, in 
an emergency situation, may make withdrawals, advances or loans that on 
a net basis exceed 30 percent of the security-based swap dealer's excess 
net capital in any 30 calendar day period without giving the advance 
notice required by this paragraph, with the prior approval of the 
Commission. Where a security-based swap dealer makes a withdrawal with 
the consent of the Commission, it shall in any event comply with 
paragraph (h)(1)(ii) of this section; or
    (ii) Two business days after any withdrawals, advances or loans if 
those withdrawals, advances or loans on a net basis exceed in the 
aggregate in any 30 calendar day period, 20 percent of the security-
based swap dealer's excess net capital.
    (iii) This paragraph (h)(1) does not apply to:
    (A) Securities or commodities transactions in the ordinary course of 
business between a security-based swap dealer and an affiliate where the 
security-based swap dealer makes payment to or on behalf of such 
affiliate for such transaction and then receives payment

[[Page 697]]

from such affiliate for the securities or commodities transaction within 
two business days from the date of the transaction; or
    (B) Withdrawals, advances or loans which in the aggregate in any 
thirty calendar day period, on a net basis, equal $500,000 or less.
    (iv) Each required notice shall be effective when received by the 
Commission in Washington, DC, the regional office of the Commission for 
the region in which the security-based swap dealer has its principal 
place of business, and the Commodity Futures Trading Commission if such 
security-based swap dealer is registered with that Commission.
    (2) Limitations on withdrawal of equity capital. No equity capital 
of the security-based swap dealer or a subsidiary or affiliate 
consolidated pursuant to Sec.  240.18a-1c may be withdrawn by action of 
a stockholder or a partner or by redemption or repurchase of shares of 
stock by any of the consolidated entities or through the payment of 
dividends or any similar distribution, nor may any unsecured advance or 
loan be made to a stockholder, partner, employee or affiliate, if after 
giving effect thereto and to any other such withdrawals, advances or 
loans and any Payments of Payments Obligations (as defined in Sec.  
240.18a-1d) under satisfactory subordinated loan agreements which are 
scheduled to occur within 180 days following such withdrawal, advance or 
loan if:
    (i) The security-based swap dealer's net capital would be less than 
120 percent of the minimum dollar amount required by paragraph (a) of 
this section; or
    (ii) The total outstanding principal amounts of satisfactory 
subordinated loan agreements of the security-based swap dealer and any 
subsidiaries or affiliates consolidated pursuant to Sec.  240.18a-1c 
(other than such agreements which qualify as equity under paragraph (g) 
of this section) would exceed 70 percent of the debt-equity total as 
defined in paragraph (g) of this section.
    (3) Temporary restrictions on withdrawal of net capital. (i) The 
Commission may by order restrict, for a period up to twenty business 
days, any withdrawal by the security-based swap dealer of equity capital 
or unsecured loan or advance to a stockholder, partner, member, employee 
or affiliate under such terms and conditions as the Commission deems 
necessary or appropriate in the public interest or consistent with the 
protection of investors if the Commission, based on the information 
available, concludes that such withdrawal, advance or loan may be 
detrimental to the financial integrity of the security-based swap 
dealer, or may unduly jeopardize the security-based swap dealer's 
ability to repay its customer claims or other liabilities which may 
cause a significant impact on the markets or expose the customers or 
creditors of the security-based swap dealer to loss.
    (ii) An order temporarily prohibiting the withdrawal of capital 
shall be rescinded if the Commission determines that the restriction on 
capital withdrawal should not remain in effect. A hearing on an order 
temporarily prohibiting withdrawal of capital will be held within two 
business days from the date of the request in writing by the security-
based swap dealer.
    (4) Miscellaneous provisions. (i) Excess net capital is that amount 
in excess of the amount required under paragraph (a) of this section. 
For the purposes of paragraphs (h)(1) and (2) of this section, a 
security-based swap dealer may use the amount of excess net capital and 
deductions required under paragraphs (c)(1)(vi) and (vii) and Sec.  
240.18a-1a reported in its most recently required filed Part II of Form 
X-17A-5 for the purposes of calculating the effect of a projected 
withdrawal, advance or loan relative to excess net capital or 
deductions. The security-based swap dealer must assure itself that the 
excess net capital or the deductions reported on the most recently 
required filed Part II of Form X-17A-5 have not materially changed since 
the time such report was filed.
    (ii) The term equity capital includes capital contributions by 
partners, par or stated value of capital stock, paid-in capital in 
excess of par, retained earnings or other capital accounts. The term 
equity capital does not include securities in the securities accounts of

[[Page 698]]

partners and balances in limited partners' capital accounts in excess of 
their stated capital contributions.
    (iii) Paragraphs (h)(1) and (2) of this section shall not preclude a 
security-based swap dealer from making required tax payments or preclude 
the payment to partners of reasonable compensation, and such payments 
shall not be included in the calculation of withdrawals, advances, or 
loans for purposes of paragraphs (h)(1) and (2) of this section.
    (iv) For the purpose of this paragraph (h), any transactions between 
a security-based swap dealer and a stockholder, partner, employee or 
affiliate that results in a diminution of the security-based swap 
dealer's net capital shall be deemed to be an advance or loan of net 
capital.

[84 FR 44052, Aug. 22, 2019, as amended at 85 FR 68656, Dec. 16, 2019]



Sec.  240.18a-1a  Options.

    (a)(1) Definitions. The term unlisted option means any option not 
included in the definition of listed option provided in Sec.  240.15c3-
1(c)(2)(x).
    (2) The term option series refers to listed option contracts of the 
same type (either a call or a put) and exercise style, covering the same 
underlying security with the same exercise price, expiration date, and 
number of underlying units.
    (3) The term related instrument within an option class or product 
group refers to futures contracts, options on futures contracts, 
security-based swaps on a narrow-based security index, and swaps 
covering the same underlying instrument. In relation to options on 
foreign currencies, a related instrument within an option class also 
shall include forward contracts on the same underlying currency.
    (4) The term underlying instrument refers to long and short 
positions, as appropriate, covering the same foreign currency, the same 
security, security future, or security-based swap other than a security-
based swap on a narrow-based security index, or a security which is 
exchangeable for or convertible into the underlying security within a 
period of 90 days. If the exchange or conversion requires the payment of 
money or results in a loss upon conversion at the time when the security 
is deemed an underlying instrument for purposes of this Appendix A, the 
broker or dealer will deduct from net worth the full amount of the 
conversion loss. The term underlying instrument shall not be deemed to 
include securities options, futures contracts, options on futures 
contracts, security-based swaps on a narrow-based security index, 
qualified stock baskets, unlisted instruments, or swaps.
    (5) The term options class refers to all options contracts covering 
the same underlying instrument.
    (6) The term product group refers to two or more option classes, 
related instruments, underlying instruments, and qualified stock baskets 
in the same portfolio type (see paragraph (b)(1)(ii) of this section) 
for which it has been determined that a percentage of offsetting profits 
may be applied to losses at the same valuation point.
    (b) The deduction under this Appendix A must equal the sum of the 
deductions specified in paragraph (b)(1)(iv)(C) of this section.
    (1)(i) Definitions. (A) The terms theoretical gains and losses mean 
the gain and loss in the value of individual option series, the value of 
underlying instruments, related instruments, and qualified stock baskets 
within that option's class, at 10 equidistant intervals (valuation 
points) ranging from an assumed movement (both up and down) in the 
current market value of the underlying instrument equal to the 
percentage corresponding to the deductions otherwise required under 
Sec.  240.15c3-1 for the underlying instrument (see paragraph 
(b)(1)(iii) of this section). Theoretical gains and losses shall be 
calculated using a theoretical options pricing model that satisfies the 
criteria set forth in paragraph (b)(1)(i)(B) of this section.
    (B) The term theoretical options pricing model means any 
mathematical model, other than a security-based swap dealer's 
proprietary model, the use of which has been approved by the Commission. 
Any such model shall calculate theoretical gains and losses as described 
in paragraph (b)(1)(i)(A) of this section for all series and issues of 
equity, index and foreign currency options and related instruments, and

[[Page 699]]

shall be made available equally and on the same terms to all security-
based swap dealers. Its procedures shall include the arrangement of the 
vendor to supply accurate and timely data to each security-based swap 
dealer with respect to its services, and the fees for distribution of 
the services. The data provided to security-based swap dealers shall 
also contain the minimum requirements set forth in paragraphs 
(b)(1)(iv)(C) of this section and the product group offsets set forth in 
paragraphs (b)(1)(iv)(B) of this section. At a minimum, the model shall 
consider the following factors in pricing the option:
    (1) The current spot price of the underlying asset;
    (2) The exercise price of the option;
    (3) The remaining time until the option's expiration;
    (4) The volatility of the underlying asset;
    (5) Any cash flows associated with ownership of the underlying asset 
that can reasonably be expected to occur during the remaining life of 
the option; and
    (6) The current term structure of interest rates.
    (C) The term major market foreign currency means the currency of a 
sovereign nation for which there is a substantial inter-bank forward 
currency market.
    (D) The term qualified stock basket means a set or basket of stock 
positions which represents no less than 50 percent of the capitalization 
for a high-capitalization or non-high-capitalization diversified market 
index, or, in the case of a narrow-based index, no less than 95 percent 
of the capitalization for such narrow-based index.
    (ii) With respect to positions involving listed options in its 
proprietary or other account, the security-based swap dealer shall group 
long and short positions into the following portfolio types:
    (A) Equity options on the same underlying instrument and positions 
in that underlying instrument;
    (B) Options on the same major market foreign currency, positions in 
that major market foreign currency, and related instruments within those 
options' classes;
    (C) High-capitalization diversified market index options, related 
instruments within the option's class, and qualified stock baskets in 
the same index;
    (D) Non-high-capitalization diversified index options, related 
instruments within the index option's class, and qualified stock baskets 
in the same index; and
    (E) Narrow-based index options, related instruments within the index 
option's class, and qualified stock baskets in the same index.
    (iii) Before making the computation, each security-based swap dealer 
shall obtain the theoretical gains and losses for each option series and 
for the related and underlying instruments within those options' class 
in the proprietary or other accounts of that security-based swap dealer. 
For each option series, the theoretical options pricing model shall 
calculate theoretical prices at 10 equidistant valuation points within a 
range consisting of an increase or a decrease of the following 
percentages of the daily market price of the underlying instrument:
    (A) +(-) 15 percent for equity securities with a ready market, 
narrow-based indexes, and non-high-capitalization diversified indexes;
    (B) +(-) 6 percent for major market foreign currencies;
    (C) +(-) 20 percent for all other currencies; and
    (D) +(-)10 percent for high-capitalization diversified indexes.
    (iv)(A) The security-based swap dealer shall multiply the 
corresponding theoretical gains and losses at each of the 10 equidistant 
valuation points by the number of positions held in a particular option 
series, the related instruments and qualified stock baskets within the 
option's class, and the positions in the same underlying instrument.
    (B) In determining the aggregate profit or loss for each portfolio 
type, the security-based swap dealer will be allowed the following 
offsets in the following order, provided, that in the case of qualified 
stock baskets, the security-based swap dealer may elect to net 
individual stocks between qualified stock baskets and take the 
appropriate deduction on the remaining, if any, securities:

[[Page 700]]

    (1) First, a security-based swap dealer is allowed the following 
offsets within an option's class:
    (i) Between options on the same underlying instrument, positions 
covering the same underlying instrument, and related instruments within 
the option's class, 100 percent of a position's gain shall offset 
another position's loss at the same valuation point;
    (ii) Between index options, related instruments within the option's 
class, and qualified stock baskets on the same index, 95 percent, or 
such other amount as designated by the Commission, of gains shall offset 
losses at the same valuation point;
    (2) Second, a security-based swap dealer is allowed the following 
offsets within an index product group:
    (i) Among positions involving different high-capitalization 
diversified index option classes within the same product group, 90 
percent of the gain in a high-capitalization diversified market index 
option, related instruments, and qualified stock baskets within that 
index option's class shall offset the loss at the same valuation point 
in a different high-capitalization diversified market index option, 
related instruments, and qualified stock baskets within that index 
option's class;
    (ii) Among positions involving different non-high-capitalization 
diversified index option classes within the same product group, 75 
percent of the gain in a non-high-capitalization diversified market 
index option, related instruments, and qualified stock baskets within 
that index option's class shall offset the loss at the same valuation 
point in another non-high-capitalization diversified market index 
option, related instruments, and qualified stock baskets within that 
index option's class or product group;
    (iii) Among positions involving different narrow-based index option 
classes within the same product group, 90 percent of the gain in a 
narrow-based market index option, related instruments, and qualified 
stock baskets within that index option's class shall offset the loss at 
the same valuation point in another narrow-based market index option, 
related instruments, and qualified stock baskets within that index 
option's class or product group;
    (iv) No qualified stock basket should offset another qualified stock 
basket; and
    (3) Third, a security-based swap dealer is allowed the following 
offsets between product groups: Among positions involving different 
diversified index product groups within the same market group, 50 
percent of the gain in a diversified market index option, a related 
instrument, or a qualified stock basket within that index option's 
product group shall offset the loss at the same valuation point in 
another product group;
    (C) For each portfolio type, the total deduction shall be the larger 
of:
    (1) The amount for any of the 10 equidistant valuation points 
representing the largest theoretical loss after applying the offsets 
provided in paragraph (b)(1)(iv)(B) if this section; or
    (2) A minimum charge equal to 25 percent times the multiplier for 
each equity and index option contract and each related instrument within 
the option's class or product group, or $25 for each option on a major 
market foreign currency with the minimum charge for futures contracts 
and options on futures contracts adjusted for contract size 
differentials, not to exceed market value in the case of long positions 
in options and options on futures contracts; plus
    (3) In the case of portfolio types involving index options and 
related instruments offset by a qualified stock basket, there will be a 
minimum charge of 5 percent of the market value of the qualified stock 
basket for high-capitalization diversified and narrow-based indexes;
    (4) In the case of portfolio types involving index options and 
related instruments offset by a qualified stock basket, there will be a 
minimum charge of 7\1/2\ percent of the market value of the qualified 
stock basket for non-high-capitalization diversified indexes; and
    (5) In the case of portfolio types involving security futures and 
equity options on the same underlying instrument and positions in that 
underlying instrument, there will be a minimum

[[Page 701]]

charge of 25 percent times the multiplier for each security-future and 
equity option.

[84 FR 44061, Aug. 22, 2019]



Sec.  240.18a-1b  Adjustments to net worth for certain commodities
transactions.

    (a) Every registered security-based swap dealer in computing net 
capital pursuant to Sec.  240.18a-1 shall comply with the following:
    (1) Where a security-based swap dealer has an asset or liability 
which is treated or defined in paragraph (c) of Sec.  240.18a-1, the 
inclusion or exclusion of all or part of such asset or liability for net 
capital shall be in accordance with Sec.  240.18a-1, except as 
specifically provided otherwise in this section. Where a commodity 
related asset or liability, including a swap-related asset or liability, 
is specifically treated or defined in 17 CFR 1.17 and is not generally 
or specifically treated or defined in Sec.  240.18a-1 or this section, 
the inclusion or exclusion of all or part of such asset or liability for 
net capital shall be in accordance with 17 CFR 1.17.
    (2) In computing net capital as defined in Sec.  240.18a-1(c)(1), 
the net worth of a security-based swap dealer shall be adjusted as 
follows with respect to commodity-related transactions:
    (i)(A) Unrealized profits shall be added and unrealized losses shall 
be deducted in the commodities accounts of the security-based swap 
dealer, including unrealized profits and losses on fixed price 
commitments and forward contracts; and
    (B) The value attributed to any commodity option which is not traded 
on a contract market shall be the difference between the option's strike 
price and the market value for the physical or futures contract which is 
the subject of the option. In the case of a long call commodity option, 
if the market value for the physical or futures contract which is the 
subject of the option is less than the strike price of the option, it 
shall be given no value. In the case of a long put commodity option, if 
the market value for the physical commodity or futures contract which is 
the subject of the option is more than the striking price of the option, 
it shall be given no value.
    (ii) Deduct any unsecured commodity futures or option account 
containing a ledger balance and open trades, the combination of which 
liquidates to a deficit or containing a debit ledger balance only: 
Provided, however, Deficits or debit ledger balances in unsecured 
customers', non-customers' and proprietary accounts, which are the 
subject of calls for margin or other required deposits need not be 
deducted until the close of business on the business day following the 
date on which such deficit or debit ledger balance originated;
    (iii) Deduct all unsecured receivables, advances and loans except 
for:
    (A) Management fees receivable from commodity pools outstanding no 
longer than thirty (30) days from the date they are due;
    (B) Receivables from foreign clearing organizations;
    (C) Receivables from registered futures commission merchants or 
brokers, resulting from cleared swap transactions or, commodity futures 
or option transactions, except those specifically excluded under 
paragraph (a)(2)(ii) of this section.
    (iv) Deduct all inventories (including work in process, finished 
goods, raw materials and inventories held for resale) except for readily 
marketable spot commodities; or spot commodities which adequately 
collateralize indebtedness under 17 CFR 1.17(c)(7);
    (v) Guarantee deposits with commodities clearing organizations are 
not required to be deducted from net worth;
    (vi) Stock in commodities clearing organizations to the extent of 
its margin value is not required to be deducted from net worth;
    (vii) Deduct from net worth the amount by which any advances paid by 
the security-based swap dealer on cash commodity contracts and used in 
computing net capital exceeds 95 percent of the market value of the 
commodities covered by such contracts.
    (viii) Do not include equity in the commodity accounts of partners 
in net worth.
    (ix) In the case of all inventory, fixed price commitments and 
forward contracts, except for inventory and forward contracts in the 
inter-bank market in those foreign currencies which

[[Page 702]]

are purchased or sold for further delivery on or subject to the rules of 
a contract market and covered by an open futures contract for which 
there will be no charge, deduct the applicable percentage of the net 
position specified below:
    (A) Inventory which is currently registered as deliverable on a 
contract market and covered by an open futures contract or by a 
commodity option on a physical--No charge.
    (B) Inventory which is covered by an open futures contract or 
commodity option--5 percent of the market value.
    (C) Inventory which is not covered--20 percent of the market value.
    (D) Fixed price commitments (open purchases and sales) and forward 
contracts which are covered by an open futures contract or commodity 
option--10 percent of the market value.
    (E) Fixed price commitments (open purchases and sales) and forward 
contracts which are not covered by an open futures contract or commodity 
option--20 percent of the market value.
    (x) Deduct for undermargined customer commodity futures accounts the 
amount of funds required in each such account to meet maintenance margin 
requirements of the applicable board of trade or, if there are no such 
maintenance margin requirements, clearing organization margin 
requirements applicable to such positions, after application of calls 
for margin, or other required deposits which are outstanding three 
business days or less. If there are no such maintenance margin 
requirements or clearing organization margin requirements on such 
accounts, then deduct the amount of funds required to provide margin 
equal to the amount necessary after application of calls for margin, or 
other required deposits outstanding three days or less to restore 
original margin when the original margin has been depleted by 50 percent 
or more. Provided, To the extent a deficit is deducted from net worth in 
accordance with paragraph (a)(2)(ii) of this section, such amount shall 
not also be deducted under this paragraph (a)(2)(x). In the event that 
an owner of a customer account has deposited an asset other than cash to 
margin, guarantee or secure his account, the value attributable to such 
asset for purposes of this paragraph shall be the lesser of the value 
attributable to such asset pursuant to the margin rules of the 
applicable board of trade, or the market value of such asset after 
application of the percentage deductions specified in paragraph 
(a)(2)(ix) of this section or, where appropriate, specified in Sec.  
240.18a-1(c)(1)(iv), (vi), or (vii) of this part;
    (xi) Deduct for undermargined non-customer and omnibus commodity 
futures accounts the amount of funds required in each such account to 
meet maintenance margin requirements of the applicable board of trade 
or, if there are no such maintenance margin requirements, clearing 
organization margin requirements applicable to such positions, after 
application of calls for margin, or other required deposits which are 
outstanding two business days or less. If there are no such maintenance 
margin requirements or clearing organization margin requirements, then 
deduct the amount of funds required to provide margin equal to the 
amount necessary after application of calls for margin, or other 
required deposits outstanding two days or less to restore original 
margin when the original margin has been depleted by 50 percent or more. 
Provided, To the extent a deficit is deducted from net worth in 
accordance with paragraph (a)(2)(ii) of this section such amount shall 
not also be deducted under this paragraph (a)(2)(xi). In the event that 
an owner of a non-customer or omnibus account has deposited an asset 
other than cash to margin, guarantee or secure the account, the value 
attributable to such asset for purposes of this paragraph shall be the 
lesser of the value attributable to such asset pursuant to the margin 
rules of the applicable board of trade, or the market value of such 
asset after application of the percentage deductions specified in 
paragraph (a)(2)(ix) of this section or, where appropriate, specified in 
Sec.  240.18a-1(c)(1)(iv), (vi), or (vii) of this part;
    (xii) In the case of open futures contracts and granted (sold) 
commodity options held in proprietary accounts carried by the security-
based swap dealer which are not covered by a position held by the 
security-based swap

[[Page 703]]

dealer or which are not the result of a ``changer trade'' made in 
accordance with the rules of a contract market, deduct:
    (A) For a security-based swap dealer which is a clearing member of a 
contract market for the positions on such contract market cleared by 
such member, the applicable margin requirement of the applicable 
clearing organization;
    (B) For a security-based swap dealer which is a member of a self-
regulatory organization, 150 percent of the applicable maintenance 
margin requirement of the applicable board of trade or clearing 
organization, whichever is greater; or
    (C) For all other security-based swap dealers, 200 percent of the 
applicable maintenance margin requirement of the applicable board of 
trade or clearing organization, whichever is greater; or
    (D) For open contracts or granted (sold) commodity options for which 
there are no applicable maintenance margin requirements, 200 percent of 
the applicable initial margin requirement; Provided, the equity in any 
such proprietary account shall reduce the deduction required by this 
paragraph (a)(2)(xii) if such equity is not otherwise includable in net 
capital.
    (xiii) In the case of a security-based swap dealer which is a 
purchaser of a commodity option which is traded on a contract market, 
the deduction shall be the same safety factor as if the security-based 
swap dealer were the grantor of such option in accordance with paragraph 
(a)(2)(xii) of this section, but in no event shall the safety factor be 
greater than the market value attributed to such option.
    (xiv) In the case of a security-based swap dealer which is a 
purchaser of a commodity option not traded on a contract market which 
has value and such value is used to increase net capital, the deduction 
is ten percent of the market value of the physical or futures contract 
which is the subject of such option but in no event more than the value 
attributed to such option.
    (xv) A loan or advance or any other form of receivable shall not be 
considered ``secured'' for the purposes of paragraph (a)(2) of this 
section unless the following conditions exist:
    (A) The receivable is secured by readily marketable collateral which 
is otherwise unencumbered and which can be readily converted into cash: 
Provided, however, That the receivable will be considered secured only 
to the extent of the market value of such collateral after application 
of the percentage deductions specified in paragraph (a)(2)(ix) of this 
section; and
    (B)(1) The readily marketable collateral is in the possession or 
control of the security-based swap dealer; or
    (2) The security-based swap dealer has a legally enforceable, 
written security agreement, signed by the debtor, and has a perfected 
security interest in the readily marketable collateral within the 
meaning of the laws of the State in which the readily marketable 
collateral is located.
    (xvi) The term cover for purposes of this section shall mean cover 
as defined in 17 CFR 1.17(j).
    (xvii) The term customer for purposes of this section shall mean 
customer as defined in 17 CFR 1.17(b)(2). The term non-customer for 
purposes of this section shall mean non-customer as defined in 17 CFR 
1.17(b)(4).
    (b) Every registered security-based swap dealer in computing net 
capital pursuant to Sec.  240.18a-1 shall comply with the following:
    (1) Cleared swaps. In the case of a cleared swap held in a 
proprietary account of the security-based swap dealer, deducting the 
amount of the applicable margin requirement of the derivatives clearing 
organization or, if the swap references an equity security index, the 
security-based swap dealer may take a deduction using the method 
specified in Sec.  240.18a-1a.
    (2) Non-cleared swaps--(i) Credit default swaps referencing broad-
based security indices. In the case of a non-cleared credit default swap 
for which the deductions in Sec.  240.18a-1(e) do not apply:
    (A) Short positions (selling protection). In the case of a non-
cleared swap that is a short credit default swap referencing a broad-
based security index, deducting the percentage of the notional amount 
based upon the current basis point spread of the credit default swap and 
the maturity of the credit default swap in accordance with table 1 to 
Sec.  240.18a-1b(b)(2)(i)(A):

[[Page 704]]



                                                        Table 1 to Sec.   240.18a-1b(b)(2)(i)(A)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                Basis point spread
   Length of time to maturity of credit  default swap    -----------------------------------------------------------------------------------------------
                        contract                            100 or less                                                                     700 or more
                                                                (%)        101-300  (%)    301-400  (%)    401-500  (%)    501-699  (%)         (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than 12 months.....................................            0.67            1.33            3.33            5.00            6.67           10.00
12 months but less than 24 months.......................            1.00            2.33            5.00            6.67            8.33           11.67
24 months but less than 36 months.......................            1.33            3.33            6.67            8.33           10.00           13.33
36 months but less than 48 months.......................            2.00            4.00            8.33           10.00           11.67           15.00
48 months but less than 60 months.......................            2.67            4.67           10.00           11.67           13.33           16.67
60 months but less than 72 months.......................            3.67            5.67           11.67           13.33           15.00           18.33
72 months but less than 84 months.......................            4.67            6.67           13.33           15.00           16.67           20.00
84 months but less than 120 months......................            5.67           10.00           15.00           16.67           18.33           26.67
120 months and longer...................................            6.67           13.33           16.67           18.33           20.00           33.33
--------------------------------------------------------------------------------------------------------------------------------------------------------

    (B) Long positions (purchasing protection). In the case of a non-
cleared swap that is a long credit default swap referencing a broad-
based security index, deducting 50 percent of the deduction that would 
be required by paragraph (b)(2)(i)(A) of this section if the non-cleared 
swap was a short credit default swap, each such deduction not to exceed 
the current market value of the long position.
    (C) Long and short credit default swaps. In the case of non-cleared 
swaps that are long and short credit default swaps referencing the same 
broad-based security index, have the same credit events which would 
trigger payment by the seller of protection, have the same basket of 
obligations which would determine the amount of payment by the seller of 
protection upon the occurrence of a credit event, that are in the same 
or adjacent spread category, and that are in the same or adjacent 
maturity category and have a maturity date within three months of the 
other maturity category, deducting the percentage of the notional amount 
specified in the higher maturity category under paragraph (b)(2)(i)(A) 
or (B) of this section on the excess of the long or short position.
    (D) Long basket of obligors and long credit default swap. In the 
case of a non-cleared swap that is a long credit default swap 
referencing a broad-based security index and the security-based swap 
dealer is long a basket of debt securities comprising all of the 
components of the security index, deducting 50 percent of the amount 
specified in Sec.  240.15c3-1(c)(2)(vi) for the component securities, 
provided the security-based swap dealer can deliver the component 
securities to satisfy the obligation of the security-based swap dealer 
on the credit default swap.
    (E) Short basket of obligors and short credit default swap. In the 
case of a non-cleared swap that is a short credit default swap 
referencing a broad-based security index and the security-based swap 
dealer is short a basket of debt securities comprising all of the 
components of the security index, deducting the amount specified in 
Sec.  240.15c3-1(c)(2)(vi) for the component securities.
    (ii) All other swaps. (A) In the case of any non-cleared swap that 
is not a credit default swap for which the deductions in Sec.  240.18a-
1(e) do not apply, deducting the amount calculated by multiplying the 
notional value of the swap by the percentage specified in:
    (1) Section 240.15c3-1 applicable to the reference asset if Sec.  
240.15c3-1 specifies a percentage deduction for the type of asset;
    (2) 17 CFR 1.17 applicable to the reference asset if 17 CFR 1.17 
specifies a percentage deduction for the type of asset and Sec.  
240.15c3-1 does not specify a percentage deduction for the type of 
asset; or
    (3) In the case of a non-cleared interest rate swap, Sec.  240.15c3-
1(c)(2)(vi)(A) based on the maturity of the swap, provided that the 
percentage deduction

[[Page 705]]

must be no less than one eighth of 1 percent of the amount of a long 
position that is netted against a short position in the case of a non-
cleared swap with a maturity of three months or more.
    (B) A security-based swap dealer may reduce the deduction under 
paragraph (b)(2)(ii) of this section by an amount equal to any reduction 
recognized for a comparable long or short position in the reference 
asset or interest rate under 17 CFR 1.17 or Sec.  240.15c3-1.

[84 FR 44063, Aug. 22, 2019]



Sec.  240.18a-1c  Consolidated Computations of Net Capital for Certain
Subsidiaries and Affiliates of Security-Based Swap Dealers.

    Every security-based swap dealer in computing its net capital 
pursuant to Sec.  240.18a-1 shall include in its computation all 
liabilities or obligations of a subsidiary or affiliate that the 
security-based swap dealer guarantees, endorses, or assumes either 
directly or indirectly.

[84 FR 44065, Aug. 22, 2019]



Sec.  240.18a-1d  Satisfactory Subordinated Loan Agreements.

    (a) Introduction--(1) Minimum requirements. This section sets forth 
minimum and non-exclusive requirements for satisfactory subordinated 
loan agreements. The Commission may require or the security-based swap 
dealer may include such other provisions as deemed necessary or 
appropriate to the extent such provisions do not cause the subordinated 
loan agreement to fail to meet the minimum requirements of this section.
    (2) Certain definitions. For purposes of Sec.  240.18a-1 and this 
section:
    (i) The term ``subordinated loan agreement'' shall mean the 
agreement or agreements evidencing or governing a subordinated borrowing 
of cash.
    (ii) The term ``Payment Obligation'' shall mean the obligation of a 
security-based swap dealer to repay cash loaned to the security-based 
swap dealer pursuant to a subordinated loan agreement and ``Payment'' 
shall mean the performance by a security-based swap dealer of a Payment 
Obligation.
    (iii) The term ``lender'' shall mean the person who lends cash to a 
security-based swap dealer pursuant to a subordinated loan agreement.
    (b) Minimum requirements for subordinated loan agreements--(1) 
Subordinated loan agreement. Subject to paragraph (a) of this section, a 
subordinated loan agreement shall mean a written agreement between the 
security-based swap dealer and the lender, which has a minimum term of 
one year, and is a valid and binding obligation enforceable in 
accordance with its terms (subject as to enforcement to applicable 
bankruptcy, insolvency, reorganization, moratorium and other similar 
laws) against the security-based swap dealer and the lender and their 
respective heirs, executors, administrators, successors and assigns.
    (2) Specific amount. All subordinated loan agreements shall be for a 
specific dollar amount which shall not be reduced for the duration of 
the agreement except by installments as specifically provided for 
therein and except as otherwise provided in this section.
    (3) Effective subordination. The subordinated loan agreement shall 
effectively subordinate any right of the lender to receive any Payment 
with respect thereto, together with accrued interest or compensation, to 
the prior payment or provision for payment in full of all claims of all 
present and future creditors of the security-based swap dealer arising 
out of any matter occurring prior to the date on which the related 
Payment Obligation matures consistent with the provisions of Sec. Sec.  
240.18a-1 and 240.18a-1d, except for claims which are the subject of 
subordinated loan agreements that rank on the same priority as or junior 
to the claim of the lender under such subordinated loan agreements.
    (4) Proceeds of subordinated loan agreements. The subordinated loan 
agreement shall provide that the cash proceeds thereof shall be used and 
dealt with by the security-based swap dealer as part of its capital and 
shall be subject to the risks of the business.
    (5) Certain rights of the security-based swap dealer. The 
subordinated loan agreement shall provide that the security-based swap 
dealer shall have the right to deposit any cash proceeds of a

[[Page 706]]

subordinated loan agreement in an account or accounts in its own name in 
any bank or trust company.
    (6) Permissive prepayments. A security-based swap dealer at its 
option but not at the option of the lender may, if the subordinated loan 
agreement so provides, make a Payment of all or any portion of the 
Payment Obligation thereunder prior to the scheduled maturity date of 
such Payment Obligation (hereinafter referred to as a ``Prepayment''), 
but in no event may any Prepayment be made before the expiration of one 
year from the date such subordinated loan agreement became effective. No 
Prepayment shall be made, if, after giving effect thereto (and to all 
Payments of Payment Obligations under any other subordinated loan 
agreements then outstanding the maturity or accelerated maturities of 
which are scheduled to fall due within six months after the date such 
Prepayment is to occur pursuant to this provision or on or prior to the 
date on which the Payment Obligation in respect of such Prepayment is 
scheduled to mature disregarding this provision, whichever date is 
earlier) without reference to any projected profit or loss of the 
security-based swap dealer, either its net capital would fall below 120 
percent of its minimum requirement under Sec.  240.18a-1, or, if the 
security-based swap dealer is approved to calculate net capital under 
Sec.  240.18a-1(d), its tentative net capital would fall to an amount 
below 120 percent of the minimum requirement. Notwithstanding the above, 
no Prepayment shall occur without the prior written approval of the 
Commission.
    (7) Suspended repayment. The Payment Obligation of the security-
based swap dealer in respect of any subordinated loan agreement shall be 
suspended and shall not mature if, after giving effect to Payment of 
such Payment Obligation (and to all Payments of Payment Obligations of 
such security-based swap dealer under any other subordinated loan 
agreement(s) then outstanding that are scheduled to mature on or before 
such Payment Obligation) either its net capital would fall below 120 
percent of its minimum requirement under Sec.  240.18a-1, or, if the 
security-based swap dealer is approved to calculate net capital under 
Sec.  240.18a-1(d), its tentative net capital would fall to an amount 
below 120 percent of the minimum requirement. The subordinated loan 
agreement may provide that if the Payment Obligation of the security-
based swap dealer thereunder does not mature and is suspended as a 
result of the requirement of this paragraph (b)(7) for a period of not 
less than six months, the security-based swap dealer shall thereupon 
commence the rapid and orderly liquidation of its business, but the 
right of the lender to receive Payment, together with accrued interest 
or compensation, shall remain subordinate as required by the provisions 
of Sec. Sec.  240.18a-1 and 240.18a-1d.
    (8) Accelerated maturity--obligation to repay to remain subordinate. 
(i) Subject to the provisions of paragraph (b)(7) of this section, a 
subordinated loan agreement may provide that the lender may, upon prior 
written notice to the security-based swap dealer and the Commission 
given not earlier than six months after the effective date of such 
subordinated loan agreement, accelerate the date on which the Payment 
Obligation of the security-based swap dealer, together with accrued 
interest or compensation, is scheduled to mature to a date not earlier 
than six months after the giving of such notice, but the right of the 
lender to receive Payment, together with accrued interest or 
compensation, shall remain subordinate as required by the provisions of 
Sec. Sec.  240.18a-1 and 240.18a-1d.
    (ii) Notwithstanding the provisions of paragraph (b)(7) of this 
section, the Payment Obligation of the security-based swap dealer with 
respect to a subordinated loan agreement, together with accrued interest 
and compensation, shall mature in the event of any receivership, 
insolvency, liquidation, bankruptcy, assignment for the benefit of 
creditors, reorganization whether or not pursuant to the bankruptcy 
laws, or any other marshalling of the assets and liabilities of the 
security-based swap dealer but the right of the lender to receive 
Payment, together with accrued interest or compensation, shall remain 
subordinate as required by the provisions of Sec. Sec.  240.18a-1 and 
240.18a-1d.
    (9) Accelerated maturity of subordinated loan agreements on event of 
default and

[[Page 707]]

event of acceleration--obligation to repay to remain subordinate. (i) A 
subordinated loan agreement may provide that the lender may, upon prior 
written notice to the security-based swap dealer and the Commission of 
the occurrence of any Event of Acceleration (as hereinafter defined) 
given no sooner than six months after the effective date of such 
subordinated loan agreement, accelerate the date on which the Payment 
Obligation of the security-based swap dealer, together with accrued 
interest or compensation, is scheduled to mature, to the last business 
day of a calendar month which is not less than six months after notice 
of acceleration is received by the security-based swap dealer and the 
Commission. Any subordinated loan agreement containing such Events of 
Acceleration may also provide, that if upon such accelerated maturity 
date the Payment Obligation of the security-based swap dealer is 
suspended as required by paragraph (b)(7) of this section and 
liquidation of the security-based swap dealer has not commenced on or 
prior to such accelerated maturity date, then notwithstanding paragraph 
(b)(7) the Payment Obligation of the security-based swap dealer with 
respect to such subordinated loan agreement shall mature on the day 
immediately following such accelerated maturity date and in any such 
event the Payment Obligations of the security-based swap dealer with 
respect to all other subordinated loan agreements then outstanding shall 
also mature at the same time but the rights of the respective lenders to 
receive Payment, together with accrued interest or compensation, shall 
remain subordinate as required by the provisions of this section. Events 
of Acceleration which may be included in a subordinated loan agreement 
complying with this paragraph (b)(9) shall be limited to:
    (A) Failure to pay interest or any installment of principal on a 
subordinated loan agreement as scheduled;
    (B) Failure to pay when due other money obligations of a specified 
material amount;
    (C) Discovery that any material, specified representation or 
warranty of the security-based swap dealer which is included in the 
subordinated loan agreement and on which the subordinated loan agreement 
was based or continued was inaccurate in a material respect at the time 
made;
    (D) Any specified and clearly measurable event which is included in 
the subordinated loan agreement and which the lender and the security-
based swap dealer agree:
    (1) Is a significant indication that the financial position of the 
security-based swap dealer has changed materially and adversely from 
agreed upon specified norms; or
    (2) Could materially and adversely affect the ability of the 
security-based swap dealer to conduct its business as conducted on the 
date the subordinated loan agreement was made; or
    (3) Is a significant change in the senior management of the 
security-based swap dealer or in the general business conducted by the 
security-based swap dealer from that which obtained on the date the 
subordinated loan agreement became effective;
    (E) Any continued failure to perform agreed covenants included in 
the subordinated loan agreement relating to the conduct of the business 
of the security-based swap dealer or relating to the maintenance and 
reporting of its financial position; and
    (ii) Notwithstanding the provisions of paragraph (b)(7) of this 
section, a subordinated loan agreement may provide that, if liquidation 
of the business of the security-based swap dealer has not already 
commenced, the Payment Obligation of the security-based swap dealer 
shall mature, together with accrued interest or compensation, upon the 
occurrence of an Event of Default (as hereinafter defined). Such 
agreement may also provide that, if liquidation of the business of the 
security-based swap dealer has not already commenced, the rapid and 
orderly liquidation of the business of the security-based swap dealer 
shall then commence upon the happening of an Event of Default. Any 
subordinated loan agreement which so provides for maturity of the 
Payment Obligation upon the occurrence of an Event of Default shall also 
provide that the date on which such Event of Default occurs shall, if 
liquidation of the security-based swap dealer has not already commenced, 
be the date on

[[Page 708]]

which the Payment Obligations of the security-based swap dealer with 
respect to all other subordinated loan agreements then outstanding shall 
mature but the rights of the respective lenders to receive Payment, 
together with accrued interest or compensation, shall remain subordinate 
as required by the provisions of this section. Events of Default which 
may be included in a subordinated loan agreement shall be limited to:
    (A) The net capital of the security-based swap dealer falling to an 
amount below its minimum requirement under Sec.  240.18a-1, or, if the 
security-based swap dealer is approved to calculate net capital under 
Sec.  240.18a-1(d), its tentative net capital falling below the minimum 
requirement, throughout a period of 15 consecutive business days, 
commencing on the day the security-based swap dealer first determines 
and notifies the Commission, or the Commission first determines and 
notifies the security-based swap dealer of such fact;
    (B) The Commission revoking the registration of the security-based 
swap dealer;
    (C) The Commission suspending (and not reinstating within 10 days) 
the registration of the security-based swap dealer;
    (D) Any receivership, insolvency, liquidation, bankruptcy, 
assignment for the benefit of creditors, reorganization whether or not 
pursuant to bankruptcy laws, or any other marshalling of the assets and 
liabilities of the security-based swap dealer. A subordinated loan 
agreement that contains any of the provisions permitted by this 
paragraph (b)(9) shall not contain the provision otherwise permitted by 
paragraph (b)(8)(i) of this section.
    (c) Miscellaneous provisions--(1) Prohibited cancellation. The 
subordinated loan agreement shall not be subject to cancellation by 
either party; no Payment shall be made with respect thereto and the 
agreement shall not be terminated, rescinded or modified by mutual 
consent or otherwise if the effect thereof would be inconsistent with 
the requirements of Sec. Sec.  240.18a-1 and 240.18a-1d.
    (2) Notification. Every security-based swap dealer shall immediately 
notify the Commission if, after giving effect to all Payments of Payment 
Obligations under subordinated loan agreements then outstanding that are 
then due or mature within the following six months without reference to 
any projected profit or loss of the security-based swap dealer, either 
its net capital would fall below 120 percent of its minimum requirement 
under Sec.  240.18a-1, or, if the security-based swap dealer is approved 
to calculate net capital under Sec.  240.18a-1(d), its tentative net 
capital would fall to an amount below 120 percent of the minimum 
requirement.
    (3) Certain legends. If all the provisions of a satisfactory 
subordinated loan agreement do not appear in a single instrument, then 
the debenture or other evidence of indebtedness shall bear on its face 
an appropriate legend stating that it is issued subject to the 
provisions of a satisfactory subordinated loan agreement which shall be 
adequately referred to and incorporated by reference.
    (4) Revolving subordinated loan agreements. A security-based swap 
dealer shall be permitted to enter into a revolving subordinated loan 
agreement that provides for prepayment within less than one year of all 
or any portion of the Payment Obligation thereunder at the option of the 
security-based swap dealer upon the prior written approval of the 
Commission. The Commission, however, shall not approve any prepayment 
if:
    (i) After giving effect thereto (and to all Payments of Payment 
Obligations under any other subordinated loan agreements then 
outstanding, the maturity or accelerated maturities of which are 
scheduled to fall due within six months after the date such prepayment 
is to occur pursuant to this provision or on or prior to the date on 
which the Payment Obligation in respect of such prepayment is scheduled 
to mature disregarding this provision, whichever date is earlier) 
without reference to any projected profit or loss of the security-based 
swap dealer, either its net capital would fall below 120 percent of its 
minimum requirement under Sec.  240.18a-1, or, if the security-based 
swap dealer is approved to calculate net capital under Sec.  240.18a-
1(d),

[[Page 709]]

its tentative net capital would fall to an amount below 120 percent of 
the minimum requirement; or
    (ii) Pre-tax losses during the latest three-month period equaled 
more than 15 percent of current excess net capital. Any subordinated 
loan agreement entered into pursuant to this paragraph (c)(4) shall be 
subject to all the other provisions of this section. Any such 
subordinated loan agreement shall not be considered equity for purposes 
of Sec.  240.18a-1(g), despite the length of the initial term of the 
loan.
    (5) Filing. Two copies of any proposed subordinated loan agreement 
(including nonconforming subordinated loan agreements) shall be filed at 
least 30 days prior to the proposed execution date of the agreement with 
the Commission. The security-based swap dealer shall also file with the 
Commission a statement setting forth the name and address of the lender, 
the business relationship of the lender to the security-based swap 
dealer, and whether the security-based swap dealer carried an account 
for the lender for effecting transactions in security-based swaps at or 
about the time the proposed agreement was so filed. All agreements shall 
be examined by the Commission prior to their becoming effective. No 
proposed agreement shall be a satisfactory subordinated loan agreement 
for the purposes of this section unless and until the Commission has 
found the agreement acceptable and such agreement has become effective 
in the form found acceptable.

[84 FR 44065, Aug. 22, 2019]



Sec.  240.18a-2  Capital requirements for major security-based swap
participants for which there is not a prudential regulator.

    (a) Every major security-based swap participant for which there is 
not a prudential regulator and is not registered as a broker or dealer 
pursuant to section 15(b) of the Act (15 U.S.C. 78o(b)) must at all 
times have and maintain positive tangible net worth.
    (b) The term tangible net worth means the net worth of the major 
security-based swap participant as determined in accordance with 
generally accepted accounting principles in the United States, excluding 
goodwill and other intangible assets. In determining net worth, all long 
and short positions in security-based swaps, swaps, and related 
positions must be marked to their market value. A major security-based 
swap participant must include in its computation of tangible net worth 
all liabilities or obligations of a subsidiary or affiliate that the 
participant guarantees, endorses, or assumes either directly or 
indirectly.
    (c) Every major security-based swap participant must comply with 
Sec.  240.15c3-4 as though it were an OTC derivatives dealer with 
respect to its security-based swap and swap activities, except that 
Sec.  240.15c3-4(c)(5)(xiii) and (xiv) and (d)(8) and (9) shall not 
apply.

[84 FR 44068, Aug. 22, 2019]



Sec.  240.18a-3  Non-cleared security-based swap margin requirements
for security-based swap dealers and major security-based swap participants
for which there is not a prudential regulator.

    (a) Every security-based swap dealer and major security-based swap 
participant for which there is not a prudential regulator must comply 
with this section.
    (b) Definitions. For the purposes of this section:
    (1) The term account means an account carried by a security-based 
swap dealer or major security-based swap participant that holds one or 
more non-cleared security-based swaps for a counterparty.
    (2) The term commercial end user means a counterparty that qualifies 
for an exception from clearing under section 3C(g)(1) of the Act (15 
U.S.C. 78o-3(g)(1)) and implementing regulations or satisfies the 
criteria in section 3C(g)(4) of the Act (15 U.S.C. 78o-3(g)(4)) and 
implementing regulations.
    (3) The term counterparty means a person with whom the security-
based swap dealer or major security-based swap participant has entered 
into a non-cleared security-based swap transaction.
    (4) The term initial margin amount means the amount calculated 
pursuant to paragraph (d) of this section.
    (5) The term non-cleared security-based swap means a security-based

[[Page 710]]

swap that is not, directly or indirectly, submitted to and cleared by a 
clearing agency registered pursuant to section 17A of the Act (15 U.S.C. 
78q-1) or by a clearing agency that the Commission has exempted from 
registration by rule or order pursuant to section 17A of the Act (15 
U.S.C. 78q-1).
    (6) The term security-based swap legacy account means an account 
that holds no security-based swaps entered into after the compliance 
date of this section and that only is used to hold one or more security-
based swaps entered into prior to the compliance date of this section 
and collateral for those security-based swaps.
    (c) Margin requirements--(1) Security-based swap dealers--(i) 
Calculation required. A security-based swap dealer must calculate with 
respect to each account of a counterparty as of the close of each 
business day:
    (A) The amount of the current exposure in the account of the 
counterparty; and
    (B) The initial margin amount for the account of the counterparty.
    (ii) Account equity requirements. Except as provided in paragraph 
(c)(1)(iii) of this section, a security-based swap dealer must take an 
action required in paragraph (c)(1)(ii)(A) or (B) of this section by no 
later than the close of business of the first business day following the 
day of the calculation required under paragraph (c)(1)(i) of this 
section or, if the counterparty is located in another country and more 
than four time zones away, the second business day following the day of 
the calculation required under paragraph (c)(1)(i) of this section:
    (A)(1) Collect from the counterparty collateral in an amount equal 
to the current exposure that the security-based swap dealer has to the 
counterparty; or
    (2) Deliver to the counterparty collateral in an amount equal to the 
current exposure that the counterparty has to the security-based swap 
dealer, provided that such amount does not include the initial margin 
amount collected from the counterparty under paragraph (c)(1)(ii)(B) of 
this section; and
    (B) Collect from the counterparty collateral in an amount equal to 
the initial margin amount.
    (iii) Exceptions--(A) Commercial end users. The requirements of 
paragraph (c)(1)(ii) of this section do not apply to an account of a 
counterparty that is a commercial end user.
    (B) Counterparties that are financial market intermediaries. The 
requirements of paragraph (c)(1)(ii)(B) of this section do not apply to 
an account of a counterparty that is a security-based swap dealer, swap 
dealer, broker or dealer, futures commission merchant, bank, foreign 
bank, or foreign broker or dealer.
    (C) Counterparties that use third-party custodians. The requirements 
of paragraph (c)(1)(ii)(B) of this section do not apply to an account of 
a counterparty that delivers the collateral to meet the initial margin 
amount to an independent third-party custodian.
    (D) Security-based swap legacy accounts. The requirements of 
paragraph (c)(1)(ii) of this section do not apply to a security-based 
swap legacy account.
    (E) Bank for International Settlements, European Stability 
Mechanism, and Multilateral development banks. The requirements of 
paragraph (c)(1)(ii) of this section do not apply to an account of a 
counterparty that is the Bank for International Settlements or the 
European Stability Mechanism, or is the International Bank for 
Reconstruction and Development, the Multilateral Investment Guarantee 
Agency, the International Finance Corporation, the Inter-American 
Development Bank, the Asian Development Bank, the African Development 
Bank, the European Bank for Reconstruction and Development, the European 
Investment Bank, the European Investment Fund, the Nordic Investment 
Bank, the Caribbean Development Bank, the Islamic Development Bank, the 
Council of Europe Development Bank, or any other multilateral 
development bank that provides financing for national or regional 
development in which the U.S. government is a shareholder or 
contributing member.
    (F) Sovereign entities. The requirements of paragraph (c)(1)(ii)(B) 
of this section do not apply to an account of a

[[Page 711]]

counterparty that is a central government (including the U.S. 
government) or an agency, department, ministry, or central bank of a 
central government if the security-based swap dealer has determined that 
the counterparty has only a minimal amount of credit risk pursuant to 
policies and procedures or credit risk models established pursuant to 
Sec.  240.15c3-1 or Sec.  240.18a-1 (as applicable).
    (G) Affiliates. The requirements of paragraph (c)(1)(ii)(B) of this 
section do not apply to an account of a counterparty that is an 
affiliate of the security-based swap dealer.
    (H) Threshold amount. (1) A security-based swap dealer may elect not 
to collect the initial margin amount required under paragraph 
(c)(1)(ii)(B) of this section to the extent that the sum of that amount 
plus all other credit exposures resulting from non-cleared swaps and 
non-cleared security-based swaps of the security-based swap dealer and 
its affiliates with the counterparty and its affiliates does not exceed 
$50 million. For purposes of this calculation, a security-based swap 
dealer need not include any exposures arising from non-cleared security 
based swap transactions with a counterparty that is a commercial end 
user, and non-cleared swap transactions with a counterparty that 
qualifies for an exception from margin requirements pursuant to section 
4s(e)(4) of the Commodity Exchange Act (7 U.S.C. 6s(e)(4)).
    (2) One-time deferral. Notwithstanding paragraph (c)(1)(iii)(H)(1) 
of this section, a security-based swap dealer may defer collecting the 
initial margin amount required under paragraph (c)(1)(ii)(B) of this 
section for up to two months following the month in which a counterparty 
no longer qualifies for this threshold exception for the first time.
    (I) Minimum transfer amount. Notwithstanding any other provision of 
this rule, a security-based swap dealer is not required to collect or 
deliver collateral pursuant to this section with respect to a particular 
counterparty unless and until the total amount of collateral that is 
required to be collected or delivered, and has not yet been collected or 
delivered, with respect to the counterparty is greater than $500,000.
    (2) Major security-based swap participants--(i) Calculation 
required. A major security-based swap participant must with respect to 
each account of a counterparty calculate as of the close of each 
business day the amount of the current exposure in the account of the 
counterparty.
    (ii) Account equity requirements. Except as provided in paragraph 
(c)(2)(iii) of this section, a major security-based swap participant 
must take an action required in paragraph (c)(2)(ii)(A) or (B) of this 
section by no later than the close of business of the first business day 
following the day of the calculation required under paragraph (c)(2)(i) 
or, if the counterparty is located in another country and more than four 
time zones away, the second business day following the day of the 
calculation required under paragraph (c)(2)(i) of this section:
    (A) Collect from the counterparty collateral in an amount equal to 
the current exposure that the major security-based swap participant has 
to the counterparty; or
    (B) Deliver to the counterparty collateral in an amount equal to the 
current exposure that the counterparty has to the major security-based 
swap participant.
    (iii) Exceptions--(A) Commercial end users. The requirements of 
paragraph (c)(2)(ii)(A) of this section do not apply to an account of a 
counterparty that is a commercial end user.
    (B) Security-based swap legacy accounts. The requirements of 
paragraph (c)(2)(ii) of this section do not apply to a security-based 
swap legacy account.
    (C) Bank for International Settlements, European Stability 
Mechanism, and Multilateral development banks. The requirements of 
paragraph (c)(2)(ii)(A) of this section do not apply to an account of a 
counterparty that is the Bank for International Settlements or the 
European Stability Mechanism, or is the International Bank for 
Reconstruction and Development, the Multilateral Investment Guarantee 
Agency, the International Finance Corporation, the Inter-American 
Development Bank, the Asian Development Bank, the African Development 
Bank, the European

[[Page 712]]

Bank for Reconstruction and Development, the European Investment Bank, 
the European Investment Fund, the Nordic Investment Bank, the Caribbean 
Development Bank, the Islamic Development Bank, the Council of Europe 
Development Bank, or any other multilateral development bank that 
provides financing for national or regional development in which the 
U.S. government is a shareholder or contributing member.
    (D) Minimum transfer amount. Notwithstanding any other provision of 
this rule, a major security-based swap participant is not required to 
collect or deliver collateral pursuant to this section with respect to a 
particular counterparty unless and until the total amount of collateral 
that is required to be collected or delivered, and has not yet been 
collected or delivered, with respect to the counterparty is greater than 
$500,000.
    (3) Deductions for collateral. (i) The fair market value of 
collateral delivered by a counterparty or the security-based swap dealer 
must be reduced by the amount of the standardized deductions the 
security-based swap dealer would apply to the collateral pursuant to 
Sec.  240.15c3-1 or Sec.  240.18a-1, as applicable, for the purpose of 
paragraph (c)(1)(ii) of this section.
    (ii) Notwithstanding paragraph (c)(3)(i) of this section, the fair 
market value of assets delivered as collateral by a counterparty or the 
security-based swap dealer may be reduced by the amount of the 
standardized deductions prescribed in 17 CFR 23.156 if the security-
based swap dealer applies these standardized deductions consistently 
with respect to the particular counterparty.
    (4) Collateral requirements. A security-based swap dealer or a major 
security-based swap participant when calculating the amounts under 
paragraphs (c)(1) and (2) of this section may take into account the fair 
market value of collateral delivered by a counterparty provided:
    (i) The collateral:
    (A) Has a ready market;
    (B) Is readily transferable;
    (C) Consists of cash, securities, money market instruments, a major 
foreign currency, the settlement currency of the non-cleared security-
based swap, or gold;
    (D) Does not consist of securities and/or money market instruments 
issued by the counterparty or a party related to the security-based swap 
dealer, the major security-based swap participant, or the counterparty; 
and
    (E) Is subject to an agreement between the security-based swap 
dealer or the major security-based swap participant and the counterparty 
that is legally enforceable by the security-based swap dealer or the 
major security-based swap participant against the counterparty and any 
other parties to the agreement; and
    (ii) The collateral is either:
    (A) Subject to the physical possession or control of the security-
based swap dealer or the major security-based swap participant and may 
be liquidated promptly by the security-based swap dealer or the major 
security-based swap participant without intervention by any other party; 
or
    (B) The collateral is carried by an independent third-party 
custodian that is a bank as defined in section 3(a)(6) of the Act or a 
registered U.S. clearing organization or depository that is not 
affiliated with the counterparty or, if the collateral consists of 
foreign securities or currencies, a supervised foreign bank, clearing 
organization, or depository that is not affiliated with the counterparty 
and that customarily maintains custody of such foreign securities or 
currencies.
    (5) Qualified netting agreements. A security-based swap dealer or 
major security-based swap participant may include the effect of a 
netting agreement that allows the security-based swap dealer or major 
security-based swap participant to net gross receivables from and gross 
payables to a counterparty upon the default of the counterparty, for the 
purposes of the calculations required pursuant to paragraphs (c)(1)(i) 
and (c)(2)(i) of this section, if:
    (i) The netting agreement is legally enforceable in each relevant 
jurisdiction, including in insolvency proceedings;

[[Page 713]]

    (ii) The gross receivables and gross payables that are subject to 
the netting agreement with a counterparty can be determined at any time; 
and
    (iii) For internal risk management purposes, the security-based swap 
dealer or major security-based swap participant monitors and controls 
its exposure to the counterparty on a net basis.
    (6) Frequency of calculations increased. The calculations required 
pursuant to paragraphs (c)(1)(i) and (c)(2)(i) of this section must be 
made more frequently than the close of each business day during periods 
of extreme volatility and for accounts with concentrated positions.
    (7) Liquidation. A security-based swap dealer or major security-
based swap participant must take prompt steps to liquidate positions in 
an account that does not meet the margin requirements of this section to 
the extent necessary to eliminate the margin deficiency.
    (d) Calculating initial margin amount. A security-based swap dealer 
must calculate the initial margin amount required by paragraph 
(c)(1)(i)(B) of this section for non-cleared security-based swaps as 
follows:
    (1) Standardized approach--(i) Credit default swaps. For credit 
default swaps, the security-based swap dealer must use the method 
specified in Sec.  240.18a-1(c)(1)(vi)(B)(1) or, if the security-based 
swap dealer is registered with the Commission as a broker or dealer, the 
method specified in Sec.  240.15c3-1(c)(2)(vi)(P)(1).
    (ii) All other security-based swaps. For security-based swaps other 
than credit default swaps, the security-based swap dealer must use the 
method specified in Sec.  240.18a-1(c)(1)(vi)(B)(2) or, if the security-
based swap dealer is registered with the Commission as a broker or 
dealer, the method specified in Sec.  240.15c3-1(c)(2)(vi)(P)(2).
    (2) Model approach. (i) For security-based swaps other than equity 
security-based swaps, a security-based swap dealer may apply to the 
Commission for authorization to use and be responsible for a model to 
calculate the initial margin amount required by paragraph (c)(1)(i)(B) 
of this section subject to the application process in Sec.  240.15c3-1e 
or Sec.  240.18a-1(d), as applicable. The model must use a 99 percent, 
one-tailed confidence level with price changes equivalent to a ten 
business-day movement in rates and prices, and must use risk factors 
sufficient to cover all the material price risks inherent in the 
positions for which the initial margin amount is being calculated, 
including foreign exchange or interest rate risk, credit risk, equity 
risk, and commodity risk, as appropriate. Empirical correlations may be 
recognized by the model within each broad risk category, but not across 
broad risk categories.
    (ii) Notwithstanding paragraph (d)(2)(i) of this section, a 
security-based swap dealer that is not registered as a broker or dealer 
pursuant to Section 15(b) of the Act (15 U.S.C. 78o(b)), other than as 
an OTC derivatives dealer, may apply to the Commission for authorization 
to use a model to calculate the initial margin amount required by 
paragraph (c)(1)(i)(B) of this section for equity security-based swaps, 
subject to the application process and model requirements of paragraph 
(d)(2)(i) of this section; provided, however, the account of the 
counterparty subject to the requirements of this paragraph may not hold 
equity security positions other than equity security-based swaps and 
equity swaps.
    (e) Risk monitoring and procedures. A security-based swap dealer 
must monitor the risk of each account and establish, maintain, and 
document procedures and guidelines for monitoring the risk of accounts 
as part of the risk management control system required by Sec.  
240.15c3-4. The security-based swap dealer must review, in accordance 
with written procedures, at reasonable periodic intervals, its non-
cleared security-based swap activities for consistency with the risk 
monitoring procedures and guidelines required by this section. The 
security-based swap dealer also must determine whether information and 
data necessary to apply the risk monitoring procedures and guidelines 
required by this section are accessible on a timely basis and whether 
information systems are available to adequately capture, monitor, 
analyze, and report relevant data and information. The risk monitoring 
procedures and guidelines must include, at a minimum, procedures and 
guidelines for:

[[Page 714]]

    (1) Obtaining and reviewing account documentation and financial 
information necessary for assessing the amount of current and potential 
future exposure to a given counterparty permitted by the security-based 
swap dealer;
    (2) Determining, approving, and periodically reviewing credit limits 
for each counterparty, and across all counterparties;
    (3) Monitoring credit risk exposure to the security-based swap 
dealer from non-cleared security-based swaps, including the type, scope, 
and frequency of reporting to senior management;
    (4) Using stress tests to monitor potential future exposure to a 
single counterparty and across all counterparties over a specified range 
of possible market movements over a specified time period;
    (5) Managing the impact of credit exposure related to non-cleared 
security-based swaps on the security-based swap dealer's overall risk 
exposure;
    (6) Determining the need to collect collateral from a particular 
counterparty, including whether that determination was based upon the 
creditworthiness of the counterparty and/or the risk of the specific 
non-cleared security-based swap contracts with the counterparty;
    (7) Monitoring the credit exposure resulting from concentrated 
positions with a single counterparty and across all counterparties, and 
during periods of extreme volatility; and
    (8) Maintaining sufficient equity in the account of each 
counterparty to protect against the largest individual potential future 
exposure of a non-cleared security-based swap carried in the account of 
the counterparty as measured by computing the largest maximum possible 
loss that could result from the exposure.

[85 FR 44068, Aug. 22, 2020]



Sec.  240.18a-4  Segregation requirements for security-based swap 
dealers and major security-based swap participants.

    Section 240.18a-4 applies to a security-based swap dealer or major 
security-based swap participant registered under section 15F(b) of the 
Act (15 U.S.C. 78o-10(b)), including a security-based swap dealer that 
is an OTC derivatives dealer as that term is defined in Sec.  240.3b-12. 
A security-based swap dealer registered under section 15F of the Act (15 
U.S.C. 78o-10) that is also a broker or dealer registered under section 
15 of the Act (15 U.S.C. 78o), other than an OTC derivatives dealer, is 
subject to the customer protection requirements under Sec.  240.15c3-3, 
including paragraph (p) of that rule with respect to its security-based 
swap activity.
    (a) Definitions. For the purposes of this section:
    (1) The term cleared security-based swap means a security-based swap 
that is, directly or indirectly, submitted to and cleared by a clearing 
agency registered with the Commission pursuant to section 17A of the Act 
(15 U.S.C. 78q-1);
    (2) The term excess securities collateral means securities and money 
market instruments carried for the account of a security-based swap 
customer that have a market value in excess of the current exposure of 
the security-based swap dealer (after reducing the current exposure by 
the amount of cash in the account) to the security-based swap customer, 
excluding:
    (i) Securities and money market instruments held in a qualified 
clearing agency account but only to the extent the securities and money 
market instruments are being used to meet a margin requirement of the 
clearing agency resulting from a security-based swap transaction of the 
security-based swap customer; and
    (ii) Securities and money market instruments held in a qualified 
registered security-based swap dealer account or in a third-party 
custodial account but only to the extent the securities and money market 
instruments are being used to meet a regulatory margin requirement of 
another security-based swap dealer resulting from the security-based 
swap dealer entering into a non-cleared security-based swap transaction 
with the other security-based swap dealer to offset the risk of a non-
cleared security-based swap transaction between the security-based swap 
dealer and the security-based swap customer.

[[Page 715]]

    (3) The term foreign major security-based swap participant has the 
meaning set forth in Sec.  240.3a67-10(a)(6).
    (4) The term foreign security-based swap dealer has the meaning set 
forth in Sec.  240.3a71-3(a)(7).
    (5) The term qualified clearing agency account means an account of a 
security-based swap dealer at a clearing agency registered with the 
Commission pursuant to section 17A of the Act (15 U.S.C. 78q-1) that 
holds funds and other property in order to margin, guarantee, or secure 
cleared security-based swap transactions for the security-based swap 
customers of the security-based swap dealer that meets the following 
conditions:
    (i) The account is designated ``Special Clearing Account for the 
Exclusive Benefit of the Cleared Security-Based Swap Customers of [name 
of security-based swap dealer]'';
    (ii) The clearing agency has acknowledged in a written notice 
provided to and retained by the security-based swap dealer that the 
funds and other property in the account are being held by the clearing 
agency for the exclusive benefit of the security-based swap customers of 
the security-based swap dealer in accordance with the regulations of the 
Commission and are being kept separate from any other accounts 
maintained by the security-based swap dealer with the clearing agency; 
and
    (iii) The account is subject to a written contract between the 
security-based swap dealer and the clearing agency which provides that 
the funds and other property in the account shall be subject to no 
right, charge, security interest, lien, or claim of any kind in favor of 
the clearing agency or any person claiming through the clearing agency, 
except a right, charge, security interest, lien, or claim resulting from 
a cleared security-based swap transaction effected in the account.
    (6) The term qualified registered security-based swap dealer account 
means an account at another security-based swap dealer registered with 
the Commission pursuant to section 15F of the Act that meets the 
following conditions:
    (i) The account is designated ``Special Reserve Account for the 
Exclusive Benefit of the Security-Based Swap Customers of [name of 
security-based swap dealer]'';
    (ii) The other security-based swap dealer has acknowledged in a 
written notice provided to and retained by the security-based swap 
dealer that the funds and other property held in the account are being 
held by the other security-based swap dealer for the exclusive benefit 
of the security-based swap customers of the security-based swap dealer 
in accordance with the regulations of the Commission and are being kept 
separate from any other accounts maintained by the security-based swap 
dealer with the other security-based swap dealer;
    (iii) The account is subject to a written contract between the 
security-based swap dealer and the other security-based swap dealer 
which provides that the funds and other property in the account shall be 
subject to no right, charge, security interest, lien, or claim of any 
kind in favor of the other security-based swap dealer or any person 
claiming through the other security-based swap dealer, except a right, 
charge, security interest, lien, or claim resulting from a non-cleared 
security-based swap transaction effected in the account; and
    (iv) The account and the assets in the account are not subject to 
any type of subordination agreement between the security-based swap 
dealer and the other security-based swap dealer.
    (7) The term qualified security means:
    (i) Obligations of the United States;
    (ii) Obligations fully guaranteed as to principal and interest by 
the United States; and
    (iii) General obligations of any State or a political subdivision of 
a State that:
    (A) Are not traded flat and are not in default;
    (B) Were part of an initial offering of $500 million or greater; and
    (C) Were issued by an issuer that has published audited financial 
statements within 120 days of its most recent fiscal year end.
    (8) The term security-based swap customer means any person from whom 
or on whose behalf the security-based swap dealer has received or 
acquired or holds funds or other property for the account of the person 
with respect to a

[[Page 716]]

cleared or non-cleared security-based swap transaction. The term does 
not include a person to the extent that person has a claim for funds or 
other property which by contract, agreement or understanding, or by 
operation of law, is part of the capital of the security-based swap 
dealer or is subordinated to all claims of security-based swap customers 
of the security-based swap dealer.
    (9) The term special reserve account for the exclusive benefit of 
security-based swap customers means an account at a bank that meets the 
following conditions:
    (i) The account is designated ``Special Reserve Account for the 
Exclusive Benefit of the Security-Based Swap Customers of [name of 
security-based swap dealer]'';
    (ii) The account is subject to a written acknowledgement by the bank 
provided to and retained by the security-based swap dealer that the 
funds and other property held in the account are being held by the bank 
for the exclusive benefit of the security-based swap customers of the 
security-based swap dealer in accordance with the regulations of the 
Commission and are being kept separate from any other accounts 
maintained by the security-based swap dealer with the bank; and
    (iii) The account is subject to a written contract between the 
security-based swap dealer and the bank which provides that the funds 
and other property in the account shall at no time be used directly or 
indirectly as security for a loan or other extension of credit to the 
security-based swap dealer by the bank and, shall be subject to no 
right, charge, security interest, lien, or claim of any kind in favor of 
the bank or any person claiming through the bank.
    (10) The term third-party custodial account means an account carried 
by an independent third-party custodian that meets the following 
conditions:
    (i) The account is established for the purposes of meeting 
regulatory margin requirements of another security-based swap dealer;
    (ii) The account is carried by a bank as defined in section 3(a)(6) 
of the Act or a registered U.S. clearing organization or depository or, 
if the collateral to be held in the account consists of foreign 
securities or currencies, a supervised foreign bank, clearing 
organization, or depository that customarily maintains custody of such 
foreign securities or currencies;
    (iii) The account is designated for and on behalf of the security-
based swap dealer for the benefit of its security-based swap customers 
and the account is subject to a written acknowledgement by the bank, 
clearing organization, or depository provided to and retained by the 
security-based swap dealer that the funds and other property held in the 
account are being held by the bank, clearing organization, or depository 
for the exclusive benefit of the security-based swap customers of the 
security-based swap dealer and are being kept separate from any other 
accounts maintained by the security-based swap dealer with the bank, 
clearing organization, or depository; and
    (iv) The account is subject to a written contract between the 
security-based swap dealer and the bank, clearing organization, or 
depository which provides that the funds and other property in the 
account shall at no time be used directly or indirectly as security for 
a loan or other extension of credit to the security-based swap dealer by 
the bank, clearing organization, or depository and, shall be subject to 
no right, charge, security interest, lien, or claim of any kind in favor 
of the bank, clearing organization, or depository or any person claiming 
through the bank, clearing organization, or depository.
    (11) The term U.S. person has the meaning set forth in Sec.  
240.3a71-3(a)(4).
    (b) Physical possession or control of excess securities collateral. 
(1) A security-based swap dealer must promptly obtain and thereafter 
maintain physical possession or control of all excess securities 
collateral carried for the security-based swap accounts of security-
based swap customers.
    (2) A security-based swap dealer has control of excess securities 
collateral only if the securities and money market instruments:
    (i) Are represented by one or more certificates in the custody or 
control of a clearing corporation or other subsidiary organization of 
either national securities exchanges, or of a custodian

[[Page 717]]

bank in accordance with a system for the central handling of securities 
complying with the provisions of Sec. Sec.  240.8c-1(g) and 240.15c2-
1(g) the delivery of which certificates to the security-based swap 
dealer does not require the payment of money or value, and if the books 
or records of the security-based swap dealer identify the security-based 
swap customers entitled to receive specified quantities or units of the 
securities so held for such security-based swap customers collectively;
    (ii) Are the subject of bona fide items of transfer; provided that 
securities and money market instruments shall be deemed not to be the 
subject of bona fide items of transfer if, within 40 calendar days after 
they have been transmitted for transfer by the security-based swap 
dealer to the issuer or its transfer agent, new certificates conforming 
to the instructions of the security-based swap dealer have not been 
received by the security-based swap dealer, the security-based swap 
dealer has not received a written statement by the issuer or its 
transfer agent acknowledging the transfer instructions and the 
possession of the securities or money market instruments, or the 
security-based swap dealer has not obtained a revalidation of a window 
ticket from a transfer agent with respect to the certificate delivered 
for transfer;
    (iii) Are in the custody or control of a bank as defined in section 
3(a)(6) of the Act, the delivery of which securities or money market 
instruments to the security-based swap dealer does not require the 
payment of money or value and the bank having acknowledged in writing 
that the securities and money market instruments in its custody or 
control are not subject to any right, charge, security interest, lien or 
claim of any kind in favor of a bank or any person claiming through the 
bank;
    (iv)(A) Are held in or are in transit between offices of the 
security-based swap dealer; or (B) Are held by a corporate subsidiary if 
the security-based swap dealer owns and exercises a majority of the 
voting rights of all of the voting securities of such subsidiary, 
assumes or guarantees all of the subsidiary's obligations and 
liabilities, operates the subsidiary as a branch office of the security-
based swap dealer, and assumes full responsibility for compliance by the 
subsidiary and all of its associated persons with the provisions of the 
Federal securities laws as well as for all of the other acts of the 
subsidiary and such associated persons; or
    (v) Are held in such other locations as the Commission shall upon 
application from a security-based swap dealer find and designate to be 
adequate for the protection of security-based swap customer securities.
    (3) Each business day the security-based swap dealer must determine 
from its books and records the quantity of excess securities collateral 
in its possession or control as of the close of the previous business 
day and the quantity of excess securities collateral not in its 
possession or control as of the previous business day. If the security-
based swap dealer did not obtain possession or control of all excess 
securities collateral on the previous business day as required by this 
section and there are securities or money market instruments of the same 
issue and class in any of the following non-control locations:
    (i) Securities or money market instruments subject to a lien 
securing an obligation of the security-based swap dealer, then the 
security-based swap dealer, not later than the next business day on 
which the determination is made, must issue instructions for the release 
of the securities or money market instruments from the lien and must 
obtain physical possession or control of the securities or money market 
instruments within two business days following the date of the 
instructions;
    (ii) Securities or money market instruments held in a qualified 
clearing agency account, then the security-based swap dealer, not later 
than the next business day on which the determination is made, must 
issue instructions for the release of the securities or money market 
instruments by the clearing agency and must obtain physical possession 
or control of the securities or money market instruments within two 
business days following the date of the instructions;
    (iii) Securities or money market instruments held in a qualified 
registered security-based swap dealer account maintained by another 
security-based

[[Page 718]]

swap dealer or in a third-party custodial account, then the security-
based swap dealer, not later than the next business day on which the 
determination is made, must issue instructions for the release of the 
securities or money market instruments by the other security-based swap 
dealer or by the third-party custodian and must obtain physical 
possession or control of the securities or money market instruments 
within two business days following the date of the instructions;
    (iv) Securities or money market instruments loaned by the security-
based swap dealer, then the security-based swap dealer, not later than 
the next business day on which the determination is made, must issue 
instructions for the return of the loaned securities or money market 
instruments and must obtain physical possession or control of the 
securities or money market instruments within five business days 
following the date of the instructions;
    (v) Securities or money market instruments failed to receive for 
more than 30 calendar days, then the security-based swap dealer, not 
later than the next business day on which the determination is made, 
must take prompt steps to obtain physical possession or control of the 
securities or money market instruments through a buy-in procedure or 
otherwise;
    (vi) Securities or money market instruments receivable by the 
security-based swap dealer as a security dividend, stock split or 
similar distribution for more than 45 calendar days, then the security-
based swap dealer, not later than the next business day on which the 
determination is made, must take prompt steps to obtain physical 
possession or control of the securities or money market instruments 
through a buy-in procedure or otherwise; or
    (vii) Securities or money market instruments included on the 
security-based swap dealer's books or records that allocate to a short 
position of the security-based swap dealer or a short position for 
another person, for more than 30 calendar days, then the security-based 
swap dealer must, not later than the business day following the day on 
which the determination is made, take prompt steps to obtain physical 
possession or control of such securities or money market instruments.
    (c) Deposit requirement for special reserve account for the 
exclusive benefit of security-based swap customers. (1) A security-based 
swap dealer must maintain a special reserve account for the exclusive 
benefit of security-based swap customers that is separate from any other 
bank account of the security-based swap dealer. The security-based swap 
dealer must at all times maintain in the special reserve account for the 
exclusive benefit of security-based swap customers, through deposits 
into the account, cash and/or qualified securities in amounts computed 
in accordance with the formula set forth in Sec.  240.18a-4a.
    (i) In determining the amount maintained in a special reserve 
account for the exclusive benefit of security-based swap customers, the 
security-based swap dealer must deduct:
    (A) The percentage of the value of a general obligation of a State 
or a political subdivision of a State specified in Sec.  240.15c3-
1(c)(2)(vi);
    (B) The aggregate value of general obligations of a State or a 
political subdivision of a State to the extent the amount of the 
obligations of a single issuer (after applying the deduction in 
paragraph (c)(1)(i)(A) of this section) exceeds two percent of the 
amount required to be maintained in the special reserve account for the 
exclusive benefit of security-based swap customers;
    (C) The aggregate value of all general obligations of States or 
political subdivisions of States to the extent the amount of the 
obligations (after applying the deduction in paragraph (c)(1)(i)(A) of 
this section) exceeds 10 percent of the amount required to be maintained 
in the special reserve account for the exclusive benefit of security-
based swap customers;
    (D) The amount of cash deposited with a single non-affiliated bank 
to the extent the amount exceeds 15 percent of the equity capital of the 
bank as reported by the bank in its most recent Call Report or any 
successor form the bank is required to file by its appropriate federal 
banking agency (as defined by section 3 of the Federal Deposit Insurance 
Act (12 U.S.C. 1813)); and

[[Page 719]]

    (E) The total amount of cash deposited with an affiliated bank.
    (ii) Exception. A security-based swap dealer for which there is a 
prudential regulator need not take the deduction specified in paragraph 
(c)(1)(i)(D) of this section if it maintains the special reserve account 
for the exclusive benefit of security-based swap customers itself rather 
than at an affiliated or non-affiliated bank.
    (2) A security-based swap dealer must not accept or use credits 
identified in the items of the formula set forth in Sec.  240.18a-4a 
except for the specified purposes indicated under items comprising Total 
Debits under the formula, and, to the extent Total Credits exceed Total 
Debits, at least the net amount thereof must be maintained in the 
Special Reserve Account pursuant to paragraph (c)(1) of this section.
    (3)(i) The computations necessary to determine the amount required 
to be maintained in the special reserve account for the exclusive 
benefit of security-based swap customers must be made weekly as of the 
close of the last business day of the week and any deposit required to 
be made into the account must be made no later than one hour after the 
opening of banking business on the second following business day. The 
security-based swap dealer may make a withdrawal from the special 
reserve account for the exclusive benefit of security-based swap 
customers only if the amount remaining in the account after the 
withdrawal is equal to or exceeds the amount required to be maintained 
in the account pursuant to paragraph (c)(1) of this section.
    (ii) Computations in addition to the computations required pursuant 
to paragraph (c)(3)(i) of this section may be made as of the close of 
any business day, and deposits so computed must be made no later than 
one hour after the open of banking business on the second following 
business day.
    (4) A security-based swap dealer must promptly deposit into a 
special reserve account for the exclusive benefit of security-based swap 
customers cash and/or qualified securities of the security-based swap 
dealer if the amount of cash and/or qualified securities in one or more 
special reserve accounts for the exclusive benefit of security-based 
swap customers falls below the amount required to be maintained pursuant 
to this section.
    (d) Requirements for non-cleared security-based swaps--(1) Notice. A 
security-based swap dealer and a major security-based swap participant 
must provide the notice required pursuant to section 3E(f)(1)(A) of the 
Act (15 U.S.C. 78c-5(f)) in writing to a duly authorized individual 
prior to the execution of the first non-cleared security-based swap 
transaction with the counterparty occurring after the compliance date of 
this section.
    (2) Subordination--(i) Counterparty that elects to have individual 
segregation at an independent third-party custodian. A security-based 
swap dealer must obtain an agreement from a counterparty whose funds or 
other property to meet a margin requirement of the security-based swap 
dealer are held at a third-party custodian in which the counterparty 
agrees to subordinate its claims against the security-based swap dealer 
for the funds or other property held at the third-party custodian to the 
claims of security-based swap customers of the security-based swap 
dealer but only to the extent that funds or other property provided by 
the counterparty to the third-party custodian are not treated as 
customer property as that term is defined in 11 U.S.C. 741 in a 
liquidation of the security-based swap dealer.
    (ii) Counterparty that elects to have no segregation. A security-
based swap dealer must obtain an agreement from a counterparty that 
affirmatively chooses not to require segregation of funds or other 
property pursuant to section 3E(f) of the Act (15 U.S.C. 78c-5(f)) in 
which the counterparty agrees to subordinate all of its claims against 
the security-based swap dealer to the claims of security-based swap 
customers of the security-based swap dealer.
    (e) Segregation and disclosure requirements for foreign security-
based swap dealers and foreign major security-based swap participants--
(1) Segregation requirements for foreign security-based swap dealers--
(i) Foreign bank. Section 3E of the Act (15 U.S.C. 78c-5) and this 
section thereunder apply to a foreign

[[Page 720]]

security-based swap dealer registered under section 15F of the Act (15 
U.S.C. 78o-10) that is a foreign bank, foreign savings bank, foreign 
cooperative bank, foreign savings and loan association, foreign building 
and loan association, or foreign credit union:
    (A) With respect to a security-based swap customer that is a U.S. 
person, and
    (B) With respect to a security-based swap customer that is not a 
U.S. person if the foreign security-based swap dealer holds funds or 
other property arising out of a transaction had by such person with a 
branch or agency (as defined in section 1(b) of the International 
Banking Act of 1978) in the United States of such foreign security-based 
swap dealer.
    (ii) Not a foreign bank. Section 3E of the Act (15 U.S.C. 78c-5) and 
this section thereunder apply to a foreign security-based swap dealer 
registered under section 15F of the Act (15 U.S.C. 78o-10) that is not a 
foreign bank, foreign savings bank, foreign cooperative bank, foreign 
savings and loan association, foreign building and loan association, or 
foreign credit union:
    (A) Cleared security-based swaps. With respect to all cleared 
security-based swap transactions, if such foreign security-based swap 
dealer has received or acquired or holds funds or other property for at 
least one security-based swap customer that is a U.S. person with 
respect to a cleared security-based swap transaction with such U.S. 
person, and
    (B) Non-cleared security-based swaps. With respect to funds or other 
property such foreign security-based swap dealer has received or 
acquired or holds for a security-based swap customer that is a U.S. 
person with respect to a non-cleared security-based swap transaction 
with such U.S. person.
    (2) Segregation requirements for foreign major security-based swap 
participants. Section 3E of the Act (15 U.S.C. 78c-5) and this section 
thereunder apply to a foreign major security-based swap participant 
registered under section 15F of the Act (15 U.S.C. 78o-10), with respect 
to a counterparty that is a U.S. person.
    (3) Disclosure requirements for foreign security-based swap dealers. 
A foreign security-based swap dealer registered under section 15F of the 
Act (15 U.S.C. 78o-10) must disclose in writing to a security-based swap 
customer that is a U.S. person, prior to receiving, acquiring, or 
holding funds or other property for such security-based swap customer 
with respect to a security-based swap transaction, the potential 
treatment of the funds or other property segregated by such foreign 
security-based swap dealer pursuant to section 3E of the Act (15 U.S.C. 
78c-5), and the rules and regulations thereunder, in insolvency 
proceedings under U.S. bankruptcy law and any applicable foreign 
insolvency laws. Such disclosure must include whether the foreign 
security-based swap dealer is subject to the segregation requirement set 
forth in section 3E of the Act (15 U.S.C. 78c-5), and the rules and 
regulations thereunder, with respect to the funds or other property 
received, acquired, or held for the security-based swap customer that 
will receive the disclosure, whether the foreign security-based swap 
dealer could be subject to the stockbroker liquidation provisions in the 
U.S. Bankruptcy Code, whether the segregated funds or other property 
could be afforded customer property treatment under U.S. bankruptcy law, 
and any other relevant considerations that may affect the treatment of 
the funds or other property segregated under section 3E of the Act (15 
U.S.C. 78c-5), and the rules and regulations thereunder, in insolvency 
proceedings of the foreign security-based swap dealer.
    (f) Exemption. The requirements of this section do not apply if the 
following conditions are met:
    (1) The security-based swap dealer does not:
    (i) Effect transactions in cleared security-based swaps for or on 
behalf of another person;
    (ii) Have any open transactions in cleared security-based swaps 
executed for or on behalf of another person; and
    (iii) Hold or control any money, securities, or other property to 
margin, guarantee, or secure a cleared security-based swap transaction 
executed for or on behalf of another person (including money, 
securities, or other property accruing to another person as a result of 
a cleared security-based swap transaction);

[[Page 721]]

    (2) The security-based swap dealer provides the notice required 
pursuant to section 3E(f)(1)(A) of the Act (15 U.S.C. 78c-5(f)(1)(A)) in 
writing to a duly authorized individual prior to the execution of the 
first non-cleared security-based swap transaction with the counterparty 
occurring after the compliance date of this section; and
    (3) The security-based swap dealer discloses in writing to a 
counterparty before engaging in the first non-cleared security-based 
swap transaction with the counterparty that any margin collateral 
received and held by the security-based swap dealer will not be subject 
to a segregation requirement and how a claim of a counterparty for the 
collateral would be treated in a bankruptcy or other formal liquidation 
proceeding of the security-based swap dealer.

[84 FR 44071, Aug. 22, 2019]



Sec.  240.18a-4a  Exhibit A--Formula for determination of security-based
swap customer reserve requirements under Sec.  240.18a-4.

------------------------------------------------------------------------
                                              Credits         Debits
------------------------------------------------------------------------
1. Free credit balances and other credit            $___
 balances in the accounts carried for
 security-based swap customers (See Note
 A).....................................
2. Monies borrowed collateralized by                $___
 securities in accounts carried for
 security-based swap customers (See Note
 B).....................................
3. Security-based swap customers'                   $___
 securities failed to receive (See Note
 C).....................................
4. Credit balances in firm accounts                 $___
 which are attributable to principal
 sales to security-based swap customers.
5. Market value of stock dividends,                 $___
 stock splits and similar distributions
 receivable outstanding over 30 calendar
 days...................................
6. Market value of short security count             $___
 differences over 30 calendar days old..
7. Market value of short securities and             $___
 credits (not to be offset by longs or
 by debits) in all suspense accounts
 over 30 calendar days..................
8. Market value of securities which are   ..............            $___
 in transfer in excess of 40 calendar
 days and have not been confirmed to be
 in transfer by the transfer agent or
 the issuer during the 40 days..........
9. Securities borrowed to effectuate      ..............            $___
 short sales by security-based swap
 customers and securities borrowed to
 make delivery on security-based swap
 customers' securities failed to deliver
10. Failed to deliver of security-based   ..............            $___
 swap customers' securities not older
 than 30 calendar days..................
11. Margin required and on deposit with   ..............            $___
 the Options Clearing Corporation for
 all option contracts written or
 purchased in accounts carried for
 security-based swap customers (See Note
 D).....................................
12. Margin related to security futures    ..............            $___
 products written, purchased or sold in
 accounts carried for security-based
 swap customers required and on deposit
 in a qualified clearing agency account
 at a clearing agency registered with
 the Commission under section 17A of the
 Act (15 U.S.C. 78q-1) or a derivatives
 clearing organization registered with
 the Commodity Futures Trading
 Commission under section 5b of the
 Commodity Exchange Act (7 U.S.C. 7a-1)
 (See Note E)...........................
13. Margin related to cleared security-   ..............            $___
 based swap transactions in accounts
 carried for security-based swap
 customers required and on deposit in a
 qualified clearing agency account at a
 clearing agency registered with the
 Commission pursuant to section 17A of
 the Act (15 U.S.C. 78q-1)..............
14. Margin related to non-cleared         ..............            $___
 security-based swap transactions in
 accounts carried for security-based
 swap customers required and held in a
 qualified registered security-based
 swap dealer account at another security-
 based swap dealer or at a third-party
 custodial account......................
                                         -------------------------------
    Total Credits.......................            $___
                                         -------------------------------
    Total Debits........................  ..............            $___
                                         -------------------------------
    Excess of Credits over Debits.......            $___
------------------------------------------------------------------------
Note A. Item 1 must include all outstanding drafts payable to security-
  based swap customers which have been applied against free credit
  balances or other credit balances and must also include checks drawn
  in excess of bank balances per the records of the security-based swap
  dealer.
Note B. Item 2 shall include the amount of options-related or security
  futures product-related Letters of Credit obtained by a member of a
  registered clearing agency or a derivatives clearing organization
  which are collateralized by security-based swap customers' securities,
  to the extent of the member's margin requirement at the registered
  clearing agency or derivatives clearing organization.
Note C. Item 3 must include in addition to security-based swap
  customers' securities failed to receive the amount by which the market
  value of securities failed to receive and outstanding more than thirty
  (30) calendar days exceeds their contract value.
Note D. Item 11 must include the amount of margin required and on
  deposit with Options Clearing Corporation to the extent such margin is
  represented by cash, proprietary qualified securities, and letters of
  credit collateralized by security-based swap customers' securities.

[[Page 722]]

 
Note E. (a) Item 12 must include the amount of margin required and on
  deposit with a clearing agency registered with the Commission under
  section 17A of the Act (15 U.S.C. 78q-1) or a derivatives clearing
  organization registered with the Commodity Futures Trading Commission
  under section 5b of the Commodity Exchange Act (7 U.S.C. 7a-1) for
  security-based swap customer accounts to the extent that the margin is
  represented by cash, proprietary qualified securities, and letters of
  credit collateralized by security-based swap customers' securities.
(b) Item 12 will apply only if the security-based swap dealer has the
  margin related to security futures products on deposit with:
(1) A registered clearing agency or derivatives clearing organization
  that:
(i) Maintains security deposits from clearing members in connection with
  regulated options or futures transactions and assessment power over
  member firms that equal a combined total of at least $2 billion, at
  least $500 million of which must be in the form of security deposits.
  For purposes of this Note E the term ``security deposits'' refers to a
  general fund, other than margin deposits or their equivalent, that
  consists of cash or securities held by a registered clearing agency or
  derivative clearing organization;
(ii) Maintains at least $3 billion in margin deposits; or
(iii) Does not meet the requirements of paragraphs (b)(1)(i) through
  (b)(1)(ii) of this Note E, if the Commission has determined, upon a
  written request for exemption by or for the benefit of the security-
  based swap dealer, that the security-based swap dealer may utilize
  such a registered clearing agency or derivatives clearing
  organization. The Commission may, in its sole discretion, grant such
  an exemption subject to such conditions as are appropriate under the
  circumstances, if the Commission determines that such conditional or
  unconditional exemption is necessary or appropriate in the public
  interest, and is consistent with the protection of investors; and
(2) A registered clearing agency or derivatives clearing organization
  that, if it holds funds or securities deposited as margin for security
  futures products in a bank, as defined in section 3(a)(6) of the Act
  (15 U.S.C. 78c(a)(6)), obtains and preserves written notification from
  the bank at which it holds such funds and securities or at which such
  funds and securities are held on its behalf. The written notification
  will state that all funds and/or securities deposited with the bank as
  margin (including security-based swap customer security futures
  products margin), or held by the bank and pledged to such registered
  clearing agency or derivatives clearing agency as margin, are being
  held by the bank for the exclusive benefit of clearing members of the
  registered clearing agency or derivatives clearing organization
  (subject to the interest of such registered clearing agency or
  derivatives clearing organization therein), and are being kept
  separate from any other accounts maintained by the registered clearing
  agency or derivatives clearing organization with the bank. The written
  notification also will provide that such funds and/or securities will
  at no time be used directly or indirectly as security for a loan to
  the registered clearing agency or derivatives clearing organization by
  the bank, and will be subject to no right, charge, security interest,
  lien, or claim of any kind in favor of the bank or any person claiming
  through the bank. This provision, however, will not prohibit a
  registered clearing agency or derivatives clearing organization from
  pledging security-based swap customer funds or securities as
  collateral to a bank for any purpose that the rules of the Commission
  or the registered clearing agency or derivatives clearing organization
  otherwise permit; and
(3) A registered clearing agency or derivatives clearing organization
  that establishes, documents, and maintains:
(i) Safeguards in the handling, transfer, and delivery of cash and
  securities;
(ii) Fidelity bond coverage for its employees and agents who handle
  security-based swap customer funds or securities. In the case of
  agents of a registered clearing agency or derivatives clearing
  organization, the agent may provide the fidelity bond coverage; and
(iii) Provisions for periodic examination by independent public
  accountants; and
(4) A derivatives clearing organization that, if it is not otherwise
  registered with the Commission, has provided the Commission with a
  written undertaking, in a form acceptable to the Commission, executed
  by a duly authorized person at the derivatives clearing organization,
  to the effect that, with respect to the clearance and settlement of
  the security-based swap customer security futures products of the
  security-based swap dealer, the derivatives clearing organization will
  permit the Commission to examine the books and records of the
  derivatives clearing organization for compliance with the requirements
  set forth in Sec.   240.15c3-3a, Note E. (b)(1) through (3).
(c) Item 12 will apply only if a security-based swap dealer determines,
  at least annually, that the registered clearing agency or derivatives
  clearing organization with which the security-based swap dealer has on
  deposit margin related to security futures products meets the
  conditions of this Note E.


[84 FR 44075, Aug. 22, 2019]



Sec.  240.18a-5  Records to be made by certain security-based swap 
dealers and major security-based swap participants.

    This section applies to the following types of entities: A security-
based swap dealer registered pursuant to section 15F of the Act (15 
U.S.C. 78o-10) that is not also a broker or dealer, including an OTC 
derivatives dealer as that term is defined in Sec.  240.3b-12, 
registered pursuant to section 15 of the Act (15 U.S.C. 78o); and a 
major security-based swap participant registered pursuant to section 15F 
of the Act that is not also a broker or dealer, including an OTC 
derivatives dealer, registered pursuant to section 15 of the Act. 
Section 240.17a-3 (rather than this section) applies to the following 
types of entities: A member of a national securities exchange who 
transacts a business in securities directly with others than members of 
a national securities exchange; a broker or dealer who transacts a 
business in securities through the medium of a member of a national 
securities exchange; a broker or dealer, including an OTC derivatives 
dealer, registered pursuant to section 15 of the Act; a security-based 
swap dealer registered pursuant to section 15F of the Act that is also a 
broker or dealer, including an OTC derivatives dealer, registered 
pursuant to section 15 of the Act; and a major security-based swap 
participant registered pursuant to section 15F of the Act that is also a 
broker or dealer, including an OTC derivatives dealer, registered 
pursuant to section 15 of the Act.
    (a) This paragraph (a) applies only to security-based swap dealers 
and major security-based swap participants registered under section 15F 
of the Act for which there is no prudential regulator.

[[Page 723]]

Each security-based swap dealer and major security-based swap 
participant subject to this paragraph (a) must make and keep current the 
following books and records:
    (1) Blotters (or other records of original entry) containing an 
itemized daily record of all purchases and sales of securities 
(including security-based swaps), all receipts and deliveries of 
securities (including certificate numbers), all receipts and 
disbursements of cash and all other debits and credits. Such records 
must show the account for which each such purchase or sale was effected, 
the name and amount of securities, the unit and aggregate purchase or 
sale price, if any (including the financial terms for security-based 
swaps), the trade date, and the name or other designation of the person 
from whom such securities were purchased or received or to whom sold or 
delivered. For security-based swaps, such records must also show, for 
each transaction, the type of security-based swap, the reference 
security, index, or obligor, the date and time of execution, the 
effective date, the scheduled termination date, the notional amount(s) 
and the currenc(ies) in which the notional amount(s) is expressed, the 
unique transaction identifier, and the counterparty's unique 
identification code.
    (2) Ledgers (or other records) reflecting all assets and 
liabilities, income and expense and capital accounts.
    (3) Ledger accounts (or other records) itemizing separately as to 
each account for every customer or non-customer of such security-based 
swap dealer or major security-based swap participant, all purchases and 
sales, receipts and deliveries of securities (including security-based 
swaps) and commodities for such account and all other debits and credits 
to such account; and in addition, for a security-based swap, the type of 
security-based swap, the reference security, index, or obligor, the date 
and time of execution, the effective date, the scheduled termination 
date, the notional amount(s) and the currenc(ies) in which the notional 
amount(s) is expressed, the unique transaction identifier, and the 
counterparty's unique identification code.
    (4) A securities record or ledger reflecting separately for each:
    (i) Security, other than a security-based swap, as of the clearance 
dates all ``long'' or ``short'' positions (including securities in 
safekeeping and securities that are the subjects of repurchase or 
reverse repurchase agreements) carried by such security-based swap 
dealer or major security-based swap participant for its account or for 
the account of its customers and showing the location of all securities 
long and the offsetting position to all securities short, including long 
security count differences and short security count differences 
classified by the date of the physical count and verification in which 
they were discovered, and, in all cases the name or designation of the 
account in which each position is carried.
    (ii) Security-based swap, the reference security, index, or obligor, 
the unique transaction identifier, the counterparty's unique 
identification code, whether it is a ``bought'' or ``sold'' position in 
the security-based swap, whether the security-based swap is cleared or 
not cleared, and if cleared, identification of the clearing agency where 
the security-based swap is cleared.
    (5) A memorandum of each purchase or sale of a security-based swap 
for the account of the security-based swap dealer or major security-
based swap participant showing the price. The memorandum must also 
include the type of security-based swap, the reference security, index, 
or obligor, the date and time of execution, the effective date, the 
scheduled termination date, the notional amount(s) and the currenc(ies) 
in which the notional amount(s) is expressed, the unique transaction 
identifier, and the counterparty's unique identification code. An order 
entered pursuant to the exercise of discretionary authority must be so 
designated.
    (6) With respect to a security other than a security-based swap, 
copies of confirmations of all purchases and sales of securities. With 
respect to a security-based swap, copies of the security-based swap 
trade acknowledgment and verification made in compliance with Sec.  
240.15Fi-2.

[[Page 724]]

    (7) For each security-based swap account, a record of the unique 
identification code of such counterparty, the name and address of such 
counterparty, and a record of the authorization of each person the 
counterparty has granted authority to transact business in the security-
based swap account.
    (8) A record of all puts, calls, spreads, straddles and other 
options in which such security-based swap dealer or major security-based 
swap participant has any direct or indirect interest or which such 
security-based swap dealer or major security-based swap participant has 
granted or guaranteed, containing, at least, an identification of the 
security, and the number of units involved.
    (9) A record of the proof of money balances of all ledger accounts 
in the form of trial balances, and a record of the computation of net 
capital or tangible net worth, as applicable, as of the trial balance 
date, pursuant to Sec.  240.18a-1 or Sec.  240.18a-2, respectively. Such 
trial balances and computations must be prepared currently at least once 
per month.
    (10)(i) A questionnaire or application for employment executed by 
each ``associated person'' (as defined in paragraph (d) of this section) 
of the security-based swap dealer or major security-based swap 
participant who effects or is involved in effecting security-based swaps 
on the security-based swap dealer's or major security-based swap 
participant's behalf, which questionnaire or application must be 
approved in writing by an authorized representative of the security-
based swap dealer or major security-based swap participant and must 
contain at least the following information with respect to the 
associated person:
    (A) The associated person's name, address, social security number, 
and the starting date of the associated person's employment or other 
association with the security-based swap dealer or major security-based 
swap participant;
    (B) The associated person's date of birth;
    (C) A complete, consecutive statement of all the associated person's 
business connections for at least the preceding ten years, including 
whether the employment was part-time or full-time;
    (D) A record of any denial of membership or registration, and of any 
disciplinary action taken, or sanction imposed, upon the associated 
person by any Federal or state agency, or by any national securities 
exchange or national securities association, including any finding that 
the associated person was a cause of any disciplinary action or had 
violated any law;
    (E) A record of any denial, suspension, expulsion or revocation of 
membership or registration of any broker, dealer, security-based swap 
dealer or major security-based swap participant with which the 
associated person was associated in any capacity at the time such action 
was taken;
    (F) A record of any permanent or temporary injunction entered 
against the associated person, or any broker, dealer, security-based 
swap dealer or major security-based swap participant with which the 
associated person was associated in any capacity at the time such 
injunction was entered;
    (G) A record of any arrest or indictment for any felony, or any 
misdemeanor pertaining to securities, commodities, banking, insurance or 
real estate (including, but not limited to, acting or being associated 
with a broker or dealer, security-based swap dealer, major security-
based swap participant, investment company, investment adviser, futures 
sponsor, bank, or savings and loan association), fraud, false statements 
or omissions, wrongful taking of property or bribery, forgery, 
counterfeiting or extortion, and the disposition of the foregoing; and
    (H) A record of any other name or names by which the associated 
person has been known or which the associated person has used.
    (ii) A record listing every associated person of the security-based 
swap dealer or major security-based swap participant which shows, for 
each associated person, every office of the security-based swap dealer 
or major security-based swap participant where the associated person 
regularly conducts the business of handling funds or securities or 
effecting any transactions in, or inducing or attempting to induce the 
purchase or sale of any security, for

[[Page 725]]

the security-based swap dealer or major security-based swap participant 
and the Central Registration Depository number, if any, and every 
internal identification number or code assigned to that person by the 
security-based swap dealer or major security-based swap participant.
    (iii) Notwithstanding paragraph (a)(10)(i) of this section:
    (A) A security-based swap dealer or major security-based swap 
participant is not required to make and keep current a questionnaire or 
application for employment executed by an associated person if the 
security-based swap dealer or major security-based swap participant is 
excluded from the prohibition in section 15F(b)(6) of the Exchange Act 
(15 U.S.C. 78o-10(b)(6)) with respect to such associated person; and
    (B) A questionnaire or application for employment executed by an 
associated person who is not a U.S. person (as that term is defined in 
Sec.  240.3a71-3(a)(4)(i)(A)) need not include the information described 
in paragraphs (a)(10)(i)(A) through (H) of this section, unless the 
security-based swap dealer or major security-based swap participant is 
required to obtain such information under applicable law in the 
jurisdiction in which the associated person is employed or located or 
obtains such information in conducting a background check that is 
customary for such firms in that jurisdiction and the creation or 
maintenance of records reflecting that information, would not result in 
a violation of applicable law in the jurisdiction in which the 
associated person is employed or located; provided, however, the 
security-based swap dealer or major security-based swap participant must 
comply with section 15F(b)(6) of the Exchange Act (15 U.S.C. 78o-
10(b)(6)).
    (11) [Reserved]
    (12) A record of the daily calculation of the current exposure and, 
if applicable, the initial margin amount for each account of a 
counterparty required under Sec.  240.18a-3(c).
    (13) A record of compliance with possession or control requirements 
under Sec.  240.18a-4(b).
    (14) A record of the reserve computation required under Sec.  
240.18a-4(c).
    (15) A record of each security-based swap transaction that is not 
verified under Sec.  240.15Fi-2 within five business days of execution 
that includes, at a minimum, the unique transaction identifier and the 
counterparty's unique identification code.
    (16) A record documenting that the security-based swap dealer has 
complied with the business conduct standards as required under Sec.  
240.15Fh-6.
    (17) A record documenting that the security-based swap dealer or 
major security-based swap participant has complied with the business 
conduct standards as required under Sec. Sec.  240.15Fh-1 through 
240.15Fh-5 and 240.15Fk-1.
    (18)(i) A record of each security-based swap portfolio 
reconciliation, whether conducted pursuant to Sec.  240.15Fi-3 or 
otherwise, including the dates of the security-based swap portfolio 
reconciliation, the number of portfolio reconciliation discrepancies, 
the number of security-based swap valuation disputes (including the 
time-to-resolution of each valuation dispute and the age of outstanding 
valuation disputes, categorized by transaction and counterparty), and 
the name of the third-party entity performing the security-based swap 
portfolio reconciliation, if any.
    (ii) A copy of each notification required to be provided to the 
Commission pursuant to Sec.  240.15Fi-3(c).
    (iii) A record of each bilateral offset and each bilateral portfolio 
compression exercise or multilateral portfolio compression exercise in 
which it participates, whether conducted pursuant to Sec.  240.15Fi-4 or 
otherwise, including the dates of the offset or compression, the 
security-based swaps included in the offset or compression, the identity 
of the counterparties participating in the offset or compression, the 
results of the compression, and the name of the third-party entity 
performing the offset or compression, if any.
    (b) This paragraph (b) applies only to security-based swap dealers 
and major security-based swap participants registered under section 15F 
of the Act for which there is a prudential regulator. Each security-
based swap dealer and major security-based swap participant subject to 
this paragraph (b) must

[[Page 726]]

make and keep current the following books and records:
    (1) For security-based swaps and any other positions related to the 
firm's business as such, blotters (or other records of original entry) 
containing an itemized daily record of all purchases and sales of 
securities (including security-based swaps), all receipts and deliveries 
of securities (including certificate numbers), all receipts and 
disbursements of cash and all other debits and credits. Such records 
must show, the account for which each such purchase and sale was 
effected, the name and amount of securities, the unit and aggregate 
purchase or sale price (if any, including the financial terms for 
security-based swaps), the trade date, and the name or other designation 
of the person from whom such securities were purchased or received or to 
whom sold or delivered. For security-based swaps, such records must also 
show, for each transaction, the type of security-based swap, the 
reference security, index, or obligor, the date and time of execution, 
the effective date, the scheduled termination date, the notional 
amount(s) and the currenc(ies) in which the notional amount(s) is 
expressed, the unique transaction identifier, and the counterparty's 
unique identification code.
    (2) Ledger accounts (or other records) itemizing separately as to 
each account for every security-based swap customer or non-customer of 
such security-based swap dealer or major security-based swap 
participant, all purchases, sales, receipts and deliveries of securities 
(including security-based swaps) and commodities for such account and 
all other debits and credits to such account; and in addition, for a 
security-based swap, the type of security-based swap, the reference 
security, index, or obligor, the date and time of execution, the 
effective date, the scheduled termination date, the notional amount(s) 
and the currenc(ies) in which the notional amount(s) is expressed, the 
unique transaction identifier, and the counterparty's unique 
identification code.
    (3) For security-based swaps and any securities positions related to 
the firm's business as a security-based swap dealer or a major security-
based swap participant, a securities record or ledger reflecting 
separately for each:
    (i) Security, other than a security-based swap, as of the clearance 
dates all ``long'' or ``short'' positions (including securities in 
safekeeping and securities that are the subjects of repurchase or 
reverse repurchase agreements) carried by such security-based swap 
dealer or major security-based swap participant for its account or for 
the account of its customers and showing the location of all securities 
long and the offsetting position to all securities short, including long 
security count differences and short security count differences 
classified by the date of the physical count and verification in which 
they were discovered, and in all cases the name or designation of the 
account in which each position is carried.
    (ii) Security-based swap, the reference security, index, or obligor, 
the unique transaction identifier, the counterparty's unique 
identification code, whether it is a ``bought'' or ``sold'' position in 
the security-based swap, whether the security-based swap is cleared or 
not cleared, and if cleared, identification of the clearing agency where 
the security-based swap is cleared.
    (4) A memorandum of each brokerage order, and of any other 
instruction, given or received for the purchase or sale of a security-
based swap, whether executed or unexecuted. The memorandum must show the 
terms and conditions of the order or instructions and of any 
modification or cancellation thereof; the account for which entered; the 
time the order was received; the time of entry; the price at which 
executed; the identity of each associated person, if any, responsible 
for the account; the identity of any other person who entered or 
accepted the order on behalf of the customer, or, if a customer entered 
the order on an electronic system, a notation of that entry; and, to the 
extent feasible, the time of execution or cancellation. The memorandum 
also must include the type of the security-based swap, the reference 
security, index, or obligor, the date and time of execution, the 
effective date, the scheduled termination date, the notional amount(s) 
and the

[[Page 727]]

currenc(ies) in which the notional amount(s) is expressed, the unique 
transaction identifier, and the counterparty's unique identification 
code. An order entered pursuant to the exercise of discretionary 
authority by the security-based swap dealer or major security-based swap 
participant, or associated person thereof, must be so designated. The 
term instruction must include instructions between partners and 
employees of a security-based swap dealer or major security-based swap 
participant. The term time of entry means the time when the security-
based swap dealer or major security-based swap participant transmits the 
order or instruction for execution.
    (5) A memorandum of each purchase or sale of a security-based swap 
for the account of the security-based swap dealer or major security-
based swap participant showing the price. The memorandum must also 
include the type of security-based swap, the reference security, index, 
or obligor, the date and time of execution, the effective date, the 
scheduled termination date, the notional amount(s) and the currenc(ies) 
in which the notional amount(s) is expressed, the unique transaction 
identifier, and the counterparty's unique identification code. An order 
entered pursuant to the exercise of discretionary authority must be so 
designated.
    (6) With respect to a security other than a security-based swap, 
copies of confirmations of all purchases and sales of securities related 
to the business of a security-based swap dealer or major security-based 
swap participant. With respect to a security-based swap, copies of the 
security-based swap trade acknowledgment and verification made in 
compliance with Sec.  240.15Fi-2.
    (7) For each security-based swap account, a record of the 
counterparty's unique identification code, the name and address of such 
counterparty, and a record of the authorization of each person the 
counterparty has granted authority to transact business in the security-
based swap account.
    (8)(i) A questionnaire or application for employment executed by 
each ``associated person'' (as defined in paragraph (c) of this section) 
of the security-based swap dealer or major security-based swap 
participant who effects or is involved in effecting security-based swaps 
on the security-based swap dealer's or major security-based swap 
participant's behalf, which questionnaire or application must be 
approved in writing by an authorized representative of the security-
based swap dealer or major security-based swap participant and must 
contain at least the following information with respect to the 
associated person:
    (A) The associated person's name, address, social security number, 
and the starting date of the associated person's employment or other 
association with the security-based swap dealer or major security-based 
swap participant;
    (B) The associated person's date of birth;
    (C) A complete, consecutive statement of all the associated person's 
business connections for at least the preceding ten years, including 
whether the employment was part-time or full-time;
    (D) A record of any denial of membership or registration, and of any 
disciplinary action taken, or sanction imposed, upon the associated 
person by any Federal or state agency, or by any national securities 
exchange or national securities association, including any finding that 
the associated person was a cause of any disciplinary action or had 
violated any law;
    (E) A record of any denial, suspension, expulsion or revocation of 
membership or registration of any broker, dealer, security-based swap 
dealer or major security-based swap participant with which the 
associated person was associated in any capacity at the time such action 
was taken;
    (F) A record of any permanent or temporary injunction entered 
against the associated person, or any broker, dealer, security-based 
swap dealer or major security-based swap participant with which the 
associated person was associated in any capacity at the time such 
injunction was entered;
    (G) A record of any arrest or indictment for any felony, or any 
misdemeanor pertaining to securities, commodities, banking, insurance or 
real estate (including, but not limited to, acting or being associated 
with a broker or dealer, security-based swap

[[Page 728]]

dealer, major security-based swap participant, investment company, 
investment adviser, futures sponsor, bank, or savings and loan 
association), fraud, false statements or omissions, wrongful taking of 
property or bribery, forgery, counterfeiting or extortion, and the 
disposition of the foregoing; and
    (H) A record of any other name or names by which the associated 
person has been known or which the associated person has used.
    (ii) A record listing every associated person of the security-based 
swap dealer or major security-based swap participant which shows, for 
each associated person, every office of the security-based swap dealer 
or major security-based swap participant where the associated person 
regularly conducts the business of handling funds or securities or 
effecting any transactions in, or inducing or attempting to induce the 
purchase or sale of any security, for the security-based swap dealer or 
major security-based swap participant and every internal identification 
number or code assigned to that person by the security-based swap dealer 
or major security-based swap participant.
    (iii) Notwithstanding paragraph (b)(8)(i) of this section;
    (A) A security-based swap dealer or major security-based swap 
participant is not required to make and keep current a questionnaire or 
application for employment executed by an associated person if the 
security-based swap dealer or major security-based swap participant is 
excluded from the prohibition in section 15F(b)(6) of the Exchange Act 
(15 U.S.C. 78o-10(b)(6)) with respect to such associated person; and
    (B) A questionnaire or application for employment executed by an 
associated person who is not a U.S. person (as that term is defined in 
Sec.  240.3a71-3(a)(4)(i)(A)) need not include the information described 
in paragraphs (b)(8)(i)(A) through (H) of this section, unless the 
security-based swap dealer or major security-based swap participant is 
required to obtain such information under applicable law in the 
jurisdiction in which the associated person is employed or located or 
obtains such information in conducting a background check that is 
customary for such firms in that jurisdiction and the creation or 
maintenance of records reflecting that information would not result in a 
violation of applicable law in the jurisdiction in which the associated 
person is employed or located; provided, however, the security-based 
swap dealer or major security-based swap participant must comply with 
Section 15F(b)(6) of the Exchange Act (15 U.S.C. 78o-10(b)(6)).
    (9) A record of compliance with possession or control requirements 
under Sec.  240.18a-4(b).
    (10) A record of the reserve computation required under Sec.  
240.18a-4(c).
    (11) A record of each security-based swap transaction that is not 
verified under Sec.  240.15Fi-2 within five business days of execution 
that includes, at a minimum, the unique transaction identifier and the 
counterparty's unique identification code.
    (12) A record documenting that the security-based swap dealer has 
complied with the business conduct standards as required under Sec.  
240.15Fh-6.
    (13) A record documenting that the security-based swap dealer or 
major security-based swap participant has complied with the business 
conduct standards as required under Sec.  240.15Fh-1 through Sec.  
240.15Fh-5 and Sec.  240.15Fk-1.
    (14)(i) A record of each security-based swap portfolio 
reconciliation, whether conducted pursuant to Sec.  240.15Fi-3 or 
otherwise, including the dates of the security-based swap portfolio 
reconciliation, the number of portfolio reconciliation discrepancies, 
the number of security-based swap valuation disputes (including the 
time-to-resolution of each valuation dispute and the age of outstanding 
valuation disputes, categorized by transaction and counterparty), and 
the name of the third-party entity performing the security-based swap 
portfolio reconciliation, if any.
    (ii) A copy of each notification required to be provided to the 
Commission pursuant to Sec.  240.15Fi-3(c).
    (iii) A record of each bilateral offset and each bilateral portfolio 
compression exercise or multilateral portfolio compression exercise in 
which it participates, whether conducted pursuant to Sec.  240.15Fi-4 or 
otherwise, including the dates of the offset or compression, the 
security-based swaps included in

[[Page 729]]

the offset or compression, the identity of the counterparties 
participating in the offset or compression, the results of the 
compression, and the name of the third-party entity performing the 
offset or compression, if any.
    (c) A security-based swap dealer or major security-based swap 
participant may comply with the recordkeeping requirements of the 
Commodity Exchange Act and chapter I of this title applicable to swap 
dealers and major swap participants in lieu of complying with paragraphs 
(a)(1), (3), and (4) or paragraphs (b)(1) through (3) of this section, 
as applicable, solely with respect to required information regarding 
security-based swap transactions and positions if:
    (1) The security-based swap dealer or major security-based swap 
participant is registered as a security-based swap dealer or major 
security-based swap participant pursuant to section 15F of the Act;
    (2) The security-based swap dealer or major security-based swap 
participant is registered as a swap dealer or major swap participant 
pursuant to section 4s of the Commodity Exchange Act and chapter I of 
this title;
    (3) The security-based swap dealer or major security-based swap 
participant is subject to 17 CFR 23.201, 23.202, 23.402, and 23.501 with 
respect to its swap-related books and records;
    (4) The security-based swap dealer or major security-based swap 
participant preserves all of the data elements necessary to create the 
records required by paragraphs (a)(1), (3), and (4) or paragraphs (b)(1) 
through (3) of this section, as applicable, as they pertain to security-
based swap and swap transactions and positions;
    (5) The security-based swap dealer or major security-based swap 
participant upon request furnishes promptly to representatives of the 
Commission the records required by paragraphs (a)(1), (3), and (4) or 
paragraphs (b)(1) through (3) of this section, as applicable, as well as 
the records required by 17 CFR 23.201, 23.202, 23.402, and 23.501 as 
they pertain to security-based swap and swap transactions and positions 
in the format applicable to that category of record as set forth in this 
section; and
    (6) The security-based swap dealer or major security-based swap 
participant provides notice of its intent to utilize this paragraph (c) 
by notifying in writing the Commission, both at the principal office of 
the Commission in Washington, DC and at the regional office of the 
Commission for the region in which the registrant has its principal 
place of business.
    (d)(1) The term associated person means for purposes of this section 
a person associated with a security-based swap dealer or major security-
based swap participant as that term is defined in section 3(a)(70) of 
the Act (15 U.S.C. 78c(a)(70)).
    (2) The term associated person, as to an entity supervised by a 
prudential regulator, includes only those persons whose activities 
relate to its business as a security-based swap dealer or major 
security-based swap participant.

[84 FR 68656, Dec. 16, 2019, as amended at 85 FR 6353, 6416, Feb. 4, 
2020]



Sec.  240.18a-6  Records to be preserved by certain security-based swap
dealers and major security-based swap participants.

    This section applies to the following types of entities: A security-
based swap dealer registered pursuant to section 15F of the Act (15 
U.S.C. 78o-10) that is not also a broker or dealer, including an OTC 
derivatives dealer as that term is defined in Sec.  240.3b-12, 
registered pursuant to section 15 of the Act (15 U.S.C. 78o); and a 
major security-based swap participant registered pursuant to section 15F 
of the Act that is not also a broker or dealer, including an OTC 
derivatives dealer, registered pursuant to section 15 of the Act. 
Section 240.17a-4 (rather than this section) applies to the following 
types of entities: A member of a national securities exchange who 
transacts a business in securities directly with others than members of 
a national securities exchange; a broker or dealer who transacts a 
business in securities through the medium of a member of a national 
securities exchange; a broker or dealer, including an OTC derivatives 
dealer, registered pursuant to section 15 of the Act; a security-based 
swap dealer registered pursuant to section 15F of the Act that is also a 
broker or dealer, including an

[[Page 730]]

OTC derivatives dealer, registered pursuant to section 15 of the Act; 
and a major security-based swap participant registered pursuant to 
section 15F of the Act that is also a broker or dealer, including an OTC 
derivatives dealer, registered pursuant to section 15 of the Act.
    (a)(1) Every security-based swap dealer and major security-based 
swap participant for which there is no prudential regulator must 
preserve for a period not less than six years, the first two years in an 
easily accessible place, all records required to be made pursuant to 
Sec.  240.18a-5(a)(1) through (4).
    (2) Every security-based swap dealer and major security-based swap 
participant for which there is a prudential regulator must preserve for 
a period not less than six years, the first two years in an easily 
accessible place, all records required to be made pursuant to Sec.  
240.18a-5(b)(1) through (3).
    (b)(1) Every security-based swap dealer and major security-based 
swap participant for which there is no prudential regulator must 
preserve for a period of not less than three years, the first two years 
in an easily accessible place:
    (i) All records required to be made pursuant to Sec.  240.18a-
5(a)(5) through (9) and (12) through (18).
    (ii) All check books, bank statements, cancelled checks, and cash 
reconciliations.
    (iii) All bills receivable or payable (or copies thereof), paid or 
unpaid, relating to the business of such security-based swap dealer or 
major security-based swap participant, as such.
    (iv) Originals of all communications received and copies of all 
communications sent (and any approvals thereof) by the security-based 
swap dealer or major security-based swap participant (including inter-
office memoranda and communications) relating to its business as such. 
As used in this paragraph (b)(1)(iv), the term ``communications'' 
includes sales scripts and recordings of telephone calls required to be 
maintained pursuant to section 15F(g)(1) of the Act (15 U.S.C. 78o-
10(g)(1)).
    (v) All trial balances and computations of net capital or tangible 
net worth requirements (and working papers in connection therewith), as 
applicable, financial statements, branch office reconciliations, and 
internal audit working papers, relating to the business of such 
security-based swap dealer or major security-based swap participant as 
such.
    (vi) All guarantees of security-based swap accounts and all powers 
of attorney and other evidence of the granting of any discretionary 
authority given in respect of any security-based swap account, and 
copies of resolutions empowering an agent to act on behalf of a 
corporation.
    (vii) All written agreements (or copies thereof) entered into by 
such security-based swap dealer or major security-based swap participant 
relating to its business as such, including agreements with respect to 
any account. Written agreements with respect to a security-based swap 
customer or non-customer, including governing documents or any document 
establishing the terms and conditions of the customer's or non-
customer's security-based swaps must be maintained with the customer's 
or non-customer's account records.
    (viii) Records which contain the following information in support of 
amounts included in the report prepared as of the audit date on Part II 
of Form X-17A-5 (Sec.  249.617 of this chapter) and in annual financial 
statements required by Sec.  240.18a-7(d):
    (A) Money balance and position, long or short, including 
description, quantity, price, and valuation of each security, including 
contractual commitments, in security-based swap customers' accounts, in 
fully secured accounts, partly secured accounts, unsecured accounts, and 
in securities accounts payable to security-based swap customers;
    (B) Money balance and position, long or short, including 
description, quantity, price, and valuation of each security, including 
contractual commitments, in security-based swap non-customers' accounts, 
in fully secured accounts, partly secured accounts, unsecured accounts, 
and in security-based swap accounts payable to non-security-based swap 
customers;

[[Page 731]]

    (C) Position, long or short, including description, quantity, price, 
and valuation of each security, including contractual commitments, 
included in the Computation of Net Capital as commitments, securities 
owned, securities owned not readily marketable, and other investments 
owned not readily marketable;
    (D) Description of futures commodity contracts or swaps, contract 
value on trade date, market value, gain or loss, and liquidating equity 
or deficit in customers' and non-customers' accounts;
    (E) Description of futures commodity contracts or swaps, contract 
value on trade date, market value, gain or loss and liquidating equity 
or deficit in trading and investment accounts;
    (F) Description, money balance, quantity, price, and valuation of 
each spot commodity and swap position or commitments in customers' and 
non-customers' accounts;
    (G) Description, money balance, quantity, price, and valuation of 
each spot commodity and swap position or commitments in trading and 
investment accounts;
    (H) Number of shares, description of security, exercise price, cost, 
and market value of put and call options, including short out of the 
money options having no market or exercise value, showing listed and 
unlisted put and call options separately;
    (I) Quantity, price, and valuation of each security underlying the 
haircut for undue concentration made in the Computation of Net Capital 
pursuant to Sec.  240.18a-1;
    (J) Description, quantity, price, and valuation of each security and 
commodity position or contractual commitment, long or short, in each 
joint account in which the security-based swap dealer or major security-
based swap participant has an interest, including each participant's 
interest and margin deposit;
    (K) Description, settlement date, contract amount, quantity, market 
price, and valuation for each aged failed to deliver requiring a charge 
in the Computation of Net Capital pursuant to Sec.  240.18a-1;
    (L) Detail relating to information for possession or control 
requirements under Sec.  240.18a-4 and reported on Part II of Form X-
17A-5 (Sec.  249.617 of this chapter);
    (M) Detail of all items, not otherwise substantiated, which are 
charged or credited in the Computation of Net Capital pursuant to 
Sec. Sec.  240.18a-1 and 240.18a-2, such as cash margin deficiencies, 
deductions related to securities values and undue concentration, aged 
securities differences, and insurance claims receivable;
    (N) Detail relating to the calculation of the risk margin amount 
pursuant to Sec.  240.18a-1(c)(6); and
    (O) Other schedules which are specifically prescribed by the 
Commission as necessary to support information reported as required by 
Sec.  240.18a-7.
    (ix) The records required to be made pursuant to Sec.  240.15c3-4 
and the results of the periodic reviews conducted pursuant to Sec.  
240.15c3-4(d).
    (x) The records required to be made pursuant to Sec.  240.18a-
1(e)(2)(iii)(F)(1) and (2).
    (xi) A copy of information required to be reported under Sec. Sec.  
242.901 through 242.909 of this chapter (Regulation SBSR).
    (xii) Copies of documents, communications, disclosures, and notices 
related to business conduct standards as required under Sec. Sec.  
240.15Fh-1 through 240.15Fh-6 and 240.15Fk-1.
    (xiii) Copies of documents used to make a reasonable determination 
with respect to special entities, including information relating to the 
financial status, the tax status, and the investment or financing 
objectives of the special entity as required under sections 15F(h)(4)(C) 
and (5)(A) of the Act (15 U.S.C. 78o-10(h)(4)(C) and (5)(A)).
    (2) Every security-based swap dealer and major security-based swap 
participant for which there is a prudential regulator must preserve for 
a period of not less than three years, the first two years in an easily 
accessible place:
    (i) All records required to be made pursuant to Sec.  240.18a-
5(b)(4) through (7) and (9) through (14).
    (ii) Originals of all communications received and copies of all 
communications sent (and any approvals thereof) by the security-based 
swap dealer or major security-based swap participant (including inter-
office memoranda and

[[Page 732]]

communications) relating to its business as a security-based swap dealer 
or major security-based swap participant. As used in this paragraph 
(b)(2)(ii), the term ``communications'' includes sales scripts and 
recordings of telephone calls required to be maintained pursuant to 
section 15F(g)(1) of the Act (15 U.S.C. 78o-10(g)(1)).
    (iii) All guarantees of security-based swap accounts and all powers 
of attorney and other evidence of the granting of any discretionary 
authority given in respect of any security-based swap account, and 
copies of resolutions empowering an agent to act on behalf of a 
corporation.
    (iv) All written agreements (or copies thereof) entered into by such 
security-based swap dealer or major security-based swap participant 
relating to its business as a security-based swap dealer or major 
security-based swap participant, including agreements with respect to 
any account. Written agreements with respect to a security-based swap 
customer or non-customer, including governing documents or any document 
establishing the terms and conditions of the customer's or non-
customer's security-based swaps, must be maintained with the customer's 
or non-customer's account records.
    (v) Detail relating to information for possession or control 
requirements under Sec.  240.18a-4 and reported on Part IIC of Form X-
17A-5 (Sec.  249.617 of this chapter) that is in support of amounts 
included in the report prepared as of the audit date on Part IIC of Form 
X-17A-5 (Sec.  249.617 of this chapter) and in the registrant's annual 
reports required by Sec.  240.18a-7(c).
    (vi) A copy of information required to be reported under Regulation 
SBSR (Sec. Sec.  242.901 through 242.909 of this chapter).
    (vii) Copies of documents, communications, disclosures, and notices 
related to business conduct standards as required under Sec. Sec.  
240.15Fh-1 through 240.15Fh-6 and 240.15Fk-1.
    (viii) Copies of documents used to make a reasonable determination 
with respect to special entities, including information relating to the 
financial status, the tax status, and the investment or financing 
objectives of the special entity as required under sections 15F(h)(4)(C) 
and (5)(A) of the Act.
    (c) Every security-based swap dealer and major security-based swap 
participant subject to this section must preserve during the life of the 
enterprise and of any successor enterprise all partnership articles or, 
in the case of a corporation, all articles of incorporation or charter, 
minute books, and stock certificate books (or, in the case of any other 
form of legal entity, all records such as articles of organization or 
formation and minute books used for a purpose similar to those records 
required for corporations or partnerships), all Forms SBSE (Sec.  
249.1600 of this chapter), all Forms SBSE-A (Sec.  249.1600a of this 
chapter), all Forms SBSE-C (Sec.  249.1600c of this chapter), all Forms 
SBSE-W (Sec.  249.1601 of this chapter), all amendments to these forms, 
and all licenses or other documentation showing the registration of the 
security-based swap dealer or major security-based swap participant with 
any securities regulatory authority or the Commodity Futures Trading 
Commission.
    (d) Every security-based swap dealer and major security-based swap 
participant subject to this section must maintain and preserve in an 
easily accessible place:
    (1) All records required under Sec.  240.18a-5(a)(10) or (b)(8) 
until at least three years after the associated person's employment and 
any other connection with the security-based swap dealer or major 
security-based swap participant has terminated.
    (2)(i) For security-based swap dealers and major security-based swap 
participants for which there is not a prudential regulator, each report 
which a securities regulatory authority or the Commodity Futures Trading 
Commission has requested or required the security-based swap dealer or 
major security-based swap participant to make and furnish to it pursuant 
to an order or settlement, and each securities regulatory authority or 
Commodity Futures Trading Commission examination report until three 
years after the date of the report.
    (ii) For security-based swap dealers and major security-based swap 
participants for which there is a prudential

[[Page 733]]

regulator, each report related to security-based swap activities which a 
securities regulatory authority, the Commodity Futures Trading 
Commission, or a prudential regulator has requested or required the 
security-based swap dealer or major security-based swap participant to 
make and furnish to it pursuant to an order or settlement, and each 
securities regulatory authority, Commodity Futures Trading Commission, 
or prudential regulator examination report until three years after the 
date of the report.
    (3)(i) For security-based swap dealers and major security-based swap 
participants for which there is not a prudential regulator, each 
compliance, supervisory, and procedures manual, including any updates, 
modifications, and revisions to the manual, describing the policies and 
practices of the security-based swap dealer or major security-based swap 
participant with respect to compliance with applicable laws and rules, 
and supervision of the activities of each natural person associated with 
the security-based swap dealer or major security-based swap participant 
until three years after the termination of the use of the manual.
    (ii) For security-based swap dealers and major security-based swap 
participants for which there is a prudential regulator, each compliance, 
supervisory, and procedures manual, including any updates, 
modifications, and revisions to the manual, describing the policies and 
practices of the security-based swap dealer or major security-based swap 
participant with respect to compliance with applicable laws and rules 
relating to security-based swap activities, and supervision of the 
activities of each natural person associated with the security-based 
swap dealer or major security-based swap participant until three years 
after the termination of the use of the manual.
    (4) The written policies and procedures required pursuant to 
Sec. Sec.  240.15Fi-3, 240.15Fi-4, and 240.15Fi-5 until three years 
after termination of the use of the policies and procedures.
    (5)(i) Each written agreement with counterparties on the terms of 
portfolio reconciliation with those counterparties as required to be 
created under Sec.  240.15Fi-3(a)(1) and (b)(1) until three years after 
the termination of the agreement and all transactions governed thereby.
    (ii) Security-based swap trading relationship documentation with 
counterparties required to be created under Sec.  240.15Fi-5 until three 
years after the termination of such documentation and all transactions 
governed thereby.
    (iii) A record of the results of each audit required to be performed 
pursuant to Sec.  240.15Fi-5(c) until three years after the conclusion 
of the audit.
    (e) The records required to be maintained and preserved pursuant to 
Sec. Sec.  240.18a-5 and 240.18a-6 may be immediately produced or 
reproduced by means of an electronic storage system (as defined in this 
paragraph (e)) that meets the conditions set forth in this paragraph (e) 
and be maintained and preserved for the required time in that form.
    (1) For purposes of this section, the term electronic storage system 
means any digital storage system that meets the applicable conditions 
set forth in this paragraph (e).
    (2) If an electronic storage system is used by a security-based swap 
dealer or major security-based swap participant, it must:
    (i) Verify automatically the quality and accuracy of the electronic 
storage system recording process;
    (ii) If applicable, serialize the original and duplicate units of 
the storage media, and time-date for the required period of retention 
the information placed in such electronic storage system; and
    (iii) Have the capacity to readily download into a readable format 
indexes and records preserved in the electronic storage system.
    (3) If a security-based swap dealer or major security-based swap 
participant uses an electronic storage system, it must:
    (i) At all times have available, for examination by the staff of the 
Commission, facilities for immediate, easily readable projection or 
production of records or images maintained on the electronic storage 
system and for producing easily readable representations of those 
records or images.
    (ii) Be ready at all times to immediately provide in a readable 
format

[[Page 734]]

any record or index stored on the electronic storage system which the 
staff of the Commission may request.
    (iii) Store separately from the original a duplicate copy of a 
record stored on the electronic storage system for the time required.
    (iv) Organize and index accurately all information maintained on 
both original and any duplicate storage system.
    (A) At all times, a security-based swap dealer or major security-
based swap participant must be able to have such indexes available for 
examination by the staff of the Commission.
    (B) Each index must be duplicated and the duplicate copies must be 
stored separately from the original copy of each index.
    (C) Original and duplicate indexes must be preserved for the time 
required for the indexed records.
    (v) Have in place an audit system providing for accountability 
regarding inputting of records required to be maintained and preserved 
pursuant to Sec. Sec.  240.18a-5 and 240.18a-6 to the electronic storage 
system and inputting of any changes made to every original and duplicate 
record maintained and preserved thereby.
    (A) At all times the security-based swap dealer or major security-
based swap participant must be able to have the results of such audit 
system available for examination by the staff of the Commission.
    (B) The audit results must be preserved for the time required for 
the audited records.
    (vi) The security-based swap dealer or major security-based swap 
participant must maintain, keep current, and provide promptly upon 
request by the staff of the Commission all information necessary to 
access records and indexes stored in the electronic storage system; or 
place in escrow and keep current a copy of the physical and logical file 
format of the electronic storage system, the field format of all 
different information types written on the electronic storage system and 
the source code, together with the appropriate documentation and 
information necessary to access records and indexes.
    (f)(1) If the records required to be maintained and preserved 
pursuant to the provisions of Sec. Sec.  240.18a-5 and 240.18a-6 are 
prepared or maintained by a third party on behalf of the security-based 
swap dealer or major security-based swap participant, the third party 
must file with the Commission a written undertaking in a form acceptable 
to the Commission, signed by a duly authorized person, to the effect 
that such records are the property of the security-based swap dealer or 
major security-based swap participant and will be surrendered promptly 
on request of the security-based swap dealer or major security-based 
swap participant and including the following provision:

    With respect to any books and records maintained or preserved on 
behalf of [SBSD or MSBSP], the undersigned hereby undertakes to permit 
examination of such books and records at any time or from time to time 
during business hours by representatives or designees of the Securities 
and Exchange Commission, and to promptly furnish to said Commission or 
its designee true, correct, complete, and current hard copies of any or 
all or any part of such books and records.

    (2) Agreement with an outside entity will not relieve such security-
based swap dealer or major security-based swap participant from the 
responsibility to prepare and maintain records as specified in this 
section or in Sec.  240.18a-5.
    (g) Every security-based swap dealer and major security-based swap 
participant subject to this section must furnish promptly to a 
representative of the Commission legible, true, complete, and current 
copies of those records of the security-based swap dealer or major 
security-based swap participant that are required to be preserved under 
this section, or any other records of the security-based swap dealer or 
major security-based swap participant subject to examination or required 
to be made or maintained pursuant to section 15F of the Act that are 
requested by a representative of the Commission.
    (h) When used in this section:
    (1) The term securities regulatory authority means the Commission, 
any self-regulatory organization, or any securities commission (or any 
agency or office performing like functions) of the States.

[[Page 735]]

    (2) The term associated person has the meaning set forth in Sec.  
240.18a-5(d).

[84 FR 68659, Dec. 16, 2019, as amended at 85 FR 6416, Feb. 4, 2020; 85 
FR 33021, June 1, 2020]



Sec.  240.18a-7  Reports to be made by certain security-based swap
dealers and major security-based swap participants.

    This section applies to the following types of entities: A security-
based swap dealer registered pursuant to section 15F of the Act (15 
U.S.C. 78o-10) that is not also a broker or dealer, other than an OTC 
derivatives dealer as that term is defined in Sec.  240.3b-12, 
registered pursuant to section 15 of the Act (15 U.S.C. 78o); a 
security-based swap dealer registered pursuant to section 15F of the Act 
that is also an OTC derivatives dealer registered pursuant to section 15 
of the Act; and a major security-based swap participant registered 
pursuant to section 15F of the Act that is not also a broker or dealer, 
including an OTC derivatives dealer, registered pursuant to section 15 
of the Act. Section 240.17a-5 (rather than this section) applies to the 
following types of entities: Except as provided above, a broker or 
dealer, including an OTC derivatives dealer, registered pursuant to 
section 15 of the Act; a broker or dealer, other than an OTC derivatives 
dealer, registered pursuant to section 15 of the Act that is also a 
security-based swap dealer registered pursuant to section 15F of the 
Act; and a broker or dealer, including an OTC derivatives dealer, 
registered pursuant to section 15 of the Act that is also a major-
security-based swap participant registered pursuant to section 15F of 
the Act.
    (a) Filing of reports. (1) Every security-based swap dealer or major 
security-based swap participant for which there is no prudential 
regulator must file with the Commission or its designee Part II of Form 
X-17A-5 (Sec.  249.617 of this chapter) within 17 business days after 
the end of each month.
    (2) Every security-based swap dealer or major security-based swap 
participant for which there is a prudential regulator must file with the 
Commission or its designee Part IIC of Form X-17A-5 (Sec.  249.617 of 
this chapter) within 30 calendar days after the end of each calendar 
quarter.
    (3) Security-based swap dealers that have been authorized by the 
Commission to compute net capital pursuant to Sec.  240.18a-1(d), must 
file the following additional reports with the Commission:
    (i) For each product for which the security-based swap dealer 
calculates a deduction for market risk other than in accordance with 
Sec.  240.18a-1(e)(1)(i) and (iii), the product category and the amount 
of the deduction for market risk within 17 business days after the end 
of the month;
    (ii) A graph reflecting, for each business line, the daily intra-
month value at risk within 17 business days after the end of the month;
    (iii) The aggregate value at risk for the security-based swap dealer 
within 17 business days after end of the month;
    (iv) For each product for which the security-based swap dealer uses 
scenario analysis, the product category and the deduction for market 
risk within 17 business days after the end of the month;
    (v) Credit risk information on security-based swap, mixed swap and 
swap exposures, within 17 business days after the end of the month, 
including:
    (A) Overall current exposure;
    (B) Current exposure (including commitments) listed by counterparty 
for the 15 largest exposures;
    (C) The ten largest commitments listed by counterparty;
    (D) The broker's or dealer's maximum potential exposure listed by 
counterparty for the 15 largest exposures;
    (E) The broker's or dealer's aggregate maximum potential exposure;
    (F) A summary report reflecting the broker's or dealer's current and 
maximum potential exposures by credit rating category; and
    (G) A summary report reflecting the broker's or dealer's current 
exposure for each of the top ten countries to which the broker or dealer 
is exposed (by residence of the main operating group of the 
counterparty);
    (vi) Regular risk reports supplied to the security-based swap 
dealer's senior management in the format described in the application, 
within 17 business days after the end of the month;

[[Page 736]]

    (vii) [Reserved]
    (viii) A report identifying the number of business days for which 
the actual daily net trading loss exceeded the corresponding daily VaR 
within 17 business days after the end of each calendar quarter; and
    (ix) The results of backtesting of all internal models used to 
compute allowable capital, including VaR and credit risk models, 
indicating the number of backtesting exceptions within 17 business days 
after the end of each calendar quarter.
    (b) Customer disclosures. (1) Every security-based swap dealer or 
major security-based swap participant for which there is no prudential 
regulator must make publicly available on its website within 10 business 
days after the date the firm is required to file with the Commission the 
annual reports pursuant to paragraph (c) of this section:
    (i) A Statement of Financial Condition with appropriate notes 
prepared in accordance with U.S. generally accepted accounting 
principles which must be audited;
    (ii) A statement of the amount of the security-based swap dealer's 
net capital and its required net capital, computed in accordance with 
Sec.  240.18a-1. Such statement must include summary financial 
statements of subsidiaries consolidated pursuant to Sec.  240.18a-1c 
(appendix C to Sec.  240.18a-1 (Rule 18a-1)), where material, and the 
effect thereof on the net capital and required net capital of the 
security-based swap dealer; and
    (iii) If, in connection with the most recent annual reports required 
under paragraph (c) of this section, the report of the independent 
public accountant required under paragraph (c)(1)(i)(C) of this section 
covering the report of the security-based swap dealer required under 
paragraph (c)(1)(i)(B)(1) of this section identifies one or more 
material weaknesses, a copy of the report.
    (2) Every security-based swap dealer or major security-based swap 
participant for which there is no prudential regulator must make 
publicly available on its website unaudited statements as of the date 
that is 6 months after the date of the most recent audited statements 
filed with the Commission under paragraph (c)(1) of this section. These 
reports must be made publicly available within 30 calendar days of the 
date of the statements.
    (3) The information that is made publicly available pursuant to 
paragraphs (b)(1) and (2) of this section must also be made available in 
writing, upon request, to any person that has a security-based swap 
account. The security-based swap dealer or major security-based swap 
participant must maintain a toll-free telephone number to receive such 
requests.
    (c) Annual reports--(1) Reports required to be filed. (i) Except as 
provided in paragraph (c)(1)(iii) of this section, every security-based 
swap dealer or major security-based swap participant registered pursuant 
to section 15F of the Act for which there is no prudential regulator 
must file annually, as applicable:
    (A) A financial report as described in paragraph (c)(2) of this 
section;
    (B)(1) If the security-based swap dealer did not claim it was exempt 
from Sec.  240.18a-4 throughout the most recent fiscal year, a 
compliance report as described in paragraph (c)(3) of this section 
executed by the person who makes the oath or affirmation under paragraph 
(d)(1) of this section; or
    (2) If the security-based swap dealer did claim it was exempt from 
Sec.  240.18a-4 throughout the most recent fiscal year, an exemption 
report as described in paragraph (c)(4) of this section executed by the 
person who makes the oath or affirmation under paragraph (d)(1) of this 
section; and
    (C) A report prepared by an independent public accountant, under the 
engagement provisions in paragraph (e) of this section, covering each 
report required to be filed under paragraphs (c)(1)(i)(A) and (B) of 
this section, as applicable.
    (ii) The reports required to be filed under this paragraph (c) must 
be as of the same fiscal year end each year, unless a change is approved 
in writing by the Commission. The original request for a change must be 
filed at the Commission's principal office in Washington, DC. A copy of 
the written approval must be sent to the regional office of the 
Commission for the region

[[Page 737]]

in which the security-based swap dealer or major security-based swap 
participant has its principal place of business.
    (iii) A security-based swap dealer or major security-based swap 
participant succeeding to and continuing the business of another 
security-based swap dealer or major security-based swap participant need 
not file reports under this paragraph (c) as of a date in the fiscal 
year in which the succession occurs if the predecessor security-based 
swap dealer or major security-based swap participant has filed the 
reports in compliance with this paragraph (c) as of a date in such 
fiscal year.
    (2) Financial report. The financial report must contain:
    (i)(A) A Statement of Financial Condition, a Statement of Income, a 
Statement of Cash Flows, a Statement of Changes in Stockholders' or 
Partners' or Sole Proprietor's Equity, and Statement of Changes in 
Liabilities Subordinated to Claims of General Creditors. The statements 
must be prepared in accordance with U.S. generally accepted accounting 
principles and must be in a format that is consistent with the 
statements contained in Part II of Form X-17A-5 (Sec.  249.617 of this 
chapter).
    (B) If there is other comprehensive income in the period(s) 
presented, the financial report must contain a Statement of 
Comprehensive Income (as defined in Sec.  210.1-02 of this chapter) in 
place of a Statement of Income.
    (ii) Supporting schedules that include, from Part II of Form X-17A-5 
(Sec.  249.617 of this chapter), a Computation of Net Capital under 
Sec.  240.18a-1, a Computation of Tangible Net Worth under Sec.  
240.18a-2, a Computation for Determination of Security-Based Swap 
Customer Reserve Requirements under Sec.  240.18a-4a (Exhibit A of Sec.  
240.18a-4), and Information Relating to the Possession or Control 
Requirements for Security-Based Swap Customers under Sec.  240.18a-4, as 
applicable.
    (iii) If any of the Computation of Net Capital under Sec.  240.18a-
1, the Computation of Tangible Net Worth under Sec.  240.18a-2, or the 
Computation for Determination of Security-Based Swap Customer Reserve 
Requirements under Exhibit A of Sec.  240.18a-4 in the financial report 
is materially different from the corresponding computation in the most 
recent Part II of Form X-17A-5 (Sec.  249.617 of this chapter) filed by 
the registrant pursuant to paragraph (a) of this section, a 
reconciliation, including appropriate explanations, between the 
computation in the financial report and the computation in the most 
recent Part II of Form X-17A-5 filed by the registrant. If no material 
differences exist, a statement so indicating must be included in the 
financial report.
    (3) Compliance report. (i) The compliance report must contain:
    (A) Statements as to whether:
    (1) The security-based swap dealer has established and maintained 
Internal Control Over Compliance as that term is defined in paragraph 
(c)(3)(ii) of this section;
    (2) The Internal Control Over Compliance of the security-based swap 
dealer was effective during the most recent fiscal year;
    (3) The Internal Control Over Compliance of the security-based swap 
dealer was effective as of the end of the most recent fiscal year;
    (4) The security-based swap dealer was in compliance with Sec. Sec.  
240.18a-1 and 240.18a-4(c) as of the end of the most recent fiscal year; 
and
    (5) The information the security-based swap dealer used to state 
whether it was in compliance with Sec. Sec.  240.18a-1 and 240.18a-4(c) 
was derived from the books and records of the security-based swap 
dealer.
    (B) If applicable, a description of each identified material 
weakness in the Internal Control Over Compliance of the security-based 
swap dealer during the most recent fiscal year.
    (C) If applicable, a description of an instance of non-compliance 
with Sec.  240.18a-1 or Sec.  240.18a-4(c) as of the end of the most 
recent fiscal year.
    (ii) The term Internal Control Over Compliance means internal 
controls that have the objective of providing the security-based swap 
dealer with reasonable assurance that non-compliance with Sec.  240.18a-
1, Sec.  240.18a-4(c), Sec.  240.18a-9, or Sec.  240.17a-13, as 
applicable, will be prevented or detected on a timely basis.
    (iii) The security-based swap dealer is not permitted to conclude 
that its

[[Page 738]]

Internal Control Over Compliance was effective during the most recent 
fiscal year if there were one or more material weaknesses in its 
Internal Control Over Compliance during the most recent fiscal year. The 
security-based swap dealer is not permitted to conclude that its 
Internal Control Over Compliance was effective as of the end of the most 
recent fiscal year if there were one or more material weaknesses in its 
internal control as of the end of the most recent fiscal year. A 
material weakness is a deficiency, or a combination of deficiencies, in 
Internal Control Over Compliance such that there is a reasonable 
possibility that non-compliance with Sec.  240.18a-1 or Sec.  240.18a-
4(c) will not be prevented, or detected on a timely basis or that non-
compliance to a material extent with Sec.  240.18a-4, except for 
paragraph (c), or Sec.  240.18a-9 or Sec.  240.17a-13, as applicable, 
will not be prevented or detected on a timely basis. A deficiency in 
Internal Control Over Compliance exists when the design or operation of 
a control does not allow the management or employees of the security-
based swap dealer in the normal course of performing their assigned 
functions, to prevent or detect on a timely basis non-compliance with 
Sec.  240.18a-1, Sec.  240.18a-4, Sec.  240.18a-9, or Sec.  240.17a-13, 
as applicable.
    (4) Exemption report. The exemption report must contain the 
following statements made to the best knowledge and belief of the 
security-based swap dealer:
    (i) A statement that the security-based swap dealer met the 
exemption provisions in Sec.  240.18a-4(f) throughout the most recent 
fiscal year without exception or that it met the exemption provisions in 
Sec.  240.18a-4(f) throughout the most recent fiscal year except as 
described under paragraph (c)(4)(ii) of this section; and
    (ii) If applicable, a statement that identifies each exception 
during the most recent fiscal year in meeting the exemption provisions 
in Sec.  240.18a-4(f) and that briefly describes the nature of each 
exception and the approximate date(s) on which the exception existed.
    (5) Timing of filing. The annual reports must be filed not more than 
sixty (60) calendar days after the end of the fiscal year of the 
security-based swap dealer or major security-based swap participant.
    (6) Location of filing. The annual reports must be filed with the 
Commission at the regional office of the Commission for the region in 
which the security-based swap dealer or major security-based swap 
participant has its principal place of business and the Commission's 
principal office in Washington, DC, or the annual reports may be filed 
with the Commission electronically in accordance with directions 
provided on the Commission's website.
    (d) Nature and form of reports. The annual reports filed pursuant to 
paragraph (c) of this section must be prepared and filed in accordance 
with the following requirements:
    (1)(i) The security-based swap dealer or major security-based swap 
participant must attach to each of the confidential and non-confidential 
portions of the annual reports separately bound under paragraph (d)(2) 
of this section a complete and executed Part III of Form X-17A-5 (Sec.  
249.617 of this chapter). The security-based swap dealer or major 
security-based swap participant must attach to the financial report an 
oath or affirmation that, to the best knowledge and belief of the person 
making the oath or affirmation:
    (A) The financial report is true and correct; and
    (B) Neither the registrant, nor any partner, officer, director, or 
equivalent person, as the case may be, has any proprietary interest in 
any account classified solely as that of a customer.
    (ii) The oath or affirmation must be made before a person duly 
authorized to administer such oaths or affirmations. If the security-
based swap dealer or major security-based swap participant is a sole 
proprietorship, the oath or affirmation must be made by the proprietor; 
if a partnership, by a general partner; if a corporation, by a duly 
authorized officer; or if a limited liability company or limited 
liability partnership, by the chief executive officer, chief financial 
officer, manager, managing member, or those members vested with 
management authority for the limited liability company or limited 
liability partnership.
    (2) The annual reports filed under paragraph (c) of this section are 
not

[[Page 739]]

confidential, except that, if the Statement of Financial Condition is in 
a format that is consistent with Part II of Form X-17A-5 (Sec.  249.617 
of this chapter), and is bound separately from the balance of the annual 
reports filed under paragraph (c) of this section, and each page of the 
balance of the annual report is stamped ``confidential,'' then the 
balance of the annual reports will be deemed confidential to the extent 
permitted by law. However, the annual reports, including the 
confidential portions, will be available for official use by any 
official or employee of the U.S. or any State, and by any other person 
if the Commission authorizes disclosure of the annual reports to that 
person as being in the public interest. Nothing contained in this 
paragraph (d)(2) may be construed to be in derogation of the right of 
customers of a security-based swap dealer or major security-based swap 
participant, upon request to the security-based swap dealer or major 
security-based swap participant, to obtain information relative to its 
financial condition.
    (e) Independent public accountant--(1) Qualifications of independent 
public accountant. The independent public accountant must be qualified 
and independent in accordance with Sec.  210.2-01 of this chapter.
    (2) Statement regarding independent public accountant. (i) Every 
security-based swap dealer or major security-based swap participant that 
is required to file annual reports under paragraph (c) of this section 
must file no later than December 10 of each year (or 30 days after 
effective date of its registration as a security-based swap dealer or 
major security-based swap participant if earlier) a statement as 
prescribed in paragraph (e)(2)(ii) of this section with the Commission's 
principal office in Washington, DC and the regional office of the 
Commission for the region in which its principal place of business is 
located. The statement must be dated no later than December 1 (or 20 
calendar days after the effective date of its registration as a 
security-based swap dealer or major security-based swap participant, if 
earlier). If the engagement of an independent public accountant is of a 
continuing nature, providing for successive engagements, no further 
filing is required. If the engagement is for a single year, or if the 
most recent engagement has been terminated or amended, a new statement 
must be filed by the required date.
    (ii) The statement must be headed ``Statement regarding independent 
public accountant under Rule 18a-7(e)(2)'' and must contain the 
following information and representations:
    (A) Name, address, telephone number and registration number of the 
security-based swap dealer or major security-based swap participant.
    (B) Name, address, and telephone number of the independent public 
accountant.
    (C) The date of the fiscal year of the annual reports of the 
security-based swap dealer or major security-based swap participant 
covered by the engagement.
    (D) Whether the engagement is for a single year or is of a 
continuing nature.
    (E) A representation that the independent public accountant has 
undertaken the items enumerated in paragraphs (f)(1) and (2) of this 
section.
    (3) Replacement of accountant. A security-based swap dealer or major 
security-based swap participant must file a notice that must be received 
by the Commission's principal office in Washington, DC and the regional 
office of the Commission for the region in which its principal place of 
business is located not more than 15 business days after:
    (i) The security-based swap dealer or major security-based swap 
participant has notified the independent public accountant that provided 
the reports the security-based swap dealer or major security-based swap 
participant filed under paragraph (c)(1)(i)(C) of this section for the 
most recent fiscal year that the independent public accountant's 
services will not be used in future engagements; or
    (ii) The security-based swap dealer or major security-based swap 
participant has notified an independent public accountant that was 
engaged to provide the reports required under paragraph (c)(1)(i)(C) of 
this section that the engagement has been terminated; or
    (iii) An independent public accountant has notified the security-
based

[[Page 740]]

swap dealer or major security-based swap participant that the 
independent public accountant would not continue under an engagement to 
provide the reports required under paragraph (c)(1)(i)(C) of this 
section; or
    (iv) A new independent public accountant has been engaged to provide 
the reports required under paragraph (c)(1)(i)(C) of this section 
without any notice of termination having been given to or by the 
previously engaged independent public accountant.
    (v) The notice must include:
    (A) The date of notification of the termination of the engagement or 
of the engagement of the new independent public accountant, as 
applicable; and
    (B) The details of any issues arising during the 24 months (or the 
period of the engagement, if less than 24 months) preceding the 
termination or new engagement relating to any matter of accounting 
principles or practices, financial statement disclosure, auditing scope 
or procedure, or compliance with applicable rules of the Commission, 
which issues, if not resolved to the satisfaction of the former 
independent public accountant, would have caused the independent public 
accountant to make reference to them in the report of the independent 
public accountant. The issues required to be reported include both those 
resolved to the former independent public accountant's satisfaction and 
those not resolved to the former accountant's satisfaction. Issues 
contemplated by this section are those which occur at the decision-
making level--that is, between principal financial officers of the 
security-based swap dealer or major security-based swap participant and 
personnel of the accounting firm responsible for rendering its report. 
The notice must also state whether the accountant's report filed under 
paragraph (c)(1)(i)(C) of this section for any of the past two fiscal 
years contained an adverse opinion or a disclaimer of opinion or was 
qualified as to uncertainties, audit scope, or accounting principles, 
and must describe the nature of each such adverse opinion, disclaimer of 
opinion, or qualification. The security-based swap dealer or major 
security-based swap participant must also request the former independent 
public accountant to furnish the security-based swap dealer or major 
security-based swap participant with a letter addressed to the 
Commission stating whether the independent public accountant agrees with 
the statements contained in the notice of the security-based swap dealer 
or major security-based swap participant and, if not, stating the 
respects in which the independent public accountant does not agree. The 
security-based swap dealer or major security-based swap participant must 
file three copies of the notice and the accountant's letter, one copy of 
which must be manually signed by the sole proprietor, or a general 
partner or a duly authorized corporate, limited liability company, or 
limited liability partnership officer or member, as appropriate, and by 
the independent public accountant, respectively.
    (f) Engagement of the independent public accountant. The independent 
public accountant engaged by the security-based swap dealer or major 
security-based swap participant to provide the reports required under 
paragraph (c)(1)(i)(C) of this section must, as part of the engagement, 
undertake the following, as applicable:
    (1) To prepare an independent public accountant's report based on an 
examination of the financial report required to be filed by the 
security-based swap dealer or major security-based swap participant 
under paragraph (c)(1)(i)(A) of this section in accordance with 
generally accepted auditing standards in the United States or the 
standards of the Public Company Accounting Oversight Board; and
    (2)(i) To prepare an independent public accountant's report based on 
an examination of the statements required under paragraphs 
(c)(3)(i)(A)(2) through (5) of this section in the compliance report 
required to be filed by the security-based swap dealer under paragraph 
(c)(1)(i)(B)(1) of this section in accordance with generally accepted 
auditing standards in the United States or the standards of the Public 
Company Accounting Oversight Board; or
    (ii) To prepare an independent public accountant's report based on a 
review of the statements required under paragraphs (c)(4)(i) through 
(ii) of this section in the exemption report required

[[Page 741]]

to be filed by the security-based swap dealer under paragraph 
(c)(1)(i)(B)(2) of this section in accordance with generally accepted 
auditing standards in the United States or the standards of the Public 
Company Accounting Oversight Board.
    (g) Notification of non-compliance or material weakness. If, during 
the course of preparing the independent public accountant's reports 
required under paragraph (c)(1)(i)(C) of this section, the independent 
public accountant determines that:
    (1) A security-based swap dealer is not in compliance with Sec.  
240.18a-1, Sec.  240.18a-4, Sec.  240.18a-9, or Sec.  240.17a-13, as 
applicable, or the independent public accountant determines that any 
material weaknesses (as defined in paragraph (c)(3)(iii) of this 
section) exist, the independent public accountant must immediately 
notify the chief financial officer of the security-based swap dealer of 
the nature of the non-compliance or material weakness. If the notice 
from the accountant concerns an instance of non-compliance that would 
require a security-based swap dealer to provide a notification under 
Sec.  240.18a-8, or if the notice concerns a material weakness, the 
security-based swap dealer must provide a notification in accordance 
with Sec.  240.18a-8, as applicable, and provide a copy of the 
notification to the independent public accountant. If the independent 
public accountant does not receive the notification within one business 
day, or if the independent public accountant does not agree with the 
statements in the notification, then the independent public accountant 
must notify the Commission within one business day. The report from the 
accountant must, if the security-based swap dealer failed to file a 
notification, describe any instances of non-compliance that required a 
notification under Sec.  240.18a-8 or any material weakness. If the 
security-based swap dealer filed a notification, the report from the 
accountant must detail the aspects of the notification of the security-
based swap dealer with which the accountant does not agree; or
    (2) A major security-based swap participant is not in compliance 
with Sec.  240.18a-2, the independent public accountant must immediately 
notify the chief financial officer of the major security-based swap 
participant of the nature of the non-compliance. If the notice from the 
accountant concerns an instance of non-compliance that would require a 
major security-based swap participant to provide a notification under 
Sec.  240.18a-8, the major security-based swap participant must provide 
a notification in accordance with Sec.  240.18a-8 and provide a copy of 
the notification to the independent public accountant. If the 
independent public accountant does not receive the notification within 
one business day, or if the independent public accountant does not agree 
with the statements in the notification, then the independent public 
accountant must notify the Commission within one business day. The 
report from the accountant must, if the major security-based swap 
participant failed to file a notification, describe any instances of 
non-compliance that required a notification under Sec.  240.18a-8. If 
the major security-based swap participant filed a notification, the 
report from the accountant must detail the aspects of the notification 
of the major security-based swap participant with which the accountant 
does not agree.
    Note 1 to paragraph (g): The attention of the security-based swap 
dealer, major security-based swap participant, and the independent 
public accountant is called to the fact that under Sec.  240.18a-8(a), 
among other things, a security-based swap dealer or major security-based 
swap participant whose net capital or tangible net worth, as applicable, 
declines below the minimum required pursuant to Sec.  240.18a-1 or Sec.  
240.18a-2, as applicable, must give notice of such deficiency that same 
day in accordance with Sec.  240.18a-8(h) and the notice must specify 
the security-based swap dealer's net capital requirement and its current 
amount of net capital, or the extent of the major security-based swap 
participant's failure to maintain positive tangible net worth, as 
applicable.
    (h) Reports of the independent public accountant required under 
paragraph (c)(1)(i)(C) of this section--(1) Technical requirements. The 
independent public accountant's reports must:
    (i) Be dated;
    (ii) Be signed manually;
    (iii) Indicate the city and state where issued; and

[[Page 742]]

    (iv) Identify without detailed enumeration the items covered by the 
reports.
    (2) Representations. The independent public accountant's reports 
must:
    (i) State whether the examinations were made in accordance with 
generally accepted auditing standards in the United States or the 
standards of the Public Company Accounting Oversight Board; and
    (ii) Identify any examination procedures deemed necessary by the 
independent public accountant under the circumstances of the particular 
case which have been omitted and the reason for their omission.
    (iii) Nothing in this section may be construed to imply authority 
for the omission of any procedure that independent public accountants 
would ordinarily employ in the course of an examination for the purpose 
of expressing the opinions required under this section.
    (3) Opinion to be expressed. The independent public accountant's 
reports must state clearly:
    (i) The opinion of the independent public accountant with respect to 
the financial report required under paragraph (c)(1)(i)(C) of this 
section and the accounting principles and practices reflected in that 
report;
    (ii) The opinion of the independent public accountant with respect 
to the financial report required under paragraph (c)(1)(i)(C) of this 
section, as to the consistency of the application of the accounting 
principles, or as to any changes in those principles which have a 
material effect on the financial statements; and
    (iii)(A) The opinion of the independent public accountant with 
respect to the statements required under paragraphs (c)(3)(i)(A)(2) 
through (5) of this section in the compliance report required under 
paragraph (c)(1)(i)(B)(1) of this section; or
    (B) The conclusion of the independent public accountant with respect 
to the statements required under paragraphs (c)(4)(i) and (ii) of this 
section in the exemption report required under paragraph (c)(1)(i)(B)(2) 
of this section.
    (4) Exceptions. Any matters to which the independent public 
accountant takes exception must be clearly identified, the exceptions 
must be specifically and clearly stated, and, to the extent practicable, 
the effect of each such exception on any related items contained in the 
annual reports required under paragraph (c) of this section must be 
given.
    (i) Notification of change of fiscal year. (1) In the event any 
security-based swap dealer or major security-based swap participant for 
which there is no prudential regulator finds it necessary to change its 
fiscal year, it must file, with the Commission's principal office in 
Washington, DC and the regional office of the Commission for the region 
in which the security-based swap dealer or major security-based swap 
participant has its principal place of business, a notice of such 
change.
    (2) Such notice must contain a detailed explanation of the reasons 
for the change. Any change in the filing period for the annual reports 
must be approved by the Commission.
    (j) Filing requirements. For purposes of filing requirements as 
described in this section, filing will be deemed to have been 
accomplished upon receipt at the Commission's principal office in 
Washington, DC, with duplicate originals simultaneously filed at the 
locations prescribed in the particular paragraph of this section which 
is applicable.

[84 FR 68662, Dec. 16, 2019]



Sec.  240.18a-8  Notification provisions for security-based swap
dealers and major security-based swap participants.

    This section applies to the following types of entities: A security-
based swap dealer registered pursuant to section 15F of the Act (15 
U.S.C. 78o-10) that is not also a broker or dealer, other than an OTC 
derivatives dealer as that term is defined in Sec.  240.3b-12, 
registered pursuant to section 15 of the Act (15 U.S.C. 78o); a 
security-based swap dealer registered pursuant to section 15F of the Act 
that is also an OTC derivatives dealer; and a major security-based swap 
participant registered pursuant to section 15F of the Act that is not 
also a broker or dealer, including an OTC derivatives dealer, registered 
pursuant to section 15 of the Act. Section 240.17a-11 (rather than this 
section) applies to the following types of entities:

[[Page 743]]

Except as provided above, a broker or dealer, including an OTC 
derivatives dealer, registered pursuant to section 15 of the Act; a 
broker or dealer, other than an OTC derivatives dealer, registered 
pursuant to section 15 of the Act that is also a security-based swap 
dealer registered pursuant to section 15F of the Act; and a broker or 
dealer, including an OTC derivatives dealer, registered pursuant to 
section 15 of the Act that is also a major-security-based swap 
participant registered pursuant to section 15F of the Act.
    (a)(1)(i) Every security-based swap dealer for which there is no 
prudential regulator whose net capital declines below the minimum amount 
required pursuant to Sec.  240.18a-1 must give notice of such deficiency 
that same day in accordance with paragraph (h) of this section. The 
notice must specify the security-based swap dealer's net capital 
requirement and its current amount of net capital. If a security-based 
swap dealer is informed by the Commission that it is, or has been, in 
violation of Sec.  240.18a-1 and the security-based swap dealer has not 
given notice of the capital deficiency under this section, the security-
based swap dealer, even if it does not agree that it is, or has been, in 
violation of Sec.  240.18a-1, must give notice of the claimed 
deficiency, which notice may specify the security-based swap dealer's 
reasons for its disagreement.
    (ii) Every security-based swap dealer for which there is no 
prudential regulator whose tentative net capital declines below the 
minimum amount required pursuant to Sec.  240.18a-1 must give notice of 
such deficiency that same day in accordance with paragraph (h) of this 
section. The notice must specify the security-based swap dealer's 
tentative net capital requirement and its current amount of tentative 
net capital. If a security-based swap is informed by the Commission that 
it is, or has been, in violation of Sec.  240.18a-1 and the security-
based swap dealer has not given notice of the capital deficiency under 
this section, the security-based swap dealer, even if it does not agree 
that it is, or has been, in violation of Sec.  240.18a-1, must give 
notice of the claimed deficiency, which notice may specify the security-
based swap dealer's reasons for its disagreement.
    (2) Every major security-based swap participant for which there is 
no prudential regulator who fails to maintain a positive tangible net 
worth pursuant to Sec.  240.18a-2 must give notice of such deficiency 
that same day in accordance with paragraph (h) of this section. The 
notice must specify the extent to which the firm has failed to maintain 
positive tangible net worth. If a major security-based swap participant 
is informed by the Commission that it is, or has been, in violation of 
Sec.  240.18a-2 and the major security-based swap participant has not 
given notice of the capital deficiency under this section, the major 
security-based swap participant, even if it does not agree that it is, 
or has been, in violation of Sec.  240.18a-2, must give notice of the 
claimed deficiency, which notice may specify the major security-based 
swap participant's reasons for its disagreement.
    (b) Every security-based swap dealer or major security-based swap 
participant for which there is no prudential regulator must send notice 
promptly (but within 24 hours) after the occurrence of the events 
specified in paragraphs (b)(1) through (3) or paragraph (b)(4) of this 
section, as applicable, in accordance with paragraph (h) of this 
section:
    (1) If a computation made by a security-based swap dealer pursuant 
to Sec.  240.18a-1 shows that its total net capital is less than 120 
percent of the security-based swap dealer's required minimum net 
capital;
    (2) If a computation made by a security-based swap dealer authorized 
by the Commission to compute net capital pursuant to Sec.  240.18a-1(d) 
shows that its total tentative net capital is less than 120 percent of 
the security-based swap dealer's required minimum tentative net capital;
    (3) If the level of tangible net worth of a major security-based 
swap participant falls below $20 million; and
    (4) The occurrence of the fourth and each subsequent backtesting 
exception under Sec.  240.18a-1(d)(9) during any 250 business day 
measurement period.
    (c) Every security-based swap dealer that files a notice of 
adjustment of its

[[Page 744]]

reported capital category with the Federal Reserve Board, the Office of 
the Comptroller of the Currency or the Federal Deposit Insurance 
Corporation must give notice of this fact that same day by transmitting 
a copy notice of the adjustment of reported capital category in 
accordance with paragraph (h) of this section.
    (d) Every security-based swap dealer or major security-based swap 
participant that fails to make and keep current the books and records 
required by Sec.  240.18a-5 or Sec.  240.17a-3, as applicable, must give 
notice of this fact that same day in accordance with paragraph (h) of 
this section, specifying the books and records which have not been made 
or which are not current. The security-based swap dealer or major 
security-based swap participant must also transmit a report in 
accordance with paragraph (h) of this section within 48 hours of the 
notice stating what the security-based swap dealer or major security-
based swap participant has done or is doing to correct the situation.
    (e) Whenever any security-based swap dealer for which there is no 
prudential regulator discovers, or is notified by an independent public 
accountant under Sec.  240.18a-7(g), of the existence of any material 
weakness, as defined in Sec.  240.18a-7(c)(3)(iii), the security-based 
swap dealer must:
    (1) Give notice, in accordance with paragraph (h) of this section, 
of the material weakness within 24 hours of the discovery or 
notification of the material weakness; and
    (2) Transmit a report in accordance with paragraph (h) of this 
section, within 48 hours of the notice stating what the security-based 
swap dealer has done or is doing to correct the situation.
    (f) [Reserved]
    (g) If a security-based swap dealer fails to make in its special 
reserve account for the exclusive benefit of security-based swap 
customers a deposit, as required by Sec.  240.18a-4(c), the security-
based swap dealer must give immediate notice in writing in accordance 
with paragraph (h) of this section.
    (h) Every notice or report required to be given or transmitted by 
this section must be given or transmitted to the principal office of the 
Commission in Washington, DC and the regional office of the Commission 
for the region in which the security-based swap dealer or major 
security-based swap participant has its principal place of business, or 
to an email address provided on the Commission's website, and to the 
Commodity Futures Trading Commission (CFTC) if the security-based swap 
dealer or major security-based swap participant is registered as a 
futures commission merchant with the CFTC. The report required by 
paragraph (d) or (e)(2) of this section may be transmitted by overnight 
delivery.

[84 FR 68667, Dec. 16, 2019]



Sec.  240.18a-9  Quarterly security counts to be made by certain 
security-based swap dealers.

    This section applies to a security-based swap dealer registered 
pursuant to section 15F of the Act (15 U.S.C. 78o-10) that does not have 
a prudential regulator and that is not also a broker or dealer, 
including an OTC derivatives dealer as that term is defined in Sec.  
240.3b-12, registered pursuant to section 15 of the Act (15 U.S.C. 78o). 
Section 240.17a-13 (rather than this section) applies to the following 
entities (if not exempt under the provisions of Sec.  240.17a-13): A 
member of a national securities exchange who transacts a business in 
securities directly with others than members of a national securities 
exchange; a broker or dealer who transacts a business in securities 
through the medium of a member of a national securities exchange; a 
broker or dealer, including an OTC derivatives dealer, registered 
pursuant to section 15 of the Act; a security-based swap dealer 
registered pursuant to section 15F of the Act that is also a broker or 
dealer, including an OTC derivatives dealer, registered pursuant to 
section 15 of the Act; and a major security-based swap participant that 
is also a broker or dealer, including an OTC derivatives dealer, 
registered pursuant to section 15 of the Act.
    (a) Any security-based swap dealer that is subject to the provisions 
of this section must at least once in each calendar quarter-year:
    (1) Physically examine and count all securities held including 
securities

[[Page 745]]

that are the subjects of repurchase or reverse repurchase agreements;
    (2) Account for all securities in transfer, in transit, pledged, 
loaned, borrowed, deposited, failed to receive, failed to deliver, 
subject to repurchase or reverse repurchase agreements or otherwise 
subject to its control or direction but not in its physical possession 
by examination and comparison of the supporting detailed records with 
the appropriate ledger control accounts;
    (3) Verify all securities in transfer, in transit, pledged, loaned, 
borrowed, deposited, failed to receive, failed to deliver, subject to 
repurchase or reverse repurchase agreements or otherwise subject to its 
control or direction but not in its physical possession, where such 
securities have been in said status for longer than thirty days;
    (4) Compare the results of the count and verification with its 
records; and
    (5) Record on the books and records of the security-based swap 
dealer all unresolved differences setting forth the security involved 
and date of comparison in a security count difference account no later 
than 7 business days after the date of each required quarterly security 
examination, count, and verification in accordance with the requirements 
provided in paragraph (b) of this section. Provided, however, that no 
examination, count, verification, and comparison for the purpose of this 
section is within 2 months of or more than 4 months following a prior 
examination, count, verification, and comparison made under this 
paragraph (a)(5).
    (b) The examination, count, verification, and comparison may be made 
either as of a date certain or on a cyclical basis covering the entire 
list of securities. In either case the recordation must be effected 
within 7 business days subsequent to the examination, count, 
verification, and comparison of a particular security. In the event that 
an examination, count, verification, and comparison is made on a 
cyclical basis, it may not extend over more than 1 calendar quarter-
year, and no security may be examined, counted, verified, or compared 
for the purpose of this section within 2 months of or more than 4 months 
after a prior examination, count, verification, and comparison.
    (c) The examination, count, verification, and comparison must be 
made or supervised by persons whose regular duties do not require them 
to have direct responsibility for the proper care and protection of the 
securities or the making or preservation of the subject records.

[84 FR 68668, Dec. 16, 2019]



Sec.  240.18a-10  Alternative compliance mechanism for security-based 
swap dealers that are registered as swap dealers and have limited 
security-based swap activities.

    (a) A security-based swap dealer may comply with capital, margin, 
segregation, recordkeeping, and reporting requirements of the Commodity 
Exchange Act and chapter I of this title applicable to swap dealers in 
lieu of complying with Sec. Sec.  240.18a-1 and 240.18a-3 through 
240.18a-9 if:
    (1) The security-based swap dealer is registered as such pursuant to 
section 15F(b) of the Act and the rules thereunder;
    (2) The security-based swap dealer is registered as a swap dealer 
pursuant to section 4s of the Commodity Exchange Act and the rules 
thereunder;
    (3) The security-based swap dealer is not registered as a broker or 
dealer pursuant to section 15 of the Act or the rules thereunder;
    (4) The security-based swap dealer meets the conditions to be exempt 
from Sec.  240.18a-4 specified in paragraph (f) of that section; and
    (5) As of the most recently ended quarter of the fiscal year of the 
security-based swap dealer, the aggregate gross notional amount of the 
outstanding security-based swap positions of the security-based swap 
dealer did not exceed the lesser of the maximum fixed-dollar amount 
specified in paragraph (f) of this section or 10 percent of the combined 
aggregate gross notional amount of the security-based swap and swap 
positions of the security-based swap dealer.
    (b) A security-based swap dealer operating under this section must:
    (1) Comply with capital, margin, segregation, recordkeeping, and 
reporting

[[Page 746]]

requirements of the Commodity Exchange Act and chapter I of this title 
applicable to swap dealers and treat security-based swaps or collateral 
related to security-based swaps as swaps or collateral related to swaps, 
as applicable, pursuant to those requirements to the extent the 
requirements do not specifically address security-based swaps or 
collateral related to security-based swaps;
    (2) Disclose in writing to each counterparty to a security-based 
swap before entering into the first transaction with the counterparty 
after the date the security-based swap dealer begins operating under 
this section that the security-based swap dealer is operating under this 
section and is therefore complying with the applicable capital, margin, 
segregation, recordkeeping, and reporting requirements of the Commodity 
Exchange Act and the rules promulgated by the Commodity Futures Trading 
Commission thereunder in lieu of complying with the capital, margin, 
segregation, recordkeeping, and reporting requirements promulgated by 
the Commission in Sec. Sec.  240.18a-1 and 240.18a-3 through 240.18a-9;
    (3) Immediately notify the Commission and the Commodity Futures 
Trading Commission in writing if the security-based swap dealer fails to 
meet a condition specified in paragraph (a) of this section;
    (4) Simultaneously notify the Commission if the security-based swap 
dealer is required to send a notice concerning its capital, books and 
records, liquidity, margin operations, or segregation operations to the 
Commodity Futures Trading Commission by transmitting to the Commission a 
copy of the notice being sent to the Commodity Futures Trading 
Commission; and
    (5) Furnish promptly to a representative of the Commission legible, 
true, complete, and current copies of those records of the security-
based swap dealer that are required to be preserved under the Commodity 
Exchange Act and chapter I of this title applicable to swap dealers, or 
any other records of the security-based swap dealer subject to 
examination pursuant to section 15F of the Act (15 U.S.C. 78o-10) that 
are requested by a representative of the Commission.
    (c) A security-based swap dealer that fails to meet one or more of 
the conditions specified in paragraph (a) of this section must begin 
complying with Sec. Sec.  240.18a-1 and 240.18a-3 through 240.18a-9 no 
later than:
    (1) Two months after the end of the month in which the security-
based swap dealer fails to meet a condition in paragraph (a) of this 
section; or
    (2) A longer period of time as granted by the Commission by order 
subject to any conditions imposed by the Commission.
    (d)(1) A person applying to register as a security-based swap dealer 
that intends to operate under this section beginning on the date of its 
registration must provide prior written notice to the Commission and the 
Commodity Futures Trading Commission of its intent to operate under the 
conditions of this section.
    (2) A security-based swap dealer that elects to operate under this 
section beginning on a date after the date of its registration as a 
security-based swap dealer must:
    (i) Provide prior written notice to the Commission and the Commodity 
Futures Trading Commission of its intent to operate under the conditions 
of this section; and
    (ii) Continue to comply with Sec. Sec.  240.18a-1 and 240.18a-3 
through 240.18a-9 for at least:
    (A) Two months after the end of the month in which the security-
based swap dealer provides the notice; or
    (B) A shorter period of time as granted by the Commission by order 
subject to any conditions imposed by the Commission.
    (e) The notices required by this section must be sent by facsimile 
transmission to the principal office of the Commission and the regional 
office of the Commission for the region in which the security-based swap 
dealer has its principal place of business or to an email address 
provided on the Commission's website, and to the principal office of the 
Commodity Futures Trading Commission in a manner consistent with the 
notification requirements of the Commodity Futures Trading Commission. 
The notice must include a

[[Page 747]]

brief summary of the reason for the notice and the contact information 
of an individual who can provide further information about the matter 
that is the subject of the notice.
    (f)(1) The maximum fixed-dollar amount is $250 billion until the 
three-year anniversary of the compliance date of this section at which 
time the maximum fixed-dollar amount is $50 billion unless the 
Commission issues an order to:
    (i) Maintain the maximum fixed-dollar amount at $250 billion for an 
additional period of time or indefinitely; or
    (ii) Lower the maximum fixed-dollar amount to an amount that is less 
than $250 billion but greater than $50 billion.
    (2) If, after considering the levels of security-based swap activity 
of security-based swap dealers operating under this section, the 
Commission determines that it may be appropriate to change the maximum 
fixed-dollar amount pursuant paragraph (f)(1)(i) or (ii) of this 
section, the Commission will publish a notice of the potential change 
and subsequently will issue an order regarding any such change.

[84 FR 44076, Aug. 22, 2019, as amended at 84 FR 68668, Dec. 16, 2019]

              Suspension and Expulsion of Exchange Members



Sec.  240.19a3-1  [Reserved]



Sec.  240.19b-3  [Reserved]



Sec.  240.19b-4  Filings with respect to proposed rule changes by
self-regulatory organizations.

    (a) Definitions. As used in this section:
    (1) The term advance notice means a notice required to be made by a 
designated clearing agency pursuant to Section 806(e) of the Payment, 
Clearing and Settlement Supervision Act (12 U.S.C. 5465(e));
    (2) The term designated clearing agency means a clearing agency that 
is registered with the Commission, and for which the Commission is the 
Supervisory Agency (as determined in accordance with section 803(8) of 
the Payment, Clearing and Settlement Supervision Act (12 U.S.C. 
5462(8)), that has been designated by the Financial Stability Oversight 
Council pursuant to section 804 of the Payment, Clearing and Settlement 
Supervision Act (12 U.S.C. 5463) as systemically important or likely to 
become systemically important;
    (3) The term Payment, Clearing and Settlement Supervision Act means 
Title VIII of the Dodd-Frank Wall Street Reform and Consumer Protection 
Act (124 Stat. 1802, 1803, 1807, 1809, 1811, 1814, 1816, 1818, 1820, 
1821; 12 U.S.C. 5461 et seq.);
    (4) The term proposed rule change has the meaning set forth in 
Section 19(b)(1) of the Act (15 U.S.C. 78s(b)(1));
    (5) The term security-based swap submission means a submission of 
identifying information required to be made by a clearing agency 
pursuant to section 3C(b)(2) of the Act (15 U.S.C. 78c-3(b)(2)) for each 
security-based swap, or any group, category, type or class of security-
based swaps, that such clearing agency plans to accept for clearing;
    (6) The term stated policy, practice, or interpretation means:
    (i) Any material aspect of the operation of the facilities of the 
self-regulatory organization; or
    (ii) Any statement made generally available to the membership of, to 
all participants in, or to persons having or seeking access (including, 
in the case of national securities exchanges or registered securities 
associations, through a member) to facilities of, the self-regulatory 
organization (``specified persons''), or to a group or category of 
specified persons, that establishes or changes any standard, limit, or 
guideline with respect to:
    (A) The rights, obligations, or privileges of specified persons or, 
in the case of national securities exchanges or registered securities 
associations, persons associated with specified persons; or
    (B) The meaning, administration, or enforcement of an existing rule.
    (b)(1) Filings with respect to proposed rule changes by a self-
regulatory organization, except filings with respect to proposed rules 
changes by self-regulatory organizations submitted pursuant to section 
19(b)(7) of the Act (15 U.S.C. 78s(b)(7)), shall be made electronically 
on Form 19b-4 (17 CFR 249.819).
    (2) For purposes of Section 19(b) of the Act and this rule, a 
``business day''

[[Page 748]]

is any day other than a Saturday, Sunday, Federal holiday, a day that 
the Office of Personnel Management has announced that Federal agencies 
in the Washington, DC area are closed to the public, a day on which the 
Commission is subject to a Federal government shutdown or a day on which 
the Commission's Washington, DC office is otherwise not open for regular 
business.
    (c) A stated policy, practice, or interpretation of the self-
regulatory organization shall be deemed to be a proposed rule change 
unless (1) it is reasonably and fairly implied by an existing rule of 
the self-regulatory organization or (2) it is concerned solely with the 
administration of the self-regulatory organization and is not a stated 
policy, practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule of the self-
regulatory organization.
    (d) Regardless of whether it is made generally available, an 
interpretation of an existing rule of the self-regulatory organization 
shall be deemed to be a proposed rule change if (1) it is approved or 
ratified by the governing body of the self-regulatory organization and 
(2) it is not reasonably and fairly implied by that rule.
    (e) For the purposes of this paragraph, new derivative securities 
product means any type of option, warrant, hybrid securities product or 
any other security, other than a single equity option or a security 
futures product, whose value is based, in whole or in part, upon the 
performance of, or interest in, an underlying instrument.
    (1) The listing and trading of a new derivative securities product 
by a self-regulatory organization shall not be deemed a proposed rule 
change, pursuant to paragraph (c)(1) of this section, if the Commission 
has approved, pursuant to section 19(b) of the Act (15 U.S.C. 78s(b)), 
the self-regulatory organization's trading rules, procedures and listing 
standards for the product class that would include the new derivative 
securities product and the self-regulatory organization has a 
surveillance program for the product class.
    (2) Recordkeeping and reporting:
    (i) Self-regulatory organizations shall retain at their principal 
place of business a file, available to Commission staff for inspection, 
of all relevant records and information pertaining to each new 
derivative securities product traded pursuant to this paragraph (e) for 
a period of not less than five years, the first two years in an easily 
accessible place, as prescribed in Sec.  240.17a-1.
    (ii) When relying on this paragraph (e), a self-regulatory 
organization shall submit Form 19b-4(e) (17 CFR 249.820) to the 
Commission within five business days after commencement of trading a new 
derivative securities product.
    (f) A proposed rule change may take effect upon filing with the 
Commission pursuant to Section 19(b)(3)(A) of the Act, 15 U.S.C. 
78s(b)(3)(A), if properly designated by the self-regulatory organization 
as:
    (1) Constituting a stated policy, practice, or interpretation with 
respect to the meaning, administration, or enforcement of an existing 
rule;
    (2) Establishing or changing a due, fee, or other charge applicable 
only to a member;
    (3) Concerned solely with the administration of the self-regulatory 
organization;
    (4) Effecting a change in an existing service of a registered 
clearing agency that either:
    (i)(A) Does not adversely affect the safeguarding of securities or 
funds in the custody or control of the clearing agency or for which it 
is responsible; and
    (B) Does not significantly affect the respective rights or 
obligations of the clearing agency or persons using the service; or
    (ii)(A) Primarily affects the clearing operations of the clearing 
agency with respect to products that are not securities, including 
futures that are not security futures, swaps that are not security-based 
swaps or mixed swaps, and forwards that are not security forwards; and
    (B) Either
    (1) Does not significantly affect any securities clearing operations 
of the clearing agency or any rights or obligations of the clearing 
agency with respect to securities clearing or persons using such 
securities-clearing service, or

[[Page 749]]

    (2) Does significantly affect any securities clearing operations of 
the clearing agency or the rights or obligations of the clearing agency 
with respect to securities clearing or persons using such securities-
clearing service, but is necessary to maintain fair and orderly markets 
for products that are not securities, including futures that are not 
security futures, swaps that are not security-based swaps or mixed 
swaps, and forwards that are not security forwards. Proposed rule 
changes filed pursuant to this subparagraph II must also be filed in 
accordance with the procedures of Section 19(b)(1) for approval pursuant 
to Section 19(b)(2) and the regulations thereunder within fifteen days 
of being filed under Section 19(b)(3)(A).
    (5) Effecting a change in an existing order-entry or trading system 
of a self-regulatory organization that:
    (i) Does not significantly affect the protection of investors or the 
public interest;
    (ii) Does not impose any significant burden on competition; and
    (iii) Does not have the effect of limiting the access to or 
availability of the system; or
    (6) Effecting a change that:
    (i) Does not significantly affect the protection of investors or the 
public interest;
    (ii) Does not impose any significant burden on competition; and
    (iii) By its terms, does not become operative for 30 days after the 
date of the filing, or such shorter time as the Commission may designate 
if consistent with the protection of investors and the public interest; 
provided that the self-regulatory organization has given the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
    (g) Proceedings to determine whether a proposed rule change should 
be disapproved will be conducted pursuant to 17 CFR 201.700 and 201.701 
(Initiation of Proceedings for SRO Proposed Rule Changes and for 
Proposed NMS Plans and Plan Amendments).
    (h) Notice of orders issued pursuant to section 19(b) of the Act 
will be given by prompt publication thereof, together with a statement 
of written reasons therefor.
    (i) Self-regulatory organizations shall retain at their principal 
place of business a file, available to interested persons for public 
inspection and copying, of all filings, notices and submissions made 
pursuant to this section and all correspondence and other communications 
reduced to writing (including comment letters) to and from such self-
regulatory organization concerning any such filing, notice or 
submission, whether such correspondence and communications are received 
or prepared before or after the filing, notice or submission of the 
proposed rule change, advance notice or security-based swap submission, 
as applicable.
    (j) Filings by a self-regulatory organization submitted on Form 19b-
4 (17 CFR 249.819) electronically shall contain an electronic signature. 
For the purposes of this section, the term electronic signature means an 
electronic entry in the form of a magnetic impulse or other form of 
computer data compilation of any letter or series of letters or 
characters comprising a name, executed, adopted or authorized as a 
signature. The signatory to an electronically submitted rule filing 
shall manually sign a signature page or other document, in the manner 
prescribed by Form 19b-4, authenticating, acknowledging or otherwise 
adopting his or her signature that appears in typed form within the 
electronic filing. Such document shall be executed before or at the time 
the rule filing is electronically submitted and shall be retained by the 
filer in accordance with Sec.  240.17a-1.
    (k) If the conditions of this section and Form 19b-4 (17 CFR 
249.819) are otherwise satisfied, all filings submitted electronically 
on or before 5:30 p.m. Eastern Standard Time or Eastern Daylight Saving 
Time, whichever is currently in effect, on a business day, shall be 
deemed filed on that business day, and all filings submitted after 5:30 
p.m. Eastern Standard Time or Eastern Daylight Saving Time, whichever is 
currently in effect, shall be deemed filed on the next business day.

[[Page 750]]

    (l) The self-regulatory organization shall post each proposed rule 
change, and any amendments thereto, on its Web site within two business 
days after the filing of the proposed rule change, and any amendments 
thereto, with the Commission. If a self-regulatory organization does not 
post a proposed rule change on its Web site on the same day that it 
filed the proposal with the Commission, then the self-regulatory 
organization shall inform the Commission of the date on which it posted 
such proposal on its Web site. Such proposed rule change and amendments 
shall be maintained on the self-regulatory organization's Web site 
until:
    (1) In the case of a proposed rule change filed under section 
19(b)(2) of the Act (15 U.S.C. 78s(b)(2)), the Commission approves or 
disapproves the proposed rule change or the self-regulatory organization 
withdraws the proposed rule change, or any amendments, or is notified 
that the proposed rule change is not properly filed; or
    (2) In the case of a proposed rule change filed under section 
19(b)(3)(A) of the Act (15 U.S.C. 78s(b)(3)(A)), or any amendment 
thereto, 60 days after the date of filing, unless the self-regulatory 
organization withdraws the proposed rule change or is notified that the 
proposed rule change is not properly filed; and
    (3) In the case of proposed rule changes approved by the Commission 
pursuant to section 19(b)(2) of the Act (15 U.S.C. 78s(b)(2)) or noticed 
by the Commission pursuant to section 19(b)(3)(A) of the Act (15 U.S.C. 
78s(b)(3)(A)), the self-regulatory organization updates its rule text as 
required by paragraph (m) of this section; and
    (4) In the case of a proposed rule change, or any amendment thereto, 
that has been disapproved, withdrawn or not properly filed, the self-
regulatory organization shall remove the proposed rule change, or any 
amendment, from its Web site within two business days of notification of 
disapproval, improper filing, or withdrawal by the SRO of the proposed 
rule change.
    (m)(1) Each self-regulatory organization shall post and maintain a 
current and complete version of its rules on its Web site.
    (2) A self-regulatory organization, other than a self-regulatory 
organization that is registered with the Commission under section 6(g) 
of the Act (15 U.S.C. 78f(g)) or pursuant to section 15A(k) of the Act 
(15 U.S.C. 78o-1(k)), shall update its Web site to reflect rule changes 
filed pursuant to section 19(b)(2) of the Act (15 U.S.C. 78s(b)(2)) 
within two business days after it has been notified of the Commission's 
approval of a proposed rule change, and to reflect rule changes filed 
pursuant to section 19(b)(3)(A) of the Act (15 U.S.C. 78s(b)(3)(A)) 
within two business days of the Commission's notice of such proposed 
rule change.
    (3) A self-regulatory organization that is registered with the 
Commission under section 6(g) of the Act (15 U.S.C. 78f(g)) or pursuant 
to section 15A(k) of the Act (15 U.S.C. 78o-1(k)), shall update its Web 
site to reflect rule changes filed pursuant to section 19(b)(2) of the 
Act by two business days after the later of:
    (A) Notification that the Commission has approved a proposed rule 
change; and
    (B)(i) The filing of a written certification with the Commodity 
Futures Trading Commission under section 5c(c) of the Commodity Exchange 
Act (7 U.S.C. 7a-2(c));
    (ii) Receipt of notice from the Commodity Futures Trading Commission 
that it has determined that review of the proposed rule change is not 
necessary; or
    (iii) Receipt of notice from the Commodity Futures Trading 
Commission that it has approved the proposed rule change.
    (4) If a rule change is not effective for a certain period, the 
self-regulatory organization shall clearly indicate the effective date 
in the relevant rule text.
    (n)(1)(i) A designated clearing agency shall provide an advance 
notice to the Commission of any proposed change to its rules, 
procedures, or operations that could materially affect the nature or 
level of risks presented by such designated clearing agency. Except as 
provided in paragraph (n)(1)(ii) of this section, such advance notice 
shall be submitted to the Commission electronically on Form 19b-4 
(referenced in 17 CFR 249.819). The Commission shall,

[[Page 751]]

upon the filing of any advance notice, provide for prompt publication 
thereof.
    (ii) Any designated clearing agency that files an advance notice 
with the Commission prior to December 10, 2013, shall file such advance 
notice in electronic format to a dedicated email address to be 
established by the Commission. The contents of an advance notice filed 
pursuant to this paragraph (n)(1)(ii) shall contain the information 
required to be included for advance notices in the General Instructions 
for Form 19b-4 (referenced in 17 CFR 249.819).
    (2)(i) For purposes of this paragraph (n), the phrase materially 
affect the nature or level of risks presented, when used to qualify 
determinations on a change to rules, procedures, or operations at the 
designated clearing agency, means matters as to which there is a 
reasonable possibility that the change could affect the performance of 
essential clearing and settlement functions or the overall nature or 
level of risk presented by the designated clearing agency.
    (ii) Changes to rules, procedures, or operations that could 
materially affect the nature or level of risks presented by a designated 
clearing agency may include, but are not limited to, changes that 
materially affect participant and product eligibility, risk management, 
daily or intraday settlement procedures, default procedures, system 
safeguards, governance or financial resources of the designated clearing 
agency.
    (iii) Changes to rules, procedures, or operations that may not 
materially affect the nature or level of risks presented by a designated 
clearing agency include, but are not limited to:
    (A) Changes to an existing procedure, control, or service that do 
not modify the rights or obligations of the designated clearing agency 
or persons using its payment, clearing, or settlement services and that 
do not adversely affect the safeguarding of securities, collateral, or 
funds in the custody or control of the designated clearing agency or for 
which it is responsible; or
    (B) Changes concerned solely with the administration of the 
designated clearing agency or related to the routine, daily 
administration, direction, and control of employees;
    (3) The designated clearing agency shall post the advance notice, 
and any amendments thereto, on its Web site within two business days 
after the filing of the advance notice, and any amendments thereto, with 
the Commission. Such advance notice and amendments shall be maintained 
on the designated clearing agency's Web site until the earlier of:
    (i) The date the designated clearing agency withdraws the advance 
notice or is notified that the advance notice is not properly filed; or
    (ii) The date the designated clearing agency posts a notice of 
effectiveness as required by paragraph (n)(4)(ii) of this section.
    (4)(i) The designated clearing agency shall post a notice on its Web 
site within two business days of the date that any change to its rules, 
procedures, or operations referred to in an advance notice has been 
permitted to take effect as such date is determined in accordance with 
Section 806(e) of the Payment, Clearing and Settlement Supervision Act 
(12 U.S.C. 5465).
    (ii) The designated clearing agency shall post a notice on its Web 
site within two business days of the effectiveness of any change to its 
rules, procedures, or operations referred to in an advance notice.
    (5) A designated clearing agency shall provide copies of all 
materials submitted to the Commission relating to an advance notice with 
the Board of Governors of the Federal Reserve System contemporaneously 
with such submission to the Commission.
    (6) The publication and Web site posting requirements contained in 
paragraphs (n)(1), (n)(3), and (n)(4) of this section do not apply to 
any information contained in an advance notice for which a designated 
clearing agency has requested confidential treatment following the 
procedures set forth in Sec.  240.24b-2.
    (o)(1) Every clearing agency that is registered with the Commission 
that plans to accept a security-based swap, or any group, category, 
type, or class of security-based swaps for clearing shall submit to the 
Commission a security-based swap submission and provide

[[Page 752]]

notice to its members of such security-based swap submission.
    (2)(i) Except as provided in paragraph (o)(2)(ii) of this section, a 
clearing agency shall submit each security-based swap submission to the 
Commission electronically on Form 19b-4 (referenced in 17 CFR 249.819) 
with the information required to be submitted for a security-based swap 
submission, as provided in Sec.  240.19b-4 and Form 19b-4. Any 
information submitted to the Commission electronically on Form 19b-4 
that is not complete or otherwise in compliance with this section and 
Form 19b-4 shall not be considered a security-based swap submission and 
the Commission shall so inform the clearing agency within twenty-one 
business days of the submission on Form 19b-4 (referenced in 17 CFR 
249.819).
    (ii) Any clearing agency that files a security-based swap submission 
with the Commission prior to December 10, 2013, shall file such 
security-based swap submission in electronic format to a dedicated email 
address to be established by the Commission. The contents of a security-
based swap submission filed pursuant to this paragraph (o)(2)(ii) shall 
contain the information required to be included for security-based swap 
submissions in the General Instructions for Form 19b-4.
    (3) A security-based swap submission submitted by a clearing agency 
to the Commission shall include a statement that includes, but is not 
limited to:
    (i) How the security-based swap submission is consistent with 
Section 17A of the Act (15 U.S.C. 78q-1);
    (ii) Information that will assist the Commission in the quantitative 
and qualitative assessment of the factors specified in Section 3C of the 
Act (15 U.S.C. 78c-3), including, but not limited to:
    (A) The existence of significant outstanding notional exposures, 
trading liquidity, and adequate pricing data;
    (B) The availability of a rule framework, capacity, operational 
expertise and resources, and credit support infrastructure to clear the 
contract on terms that are consistent with the material terms and 
trading conventions on which the contract is then traded;
    (C) The effect on the mitigation of systemic risk, taking into 
account the size of the market for such contract and the resources of 
the clearing agency available to clear the contract;
    (D) The effect on competition, including appropriate fees and 
charges applied to clearing; and
    (E) The existence of reasonable legal certainty in the event of the 
insolvency of the relevant clearing agency or one or more of its 
clearing members with regard to the treatment of customer and security-
based swap counterparty positions, funds, and property;
    (iii) A description of how the rules of the clearing agency 
prescribe that all security-based swaps submitted to the clearing agency 
with the same terms and conditions are economically equivalent within 
the clearing agency and may be offset with each other within the 
clearing agency, as applicable to the security-based swaps described in 
the security-based swap submission; and
    (iv) A description of how the rules of the clearing agency provide 
for non-discriminatory clearing of a security-based swap executed 
bilaterally or on or through the rules of an unaffiliated national 
securities exchange or security-based swap execution facility, as 
applicable to the security-based swaps described in the security-based 
swap submission.
    (4) A clearing agency shall submit security-based swaps to the 
Commission for review by group, category, type or class of security-
based swaps, to the extent reasonable and practicable to do so.
    (5) A clearing agency shall post each security-based swap 
submission, and any amendments thereto, on its Web site within two 
business days after the submission of the security-based swap 
submission, and any amendments thereto, with the Commission. Such 
security-based swap submission and amendments shall be maintained on the 
clearing agency's Web site until the Commission makes a determination 
regarding the security-based swap submission or the clearing agency

[[Page 753]]

withdraws the security-based swap submission, or is notified that the 
security-based swap submission is not properly filed.
    (6) In connection with any security-based swap submission that is 
submitted by a clearing agency to the Commission, the clearing agency 
shall provide any additional information requested by the Commission as 
necessary to assess any of the factors it determines to be appropriate 
in order to make the determination of whether the clearing requirement 
applies.
    (7) Notices of orders issued pursuant to Section 3C of the Act (15 
U.S.C. 78c-3), regarding security-based swap submissions will be given 
by prompt publication thereof, together with a statement of written 
reasons therefor.

[45 FR 73914, Nov. 7, 1980, as amended at 59 FR 66701, Dec. 28, 1994; 63 
FR 70967, Dec. 22, 1998; 66 FR 43742, Aug. 20, 2001; 69 FR 60300, Oct. 
8, 2004; 73 FR 16189, Mar. 27, 2008; 76 FR 4072, Jan. 24, 2011; 76 FR 
20509, Apr. 13, 2011; 76 FR 41092, July 13, 2011; 77 FR 41648, July 13, 
2012; 77 FR 73305, Dec. 10, 2012; 78 FR 21057, Apr. 9, 2013; 85 FR 
65497, Oct. 15, 2020]



Sec.  240.19b-5  Temporary exemption from the filing requirements of
Section 19(b) of the Act.

                            Preliminary Notes

    1. The following section provides for a temporary exemption from the 
rule filing requirement for self-regulatory organizations that file 
proposed rule changes concerning the operation of a pilot trading system 
pursuant to section 19(b) of the Act (15 U.S.C. 78s(b), as amended). All 
other requirements under the Act that are applicable to self-regulatory 
organizations continue to apply.
    2. The disclosures made pursuant to the provisions of this section 
are in addition to any other applicable disclosure requirements under 
the federal securities laws.
    (a) For purposes of this section, the term specialist means any 
member subject to a requirement of a self-regulatory organization that 
such member regularly maintain a market in a particular security.
    (b) For purposes of this section, the term trading system means the 
rules of a self-regulatory organization that:
    (1) Determine how the orders of multiple buyers and sellers are 
brought together; and
    (2) Establish non-discretionary methods under which such orders 
interact with each other and under which the buyers and sellers entering 
such orders agree to the terms of trade.
    (c) For purposes of this section, the term pilot trading system 
shall mean a trading system operated by a self-regulatory organization 
that is not substantially similar to any trading system or pilot trading 
system operated by such self-regulatory organization at any time during 
the preceding year, and that:
    (1)(i) Has been in operation for less than two years;
    (ii) Is independent of any other trading system operated by such 
self-regulatory organization that has been approved by the Commission 
pursuant to section 19(b) of the Act, (15 U.S.C. 78s(b));
    (iii) With respect to each security traded on such pilot trading 
system, during at least two of the last four consecutive calendar 
months, has traded no more than 5 percent of the average daily trading 
volume of such security in the United States; and
    (iv) With respect to all securities traded on such pilot trading 
system, during at least two of the last four consecutive calendar 
months, has traded no more than 20 percent of the average daily trading 
volume of all trading systems operated by such self-regulatory 
organization; or
    (2)(i) Has been in operation for less than two years;
    (ii) With respect to each security traded on such pilot trading 
system, during at least two of the last four consecutive calendar 
months, has traded no more than 1 percent of the average daily trading 
volume of such security in the United States; and
    (iii) With respect to all securities traded on such pilot trading 
system, during at least two of the last four consecutive calendar 
months, has traded no more than 20 percent of the average daily trading 
volume of all trading systems operated by such self-regulatory 
organization; or
    (3)(i) Has been in operation for less than two years; and

[[Page 754]]

    (ii)(A) Satisfied the definition of pilot trading system under 
paragraph (c)(1) of this section no more than 60 days ago, and continues 
to be independent of any other trading system operated by such self-
regulatory organization that has been approved by the Commission 
pursuant to section 19(b) of the Act, (15 U.S.C. 78s(b)); or
    (B) Satisfied the definition of pilot trading system under paragraph 
(c)(2) of this section no more than 60 days ago.
    (d) A pilot trading system shall be deemed independent of any other 
trading system operated by a self-regulatory organization if:
    (1) Such pilot trading system trades securities other than the 
issues of securities that trade on any other trading system operated by 
such self-regulatory organization that has been approved by the 
Commission pursuant to section 19(b) of the Act, (15 U.S.C. 78s(b));
    (2) Such pilot trading system does not operate during the same 
trading hours as any other trading system operated by such self-
regulatory organization that has been approved by the Commission 
pursuant to section 19(b) of the Act, (15 U.S.C. 78s(b)); or
    (3) No specialist or market maker on any other trading system 
operated by such self-regulatory organization that has been approved by 
the Commission pursuant to section 19(b) of the Act, (15 U.S.C. 78s(b)), 
is permitted to effect transactions on the pilot trading system in 
securities in which they are a specialist or market maker.
    (e) A self-regulatory organization shall be exempt temporarily from 
the requirement under section 19(b) of the Act, (15 U.S.C. 78s(b)), to 
submit on Form 19b-4, 17 CFR 249.819, proposed rule changes for 
establishing a pilot trading system, if the self-regulatory organization 
complies with the following requirements:
    (1) Form PILOT. The self-regulatory organization:
    (i) Files Part I of Form PILOT, 17 CFR 249.821, in accordance with 
the instructions therein, at least 20 days prior to commencing operation 
of the pilot trading system;
    (ii) Files an amendment on Part I of Form PILOT at least 20 days 
prior to implementing a material change to the operation of the pilot 
trading system; and
    (iii) Files a quarterly report on Part II of Form PILOT within 30 
calendar days after the end of each calendar quarter in which the market 
has operated after the effective date of this section.
    (2) Fair access. (i) The self-regulatory organization has in place 
written rules to ensure that all members of the self-regulatory 
organization have fair access to the pilot trading system, and that 
information regarding orders on the pilot trading system is equally 
available to all members of the self-regulatory organization with access 
to such pilot trading system.
    (ii) Notwithstanding the requirement in paragraph (e)(2)(i) of this 
section, a specialist on the pilot trading system may have preferred 
access to information regarding orders that it represents in its 
capacity as specialist.
    (iii) The rules established by a self-regulatory organization 
pursuant to paragraph (e)(2)(i) of this section will be considered rules 
governing the pilot trading system for purposes of the temporary 
exemption under this section.
    (3) Trading rules and procedures and listing standards. (i) The 
self-regulatory organization has in place written trading rules and 
procedures and listing standards necessary to operate the pilot trading 
system.
    (ii) The rules established by a self-regulatory organization 
pursuant to paragraph (e)(3)(i) of this section will be considered rules 
governing the pilot trading system for purposes of the temporary 
exemption under this section.
    (4) Surveillance. The self-regulatory organization establishes 
internal procedures for the effective surveillance of trading activity 
on the self-regulatory organization's pilot trading system.
    (5) Clearance and settlement. The self-regulatory organization 
establishes reasonable clearance and settlement procedures for 
transactions effected on the self-regulatory organizations pilot trading 
system.
    (6) Types of securities. The self-regulatory organization permits to 
trade on the pilot trading system only securities registered under 
section 12 of the Act, (15 U.S.C. 78l).

[[Page 755]]

    (7) Activities of specialists. (i) The self-regulatory organization 
does not permit any member to be a specialist in a security on the pilot 
trading system and a specialist in a security on a trading system 
operated by such self-regulatory organization that has been approved by 
the Commission pursuant to section 19(b) of the Act, (15 U.S.C. 78s(b)), 
or on another pilot trading system operated by such self-regulatory 
organization, if such securities are related securities, except that a 
member may be a specialist in related securities that the Commission, 
upon application by the self-regulatory organization, later determines 
is necessary or appropriate in the public interest and consistent with 
the protection of investors;
    (ii) Notwithstanding paragraph (e)(7)(i) of this section, a self-
regulatory organization may permit a member to be a specialist in any 
security on a pilot trading system, if the pilot trading system is 
operated during trading hours different from the trading hours of the 
trading system in which such member is a specialist.
    (iii) For purposes of paragraph (e)(7) of this section, the term 
related securities means any two securities in which:
    (A) The value of one security is determined, in whole or significant 
part, by the performance of the other security; or
    (B) The value of both securities is determined, in whole or 
significant part, by the performance of a third security, combination of 
securities, index, indicator, interest rate or other common factor.
    (8) Examinations, inspections, and investigations. The self-
regulatory organization cooperates with the examination, inspection, or 
investigation by the Commission of transactions effected on the pilot 
trading system.
    (9) Recordkeeping. The self-regulatory organization shall retain at 
its principal place of business and make available to Commission staff 
for inspection, all the rules and procedures relating to each pilot 
trading system operating pursuant to this section for a period of not 
less than five years, the first two years in an easily accessible place, 
as prescribed in Sec.  240.17a-1.
    (10) Public availability of pilot trading system rules. The self-
regulatory organization makes publicly available all trading rules and 
procedures, including those established under paragraphs (e)(2) and 
(e)(3) of this section.
    (11) Every notice or amendment filed pursuant to this paragraph (e) 
shall constitute a ``report'' within the meaning of sections 11A, 17(a), 
18(a), and 32(a), (15 U.S.C. 78k-1, 78q(a), 78r(a), and 78ff(a)), and 
any other applicable provisions of the Act. All notices or reports filed 
pursuant to this paragraph (e) shall be deemed to be confidential until 
the pilot trading system commences operation.
    (f)(1) A self-regulatory organization shall request Commission 
approval, pursuant to section 19(b)(2) of the Act, (15 U.S.C. 
78s(b)(2)), for any rule change relating to the operation of a pilot 
trading system by submitting Form 19b-4, 17 CFR 249.819, no later than 
two years after the commencement of operation of such pilot trading 
system, or shall cease operation of the pilot trading system.
    (2) Simultaneous with a request for Commission approval pursuant to 
section 19(b)(2) of the Act, (15 U.S.C. 78s(b)(2)), a self-regulatory 
organization may request Commission approval pursuant to section 
19(b)(3)(A) of the Act, (15 U.S.C. 78s(b)(3)(A)), for any rule change 
relating to the operation of a pilot trading system by submitting Form 
19b-4, 17 CFR 249.819, effective immediate upon filing, to continue 
operations of such trading system for a period not to exceed six months.
    (g) Notwithstanding paragraph (e) of this section, rule changes with 
respect to pilot trading systems operated by a self-regulatory 
organization shall not be exempt from the rule filing requirements of 
section 19(b)(2) of the Act, (15 U.S.C. 78s(b)(2)), if the Commission 
determines, after notice to the SRO and opportunity for the SRO to 
respond, that exemption of such rule changes is not necessary or 
appropriate in the public interest or consistent with the protection of 
investors.

[63 FR 70920, Dec. 22, 1998]

[[Page 756]]



Sec.  240.19b-7  Filings with respect to proposed rule changes submitted
pursuant to Section 19(b)(7) of the Act.

    Preliminary Note: A self-regulatory organization also must refer to 
Form 19b-7 (17 CFR 249.822) for further requirements with respect to the 
filing of proposed rule changes.

    (a) Filings with respect to proposed rule changes by a self-
regulatory organization submitted pursuant to section 19(b)(7) of the 
Act (15 U.S.C. 78s(b)(7)) shall be made electronically on Form 19b-7 (17 
CFR 249.822).
    (b) A proposed rule change will not be deemed filed on the date it 
is received by the Commission unless:
    (1) A completed Form 19b-7 (17 CFR 249.822) is submitted 
electronically; and
    (2) In order to elicit meaningful comment, it is accompanied by:
    (i) A clear and accurate statement of the basis and purpose of such 
rule change, including the impact on competition or efficiency, if any; 
and
    (ii) A summary of any written comments (including e-mail) received 
by the self-regulatory organization on the proposed rule change.
    (c) Self-regulatory organizations shall retain at their principle 
place of business a file, available to interested persons for public 
inspection and copying, of all filings made pursuant to this section and 
all correspondence and other communications reduced to writing 
(including comment letters) to and from such self-regulatory 
organization concerning such filing, whether such correspondence and 
communications are received or prepared before or after the filing of 
the proposed rule change.
    (d) Filings with respect to proposed rule changes by a self-
regulatory organization submitted on Form 19b-7 (17 CFR 249.822) 
electronically shall contain an electronic signature. For the purposes 
of this section, the term electronic signature means an electronic entry 
in the form of a magnetic impulse or other form of computer data 
compilation of any letter or series of letters or characters comprising 
a name, executed, adopted or authorized as a signature. The signatory to 
an electronically submitted rule filing shall manually sign a signature 
page or other document, in the manner prescribed by Form 19b-7, 
authenticating, acknowledging or otherwise adopting his or her signature 
that appears in typed form within the electronic filing. Such document 
shall be executed before or at the time the rule filing is 
electronically submitted and shall be retained by the filer in 
accordance with 17 CFR 240.17a-1.
    (e) If the conditions of this section and Form 19b-7 (17 CFR 
249.822) are otherwise satisfied, all filings submitted electronically 
on or before 5:30 p.m. Eastern Standard Time or Eastern Daylight Saving 
Time, whichever is currently in effect, on a business day, shall be 
deemed filed on that business day, and all filings submitted after 5:30 
p.m. Eastern Standard Time or Eastern Daylight Saving Time, whichever is 
currently in effect, shall be deemed filed on the next business day.
    (f) The self-regulatory organization shall post the proposed rule 
change, and any amendments thereto, submitted on Form 19b-7 (17 CFR 
249.822), on its Web site within two business days after the filing of 
the proposed rule change, and any amendments thereto, with the 
Commission. Unless the self-regulatory organization withdraws the 
proposed rule change or is notified that the proposed rule change is not 
properly filed, such proposed rule change and amendments shall be 
maintained on the self-regulatory organization's Web site until 60 days 
after:
    (1) The filing of a written certification with the Commodity Futures 
Trading Commission under section 5c(c) of the Commodity Exchange Act (7 
U.S.C. 7a-2(c));
    (2) The Commodity Futures Trading Commission determines that review 
of the proposed rule change is not necessary; or
    (3) The Commodity Futures Trading Commission approves the proposed 
rule change; and
    (4) In the case of a proposed rule change, or any amendment thereto, 
that has been withdrawn or not properly filed, the self-regulatory 
organization shall remove the proposed rule change, or any amendment, 
from its Web site within two business days of notification of improper 
filing or withdrawal by the self-regulatory organization of the proposed 
rule change.

[[Page 757]]

    (g)(1) Each self-regulatory organization shall post and maintain a 
current and complete version of its rules on its Web site.
    (2) The self-regulatory organization shall update its Web site to 
reflect rule changes filed pursuant to section 19(b)(7) of the Act (15 
U.S.C. 78s(b)(7)), by two business days after the later of:
    (A) The Commission's notice of such proposed rule change; and
    (B)(i) The filing of a written certification with the Commodity 
Futures Trading Commission under section 5c(c) of the Commodity Exchange 
Act (7 U.S.C. 7a-2(c));
    (ii) Receipt of notice from the Commodity Futures Trading Commission 
that it has determined that review of the proposed rule change is not 
necessary; or
    (iii) Receipt of notice from the Commodity Futures Trading 
Commission that it has approved the proposed rule change.
    (3) If a rule change is not effective for a certain period, the 
self-regulatory organization shall clearly indicate the effective date 
in the relevant rule text.

[66 FR 43743, Aug. 20, 2001, as amended at 73 FR 16189, Mar. 27, 2008]



Sec.  240.19c-1  Governing certain off-board agency transactions by
members of national securities exchanges.

    The rules of each national securities exchange shall provide as 
follows:
    No rule, stated policy, or practice of this exchange shall prohibit 
or condition, or be construed to prohibit or condition or otherwise 
limit, directly or indirectly, the ability of any member acting as agent 
to effect any transaction otherwise than on this exchange with another 
person (except when such member also is acting as agent for such other 
person in such transaction), in any equity security listed on this 
exchange or to which unlisted trading privileges on this exchange have 
been extended.

(Secs. 2, 3, 6, 11, 17, 19, 23, Pub. L. 78-291, 48 Stat. 881, 882, 885, 
891, 897, 898, 901, as amended by secs. 2, 3, 6, 14, 16, 18, Pub. L. 94-
29, 89 Stat. 97, 104, 110, 137, 146, 155 (15 U.S.C. 78b, 78c, 78f, 78k, 
78q, 78s, 78w, as amended by Pub. L. 94-29 (June 4, 1975)); sec. 7 Pub. 
L. 94-29, 89 Stat. 111 (15 U.S.C. 78k-1))

[43 FR 1328, Jan. 9, 1978]



Sec.  240.19c-3  Governing off-board trading by members of national
securities exchanges.

    The rules of each national securities exchange shall provide as 
follows:
    (a) No rule, stated policy or practice of this exchange shall 
prohibit or condition, or be construed to prohibit, condition or 
otherwise limit, directly or indirectly, the ability of any member to 
effect any transaction otherwise than on this exchange in any reported 
security listed and registered on this exchange or as to which unlisted 
trading privileges on this exchange have been extended (other than a put 
option or call option issued by the Options Clearing Corporation) which 
is not a covered security.
    (b) For purposes of this rule,
    (1) The term Act shall mean the Securities Exchange Act of 1934, as 
amended.
    (2) The term exchange shall mean a national securities exchange 
registered as such with the Securities and Exchange Commission pursuant 
to section 6 of the Act.
    (3) The term covered security shall mean (i) Any equity security or 
class of equity securities which
    (A) Was listed and registered on an exchange on April 26, 1979, and
    (B) Remains listed and registered on at least one exchange 
continuously thereafter;
    (ii) Any equity security or class of equity securities which
    (A) Was traded on one or more exchanges on April 26, 1979, pursuant 
to unlisted trading privileges permitted by section 12(f)(1)(A) of the 
Act, and
    (B) Remains traded on any such exchange pursuant to such unlisted 
trading privileges continuously thereafter; and
    (iii) Any equity security or class of equity securities which

[[Page 758]]

    (A) Is issued in connection with a statutory merger, consolidation 
or similar plan or reorganization (including a reincorporation or change 
of domicile) in exchange for an equity security or class of equity 
securities described in paragraph (b)(3)(i) or (ii) of this rule,
    (B) Is listed and registered on an exchange after April 26, 1979, 
and
    (C) Remains listed and registered on at least one exchange 
continuously thereafter.
    (4) The term reported security shall mean any security or class of 
securities for which transaction reports are collected, processed and 
made available pursuant to an effective transaction reporting plan.
    (5) The term transaction report shall mean a report containing the 
price and volume associated with a completed transaction involving the 
purchase or sale of a security.
    (6) The term effective transaction reporting plan shall mean any 
plan approved by the Commission pursuant to Sec.  242.601 of this 
chapter for collecting, processing, and making available transaction 
reports with respect to transactions in an equity security or class of 
equity securities.

[45 FR 41134, June 18, 1980, as amended at 70 FR 37618, June 29, 2005]



Sec.  240.19c-4  Governing certain listing or authorization determinations
by national securities exchanges and associations.

    (a) The rules of each exchange shall provide as follows: No rule, 
stated policy, practice, or interpretation of this exchange shall permit 
the listing, or the continuance of the listing, of any common stock or 
other equity security of a domestic issuer, if the issuer of such 
security issues any class of security, or takes other corporate action, 
with the effect of nullifying, restricting or disparately reducing the 
per share voting rights of holders of an outstanding class or classes of 
common stock of such issuer registered pursuant to section 12 of the 
Act.
    (b) The rules of each association shall provide as follows: No rule, 
stated policy, practice, or interpretation of this association shall 
permit the authorization for quotation and/or transaction reporting 
through an automated inter-dealer quotation system (``authorization''), 
or the continuance of authorization, of any common stock or other equity 
security of a domestic issuer, if the issuer of such security issues any 
class of security, or takes other corporate action, with the effect of 
nullifying, restricting, or disparately reducing the per share voting 
rights of holders of an outstanding class or classes of common stock of 
such issuer registered pursuant to section 12 of the Act.
    (c) For the purposes of paragraphs (a) and (b) of this section, the 
following shall be presumed to have the effect of nullifying, 
restricting, or disparately reducing the per share voting rights of an 
outstanding class or classes of common stock:
    (1) Corporate action to impose any restriction on the voting power 
of shares of the common stock of the issuer held by a beneficial or 
record holder based on the number of shares held by such beneficial or 
record holder;
    (2) Corporate action to impose any restriction on the voting power 
of shares of the common stock of the issuer held by a beneficial or 
record holder based on the length of time such shares have been held by 
such beneficial or record holder;
    (3) Any issuance of securities through an exchange offer by the 
issuer for shares of an outstanding class of the common stock of the 
issuer, in which the securities issued have voting rights greater than 
or less than the per share voting rights of any outstanding class of the 
common stock of the issuer.
    (4) Any issuance of securities pursuant to a stock dividend, or any 
other type of distribution of stock, in which the securities issued have 
voting rights greater than the per share voting rights of any 
outstanding class of the common stock of the issuer.
    (d) For the purpose of paragraphs (a) and (b) of this section, the 
following, standing alone, shall be presumed not to have the effect of 
nullifying, restricting, or disparately reducing the per share voting 
rights of holders of an outstanding class or classes of common stock:

[[Page 759]]

    (1) The issuance of securities pursuant to an initial registered 
public offering;
    (2) The issuance of any class of securities, through a registered 
public offering, with voting rights not greater than the per share 
voting rights of any outstanding class of the common stock of the 
issuer;
    (3) The issuance of any class of securities to effect a bona fide 
merger or acquisition, with voting rights not greater than the per share 
voting rights of any outstanding class of the common stock of the 
issuer.
    (4) Corporate action taken pursuant to state law requiring a state's 
domestic corporation to condition the voting rights of a beneficial or 
record holder of a specified threshold percentage of the corporation's 
voting stock on the approval of the corporation's independent 
shareholders.
    (e) Definitions. The following terms shall have the following 
meanings for purposes of this section, and the rules of each exchange 
and association shall include such definitions for the purposes of the 
prohibition in paragraphs (a) and (b), respectively, of this section:
    (1) The term Act shall mean the Securities Exchange Act of 1934, as 
amended.
    (2) The term common stock shall include any security of an issuer 
designated as common stock and any security of an issuer, however 
designated, which, by statute or by its terms, is a common stock (e.g., 
a security which entitles the holders thereof to vote generally on 
matters submitted to the issuer's security holders for a vote).
    (3) The term equity security shall include any equity security 
defined as such pursuant to Rule 3a11-1 under the Act (17 CFR 240.3a11-
1).
    (4) The term domestic issuer shall mean an issuer that is not a 
``foreign private issuer'' as defined in Rule 3b-4 under the Act (17 CFR 
240.3b-4).
    (5) The term security shall include any security defined as such 
pursuant to section 3(a)(10) of the Act, but shall exclude any class of 
security having a preference or priority over the issuer's common stock 
as to dividends, interest payments, redemption or payments in 
liquidation, if the voting rights of such securities only become 
effective as a result of specified events, not relating to an 
acquisition of the common stock of the issuer, which reasonably can be 
expected to jeopardize the issuer's financial ability to meet its 
payment obligations to the holders of that class of securities.
    (6) The term exchange shall mean a national securities exchange, 
registered as such with the Securities and Exchange Commission pursuant 
to section 6 of the Act (15 U.S.C. 78f), which makes transaction reports 
available pursuant to Sec.  242.601 of this chapter; and
    (7) The term association shall mean a national securities 
association registered as such with the Securities and Exchange 
Commission pursuant to section 15A of the Act.
    (f) An exchange or association may adopt a rule, stated policy, 
practice, or interpretation, subject to the procedures specified by 
section 19(b) of the Act, specifying what types of securities issuances 
and other corporate actions are covered by, or excluded from, the 
prohibition in paragraphs (a) and (b) of this section, respectively, if 
such rule, stated policy, practice, or interpretation is consistent with 
the protection of investors and the public interest, and otherwise in 
furtherance of the purposes of the Act and this section.

[53 FR 26394, July 12, 1988, as amended at 70 FR 37618, June 29, 2005]



Sec.  240.19c-5  Governing the multiple listing of options on national
securities exchanges.

    (a) The rules of each national securities exchange that provides a 
trading market in standardized put or call options shall provide as 
follows:
    (1) On and after January 22, 1990, but not before, no rule, stated 
policy, practice, or interpretation of this exchange shall prohibit or 
condition, or be construed to prohibit or condition or otherwise limit, 
directly or indirectly, the ability of this exchange to list any stock 
options class first listed on an exchange on or after January 22, 1990, 
because that options class is listed on another options exchange.
    (2) During the period from January 22, 1990, to January 21, 1991, 
but not before, no rule, stated policy, practice, or interpretation of 
this exchange shall

[[Page 760]]

prohibit or condition, or be construed to prohibit or condition or 
otherwise limit, directly or indirectly, the ability of this exchange to 
list up to ten classes of standardized stock options overlying exchange-
listed stocks that were listed on another options exchange before 
January 22, 1990. These ten classes shall be in addition to any option 
on an exchange-listed stock trading on this exchange that was traded on 
more than one options exchange before January 22, 1990.
    (3) On and after January 21, 1991, but not before, no rule, stated 
policy, practice, or interpretation of this exchange shall prohibit or 
condition, or be construed to prohibit or condition or otherwise limit, 
directly or indirectly, the ability of this exchange to list any stock 
options class because that options class is listed on another options 
exchange.
    (b) For purposes of paragraph (a)(2) of this Rule, if any options 
class is delisted from an options exchange as a result of a merger of 
the equity security underlying the option or a failure of the underlying 
security to satisfy that exchange's options listing standards, then the 
exchange is permitted to select a replacement option from among those 
standardized options overlying exchange-listed stocks that were listed 
on another options exchange before January 22, 1990.
    (c) For purposes of this Rule, the term exchange shall mean a 
national securities exchange, registered as such with the Commission 
pursuant to Section 6 of the Securities Exchange Act of 1934, as 
amended.
    (d) For purposes of this Rule, the term standardized option shall 
have the same meaning as that term is defined in Rule 9b-1 under the 
Securities Exchange Act of 1934, as amended, 17 CFR 240.9b-1.
    (e) For purposes of this Rule, the term options class shall have the 
same meaning as that term is defined in Rule 9b-1 under the Securities 
Exchange Act of 1934, as amended, 17 CFR 240.9b-1.

[54 FR 23976, June 5, 1989]



Sec.  240.19d-1  Notices by self-regulatory organizations of final
disciplinary actions, denials, bars, or limitations respecting membership,
association, participation, or access to services, and summary suspensions.

    (a) General. If any self-regulatory organization for which the 
Commission is the appropriate regulatory agency takes any action 
described in this rule to which the person affected thereby has 
consented and such action:
    (1) Conditions or limits membership or participation in, association 
with a member of, or access to services offered by, such organization or 
a member thereof and
    (2) Is based upon a statutory disqualification defined in section 
3(a)(39) of the Act, notice thereof shall be filed under Rule 19h-1 and 
not under this rule.
    (b) The notice requirement of section 19(d)(1) of the Act, 
concerning an action subject to such section taken by a self-regulatory 
organization for which the Commission is the appropriate regulatory 
agency, shall be satisfied by any notice with respect to such action 
(including a notice filed pursuant to this rule) which contains the 
information required in the statement supporting the organization's 
determination required by section 6(d) (1) or (2), section 15A(h) (1) or 
(2), or section 17A(b)(5) (A) or (B) of the Act, as appropriate.
    (c)(1) Any self-regulatory organization for which the Commission is 
the appropriate regulatory agency that takes any final disciplinary 
action with respect to any person shall promptly file a notice thereof 
with the Commission in accordance with paragraph (d) of this section. 
For the purposes of this rule, a ``final disciplinary action'' shall 
mean the imposition of any final disciplinary sanction pursuant to 
section 6(b)(6), 15A(b)(7), or 17A(b)(3)(G) of the Act or other action 
of a self-regulatory organization which, after notice and opportunity 
for hearing, results in any final disposition of charges of:
    (i) One or more violations of--
    (A) The rules of such organization;
    (B) The provisions of the Act or rules thereunder; or

[[Page 761]]

    (C) In the case of a municipal securities broker or dealer, the 
rules of the Municipal Securities Rulemaking Board;
    (ii) Acts or practices constituting a statutory disqualification of 
a type defined in subparagraph (D) or (E) (except prior convictions) of 
section 3(a)(39) of the Act; or
    (iii) In the case of a proceeding by a national securities exhange 
or registered securities association based on section 6(c)(3)(A)(ii), 
6(c)(3)(B)(ii), 15A(g)(3)(A)(ii), or 15A(g)(3)(B)(ii) of the Act, acts 
or practices inconsistent with just and equitable principles of trade.

Provided, however, That in the case of a disciplinary action in which a 
national securities exchange imposes a fine not exceeding $1000 or 
suspends floor privileges of a clerical employee for not more than five 
days for violation of any of its regulations concerning personal decorum 
on a trading floor, the disposition shall not be considered ``final'' 
for purposes of this paragraph if the sanctioned person has not sought 
an adjudication, including a hearing, or otherwise exhausted his 
administrative remedies at the exchange with respect to the matter. 
Provided further, That this exemption from the notice requirement of 
this paragraph shall not be available where a decorum sanction is 
imposed at, or results from, a hearing on the matter.
    (2) Any disciplinary action, other than a decorum sanction not 
deemed ``final'' under paragraph (c)(1) of this section, taken by a 
self-regulatory organization for which the Commission is the appropriate 
regulatory agency against any person for violation of a rule of the 
self-regulatory organization which has been designated as a minor rule 
violation pursuant to a plan or any amendment thereto filed with and 
declared effective by the Commission under this paragraph, shall not be 
considered ``final'' for purposes of paragraph (c)(1) of this section if 
the sanction imposed consists of a fine not exceeding $2500 and the 
sanctioned person has not sought an adjudication, including a hearing, 
or otherwise exhausted his administrative remedies at the self-
regulatory organization with resepect to the matter. After appropriate 
notice of the terms of substance of the filing or a description of the 
subjects and issues involved and opportunity for interested persons to 
submit written comment, the Commission may, by order, declare such plan 
or amendment effective if it finds that such plan or amendment is 
consistent with the public interest, the protection of investors, or 
otherwise in furtherance of the purposes of the Act. The Commission in 
its order may restrict the categories of violations to be designated as 
minor rule violations and may impose any other terms or conditions to 
the plan (including abbreviated reporting of selected minor rule 
violations) and to the period of its effectiveness which it deems 
necessary or appropriate in the public interest, for the protection of 
investors or otherwise in furtherance of the purposes of the Act.
    (d) Contents of notice required by paragraph (c)(1). Any notice 
filed pursuant to paragraph (c)(1) of this section, shall consist of the 
following, as appropriate:
    (1) The name of the respondent concerned together with his last 
known place of residence or business as reflected on the records of the 
self-regulatory organization and the name of the person, committee, or 
other organizational unit which brought the charges involved; except 
that, as to any respondent who has been found not to have violated a 
provision covered by a charge, identifying information with respect to 
such person may be deleted insofar as the notice reports the disposition 
of that charge, unless, prior to the filing of the notice, the 
respondent requests otherwise;
    (2) A statement describing the investigative or other origin of the 
action;
    (3) As charged in the proceeding, the specific provisions of the 
Act, the rules or regulations thereunder, the rules of the organization, 
and, in the case of a registered securities association, the rules of 
the Municipal Securities Rulemaking Board, and, in the event a violation 
of other statutes or rules constitutes a violation of any rule of the 
organization, such other statutes or rules; and a statement describing 
the answer of the respondent to the charges;
    (4) A statement setting forth findings of fact with respect to any 
act or practice which such respondent was

[[Page 762]]

charged with having engaged in or omitted; the conclusion of the 
organization as to whether such respondent is deemed to have violated 
any provision covered by the charges; and a statement of the 
organization in support of the resolution of the principal issues raised 
in the proceedings;
    (5) A statement describing any sanction imposed, the reasons 
therefor, and the date upon which such sanction has or will become 
effective, together with a finding if appropriate, as to whether such 
respondent was a cause of any sanction imposed upon any other person; 
and
    (6) Such other matters as the organization may deem relevant.
    (e) Notice of final denial, bar, prohibition, termination or 
limitation based on qualification or administrative rules. Any final 
action of a self-regulatory organization for which the Commission is the 
appropriate regulatory agency that is taken with respect to any person 
constituting a denial, bar, prohibition, or limitation of membership, 
participation or association with a member, or of access to services 
offered by a self-regulatory organization or a member thereof, and which 
is based on an alleged failure of any person to:
    (1) Pass any test or examination required by the rules of the 
Commission or such organization;
    (2) Comply with other qualification standards established by rules 
of the Commission or such organization; or
    (3) Comply with any administrative requirements of such organization 
(including failure to pay entry or other dues or fees or to file 
prescribed forms or reports) not involving charges of violations which 
may lead to a disciplinary sanction shall not be considered a 
``disciplinary action'' for purposes of paragraph (c) of this rule; but 
notice thereof shall be promptly filed with the Commission in accordance 
with paragraph (f) of this section, Provided, however, That no 
disposition of a matter shall be considered ``final'' pursuant to this 
paragraph which results merely from a notice of such failure to the 
person affected, if such person has not sought an adjudication, 
including a hearing, or otherwise exhausted his administrative remedies 
within such organization with respect to such a matter.
    (f) Contents of notice required by paragraph (e). Any notice filed 
pursuant to paragraph (e) of this section shall consist of the 
following, as appropriate:
    (1) The name of each person concerned together with his last known 
place of residence or business as reflected on the records of the 
organization;
    (2) The specific provisions of the Act, the rules or regulations 
thereunder, the rules of the organization, and, in the case of a 
registered securities association, the rules of the Municipal Securities 
Rulemaking Board, upon which the action of the organization was based, 
and a statement describing the answer of the person concerned;
    (3) A statement setting forth findings of fact and conclusions as to 
each alleged failure of the person to pass any required examination, 
comply with other qualification standards, or comply with administrative 
obligations, and a statement of the organization in support of the 
resolution of the principal issues raised in the proceeding;
    (4) The date upon which such action has or will become effective; 
and
    (5) Such other matters as the organization may deem relevant.
    (g) Notice of final action based upon prior adjudicated statutory 
disqualifications. Any self-regulatory organization for which the 
Commission is the appropriate regulatory agency that takes any final 
action with respect to any person which:
    (1) Denies or conditions membership or participation in, or 
association with a member of, such organization or prohibits or limits 
access to services offered by such organization or a member thereof; and
    (2) Is based upon a statutory disqualification of a type defined in 
subparagraph (A), (B), or (C) of section 3(a)(39) of the Act or 
consisting of a prior conviction, as described in subparagraph (E) of 
said section 3(a)(39), shall promptly file a notice of such action with 
the Commission in accordance with paragraph (h) of this section, 
provided, however, That no disposition of a matter shall be considered 
``final'' pursuant to this paragraph where such person has not sought an 
adjudication,

[[Page 763]]

including a hearing, or otherwise exhausted his administrative remedies 
within such organization with respect to such a matter.
    (h) Contents of notice required by paragraph (g). Any notice filed 
pursuant to paragraph (g) of this section shall consist of the 
following, as appropriate:
    (1) The name of the person concerned together with his last known 
place of residence or business as reflected on the record of the 
organization;
    (2) A statement setting forth the principal issues raised, the 
answer of any person concerned, and a statement of the organization in 
support of the resolution of the principal issues raised in the 
proceeding;
    (3) Any description furnished by or on behalf of the person 
concerned of the activities engaged in by the person since the 
adjudication upon which the disqualification is based;
    (4) Any description furnished by or on behalf of the person 
concerned of the prospective business or employment in which the person 
plans to engage and the manner and extent of supervision to be exercised 
over and by such person;
    (5) A copy of the order or decision of the court, the Commission or 
the self-regulatory organization which adjudicated the matter giving 
rise to such statutory disqualification;
    (6) The nature of the action taken and the date upon which such 
action is to be made effective; and
    (7) Such other matters as the organization deems relevant.
    (i) Notice of summary suspension of membership, participation, or 
association, or summary limitation or prohibition of access to services. 
If any self-regulatory organization for which the Commission is the 
appropriate regulatory agency summarily suspends a member, participant, 
or person associated with a member, or summarily limits or prohibits any 
person with respect to access to or services offered by the organization 
or (in the case of a national securities exchange or a registered 
securities association) a member thereof pursuant to the provisions of 
section 6(d)(3), 15A(h)(3) or 17A(b)(5) (C) of the Act, such 
organization shall, within 24 hours of the effectiveness of such summary 
suspension, limitation or prohibition notify the Commission of such 
action, which notice shall contain at least the following information:
    (1) The name of the person concerned together with his last known 
place of residence or business as reflected on the records of the 
organization;
    (2) The date upon which such summary action has or will become 
effective;
    (3) If such summary action is based upon the provisions of section 
6(d)(3)(A), 15A(h)(3)(A), or 17A(b)(5) (C)(i) of the Act, a copy of the 
relevant order or decision of the self-regulatory organization;
    (4) If such summary action is based upon the provisions of section 
6(d)(3) (B) or (C), 15A(h)(3) (B) or (C), or 17A(b)(5)(C) (ii) or (iii) 
of the Act, a statement describing, as appropriate:
    (i) The financial or operating difficulty of the member or 
participant upon which such organization determined the member or 
particpant could not be permitted to continue to do business with safety 
to investors, creditors, other members or participants, or the 
organization;
    (ii) The pertinent failure to meet qualification requirements or 
other prerequisites for access and the basis upon which such 
organization determined that the person concerned could not be permitted 
to have access with safety to investors, creditors, other members, or 
the organization; or
    (iii) The default of any delivery of funds or securities to a 
clearing agency by a participant.
    (5) The nature and effective date of the suspension, limitation or 
prohibition; and
    (6) Such other matters as the organization deems relevant.
    (j) Notice of limitation or prohibition of access to services by 
delisting of security. Any national securities exchange for which the 
Commission is the appropriate regulatory agency that delists a security 
pursuant to section 12(d) of the Act (15 U.S.C. 78l(d)), and Sec. 
240.12d2-2 must file a notice with the Commission in accordance with 
paragraph (k) of this section.
    (k) Contents of notice required by paragraph (j) of this section. 
The national securities exchange shall file notice pursuant to paragraph 
(j) of this

[[Page 764]]

section on Form 25 (Sec.  249.25 of this chapter). Form 25 shall serve 
as notification to the Commission of such limitation or prohibition of 
access to services. The national securities exchange must attach a copy 
of its delisting determination to Form 25 and file Form 25 with the 
attachment on EDGAR.

[42 FR 36415, July 14, 1977, as amended at 49 FR 23831, June 8, 1984; 71 
FR 42469, July 22, 2005]



Sec.  240.19d-2  Applications for stays of disciplinary sanctions or
summary suspensions by a self-regulatory organization.

    If any self-regulatory organization imposes any final disciplinary 
sanction as to which a notice is required to be filed with the 
Commission pursuant to Section 19(d)(1) of the Exchange Act, 15 U.S.C. 
78s(d)(1), pursuant to Section 6(b)(6), 15A(b)(7) or 17A(b)(3)(G) of the 
Act (15 U.S.C. 78f(b)(6), 78o-3(b)(7) or 78q-1(b)(3)(G)), or summarily 
suspends or limits or prohibits access pursuant to Section 6(d)(3), 
15A(h)(3) or 17A(b)(5)(C) of the Act (15 U.S.C. 78f(d)(3), 78o-3(h)(3) 
or 78q-1(b)(5)(C)), any person aggrieved thereby for which the 
Commission is the appropriate regulatory agency may file with the 
Commission a written motion for a stay of imposition of such action 
pursuant to Rule 401 of the Commission's Rules of Practice, Sec.  
201.401 of this chapter.

[60 FR 32825, June 23, 1995]



Sec.  240.19d-3  Applications for review of final disciplinary sanctions,
denials of membership, participation or association, or prohibitions or
limitations of access to services imposed by self-regulatory organizations.

    Applications to the Commission for review of any final disciplinary 
sanction, denial or conditioning of membership, participation, bar from 
association, or prohibition or limitation with respect to access to 
services offered by a self-regulatory organization or a member thereof 
by any such organization shall be made pursuant to Rule 420 of the 
Commission's Rules of Practice, Sec.  201.420 of this chapter.

[60 FR 32825, June 23, 1995]



Sec.  240.19d-4  Notice by the Public Company Accounting Oversight Board
of disapproval of registration or of disciplinary action.

    (a) Definitions--(1) Board means the Public Company Accounting 
Oversight Board.
    (2) Public accounting firm shall have the meaning set forth in 15 
U.S.C. 7201(a)(11).
    (3) Registered public accounting firm shall have the meaning set 
forth in 15 U.S.C. 7201(a)(12).
    (4) Associated person shall mean a person associated with a 
registered public accounting firm as defined in 15 U.S.C. 7201(a)(9).
    (b)(1) Notice of disapproval of registration. If the Board 
disapproves a completed application for registration by a public 
accounting firm, the Board shall file a notice of its disapproval with 
the Commission within 30 days and serve a copy on the public accounting 
firm.
    (2) Contents of the notice. The notice required by paragraph (b)(1) 
of this section shall provide the following information:
    (i) The name of the public accounting firm and the public accounting 
firm's last known address as reflected in the Board's records;
    (ii) The basis for the Board's disapproval, and a copy of the 
Board's written notice of disapproval; and
    (iii) Such other information as the Board may deem relevant.
    (c)(1) Notice of disciplinary action. If the Board imposes any final 
disciplinary sanction on any registered public accounting firm or any 
associated person of a registered public accounting firm under 15 U.S.C. 
7215(b)(3) or 7215(c), the Board shall file a notice of the disciplinary 
sanction with the Commission within 30 days and serve a copy on the 
person sanctioned.
    (2) Contents of the notice. The notice required by paragraph (c)(1) 
of this section shall provide the following information:
    (i) The name of the registered public accounting firm or the 
associated person, together with the firm's or the person's last known 
address as reflected in the Board's records;
    (ii) A description of the acts or practices, or omissions to act, 
upon which the sanction is based;

[[Page 765]]

    (iii) A statement of the sanction imposed, the reasons therefor, or 
a copy of the Board's statement justifying the sanction, and the 
effective date of such sanction; and
    (iv) Such other information as the Board may deem relevant.

[69 FR 13182, Mar. 19, 2004]



Sec.  240.19g2-1  Enforcement of compliance by national securities
exchanges and registered securities associations with the Act and rules 
and regulations thereunder.

    (a) In enforcing compliance, within the meaning of section 19(g) of 
the Act, with the Act and the rules and regulations thereunder by its 
members and persons associated with its members, a national securities 
exchange or registered securities association is not required:
    (1) To enforce compliance with sections 12 (other than sections 
12(j) and 12(k)), 13, 14 (other than section 14(b)), 15(d) and 16 and 
the rules thereunder except to the extent of any action normally taken 
with respect to any person which is not a member or a person associated 
with a member;
    (2) To enforce compliance with respect to persons associated with a 
member, other than securities persons or persons who control a member; 
and
    (3) To conduct examinations as to qualifications of, require filing 
of periodic reports by, or conduct regular inspections (including 
examinations of books and records) of, persons associated with a member, 
other than securities persons whose functions are not solely clerical or 
ministerial.
    (b) For the purpose of this rule:
    (1) A securities person is a person who is a general partner or 
officer (or person occupying a similar status or performing similar 
functions) or employee of a member; Provided, however, That a registered 
broker or dealer which controls, is controlled by, or is under common 
control with, the member and the general partners and officers (and 
persons occupying similar status or performing similar functions) and 
employees of such a registered broker or dealer shall be securities 
persons if they effect, directly or indirectly, transactions in 
securities through the member by use of facilities maintained or 
supervised by such exchange or association; and
    (2) Control means the power to direct or cause the direction of the 
management or policies of a company whether through ownership of 
securities, by contract or otherwise; Provided, however, That:
    (i) Any person who, directly or indirectly, (A) has the right to 
vote 25 percent or more of the voting securities, (B) is entitled to 
receive 25 percent or more of the net profits, or (C) is a director (or 
person occupying a similar status or performing similar functions) of a 
company shall be presumed to be a person who controls such company;
    (ii) Any person not covered by paragraph (b)(2)(i) of this section 
shall be presumed not to be a person who controls such company; and
    (iii) Any presumption may be rebutted on an appropriate showing.

(Secs. 3, 6, 19, 23, 48 Stat. 882, 885, 898, as amended (15 U.S.C. 78c, 
78f, 78s, 78w); sec. 15A, 52 Stat. 1070, as amended (15 U.S.C. 78o-3))

[41 FR 51808, Nov. 24, 1976]



Sec.  240.19h-1  Notice by a self-regulatory organization of proposed 
admission to or continuance in membership or participation or association
with a member of any person subject to a statutory disqualification, and 
applications to the Commission for relief therefrom.

    (a) Notice of admission or continuance notwithstanding a statutory 
disqualification. (1) Any self-regulatory organization proposing, 
conditionally or unconditionally, to admit to, or continue any person 
in, membership or participation or (in the case of a national securities 
exchange or registered securities association) association with a 
member, notwithstanding a statutory disqualification, as defined in 
section 3(a)(39) of the Act, with respect to such person, shall file a 
notice with the Commission of such proposed admission or continuance. If 
such disqualified person has not consented to the terms of such 
proposal, notice of the organization's action shall be filed pursuant to 
rule 19d-1 under the Act and not this rule.
    (2) With respect to a person associated with a member of a national 
securities exchange or registered securities

[[Page 766]]

association, notices need be filed with the Commission pursuant to this 
rule only if such person:
    (i) Controls such member, is a general partner or officer (or person 
occupying a similar status or performing similar functions) of such 
member, is an employee who, on behalf of such member, is engaged in 
securities advertising, public relations, research, sales, trading, or 
training or supervision of other employees who engage or propose to 
engage in such activities, except clerical and ministerial persons 
engaged in such activities, or is an employee with access to funds, 
securities or books and records, or
    (ii) Is a broker or dealer not registered with the Commission, or 
controls such (unregistered) broker or dealer or is a general partner or 
officer (or person occupying a similar status or performing similar 
functions) of such broker or dealer.
    (3) A notice need not be filed with the Commission pursuant to this 
rule if:
    (i) The person subject to the statutory disqualification is already 
a participant in, a member of, or a person associated with a member of, 
a self-regulatory organization, and the terms and conditions of the 
proposed admission by another self-regulatory organization are the same 
in all material respects as those imposed or not disapproved in 
connection with such person's prior admission or continuance pursuant to 
an order of the Commission under paragraph (d) of this section or other 
substantially equivalent written communication.
    (ii) The self-regulatory organization finds, after reasonable 
inquiry, that except for the identity of the employer concerned, the 
terms and conditions of the proposed admission or continuance are the 
same in all material respects as those imposed or not disapproved in 
connection with a prior admission or continuance of the person subject 
to the statutory disqualification pursuant to an order of the Commission 
under paragraph (d) of this section or other substantially equivalent 
written communication and that there is no intervening conduct or other 
circumstance that would cause the employment to be inconsistent with the 
public interest or the protection of investors;
    (iii) The disqualification consists of (A) an injunction from 
engaging in any action, conduct, or practice specified in section 
15(b)(4)(C) of the Act, which injunction was entered 10 or more years 
prior to the proposed admission or continuance--Provided, however, That 
in the case of a final or permanent injunction which was preceded by a 
preliminary injunction against the same person in the same court 
proceeding, such ten-year period shall begin to run from the date of 
such preliminary injunction--and/or (B) a finding by the Commission or a 
self-regulatory organization of a willful violation of the Act, the 
Securities Act of 1933, the Investment Advisers Act of 1940, the 
Investment Company Act of 1940, or a rule or regulation under one or 
more of such Acts and the sanction for such violation is no longer in 
effect;
    (iv) The disqualification previously (A) was a basis for the 
institution of an administrative proceeding pursuant to a provision of 
the federal securities laws, and (B) was considered by the Commission in 
determining a sanction against such person in the proceeding; and the 
Commission concluded in such proceeding that it would not restrict or 
limit the future securities activities of such person in the capacity 
now proposed or, if it imposed any such restrictions or limitations for 
a specified time period, such time period has elapsed;
    (v) The disqualification consists of a court order or judgment of 
injunction or conviction, and such order or judgment (A) expressly 
includes a provision that, on the basis of such order or judgment, the 
Commission will not institute a proceeding against such person pursuant 
to section 15(b) or 15B of the Act or that the future securities 
activities of such persons in the capacity now proposed will not be 
restricted or limited or (B) includes such restrictions or limitations 
for a specified time period and such time period has elapsed; or
    (vi) In the case of a person seeking to become associated with a 
broker or dealer or municipal securities dealer, the Commission has 
previously consented to such proposed association pursuant to section 
15(b)(6) or 15B(c)(4) of the Act.

[[Page 767]]


In the case of an admission to membership, participation, or 
association, if an exception provided for in this paragraph (a)(3) is 
applicable, the self-regulatory organization shall, pursuant to its 
rules, determine when the admission to membership, participation, or 
association shall become effective.
    (4) If a self-regulatory organization determines to admit to, or 
continue any person in, membership, participation, or association with a 
member pursuant to an exception from the notice requirements provided in 
paragraph (a)(3)(ii), (iv) or (v) of this section, such organization 
shall, within 14 calendar days of its making of such determination, 
furnish to the Commission, by letter, a notification setting forth, as 
appropriate:
    (i) The name of the person subject to the statutory 
disqualification;
    (ii) The name of the person's prospective and immediately preceding 
employers who are (were) brokers or dealers or municipal securities 
dealers;
    (iii) The name of the person's prospective supervisor(s);
    (iv) The respective places of such employments as reflected on the 
records of the self-regulatory organization;
    (v) If applicable, the findings of the self-regulatory organization 
referred to in paragraph (a)(3)(ii) of this section and the nature 
(including relevant dates) of the previous Commission or court 
determination referred to in paragraph (a)(3)(iv) or (v) of this 
section; and
    (vi) An identification of any other self-regulatory organization 
which has indicated its agreement with the terms and conditions of the 
proposed admission or continuance;
    (5) If a notice or notification has been previously filed or 
furnished pursuant to this rule by a self-regulatory organization, any 
other such organization need not file or furnish a separate notice or 
notification pursuant to this rule with respect to the same matter if 
such other organization agrees with the terms and conditions of the 
membership, participation or association reflected in the notice or 
notification so filed or furnished, and such agreement is set forth in 
the notice or notification.
    (6) The notice requirements of sections 6(c)(2), 15A(g)(2), and 
17A(b)(4)(A) of the Act concerning an action of a self-regulatory 
organization subject to one (or more) of such sections and this 
paragraph (a) shall be satisfied by a notice with respect to such action 
filed in accordance with paragraph (c) of this section.
    (7) The Commission, by written notice to a self-regulatory 
organization on or before the thirtieth day after receipt of a notice 
under this Rule, may direct that such organization not admit to 
membership, participation, or association with a member any person who 
is subject to a statutory disqualification for a period not to exceed an 
additional 60 days beyond the initial 30 day notice period in order that 
the Commission may extend its consideration of the proposal; Provided, 
however, That during such extended period of consideration, the 
Commission will not direct the self-regulatory organization to bar the 
proposed admission to membership, participation or association with a 
member pursuant to section 6(c)(2), 15A(g)(2), or 17A(b)(4)(A) of the 
Act, and the Commission will not institute proceedings pursuant to 
section 15(b) or 15B of the Act on the basis of such disqualification if 
the self-regulatory organization has permitted the admission to 
membership, participation or association with a member, on a temporary 
basis, pending a final Commission determination.
    (b) Preliminary notifications. Promptly after receiving an 
application for admission to, or continuance in, participation or 
membership in, or association with a member of, a self-regulatory 
organization which would be required to file with the Commission a 
notice thereof pursuant to paragraph (a) of this section if such 
admission or continuance is ultimately proposed by such organization, 
the organization shall file with the Commission a notification of such 
receipt. Such notification shall include, as appropriate:
    (1) The date of such receipt;
    (2) The names of the person subject to the statutory 
disqualification and the prospective employer concerned together with 
their respective last known

[[Page 768]]

places of residence or business as reflected on the records of the 
organization;
    (3) The basis for any such disqualification including (if based on a 
prior adjudication) a copy of the order or decision of the court, the 
Commission, or the self-regulatory organization which adjudicated the 
matter giving rise to the disqualification; and
    (4) The capacity in which the person concerned is proposed to be 
employed.
    (c) Contents of notice of admission or continuance. A notice filed 
with the Commission pursuant to paragraph (a) of this section shall 
contain the following, as appropriate:
    (1) The name of the person concerned together with his last known 
place of residence or business as reflected on the records of the self-
regulatory organization;
    (2) The basis for any such disqualification from membership, 
participation or association including (if based on a prior 
adjudication) a copy of the order or decision of the court, the 
Commission or the self-regulatory organization which adjudicated the 
matter giving rise to such disqualification;
    (3) In the case of an admission, the date upon which it is proposed 
by the organization that such membership, participation or association 
shall become effective, which shall be not less than 30 days from the 
date upon which the Commission receives the notice;
    (4) A description by or on behalf of the person concerned of the 
activities engaged in by the person since the disqualification arose, 
the prospective business or employment in which the person plans to 
engage and the manner and extent of supervision to be exercised over and 
by such person. This description shall be accompanied by a written 
statement submitted to the self-regulatory organization by the proposed 
employer setting forth the terms and conditions of such employment and 
supervision. The description also shall include (i) the qualifications, 
experience and disciplinary records of the proposed supervisors of the 
person and their family relationship (if any) to that person; (ii) the 
findings and results of all examinations conducted, during the two years 
preceding the filing of the notice, by self-regulatory organizations of 
the main office of the proposed employer and of the branch office(s) in 
which the employment will occur or be subject to supervisory controls; 
(iii) a copy of a completed Form U-4 with respect to the proposed 
association of such person and a certification by the self-regulatory 
organization that such person is fully qualified under all applicable 
requirements to engage in the proposed activities; and (iv) the name and 
place of employment of any other associated person of the proposed 
employer who is subject to a statutory disqualification (other than a 
disqualification specified in paragraph (a)(3)(iii) of this section);
    (5) If a hearing on the matter has been held by the organization, a 
certified record of the hearing together with copies of any exhibits 
introduced therein;
    (6) All written submissions not included in a certified oral hearing 
record which were considered by the organization in its disposition of 
the matter;
    (7) An identification of any other self-regulatory organization 
which has indicated its agreement with the terms and conditions of the 
proposed admission or continuance;
    (8) All information furnished in writing to the self-regulatory 
organization by the staff of the Commission for consideration by the 
organization in its disposition of the matter or the incorporation by 
reference of such information, and a statement of the organization's 
views thereon; and
    (9) Such other matters as the organization or person deems relevant.

If the notice contains assertions of material facts not a matter of 
record before the self-regulatory organization, such facts shall be 
sworn to by affidavit of the person or organization offering such facts 
for Commission consideration. The notice may be accompanied by a brief.
    (d) Application to the Commission for relief from certain statutory 
disqualifications. The filing of a notice pursuant to paragraph (a) of 
this section shall neither affect nor foreclose any action which the 
Commission may take with respect to such person pursuant to the 
provisions of section 15(b), 15B or 19(h)

[[Page 769]]

of the Act or any rule thereunder. Accordingly, a notice filed pursuant 
to paragraph (a) of this section with respect to the membership, 
participation, or association of any person subject to an ``applicable 
disqualification,'' as defined in paragraph (f) of this section, may be 
accompanied by an application by or on behalf of the person concerned to 
the Commission for an order declaring, as applicable, that 
notwithstanding such disqualification, the Commission:
    (1) Will not institute proceedings pursuant to section 15(b)(1)(B), 
15(b)(4), 15(b)(6), 15B(a)(2), 15B(c)(2), 19(h)(2) or 19(h)(3) of the 
Act if such person seeks to obtain or continue registration as a broker 
or dealer or municipal securities dealer or association with a broker or 
dealer or municipal securities dealer so registered, or membership or 
participation in a self-regulatory organization;
    (2) Will not direct otherwise, as provided in section 6(c)(2), 
15A(g)(2) or 17A(b)(4)(A) of the Act; and
    (3) Will deem such person qualified pursuant to Rule G-4 of the 
Municipal Securities Rulemaking Board under the Act.

If a Commission consent is required in order to render a proposed 
association lawful under section 15(b)(6) or 15B(c)(4) of the Act, an 
application by or on behalf of the person seeking such consent shall 
accompany the notice of the proposed association filed pursuant to 
paragraph (a) of this section. The Commission may, in its discretion and 
subject to such terms and conditions as it deems necessary, issue such 
an order and consent should the Commission determine not to object to 
the position of the self-regulatory organization set forth in the notice 
or application; Provided, however, That nothing herein shall foreclose 
the right of any person, at his election, to apply directly to the 
Commission for such consent, if he makes such application pursuant to 
the terms of an existing order of the Commission under section 15(b)(6) 
or 15B(c)(4) of the Act limiting his association with a broker or dealer 
or municipal securities dealer but explicitly granting him such a right 
to apply for entry or reentry at a later time.
    (e) Contents of application to the Commission. An application to the 
Commission pursuant to paragraph (d) of this section shall consist of 
the following, as appropriate:
    (1) The name of the person subject to the disqualification together 
with his last known place of residence or business as reflected on the 
records of the self-regulatory organization;
    (2) A copy of the order or decision of the court, the Commission or 
the self-regulatory organization which adjudicated the matter giving 
rise to such ``applicable disqualification'';
    (3) The nature of the relief sought and the reasons therefor;
    (4) A description of the activities engaged in by the person since 
the disqualification arose;
    (5) A description of the prospective business or employment in which 
the person plans to engage and the manner and extent of supervision to 
be exercised over and by such person. This description shall be 
accompanied by a written statement submitted to the self-regulatory 
organization by the proposed employer setting forth the terms and 
conditions of such employment and supervision. The description also 
shall include (i) the qualifications, experience, and disciplinary 
records of the proposed supervisors of the person and their family 
relationship (if any) to that person; (ii) the findings and results of 
all examinations conducted, during the two years preceding the filing of 
the application, by self-regulatory organizations of the main office of 
the proposed employer and of the branch office(s) in which the 
employment will occur or be subject to supervisory controls; (iii) a 
copy of a completed Form U-4 with respect to the proposed association of 
such person and a certification by the self-regulatory organization that 
such person is fully qualified under all applicable requirements to 
engage in the proposed activities; and (iv) the name and place of 
employment of any other associated person of the proposed employer who 
is subject to a statutory disqualification (other than a 
disqualification specified in paragraph (a)(3)(iii) of this section);

[[Page 770]]

    (6) If a hearing on the matter has been held by the organization, a 
certified copy of the hearing record, together with copies of any 
exhibits introduced therein;
    (7) All written submissions not included in a certified oral hearing 
record which were considered by the organization in its disposition of 
the matter;
    (8) All information furnished in writing to the self-regulatory 
organization by the staff of the Commission for consideration by the 
organization in its disposition of the matter or the incorporation by 
reference of such information, and a statement of the organization's 
views thereon; and
    (9) Such other matters as the organization or person deems relevant.

If the application contains assertions of material facts not a matter of 
record before the organization, such facts shall be sworn to by 
affidavit of the person or organization offering such facts for 
Commission consideration.
    (f) Definitions. For purposes of this rule:
    (1) The term applicable disqualification shall mean:
    (i) Any effective order of the Commission pursuant to section 15(b) 
(4) or (6), 15B(c) (2) or (4) or 19(h) (2) or (3) of the Act--
    (A) Revoking, suspending or placing limitations on the registration, 
activities, functions, or operations of a broker or dealer;
    (B) Suspending, barring, or placing limitations on the association, 
activities, or functions of an associated person of a broker or dealer;
    (C) Suspending or expelling any person from membership or 
participation in a self-regulatory organization; or
    (D) Suspending or barring any person from being associated with a 
member of a national securities exchange or registered securities 
association;
    (ii) Any conviction of injunction of a type described in section 
15(b)(4) (B) or (C) of the Act; or
    (iii) A failure under the provisions of Rule G-4 of the Municipal 
Securities Rulemaking Board under the Act, to meet qualifications 
standards, and such failure may be remedied by a finding or 
determination by the Commission pursuant to such rule(s) that the person 
affected nevertheless meets such standards.
    (2) The term control shall mean the power to direct or cause the 
direction of the management or policies of a company whether through 
ownership of securities, by contract or otherwise; Provided, however, 
That
    (i) Any person who, directly or indirectly, (A) has the right to 
vote 10 percent or more of the voting securities, (B) is entitled to 
receive 10 percent or more of the net profits, or (C) is a director (or 
person occupying a similar status or performing similar functions) of a 
company shall be presumed to be a person who controls such company;
    (ii) Any person not covered by paragraph (i) shall be presumed not 
to be a person who controls such company; and
    (iii) Any presumption may be rebutted on an appropriate showing.
    (g) Where it deems appropriate to do so, the Commission may 
determine whether to (1) direct, pursuant to section 6(c)(2), 15A(g)(2) 
or 17A(b)(4)(A) of the Act, that a proposed admission covered by a 
notice filed pursuant to paragraph (a) of this section shall be denied 
or an order barring a proposed association issued or (2) grant or deny 
an application filed pursuant to paragraph (d) of this section on the 
basis of the notice or application filed by the self-regulatory 
organization, the person subject to the disqualification, or other 
applicant (such as the proposed employer) on behalf of such person, 
without oral hearing. Any request for oral hearing or argument should be 
submitted with the notice or application.
    (h) The Rules of Practice (17 CFR part 201) shall apply to 
proceedings under this rule to the extent that they are not inconsistent 
with this rule.

(15 U.S.C. 78a et seq., as amended by Pub. L. 94-29 (June 4, 1975) and 
by Pub. L. 98-38 (June 6, 1983), particularly secs. 11A, 15, 19 and 23 
thereof (15 U.S.C. 78k-1, 78o, 78s and 78w))

[46 FR 58661, Dec. 3, 1981, as amended at 48 FR 53691, Nov. 29, 1983]

           Securities Whistleblower Incentives and Protections

    Source: Sections 240.21F-1 through 240.21F-17 appear at 76 FR 34363, 
June 13, 2011.

[[Page 771]]



Sec.  240.21F-1  General.

    Section 21F of the Securities Exchange Act of 1934 (``Exchange 
Act'') (15 U.S.C. 78u-6), entitled ``Securities Whistleblower Incentives 
and Protection,'' requires the Securities and Exchange Commission 
(``Commission'') to pay awards, subject to certain limitations and 
conditions, to whistleblowers who provide the Commission with original 
information about violations of the Federal securities laws. These rules 
describe the whistleblower program that the Commission has established 
to implement the provisions of Section 21F, and explain the procedures 
you will need to follow in order to be eligible for an award. You should 
read these procedures carefully because the failure to take certain 
required steps within the time frames described in these rules may 
disqualify you from receiving an award for which you otherwise may be 
eligible. Unless expressly provided for in these rules, no person is 
authorized to make any offer or promise, or otherwise to bind the 
Commission with respect to the payment of any award or the amount 
thereof. The Securities and Exchange Commission's Office of the 
Whistleblower administers our whistleblower program. Questions about the 
program or these rules should be directed to the SEC Office of the 
Whistleblower, 100 F Street, NE., Washington, DC 20549-5631.



Sec.  240.21F-2  Whistleblower status, award eligibility, confidentiality,
and retaliation protections.

    (a) Whistleblower status. (1) You are a whistleblower for purposes 
of Section 21F of the Exchange Act (15 U.S.C. 78u-6) as of the time 
that, alone or jointly with others, you provide the Commission with 
information in writing that relates to a possible violation of the 
federal securities laws (including any law, rule, or regulation subject 
to the jurisdiction of the Commission) that has occurred, is ongoing, or 
is about to occur.
    (2) A whistleblower must be an individual. A company or other entity 
is not eligible to be a whistleblower.
    (b) Award eligibility. To be eligible for an award under Section 
21F(b) of the Exchange Act (15 U.S.C. 78u-6(b)) based on any information 
you provide that relates to a possible violation of the federal 
securities laws, you must comply with the procedures and the conditions 
described in Sec. Sec.  240.21F-4, 240.21F-8, and 240.21F-9. You should 
carefully review those rules before you submit any information that you 
may later wish to rely upon to claim an award.
    (c) Confidentiality protections. To qualify for the confidentiality 
protections afforded by Section 21F(h)(2) of the Exchange Act (15 U.S.C. 
78u-6(h)(2)) based on any information you provide that relates to a 
possible violation of the federal securities laws, you must comply with 
the procedures and the conditions described in Rule 21F-9(a) (Sec.  
240.21F-9(a)).
    (d) Retaliation protections. (1) To qualify for the retaliation 
protections afforded by Section 21F(h)(1) of the Exchange Act (15 U.S.C. 
78u-6(h)(1)), you must satisfy all of the following criteria:
    (i) You must qualify as a whistleblower under paragraph (a) of this 
section before experiencing the retaliation for which you seek redress;
    (ii) You must reasonably believe that the information you provide to 
the Commission under paragraph (a) of this section relates to a possible 
violation of the federal securities laws; and
    (iii) You must perform a lawful act that meets the following two 
criteria:
    (A) First, the lawful act must be performed in connection with any 
of the activities described in Section 21F(h)(1)(A)(i) through (iii) of 
the Exchange Act (15 U.S.C. 78u-6(h)(1)(A)(i) through (iii)); and
    (B) Second, the lawful act must relate to the subject matter of your 
submission to the Commission under paragraph (a) of this section.
    (2) To receive retaliation protection for a lawful act described in 
paragraph (d)(1)(iii) of this section, you do not need to qualify as a 
whistleblower under paragraph (a) of this section before performing the 
lawful act, but you must qualify as a whistleblower under paragraph (a) 
of this section before experiencing retaliation for the lawful act.
    (3) To qualify for retaliation protection, you do not need to 
satisfy the procedures and conditions for award

[[Page 772]]

eligibility in Sec. Sec.  240.21F-4, 240.21F-8, and 240.21F-9.
    (4) Section 21F(h)(1) of the Exchange Act (15 U.S.C. 78u-6(h)(1)), 
including any rules promulgated thereunder, shall be enforceable in an 
action or proceeding brought by the Commission.

[85 FR 75942, Nov. 5, 2020]



Sec.  240.21F-3  Payment of awards.

    (a) Commission actions: Subject to the eligibility requirements 
described in Sec. Sec.  240.21F-2, 240.21F-8, and 240.21F-16 of this 
chapter, the Commission will pay an award or awards to one or more 
whistleblowers who:
    (1) Voluntarily provide the Commission
    (2) With original information
    (3) That leads to the successful enforcement by the Commission of a 
Federal court or administrative action
    (4) In which the Commission obtains monetary sanctions totaling more 
than $1,000,000.

    Note to paragraph (a): The terms voluntarily, original information, 
leads to successful enforcement, action, and monetary sanctions are 
defined in Sec.  240.21F-4 of this chapter.

    (b) Related actions: The Commission will also pay an award based on 
amounts collected in certain related actions.
    (1) A related action is a judicial or administrative action that is 
brought by one of the governmental entities listed in paragraphs 
(b)(1)(i) through (iii) of this section or a self-regulatory 
organization as specified in paragraph (b)(1)(iv) of this section 
(collectively ``governmental/SRO authority''), that yields monetary 
sanctions, and that is based upon information that either the 
whistleblower provided directly to a governmental/SRO entity or the 
Commission itself passed along to the governmental/SRO entity pursuant 
to the Commission's procedures for sharing information, and which is the 
same original information that the whistleblower voluntarily provided to 
the Commission and that led the Commission to obtain monetary sanctions 
totaling more than $1,000,000.
    (i) The Attorney General of the United States;
    (ii) An appropriate regulatory authority (as defined in Sec.  
240.21F-4); or
    (iii) A state Attorney General in a criminal case; or
    (iv) A self-regulatory organization (as defined in Sec.  240.21F-4).
    (2) In order for the Commission to make an award in connection with 
a related action, the Commission must determine that the same original 
information that the whistleblower gave to the Commission also led to 
the successful enforcement of the related action under the same criteria 
described in these rules for awards made in connection with Commission 
actions. The Commission may seek assistance and confirmation from the 
authority bringing the related action in making this determination. The 
Commission will deny an award in connection with the related action if:
    (i) The Commission determines that the criteria for an award are not 
satisfied; or
    (ii) The Commission is unable to make a determination because the 
Office of the Whistleblower could not obtain sufficient and reliable 
information that could be used as the basis for an award determination 
pursuant to Sec.  240.21F-12(a) of this chapter. Additional procedures 
apply to the payment of awards in related actions. These procedures are 
described in Sec. Sec.  240.21F-11 and 240.21F-14 of this chapter.
    (3) The following provision shall apply where a claimant's 
application for a potential related action may also involve a potential 
recovery from another whistleblower award program for that same action.
    (i) Notwithstanding paragraph (b)(1) of this section, if a judicial 
or administrative action is subject to a separate monetary award program 
established by the Federal Government, a state government, or a self-
regulatory organization, the Commission will deem the action a related 
action only if the Commission finds (based on the facts and 
circumstances of the action) that its whistleblower program has the more 
direct or relevant connection to the action.
    (ii) In determining whether a potential related action has a more 
direct or relevant connection to the Commission's whistleblower program 
than another award program, the Commission

[[Page 773]]

will consider the nature, scope, and impact of the misconduct charged in 
the potential related action, and its relationship to the Federal 
securities laws. This inquiry may include consideration of, among other 
things:
    (A) The relative extent to which the misconduct charged in the 
potential related action implicates the public policy interests 
underlying the Federal securities laws (such as investor protection) 
rather than other law-enforcement or regulatory interests (such as tax 
collection or fraud against the Federal Government);
    (B) The degree to which the monetary sanctions imposed in the 
potential related action are attributable to conduct that also underlies 
the Federal securities law violations that were the subject of the 
Commission's enforcement action; and
    (C) Whether the potential related action involves state-law claims 
and the extent to which the state may have a whistleblower award program 
that potentially applies to that type of law-enforcement action.
    (iii) If the Commission determines to deem the action a related 
action, the Commission will not make an award to you for the related 
action if you have already been granted an award by the governmental/SRO 
entity responsible for administering the other whistleblower award 
program. Further, if you were denied an award by the other award 
program, you will not be permitted to readjudicate any issues before the 
Commission that the governmental/SRO entity responsible for 
administering the other whistleblower award program resolved against you 
as part of the award denial. Additionally, if the Commission makes an 
award before an award determination is finalized by the governmental/SRO 
entity responsible for administering the other award program, the 
Commission shall condition its award on the meritorious whistleblower 
making a prompt, irrevocable waiver of any claim to an award from the 
other award program.

[76 FR 34363, June 13, 2011, as amended at 85 FR 70943, Nov. 5, 2020]



Sec.  240.21F-4  Other definitions.

    (a) Voluntary submission of information. (1) Your submission of 
information is made voluntarily within the meaning of Sec. Sec.  
240.21F-1 through 240.21F-17 of this chapter if you provide your 
submission before a request, inquiry, or demand that relates to the 
subject matter of your submission is directed to you or anyone 
representing you (such as an attorney):
    (i) By the Commission;
    (ii) In connection with an investigation, inspection, or examination 
by the Public Company Accounting Oversight Board, or any self-regulatory 
organization; or
    (iii) In connection with an investigation by Congress, any other 
authority of the Federal government, or a state Attorney General or 
securities regulatory authority.
    (2) If the Commission or any of these other authorities direct a 
request, inquiry, or demand as described in paragraph (a)(1) of this 
section to you or your representative first, your submission will not be 
considered voluntary, and you will not be eligible for an award, even if 
your response is not compelled by subpoena or other applicable law. 
However, your submission of information to the Commission will be 
considered voluntary if you voluntarily provided the same information to 
one of the other authorities identified above prior to receiving a 
request, inquiry, or demand from the Commission.
    (3) In addition, your submission will not be considered voluntary if 
you are required to report your original information to the Commission 
as a result of a pre-existing legal duty, a contractual duty that is 
owed to the Commission or to one of the other authorities set forth in 
paragraph (a)(1) of this section, or a duty that arises out of a 
judicial or administrative order.
    (b) Original information. (1) In order for your whistleblower 
submission to be considered original information, it must be:
    (i) Derived from your independent knowledge or independent analysis;
    (ii) Not already known to the Commission from any other source, 
unless you are the original source of the information;
    (iii) Not exclusively derived from an allegation made in a judicial 
or administrative hearing, in a governmental

[[Page 774]]

report, hearing, audit, or investigation, or from the news media, unless 
you are a source of the information; and
    (iv) Provided to the Commission for the first time after July 21, 
2010 (the date of enactment of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act).
    (2) Independent knowledge means factual information in your 
possession that is not derived from publicly available sources. You may 
gain independent knowledge from your experiences, communications and 
observations in your business or social interactions.
    (3) Independent analysis means your own analysis, whether done alone 
or in combination with others. Analysis means your examination and 
evaluation of information that may be publicly available, but which 
reveals information that is not generally known or available to the 
public.
    (4) The Commission will not consider information to be derived from 
your independent knowledge or independent analysis in any of the 
following circumstances:
    (i) If you obtained the information through a communication that was 
subject to the attorney-client privilege, unless disclosure of that 
information would otherwise be permitted by an attorney pursuant to 
Sec.  205.3(d)(2) of this chapter, the applicable state attorney conduct 
rules, or otherwise;
    (ii) If you obtained the information in connection with the legal 
representation of a client on whose behalf you or your employer or firm 
are providing services, and you seek to use the information to make a 
whistleblower submission for your own benefit, unless disclosure would 
otherwise be permitted by an attorney pursuant to Sec.  205.3(d)(2) of 
this chapter, the applicable state attorney conduct rules, or otherwise; 
or
    (iii) In circumstances not covered by paragraphs (b)(4)(i) or 
(b)(4)(ii) of this section, if you obtained the information because you 
were:
    (A) An officer, director, trustee, or partner of an entity and 
another person informed you of allegations of misconduct, or you learned 
the information in connection with the entity's processes for 
identifying, reporting, and addressing possible violations of law;
    (B) An employee whose principal duties involve compliance or 
internal audit responsibilities, or you were employed by or otherwise 
associated with a firm retained to perform compliance or internal audit 
functions for an entity;
    (C) Employed by or otherwise associated with a firm retained to 
conduct an inquiry or investigation into possible violations of law; or
    (D) An employee of, or other person associated with, a public 
accounting firm, if you obtained the information through the performance 
of an engagement required of an independent public accountant under the 
Federal securities laws (other than an audit subject to Sec.  240.21F-
8(c)(4) of this chapter), and that information related to a violation by 
the engagement client or the client's directors, officers or other 
employees.
    (iv) If you obtained the information by a means or in a manner that 
is determined by a United States court to violate applicable Federal or 
state criminal law; or
    (v) Exceptions. Paragraph (b)(4)(iii) of this section shall not 
apply if:
    (A) You have a reasonable basis to believe that disclosure of the 
information to the Commission is necessary to prevent the relevant 
entity from engaging in conduct that is likely to cause substantial 
injury to the financial interest or property of the entity or investors;
    (B) You have a reasonable basis to believe that the relevant entity 
is engaging in conduct that will impede an investigation of the 
misconduct; or
    (C) At least 120 days have elapsed since you provided the 
information to the relevant entity's audit committee, chief legal 
officer, chief compliance officer (or their equivalents), or your 
supervisor, or since you received the information, if you received it 
under circumstances indicating that the entity's audit committee, chief 
legal officer, chief compliance officer (or their equivalents), or your 
supervisor was already aware of the information.
    (vi) If you obtained the information from a person who is subject to 
this section, unless the information is not

[[Page 775]]

excluded from that person's use pursuant to this section, or you are 
providing the Commission with information about possible violations 
involving that person.
    (5) The Commission will consider you to be an original source of the 
same information that we obtain from another source if the information 
satisfies the definition of original information and the other source 
obtained the information from you or your representative. In order to be 
considered an original source of information that the Commission 
receives from Congress, any other authority of the Federal government, a 
state Attorney General or securities regulatory authority, any self-
regulatory organization, or the Public Company Accounting Oversight 
Board, you must have voluntarily given such authorities the information 
within the meaning of these rules. You must establish your status as the 
original source of information to the Commission's satisfaction. In 
determining whether you are the original source of information, the 
Commission may seek assistance and confirmation from one of the other 
authorities described above, or from another entity (including your 
employer), in the event that you claim to be the original source of 
information that an authority or another entity provided to the 
Commission.
    (6) If the Commission already knows some information about a matter 
from other sources at the time you make your submission, and you are not 
an original source of that information under paragraph (b)(5) of this 
section, the Commission will consider you an original source of any 
information you provide that is derived from your independent knowledge 
or analysis and that materially adds to the information that the 
Commission already possesses.
    (7) If you provide information to the Congress, any other authority 
of the Federal government, a state Attorney General or securities 
regulatory authority, any self-regulatory organization, or the Public 
Company Accounting Oversight Board, or to an entity's internal 
whistleblower, legal, or compliance procedures for reporting allegations 
of possible violations of law, and you, within 120 days, submit the same 
information to the Commission pursuant to Sec.  240.21F-9 of this 
chapter, as you must do in order for you to be eligible to be considered 
for an award, then, for purposes of evaluating your claim to an award 
under Sec. Sec.  240.21F-10 and 240.21F-11 of this chapter, the 
Commission will consider that you provided information as of the date of 
your original disclosure, report or submission to one of these other 
authorities or persons. You must establish the effective date of any 
prior disclosure, report, or submission, to the Commission's 
satisfaction. The Commission may seek assistance and confirmation from 
the other authority or person in making this determination.
    (c) Information that leads to successful enforcement. The Commission 
will consider that you provided original information that led to the 
successful enforcement of a judicial or administrative action in any of 
the following circumstances:
    (1) You gave the Commission original information that was 
sufficiently specific, credible, and timely to cause the staff to 
commence an examination, open an investigation, reopen an investigation 
that the Commission had closed, or to inquire concerning different 
conduct as part of a current examination or investigation, and the 
Commission brought a successful judicial or administrative action based 
in whole or in part on conduct that was the subject of your original 
information; or
    (2) You gave the Commission original information about conduct that 
was already under examination or investigation by the Commission, the 
Congress, any other authority of the federal government, a state 
Attorney General or securities regulatory authority, any self-regulatory 
organization, or the PCAOB (except in cases where you were an original 
source of this information as defined in paragraph (b)(5) of this 
section), and your submission significantly contributed to the success 
of the action.
    (3) You reported original information through an entity's internal 
whistleblower, legal, or compliance procedures for reporting allegations 
of possible violations of law before or at the same

[[Page 776]]

time you reported them to the Commission; the entity later provided your 
information to the Commission, or provided results of an audit or 
investigation initiated in whole or in part in response to information 
you reported to the entity; and the information the entity provided to 
the Commission satisfies either paragraph (c)(1) or (c)(2) of this 
section. Under this paragraph (c)(3), you must also submit the same 
information to the Commission in accordance with the procedures set 
forth in Sec.  240.21F-9 within 120 days of providing it to the entity.
    (d) An action generally means a single captioned judicial or 
administrative proceeding brought by the Commission. Notwithstanding the 
foregoing:
    (1) For purposes of making an award under Sec.  240.21F-10 of this 
chapter, the Commission will treat as a Commission action two or more 
administrative or judicial proceedings brought by the Commission if 
these proceedings arise out of the same nucleus of operative facts; or
    (2) For purposes of determining the payment on an award under Sec.  
240.21F-14 of this chapter, the Commission will deem as part of the 
Commission action upon which the award was based any subsequent 
Commission proceeding that, individually, results in a monetary sanction 
of $1,000,000 or less, and that arises out of the same nucleus of 
operative facts.
    (3) For purposes of making an award under Sec. Sec.  240.21F-10 and 
240.21F-11, the following will be deemed to be an administrative action 
and any money required to be paid thereunder will be deemed a monetary 
sanction under Sec.  240.21F-4(e):
    (i) A non-prosecution agreement or deferred prosecution agreement 
entered into by the U.S. Department of Justice; or
    (ii) A similar settlement agreement entered into by the Commission 
outside of the context of a judicial or administrative proceeding to 
address violations of the securities laws.
    (e) Monetary sanctions means:
    (1) An order to pay money that results from a Commission action or 
related action and which is either:
    (i) Expressly designated as a penalty, disgorgement, or interest; or
    (ii) Otherwise ordered as relief for the violations that are the 
subject of the covered action or related action; or
    (2) Any money deposited into a disgorgement fund or other fund 
pursuant to section 308(b) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 
7246(b)), as a result of such action or any settlement of such action.
    (f) Appropriate regulatory agency means the Commission, the 
Comptroller of the Currency, the Board of Governors of the Federal 
Reserve System, the Federal Deposit Insurance Corporation, the Office of 
Thrift Supervision, and any other agencies that may be defined as 
appropriate regulatory agencies under Section 3(a)(34) of the Exchange 
Act (15 U.S.C. 78c(a)(34)).
    (g) Appropriate regulatory authority means an appropriate regulatory 
agency other than the Commission.
    (h) Self-regulatory organization means any national securities 
exchange, registered securities association, registered clearing agency, 
the Municipal Securities Rulemaking Board, and any other organizations 
that may be defined as self-regulatory organizations under Section 
3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26)).

[76 FR 34363, June 13, 2011, as amended at 85 FR 70943, Nov. 5, 2020]



Sec.  240.21F-5  Amount of award.

    (a) The determination of the amount of an award is in the discretion 
of the Commission.
    (b) If all of the conditions are met for a whistleblower award in 
connection with a Commission action or a related action, the Commission 
will then decide the percentage amount of the award applying the 
criteria set forth in Sec.  240.21F-6 of this chapter and pursuant to 
the procedures set forth in Sec. Sec.  240.21F-10 and 240.21F-11 of this 
chapter. The amount will be at least 10 percent and no more than 30 
percent of the monetary sanctions that the Commission and the other 
authorities are able to collect. The percentage awarded in connection 
with a Commission action may differ from the percentage awarded in 
connection with a related action.

[[Page 777]]

    (c) If the Commission makes awards to more than one whistleblower in 
connection with the same action or related action, the Commission will 
determine an individual percentage award for each whistleblower, but in 
no event will the total amount awarded to all whistleblowers in the 
aggregate be less than 10 percent or greater than 30 percent of the 
amount the Commission or the other authorities collect.



Sec.  240.21F-6  Criteria for determining amount of award.

    In exercising its discretion to determine the appropriate award, the 
Commission may consider the following factors (and only the following 
factors) in relation to the facts and circumstances of each case in 
setting the dollar or percentage amount of the award. In the event that 
awards are determined for multiple whistleblowers in connection an 
action, these factors will be used to determine the relative allocation 
of awards among the whistleblowers.
    (a) Factors that may increase the amount of a whistleblower's award. 
In determining whether to increase the amount of an award, the 
Commission will consider the following factors, which are not listed in 
order of importance.
    (1) Significance of the information provided by the whistleblower. 
The Commission will assess the significance of the information provided 
by a whistleblower to the success of the Commission action or related 
action. In considering this factor, the Commission may take into 
account, among other things:
    (i) The nature of the information provided by the whistleblower and 
how it related to the successful enforcement action, including whether 
the reliability and completeness of the information provided to the 
Commission by the whistleblower resulted in the conservation of 
Commission resources;
    (ii) The degree to which the information provided by the 
whistleblower supported one or more successful claims brought in the 
Commission or related action.
    (2) Assistance provided by the whistleblower. The Commission will 
assess the degree of assistance provided by the whistleblower and any 
legal representative of the whistleblower in the Commission action or 
related action. In considering this factor, the Commission may take into 
account, among other things:
    (i) Whether the whistleblower provided ongoing, extensive, and 
timely cooperation and assistance by, for example, helping to explain 
complex transactions, interpreting key evidence, or identifying new and 
productive lines of inquiry;
    (ii) The timeliness of the whistleblower's initial report to the 
Commission or to an internal compliance or reporting system of business 
organizations committing, or impacted by, the securities violations, 
where appropriate;
    (iii) The resources conserved as a result of the whistleblower's 
assistance;
    (iv) Whether the whistleblower appropriately encouraged or 
authorized others to assist the staff of the Commission who might 
otherwise not have participated in the investigation or related action;
    (v) The efforts undertaken by the whistleblower to remediate the 
harm caused by the violations, including assisting the authorities in 
the recovery of the fruits and instrumentalities of the violations; and
    (vi) Any unique hardships experienced by the whistleblower as a 
result of his or her reporting and assisting in the enforcement action.
    (3) Law enforcement interest. The Commission will assess its 
programmatic interest in deterring violations of the securities laws by 
making awards to whistleblowers who provide information that leads to 
the successful enforcement of such laws. In considering this factor, the 
Commission may take into account, among other things:
    (i) The degree to which an award enhances the Commission's ability 
to enforce the Federal securities laws and protect investors; and
    (ii) The degree to which an award encourages the submission of high 
quality information from whistleblowers by appropriately rewarding 
whistleblowers' submission of significant information and assistance, 
even in cases where the monetary sanctions available for collection are 
limited or potential monetary sanctions were reduced

[[Page 778]]

or eliminated by the Commission because an entity self-reported a 
securities violation following the whistleblower's related internal 
disclosure, report, or submission.
    (iii) Whether the subject matter of the action is a Commission 
priority, whether the reported misconduct involves regulated entities or 
fiduciaries, whether the whistleblower exposed an industry-wide 
practice, the type and severity of the securities violations, the age 
and duration of misconduct, the number of violations, and the isolated, 
repetitive, or ongoing nature of the violations; and
    (iv) The dangers to investors or others presented by the underlying 
violations involved in the enforcement action, including the amount of 
harm or potential harm caused by the underlying violations, the type of 
harm resulting from or threatened by the underlying violations, and the 
number of individuals or entities harmed.
    (4) Participation in internal compliance systems. The Commission 
will assess whether, and the extent to which, the whistleblower and any 
legal representative of the whistleblower participated in internal 
compliance systems. In considering this factor, the Commission may take 
into account, among other things:
    (i) Whether, and the extent to which, a whistleblower reported the 
possible securities violations through internal whistleblower, legal or 
compliance procedures before, or at the same time as, reporting them to 
the Commission; and
    (ii) Whether, and the extent to which, a whistleblower assisted any 
internal investigation or inquiry concerning the reported securities 
violations.
    (b) Factors that may decrease the amount of a whistleblower's award. 
In determining whether to decrease the amount of an award, the 
Commission will consider the following factors, which are not listed in 
order of importance.
    (1) Culpability. The Commission will assess the culpability or 
involvement of the whistleblower in matters associated with the 
Commission's action or related actions. In considering this factor, the 
Commission may take into account, among other things:
    (i) The whistleblower's role in the securities violations;
    (ii) The whistleblower's education, training, experience, and 
position of responsibility at the time the violations occurred;
    (iii) Whether the whistleblower acted with scienter, both generally 
and in relation to others who participated in the violations;
    (iv) Whether the whistleblower financially benefitted from the 
violations;
    (v) Whether the whistleblower is a recidivist;
    (vi) The egregiousness of the underlying fraud committed by the 
whistleblower; and
    (vii) Whether the whistleblower knowingly interfered with the 
Commission's investigation of the violations or related enforcement 
actions.
    (2) Unreasonable reporting delay. The Commission will assess whether 
the whistleblower unreasonably delayed reporting the securities 
violations. In considering this factor, the Commission may take into 
account, among other things:
    (i) Whether the whistleblower was aware of the relevant facts but 
failed to take reasonable steps to report or prevent the violations from 
occurring or continuing;
    (ii) Whether the whistleblower was aware of the relevant facts but 
only reported them after learning about a related inquiry, 
investigation, or enforcement action; and
    (iii) Whether there was a legitimate reason for the whistleblower to 
delay reporting the violations.
    (3) Interference with internal compliance and reporting systems. The 
Commission will assess, in cases where the whistleblower interacted with 
his or her entity's internal compliance or reporting system, whether the 
whistleblower undermined the integrity of such system. In considering 
this factor, the Commission will take into account whether there is 
evidence provided to the Commission that the whistleblower knowingly:
    (i) Interfered with an entity's established legal, compliance, or 
audit procedures to prevent or delay detection of the reported 
securities violation;

[[Page 779]]

    (ii) Made any material false, fictitious, or fraudulent statements 
or representations that hindered an entity's efforts to detect, 
investigate, or remediate the reported securities violations; and
    (iii) Provided any false writing or document knowing the writing or 
document contained any false, fictitious or fraudulent statements or 
entries that hindered an entity's efforts to detect, investigate, or 
remediate the reported securities violations.
    (c) Additional considerations in connection with certain awards of 
$5 million or less. (1) This subpart applies when the Commission is 
considering any meritorious award application where:
    (i) The statutory maximum award of 30 percent of the monetary 
sanctions collected in any covered and related action(s), in the 
aggregate, is $5 million or less, and the Commission determines that it 
does not reasonably anticipate that future collections would cause the 
statutory maximum award to be paid to any whistleblower to exceed $5 
million in the aggregate;
    (ii) None of the negative award factors specified in paragraphs 
Sec. Sec.  240.21F-6(b)(1) or 240.21F-6(b)(3) were found present with 
respect to the claimant's award application, and the award claim does 
not trigger Sec.  240.21F-16 (concerning awards to whistleblowers who 
engage in culpable conduct);
    (iii) The claimant did not engage in unreasonable reporting delay 
under Sec.  240.21F-(6)(b)(2) (although the Commission, in its sole 
discretion, may in certain limited circumstances determine to waive this 
criterion if the claimant can demonstrate that doing so based on the 
facts and circumstances of the matter is consistent with the public 
interest, the promotion of investor protection, and the objectives of 
the whistleblower program); and
    (iv) The Commission does not otherwise determine in its sole 
discretion that application of the enhancement afforded by this subpart 
would be inappropriate because either:
    (A) The whistleblower's assistance in the covered action or related 
action (as assessed under Sec.  240.21F-6(a) of this section) was, under 
the relevant facts and circumstances, limited; or
    (B) Providing the enhancement would be inconsistent with the public 
interest, the promotion of investor protection, or the objectives of the 
whistleblower program.
    (2) If the Commission determines that the criteria in Sec.  240.21F-
6(c)(1) are satisfied, the resulting payout to a claimant for the 
original information that the claimant provided that led to one or more 
successful covered or related action(s), collectively, will be the 
maximum allowed under the statute.
    (3) Notwithstanding Sec.  240.21F-6(c)(2), if two or more claimants 
qualify for an award in connection with any covered action or related 
action and at least one of those claimant's award applications qualifies 
under Sec.  240.21F-6(c)(1), the aggregate amount awarded to all 
meritorious claimants will be the statutory maximum. In allocating that 
amount among the meritorious claimants, the Commission will consider 
whether an individual claimant's award application satisfies Sec. Sec.  
240.21F-6(c)(1)(ii) and 240.21F-6(c)(1)(iii).

[76 FR 34363, June 13, 2011, as amended at 85 FR 70943, Nov. 5, 2020]



Sec.  240.21F-7  Confidentiality of submissions.

    (a) Pursuant to Section 21F(h)(2) of the Exchange Act (15 U.S.C. 
78u-6(h)(2)) and Sec.  240.21F-2(c), the Commission will not disclose 
information that could reasonably be expected to reveal the identity of 
a whistleblower provided that the whistleblower has submitted 
information utilizing the processes specified in Sec.  240.21F-9(a), 
except that the Commission may disclose such information in the 
following circumstances:
    (1) When disclosure is required to a defendant or respondent in 
connection with a Federal court or administrative action that the 
Commission files or in another public action or proceeding that is filed 
by an authority to which we provide the information, as described below;
    (2) When the Commission determines that it is necessary to 
accomplish the purposes of the Exchange Act (15 U.S.C. 78a) and to 
protect investors, it may provide your information to the Department of 
Justice, an appropriate regulatory authority, a self regulatory

[[Page 780]]

organization, a state attorney general in connection with a criminal 
investigation, any appropriate state regulatory authority, the Public 
Company Accounting Oversight Board, or foreign securities and law 
enforcement authorities. Each of these entities other than foreign 
securities and law enforcement authorities is subject to the 
confidentiality requirements set forth in Section 21F(h) of the Exchange 
Act (15 U.S.C. 78u-6(h)). The Commission will determine what assurances 
of confidentiality it deems appropriate in providing such information to 
foreign securities and law enforcement authorities.
    (3) The Commission may make disclosures in accordance with the 
Privacy Act of 1974 (5 U.S.C. 552a).
    (b) You may submit information to the Commission anonymously. If you 
do so, however, you must also do the following:
    (1) You must have an attorney represent you in connection with both 
your submission of information and your claim for an award, and your 
attorney's name and contact information must be provided to the 
Commission at the time you submit your information;
    (2) You and your attorney must follow the procedures set forth in 
Sec.  240.21F-9 of this chapter for submitting original information 
anonymously; and
    (3) Before the Commission will pay any award to you, you must 
disclose your identity to the Commission and your identity must be 
verified by the Commission as set forth in Sec.  240.21F-10 of this 
chapter.

[76 FR 34363, June 13, 2011, as amended at 85 FR 70944, Nov. 5, 2020]



Sec.  240.21F-8  Eligibility and forms.

    (a) To be eligible for a whistleblower award, you must give the 
Commission information in the form and manner that the Commission 
requires. The procedures for submitting information and making a claim 
for an award are described in Sec.  240.21F-9 through Sec.  240.21F-11 
of this chapter. You should read these procedures carefully because you 
need to follow them in order to be eligible for an award, except that 
the Commission may, in its sole discretion, waive any of these 
procedures based upon a showing of extraordinary circumstances.
    (b) In addition to any forms required by these rules, the Commission 
may also require that you provide certain additional information. You 
may be required to:
    (1) Provide explanations and other assistance in order that the 
staff may evaluate and use the information that you submitted;
    (2) Provide all additional information in your possession that is 
related to the subject matter of your submission in a complete and 
truthful manner, through follow-up meetings, or in other forms that our 
staff may agree to;
    (3) Provide testimony or other evidence acceptable to the staff 
relating to whether you are eligible, or otherwise satisfy any of the 
conditions, for an award; and
    (4) Enter into a confidentiality agreement in a form acceptable to 
the Office of the Whistleblower, covering any non-public information 
that the Commission provides to you, and including a provision that a 
violation of the agreement may lead to your ineligibility to receive an 
award.
    (c) You are not eligible to be considered for an award if you do not 
satisfy the requirements of paragraphs (a) and (b) of this section. In 
addition, you are not eligible if:
    (1) You are, or were at the time you acquired the original 
information provided to the Commission, a member, officer, or employee 
of the Commission, the Department of Justice, an appropriate regulatory 
agency, a self-regulatory organization, the Public Company Accounting 
Oversight Board, or any law enforcement organization;
    (2) You are, or were at the time you acquired the original 
information provided to the Commission, a member, officer, or employee 
of a foreign government, any political subdivision, department, agency, 
or instrumentality of a foreign government, or any other foreign 
financial regulatory authority as that term is defined in Section 
3(a)(52) of the Exchange Act (15 U.S.C. 78c(a)(52));
    (3) You are convicted of a criminal violation that is related to the 
Commission action or to a related action

[[Page 781]]

(as defined in Sec.  240.21F-4 of this chapter) for which you otherwise 
could receive an award;
    (4) You obtained the original information that you gave the 
Commission through an audit of a company's financial statements, and 
making a whistleblower submission would be contrary to requirements of 
Section 10A of the Exchange Act (15 U.S.C. 78j-a).
    (5) You are the spouse, parent, child, or sibling of a member or 
employee of the Commission, or you reside in the same household as a 
member or employee of the Commission;
    (6) You acquired the original information you gave the Commission 
from a person:
    (i) Who is subject to paragraph (c)(4) of this section, unless the 
information is not excluded from that person's use, or you are providing 
the Commission with information about possible violations involving that 
person; or
    (ii) With the intent to evade any provision of these rules; or
    (7) The Commission or a court of competent jurisdiction finds that, 
in your whistleblower submission, your other dealings with the 
Commission (including your dealings beyond the whistleblower program and 
covered action), or your dealings with another governmental/SRO entity 
(as specified in Sec.  240.21F-3(b)(1)) in connection with a related 
action, you knowingly and willfully made any materially false, 
fictitious, or fraudulent statement or representation, or used any false 
writing or document knowing that it contains any materially false, 
fictitious, or fraudulent statement or entry with intent to mislead or 
otherwise hinder the Commission or another governmental/SRO entity, 
provided that this provision should not apply if the Commission, in its 
discretion, finds it consistent with the public interest, the promotion 
of investor protection, and the objectives of the whistleblower program.
    (d) The Commission may modify or revise Form TCR and Form WB-APP as 
provided below.
    (1) The Commission will periodically designate on the Commission's 
web page a Form TCR (Tip, Complaint, or Referral) that individuals 
seeking to be eligible for an award through the process identified in 
Sec.  240.21F-9(a)(2) shall use.
    (2) The Commission will also periodically designate on the 
Commission's web page a Form WB-APP for use by individuals seeking to 
apply for an award in connection with a Commission-covered judicial or 
administrative action (15 U.S.C. 21F(a)(1)), or a related action (Sec.  
240.21F-3(b)(1)).
    (e) The Commission shall have the authority to impose a permanent 
bar on a claimant as provided below.
    (1) Grounds for a permanent bar. Submissions or applications that 
are frivolous or fraudulent, or that would otherwise hinder the 
effective and efficient operation of the Whistleblower Program may 
result in the Commission issuing a permanent bar as part of a final 
order in the course of considering a whistleblower award application 
from you. If such a bar is issued, the Office of the Whistleblower will 
not accept or act on any other applications from you. A permanent bar 
may be issued in the following circumstances:
    (i) If you make three or more award applications for Commission 
actions that the Commission finds to be frivolous or lacking a colorable 
connection between the tip (or tips) and the Commission actions for 
which you are seeking awards; or
    (ii) If the Commission finds that you have violated paragraph (c)(7) 
of this section.
    (2) General procedures for issuance of a permanent bar. The 
Commission will consider whether to issue a permanent bar in connection 
with an award application from you. In general, the Preliminary 
Determination or Preliminary Summary Disposition must state that a bar 
is being recommended, and you will then have an opportunity to respond 
in writing in accordance with the award processing procedures specified 
in Sec. Sec.  240.21F-10(e)(2) and 240.21F-18(b)(3). If the basis for a 
bar arises or is discovered after the issuance of a Preliminary 
Determination or Preliminary Summary Disposition, the Office of the 
Whistleblower shall notify you and afford you an opportunity to submit a 
response before the Commission determines whether to issue a bar.

[[Page 782]]

    (3) Notice and opportunity to withdraw frivolous applications. (i) 
Except as provided in paragraph (e)(3)(ii) of this section, before any 
Preliminary Determination or Preliminary Summary Disposition is issued 
that may recommend a bar, the Office of the Whistleblower shall advise 
you of any assessment by that Office that your award application is 
frivolous (``frivolous application'') or based on a tip that lacks a 
colorable connection to the action for which you have sought an award 
(``noncolorable application''). If you withdraw your award application 
within 30 days of the notification from the Office of the Whistleblower, 
it will not be considered by the Commission in determining whether to 
exercise its authority under this paragraph (e).
    (ii) The notification and opportunity to withdraw provided for by 
paragraph (e)(3)(i) are limited to the first three applications 
submitted by you that are reviewed by the Office of the Whistleblower 
and preliminarily deemed by that Office to be either a frivolous 
application or a noncolorable application. After these first three award 
applications, you will not be provided notice or an opportunity to 
withdraw any other frivolous or noncolorable applications.
    (iii) For purposes of determining whether a bar should be imposed 
under section (e) of this rule, you will not be permitted to withdraw 
your application:
    (A) After the 30-day period to withdraw has run following notice 
from the Office of the Whistleblower with respect to the initial three 
applications assessed by that Office to be frivolous or lacking a 
colorable connection to the action; or
    (B) After a Preliminary Determination or Preliminary Summary 
Disposition has issued in connection with any other such application.
    (4) Award applications pending before the effective date of 
paragraph (e). (i) Paragraph (e) of this section shall apply to all 
award applications pending as of the effective date of paragraph (e) of 
this section. But with respect to any such pending award applications, 
the Office of the Whistleblower shall advise you, before any Preliminary 
Determination or Preliminary Summary Disposition is issued that may 
recommend a bar, of any assessment by that Office that the conditions 
for issuing a bar are satisfied because either:
    (A) You submitted an award application prior to the effective date 
of this section (e) and that application is frivolous or lacking a 
colorable connection between the tip and the action for which you have 
sought an award; or
    (B) You made a materially false, fictitious, or fraudulent statement 
or representation or used a false writing or document in violation of 
paragraph (c)(7) of this section prior to the effective date of this 
section (e).
    (ii) If, within 30 days of the Office of the Whistleblower providing 
the foregoing notification, you withdraw the relevant award 
application(s), the withdrawn award application(s) will not be 
considered by the Commission in determining whether to exercise its 
authority under paragraph (e). Further, the procedures specified in 
paragraph (e)(3)(i) through (iii) of this section shall apply to any 
award application that is pending as of the effective date of this rule 
that is determined to be a frivolous or noncolorable application.

[76 FR 34363, June 13, 2011, as amended at 85 FR 70944, Nov. 5, 2020]



Sec.  240.21F-9  Procedures for submitting original information.

    (a) To submit information in a manner that satisfies Sec.  240.21F-
2(b) and Sec.  240.21F-2(c) of this chapter you must submit your 
information to the Commission by any of these methods:
    (1) Online, through the Commission's website located at www.sec.gov, 
using the Commission's electronic TCR portal (Tip, Complaint, or 
Referral);
    (2) Mailing or faxing a Form TCR to the SEC Office of the 
Whistleblower at the mailing address or fax number designated on the 
SEC's web page for making such submissions; or
    (3) By any other such method that the Commission may expressly 
designate on its website as a mechanism that satisfies Sec. Sec.  
240.21F-2(b) and 240.21F-2(c) of this chapter. For a 30-day period 
following the Commission's

[[Page 783]]

designation of any new forms by placing them on the Commission's 
website, the Commission shall also continue to accept submissions made 
using the prior version of the forms.
    (b) Further, to be eligible for an award, you must declare under 
penalty of perjury at the time you submit your information pursuant to 
paragraph (a)(1), (a)(2), or (a)(3) of this section that your 
information is true and correct to the best of your knowledge and 
belief.
    (c) Notwithstanding paragraphs (a) and (b) of this section, if you 
are providing your original information to the Commission anonymously, 
then your attorney must submit your information on your behalf pursuant 
to the procedures specified in paragraph (a) of this section. Prior to 
your attorney's submission, you must provide your attorney with a 
completed Form TCR that you have signed under penalty of perjury. When 
your attorney makes her submission on your behalf, your attorney will be 
required to certify that he or she:
    (1) Has verified your identity;
    (2) Has reviewed your completed and signed Form TCR for completeness 
and accuracy and that the information contained therein is true, correct 
and complete to the best of the attorney's knowledge, information and 
belief;
    (3) Has obtained your non-waivable consent to provide the Commission 
with your original completed and signed Form TCR in the event that the 
Commission requests it due to concerns that you may have knowingly and 
willfully made false, fictitious, or fraudulent statements or 
representations, or used any false writing or document knowing that the 
writing or document contains any false fictitious or fraudulent 
statement or entry; and
    (4) Consents to be legally obligated to provide the signed Form TCR 
within seven (7) calendar days of receiving such request from the 
Commission.
    (d) If you submitted original information in writing to the 
Commission after July 21, 2010 (the date of enactment of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act) but before the effective 
date of these rules, your submission will be deemed to satisfy the 
requirements set forth in paragraphs (a) and (b) of this section. If you 
were an anonymous whistleblower, however, you must provide your attorney 
with a completed and signed copy of Form TCR within 60 days of the 
effective date of these rules, your attorney must retain the signed form 
in his or her records, and you must provide of copy of the signed form 
to the Commission staff upon request by Commission staff prior to any 
payment of an award to you in connection with your submission. 
Notwithstanding the foregoing, you must follow the procedures and 
conditions for making a claim for a whistleblower award described in 
Sec. Sec.  240.21F-10 and 240.21F-11 of this chapter.
    (e) You must follow the procedures specified in paragraphs (a) and 
(b) of this section within 30 days of when you first provide the 
Commission with original information that you rely upon as a basis for 
claiming an award. If you fail to do so, then you will be deemed 
ineligible for an award in connection with that information (even if you 
later resubmit that information in accordance with paragraphs (a) and 
(b) of this section). Notwithstanding the foregoing, the Commission 
shall waive your noncompliance with paragraphs (a) and (b) of this 
section if:
    (1) You demonstrate to the satisfaction of the Commission that you 
complied with the requirements of paragraphs (a) and (b) of this section 
within 30 days of first obtaining actual or constructive notice about 
those requirements (or 30 days from the date you retain counsel to 
represent you in connection with your submission of original 
information, whichever occurs first); and
    (2) The Commission can readily develop an administrative record that 
unambiguously demonstrates that you would otherwise qualify for an 
award.

[76 FR 34363, June 13, 2011, as amended at 85 FR 70945, Nov. 5, 2020]



Sec.  240.21F-10  Procedures for making a claim for a whistleblower award
in SEC actions that result in monetary sanctions in excess of $1,000,000.

    (a) Whenever a Commission action results in monetary sanctions 
totaling more than $1,000,000, the Office of the

[[Page 784]]

Whistleblower will cause to be published on the Commission's Web site a 
``Notice of Covered Action.'' Such Notice will be published subsequent 
to the entry of a final judgment or order that alone, or collectively 
with other judgments or orders previously entered in the Commission 
action, exceeds $1,000,000; or, in the absence of such judgment or order 
subsequent to the deposit of monetary sanctions exceeding $1,000,000 
into a disgorgement or other fund pursuant to Section 308(b) of the 
Sarbanes-Oxley Act of 2002. A claimant will have ninety (90) days from 
the date of the Notice of Covered Action to file a claim for an award 
based on that action, or the claim will be barred.
    (b) To file a claim for a whistleblower award, you must file Form 
WB-APP (as specified in Sec.  240.21F-8(d)(2). You must sign this form 
as the claimant and submit it to the Office of the Whistleblower by 
mail, email (as a PDF attachment), or fax (or any other manner that the 
Office permits).
    (1) All claim forms, including any attachments, must be received by 
the Office of the Whistleblower within ninety (90) calendar days of the 
date of the Notice of Covered Action in order to be considered for an 
award.
    (2) Notwithstanding paragraphs (a) and (b)(1) of this section, the 
time period to file an application for an award based on a Commission 
settlement agreement covered by Sec.  240.21F-4(d) of this chapter shall 
be governed exclusively by Sec.  240.21F-11(b)(1) of this chapter if the 
settlement agreement was entered into after July 21, 2010 but before the 
effective date of this section as amended in 2020.
    (c) If you provided your original information to the Commission 
anonymously, you must disclose your identity on the Form WB-APP, and 
your identity must be verified in a form and manner that is acceptable 
to the Office of the Whistleblower prior to the payment of any award.
    (d) Once the time for filing any appeals of the Commission's 
judicial or administrative action has expired, or where an appeal has 
been filed, after all appeals in the action have been concluded, one or 
more staff members designated by the Director of the Division of 
Enforcement (``Claims Review Staff'') will evaluate all timely 
whistleblower award claims submitted on Form WB-APP in accordance with 
the criteria set forth in these rules. In connection with this process, 
the Office of the Whistleblower may require that you provide additional 
information relating to your eligibility for an award or satisfaction of 
any of the conditions for an award, as set forth in Sec.  240.21F-8(b) 
of this chapter. Following a determination by the Claims Review Staff 
(and an opportunity for the Commission to review that determination), 
the Office of the Whistleblower will send you a Preliminary 
Determination setting forth a preliminary assessment as to whether the 
claim should be allowed or denied and, if allowed, setting forth the 
proposed award dollar and percentage amount, and the grounds therefore.
    (e) You may contest the Preliminary Determination made by the Claims 
Review Staff by submitting a written response to the Office of the 
Whistleblower setting forth the grounds for your objection to either the 
denial of an award or the proposed amount of an award. The response must 
be in the form and manner that the Office of the Whistleblower shall 
require. You may also include documentation or other evidentiary support 
for the grounds advanced in your response. In applying the award factors 
specified in Sec.  240.21F-6 of this chapter and determining the award 
dollar and percentage amounts set forth in the Preliminary 
Determination, the award factors may be considered by the SEC staff and 
the Commission in dollar terms, percentage terms or some combination 
thereof. Should you choose to contest a Preliminary Determination, you 
may set forth the reasons for your objection to the proposed amount of 
an award, including the grounds therefore, in dollar terms, percentage 
terms or some combination thereof.
    (1) Before determining whether to contest a Preliminary 
Determination, you may:
    (i) Within thirty (30) days of the date of the Preliminary 
Determination, request that the Office of the Whistleblower make 
available for your review the materials from among those set forth in 
Sec.  240.21F-12(a) of this chapter

[[Page 785]]

that formed the basis of the Claims Review Staff's Preliminary 
Determination.
    (ii) Within thirty (30) calendar days of the date of the Preliminary 
Determination, request a meeting with the Office of the Whistleblower; 
however, such meetings are not required and the office may in its sole 
discretion decline the request.
    (2) If you decide to contest the Preliminary Determination, you must 
submit your written response and supporting materials within sixty (60) 
calendar days of the date of the Preliminary Determination, or if a 
request to review materials is made pursuant to paragraph (e)(1) of this 
section, then within sixty (60) calendar days of the Office of the 
Whistleblower making those materials available for your review.
    (f) If you fail to submit a timely response pursuant to paragraph 
(e) of this section, then the Preliminary Determination will become the 
Final Order of the Commission (except where the Preliminary 
Determination recommended an award, in which case the Preliminary 
Determination will be deemed a Proposed Final Determination for purposes 
of paragraph (h) of this section). Your failure to submit a timely 
response contesting a Preliminary Determination will constitute a 
failure to exhaust administrative remedies, and you will be prohibited 
from pursuing an appeal pursuant to Sec.  240.21F-13 of this chapter.
    (g) If you submit a timely response pursuant to paragraph (e) of 
this section, then the Claims Review Staff will consider the issues and 
grounds advanced in your response, along with any supporting 
documentation you provided, and will make its Proposed Final 
Determination.
    (h) The Office of the Whistleblower will then notify the Commission 
of each Proposed Final Determination. Within thirty 30 days thereafter, 
any Commissioner may request that the Proposed Final Determination be 
reviewed by the Commission. If no Commissioner requests such a review 
within the 30-day period, then the Proposed Final Determination will 
become the Final Order of the Commission. In the event a Commissioner 
requests a review, the Commission will review the record that the staff 
relied upon in making its determinations, including your previous 
submissions to the Office of the Whistleblower, and issue its Final 
Order.
    (i) The Office of the Whistleblower will provide you with the Final 
Order of the Commission.

[76 FR 34363, June 13, 2011, as amended at 85 FR 70945, Nov. 5, 2020]



Sec.  240.21F-11  Procedures for determining awards based upon a 
related action.

    (a) If you are eligible to receive an award following a Commission 
action that results in monetary sanctions totaling more than $1,000,000, 
you also may be eligible to receive an award based on the monetary 
sanctions that are collected from a related action (as defined in Sec.  
240.21F-3 of this chapter).
    (b) You must also use Form WB-APP (as specified in Sec.  240.21F-
8(d)(2)) to submit a claim for an award in a potential related action. 
You must sign this form as the claimant and submit it to the Office of 
the Whistleblower by mail, email (as a PDF attachment), or fax (or any 
other manner that the Office permits) as follows:
    (1) If a final order imposing monetary sanctions has been entered in 
a potential related action at the time you submit your claim for an 
award in connection with a Commission action, you must submit your claim 
for an award in that related action on the same Form WB-APP that you use 
for the Commission action. For purposes of this paragraph and paragraph 
(b)(2) of this section, a final order imposing monetary sanctions is 
entered on the date of a court or administrative order imposing the 
monetary sanctions; however, with respect to any agreement covered by 
Sec.  240.21F-4(d) of this chapter (such as a deferred prosecution 
agreement or a nonprosecution agreement entered by the Department of 
Justice), the Commission will deem the date of the entry of the final 
order to be the later of either:
    (i) The effective date of this section as amended in 2020; or
    (ii) The date of the earliest public availability of the instrument 
reflecting the arrangement if evidenced by a

[[Page 786]]

press release or similar dated publication notice (or otherwise, the 
date of the last signature necessary for the agreement).
    (2) If a final order imposing monetary sanctions in a potential 
related action has not been entered at the time you submit your claim 
for an award in connection with a Commission action, you must submit 
your claim on Form WB-APP within ninety (90) days of the issuance of a 
final order imposing sanctions in the potential related action.
    (c) The Office of the Whistleblower may request additional 
information from you in connection with your claim for an award in a 
related action to demonstrate that you directly (or through the 
Commission) voluntarily provided the governmental/SRO entity (as 
specified in Sec.  240.21F-3(b)(1) of this chapter) the same original 
information that led to the Commission's successful covered action, and 
that this information led to the successful enforcement of the related 
action. Further, the Office of the Whistleblower, in its discretion, may 
seek assistance and confirmation from the governmental/SRO entity in 
making an award determination.
    (d) Once the time for filing any appeals of the final judgment or 
order in a potential related action has expired, or if an appeal has 
been filed, after all appeals in the action have been concluded, the 
Claims Review Staff (as specified in Sec.  240.21F-10(d) of this 
chapter) will evaluate all timely whistleblower award claims submitted 
on Form WB-APP in connection with the related action. The evaluation 
will be undertaken pursuant to the criteria set forth in these rules. In 
connection with this process, the Office of the Whistleblower may 
require that you provide additional information relating to your 
eligibility for an award or satisfaction of any of the conditions for an 
award, as set forth in Sec.  240.21F-(8)(b) of this chapter. Following a 
determination by the Claims Review Staff (and an opportunity for the 
Commission to review that determination), the Office of the 
Whistleblower will send you a Preliminary Determination setting forth a 
preliminary assessment as to whether the claim should be allowed or 
denied and, if allowed, setting forth the proposed award percentage 
amount.
    (e) You may contest the Preliminary Determination made by the Claims 
Review Staff by submitting a written response to the Office of the 
Whistleblower setting forth the grounds for your objection to either the 
denial of an award or the proposed amount of an award. The response must 
be in the form and manner that the Office of the Whistleblower shall 
require. You may also include documentation or other evidentiary support 
for the grounds advanced in your response. In applying the award factors 
specified in Sec.  240.21F-6 of this chapter and determining the award 
dollar and percentage amounts set forth in the Preliminary 
Determination, the award factors may be considered by the SEC staff and 
the Commission in dollar terms, percentage terms or some combination 
thereof. Should you choose to contest a Preliminary Determination, you 
may set forth the reasons for your objection to the proposed amount of 
an award, including the grounds therefore, in dollar terms, percentage 
terms or some combination thereof.
    (1) Before determining whether to contest a Preliminary 
Determination, you may:
    (i) Within thirty (30) days of the date of the Preliminary 
Determination, request that the Office of the Whistleblower make 
available for your review the materials from among those set forth in 
Sec.  240.21F-12(a) of this chapter that formed the basis of the Claims 
Review Staff's Preliminary Determination.
    (ii) Within thirty (30) days of the date of the Preliminary 
Determination, request a meeting with the Office of the Whistleblower; 
however, such meetings are not required and the office may in its sole 
discretion decline the request.
    (2) If you decide to contest the Preliminary Determination, you must 
submit your written response and supporting materials within sixty (60) 
calendar days of the date of the Preliminary Determination, or if a 
request to review materials is made pursuant to paragraph (e)(1)(i) of 
this section, then within sixty (60) calendar days of the Office of the 
Whistleblower making

[[Page 787]]

those materials available for your review.
    (f) If you fail to submit a timely response pursuant to paragraph 
(e) of this section, then the Preliminary Determination will become the 
Final Order of the Commission (except where the Preliminary 
Determination recommended an award, in which case the Preliminary 
Determination will be deemed a Proposed Final Determination for purposes 
of paragraph (h) of this section). Your failure to submit a timely 
response contesting a Preliminary Determination will constitute a 
failure to exhaust administrative remedies, and you will be prohibited 
from pursuing an appeal pursuant to Sec.  240.21F-13 of this chapter.
    (g) If you submit a timely response pursuant to paragraph (e) of 
this section, then the Claims Review Staff will consider the issues and 
grounds that you advanced in your response, along with any supporting 
documentation you provided, and will make its Proposed Final 
Determination.
    (h) The Office of the Whistleblower will notify the Commission of 
each Proposed Final Determination. Within thirty 30 days thereafter, any 
Commissioner may request that the Proposed Final Determination be 
reviewed by the Commission. If no Commissioner requests such a review 
within the 30-day period, then the Proposed Final Determination will 
become the Final Order of the Commission. In the event a Commissioner 
requests a review, the Commission will review the record that the staff 
relied upon in making its determinations, including your previous 
submissions to the Office of the Whistleblower, and issue its Final 
Order.
    (i) The Office of the Whistleblower will provide you with the Final 
Order of the Commission.

[76 FR 34363, June 13, 2011, as amended at 85 FR 70946, Nov. 5, 2020]



Sec.  240.21F-12  Materials that may form the basis of an award 
determination and that may comprise the record on appeal.

    (a) The following items constitute the materials that the 
Commission, the Claims Review Staff (as specified in Sec.  240.21F-10(d) 
of this chapter), and the Office of the Whistleblower may rely upon to 
make an award determination pursuant to Sec. Sec.  240.21F-10, 240.21F-
11, and 240.21F-18 of this chapter:
    (1) Any publicly available materials from the covered action or 
related action, including:
    (i) The complaint, notice of hearing, answers and any amendments 
thereto;
    (ii) The final judgment, consent order, or final administrative 
order;
    (iii) Any transcripts of the proceedings, including any exhibits;
    (iv) Any items that appear on the docket; and
    (v) Any appellate decisions or orders.
    (2) The whistleblower's Form TCR, including attachments, and other 
related materials provided by the whistleblower to assist the Commission 
with the investigation or examination;
    (3) The whistleblower's Form WB-APP, including attachments, any 
supplemental materials submitted by the whistleblower before the 
deadline to file a claim for a whistleblower award for the relevant 
Notice of Covered Action, and any other materials timely submitted by 
the whistleblower in response either
    (i) To a request from the Office of the Whistleblower or the 
Commission; or
    (ii) To the Preliminary Determination or Preliminary Summary 
Disposition that was provided to the claimant;
    (4) Sworn declarations (including attachments) from the Commission 
staff regarding any matters relevant to the award determination;
    (5) With respect to an award claim involving a related action, any 
statements or other information that the entity provides or identifies 
in connection with an award determination, provided the entity has 
authorized the Commission to share the information with the claimant. 
(Neither the Commission nor the Claims Review Staff may rely upon 
information that the entity has not authorized the Commission to share 
with the claimant); and
    (6) Any other documents or materials from third parties (including 
sworn declarations) that are received or obtained by the Office of the 
Whistleblower to resolve the claimant's award application, including 
information related to the claimant's eligibility. (The Commission, the 
Claims Review Staff, and the Office of the Whistleblower

[[Page 788]]

may not rely upon information that the third party has not authorized 
the Commission to share with the claimant.)
    (b) These rules do not entitle claimants to obtain from the 
Commission any materials (including any pre-decisional or internal 
deliberative process materials that are prepared exclusively to assist 
the Commission in deciding the claim) other than those listed in 
paragraph (a) of this section. Moreover, the Office of the Whistleblower 
may make redactions as necessary to comply with any statutory 
restrictions, to protect the Commission's law enforcement and regulatory 
functions, and to comply with requests for confidential treatment from 
other law enforcement and regulatory authorities. The Office of the 
Whistleblower may also require you to sign a confidentiality agreement, 
as set forth in Sec.  240.21F-(8)(b)(4) of this chapter, before 
providing these materials.

[76 FR 34363, June 13, 2011, as amended at 85 FR 70947, Nov. 5, 2020]



Sec.  240.21F-13  Appeals.

    (a) Section 21F of the Exchange Act (15 U.S.C. 78u-6) commits 
determinations of whether, to whom, and in what amount to make awards to 
the Commission's discretion. A determination of whether or to whom to 
make an award may be appealed within 30 days after the Commission issues 
its final decision to the United States Court of Appeals for the 
District of Columbia Circuit, or to the circuit where the aggrieved 
person resides or has his principal place of business. Where the 
Commission makes an award based on the factors set forth in Sec.  
240.21F-6 of this chapter of not less than 10 percent and not more than 
30 percent of the monetary sanctions collected in the Commission or 
related action, the Commission's determination regarding the amount of 
an award (including the allocation of an award as between multiple 
whistleblowers, and any factual findings, legal conclusions, policy 
judgments, or discretionary assessments involving the Commission's 
consideration of the factors in Sec.  240.21F-6 of this chapter) is not 
appealable.
    (b) The record on appeal shall consist of the Final Order, any 
materials that were considered by the Commission in issuing the Final 
Order, and any materials that were part of the claims process leading 
from the Notice of Covered Action to the Final Order (including, but not 
limited to, the Notice of Covered Action, whistleblower award 
applications filed by the claimant, the Preliminary Determination or 
Preliminary Summary Disposition, materials that were considered by the 
Claims Review Staff in issuing the Preliminary Determination or that 
were provided to the claimant by the Office of the Whistleblower in 
connection with a Preliminary Summary Disposition, and materials that 
were timely submitted by the claimant in response to the Preliminary 
Determination or Preliminary Summary Disposition). The record on appeal 
shall not include any pre-decisional or internal deliberative process 
materials that are prepared exclusively to assist the Commission and the 
Claims Review Staff (as specified in Sec.  240.21F-10(d) of this 
chapter) in deciding the claim (including the staff's Proposed Final 
Determination or the Office of the Whistleblower's Proposed Final 
Summary Disposition, or any Draft Preliminary Determination or Draft 
Summary Disposition that were provided to the Commission for review). 
When more than one claimant has sought an award based on a single Notice 
of Covered Action, the Commission may exclude from the record on appeal 
any materials that do not relate directly to the claimant who is seeking 
judicial review.

[76 FR 34363, June 13, 2011, as amended at 85 FR 70947, Nov. 5, 2020]



Sec.  240.21F-14  Procedures applicable to the payment of awards.

    (a) Any award made pursuant to these rules will be paid from the 
Securities and Exchange Commission Investor Protection Fund (the 
``Fund'').
    (b) A recipient of a whistleblower award is entitled to payment on 
the award only to the extent that a monetary sanction is collected in 
the Commission action or in a related action upon which the award is 
based.
    (c) Payment of a whistleblower award for a monetary sanction 
collected in a Commission action or related action shall be made 
following the later of:

[[Page 789]]

    (1) The date on which the monetary sanction is collected; or
    (2) The completion of the appeals process for all whistleblower 
award claims arising from:
    (i) The Notice of Covered Action, in the case of any payment of an 
award for a monetary sanction collected in a Commission action; or
    (ii) The related action, in the case of any payment of an award for 
a monetary sanction collected in a related action.
    (d) If there are insufficient amounts available in the Fund to pay 
the entire amount of an award payment within a reasonable period of time 
from the time for payment specified by paragraph (c) of this section, 
then subject to the following terms, the balance of the payment shall be 
paid when amounts become available in the Fund, as follows:
    (1) Where multiple whistleblowers are owed payments from the Fund 
based on awards that do not arise from the same Notice of Covered Action 
(or related action), priority in making these payments will be 
determined based upon the date that the collections for which the 
whistleblowers are owed payments occurred. If two or more of these 
collections occur on the same date, those whistleblowers owed payments 
based on these collections will be paid on a pro rata basis until 
sufficient amounts become available in the Fund to pay their entire 
payments.
    (2) Where multiple whistleblowers are owed payments from the Fund 
based on awards that arise from the same Notice of Covered Action (or 
related action), they will share the same payment priority and will be 
paid on a pro rata basis until sufficient amounts become available in 
the Fund to pay their entire payments.



Sec.  240.21F-15  No amnesty.

    The Securities Whistleblower Incentives and Protection provisions do 
not provide amnesty to individuals who provide information to the 
Commission. The fact that you may become a whistleblower and assist in 
Commission investigations and enforcement actions does not preclude the 
Commission from bringing an action against you based upon your own 
conduct in connection with violations of the Federal securities laws. If 
such an action is determined to be appropriate, however, the Commission 
will take your cooperation into consideration in accordance with its 
Policy Statement Concerning Cooperation by Individuals in Investigations 
and Related Enforcement Actions (17 CFR 202.12).



Sec.  240.21F-16  Awards to whistleblowers who engage in culpable conduct.

    In determining whether the required $1,000,000 threshold has been 
satisfied (this threshold is further explained in Sec.  240.21F-10 of 
this chapter) for purposes of making any award, the Commission will not 
take into account any monetary sanctions that the whistleblower is 
ordered to pay, or that are ordered against any entity whose liability 
is based substantially on conduct that the whistleblower directed, 
planned, or initiated. Similarly, if the Commission determines that a 
whistleblower is eligible for an award, any amounts that the 
whistleblower or such an entity pay in sanctions as a result of the 
action or related actions will not be included within the calculation of 
the amounts collected for purposes of making payments.



Sec.  240.21F-17  Staff communications with individuals reporting possible
securities law violations.

    (a) No person may take any action to impede an individual from 
communicating directly with the Commission staff about a possible 
securities law violation, including enforcing, or threatening to 
enforce, a confidentiality agreement (other than agreements dealing with 
information covered by Sec.  240.21F-4(b)(4)(i) and Sec.  240.21F-
4(b)(4)(ii) of this chapter related to the legal representation of a 
client) with respect to such communications.
    (b) If you are a director, officer, member, agent, or employee of an 
entity that has counsel, and you have initiated communication with the 
Commission relating to a possible securities law violation, the staff is 
authorized to communicate directly with you regarding the possible 
securities law violation without seeking the consent of the entity's 
counsel.

[[Page 790]]



Sec.  240.21F-18  Summary disposition.

    (a) Notwithstanding the procedures specified in Sec.  240.21F-10(d) 
through (g) and in Sec.  240.21F-11(d) through (g) of this chapter, the 
Office of the Whistleblower may determine that an award application that 
meets any of the following conditions for denial shall be resolved 
through the summary disposition process described further in paragraph 
(b) of this section:
    (1) You submitted an untimely award application;
    (2) You did not comply with the requirements of Sec.  240.21F-9 of 
this chapter when submitting the tip upon which your award claim is 
based, and you otherwise are not eligible for a waiver under either 
Sec.  240.21F-9(e) or the Commission's other waiver authorities;
    (3) The information that you submitted was never provided to or used 
by the staff handling the covered action or the underlying investigation 
(or examination), and those staff members otherwise had no contact with 
you;
    (4) You did not comply with Sec.  240.21F-8(b) of this chapter;
    (5) You failed to specify in the award application the submission 
pursuant to Sec.  240.21F-9(a) of this chapter upon which your claim to 
an award is based;
    (6) Your application does not raise any novel or important legal or 
policy questions.
    (b) The following procedures shall apply to any award application 
designated for summary disposition:
    (1) The Office of the Whistleblower shall issue a Preliminary 
Summary Disposition that notifies you that your award application has 
been designated for resolution through the summary disposition process. 
The Preliminary Summary Disposition shall also state that the Office has 
preliminarily determined to recommend that the Commission deny the award 
application and identify the basis for the denial.
    (2) Prior to issuing the Preliminary Summary Disposition, the Office 
of the Whistleblower shall prepare a staff declaration that sets forth 
any pertinent facts regarding the Office's recommendation to deny your 
application. At the same time that it provides you with the Preliminary 
Summary Disposition, the Office of the Whistleblower shall, in its sole 
discretion, either
    (i) Provide you with the staff declaration; or
    (ii) Notify you that a staff declaration has been prepared and 
advise you that you may obtain the declaration only if within fifteen 
(15) calendar days you sign and complete a confidentiality agreement in 
a form and manner acceptable to the Office of the Whistleblower pursuant 
to Sec.  240.21F-8(b)(4) of this chapter. If you fail to return the 
signed confidentiality agreement within fifteen (15) calendar days, you 
will be deemed to have waived your ability to receive the staff 
declaration.
    (3) You may reply to the Preliminary Summary Disposition by 
submitting a response to the Office of the Whistleblower within thirty 
(30) calendar days of the later of:
    (i) The date of the Preliminary Summary Disposition, or
    (ii) The date that the Office of the Whistleblower sends the staff 
declaration to you following your timely return of a signed 
confidentiality agreement. The response must identify the grounds for 
your objection to the denial (or in the case of item (a)(5) of this 
section, correct the defect). The response must be in the form and 
manner that the Office of the Whistleblower shall require. You may 
include documentation or other evidentiary support for the grounds 
advanced in your response.
    (4) If you fail to submit a timely response pursuant to paragraph 
(b)(3) of this section, the Preliminary Summary Disposition will become 
the Final Order of the Commission. Your failure to submit a timely 
written response will constitute a failure to exhaust administrative 
remedies.
    (5) If you submit a timely response pursuant to paragraph (b)(3) of 
this section, the Office of the Whistleblower will consider the issues 
and grounds advanced in your response, along with any supporting 
documentation that you provided, and will prepare a Proposed Final 
Summary Disposition. The Office of the Whistleblower may supplement the 
administrative record as appropriate. (This provision does not prevent 
the Office of the Whistleblower

[[Page 791]]

from determining that, based on your written response, the award claim 
is no longer appropriate for summary disposition and that it should be 
resolved through the claims adjudication procedures specified in either 
Sec. Sec.  240.21F-10 or 240.21F-11 of this chapter).
    (6) The Office of the Whistleblower will then notify the Commission 
of the Proposed Final Summary Disposition. Within thirty (30) calendar 
days thereafter, any Commissioner may request that the Proposed Final 
Summary Disposition be reviewed by the Commission. If no Commissioner 
requests such a review within the 30-day period, then the Proposed Final 
Summary Disposition will become the Final Order of the Commission. In 
the event a Commissioner requests a review, the Commission will consider 
the award application and issue a Final Order.
    (7) The Office of the Whistleblower will provide you with the Final 
Order of the Commission.
    (c) In considering an award determination pursuant to this rule, the 
Office of the Whistleblower and the Commission may rely upon the items 
specified in Sec.  240.21F-12(a) of this chapter. Further, Sec.  
240.21F-12(b) of this chapter shall apply to summary dispositions.

[85 FR 70947, Nov. 5, 2020]

      Inspection and Publication of Information Filed Under the Act



Sec.  240.24b-1  Documents to be kept public by exchanges.

    Upon action of the Commission granting an exchange's application for 
registration or exemption, the exchange shall make available to public 
inspection at its offices during reasonable office hours a copy of the 
statement and exhibits filed with the Commission (including any 
amendments thereto) except those portions thereof to the disclosure of 
which the exchange shall have filed objection pursuant to Sec.  240.24b-
2 which objection shall not have been overruled by the Commission 
pursuant to section 24(b) of the Act.

(Sec. 24, 48 Stat. 901; 15 U.S.C. 78x)

    Cross Reference: For regulations relating to registration and 
exemption of exchanges, see Sec. Sec.  240.6a-1 to 240.6a-3.

[13 FR 8214, Dec. 22, 1948]



Sec.  240.24b-2  Nondisclosure of information filed with the Commission
and with any exchange.

    Preliminary Note: Except as otherwise provided in this rule, 
confidential treatment requests shall be submitted in paper format only, 
whether or not the filer is required to submit a filing in electronic 
format.

    (a) Any person filing any registration statement, report, 
application, statement, correspondence, notice or other document (herein 
referred to as the material filed) pursuant to the Act may make written 
objection to the public disclosure of any information contained therein 
in accordance with the procedure set forth below. The procedure provided 
in this rule shall be the exclusive means of requesting confidential 
treatment of information required to be filed under the Act.
    (b) Except as otherwise provided in paragraphs (g) and (h) of this 
section, the person shall omit from material filed the portion thereof 
which it desires to keep undisclosed (hereinafter called the 
confidential portion). In lieu thereof, it shall indicate at the 
appropriate place in the material filed that the confidential portion 
has been so omitted and filed separately with the Commission. The person 
shall file with the copies of the material filed with the Commission:
    (1) One copy of the confidential portion, marked ``Confidential 
Treatment,'' of the material filed with the Commission. The copy shall 
contain an appropriate identification of the item or other requirement 
involved and, notwithstanding that the confidential portion does not 
constitute the whole of the answer, the entire answer thereto; except 
that in the case where the confidential portion is part of a financial 
statement or schedule, only the particular financial statement or 
schedule need be included. The copy of the confidential portion shall be 
in the same form as the remainder of the material filed;
    (2) An application making objection to the disclosure of the 
confidential portion. Such application shall be on a sheet or sheets 
separate from the confidential portion, and shall contain:
    (i) An identification of the portion;
    (ii) A statement of the grounds of objection referring to, and 
containing an

[[Page 792]]

analysis of, the applicable exemption(s) from disclosure under the 
Freedom of Information Act (5 U.S.C. 552(b)), and a justification of the 
period of time for which confidential treatment is sought;
    (iii) A written consent to the furnishing of the confidential 
portion to other government agencies, offices or bodies and to the 
Congress; and
    (iv) The name of each exchange, if any, with which the material is 
filed.
    (3) The copy of the confidential portion and the application filed 
in accordance with this paragraph (b) shall be enclosed in a separate 
envelope marked ``Confidential Treatment'' and addressed to The 
Secretary, Securities and Exchange Commission, Washington, DC 20549.
    (c) Pending a determination as to the objection filed the material 
for which confidential treatment has been applied will not be made 
available to the public.
    (d)(1) If it is determined that the objection should be sustained, a 
notation to that effect will be made at the appropriate place in the 
material filed. Such a determination will not preclude reconsideration 
whenever appropriate, such as upon receipt of any subsequent request 
under the Freedom of Information Act (5 U.S.C. 552) and, if appropriate, 
revocation of the confidential status of all or a portion of the 
information in question. Where an initial determination has been made 
under this rule to sustain objections to disclosure, the Commission will 
attempt to give the person requesting confidential treatment advance 
notice, wherever possible, if confidential treatment is revoked.
    (2) In any case where an objection to disclosure has been disallowed 
or where a prior grant of confidential treatment has been revoked, the 
person who requested such treatment will be so informed by registered or 
certified mail to the person or his agent for service. Pursuant to Sec.  
201.431 of this chapter, persons making objections to disclosure may 
petition the Commission for review of a determination by the Division 
disallowing objections or revoking confidential treatment.
    (e) The confidential portion shall be made available to the public 
at the time and according to the conditions specified in paragraphs (d) 
(1) and (2) of this section:
    (1) Upon the lapse of five days after the dispatch of notice by 
registered or certified mail of a determination disallowing an 
objection, if prior to the lapse of such five days the person shall not 
have communicated to the Secretary of the Commission his intention to 
seek review by the Commission under Sec.  201.431 of this chapter of the 
determination made by the Division; or
    (2) If such a petition for review shall have been filed under Sec.  
201.431 of this chapter, upon final disposition thereof adverse to the 
petitioner.
    (f) If the confidential portion is made available to the public, one 
copy thereof shall be attached to each copy of the material filed with 
the Commission and with each exchange.
    (g) An SCI entity (as defined in Sec.  242.1000 of this chapter) 
shall not omit the confidential portion from the material filed in 
electronic format on Form SCI pursuant to Regulation SCI, Sec.  242.1000 
et. seq., and, in lieu of the procedures described in paragraph (b) of 
this section, may request confidential treatment of all information 
provided on Form SCI by completing Section IV of Form SCI.
    (h) A security-based swap data repository shall not omit the 
confidential portion from the material filed in electronic format 
pursuant to section 13(n) of the Act (15 U.S.C. 78m(n)) and the rules 
and regulations thereunder. In lieu of the procedures described in 
paragraph (b) of this section, a security-based swap data repository 
shall request confidential treatment electronically for any material 
filed in electronic format pursuant to section 13(n) of the Act (15 
U.S.C. 78m(n)) and the rules and regulations thereunder.

[41 FR 20578, May 19, 1976, as amended at 58 FR 14685, Mar. 18, 1993; 60 
FR 32825, June 23, 1995; 60 FR 47692, Sept. 14, 1995; 61 FR 30404, June 
14, 1996; 79 FR 72436, Dec. 5, 2014; 80 FR 14556, Mar. 19, 2015; 84 FR 
50739, Sept. 26, 2019]

[[Page 793]]



Sec.  240.24b-3  Information filed by issuers and others under
sections 12, 13, 14, and 16.

    (a) Except as otherwise provided in this section and in Sec.  
240.17a-6, each exchange shall keep available to the public under 
reasonable regulations as to the manner of inspection, during reasonable 
office hours, all information regarding a security registered on such 
exchange which is filed with it pursuant to section 12, 13, 14, or 16, 
or any rules or regulations thereunder. This requirement shall not apply 
to any information to the disclosure of which objection has been filed 
pursuant to Sec.  240.24b-2, which objection shall not have been 
overruled by the Commission pursuant to section 24(b). The making of 
such information available pursuant to this section shall not be deemed 
a representation by any exchange as to the accuracy, completeness, or 
genuineness thereof.
    (b) In the case of an application for registration of a security 
pursuant to section 12 an exchange may delay making available the 
information contained therein until it has certified to the Commission 
its approval of such security for listing and registration.

(Sec. 24, 48 Stat. 901, as amended; 15 U.S.C. 78x)

[16 FR 3109, Apr. 10, 1951]



Sec.  240.24c-1  Access to nonpublic information.

    (a) For purposes of this section, the term ``nonpublic information'' 
means records, as defined in Section 24(a) of the Act, and other 
information in the Commission's possession, which are not available for 
public inspection and copying.
    (b) The Commission may, in its discretion and upon a showing that 
such information is needed, provide nonpublic information in its 
possession to any of the following persons if the person receiving such 
nonpublic information provides such assurances of confidentiality as the 
Commission deems appropriate:
    (1) A federal, state, local or foreign government or any political 
subdivision, authority, agency or instrumentality of such government;
    (2) A self-regulatory organization as defined in Section 3(a)(26) of 
the Act, or any similar organization empowered with self-regulatory 
responsibilities under the federal securities laws (as defined in 
Section 3(a)(47) of the Act), the Commodity Exchange Act (7 U.S.C. 1, et 
seq.), or any substantially equivalent foreign statute or regulation;
    (3) A foreign financial regulatory authority as defined in Section 
3(a)(51) of the Act;
    (4) The Securities Investor Protection Corporation or any trustee or 
counsel for a trustee appointed pursuant to Section 5(b) of the 
Securities Investor Protection Act of 1970;
    (5) A trustee in bankruptcy;
    (6) A trustee, receiver, master, special counsel or other person 
that is appointed by a court of competent jurisdiction or as a result of 
an agreement between the parties in connection with litigation or an 
administrative proceeding involving allegations of violations of the 
securities laws (as defined in Section 3(a)(47) of the Act) or the 
Commission's Rules of Practice, 17 CFR part 201, or otherwise, where 
such trustee, receiver, master, special counsel or other person is 
specifically designated to perform particular functions with respect to, 
or as a result of, the litigation or proceeding or in connection with 
the administration and enforcement by the Commission of the federal 
securities laws or the Commission's Rules of Practice;
    (7) A bar association, state accountancy board or other federal, 
state, local or foreign licensing or oversight authority, or a 
professional association or self-regulatory authority to the extent that 
it performs similar functions; or
    (8) A duly authorized agent, employee or representative of any of 
the above persons.
    (c) Nothing contained in this section shall affect:
    (1) The Commission's authority or discretion to provide or refuse to 
provide access to, or copies of, nonpublic information in its possession 
in accordance with such other authority or discretion as the Commission 
possesses by statute, rule or regulation; or
    (2) The Commission's responsibilities under the Privacy Act of 1974 
(5 U.S.C.

[[Page 794]]

552a), or the Right to Financial Privacy Act of 1978 (12 U.S.C. 3401-22) 
as limited by section 21(h) of the Act.

[58 FR 52419, Oct. 8, 1993]



Sec.  240.31  Section 31 transaction fees.

    (a) Definitions. For the purpose of this section, the following 
definitions shall apply:
    (1) Assessment charge means the amount owed by a covered SRO for a 
covered round turn transaction pursuant to section 31(d) of the Act (15 
U.S.C. 78ee(d)).
    (2) Billing period means, for a single calendar year:
    (i) January 1 through August 31 (``billing period 1''); or
    (ii) September 1 through December 31 (``billing period 2'').
    (3) Charge date means the date on which a covered sale or covered 
round turn transaction occurs for purposes of determining the liability 
of a covered SRO pursuant to section 31 of the Act (15 U.S.C. 78ee). The 
charge date is:
    (i) The settlement date, with respect to any covered sale (other 
than a covered sale resulting from the exercise of an option settled by 
physical delivery or from the maturation of a security future settled by 
physical delivery) or covered round turn transaction that a covered SRO 
is required to report to the Commission based on data that the covered 
SRO receives from a designated clearing agency;
    (ii) The exercise date, with respect to a covered sale resulting 
from the exercise of an option settled by physical delivery;
    (iii) The maturity date, with respect to a covered sale resulting 
from the maturation of a security future settled by physical delivery; 
and
    (iv) The trade date, with respect to all other covered sales and 
covered round turn transactions.
    (4) Covered association means any national securities association by 
or through any member of which covered sales or covered round turn 
transactions occur otherwise than on a national securities exchange.
    (5) Covered exchange means any national securities exchange on which 
covered sales or covered round turn transactions occur.
    (6) Covered sale means a sale of a security, other than an exempt 
sale or a sale of a security future, occurring on a national securities 
exchange or by or through any member of a national securities 
association otherwise than on a national securities exchange.
    (7) Covered round turn transaction means a round turn transaction in 
a security future, other than a round turn transaction in a future on a 
narrow-based security index, occurring on a national securities exchange 
or by or through a member of a national securities association otherwise 
than on a national securities exchange.
    (8) Covered SRO means a covered exchange or covered association.
    (9) Designated clearing agency means a clearing agency registered 
under section 17A of the Act (15 U.S.C. 78q-1) that clears and settles 
covered sales or covered round turn transactions.
    (10) Due date means:
    (i) March 15, with respect to the amounts owed by covered SROs under 
section 31 of the Act (15 U.S.C. 78ee) for covered sales and covered 
round turn transactions having a charge date in billing period 2; and
    (ii) September 30, with respect to the amounts owed by covered SROs 
under section 31 of the Act (15 U.S.C. 78ee) for covered sales and 
covered round turn transactions having a charge date in billing period 
1.
    (11) Exempt sale means:
    (i) Any sale of a security offered pursuant to an effective 
registration statement under the Securities Act of 1933 (except a sale 
of a put or call option issued by the Options Clearing Corporation) or 
offered in accordance with an exemption from registration afforded by 
section 3(a) or 3(b) of the Securities Act of 1933 (15 U.S.C. 77c(a) or 
77c(b)), or a rule thereunder;
    (ii) Any sale of a security by an issuer not involving any public 
offering within the meaning of section 4(2) of the Securities Act of 
1933 (15 U.S.C. 77d(2));
    (iii) Any sale of a security pursuant to and in consummation of a 
tender or exchange offer;
    (iv) Any sale of a security upon the exercise of a warrant or right 
(except a put or call), or upon the conversion of a convertible 
security;

[[Page 795]]

    (v) Any sale of a security that is executed outside the United 
States and is not reported, or required to be reported, to a transaction 
reporting association as defined in Sec.  242.600 of this chapter and 
any approved plan filed thereunder;
    (vi) Any sale of an option on a security index (including both a 
narrow-based security index and a non-narrow-based security index);
    (vii) Any sale of a bond, debenture, or other evidence of 
indebtedness; and
    (viii) Any recognized riskless principal sale.
    (12) Fee rate means the fee rate applicable to covered sales under 
section 31(b) or (c) of the Act (15 U.S.C. 78ee(b) or (c)), as adjusted 
from time to time by the Commission pursuant to section 31(j) of the Act 
(15 U.S.C. 78ee(j)).
    (13) Narrow-based security index means the same as in section 
3(a)(55)(B) and (C) of the Act (15 U.S.C. 78c(a)(55)(B) and (C)).
    (14) Recognized riskless principal sale means a sale of a security 
where all of the following conditions are satisfied:
    (i) A broker-dealer receives from a customer an order to buy (sell) 
a security;
    (ii) The broker-dealer engages in two contemporaneous offsetting 
transactions as principal, one in which the broker-dealer buys (sells) 
the security from (to) a third party and the other in which the broker-
dealer sells (buys) the security to (from) the customer; and
    (iii) The Commission, pursuant to section 19(b)(2) of the Act (15 
U.S.C. 78s(b)(2)), has approved a proposed rule change submitted by the 
covered SRO on which the second of the two contemporaneous offsetting 
transactions occurs that permits that transaction to be reported as 
riskless.
    (15) Round turn transaction in a security future means one purchase 
and one sale of a contract of sale for future delivery.
    (16) Physical delivery exchange-traded option means a securities 
option that is listed and registered on a national securities exchange 
and settled by the physical delivery of the underlying securities.
    (17) Section 31 bill means the bill sent by the Commission to a 
covered SRO pursuant to section 31 of the Act (15 U.S.C. 78ee) showing 
the total amount due from the covered SRO for the billing period, as 
calculated by the Commission based on the data submitted by the covered 
SRO in its Form R31 (Sec.  249.11 of this chapter) submissions for the 
months of the billing period.
    (18) Trade reporting system means an automated facility operated by 
a covered SRO used to collect or compare trade data.
    (b) Reporting of covered sales and covered round turn transactions. 
(1) Each covered SRO shall submit a completed Form R31 (Sec.  249.11 of 
this chapter) to the Commission within ten business days after the end 
of each month.
    (2) A covered exchange shall provide on Form R31 the following data 
on covered sales and covered round turn transactions occurring on that 
exchange and having a charge date in that month:
    (i) The aggregate dollar amount of covered sales that it reported to 
a designated clearing agency, as reflected in the data provided by the 
designated clearing agency;
    (ii) The aggregate dollar amount of covered sales resulting from the 
exercise of physical delivery exchange-traded options or from matured 
security futures, as reflected in the data provided by a designated 
clearing agency that clears and settles options or security futures;
    (iii) The aggregate dollar amount of covered sales that it captured 
in a trade reporting system but did not report to a designated clearing 
agency;
    (iv) The aggregate dollar amount of covered sales that it neither 
captured in a trade reporting system nor reported to a designated 
clearing agency; and
    (v) The total number of covered round turn transactions that it 
reported to a designated clearing agency, as reflected in the data 
provided by the designated clearing agency.
    (3) A covered association shall provide on Form R31 the following 
data on covered sales and covered round turn transactions occurring by 
or through any member of such association otherwise than on a national 
securities exchange and having a charge date in that month:

[[Page 796]]

    (i) The aggregate dollar amount of covered sales that it captured in 
a trade reporting system;
    (ii) The aggregate dollar amount of covered sales that it did not 
capture in a trade reporting system; and
    (iii) The total number of covered round turn transactions that it 
reported to a designated clearing agency, as reflected in the data 
provided by the designated clearing agency.
    (4) Duties of designated clearing agency. (i) A designated clearing 
agency shall provide a covered SRO, upon request, the data in its 
possession needed by the covered SRO to complete Part I of Form R31 
(Sec.  249.11 of this chapter).
    (ii) If a covered exchange trades physical delivery exchange-traded 
options or security futures that settle by physical delivery of the 
underlying securities, the designated clearing agency that clears and 
settles such transactions shall provide that covered exchange with the 
data in its possession relating to the covered sales resulting from the 
exercise of such options or from the matured security futures. If, 
during a particular month, the designated clearing agency cannot 
determine the covered exchange on which the options or security futures 
originally were traded, the designated clearing agency shall assign 
covered sales resulting from exercises or maturations as follows. To 
provide Form R31 data to the covered exchange for a particular month, 
the designated clearing agency shall:
    (A) Calculate the aggregate dollar amount of all covered sales in 
the previous calendar month resulting from exercises and maturations, 
respectively, occurring on all covered exchanges for which it clears and 
settles transactions;
    (B) Calculate, for the previous calendar month, the aggregate dollar 
amount of covered sales of physical delivery exchange-traded options 
occurring on each covered exchange for which it clears and settles 
transactions, and the aggregate dollar amount of covered sales of 
physical delivery exchange-traded options occurring on all such 
exchanges collectively;
    (C) Calculate, for the previous calendar month, the total number of 
covered round turn transactions in security futures that settle by 
physical delivery that occurred on each covered exchange for which it 
clears and settles transactions, and the total number of covered round 
turn transactions in security futures that settle by physical delivery 
that occurred on all such exchanges collectively;
    (D) Determine for the previous calendar month each covered 
exchange's percentage of the total dollar volume of physical delivery 
exchange-traded options (``exercise percentage'') and each covered 
exchange's percentage of the total number of covered round turn 
transactions in security futures that settle by physical delivery 
(``maturation percentage''); and
    (E) In the current month, assign to each covered exchange for which 
it clears and settles covered sales the exercise percentage of the 
aggregate dollar amount of covered sales on all covered exchanges 
resulting from the exercise of physical delivery exchange-traded options 
and the maturation percentage of all covered sales on all covered 
exchanges resulting from the maturation of security futures that settle 
by physical delivery.
    (5) A covered SRO shall provide in Part I of Form R31 only the data 
supplied to it by a designated clearing agency.
    (c) Calculation and billing of section 31 fees. (1) The amount due 
from a covered SRO for a billing period, as reflected in its Section 31 
bill, shall be the sum of the monthly amounts due for each month in the 
billing period.
    (2) The monthly amount due from a covered SRO shall equal:
    (i) The aggregate dollar amount of its covered sales that have a 
charge date in that month, times the fee rate; plus
    (ii) The total number of its covered round turn transactions that 
have a charge date in that month, times the assessment charge.
    (3) By the due date, each covered SRO shall pay the Commission, 
either directly or through a designated clearing agency acting as agent, 
the entire amount due for the billing period, as reflected in its 
Section 31 bill.

[69 FR 41078, July 7, 2004, as amended at 70 FR 37619, June 29, 2005]

[[Page 797]]



Sec.  240.31T  Temporary rule regarding fiscal year 2004.

    (a) Definitions. (1) For the purpose of this section, the following 
definitions shall apply:
    (i) FY2004 adjustment amount means the FY2004 recalculated amount 
minus the FY2004 prepayment amount.
    (ii) FY2004 prepayment amount means the total dollar amount of fees 
and assessments paid by a covered SRO pursuant to the March 15, 2004, 
due date for covered sales and covered round turn transactions having a 
charge date between September 1, 2003, and December 31, 2003, inclusive.
    (iii) FY2004 recalculated amount means the total dollar amount of 
fees and assessments owed by a covered SRO for covered sales and covered 
round turn transactions having a charge date between September 1, 2003, 
and December 31, 2003, inclusive, as calculated by the Commission based 
on the data submitted by the covered SRO in its Form R31 (Sec.  249.11 
of this chapter) submissions for September 2003, October 2003, November 
2003, and December 2003, and indicated on a Section 31 bill for these 
months.
    (2) Any term used in this section that is defined in Sec.  240.30(a) 
of this chapter shall have the same meaning as in Sec.  240.30(a) of 
this chapter.
    (b) By August 13, 2004, each covered SRO shall submit to the 
Commission a completed Form R31 for each of the months September 2003 to 
June 2004, inclusive.
    (c) If the FY2004 adjustment amount of a covered SRO is a positive 
number, the covered SRO shall include the FY2004 adjustment amount with 
the payment for its next Section 31 bill.
    (d) If the FY2004 adjustment amount is a negative number, the 
Commission shall credit the FY2004 adjustment amount to the covered 
SRO's next Section 31 bill.
    (e) Notwithstanding paragraph (a)(1)(iii) of this section, any 
covered exchange that as of August 2003 was calculating its Section 31 
fees based on the trade date of its covered sales shall not include on 
its September 2003 Form R31 data for any covered sale having a trade 
date before September 1, 2003.
    (f) This temporary section shall expire on January 1, 2005.

[69 FR 41080, July 7, 2004]



Sec.  240.36a1-1  Exemption from Section 7 for OTC derivatives dealers.

    Preliminary Note: OTC derivatives dealers are a special class of 
broker-dealers that are exempt from certain broker-dealer requirements, 
including membership in a self-regulatory organization (Sec.  240.15b9-
2), regular broker-dealer margin rules (Sec.  240.36a1-1), and 
application of the Securities Investor Protection Act of 1970 (Sec.  
240.36a1-2). OTC derivative dealers are subject to special requirements, 
including limitations on the scope of their securities activities (Sec.  
240.15a-1), specified internal risk management control systems (Sec.  
240.15c3-4), recordkeeping obligations (Sec.  240.17a-3(a)(10)), and 
reporting responsibilities (Sec.  240.17a-12). They are also subject to 
alternative net capital treatment (Sec.  240.15c3-1(a)(5)).

    (a) Except as otherwise provided in paragraph (b) of this section, 
transactions involving the extension of credit by an OTC derivatives 
dealer shall be exempt from the provisions of section 7(c) of the Act 
(15 U.S.C. 78g(c)), provided that the OTC derivatives dealer complies 
with Section 7(d) of the Act (15 U.S.C. 78g(d)).
    (b) The exemption provided under paragraph (a) of this section shall 
not apply to extensions of credit made directly by a registered broker 
or dealer (other than an OTC derivatives dealer) in connection with 
transactions in eligible OTC derivative instruments for which an OTC 
derivatives dealer acts as counterparty.

[63 FR 59404, Nov. 3, 1998]



Sec.  240.36a1-2  Exemption from SIPA for OTC derivatives dealers.

    Preliminary Note: OTC derivatives dealers are a special class of 
broker-dealers that are exempt from certain broker-dealer requirements, 
including membership in a self-regulatory organization (Sec.  240.15b9-
2), regular broker-dealer margin rules (Sec.  240.36a1-1), and 
application of the Securities Investor Protection Act of 1970 (Sec.  
240.36a1-2). OTC derivative dealers are subject to special requirements, 
including limitations on the scope of their securities activities (Sec.  
240.15a-1), specified internal risk management control systems (Sec.  
240.15c3-4), recordkeeping obligations (Sec.  240.17a-3(a)(10)), and 
reporting responsibilities (Sec.  240.17a-12). They are also subject to

[[Page 798]]

alternative net capital treatment (Sec.  240.15c3-1(a)(5)).

    OTC derivatives dealers, as defined in Sec.  240.3b-12, shall be 
exempt from the provisions of the Securities Investor Protection Act of 
1970 (15 U.S.C. 78aaa through 78lll).

[63 FR 59404, Nov. 3, 1998]

Subpart B--Rules and Regulations Under the Securities Investor Protection 
Act of 1970 [Reserved]

[[Page 799]]



                              FINDING AIDS




  --------------------------------------------------------------------

  A list of CFR titles, subtitles, chapters, subchapters and parts and 
an alphabetical list of agencies publishing in the CFR are included in 
the CFR Index and Finding Aids volume to the Code of Federal Regulations 
which is published separately and revised annually.

  Table of CFR Titles and Chapters
  Alphabetical List of Agencies Appearing in the CFR
  Table of OMB Control Numbers
  List of CFR Sections Affected

[[Page 801]]



                    Table of CFR Titles and Chapters




                      (Revised as of April 1, 2021)

                      Title 1--General Provisions

         I  Administrative Committee of the Federal Register 
                (Parts 1--49)
        II  Office of the Federal Register (Parts 50--299)
       III  Administrative Conference of the United States (Parts 
                300--399)
        IV  Miscellaneous Agencies (Parts 400--599)
        VI  National Capital Planning Commission (Parts 600--699)

                    Title 2--Grants and Agreements

            Subtitle A--Office of Management and Budget Guidance 
                for Grants and Agreements
         I  Office of Management and Budget Governmentwide 
                Guidance for Grants and Agreements (Parts 2--199)
        II  Office of Management and Budget Guidance (Parts 200--
                299)
            Subtitle B--Federal Agency Regulations for Grants and 
                Agreements
       III  Department of Health and Human Services (Parts 300--
                399)
        IV  Department of Agriculture (Parts 400--499)
        VI  Department of State (Parts 600--699)
       VII  Agency for International Development (Parts 700--799)
      VIII  Department of Veterans Affairs (Parts 800--899)
        IX  Department of Energy (Parts 900--999)
         X  Department of the Treasury (Parts 1000--1099)
        XI  Department of Defense (Parts 1100--1199)
       XII  Department of Transportation (Parts 1200--1299)
      XIII  Department of Commerce (Parts 1300--1399)
       XIV  Department of the Interior (Parts 1400--1499)
        XV  Environmental Protection Agency (Parts 1500--1599)
     XVIII  National Aeronautics and Space Administration (Parts 
                1800--1899)
        XX  United States Nuclear Regulatory Commission (Parts 
                2000--2099)
      XXII  Corporation for National and Community Service (Parts 
                2200--2299)
     XXIII  Social Security Administration (Parts 2300--2399)
      XXIV  Department of Housing and Urban Development (Parts 
                2400--2499)
       XXV  National Science Foundation (Parts 2500--2599)
      XXVI  National Archives and Records Administration (Parts 
                2600--2699)

[[Page 802]]

     XXVII  Small Business Administration (Parts 2700--2799)
    XXVIII  Department of Justice (Parts 2800--2899)
      XXIX  Department of Labor (Parts 2900--2999)
       XXX  Department of Homeland Security (Parts 3000--3099)
      XXXI  Institute of Museum and Library Services (Parts 3100--
                3199)
     XXXII  National Endowment for the Arts (Parts 3200--3299)
    XXXIII  National Endowment for the Humanities (Parts 3300--
                3399)
     XXXIV  Department of Education (Parts 3400--3499)
      XXXV  Export-Import Bank of the United States (Parts 3500--
                3599)
     XXXVI  Office of National Drug Control Policy, Executive 
                Office of the President (Parts 3600--3699)
    XXXVII  Peace Corps (Parts 3700--3799)
     LVIII  Election Assistance Commission (Parts 5800--5899)
       LIX  Gulf Coast Ecosystem Restoration Council (Parts 5900--
                5999)

                        Title 3--The President

         I  Executive Office of the President (Parts 100--199)

                           Title 4--Accounts

         I  Government Accountability Office (Parts 1--199)

                   Title 5--Administrative Personnel

         I  Office of Personnel Management (Parts 1--1199)
        II  Merit Systems Protection Board (Parts 1200--1299)
       III  Office of Management and Budget (Parts 1300--1399)
        IV  Office of Personnel Management and Office of the 
                Director of National Intelligence (Parts 1400--
                1499)
         V  The International Organizations Employees Loyalty 
                Board (Parts 1500--1599)
        VI  Federal Retirement Thrift Investment Board (Parts 
                1600--1699)
      VIII  Office of Special Counsel (Parts 1800--1899)
        IX  Appalachian Regional Commission (Parts 1900--1999)
        XI  Armed Forces Retirement Home (Parts 2100--2199)
       XIV  Federal Labor Relations Authority, General Counsel of 
                the Federal Labor Relations Authority and Federal 
                Service Impasses Panel (Parts 2400--2499)
       XVI  Office of Government Ethics (Parts 2600--2699)
       XXI  Department of the Treasury (Parts 3100--3199)
      XXII  Federal Deposit Insurance Corporation (Parts 3200--
                3299)
     XXIII  Department of Energy (Parts 3300--3399)
      XXIV  Federal Energy Regulatory Commission (Parts 3400--
                3499)
       XXV  Department of the Interior (Parts 3500--3599)
      XXVI  Department of Defense (Parts 3600--3699)

[[Page 803]]

    XXVIII  Department of Justice (Parts 3800--3899)
      XXIX  Federal Communications Commission (Parts 3900--3999)
       XXX  Farm Credit System Insurance Corporation (Parts 4000--
                4099)
      XXXI  Farm Credit Administration (Parts 4100--4199)
    XXXIII  U.S. International Development Finance Corporation 
                (Parts 4300--4399)
     XXXIV  Securities and Exchange Commission (Parts 4400--4499)
      XXXV  Office of Personnel Management (Parts 4500--4599)
     XXXVI  Department of Homeland Security (Parts 4600--4699)
    XXXVII  Federal Election Commission (Parts 4700--4799)
        XL  Interstate Commerce Commission (Parts 5000--5099)
       XLI  Commodity Futures Trading Commission (Parts 5100--
                5199)
      XLII  Department of Labor (Parts 5200--5299)
     XLIII  National Science Foundation (Parts 5300--5399)
       XLV  Department of Health and Human Services (Parts 5500--
                5599)
      XLVI  Postal Rate Commission (Parts 5600--5699)
     XLVII  Federal Trade Commission (Parts 5700--5799)
    XLVIII  Nuclear Regulatory Commission (Parts 5800--5899)
      XLIX  Federal Labor Relations Authority (Parts 5900--5999)
         L  Department of Transportation (Parts 6000--6099)
       LII  Export-Import Bank of the United States (Parts 6200--
                6299)
      LIII  Department of Education (Parts 6300--6399)
       LIV  Environmental Protection Agency (Parts 6400--6499)
        LV  National Endowment for the Arts (Parts 6500--6599)
       LVI  National Endowment for the Humanities (Parts 6600--
                6699)
      LVII  General Services Administration (Parts 6700--6799)
     LVIII  Board of Governors of the Federal Reserve System 
                (Parts 6800--6899)
       LIX  National Aeronautics and Space Administration (Parts 
                6900--6999)
        LX  United States Postal Service (Parts 7000--7099)
       LXI  National Labor Relations Board (Parts 7100--7199)
      LXII  Equal Employment Opportunity Commission (Parts 7200--
                7299)
     LXIII  Inter-American Foundation (Parts 7300--7399)
      LXIV  Merit Systems Protection Board (Parts 7400--7499)
       LXV  Department of Housing and Urban Development (Parts 
                7500--7599)
      LXVI  National Archives and Records Administration (Parts 
                7600--7699)
     LXVII  Institute of Museum and Library Services (Parts 7700--
                7799)
    LXVIII  Commission on Civil Rights (Parts 7800--7899)
      LXIX  Tennessee Valley Authority (Parts 7900--7999)
       LXX  Court Services and Offender Supervision Agency for the 
                District of Columbia (Parts 8000--8099)
      LXXI  Consumer Product Safety Commission (Parts 8100--8199)
    LXXIII  Department of Agriculture (Parts 8300--8399)

[[Page 804]]

     LXXIV  Federal Mine Safety and Health Review Commission 
                (Parts 8400--8499)
     LXXVI  Federal Retirement Thrift Investment Board (Parts 
                8600--8699)
    LXXVII  Office of Management and Budget (Parts 8700--8799)
      LXXX  Federal Housing Finance Agency (Parts 9000--9099)
   LXXXIII  Special Inspector General for Afghanistan 
                Reconstruction (Parts 9300--9399)
    LXXXIV  Bureau of Consumer Financial Protection (Parts 9400--
                9499)
    LXXXVI  National Credit Union Administration (Parts 9600--
                9699)
     XCVII  Department of Homeland Security Human Resources 
                Management System (Department of Homeland 
                Security--Office of Personnel Management) (Parts 
                9700--9799)
    XCVIII  Council of the Inspectors General on Integrity and 
                Efficiency (Parts 9800--9899)
      XCIX  Military Compensation and Retirement Modernization 
                Commission (Parts 9900--9999)
         C  National Council on Disability (Parts 10000--10049)
        CI  National Mediation Board (Part 10101)

                      Title 6--Domestic Security

         I  Department of Homeland Security, Office of the 
                Secretary (Parts 1--199)
         X  Privacy and Civil Liberties Oversight Board (Parts 
                1000--1099)

                         Title 7--Agriculture

            Subtitle A--Office of the Secretary of Agriculture 
                (Parts 0--26)
            Subtitle B--Regulations of the Department of 
                Agriculture
         I  Agricultural Marketing Service (Standards, 
                Inspections, Marketing Practices), Department of 
                Agriculture (Parts 27--209)
        II  Food and Nutrition Service, Department of Agriculture 
                (Parts 210--299)
       III  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 300--399)
        IV  Federal Crop Insurance Corporation, Department of 
                Agriculture (Parts 400--499)
         V  Agricultural Research Service, Department of 
                Agriculture (Parts 500--599)
        VI  Natural Resources Conservation Service, Department of 
                Agriculture (Parts 600--699)
       VII  Farm Service Agency, Department of Agriculture (Parts 
                700--799)
      VIII  Agricultural Marketing Service (Federal Grain 
                Inspection Service, Fair Trade Practices Program), 
                Department of Agriculture (Parts 800--899)

[[Page 805]]

        IX  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Fruits, Vegetables, Nuts), Department 
                of Agriculture (Parts 900--999)
         X  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Milk), Department of Agriculture 
                (Parts 1000--1199)
        XI  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Miscellaneous Commodities), Department 
                of Agriculture (Parts 1200--1299)
       XIV  Commodity Credit Corporation, Department of 
                Agriculture (Parts 1400--1499)
        XV  Foreign Agricultural Service, Department of 
                Agriculture (Parts 1500--1599)
       XVI  (Parts 1600--1699) [Reserved]
      XVII  Rural Utilities Service, Department of Agriculture 
                (Parts 1700--1799)
     XVIII  Rural Housing Service, Rural Business-Cooperative 
                Service, Rural Utilities Service, and Farm Service 
                Agency, Department of Agriculture (Parts 1800--
                2099)
        XX  (Parts 2200--2299) [Reserved]
       XXV  Office of Advocacy and Outreach, Department of 
                Agriculture (Parts 2500--2599)
      XXVI  Office of Inspector General, Department of Agriculture 
                (Parts 2600--2699)
     XXVII  Office of Information Resources Management, Department 
                of Agriculture (Parts 2700--2799)
    XXVIII  Office of Operations, Department of Agriculture (Parts 
                2800--2899)
      XXIX  Office of Energy Policy and New Uses, Department of 
                Agriculture (Parts 2900--2999)
       XXX  Office of the Chief Financial Officer, Department of 
                Agriculture (Parts 3000--3099)
      XXXI  Office of Environmental Quality, Department of 
                Agriculture (Parts 3100--3199)
     XXXII  Office of Procurement and Property Management, 
                Department of Agriculture (Parts 3200--3299)
    XXXIII  Office of Transportation, Department of Agriculture 
                (Parts 3300--3399)
     XXXIV  National Institute of Food and Agriculture (Parts 
                3400--3499)
      XXXV  Rural Housing Service, Department of Agriculture 
                (Parts 3500--3599)
     XXXVI  National Agricultural Statistics Service, Department 
                of Agriculture (Parts 3600--3699)
    XXXVII  Economic Research Service, Department of Agriculture 
                (Parts 3700--3799)
   XXXVIII  World Agricultural Outlook Board, Department of 
                Agriculture (Parts 3800--3899)
       XLI  [Reserved]
      XLII  Rural Business-Cooperative Service and Rural Utilities 
                Service, Department of Agriculture (Parts 4200--
                4299)

[[Page 806]]

         L  Rural Business-Cooperative Service, Rural Housing 
                Service, and Rural Utilities Service, Department 
                of Agriculture (Part 5001)

                    Title 8--Aliens and Nationality

         I  Department of Homeland Security (Parts 1--499)
         V  Executive Office for Immigration Review, Department of 
                Justice (Parts 1000--1399)

                 Title 9--Animals and Animal Products

         I  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 1--199)
        II  Agricultural Marketing Service (Fair Trade Practices 
                Program), Department of Agriculture (Parts 200--
                299)
       III  Food Safety and Inspection Service, Department of 
                Agriculture (Parts 300--599)

                           Title 10--Energy

         I  Nuclear Regulatory Commission (Parts 0--199)
        II  Department of Energy (Parts 200--699)
       III  Department of Energy (Parts 700--999)
         X  Department of Energy (General Provisions) (Parts 
                1000--1099)
      XIII  Nuclear Waste Technical Review Board (Parts 1300--
                1399)
      XVII  Defense Nuclear Facilities Safety Board (Parts 1700--
                1799)
     XVIII  Northeast Interstate Low-Level Radioactive Waste 
                Commission (Parts 1800--1899)

                      Title 11--Federal Elections

         I  Federal Election Commission (Parts 1--9099)
        II  Election Assistance Commission (Parts 9400--9499)

                      Title 12--Banks and Banking

         I  Comptroller of the Currency, Department of the 
                Treasury (Parts 1--199)
        II  Federal Reserve System (Parts 200--299)
       III  Federal Deposit Insurance Corporation (Parts 300--399)
        IV  Export-Import Bank of the United States (Parts 400--
                499)
         V  (Parts 500--599) [Reserved]
        VI  Farm Credit Administration (Parts 600--699)
       VII  National Credit Union Administration (Parts 700--799)
      VIII  Federal Financing Bank (Parts 800--899)
        IX  (Parts 900--999) [Reserved]
         X  Bureau of Consumer Financial Protection (Parts 1000--
                1099)

[[Page 807]]

        XI  Federal Financial Institutions Examination Council 
                (Parts 1100--1199)
       XII  Federal Housing Finance Agency (Parts 1200--1299)
      XIII  Financial Stability Oversight Council (Parts 1300--
                1399)
       XIV  Farm Credit System Insurance Corporation (Parts 1400--
                1499)
        XV  Department of the Treasury (Parts 1500--1599)
       XVI  Office of Financial Research, Department of the 
                Treasury (Parts 1600--1699)
      XVII  Office of Federal Housing Enterprise Oversight, 
                Department of Housing and Urban Development (Parts 
                1700--1799)
     XVIII  Community Development Financial Institutions Fund, 
                Department of the Treasury (Parts 1800--1899)

               Title 13--Business Credit and Assistance

         I  Small Business Administration (Parts 1--199)
       III  Economic Development Administration, Department of 
                Commerce (Parts 300--399)
        IV  Emergency Steel Guarantee Loan Board (Parts 400--499)
         V  Emergency Oil and Gas Guaranteed Loan Board (Parts 
                500--599)

                    Title 14--Aeronautics and Space

         I  Federal Aviation Administration, Department of 
                Transportation (Parts 1--199)
        II  Office of the Secretary, Department of Transportation 
                (Aviation Proceedings) (Parts 200--399)
       III  Commercial Space Transportation, Federal Aviation 
                Administration, Department of Transportation 
                (Parts 400--1199)
         V  National Aeronautics and Space Administration (Parts 
                1200--1299)
        VI  Air Transportation System Stabilization (Parts 1300--
                1399)

                 Title 15--Commerce and Foreign Trade

            Subtitle A--Office of the Secretary of Commerce (Parts 
                0--29)
            Subtitle B--Regulations Relating to Commerce and 
                Foreign Trade
         I  Bureau of the Census, Department of Commerce (Parts 
                30--199)
        II  National Institute of Standards and Technology, 
                Department of Commerce (Parts 200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  Foreign-Trade Zones Board, Department of Commerce 
                (Parts 400--499)
       VII  Bureau of Industry and Security, Department of 
                Commerce (Parts 700--799)

[[Page 808]]

      VIII  Bureau of Economic Analysis, Department of Commerce 
                (Parts 800--899)
        IX  National Oceanic and Atmospheric Administration, 
                Department of Commerce (Parts 900--999)
        XI  National Technical Information Service, Department of 
                Commerce (Parts 1100--1199)
      XIII  East-West Foreign Trade Board (Parts 1300--1399)
       XIV  Minority Business Development Agency (Parts 1400--
                1499)
            Subtitle C--Regulations Relating to Foreign Trade 
                Agreements
        XX  Office of the United States Trade Representative 
                (Parts 2000--2099)
            Subtitle D--Regulations Relating to Telecommunications 
                and Information
     XXIII  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                2300--2399) [Reserved]

                    Title 16--Commercial Practices

         I  Federal Trade Commission (Parts 0--999)
        II  Consumer Product Safety Commission (Parts 1000--1799)

             Title 17--Commodity and Securities Exchanges

         I  Commodity Futures Trading Commission (Parts 1--199)
        II  Securities and Exchange Commission (Parts 200--399)
        IV  Department of the Treasury (Parts 400--499)

          Title 18--Conservation of Power and Water Resources

         I  Federal Energy Regulatory Commission, Department of 
                Energy (Parts 1--399)
       III  Delaware River Basin Commission (Parts 400--499)
        VI  Water Resources Council (Parts 700--799)
      VIII  Susquehanna River Basin Commission (Parts 800--899)
      XIII  Tennessee Valley Authority (Parts 1300--1399)

                       Title 19--Customs Duties

         I  U.S. Customs and Border Protection, Department of 
                Homeland Security; Department of the Treasury 
                (Parts 0--199)
        II  United States International Trade Commission (Parts 
                200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  U.S. Immigration and Customs Enforcement, Department 
                of Homeland Security (Parts 400--599) [Reserved]

[[Page 809]]

                     Title 20--Employees' Benefits

         I  Office of Workers' Compensation Programs, Department 
                of Labor (Parts 1--199)
        II  Railroad Retirement Board (Parts 200--399)
       III  Social Security Administration (Parts 400--499)
        IV  Employees' Compensation Appeals Board, Department of 
                Labor (Parts 500--599)
         V  Employment and Training Administration, Department of 
                Labor (Parts 600--699)
        VI  Office of Workers' Compensation Programs, Department 
                of Labor (Parts 700--799)
       VII  Benefits Review Board, Department of Labor (Parts 
                800--899)
      VIII  Joint Board for the Enrollment of Actuaries (Parts 
                900--999)
        IX  Office of the Assistant Secretary for Veterans' 
                Employment and Training Service, Department of 
                Labor (Parts 1000--1099)

                       Title 21--Food and Drugs

         I  Food and Drug Administration, Department of Health and 
                Human Services (Parts 1--1299)
        II  Drug Enforcement Administration, Department of Justice 
                (Parts 1300--1399)
       III  Office of National Drug Control Policy (Parts 1400--
                1499)

                      Title 22--Foreign Relations

         I  Department of State (Parts 1--199)
        II  Agency for International Development (Parts 200--299)
       III  Peace Corps (Parts 300--399)
        IV  International Joint Commission, United States and 
                Canada (Parts 400--499)
         V  United States Agency for Global Media (Parts 500--599)
       VII  U.S. International Development Finance Corporation 
                (Parts 700--799)
        IX  Foreign Service Grievance Board (Parts 900--999)
         X  Inter-American Foundation (Parts 1000--1099)
        XI  International Boundary and Water Commission, United 
                States and Mexico, United States Section (Parts 
                1100--1199)
       XII  United States International Development Cooperation 
                Agency (Parts 1200--1299)
      XIII  Millennium Challenge Corporation (Parts 1300--1399)
       XIV  Foreign Service Labor Relations Board; Federal Labor 
                Relations Authority; General Counsel of the 
                Federal Labor Relations Authority; and the Foreign 
                Service Impasse Disputes Panel (Parts 1400--1499)
        XV  African Development Foundation (Parts 1500--1599)
       XVI  Japan-United States Friendship Commission (Parts 
                1600--1699)
      XVII  United States Institute of Peace (Parts 1700--1799)

[[Page 810]]

                          Title 23--Highways

         I  Federal Highway Administration, Department of 
                Transportation (Parts 1--999)
        II  National Highway Traffic Safety Administration and 
                Federal Highway Administration, Department of 
                Transportation (Parts 1200--1299)
       III  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 1300--1399)

                Title 24--Housing and Urban Development

            Subtitle A--Office of the Secretary, Department of 
                Housing and Urban Development (Parts 0--99)
            Subtitle B--Regulations Relating to Housing and Urban 
                Development
         I  Office of Assistant Secretary for Equal Opportunity, 
                Department of Housing and Urban Development (Parts 
                100--199)
        II  Office of Assistant Secretary for Housing-Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 200--299)
       III  Government National Mortgage Association, Department 
                of Housing and Urban Development (Parts 300--399)
        IV  Office of Housing and Office of Multifamily Housing 
                Assistance Restructuring, Department of Housing 
                and Urban Development (Parts 400--499)
         V  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 500--599)
        VI  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 600--699) [Reserved]
       VII  Office of the Secretary, Department of Housing and 
                Urban Development (Housing Assistance Programs and 
                Public and Indian Housing Programs) (Parts 700--
                799)
      VIII  Office of the Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Section 8 Housing Assistance 
                Programs, Section 202 Direct Loan Program, Section 
                202 Supportive Housing for the Elderly Program and 
                Section 811 Supportive Housing for Persons With 
                Disabilities Program) (Parts 800--899)
        IX  Office of Assistant Secretary for Public and Indian 
                Housing, Department of Housing and Urban 
                Development (Parts 900--1699)
         X  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Interstate Land Sales 
                Registration Program) [Reserved]
       XII  Office of Inspector General, Department of Housing and 
                Urban Development (Parts 2000--2099)
        XV  Emergency Mortgage Insurance and Loan Programs, 
                Department of Housing and Urban Development (Parts 
                2700--2799) [Reserved]
        XX  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 3200--3899)

[[Page 811]]

      XXIV  Board of Directors of the HOPE for Homeowners Program 
                (Parts 4000--4099) [Reserved]
       XXV  Neighborhood Reinvestment Corporation (Parts 4100--
                4199)

                           Title 25--Indians

         I  Bureau of Indian Affairs, Department of the Interior 
                (Parts 1--299)
        II  Indian Arts and Crafts Board, Department of the 
                Interior (Parts 300--399)
       III  National Indian Gaming Commission, Department of the 
                Interior (Parts 500--599)
        IV  Office of Navajo and Hopi Indian Relocation (Parts 
                700--899)
         V  Bureau of Indian Affairs, Department of the Interior, 
                and Indian Health Service, Department of Health 
                and Human Services (Part 900--999)
        VI  Office of the Assistant Secretary, Indian Affairs, 
                Department of the Interior (Parts 1000--1199)
       VII  Office of the Special Trustee for American Indians, 
                Department of the Interior (Parts 1200--1299)

                      Title 26--Internal Revenue

         I  Internal Revenue Service, Department of the Treasury 
                (Parts 1--End)

           Title 27--Alcohol, Tobacco Products and Firearms

         I  Alcohol and Tobacco Tax and Trade Bureau, Department 
                of the Treasury (Parts 1--399)
        II  Bureau of Alcohol, Tobacco, Firearms, and Explosives, 
                Department of Justice (Parts 400--799)

                   Title 28--Judicial Administration

         I  Department of Justice (Parts 0--299)
       III  Federal Prison Industries, Inc., Department of Justice 
                (Parts 300--399)
         V  Bureau of Prisons, Department of Justice (Parts 500--
                599)
        VI  Offices of Independent Counsel, Department of Justice 
                (Parts 600--699)
       VII  Office of Independent Counsel (Parts 700--799)
      VIII  Court Services and Offender Supervision Agency for the 
                District of Columbia (Parts 800--899)
        IX  National Crime Prevention and Privacy Compact Council 
                (Parts 900--999)
        XI  Department of Justice and Department of State (Parts 
                1100--1199)

[[Page 812]]

                            Title 29--Labor

            Subtitle A--Office of the Secretary of Labor (Parts 
                0--99)
            Subtitle B--Regulations Relating to Labor
         I  National Labor Relations Board (Parts 100--199)
        II  Office of Labor-Management Standards, Department of 
                Labor (Parts 200--299)
       III  National Railroad Adjustment Board (Parts 300--399)
        IV  Office of Labor-Management Standards, Department of 
                Labor (Parts 400--499)
         V  Wage and Hour Division, Department of Labor (Parts 
                500--899)
        IX  Construction Industry Collective Bargaining Commission 
                (Parts 900--999)
         X  National Mediation Board (Parts 1200--1299)
       XII  Federal Mediation and Conciliation Service (Parts 
                1400--1499)
       XIV  Equal Employment Opportunity Commission (Parts 1600--
                1699)
      XVII  Occupational Safety and Health Administration, 
                Department of Labor (Parts 1900--1999)
        XX  Occupational Safety and Health Review Commission 
                (Parts 2200--2499)
       XXV  Employee Benefits Security Administration, Department 
                of Labor (Parts 2500--2599)
     XXVII  Federal Mine Safety and Health Review Commission 
                (Parts 2700--2799)
        XL  Pension Benefit Guaranty Corporation (Parts 4000--
                4999)

                      Title 30--Mineral Resources

         I  Mine Safety and Health Administration, Department of 
                Labor (Parts 1--199)
        II  Bureau of Safety and Environmental Enforcement, 
                Department of the Interior (Parts 200--299)
        IV  Geological Survey, Department of the Interior (Parts 
                400--499)
         V  Bureau of Ocean Energy Management, Department of the 
                Interior (Parts 500--599)
       VII  Office of Surface Mining Reclamation and Enforcement, 
                Department of the Interior (Parts 700--999)
       XII  Office of Natural Resources Revenue, Department of the 
                Interior (Parts 1200--1299)

                 Title 31--Money and Finance: Treasury

            Subtitle A--Office of the Secretary of the Treasury 
                (Parts 0--50)
            Subtitle B--Regulations Relating to Money and Finance
         I  Monetary Offices, Department of the Treasury (Parts 
                51--199)
        II  Fiscal Service, Department of the Treasury (Parts 
                200--399)
        IV  Secret Service, Department of the Treasury (Parts 
                400--499)
         V  Office of Foreign Assets Control, Department of the 
                Treasury (Parts 500--599)

[[Page 813]]

        VI  Bureau of Engraving and Printing, Department of the 
                Treasury (Parts 600--699)
       VII  Federal Law Enforcement Training Center, Department of 
                the Treasury (Parts 700--799)
      VIII  Office of Investment Security, Department of the 
                Treasury (Parts 800--899)
        IX  Federal Claims Collection Standards (Department of the 
                Treasury--Department of Justice) (Parts 900--999)
         X  Financial Crimes Enforcement Network, Department of 
                the Treasury (Parts 1000--1099)

                      Title 32--National Defense

            Subtitle A--Department of Defense
         I  Office of the Secretary of Defense (Parts 1--399)
         V  Department of the Army (Parts 400--699)
        VI  Department of the Navy (Parts 700--799)
       VII  Department of the Air Force (Parts 800--1099)
            Subtitle B--Other Regulations Relating to National 
                Defense
       XII  Department of Defense, Defense Logistics Agency (Parts 
                1200--1299)
       XVI  Selective Service System (Parts 1600--1699)
      XVII  Office of the Director of National Intelligence (Parts 
                1700--1799)
     XVIII  National Counterintelligence Center (Parts 1800--1899)
       XIX  Central Intelligence Agency (Parts 1900--1999)
        XX  Information Security Oversight Office, National 
                Archives and Records Administration (Parts 2000--
                2099)
       XXI  National Security Council (Parts 2100--2199)
      XXIV  Office of Science and Technology Policy (Parts 2400--
                2499)
     XXVII  Office for Micronesian Status Negotiations (Parts 
                2700--2799)
    XXVIII  Office of the Vice President of the United States 
                (Parts 2800--2899)

               Title 33--Navigation and Navigable Waters

         I  Coast Guard, Department of Homeland Security (Parts 
                1--199)
        II  Corps of Engineers, Department of the Army, Department 
                of Defense (Parts 200--399)
        IV  Great Lakes St. Lawrence Seaway Development 
                Corporation, Department of Transportation (Parts 
                400--499)

                          Title 34--Education

            Subtitle A--Office of the Secretary, Department of 
                Education (Parts 1--99)
            Subtitle B--Regulations of the Offices of the 
                Department of Education

[[Page 814]]

         I  Office for Civil Rights, Department of Education 
                (Parts 100--199)
        II  Office of Elementary and Secondary Education, 
                Department of Education (Parts 200--299)
       III  Office of Special Education and Rehabilitative 
                Services, Department of Education (Parts 300--399)
        IV  Office of Career, Technical, and Adult Education, 
                Department of Education (Parts 400--499)
         V  Office of Bilingual Education and Minority Languages 
                Affairs, Department of Education (Parts 500--599) 
                [Reserved]
        VI  Office of Postsecondary Education, Department of 
                Education (Parts 600--699)
       VII  Office of Educational Research and Improvement, 
                Department of Education (Parts 700--799) 
                [Reserved]
            Subtitle C--Regulations Relating to Education
        XI  (Parts 1100--1199) [Reserved]
       XII  National Council on Disability (Parts 1200--1299)

                          Title 35 [Reserved]

             Title 36--Parks, Forests, and Public Property

         I  National Park Service, Department of the Interior 
                (Parts 1--199)
        II  Forest Service, Department of Agriculture (Parts 200--
                299)
       III  Corps of Engineers, Department of the Army (Parts 
                300--399)
        IV  American Battle Monuments Commission (Parts 400--499)
         V  Smithsonian Institution (Parts 500--599)
        VI  [Reserved]
       VII  Library of Congress (Parts 700--799)
      VIII  Advisory Council on Historic Preservation (Parts 800--
                899)
        IX  Pennsylvania Avenue Development Corporation (Parts 
                900--999)
         X  Presidio Trust (Parts 1000--1099)
        XI  Architectural and Transportation Barriers Compliance 
                Board (Parts 1100--1199)
       XII  National Archives and Records Administration (Parts 
                1200--1299)
        XV  Oklahoma City National Memorial Trust (Parts 1500--
                1599)
       XVI  Morris K. Udall Scholarship and Excellence in National 
                Environmental Policy Foundation (Parts 1600--1699)

             Title 37--Patents, Trademarks, and Copyrights

         I  United States Patent and Trademark Office, Department 
                of Commerce (Parts 1--199)
        II  U.S. Copyright Office, Library of Congress (Parts 
                200--299)
       III  Copyright Royalty Board, Library of Congress (Parts 
                300--399)
        IV  National Institute of Standards and Technology, 
                Department of Commerce (Parts 400--599)

[[Page 815]]

           Title 38--Pensions, Bonuses, and Veterans' Relief

         I  Department of Veterans Affairs (Parts 0--199)
        II  Armed Forces Retirement Home (Parts 200--299)

                       Title 39--Postal Service

         I  United States Postal Service (Parts 1--999)
       III  Postal Regulatory Commission (Parts 3000--3099)

                  Title 40--Protection of Environment

         I  Environmental Protection Agency (Parts 1--1099)
        IV  Environmental Protection Agency and Department of 
                Justice (Parts 1400--1499)
         V  Council on Environmental Quality (Parts 1500--1599)
        VI  Chemical Safety and Hazard Investigation Board (Parts 
                1600--1699)
       VII  Environmental Protection Agency and Department of 
                Defense; Uniform National Discharge Standards for 
                Vessels of the Armed Forces (Parts 1700--1799)
      VIII  Gulf Coast Ecosystem Restoration Council (Parts 1800--
                1899)
        IX  Federal Permitting Improvement Steering Council (Part 
                1900)

          Title 41--Public Contracts and Property Management

            Subtitle A--Federal Procurement Regulations System 
                [Note]
            Subtitle B--Other Provisions Relating to Public 
                Contracts
        50  Public Contracts, Department of Labor (Parts 50-1--50-
                999)
        51  Committee for Purchase From People Who Are Blind or 
                Severely Disabled (Parts 51-1--51-99)
        60  Office of Federal Contract Compliance Programs, Equal 
                Employment Opportunity, Department of Labor (Parts 
                60-1--60-999)
        61  Office of the Assistant Secretary for Veterans' 
                Employment and Training Service, Department of 
                Labor (Parts 61-1--61-999)
   62--100  [Reserved]
            Subtitle C--Federal Property Management Regulations 
                System
       101  Federal Property Management Regulations (Parts 101-1--
                101-99)
       102  Federal Management Regulation (Parts 102-1--102-299)
  103--104  (Parts 103-001--104-099) [Reserved]
       105  General Services Administration (Parts 105-1--105-999)
       109  Department of Energy Property Management Regulations 
                (Parts 109-1--109-99)
       114  Department of the Interior (Parts 114-1--114-99)
       115  Environmental Protection Agency (Parts 115-1--115-99)
       128  Department of Justice (Parts 128-1--128-99)
  129--200  [Reserved]

[[Page 816]]

            Subtitle D--Other Provisions Relating to Property 
                Management [Reserved]
            Subtitle E--Federal Information Resources Management 
                Regulations System [Reserved]
            Subtitle F--Federal Travel Regulation System
       300  General (Parts 300-1--300-99)
       301  Temporary Duty (TDY) Travel Allowances (Parts 301-1--
                301-99)
       302  Relocation Allowances (Parts 302-1--302-99)
       303  Payment of Expenses Connected with the Death of 
                Certain Employees (Part 303-1--303-99)
       304  Payment of Travel Expenses from a Non-Federal Source 
                (Parts 304-1--304-99)

                        Title 42--Public Health

         I  Public Health Service, Department of Health and Human 
                Services (Parts 1--199)
   II--III  [Reserved]
        IV  Centers for Medicare & Medicaid Services, Department 
                of Health and Human Services (Parts 400--699)
         V  Office of Inspector General-Health Care, Department of 
                Health and Human Services (Parts 1000--1099)

                   Title 43--Public Lands: Interior

            Subtitle A--Office of the Secretary of the Interior 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Lands
         I  Bureau of Reclamation, Department of the Interior 
                (Parts 400--999)
        II  Bureau of Land Management, Department of the Interior 
                (Parts 1000--9999)
       III  Utah Reclamation Mitigation and Conservation 
                Commission (Parts 10000--10099)

             Title 44--Emergency Management and Assistance

         I  Federal Emergency Management Agency, Department of 
                Homeland Security (Parts 0--399)
        IV  Department of Commerce and Department of 
                Transportation (Parts 400--499)

                       Title 45--Public Welfare

            Subtitle A--Department of Health and Human Services 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Welfare

[[Page 817]]

        II  Office of Family Assistance (Assistance Programs), 
                Administration for Children and Families, 
                Department of Health and Human Services (Parts 
                200--299)
       III  Office of Child Support Enforcement (Child Support 
                Enforcement Program), Administration for Children 
                and Families, Department of Health and Human 
                Services (Parts 300--399)
        IV  Office of Refugee Resettlement, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 400--499)
         V  Foreign Claims Settlement Commission of the United 
                States, Department of Justice (Parts 500--599)
        VI  National Science Foundation (Parts 600--699)
       VII  Commission on Civil Rights (Parts 700--799)
      VIII  Office of Personnel Management (Parts 800--899)
        IX  Denali Commission (Parts 900--999)
         X  Office of Community Services, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 1000--1099)
        XI  National Foundation on the Arts and the Humanities 
                (Parts 1100--1199)
       XII  Corporation for National and Community Service (Parts 
                1200--1299)
      XIII  Administration for Children and Families, Department 
                of Health and Human Services (Parts 1300--1399)
       XVI  Legal Services Corporation (Parts 1600--1699)
      XVII  National Commission on Libraries and Information 
                Science (Parts 1700--1799)
     XVIII  Harry S. Truman Scholarship Foundation (Parts 1800--
                1899)
       XXI  Commission of Fine Arts (Parts 2100--2199)
     XXIII  Arctic Research Commission (Parts 2300--2399)
      XXIV  James Madison Memorial Fellowship Foundation (Parts 
                2400--2499)
       XXV  Corporation for National and Community Service (Parts 
                2500--2599)

                          Title 46--Shipping

         I  Coast Guard, Department of Homeland Security (Parts 
                1--199)
        II  Maritime Administration, Department of Transportation 
                (Parts 200--399)
       III  Coast Guard (Great Lakes Pilotage), Department of 
                Homeland Security (Parts 400--499)
        IV  Federal Maritime Commission (Parts 500--599)

                      Title 47--Telecommunication

         I  Federal Communications Commission (Parts 0--199)
        II  Office of Science and Technology Policy and National 
                Security Council (Parts 200--299)

[[Page 818]]

       III  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                300--399)
        IV  National Telecommunications and Information 
                Administration, Department of Commerce, and 
                National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 400--499)
         V  The First Responder Network Authority (Parts 500--599)

           Title 48--Federal Acquisition Regulations System

         1  Federal Acquisition Regulation (Parts 1--99)
         2  Defense Acquisition Regulations System, Department of 
                Defense (Parts 200--299)
         3  Department of Health and Human Services (Parts 300--
                399)
         4  Department of Agriculture (Parts 400--499)
         5  General Services Administration (Parts 500--599)
         6  Department of State (Parts 600--699)
         7  Agency for International Development (Parts 700--799)
         8  Department of Veterans Affairs (Parts 800--899)
         9  Department of Energy (Parts 900--999)
        10  Department of the Treasury (Parts 1000--1099)
        12  Department of Transportation (Parts 1200--1299)
        13  Department of Commerce (Parts 1300--1399)
        14  Department of the Interior (Parts 1400--1499)
        15  Environmental Protection Agency (Parts 1500--1599)
        16  Office of Personnel Management Federal Employees 
                Health Benefits Acquisition Regulation (Parts 
                1600--1699)
        17  Office of Personnel Management (Parts 1700--1799)
        18  National Aeronautics and Space Administration (Parts 
                1800--1899)
        19  Broadcasting Board of Governors (Parts 1900--1999)
        20  Nuclear Regulatory Commission (Parts 2000--2099)
        21  Office of Personnel Management, Federal Employees 
                Group Life Insurance Federal Acquisition 
                Regulation (Parts 2100--2199)
        23  Social Security Administration (Parts 2300--2399)
        24  Department of Housing and Urban Development (Parts 
                2400--2499)
        25  National Science Foundation (Parts 2500--2599)
        28  Department of Justice (Parts 2800--2899)
        29  Department of Labor (Parts 2900--2999)
        30  Department of Homeland Security, Homeland Security 
                Acquisition Regulation (HSAR) (Parts 3000--3099)
        34  Department of Education Acquisition Regulation (Parts 
                3400--3499)
        51  Department of the Army Acquisition Regulations (Parts 
                5100--5199) [Reserved]
        52  Department of the Navy Acquisition Regulations (Parts 
                5200--5299)

[[Page 819]]

        53  Department of the Air Force Federal Acquisition 
                Regulation Supplement (Parts 5300--5399) 
                [Reserved]
        54  Defense Logistics Agency, Department of Defense (Parts 
                5400--5499)
        57  African Development Foundation (Parts 5700--5799)
        61  Civilian Board of Contract Appeals, General Services 
                Administration (Parts 6100--6199)
        99  Cost Accounting Standards Board, Office of Federal 
                Procurement Policy, Office of Management and 
                Budget (Parts 9900--9999)

                       Title 49--Transportation

            Subtitle A--Office of the Secretary of Transportation 
                (Parts 1--99)
            Subtitle B--Other Regulations Relating to 
                Transportation
         I  Pipeline and Hazardous Materials Safety 
                Administration, Department of Transportation 
                (Parts 100--199)
        II  Federal Railroad Administration, Department of 
                Transportation (Parts 200--299)
       III  Federal Motor Carrier Safety Administration, 
                Department of Transportation (Parts 300--399)
        IV  Coast Guard, Department of Homeland Security (Parts 
                400--499)
         V  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 500--599)
        VI  Federal Transit Administration, Department of 
                Transportation (Parts 600--699)
       VII  National Railroad Passenger Corporation (AMTRAK) 
                (Parts 700--799)
      VIII  National Transportation Safety Board (Parts 800--999)
         X  Surface Transportation Board (Parts 1000--1399)
        XI  Research and Innovative Technology Administration, 
                Department of Transportation (Parts 1400--1499) 
                [Reserved]
       XII  Transportation Security Administration, Department of 
                Homeland Security (Parts 1500--1699)

                   Title 50--Wildlife and Fisheries

         I  United States Fish and Wildlife Service, Department of 
                the Interior (Parts 1--199)
        II  National Marine Fisheries Service, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 200--299)
       III  International Fishing and Related Activities (Parts 
                300--399)
        IV  Joint Regulations (United States Fish and Wildlife 
                Service, Department of the Interior and National 
                Marine Fisheries Service, National Oceanic and 
                Atmospheric Administration, Department of 
                Commerce); Endangered Species Committee 
                Regulations (Parts 400--499)
         V  Marine Mammal Commission (Parts 500--599)

[[Page 820]]

        VI  Fishery Conservation and Management, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 600--699)

[[Page 821]]





           Alphabetical List of Agencies Appearing in the CFR




                      (Revised as of April 1, 2021)

                                                  CFR Title, Subtitle or 
                     Agency                               Chapter

Administrative Conference of the United States    1, III
Advisory Council on Historic Preservation         36, VIII
Advocacy and Outreach, Office of                  7, XXV
Afghanistan Reconstruction, Special Inspector     5, LXXXIII
     General for
African Development Foundation                    22, XV
  Federal Acquisition Regulation                  48, 57
Agency for International Development              2, VII; 22, II
  Federal Acquisition Regulation                  48, 7
Agricultural Marketing Service                    7, I, VIII, IX, X, XI; 9, 
                                                  II
Agricultural Research Service                     7, V
Agriculture, Department of                        2, IV; 5, LXXIII
  Advocacy and Outreach, Office of                7, XXV
  Agricultural Marketing Service                  7, I, VIII, IX, X, XI; 9, 
                                                  II
  Agricultural Research Service                   7, V
  Animal and Plant Health Inspection Service      7, III; 9, I
  Chief Financial Officer, Office of              7, XXX
  Commodity Credit Corporation                    7, XIV
  Economic Research Service                       7, XXXVII
  Energy Policy and New Uses, Office of           2, IX; 7, XXIX
  Environmental Quality, Office of                7, XXXI
  Farm Service Agency                             7, VII, XVIII
  Federal Acquisition Regulation                  48, 4
  Federal Crop Insurance Corporation              7, IV
  Food and Nutrition Service                      7, II
  Food Safety and Inspection Service              9, III
  Foreign Agricultural Service                    7, XV
  Forest Service                                  36, II
  Information Resources Management, Office of     7, XXVII
  Inspector General, Office of                    7, XXVI
  National Agricultural Library                   7, XLI
  National Agricultural Statistics Service        7, XXXVI
  National Institute of Food and Agriculture      7, XXXIV
  Natural Resources Conservation Service          7, VI
  Operations, Office of                           7, XXVIII
  Procurement and Property Management, Office of  7, XXXII
  Rural Business-Cooperative Service              7, XVIII, XLII
  Rural Development Administration                7, XLII
  Rural Housing Service                           7, XVIII, XXXV
  Rural Utilities Service                         7, XVII, XVIII, XLII
  Secretary of Agriculture, Office of             7, Subtitle A
  Transportation, Office of                       7, XXXIII
  World Agricultural Outlook Board                7, XXXVIII
Air Force, Department of                          32, VII
  Federal Acquisition Regulation Supplement       48, 53
Air Transportation Stabilization Board            14, VI
Alcohol and Tobacco Tax and Trade Bureau          27, I
Alcohol, Tobacco, Firearms, and Explosives,       27, II
     Bureau of
AMTRAK                                            49, VII
American Battle Monuments Commission              36, IV
American Indians, Office of the Special Trustee   25, VII
Animal and Plant Health Inspection Service        7, III; 9, I
Appalachian Regional Commission                   5, IX
Architectural and Transportation Barriers         36, XI
   Compliance Board
[[Page 822]]

Arctic Research Commission                        45, XXIII
Armed Forces Retirement Home                      5, XI; 38, II
Army, Department of                               32, V
  Engineers, Corps of                             33, II; 36, III
  Federal Acquisition Regulation                  48, 51
Benefits Review Board                             20, VII
Bilingual Education and Minority Languages        34, V
     Affairs, Office of
Blind or Severely Disabled, Committee for         41, 51
     Purchase from People Who Are
  Federal Acquisition Regulation                  48, 19
Career, Technical, and Adult Education, Office    34, IV
     of
Census Bureau                                     15, I
Centers for Medicare & Medicaid Services          42, IV
Central Intelligence Agency                       32, XIX
Chemical Safety and Hazard Investigation Board    40, VI
Chief Financial Officer, Office of                7, XXX
Child Support Enforcement, Office of              45, III
Children and Families, Administration for         45, II, III, IV, X, XIII
Civil Rights, Commission on                       5, LXVIII; 45, VII
Civil Rights, Office for                          34, I
Coast Guard                                       33, I; 46, I; 49, IV
Coast Guard (Great Lakes Pilotage)                46, III
Commerce, Department of                           2, XIII; 44, IV; 50, VI
  Census Bureau                                   15, I
  Economic Analysis, Bureau of                    15, VIII
  Economic Development Administration             13, III
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 13
  Foreign-Trade Zones Board                       15, IV
  Industry and Security, Bureau of                15, VII
  International Trade Administration              15, III; 19, III
  National Institute of Standards and Technology  15, II; 37, IV
  National Marine Fisheries Service               50, II, IV
  National Oceanic and Atmospheric                15, IX; 50, II, III, IV, 
       Administration                             VI
  National Technical Information Service          15, XI
  National Telecommunications and Information     15, XXIII; 47, III, IV
       Administration
  National Weather Service                        15, IX
  Patent and Trademark Office, United States      37, I
  Secretary of Commerce, Office of                15, Subtitle A
Commercial Space Transportation                   14, III
Commodity Credit Corporation                      7, XIV
Commodity Futures Trading Commission              5, XLI; 17, I
Community Planning and Development, Office of     24, V, VI
     Assistant Secretary for
Community Services, Office of                     45, X
Comptroller of the Currency                       12, I
Construction Industry Collective Bargaining       29, IX
     Commission
Consumer Financial Protection Bureau              5, LXXXIV; 12, X
Consumer Product Safety Commission                5, LXXI; 16, II
Copyright Royalty Board                           37, III
Corporation for National and Community Service    2, XXII; 45, XII, XXV
Cost Accounting Standards Board                   48, 99
Council on Environmental Quality                  40, V
Council of the Inspectors General on Integrity    5, XCVIII
     and Efficiency
Court Services and Offender Supervision Agency    5, LXX; 28, VIII
     for the District of Columbia
Customs and Border Protection                     19, I
Defense, Department of                            2, XI; 5, XXVI; 32, 
                                                  Subtitle A; 40, VII
  Advanced Research Projects Agency               32, I
  Air Force Department                            32, VII
  Army Department                                 32, V; 33, II; 36, III; 
                                                  48, 51
  Defense Acquisition Regulations System          48, 2
  Defense Intelligence Agency                     32, I
  Defense Logistics Agency                        32, I, XII; 48, 54

[[Page 823]]

  Engineers, Corps of                             33, II; 36, III
  National Imagery and Mapping Agency             32, I
  Navy, Department of                             32, VI; 48, 52
  Secretary of Defense, Office of                 2, XI; 32, I
Defense Contract Audit Agency                     32, I
Defense Intelligence Agency                       32, I
Defense Logistics Agency                          32, XII; 48, 54
Defense Nuclear Facilities Safety Board           10, XVII
Delaware River Basin Commission                   18, III
Denali Commission                                 45, IX
Disability, National Council on                   5, C; 34, XII
District of Columbia, Court Services and          5, LXX; 28, VIII
     Offender Supervision Agency for the
Drug Enforcement Administration                   21, II
East-West Foreign Trade Board                     15, XIII
Economic Analysis, Bureau of                      15, VIII
Economic Development Administration               13, III
Economic Research Service                         7, XXXVII
Education, Department of                          2, XXXIV; 5, LIII
  Bilingual Education and Minority Languages      34, V
       Affairs, Office of
  Career, Technical, and Adult Education, Office  34, IV
       of
  Civil Rights, Office for                        34, I
  Educational Research and Improvement, Office    34, VII
       of
  Elementary and Secondary Education, Office of   34, II
  Federal Acquisition Regulation                  48, 34
  Postsecondary Education, Office of              34, VI
  Secretary of Education, Office of               34, Subtitle A
  Special Education and Rehabilitative Services,  34, III
       Office of
Educational Research and Improvement, Office of   34, VII
Election Assistance Commission                    2, LVIII; 11, II
Elementary and Secondary Education, Office of     34, II
Emergency Oil and Gas Guaranteed Loan Board       13, V
Emergency Steel Guarantee Loan Board              13, IV
Employee Benefits Security Administration         29, XXV
Employees' Compensation Appeals Board             20, IV
Employees Loyalty Board                           5, V
Employment and Training Administration            20, V
Employment Policy, National Commission for        1, IV
Employment Standards Administration               20, VI
Endangered Species Committee                      50, IV
Energy, Department of                             2, IX; 5, XXIII; 10, II, 
                                                  III, X
  Federal Acquisition Regulation                  48, 9
  Federal Energy Regulatory Commission            5, XXIV; 18, I
  Property Management Regulations                 41, 109
Energy, Office of                                 7, XXIX
Engineers, Corps of                               33, II; 36, III
Engraving and Printing, Bureau of                 31, VI
Environmental Protection Agency                   2, XV; 5, LIV; 40, I, IV, 
                                                  VII
  Federal Acquisition Regulation                  48, 15
  Property Management Regulations                 41, 115
Environmental Quality, Office of                  7, XXXI
Equal Employment Opportunity Commission           5, LXII; 29, XIV
Equal Opportunity, Office of Assistant Secretary  24, I
     for
Executive Office of the President                 3, I
  Environmental Quality, Council on               40, V
  Management and Budget, Office of                2, Subtitle A; 5, III, 
                                                  LXXVII; 14, VI; 48, 99
  National Drug Control Policy, Office of         2, XXXVI; 21, III
  National Security Council                       32, XXI; 47, II
  Presidential Documents                          3
  Science and Technology Policy, Office of        32, XXIV; 47, II
  Trade Representative, Office of the United      15, XX
       States
Export-Import Bank of the United States           2, XXXV; 5, LII; 12, IV
Family Assistance, Office of                      45, II

[[Page 824]]

Farm Credit Administration                        5, XXXI; 12, VI
Farm Credit System Insurance Corporation          5, XXX; 12, XIV
Farm Service Agency                               7, VII, XVIII
Federal Acquisition Regulation                    48, 1
Federal Aviation Administration                   14, I
  Commercial Space Transportation                 14, III
Federal Claims Collection Standards               31, IX
Federal Communications Commission                 5, XXIX; 47, I
Federal Contract Compliance Programs, Office of   41, 60
Federal Crop Insurance Corporation                7, IV
Federal Deposit Insurance Corporation             5, XXII; 12, III
Federal Election Commission                       5, XXXVII; 11, I
Federal Emergency Management Agency               44, I
Federal Employees Group Life Insurance Federal    48, 21
     Acquisition Regulation
Federal Employees Health Benefits Acquisition     48, 16
     Regulation
Federal Energy Regulatory Commission              5, XXIV; 18, I
Federal Financial Institutions Examination        12, XI
     Council
Federal Financing Bank                            12, VIII
Federal Highway Administration                    23, I, II
Federal Home Loan Mortgage Corporation            1, IV
Federal Housing Enterprise Oversight Office       12, XVII
Federal Housing Finance Agency                    5, LXXX; 12, XII
Federal Labor Relations Authority                 5, XIV, XLIX; 22, XIV
Federal Law Enforcement Training Center           31, VII
Federal Management Regulation                     41, 102
Federal Maritime Commission                       46, IV
Federal Mediation and Conciliation Service        29, XII
Federal Mine Safety and Health Review Commission  5, LXXIV; 29, XXVII
Federal Motor Carrier Safety Administration       49, III
Federal Permitting Improvement Steering Council   40, IX
Federal Prison Industries, Inc.                   28, III
Federal Procurement Policy Office                 48, 99
Federal Property Management Regulations           41, 101
Federal Railroad Administration                   49, II
Federal Register, Administrative Committee of     1, I
Federal Register, Office of                       1, II
Federal Reserve System                            12, II
  Board of Governors                              5, LVIII
Federal Retirement Thrift Investment Board        5, VI, LXXVI
Federal Service Impasses Panel                    5, XIV
Federal Trade Commission                          5, XLVII; 16, I
Federal Transit Administration                    49, VI
Federal Travel Regulation System                  41, Subtitle F
Financial Crimes Enforcement Network              31, X
Financial Research Office                         12, XVI
Financial Stability Oversight Council             12, XIII
Fine Arts, Commission of                          45, XXI
Fiscal Service                                    31, II
Fish and Wildlife Service, United States          50, I, IV
Food and Drug Administration                      21, I
Food and Nutrition Service                        7, II
Food Safety and Inspection Service                9, III
Foreign Agricultural Service                      7, XV
Foreign Assets Control, Office of                 31, V
Foreign Claims Settlement Commission of the       45, V
     United States
Foreign Service Grievance Board                   22, IX
Foreign Service Impasse Disputes Panel            22, XIV
Foreign Service Labor Relations Board             22, XIV
Foreign-Trade Zones Board                         15, IV
Forest Service                                    36, II
General Services Administration                   5, LVII; 41, 105
  Contract Appeals, Board of                      48, 61
  Federal Acquisition Regulation                  48, 5
  Federal Management Regulation                   41, 102
  Federal Property Management Regulations         41, 101
  Federal Travel Regulation System                41, Subtitle F

[[Page 825]]

  General                                         41, 300
  Payment From a Non-Federal Source for Travel    41, 304
       Expenses
  Payment of Expenses Connected With the Death    41, 303
       of Certain Employees
  Relocation Allowances                           41, 302
  Temporary Duty (TDY) Travel Allowances          41, 301
Geological Survey                                 30, IV
Government Accountability Office                  4, I
Government Ethics, Office of                      5, XVI
Government National Mortgage Association          24, III
Grain Inspection, Packers and Stockyards          7, VIII; 9, II
     Administration
Gulf Coast Ecosystem Restoration Council          2, LIX; 40, VIII
Harry S. Truman Scholarship Foundation            45, XVIII
Health and Human Services, Department of          2, III; 5, XLV; 45, 
                                                  Subtitle A
  Centers for Medicare & Medicaid Services        42, IV
  Child Support Enforcement, Office of            45, III
  Children and Families, Administration for       45, II, III, IV, X, XIII
  Community Services, Office of                   45, X
  Family Assistance, Office of                    45, II
  Federal Acquisition Regulation                  48, 3
  Food and Drug Administration                    21, I
  Indian Health Service                           25, V
  Inspector General (Health Care), Office of      42, V
  Public Health Service                           42, I
  Refugee Resettlement, Office of                 45, IV
Homeland Security, Department of                  2, XXX; 5, XXXVI; 6, I; 8, 
                                                  I
  Coast Guard                                     33, I; 46, I; 49, IV
  Coast Guard (Great Lakes Pilotage)              46, III
  Customs and Border Protection                   19, I
  Federal Emergency Management Agency             44, I
  Human Resources Management and Labor Relations  5, XCVII
       Systems
  Immigration and Customs Enforcement Bureau      19, IV
  Transportation Security Administration          49, XII
HOPE for Homeowners Program, Board of Directors   24, XXIV
     of
Housing, Office of, and Multifamily Housing       24, IV
     Assistance Restructuring, Office of
Housing and Urban Development, Department of      2, XXIV; 5, LXV; 24, 
                                                  Subtitle B
  Community Planning and Development, Office of   24, V, VI
       Assistant Secretary for
  Equal Opportunity, Office of Assistant          24, I
       Secretary for
  Federal Acquisition Regulation                  48, 24
  Federal Housing Enterprise Oversight, Office    12, XVII
       of
  Government National Mortgage Association        24, III
  Housing--Federal Housing Commissioner, Office   24, II, VIII, X, XX
       of Assistant Secretary for
  Housing, Office of, and Multifamily Housing     24, IV
       Assistance Restructuring, Office of
  Inspector General, Office of                    24, XII
  Public and Indian Housing, Office of Assistant  24, IX
       Secretary for
  Secretary, Office of                            24, Subtitle A, VII
Housing--Federal Housing Commissioner, Office of  24, II, VIII, X, XX
     Assistant Secretary for
Housing, Office of, and Multifamily Housing       24, IV
     Assistance Restructuring, Office of
Immigration and Customs Enforcement Bureau        19, IV
Immigration Review, Executive Office for          8, V
Independent Counsel, Office of                    28, VII
Independent Counsel, Offices of                   28, VI
Indian Affairs, Bureau of                         25, I, V
Indian Affairs, Office of the Assistant           25, VI
     Secretary
Indian Arts and Crafts Board                      25, II
Indian Health Service                             25, V
Industry and Security, Bureau of                  15, VII

[[Page 826]]

Information Resources Management, Office of       7, XXVII
Information Security Oversight Office, National   32, XX
     Archives and Records Administration
Inspector General
  Agriculture Department                          7, XXVI
  Health and Human Services Department            42, V
  Housing and Urban Development Department        24, XII, XV
Institute of Peace, United States                 22, XVII
Inter-American Foundation                         5, LXIII; 22, X
Interior, Department of                           2, XIV
  American Indians, Office of the Special         25, VII
       Trustee
  Endangered Species Committee                    50, IV
  Federal Acquisition Regulation                  48, 14
  Federal Property Management Regulations System  41, 114
  Fish and Wildlife Service, United States        50, I, IV
  Geological Survey                               30, IV
  Indian Affairs, Bureau of                       25, I, V
  Indian Affairs, Office of the Assistant         25, VI
       Secretary
  Indian Arts and Crafts Board                    25, II
  Land Management, Bureau of                      43, II
  National Indian Gaming Commission               25, III
  National Park Service                           36, I
  Natural Resource Revenue, Office of             30, XII
  Ocean Energy Management, Bureau of              30, V
  Reclamation, Bureau of                          43, I
  Safety and Enforcement Bureau, Bureau of        30, II
  Secretary of the Interior, Office of            2, XIV; 43, Subtitle A
  Surface Mining Reclamation and Enforcement,     30, VII
       Office of
Internal Revenue Service                          26, I
International Boundary and Water Commission,      22, XI
     United States and Mexico, United States 
     Section
International Development, United States Agency   22, II
     for
  Federal Acquisition Regulation                  48, 7
International Development Cooperation Agency,     22, XII
     United States
International Development Finance Corporation,    5, XXXIII; 22, VII
     U.S.
International Joint Commission, United States     22, IV
     and Canada
International Organizations Employees Loyalty     5, V
     Board
International Trade Administration                15, III; 19, III
International Trade Commission, United States     19, II
Interstate Commerce Commission                    5, XL
Investment Security, Office of                    31, VIII
James Madison Memorial Fellowship Foundation      45, XXIV
Japan-United States Friendship Commission         22, XVI
Joint Board for the Enrollment of Actuaries       20, VIII
Justice, Department of                            2, XXVIII; 5, XXVIII; 28, 
                                                  I, XI; 40, IV
  Alcohol, Tobacco, Firearms, and Explosives,     27, II
       Bureau of
  Drug Enforcement Administration                 21, II
  Federal Acquisition Regulation                  48, 28
  Federal Claims Collection Standards             31, IX
  Federal Prison Industries, Inc.                 28, III
  Foreign Claims Settlement Commission of the     45, V
       United States
  Immigration Review, Executive Office for        8, V
  Independent Counsel, Offices of                 28, VI
  Prisons, Bureau of                              28, V
  Property Management Regulations                 41, 128
Labor, Department of                              2, XXIX; 5, XLII
  Benefits Review Board                           20, VII
  Employee Benefits Security Administration       29, XXV
  Employees' Compensation Appeals Board           20, IV
  Employment and Training Administration          20, V
  Federal Acquisition Regulation                  48, 29
  Federal Contract Compliance Programs, Office    41, 60
       of
  Federal Procurement Regulations System          41, 50
  Labor-Management Standards, Office of           29, II, IV

[[Page 827]]

  Mine Safety and Health Administration           30, I
  Occupational Safety and Health Administration   29, XVII
  Public Contracts                                41, 50
  Secretary of Labor, Office of                   29, Subtitle A
  Veterans' Employment and Training Service,      41, 61; 20, IX
       Office of the Assistant Secretary for
  Wage and Hour Division                          29, V
  Workers' Compensation Programs, Office of       20, I, VI
Labor-Management Standards, Office of             29, II, IV
Land Management, Bureau of                        43, II
Legal Services Corporation                        45, XVI
Libraries and Information Science, National       45, XVII
     Commission on
Library of Congress                               36, VII
  Copyright Royalty Board                         37, III
  U.S. Copyright Office                           37, II
Management and Budget, Office of                  5, III, LXXVII; 14, VI; 
                                                  48, 99
Marine Mammal Commission                          50, V
Maritime Administration                           46, II
Merit Systems Protection Board                    5, II, LXIV
Micronesian Status Negotiations, Office for       32, XXVII
Military Compensation and Retirement              5, XCIX
     Modernization Commission
Millennium Challenge Corporation                  22, XIII
Mine Safety and Health Administration             30, I
Minority Business Development Agency              15, XIV
Miscellaneous Agencies                            1, IV
Monetary Offices                                  31, I
Morris K. Udall Scholarship and Excellence in     36, XVI
     National Environmental Policy Foundation
Museum and Library Services, Institute of         2, XXXI
National Aeronautics and Space Administration     2, XVIII; 5, LIX; 14, V
  Federal Acquisition Regulation                  48, 18
National Agricultural Library                     7, XLI
National Agricultural Statistics Service          7, XXXVI
National and Community Service, Corporation for   2, XXII; 45, XII, XXV
National Archives and Records Administration      2, XXVI; 5, LXVI; 36, XII
  Information Security Oversight Office           32, XX
National Capital Planning Commission              1, IV, VI
National Counterintelligence Center               32, XVIII
National Credit Union Administration              5, LXXXVI; 12, VII
National Crime Prevention and Privacy Compact     28, IX
     Council
National Drug Control Policy, Office of           2, XXXVI; 21, III
National Endowment for the Arts                   2, XXXII
National Endowment for the Humanities             2, XXXIII
National Foundation on the Arts and the           45, XI
     Humanities
National Geospatial-Intelligence Agency           32, I
National Highway Traffic Safety Administration    23, II, III; 47, VI; 49, V
National Imagery and Mapping Agency               32, I
National Indian Gaming Commission                 25, III
National Institute of Food and Agriculture        7, XXXIV
National Institute of Standards and Technology    15, II; 37, IV
National Intelligence, Office of Director of      5, IV; 32, XVII
National Labor Relations Board                    5, LXI; 29, I
National Marine Fisheries Service                 50, II, IV
National Mediation Board                          5, CI; 29, X
National Oceanic and Atmospheric Administration   15, IX; 50, II, III, IV, 
                                                  VI
National Park Service                             36, I
National Railroad Adjustment Board                29, III
National Railroad Passenger Corporation (AMTRAK)  49, VII
National Science Foundation                       2, XXV; 5, XLIII; 45, VI
  Federal Acquisition Regulation                  48, 25
National Security Council                         32, XXI; 47, II
National Technical Information Service            15, XI
National Telecommunications and Information       15, XXIII; 47, III, IV, V
   Administration
[[Page 828]]

National Transportation Safety Board              49, VIII
Natural Resource Revenue, Office of               30, XII
Natural Resources Conservation Service            7, VI
Navajo and Hopi Indian Relocation, Office of      25, IV
Navy, Department of                               32, VI
  Federal Acquisition Regulation                  48, 52
Neighborhood Reinvestment Corporation             24, XXV
Northeast Interstate Low-Level Radioactive Waste  10, XVIII
     Commission
Nuclear Regulatory Commission                     2, XX; 5, XLVIII; 10, I
  Federal Acquisition Regulation                  48, 20
Occupational Safety and Health Administration     29, XVII
Occupational Safety and Health Review Commission  29, XX
Ocean Energy Management, Bureau of                30, V
Oklahoma City National Memorial Trust             36, XV
Operations Office                                 7, XXVIII
Patent and Trademark Office, United States        37, I
Payment From a Non-Federal Source for Travel      41, 304
     Expenses
Payment of Expenses Connected With the Death of   41, 303
     Certain Employees
Peace Corps                                       2, XXXVII; 22, III
Pennsylvania Avenue Development Corporation       36, IX
Pension Benefit Guaranty Corporation              29, XL
Personnel Management, Office of                   5, I, IV, XXXV; 45, VIII
  Federal Acquisition Regulation                  48, 17
  Federal Employees Group Life Insurance Federal  48, 21
       Acquisition Regulation
  Federal Employees Health Benefits Acquisition   48, 16
       Regulation
  Human Resources Management and Labor Relations  5, XCVII
       Systems, Department of Homeland Security
Pipeline and Hazardous Materials Safety           49, I
     Administration
Postal Regulatory Commission                      5, XLVI; 39, III
Postal Service, United States                     5, LX; 39, I
Postsecondary Education, Office of                34, VI
President's Commission on White House             1, IV
     Fellowships
Presidential Documents                            3
Presidio Trust                                    36, X
Prisons, Bureau of                                28, V
Privacy and Civil Liberties Oversight Board       6, X
Procurement and Property Management, Office of    7, XXXII
Public and Indian Housing, Office of Assistant    24, IX
     Secretary for
Public Contracts, Department of Labor             41, 50
Public Health Service                             42, I
Railroad Retirement Board                         20, II
Reclamation, Bureau of                            43, I
Refugee Resettlement, Office of                   45, IV
Relocation Allowances                             41, 302
Research and Innovative Technology                49, XI
     Administration
Rural Business-Cooperative Service                7, XVIII, XLII
Rural Development Administration                  7, XLII
Rural Housing Service                             7, XVIII, XXXV
Rural Utilities Service                           7, XVII, XVIII, XLII
Safety and Environmental Enforcement, Bureau of   30, II
Saint Lawrence Seaway Development Corporation     33, IV
Science and Technology Policy, Office of, and     32, XXIV; 47, II
     National Security Council
Secret Service                                    31, IV
Securities and Exchange Commission                5, XXXIV; 17, II
Selective Service System                          32, XVI
Small Business Administration                     2, XXVII; 13, I
Smithsonian Institution                           36, V
Social Security Administration                    2, XXIII; 20, III; 48, 23
Soldiers' and Airmen's Home, United States        5, XI
Special Counsel, Office of                        5, VIII
Special Education and Rehabilitative Services,    34, III
     Office of
State, Department of                              2, VI; 22, I; 28, XI
  Federal Acquisition Regulation                  48, 6

[[Page 829]]

Surface Mining Reclamation and Enforcement,       30, VII
     Office of
Surface Transportation Board                      49, X
Susquehanna River Basin Commission                18, VIII
Tennessee Valley Authority                        5, LXIX; 18, XIII
Trade Representative, United States, Office of    15, XX
Transportation, Department of                     2, XII; 5, L
  Commercial Space Transportation                 14, III
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 12
  Federal Aviation Administration                 14, I
  Federal Highway Administration                  23, I, II
  Federal Motor Carrier Safety Administration     49, III
  Federal Railroad Administration                 49, II
  Federal Transit Administration                  49, VI
  Maritime Administration                         46, II
  National Highway Traffic Safety Administration  23, II, III; 47, IV; 49, V
  Pipeline and Hazardous Materials Safety         49, I
       Administration
  Saint Lawrence Seaway Development Corporation   33, IV
  Secretary of Transportation, Office of          14, II; 49, Subtitle A
  Transportation Statistics Bureau                49, XI
Transportation, Office of                         7, XXXIII
Transportation Security Administration            49, XII
Transportation Statistics Bureau                  49, XI
Travel Allowances, Temporary Duty (TDY)           41, 301
Treasury, Department of the                       2, X; 5, XXI; 12, XV; 17, 
                                                  IV; 31, IX
  Alcohol and Tobacco Tax and Trade Bureau        27, I
  Community Development Financial Institutions    12, XVIII
       Fund
  Comptroller of the Currency                     12, I
  Customs and Border Protection                   19, I
  Engraving and Printing, Bureau of               31, VI
  Federal Acquisition Regulation                  48, 10
  Federal Claims Collection Standards             31, IX
  Federal Law Enforcement Training Center         31, VII
  Financial Crimes Enforcement Network            31, X
  Fiscal Service                                  31, II
  Foreign Assets Control, Office of               31, V
  Internal Revenue Service                        26, I
  Investment Security, Office of                  31, VIII
  Monetary Offices                                31, I
  Secret Service                                  31, IV
  Secretary of the Treasury, Office of            31, Subtitle A
Truman, Harry S. Scholarship Foundation           45, XVIII
United States Agency for Global Media             22, V
United States and Canada, International Joint     22, IV
     Commission
United States and Mexico, International Boundary  22, XI
     and Water Commission, United States Section
U.S. Copyright Office                             37, II
Utah Reclamation Mitigation and Conservation      43, III
     Commission
Veterans Affairs, Department of                   2, VIII; 38, I
  Federal Acquisition Regulation                  48, 8
Veterans' Employment and Training Service,        41, 61; 20, IX
     Office of the Assistant Secretary for
Vice President of the United States, Office of    32, XXVIII
Wage and Hour Division                            29, V
Water Resources Council                           18, VI
Workers' Compensation Programs, Office of         20, I, VII
World Agricultural Outlook Board                  7, XXXVIII

[[Page 831]]







                      Table of OMB Control Numbers



The OMB control numbers for chapter II of title 17 appear in Sec.  
200.800. For the convenience of the user, Sec.  200.800 is reprinted 
below.



Sec.  200.800  OMB control numbers assigned pursuant to the Paperwork Reduction Act.

    (a) Purpose: This subpart collects and displays the control numbers 
assigned to information collection requirements of the Commission by the 
Office of Management and Budget pursuant to the Paperwork Reduction Act 
of 1980, 44 U.S.C. 3500 et seq. This subpart displays current OMB 
control numbers for those information collection requirements of the 
Commission that are rules and regulations and codified in 17 CFR either 
in full text or incorporated by reference with the approval of the 
Director of the Office of the Federal Register.
    (b) Display.

------------------------------------------------------------------------
                                    17 CFR part or section
      Information collection         where identified and    Current OMB
           requirement                     described         control No.
------------------------------------------------------------------------
Regulation S-X...................  Part 210................    3235-0009
Regulation S-B...................  Part 228................    3235-0417
Regulation S-K...................  Part 229................    3235-0071
Rule 154.........................  230.154.................    3235-0495
Rule 155.........................  230.155.................    3235-0549
Rule 236.........................  230.236.................    3235-0095
Rule 237.........................  230.237.................    3235-0528
Regulation A.....................  230.251 thru 230.263....    3235-0286
Regulation C.....................  230.400 thru 230.494....    3235-0074
Rule 425.........................  230.425.................    3235-0521
Rule 477.........................  230.477.................    3235-0550
Rule 489.........................  230.489.................    3235-0411
Rule 498.........................  230.498.................    3235-0488
Rule 498A........................  230.498A................    3235-0765
Regulation D.....................  230.500 thru 230.508....    3235-0076
Regulation E.....................  230.601 thru 230.610a...    3235-0232
Rule 604.........................  230.604.................    3235-0232
Rule 605.........................  230.605.................    3235-0232
Rule 609.........................  230.609.................    3235-0233
Rule 701.........................  230.701.................    3235-0522
Regulation S.....................  230.901 thru 230.905....    3235-0357
Regulation S-T...................  Part 232................    3235-0424
Form SB-1........................  239.9...................    3235-0423
Form SB-2........................  239.10..................    3235-0418
Form S-1.........................  239.11..................    3235-0065
Form S-2.........................  239.12..................    3235-0072
Form S-3.........................  239.13..................    3235-0073
Form N-2.........................  239.14..................    3235-0026
Form N-1A........................  239.15A.................    3235-0307
Form S-6.........................  239.16..................    3235-0184
Form S-8.........................  239.16b.................    3235-0066
Form N-3.........................  239.17a.................    3235-0316
Form N-4.........................  239.17b.................    3235-0318
Form S-11........................  239.18..................    3235-0067
Form N-14........................  239.23..................    3235-0336
Form N-5.........................  239.24..................    3235-0169
Form S-4.........................  239.25..................    3235-0324
Form F-1.........................  239.31..................    3235-0258
Form F-2.........................  239.32..................    3235-0257
Form F-3.........................  239.33..................    3235-0256
Form F-4.........................  239.34..................    3235-0325
Form F-6.........................  239.36..................    3235-0292
Form F-7.........................  239.37..................    3235-0383
Form F-8.........................  239.38..................    3235-0378
Form F-10........................  239.40..................    3235-0380

[[Page 832]]

 
Form F-80........................  239.41..................    3235-0404
Form F-X.........................  239.42..................    3235-0379
Form F-N.........................  239.43..................    3235-0411
Form ID..........................  239.63..................    3235-0328
Form SE..........................  239.64..................    3235-0327
Form TH..........................  239.65..................    3235-0425
Form 1-A.........................  239.90..................    3235-0286
Form 2-A.........................  239.91..................    3235-0286
Form 144.........................  239.144.................    3235-0101
Form 1-E.........................  239.200.................    3235-0232
Form CB..........................  239.800.................    3235-0518
Rule 6a-1........................  240.6a-1................    3235-0017
Rule 6a-3........................  240.6a-3................    3235-0021
Rule 6a-4........................  240.6a-4................    3235-0554
Rule 6h-1........................  240.6h-1................    3235-0555
Rule 8c-1........................  240.8c-1................    3235-0514
Rule 9b-1........................  240.9b-1................    3235-0480
Rule 10a-1.......................  240.10a-1...............    3235-0475
Rule 10b-10......................  240.10b-10..............    3235-0444
Rule 10b-17......................  240.10b-17..............    3235-0476
Rule 10b-18......................  240.10b-18..............    3235-0474
Rule 10A-1.......................  240.10A-1...............    3235-0468
Rule 11a1-1(T)...................  240.11a1-1(T)...........    3235-0478
Rule 12a-5.......................  240.12a-5...............    3235-0079
Regulation 12B...................  240.12b-1 thru 240.12b-     3235-0062
                                    36.
Rule 12d1-3......................  240.12d1-3..............    3235-0109
Rule 12d2-1......................  240.12d2-1..............    3235-0081
Rule 12d2-2......................  240.12d2-2..............    3235-0080
Rule 12f-1.......................  240.12f-1...............    3235-0128
Rule 13a-16......................  240.13a-16..............    3235-0116
Regulation 13D/G.................  240.13d-1 thru 240.13d-7    3235-0145
Schedule 13D.....................  240.13d-101.............    3235-0145
Schedule 13G.....................  240.13d-102.............    3235-0145
Rule 13e-1.......................  240.13e-1...............    3235-0305
Rule 13e-3.......................  240.13e-3...............    3235-0007
Schedule 13E-3...................  240.13e-100.............    3235-0007
Schedule 13e-4F..................  240.13e-101.............    3235-0375
Regulation 14A...................  240.14a-1 thru 240.14a-     3235-0059
                                    12.
Schedule 14A.....................  240.14a-101.............    3235-0059
Regulation 14C...................  240.14c-1...............    3235-0057
Schedule 14C.....................  240.14c-101.............    3235-0057
Regulation 14D...................  240.14d-1 thru 240.14d-9    3235-0102
Schedule TO......................  240.14d-100.............    3235-0515
Schedule 14D-1...................  240.14d-101.............    3235-0102
Schedule 14D-9...................  240.14d-101.............    3235-0102
Schedule 14D-1F..................  240.14d-102.............    3235-0376
Schedule 14D-9F..................  240.14d-103.............    3235-0382
Regulation 14E...................  240.14e-1 thru 240.14e-2    3235-0102
Rule 14f-1.......................  240.14f-1...............    3235-0108
Rule 15a-4.......................  240.15a-4...............    3235-0010
Rule 15a-6.......................  240.15a-6...............    3235-0371
Rule 15b1-1......................  240.15b1-1..............    3235-0012
Rule 15b6-1(a)...................  240.15b6-1(a)...........    3235-0018
Rule 15c1-5......................  240.15c1-5..............    3235-0471
Rule 15c1-6......................  240.15c1-6..............    3235-0472
Rule 15c1-7......................  240.15c1-7..............    3235-0134
Rule 15c2-1......................  240.15c2-1..............    3235-0485
Rule 15c2-5......................  240.15c2-5..............    3235-0198
Rule 15c2-7......................  240.15c2-7..............    3235-0479
Rule 15c2-8......................  240.15c2-8..............    3235-0481
Rule 15c2-11.....................  240.15c2-11.............    3235-0202
Rule 15c2-12.....................  240.15c2-12.............    3235-0372
Rule 15c3-1......................  240.15c3-1..............    3235-0200
Rule 15c3-1(c)(13)...............  240.15c3-1(c)(13).......    3235-0499
Appendix F to Rule 15c3-1........  240.15c3-1f.............    3235-0496
Rule 15c3-3......................  240.15c3-3..............    3235-0078
Rule 15c3-4......................  240.15c3-4..............    3235-0497
Rule 15d-16......................  240.15d-16..............    3235-0116
Rule 15g-2.......................  240.15g-2...............    3235-0434
Rule 15g-3.......................  240.15g-3...............    3235-0392
Rule 15g-4.......................  240.15g-4...............    3235-0393
Rule 15g-5.......................  240.15g-5...............    3235-0394

[[Page 833]]

 
Rule 15g-6.......................  240.15g-6...............    3235-0395
Rule 15g-9.......................  240.15g-9...............    3235-0385
Rule 15Aj-1......................  240.15Aj-1..............    3235-0044
Rule 15Ba2-1.....................  240.15Ba2-1.............    3235-0083
Rule 15Ba2-5.....................  240.15Ba2-5.............    3235-0088
Rule 15Bc3-1.....................  240.15Bc3-1.............    3235-0087
Rule 17a-1.......................  240.17a-1...............    3235-0208
Rule 17a-2.......................  240.17a-2...............    3235-0201
Rule 17a-3.......................  240.17a-3...............    3235-0033
Rule 17a-3(a)(16)................  240.17a-3(a)(16)........    3235-0508
Rule 17a-4.......................  240.17a-4...............    3235-0279
Rule 17a-4(b)(10)................  240.17a-4(b)(10)........    3235-0506
Rule 17a-5.......................  240.17a-5...............    3235-0123
Rule 17a-5(c)....................  240.17a-5(c)............    3235-0199
Rule 17a-6.......................  240.17a-6...............    3235-0489
Rule 17a-7.......................  240.17a-7...............    3235-0131
Rule 17a-8.......................  240.17a-8...............    3235-0092
Rule 17a-9T......................  240.17a-9T..............    3235-0524
Rule 17a-10......................  240.17a-10..............    3235-0122
Rule 17a-11......................  240.17a-11..............    3235-0085
Rule 17a-12......................  240.17a-12..............    3235-0498
Rule 17a-13......................  240.17a-13..............    3235-0035
Rule 17a-19......................  240.17a-19..............    3235-0133
Rule 17a-22......................  240.17a-22..............    3235-0196
Rule 17a-25......................  240.17a-25..............    3235-0540
Rule 17f-1(b)....................  240.17f-1(b)............    3235-0032
Rule 17f-1(c)....................  240.17f-1(c)............    3235-0037
Rule 17f-1(g)....................  240.17f-1(g)............    3235-0290
Rule 17f-2(a)....................  240.17f-2(a)............    3235-0034
Rule 17f-2(c)....................  240.17f-2(c)............    3235-0029
Rule 17f-2(d)....................  240.17f-2(d)............    3235-0028
Rule 17f-2(e)....................  240.17f-2(e)............    3235-0031
Rule 17f-5.......................  240.17f-5...............    3235-0269
Rule 17h-1T......................  240.17h-1T..............    3235-0410
Rule 17h-2T......................  240.17h-2T..............    3235-0410
Rule 17Ab2-1.....................  240.17Ab2-1(a)..........    3235-0195
Rule 17Ac2-1.....................  240.17Ac2-1.............    3235-0084
Rule 17Ad-2(c), (d), and (h).....  240.17Ad-2(c), (d) and      3235-0130
                                    (h).
Rule 17Ad-3(b)...................  240.17Ad-3(b)...........    3235-0473
Rule 17Ad-4(b) and (c)...........  240.17Ad-4(b) and (c)...    3235-0341
Rule 17Ad-6......................  240.17Ad-6..............    3235-0291
Rule 17Ad-7......................  240.17Ad-7..............    3235-0291
Rule 17Ad-10.....................  240.17Ad-10.............    3235-0273
Rule 17Ad-11.....................  240.17Ad-11.............    3235-0274
Rule 17Ad-13.....................  240.17Ad-13.............    3235-0275
Rule 17Ad-15.....................  240.17Ad-15.............    3235-0409
Rule 17Ad-16.....................  240.17Ad-16.............    3235-0413
Rule 17Ad-17.....................  240.17Ad-17.............    3235-0469
Rule 19b-1.......................  240.19b-1...............    3235-0354
Rule 19b-4.......................  240.19b-4...............    3235-0045
Rule 19b-4(e)....................  240.19b-4(e)............    3235-0504
Rule 19b-5.......................  240.19b-5...............    3235-0507
Rule 19b-7.......................  240.19b-7...............    3235-0553
Rule 19d-1.......................  240.19d-1(b) thru           3235-0206
                                    240.19d-1(i).
Rule 19d-2.......................  240.19d-2...............    3235-0205
Rule 19d-3.......................  240.19d-3...............    3235-0204
Rule 19h-1.......................  240.19h-1(a), (c) thru      3235-0259
                                    (e), and (g).
Rule 24b-1.......................  240.24b-1...............    3235-0194
Rule 101.........................  242.101.................    3235-0464
Rule 102.........................  242.102.................    3235-0467
Rule 103.........................  242.103.................    3235-0466
Rule 104.........................  242.104.................    3235-0465
Rule 301.........................  242.301.................    3235-0509
Rule 302.........................  242.302.................    3235-0510
Rule 303.........................  242.303.................    3235-0505
Rule 604.........................  242.604.................    3235-0462
Rule 605.........................  242.605.................    3235-0542
Rule 606.........................  242.606.................    3235-0541
Rule 607.........................  242.607.................    3235-0435
Rule 608.........................  242.608.................    3235-0500
Rule 609.........................  242.609.................    3235-0043
Rule 611.........................  242.611.................    3235-0600

[[Page 834]]

 
Regulation S-P...................  Part 248................    3235-0537
Form 1...........................  249.1...................    3235-0017
Form 1-N.........................  249.10..................    3235-0554
Form 25..........................  249.25..................    3235-0080
Form 26..........................  249.26..................    3235-0079
Form 3...........................  249.103.................    3235-0104
Form 4...........................  249.104.................    3235-0287
Form 5...........................  249.105.................    3235-0362
Form 8-A.........................  249.208a................    3235-0056
Form 10..........................  249.210.................    3235-0064
Form 10-SB.......................  249.210b................    3235-0419
Form 18..........................  249.218.................    3235-0121
Form 20-F........................  249.220f................    3235-0288
Form 40-F........................  249.240f................    3235-0381
Form 6-K.........................  249.306.................    3235-0116
Form 8-K.........................  249.308.................    3235-0060
Form 10-Q........................  249.308a................    3235-0070
Form 10-QSB......................  249.308b................    3235-0416
Form 10-K........................  249.310.................    3235-0063
Form 10-KSB......................  249.310b................    3235-0420
Form 11-K........................  249.311.................    3235-0082
Form 18-K........................  249.318.................    3235-0120
Form 12B-25......................  249.322.................    3235-0058
Form 15..........................  249.323.................    3235-0167
Form 13F.........................  249.325.................    3235-0006
Form SE..........................  249.444.................    3235-0327
Form ID..........................  249.446.................    3235-0328
Form DF..........................  249.448.................    3235-0482
Form BD..........................  249.501.................    3235-0012
Form BDW.........................  249.501a................    3235-0018
Form BD-N........................  249.501b................    3235-0556
Form X-17A-5.....................  249.617.................    3235-0123
Form X-17A-19....................  249.635.................    3235-0133
Form ATS.........................  249.637.................    3235-0509
Form ATS-R.......................  249.638.................    3235-0509
Form CRS.........................  249.640.................    3235-0766
Form X-15AJ-1....................  249.802.................    3235-0044
Form X-15AJ-2....................  249.803.................    3235-0044
Form 19b-4.......................  249.819.................    3235-0045
Form 19b-4(e)....................  249.820.................    3235-0504
Form Pilot.......................  249.821.................    3235-0507
Form SIP.........................  249.1001................    3235-0043
Form MSD.........................  249.1100................    3235-0083
Form MSDW........................  249.1110................    3235-0087
Form X-17F-1A....................  249.1200................    3235-0037
Form TA-1........................  249b.100................    3235-0084
Form TA-W........................  249b.101................    3235-0151
Form TA-2........................  249b.102................    3235-0337
Form CA-1........................  249b.200................    3235-0195
Rule 7a-15 thru 7a-37............  260.7a-15 thru 260.7a-37    3235-0132
Form T-1.........................  269.1...................    3235-0110
Form T-2.........................  269.2...................    3235-0111
Form T-3.........................  269.3...................    3235-0105
Form T-4.........................  269.4...................    3235-0107
Form ID..........................  269.7...................    3235-0328
Form SE..........................  269.8...................    3235-0327
Form T-6.........................  269.9...................    3235-0391
Rule 0-1.........................  270.0-1.................    3235-0531
Rule 2a-7........................  270.2a-7................    3235-0268
Rule 2a19-1......................  270.2a19-1..............    3235-0332
Rule 3a-4........................  270.3a-4................    3235-0459
Rule 6c-7........................  270.6c-7................    3235-0276
Rule 6e-2........................  270.6e-2................    3235-0177
Rule 7d-1........................  270.7d-1................    3235-0311
Rule 7d-2........................  270.7d-2................    3235-0527
Section 8(b) of the Investment     270.8b-1 thru 270.8b-32.    3235-0176
 Company Act of 1940.
Rule 10f-3.......................  270.10f-3...............    3235-0226
Rule 11a-2.......................  270.11a-2...............    3235-0272
Rule 11a-3.......................  270.11a-3...............    3235-0358
Rule 12b-1.......................  270.12b-1...............    3235-0212
Rule 17a-7.......................  270.17a-7...............    3235-0214
Rule 17a-8.......................  270.17a-8...............    3235-0235

[[Page 835]]

 
Rule 17e-1.......................  270.17e-1...............    3235-0217
Rule 17f-1.......................  270.17f-1...............    3235-0222
Rule 17f-2.......................  270.17f-2...............    3235-0223
Rule 17f-4.......................  270.17f-4...............    3235-0225
Rule 17f-6.......................  270.17f-6...............    3235-0447
Rule 17f-7.......................  270.17f-7...............    3235-0529
Rule 17g-1(g)....................  270.17g-1(g)............    3235-0213
Rule 17j-1.......................  270.17j-1...............    3235-0224
Rule 18f-1.......................  270.18f-1...............    3235-0211
Rule 18f-3.......................  270.18f-3...............    3235-0441
Rule 19a-1.......................  270.19a-1...............    3235-0216
Rule 20a-1.......................  270.20a-1...............    3235-0158
Rule 22d-1.......................  270.22d-1...............    3235-0310
Rule 23c-1.......................  270.23c-1...............    3235-0260
Rule 23c-3.......................  270.23c-3...............    3235-0422
Rule 27e-1.......................  270.27e-1...............    3235-0545
Rule 30b2-1......................  270.30b2-1..............    3235-0220
Rule 30d-2.......................  270.30d-2...............    3235-0494
Rule 30e-1.......................  270.30e-1...............    3235-0025
Rule 30e-3.......................  270.30e-3...............    3235-0758
Rule 31a-1.......................  270.31a-1...............    3235-0178
Rule 31a-2.......................  270.31a-2...............    3235-0179
Rule 32a-4.......................  270.32a-4...............    3235-0530
Rule 34b-1.......................  270.34b-1...............    3235-0346
Rule 35d-1.......................  270.35d-1...............    3235-0548
Form N-5.........................  274.5...................    3235-0169
Form N-8A........................  274.10..................    3235-0175
Form N-2.........................  274.11a-1...............    3235-0026
Form N-3.........................  274.11b.................    3235-0316
Form N-4.........................  274.11c.................    3235-0318
Form N-8B-2......................  274.12..................    3235-0186
Form N-6F........................  274.15..................    3235-0238
Form 24F-2.......................  274.24..................    3235-0456
Form N-18F-1.....................  274.51..................    3235-0211
Form N-54A.......................  274.53..................    3235-0237
Form N-54C.......................  274.54..................    3235-0236
Form N-CEN.......................  274.101.................    3235-0729
Form N-27E-1.....................  274.127e-1..............    3235-0545
Form N-27F-1.....................  274.127f-1..............    3235-0546
Form N-PORT......................  274.150.................    3235-0730
Form N-17D-1.....................  274.200.................    3235-0229
Form N-23C-1.....................  274.201.................    3235-0230
Form N-8F........................  274.218.................    3235-0157
Form N-17F-1.....................  274.219.................    3235-0359
Form N-17F-2.....................  274.220.................    3235-0360
Form N-23c-3.....................  274.221.................    3235-0422
Form ID..........................  274.402.................    3235-0328
Form SE..........................  274.403.................    3235-0327
Rule 0-2.........................  275.0-2.................    3235-0240
Rule 203-3.......................  275.203-3...............    3235-0538
Rule 204-2.......................  275.204-2...............    3235-0278
Rule 204-3.......................  275.204-3...............    3235-0047
Rule 206(3)-2....................  275.206(3)-2............    3235-0243
Rule 206(4)-2....................  275.206(4)-2............    3235-0241
Rule 206(4)-3....................  275.206(4)-3............    3235-0242
Rule 206(4)-4....................  275.206(4)-4............    3235-0345
Form ADV.........................  279.1...................    3235-0049
Schedule I to Form ADV...........  279.1...................    3235-0490
Form ADV-W.......................  279.2...................    3235-0313
Form ADV-H.......................  379.3...................    3235-0538
Form 4-R.........................  279.4...................    3235-0240
Form 5-R.........................  279.5...................    3235-0240
Form 6-R.........................  279.6...................    3235-0240
Form 7-R.........................  279.7...................    3235-0240
Form ADV-E.......................  279.8...................    3235-0361
------------------------------------------------------------------------


[[Page 836]]


[67 FR 14634, Mar. 27, 2002, as amended at 70 FR 37611, June 29, 2005; 
76 FR 46616, Aug. 3, 2011; 77 FR 18684, Mar. 28, 2012; 80 FR 6902, Feb. 
9, 2015; 82 FR 82009, Nov. 18, 2016; 83 FR 29203, June 22, 2018; 84 FR 
33629, July 12, 2019; 85 FR 26092, May 1, 2020]

[[Page 837]]



List of CFR Sections Affected



All changes in this volume of the Code of Federal Regulations (CFR) that 
were made by documents published in the Federal Register since January 
1, 2016 are enumerated in the following list. Entries indicate the 
nature of the changes effected. Page numbers refer to Federal Register 
pages. The user should consult the entries for chapters, parts and 
subparts as well as sections for revisions.
For changes to this volume of the CFR prior to this listing, consult the 
annual edition of the monthly List of CFR Sections Affected (LSA). The 
LSA is available at www.govinfo.gov. For changes to this volume of the 
CFR prior to 2001, see the ``List of CFR Sections Affected, 1949-1963, 
1964-1972, 1973-1985, and 1986-2000'' published in 11 separate volumes. 
The ``List of CFR Sections Affected 1986-2000'' is available at 
www.govinfo.gov.

                                  2016

17 CFR
                                                                   81 FR
                                                                    Page
Chapter II
240 Authority citation amended......................................8637
    Technical correction....................................12821, 32643
    Authority citation revised..............................28705, 30142
    Policy statement........................................33374, 49163
    Authority citation amended.....................................70900
240.3a67-10 (a)(5), (6) and (d) added..............................30142
240.3a71-3 (b)(1)(iii)(C) added; eff. 4-19-16.......................8637
    (a)(6) through (9) and (c) added...............................30142
240.3a71-5 (c) added; eff. 4-19-16..................................8637
240.3a71-6 Added...................................................30143
    (d)(3) added...................................................39844
240.3b-4 (c)(1) Instruction redesignated as (c)(1) Note and 
        revised....................................................28705
240.10A-1 (a)(4)(i) amended; eff. 6-1-18...........................82020
240.12b-25 Heading, (a) and (b)(2)(ii) amended; eff. 6-1-18........82020
240.12g-1 Revised..................................................28705
    (b)(1) correctly revised.......................................95458
240.12g-2 Revised..................................................28705
240.12g-3 (a)(2), (b)(2) and (c)(2) revised........................28706
240.12g-4 (a) revised..............................................28706
240.12g5-1 (a)(8) added............................................28706
240.12h-3 (b)(1) revised...........................................28706
240.13a-10 (h) and Note 1 amended; eff. 6-1-18.....................82020
240.13a-11 (b) introductory text amended; eff. 6-1-18..............82020
240.13a-13 (b)(1) amended; eff. 6-1-18.............................82020
240.13a-16 (a)(1) amended; eff. 6-1-18.............................82020
240.13n-4 (b)(8) amended; (b)(9), (10) and (d) added...............60607
240.13q-1 Revised..................................................49426
240.15d-10 (h) amended; eff. 6-1-18................................82020
240.15d-11 (b) introductory text amended; eff. 6-1-18..............82020
240.15d-13 (b)(1) amended; eff. 6-1-18.............................82020
240.15d-16 (a)(1) amended; eff. 6-1-18.............................82020
240.15Fb1-1 Undesignated center heading revised....................39844
240.15Fh-1 Added...................................................30144
240.15Fh-2 Added...................................................30144
240.15Fh-3 Added...................................................30144
240.15Fh-4 Added...................................................30144
240.15Fh-5 Added...................................................30144
240.15Fh-6 Added...................................................30144
240.15Fi-1 Added...................................................39844
240.15Fi-2 Added...................................................39844
240.15Fk-1 Added...................................................30144

[[Page 838]]

240.15g-9 (c)(2) amended; eff. 5-22-17.............................83553
240.17a-23 Removed; CFR correction.................................18747
240.17Ab2-2 Added..................................................70901
240.17Ad-22 (a), (c)(1) and (d) introductory text revised; (e) and 
        (f) added..................................................70901

                                  2017

17 CFR
                                                                   82 FR
                                                                    Page
Chapter I
240 Authority citation amended.....................................17555
240.12a-11 Revised; interim........................................10707
240.12b-2 Amended..................................................17555
240.12h-1 (i) revised; interim.....................................10707
240.14a-21 (a), (b), (c) and section amended.......................17555
240.15c6-1 (a) revised; eff. 5-30-17...............................15601

                                  2018

17 CFR
                                                                   83 FR
                                                                    Page
Chapter II
240 Policy statement...............................................55486
240.3a1-1 revised..................................................38911
240.3a51-1 (a)(2)(i)(A)(3) revised.................................50221
    (a) introductory text amended..................................58427
240.10A-1 (b)(3) revised...........................................50221
240.12b-2 Amended...........................................32021, 50221
240.12g-3 (a)(2), (b)(2), and (c)(2) revised.......................50221
240.13a-10 (b) and (g)(3) revised..................................50221
240.13a-14 (f) revised.............................................40878
240.13b2-2 (b)(2)(i) and (ii) revised..............................50222
240.13h-1 (a)(5) amended...........................................58427
240.14a-16 (f)(2)(iii) amended.....................................29204
240.15c2-12 (b)(5)(i)(C)(14) amended; (b)(5)(i)(C)(15), (16), and 
        (f)(11) added..............................................44742
240.15c3-1g (b)(1)(i)(A), (ii)(A), (E), (2)(i)(A), and (D) revised
                                                                   50222
240.15d-2 (a) revised..............................................50222
240.15d-10 (b) and (g)(3) revised..................................50222
240.15d-14 (f) revised.............................................40878
240.17a-5 (d)(2)(i) Note 1 added...................................50223
240.17a-12 (b)(2) Note 1 added.....................................50223
240.17g-3 (a)(1)(i) amended........................................50223
240.17h-1T (a)(1)(v) Note 1 added..................................50223

                                  2019

17 CFR
                                                                   84 FR
                                                                    Page
Chapter II
240 Authority citation amended.......................33491, 33629, 44041
    Correction: authority citation amended.........................55055
    Technical correction....................................13796, 39178
    Compliance notification........................................18136
240.3a71-6 (d)(4) and (5) added....................................44041
    (d)(6) added...................................................68646
240.10A-1 (c) introductory text revised............................50739
240.12b-23 Revised.................................................12727
240.12b-32 Removed.................................................12728
240.14a-101 Amended..........................................2426, 12728
240.15c3-1 (a)(5) and (c)(2)(xii) redesignated as (a)(5)(i) and 
        (c)(2)(xii)(A); (a)(5)(ii), (10) undesignated center 
        heading and text, (c)(2)(vi)(O), (P), new (xii)(B), (xv), 
        and (17) added; (a)(7) undesignated center heading, (i), 
        (ii), and (c)(2)(iv)(E) revised............................44042
240.15c3-1a (a)(3), (4), (b)(1)(v)(C)(3), and (4) revised; 
        (b)(1)(v)(C)(5) added......................................44044
240.15c3-1b (a)(3)(iii)(C) amended; (b) added......................44044
240.15c3-1d (b)(7), (8), (10)(ii)(B), (c)(2), and (5)(i)(B) 
        revised....................................................44045
240.15c3-1e (c)(4)(v)(D) removed; Preliminary note, (a)(7), and 
        (c)(4)(v)(E) through (H) redesignated as introductory 
        text, (a)(7)(i), and (c)(4)(v)(D) through (G); new 
        introductory text, (a) introductory text, (c)(3), and 
        (e)(1) revised; new (a)(7)(ii), (c)(4)(v)(B)(1), and (2) 
        added; (e) introductory text amended.......................44046
240.15c3-3 Introductory text and (p) added.........................44047
240.15c3-3b Added..................................................44050
240.15l-1 Added....................................................33491
240.15Fb6-1 Removed; eff. 4-22-19...................................4947
240.15Ga-2 (e) revised; (f)(i) and (ii) redesignated as (f)(1) and 
        (2)........................................................40258

[[Page 839]]

240.16a-3 (e) removed..............................................12728
240.17a-3 (a)(24) added............................................33629
    Introductory text, (a)(12)(i)(I), and (25) through (30) added; 
(a) introductory text, (1), (3), (4)(vi), (vii), (5) through (11), 
(12)(i) introductory text, (A), (E) through (H), (ii), and (b) 
through (g) revised; (a)(12)(i) undesignated text and (h) removed; 
(a)(16)(ii)(A), (B), (17)(i)(A), (B)(1), (C), (D), (18)(i), and 
(19)(i) amended....................................................68646
240.17a-4 Introductory text, (b)(8)(xvi), (xvii), (14), (15), 
        (16), and (m)(5) added; (a), (b) introductory text, (1), 
        (3), (4), (5), (7), (b)(8) introductory text, (i), (v) 
        through (viii), (xii) through (xv), (9), (12), (13), (c), 
        (d), (e) introductory text through (4), (6), (f)(3)(vii), 
        (g), (i), (m)(1) through (4) revised; (b)(11), (e)(8), (f) 
        introductory text, (2) introductory text, (3) introductory 
        text, (iv)(B), (vi), (h), (j), (k)(1), and (l) amended.....68649
240.17a-5 Introductory text added; (a)(1) removed; (a)(2) through 
        (7) redesignated as (a)(1) through (6); (a) heading, new 
        (a)(1)(ii), (iii), (iv), new (a)(2) through (5), (b)(1), 
        (c)(3), (d)(1)(i)(B), (2)(i), (ii), (iii), (3)(i)(A)(4), 
        (5), (B), (C), (iii), (6), (e)(1)(ii), (2), (3), (4), (h) 
        note, and (o) revised; new (a)(6), (b)(3), (4), (5), 
        (c)(1), (2), (4)(iii), (5)(iii)(C), (d)(1)(i) introductory 
        text, (f)(3)(v)(B), (k) introductory text, (l), (m)(1), 
        (2), (4), and (n)(2) amended; undesignated text following 
        (c)(4)(iii) designated as (c)(4)(iv).......................68652
240.17a-11 (a) removed; (b) through (i) redesignated as (a) 
        through (d) and (g) through (j); Introductory text and (f) 
        added; new (a), (b) introductory text, (c), (d), and (g) 
        through (j) revised........................................68655
240.17a-12 Amended.................................................68656
240.17a-4 (e)(5) revised...........................................33492
    (e)(10) added..................................................33629
240.17a-5 (e)(1)(i)(A) revised.....................................27712
240.17a-14 Added...................................................33629
240.17g-5 (a)(3)(iv) added.........................................40258
240.17g-7 (a)(3) revised...........................................40258
240.18a-1--240.18a-10 Undesignated center heading added............44052
240.18a-1 Added....................................................44052
    (d)(9)(iii)(A) and (B) added...................................68656
240.18a-1a Added...................................................44061
240.18a-1b Added...................................................44063
240.18a-1c Added...................................................44065
240.18a-1d Added...................................................44065
240.18a-2 Added....................................................44068
240.18a-3 Added....................................................44068
240.18a-4 Added....................................................44071
240.18a-4a Added...................................................44075
240.18a-5 Added....................................................68656
240.18a-6 Added....................................................68659
240.18a-7 Added....................................................68662
240.18a-8 Added....................................................68667
240.18a-9 Added....................................................68668
240.18a-10 Added...................................................44076
    (a) introductory text, (b)(1), (2), (3), (c) introductory 
text, (d)(2)(ii) introductory text, and (e) revised; (b)(4) and 
(5) added..........................................................68668
240.24b-2 (b)(2) revised...........................................50739

                                  2020

17 CFR
                                                                   85 FR
                                                                    Page
Chapter II
240 Technical correction....................................19884, 28484
240.0-13 Heading, (a), (b), and (e) revised; eff. 4-6-20............6350
240.3a71-3 (a)(10) through (13) and (d) added; (b)(1)(iii)(C) 
        revised; eff. 4-6-20........................................6350
240.3a71-6 (d)(7) added; eff. 4-6-20................................6412
240.12b-2 Amended; eff. 4-27-20....................................17241
240.12b-2 Amended..................................................54071
240.12b-11 (d) revised.............................................78229
240.12h-5 Revised..................................................22006
240.14a-1 (l)(1)(iii) revised; (l)(2)(iii) and (iv)(C) amended; 
        (l)(2)(v) added............................................55154
240.14a-8 (b)(1), (2), (c), and (i)(12) revised; (b)(3) added; 
        eff. through 1-1-23 in part................................70294
240.14a-2 (b)(9) added.............................................55154
240.14a-9 Note amended.............................................55155
240.14a-16 (f)(2)(iii) revised.....................................26101
240.14a-101 Amended..................................26101, 33359, 63761
240.14d-1 (h) revised..............................................78229
240.15c2-11 Revised................................................68203
240.15Fb1-1 (b) and (d) revised....................................78229

[[Page 840]]

240.15Fb2-1 (d) and (e) revised; eff. 4-6-20........................6352
240.15Fi-1 Revised; eff. 4-6-20.....................................6412
240.15Fi-3 Added; eff. 4-6-20.......................................6413
240.15Fi-4 Added; eff. 4-6-20.......................................6414
240.15Fi-5 Added; eff. 4-6-20.......................................6414
240.15g-1 (b) and (c) revised......................................64278
240.16a-3 (i) revised..............................................78230
240.17a-3 (a)(31) added; eff. 4-6-20................................6416
240.17a-4 (b)(1) revised; (e)(11) and (12) added; eff. 4-6-20.......6416
240.17Ad-22 (a)(3), (5), and (16) revised..........................28867
240.18a-5 (a)(10)(iii) and (b)(8)(iii) added; eff. 4-6-20...........6353
    (a)(18) and (b)(14) added; eff. 4-6-20..........................6416
240.18a-6 (b)(1)(i) and (2)(i) revised; (d)(4) and (5) added; eff. 
        4-6-20......................................................6416
240.18a-6 (b)(1)(x) revised........................................33021
240.21F-2 Revised..................................................70942
240.21F-3 (b)(1) and (3) revised...................................70943
240.21F-4 (c)(2) and (e) revised; (d)(3) added.....................70943
240.21F-6 Introductory text amended; (c) added.....................70943
240.21F-7 (a) introductory text revised............................70944
240.21F-8 Heading and (c)(7) revised; (d) and (e) added............70944
240.21F-9 (a) and (b) revised; (c) introductory text, (2) through 
        (4), and (d) amended; (e) added............................70945
240.21F-10 (b) through (e) revised.................................70945
240.21F-11 (b) through (e) revised.................................70946
240.21F-12 (a) introductory text, (3), and (6) revised; (a)(2) 
        amended....................................................70947
240.21F-13 (b) revised.............................................70947
240.21F-18 Added...................................................70947
240.19b-4 (g) revised..............................................65497

                                  2021

   (Regulations published from January 1, 2021, through April 1, 2021)

17 CFR
                                                                   86 FR
                                                                    Page
Chapter II
240 Policy statement...............................................11627
240.12g5-1 (a)(2) revised; (a)(9) added.............................3601
240.12g-6 Heading and (a) introductory text revised.................3601
240.13q-1 Revised...................................................4714
240.14a-3 (b)(5)(i) removed.........................................2131
240.14a-101 Amended.................................................2131
240.17Ad-24 Added; eff. 4-2-21......................................7643


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