[Federal Register Volume 59, Number 116 (Friday, June 17, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-14738]


[[Page Unknown]]

[Federal Register: June 17, 1994]


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SECURITIES AND EXCHANGE COMMISSION

[Release Nos. 33-7066; 34-34176; International Series Release No. 671]

 

Exemptions From Rules 10b-6, 10b-7, and 10b-8 During 
Distributions of Certain French Securities

June 7, 1994
    Pursuant to delegated authority, the Division of Market Regulation 
issued the following letter granting class exemptions (``Exemptions'') 
from rules 10b-6, 10b-7, and 10b-8 (``Trading Practices Rules'') under 
the Securities Exchange Act of 1934 to facilitate distributions in the 
United States of securities of certain highly capitalized French 
issuers. The Exemptions permit distribution participants and their 
affiliated purchases to effect transactions in France that otherwise 
would be prohibited by the Trading Practices Rules, subject to certain 
disclosure, recordkeeping, record production, and notice requirements.
    The Exemptions have been issued in the context of a continuing 
review of the Trading Practices Rules, and are published to provide 
notice of their availability.
Margaret H. McFarland,
Deputy Secretary.

English Translation of the Letter

Dear Mr. Becker,
    I am writing in connection with possible offerings of equity 
securities of certain French companies involving a distribution of some 
or all of the Securities in the United States.\1\
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    \1\The term equity securities shall include equity related 
securities such as convertible or exchangeable bonds and warrants. 
Such equity related securities may be issued by the issuer of the 
equity securities itself or by a subsidiary of such issuer. 
Offerings of straight debt securities are outside the scope of this 
letter.
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    With reference to the policy statement issued by the Securities and 
Exchange Commission on November 3, 1993, I am writing to request 
exemptions from rules 10b-6, 106-7 and 10b-8 under the Securities 
Exchange Act of 1934 for French issuers to the extent set forth in part 
III below.

I. Offerings By French Companies

    The structure of an offering of equity securities in a French 
company varies depending on whether it is a primary or a secondary 
offering.

A. Primary Offerings

    French law grants shareholders of a French company pre-emptive 
rights to subscribe for shares issued by such company. French law also 
authorizes shareholders, voting at a shareholders meeting, to renounce 
such pre-emptive rights. In practice, in the case of a renunciation of 
such pre-emptive rights, most offerings are conducted so as to grant 
current shareholders a priority right to purchase new shares before the 
general public during a period of 5 to 10 days.
1. Offerings With Pre-emptive Rights
    Offerings with pre-emptive rights permit the current shareholders 
to participate in the capital increase pro rata or to sell their pre-
emptive rights, which are securities separable from the shares, on the 
market. The existence of a negotiable pre-emptive right permits 
detachment of the offering price from the stock market price, because 
the shareholders who do not want to participate in an offering can, by 
selling their rights on the market, be compensated for the dilution 
which could result from an offering price which is significantly less 
than the market price and/or than their share in the net assets. The 
discount from the stock market price is generally 10% to 20%. The 
technique of an offering with pre-emptive rights is principally used 
for offerings of shares rather than for those of ``composite 
securities'', such as bonds with warrants or bonds convertible into 
shares, for reasons of valuation and quotation on the appropriate stock 
market.
2. Offerings Without Pre-emptive Rights
    French law permits an issuer, when it is authorized by its 
shareholders, to issue shares (or securities exchangeable for, or 
convertible into, shares) without pre-emptive rights. In this case, the 
law limits the discount at which the issuer may offer the shares from 
the stock market price.\15\ The issue price must be at least equal to 
the average of the stock market prices for any 20 consecutive business 
days during the 40-day period immediately preceding the date of the 
offering (the ``20/40 rule''). The 20/40 rule protects shareholders to 
the extent that it limits the discount that can be set for an offering 
of shares without pre-emptive rights. In addition, the COB has 
recommended a priority period in the case of an offering without pre-
emptive rights, permitting current shareholders to subscribe for new 
shares on a priority basis. This period provides existing shareholders 
the ability to maintain their shareholding in the capital of a company 
of which they are shareholders, even if they have waived their pre-
emptive rights. The practice of the priority period has been widely 
followed for offerings without pre-emptive rights; offerings without a 
priority period are rare today in France (1 or 2 per year).
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    \15\Article 186-1, second paragraph of the law of July 24, 1966 
on commercial companies.
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    The 20/40 rule applies, according to the text of the law, only to 
straight share offerings; however, to avoid circumvention of the law, 
the COB requires that the 20/40 rule be applied in the case of 
offerings of convertible bonds or warrants. In applying the 20/40 rule, 
issuers generally choose a reference period that is close to the 
offering date in order to limit the amount of the discount.
    In order to facilitate an underwritten offering in France and/or on 
the international market at the same time as an offering with a 
priority period, the COB has accepted that the priority period only 
apply to a substantial part (i.e., at least two thirds) of the 
offering.
3. Offerings Without a Priority Period
    Offerings without a priority period are extremely rare. Such 
offerings are used under very limited circumstances, such as when an 
issuer needs to offer shares publicly on a foreign market. Such an 
offering can only take place if one or both of the following two 
conditions are met:

--It must be at the closest possible price to the stock market price; 
and/or
--The existing shareholders are compensated, for example in the form of 
a distribution of free shares or warrants.

    Offerings without a priority period will probably remain atypical, 
because shareholders generally want to avoid dilution through the use 
of pre-emptive rights or a priority period.
4. Underwritten Offerings
    In the case of offerings with a priority period, an underwritten 
offering can occur during the period when the existing shareholders 
have a priority right to subscribe for new shares, by anticipating that 
a fraction of the existing shareholders will not subscribe for new 
shares. Underwritten offerings in France and/or on the international 
market can therefore take place during the priority period granted to 
existing shareholders without extending the offering period. In order 
to accommodate the differences between the actual behavior of the 
existing shareholders and the level of anticipated purchases, several 
techniques are used: ``claw-back'' arrangements, over-allotment options 
and arrangements whereby a majority shareholder renounces his priority 
subscription rights.

B. Secondary Offerings

1. Public Offerings
    Public offerings are the traditional means of selling a large 
number of shares of a listed company on the market. Public offerings 
are regulated both by the general rules of the CBV (title 7) and by the 
rules of the COB 89.03, chapter III. Public offerings are at a price 
different from the market price. sellers, however, generally offer the 
shares at a price which is close to the market. price Privatizations, 
which are a particular kind of public offerings, because of the nature 
of the seller (the State) and of the volume of capital involved (up to 
several dozen billion francs per transaction), can be carried out with 
a substantial discount from the last quoted market price (e.g., 10 to 
15%).
    Public offerings require the following:

--approval of the CBV;
--the clearance of the prospectus by the COB;
--The centralization of subscription orders by the Societe des Bourses 
Francaises;

    In addition, public tender offers are market transactions which 
require a high level of disclosure.
    In a public offering, all financial institutions, such as banks 
(but also other financial intermediaries such as the French National 
Post Office and brokerage houses), can receive orders from the public. 
Such orders are transmitted to the SBF where they are centralized. None 
of the financial institutions has any influence over the allocation of 
the shares.
    A public offering may be underwritten on a stand-by basis. 
Historically, most public offerings, and in particular those relating 
to privatizations, are oversubscribed (about 2 to 4 times).
2. Underwritten Offerings
    Whenever an offering is sufficiently large, an underwritten 
offering can take place in France and/or on an international market. 
This is particularly the case in the context of privatization 
transactions. Such transactions, which use the book-billing method, 
provide the banks leading the syndicate greater flexibility when 
allocating shares to investors. In the context of an underwritten 
offering, the price for the offering is set based upon indications of 
interest received from potential investors; however, the final price 
determined by the lead managers cannot be less than the price in the 
public tender offer. During the first privatization which used this 
technique (Rhone-Poulenc, November 1993), the institutional investors 
who purchased shares in the underwritten offering paid a price 8% 
higher than that paid by individuals who purchased shares in the public 
offering.
3. Bought Deals
    The ``bought deal'' permits the placement of a certain amount 
(usually large) of securities with certain institutional investors. 
This type of offering, different from a public offering, can only occur 
when it involves shares of a listed company being offered at the market 
price or by techniques explicitly provided for in the general rules of 
the CBV:

--By ``applications'' (title 4, chapter III of the general rules of the 
CBV), the price in this case must be between the best purchase offer 
and the best sale offer existing at the time of the application 
(article 4-7-3);
--By option contracts (title 7, chapter II of the general rules of the 
CBV): these contracts permit the sale or purchase of a given amount of 
securities at a price quoted on a stock market the day of the contract 
or the day of its term or at the average of the quoted prices between 
those two dates.

    The seller of securities places the securities through a bank or 
banks with institutional investors of such seller's choice. 
Accordingly, the seller transfers the securities first to the bank or 
banks which have committed to sell them to such institutional investors 
in France or abroad.
    The COB carefully reviews this type of placement in order to ensure 
that it is not used to advantage unfairly any existing shareholder of 
the company.

C. Market Activities of Underwriters During Offerings

    In France, the banks are the underwriters of securities. The vast 
majority of French banks provide a full range of banking and securities 
services such as brokerage, underwriting and investment advisory 
services including managing on a discretionary basis the portfolios of 
bank customers. However, banks may not be direct members of the Paris 
Bourse and have to set up separate subsidiaries which will be members 
of the Bourse.
    The French banks acting as underwriters typically continue to 
engage in a range of trading activities during a distribution. The 
underwriters may be active in trading all kinds of securities of the 
issuer or derivative instruments related to such securities both in the 
cash market and in the options market. In these markets, the 
underwriters trade securities in the ordinary course for their own 
account. In addition, the underwriters continue to make investment 
decisions for the accounts they manage and their mutual fund management 
company affiliates continue to make investment decisions on behalf of 
the mutual funds they manage.
    However, pursuant to legal and regulatory requirements to which 
they are subject and pursuant to their own respective internal policies 
and conduct of business rules, banks maintain ``Chinese wall'' 
procedures to separate certain divisions within their respective 
organizations. The main purpose of these Chinese walls is to ensure 
that confidential information held within parts of the respective 
companies or divisions does not spread inadvertently to other parts of 
those companies or to affiliated entities.
    In addition, under French law, companies are prohibited from 
purchasing their own shares either directly or through a financial 
intermediary acting on behalf of the company except in limited 
circumstances. These circumstances are set forth in article 217-1 and 
217-2 of the Companies Act of July 24, 1966, and in COB Regulations No. 
90.04. They include purchases made for the purpose of offering shares 
to employees of the corporation and, for listed companies, purchases 
made for the purpose of market stabilization. These purchases are 
limited to 10% of the share capital of the corporation. The company may 
not own more than 10% of any class of its outstanding shares in capital 
at any time.
    Under COB Regulation No 90.04, such purchases may be only to ensure 
the liquidity of the shares or to control excessive fluctuations in 
their price. The company is required to file a copy of the 
shareholder's resolution authorizing such transactions with the COB 
prior to engaging in such transactions, as well as a monthly copy of 
the register of purchases and sales thereafter.
    Under article 9 of COB Regulation No. 90.04, transactions made by a 
company in its own shares and, during a distribution period, 
transactions made by financial intermediaries for their own account or 
on behalf of the underwriting syndicate, for the purpose of ensuring 
the proper execution of the distribution are presumed to be legitimate 
when complying with the following requirements: (i) the transactions 
are performed contrary to the trend of the last quoted price, (ii) the 
transactions represent a maximum volume of 25% of the total daily 
transactions recorded over a reference period\16\ preceding the 
transactions, (iii) they are performed only by one intermediary per 
stock exchange session except during a public offering.
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    \16\Under article 217-4 of the Companies Act, the reference 
period consist of five business days for the securities on the 
monthly settlements market and of 30 business days for securities 
listed on the immediate settlement market.
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    The distribution period begins with the announcement of the 
distribution and ends one month after the listing of the newly issued 
shares.

II. The French Securities Market

A. The Equity Market

    Securities may be listed on one of France's seven stock exchanges: 
Paris, Bordeaux, Lille, Lyon, Marseille, Nancy and Nantes which 
together constitute a single exchange system headed by the same 
authorities and subject to the same listing requirements. All 
securities are traded through a single electronic system, CAC.
Trading on the Paris Bourse
    Trading on the Paris Bourse begins at 10 a.m. and ends at 5 p.m. 
(Paris time) each business day.
    Securities may be traded on the cash market (marche au comptant) or 
on the monthly settlement market (reglement mensuel RM). Cash 
transactions comprise the least actively traded French and foreign 
equity securities on the official list, all debt securities on the 
official list and all equity stocks on the second market and hors cote.
    The most actively traded French and foreign equity securities on 
the official list are traded on a monthly settlement basis. All the 
securities comprising the CAC 40 Index are traded on the monthly 
settlement market.
    Securities on the monthly settlement market are traded in round 
lots of 5, 10, 25, 50 and 100, set by the Paris Bourse to reflect their 
limit price. While transactions are firm both in prices and quantity 
once they have been concluded, the actual cash settlement and delivery 
of the shares do not take place until the end of the trading month. 
Investors on the monthly settlement market must meet an initial margin 
requirement which may be adjusted as necessary.
    When investors place orders on the monthly settlement market they 
may request immediate settlement provided that they have the related 
cash (for a purchase) or securities (for a sale). Trades on odd lots 
are settled immediately.
Electronic Trading With CAC
    Trading in France takes place on a centralized order driven market 
through member firms, authorized by the Conseil des Bourses de Valeurs, 
acting as brokers. Transactions are handled by CAC, an electronic 
trading system, through terminals installed in member firms' premises 
and linked to the Paris Bourse central computers. The core of the CAC 
system is linked upstream to an order routing system and downstream to 
a computerised system that disseminates key markets data in real time.
    Orders entered in the CAC system by the Bourse member firms acting 
either on their own behalf or as agents for their clients, are 
automatically ranked by price limit and, within each limit, are queued 
to reflect the order of entry in the system.
    From 9 a.m. to 10 a.m. the market is in its pre-opening phase and 
orders are entered into the centralized order book, without any 
transaction taking place.
    At 10 a.m., the market opens. Based on the limit orders received, 
the central computer calculates the opening price at which the largest 
number of bids and asks orders can be matched. At the same time, the 
system transforms orders at market price into limit orders at the 
opening price, with the result that all limit buy orders at higher 
prices and limit sell orders at lower prices are executed. Limit orders 
at the opening price are executed to the extent that match orders are 
available.
    From 10 a.m. to 5 p.m., trading takes place on a continuous basis. 
The execution price is the price limit placed on the matching order. 
Where price limits are identical, orders are executed on a first 
entered, first matched basis.
    CAC automatically feeds information into the system's electronic 
data dissemination network. As a result, at any given time, the CAC 
displays the five best bids and asks (price and volume) as well as, in 
real time, the five latest transactions completed (time price, number 
of shares traded).
    French securities brokers may also act as principals with respect 
to clients on the Paris Bourse. However, such prices must be lodged on 
to the CAC and must be at or within the current market spread at the 
time of their transmission. After hours principal transactions may also 
take place at any price within the spread at the previous close, plus 
or minus 1%. Those transactions must be reported to the SBF prior to 
the opening of the next trading session. Every morning, prior to the 
opening, the SBF disseminates through the market data feed message zone 
the name of the stocks on which after hours transactions have been 
reported and the number of shares traded.
    Finally block trades in specific securities are permitted outside 
the market spread, subject to certain restrictions (e.g. the securities 
broker effecting the trade must agree to fill all buy orders whose 
price is higher and all sell orders whose price is lower than such 
block trade).
    The Enforcement Division of the SBF is in charge of seeing that 
member firms of the Paris Bourse comply with the securities laws and 
the regulations of the CBV.

B. The MONEP (The Options Market)

    The MONEP (Paris Traded Options Market) is located within the Paris 
Bourse; it is governed and regulated by the Conseil des Bourses de 
Valeurs, through its general regulation. There are 21 market markers in 
options on the shares on the MONEP.
    The market makers are registered with a professional body, the 
``Societe de Compensation des Marches Conditionnels'' (SCMC) which is 
affiliated with the SBF and to which the SBF has delegated 
responsibility for (i) options market administration, (ii) technical 
clearing of the MONEP, (iii) surveillance and control of operations and 
members. MONEP members can operate on the markets as brokers and/or as 
market makers.
    Twenty seven series of equity options and two series of options 
based on the CAC 40 index are traded on the floor of the Paris Bourse, 
from 10 a.m. to 5 p.m., on a continuous basis by open outcry around 
different pits., two to four classes of options being listed and traded 
in each pit. In each pit, several SCMC representatives execute orders 
from the Public Order Book and are responsible for seeing that traders 
comply with the market's rules.
    In addition, for retail orders, brokerage firms have a direct 
access to an automated trading system called STAMP (Systeme de 
Transactions Automaiisees du MONEP) through terminals in their own 
trading rooms. Orders are keyed into the centralized public order book 
and the data are displayed and disseminated to users. Such orders are 
either matched automatically inside the book when they represent the 
market's best price or routed to SCMC staff for priority execution on 
the floor if better prices are available there.
    MONEP member firms operate through representatives acting in two 
distinct capacities: (i) As brokers who trade orders received directly 
from clients or issued for brokerage houses' own account, (ii) as 
market makers. Since a modification of the General Regulation of the 
CBV that took place in August 1993, there are three types of market 
makers:

--The market makers ``specialist'': a specialist market maker is 
designated for each class of option. He is the only market maker 
responsible for quoting and continuously updating a bid/ask price for 
the series of option allocated to the firm. The bid/ask price offered 
by the specialist is disseminated by the SCMC on quotation screens.
--The market maker ``counterpart to the market'': he is required to be 
present on the floor and may trade within the bid/ask price offered by 
the specialist. There are various counterparts to the market for the 
same class of option.
--The market maker acting as ``block transaction counterpart''. His 
activity consists in arranging options blocks transactions for 
institutional clients, typically from the firm's trading room. The 
transaction is then executed on the market if the price is within the 
spread displayed.

    This change is being implemented gradually on a class of option by 
class of option basis.
    Market makers are required to be present on the floor during 
trading hours and to quote a bid/ask price to any broker or to the SCMC 
upon requests. Market makers quotation (bid/ask prices) are entered and 
disseminated on a real time basis. All trades are immediately time-
stamped and entered into the market system in order to be displayed on 
the floor and disseminated outside the floor.
    After hours trading is forbidden.

C. The Regulatory Authorities

    A professional body, the Conseil des Bourses de Valeurs (CBV) 
(Stock Exchange Council) is the market regulatory body. The Conseil des 
Bourses de Valeurs promulgates regulation dealing with the operation of 
the French stock exchanges and set forth the conditions for 
authorization of member firms, for admission and withdrawal from 
listing, and for take over bids. The CBV rules also set forth a 
professional code of conduct for Bourse members, their subsidiaries, 
their manager and their staff. In addition, the Council can take 
disciplinary action as necessary.
    Another professional body, the Societe des Bourses Francaises, 
implements the CBV regulations, monitors the trading system, 
disseminates data on market conditions, provides a number of listing 
and issuing services and acts as a clearing house between member firms. 
The SBF handles day to day administration, surveillance, and 
development of the market.
    The Commission des operations de bourse (COB), an independent 
administrative body, is responsible for overall supervision of French 
securities, options and futures markets. Under the Ordinance of 
September 28, 1967, setting up the COB, the COB is responsible for 
seeing to the protection of savings invested in securities and all 
other investments involving a public offering, to the provision of 
information to investors and to the proper functioning of markets for 
securities, listed financial products or negotiable futures contracts.
    If the SBF primarily regulates and carries out the surveillance of 
the market, including by controlling quotation rules, participant's 
risks or margin calls, the market surveillance carried out by the COB 
is of a different nature because the COB is entrusted with the broad 
mission of protecting investors.
    The market surveillance carried out by the COB aims at (i) 
detecting abnormal situations in the functioning of the markets (ii) 
sorting and treating data that enable the COB to check that its rules 
are complied with, including those relating to public offers and 
information of shareholders (iii) detecting securities and futures 
frauds as well as violations to the business codes of conduct and to 
regulations of the CBV and the Conseil des Marches a Terme (Futures 
Market Council).
    The surveillance department of the Enforcement Division of the COB 
is connected to the various computers of the Paris Bourse, among which 
the CAC, TOPVAL and REUTER workstations providing the COB with data on 
a real time basis. Moreover, the COB has set up its own data base 
directly linked to the Paris Bourse, the MONEP and the MATIF.
    On December 14, 1989, the Commission des operations de bourse and 
the Securities and Exchange Commission entered into an administrative 
agreement on cooperation and exchange of information. This 
Administrative Agreement entered into force on January 31, 1991.
    Under this Agreement, the COB and the SEC may exchange transaction 
information, including the identity of customers, where necessary, in 
the course of an investigation initiated by either of the Commissions.

D. Laws and Regulations Governing Fraudulent and Manipulative Practices

    Provisions relating to fraudulent and manipulative practices are 
set forth mainly in the Ordinance of September 28, 1967, and in COB 
Regulation No. 90.04 and No. 90.08.\17\ Article 10.1 of the Ordinance 
of September 1967 makes it a criminal offense for any persons who have 
access to privileged information on an issuer of securities or on the 
futures prospects of a security or a negotiable future contract to 
effect transactions on the market, either directly or through a third 
party, before the general public was aware of this information. It 
would also be a criminal offense for such a person to communicate such 
information to a third party outside the normal course of his 
professional activities. Under article 10.1, criminal sanctions shall 
also apply to any persons who have knowingly disseminated to the 
public, through whatever channels or means, false or deceitful 
information on an issuer of securities or on the future prospects of a 
security, a quoted financial product or a negotiable futures contract 
of such nature as to influence prices. Under article 10.3, similar 
penalties shall apply to any person who, either directly or indirectly, 
has knowingly carried out or attempted to carry out a purpose-fully 
misleading act on a financial market with the aim of impeding the 
normal functioning of the market. It should be stressed that under 
article 40 of the Criminal Proceeding Code, any governmental entity who 
becomes aware of a fact that may constitute a criminal offense has to 
transmit the information to the Public Prosecutor.
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    \17\It could, however, be considered more generally that all 
regulations taken by the COB aim at preventing fraudulent practices 
and ensuring investors protection.
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    The violation of COB Regulation No. 90.08 relating to the use of 
privileged information is sanctioned by the COB through an 
administrative proceeding.
    COB Regulation No. 90.04 provides that price setting on the market 
shall result from the general matching of bids and offers in compliance 
with the Regulation of the Conseil des Bourses de Valeurs or the 
Counseil du Marche a Terme. Orders transmitted on the market shall not 
be aimed at hindering or misleading the setting of prices on the 
market. If the COB so requires in the course of an investigation, any 
person transmitting orders on the market must be able to publicly 
explain the reasons for, and the details of, the orders.
    Regulation 2.3.11 of the CBV requires the member firms to maintain 
records of securities transaction effected by them. Such records must 
be maintained for at least five years from the date thereof. To ensure 
that the market's rules and business code of conduct are complied with 
by all participants, member firms must specify, when entering orders 
into the system, whether these orders come from customers or are being 
executed for the firm's own account, and whether such orders are the 
result of program trading. The required transaction information 
includes (i) the name of the security that is the subject of the 
transaction, (ii) the date of the transaction, (iii) the price and size 
of the transaction, (iv) whether the transaction was effected for a 
customer or a proprietary account, (v) the market on which the 
transaction is effected, (vi) whether the transaction was a purchase or 
a sale and (vii) the identity of the account on whose behalf the 
transaction was effected.

III. Proposed Exemption From Rules 10b-6, 10b-7, 10b-8

A. Reasons for Relief

    The application of rules 10b-6, 10b-7 and 10b-8 to the activities 
of distribution participants and their affiliates outside the United 
States, as experienced on the occasion of several public offerings in 
the past few years,\18\ often conflicts with market practices in France 
and impose compliance burdens and costs on French issuers and 
underwriters and their affiliated purchasers. The application of rules 
10b-6, 10b-7 and 10b-8 outside the United States has and would have, 
inter alia, the following consequences, which jeopardize the success of 
primary or secondary offering.
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    \18\Elf Acquitaine distributions: June 1991 and February 1994.
    Total distributions: October 1991 and June 1992.
    Alcatel Alsthom distribution: May 1992.
    Rhone-Poulenc distributions: January 1993 and November 1993.
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    1. Distribution participants, including the underwriters and in 
particular the lead underwriter would be unable to maintain an orderly 
market by buying and selling affected securities as principles during 
the offering, within the limits set forth in COB Regulations. Moreover, 
the affiliates of the distribution participants would be precluded from 
fulfilling their formal market-making obligations on the MONEP with 
respect to listed options that are affected securities.
    2. The underwriters might not be able to continue certain of their 
regular contacts with customers such as discussions regarding 
investment strategies with respect to the rights and shares and might 
not be permitted to buy and sell affected securities in connection with 
their customers' trading activities.
    3. Distribution participants' risk management activities would be 
restricted. They would be precluded by rule 10b-6 from hedging in 
derivatives or other affected securities.
    4. Distribution participants' customary proprietary trading 
activities, involving arbitrage and other trading strategies would be 
curtailed.

B. Scope of Exemption

    We propose that the Commission grant exemptions to the effect that 
rules 10b-6, 10b-7 and 10b-8 shall not apply to distribution 
participants, including issuers of qualified French securities (as 
defined below), and their affiliated purchasers (the Relevant Parties) 
in connection with transactions in Relevant Securities (as defined 
below) outside the United States during distributions in the United 
States of Qualified French Securities (as defined below), subject to 
the following terms, conditions and limitations:
1. Securities
    (a) The security being distributed (a ``Qualified French 
Security'') must:
    (i) Be issued by (aa) a ``foreign private issuer'' within the 
meaning of rule 3b-4 under the Exchange Act incorporated under the laws 
of France, which issuer (a ``French Issuer'') has outstanding a 
component security of the CAC 40 Index\19\ (bb) or a subsidiary of a 
French Issuer; and
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    \19\The CAC 40 is a regularly updated market capitalization 
weighted performance index of CAC 40 French Companies; the shares 
included in the CAC 40 are selected on the basis of their market 
capitalization, their trading volume and their sector of activity so 
that the CAC 40 index covers a diversified range of activities. 
References to the CAC 40 refer to the composition of the index on 
the date of this letter; provided, however, that any security added 
to the CAC 40 after the date of this letter also will be treated as 
a Qualified French Security if its issuer satisfies the requirements 
in 1.a.i and such security has an aggregate market value that equals 
or exceeds the equivalent of FF 6 billion (which exceeded US $1 
billion at June 6, 1994,) and an average daily trading volume that 
equals or exceeds the equivalent of FF 30 million (which exceeded US 
$5 million at June 6, 1994,) as published by FFRAs (as defined in 
note 2 below) and any US securities exchanges or automated inter-
dealer quotation systems during a period (the ``Reference Period'') 
that is 20 consecutive business days in Paris within 60 consecutive 
calendar days prior to the commencement of the Covered Period (as 
defined in 3.a below).
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    (ii) Satisfy one of the following:
    (aa) Be a CAC 40 Index component security; or
    (bb) Be an equity security of a French Issuer having an average 
daily trading volume that equals or exceeds the equivalent of FF 30 
million (which exceeded US $5 million at June 6, 1994), as published by 
foreign financial regulatory authorities (``FFRAs'')\20\ and any US 
securities exchanges or automated inter-dealer quotation systems during 
the Reference Period; or
---------------------------------------------------------------------------

    \20\An FFRA is defined in section 3(a)(51) of the Exchange Act, 
5 U.S.C. 78(c)(51), as any (A) foreign securities authority; (B) 
other governmental body or foreign equivalent of a self-regulatory 
organization empowered by a foreign government to administer or 
enforce its laws relating to the regulation of fiduciaries, trusts, 
commercial lending, insurance, trading in contracts of sale of a 
commodity for future delivery, or other instruments traded on or 
subject to the rules of a contract market, board of trade, or 
foreign equivalent, or other financial activities, or (C) membership 
organization a function of which is to regulate participation of its 
members in activities listed above. For purposes of this letter, the 
Societe des Bourses Francaises, is considered to be an FFRA.
---------------------------------------------------------------------------

    (cc) Be a security that is convertible into, exchangeable for, or 
is a right to acquire a security of a French Issuer described in 
subparagraph ii (aa) or (bb) above.
    (b) ``Relevant Security'' means:
    (i) A Qualified French Security; or
    (ii) A security of the same class and series as, or a right to 
purchase, a Qualified French Security.
2. Transactions Effected in the United States
    All transactions in Relevant Securities effected in the United 
States shall comply with rules 10b-6, 10b-7 and 10b-8.
3. Transactions Effected in France
    (a) All transactions during the Covered Period (as defined below) 
in Relevant Securities effected in France shall be conducted in 
compliance with French law. For purposes of this exemption, ``Covered 
Period'' means (i) in the case of a rights offering, the period 
commencing when the subscription price is determined and continuing 
until the completion of the distribution in the United States, and (ii) 
in the case of any other offering, the period commencing in Paris three 
business days before the price is determined in the United States and 
continuing until the completion of the distribution in the United 
States; provided, however, that the Covered Period shall not commence 
with respect to any Relevant Party until such person becomes a 
distribution participant.
    (b) All transactions in Relevant Securities during the Covered 
Period effected in France on a principal basis shall be effected or 
reported on the trading facilities of the Societe des Bourses 
Francaises.
    (c) Disclosure of Trading Activities.\21\
---------------------------------------------------------------------------

    \21\This disclosure requirement shall not apply to distributions 
effected solely pursuant to Rule 144A under the Securities Act of 
1933 (the ``Securities Act'').
---------------------------------------------------------------------------

    (i) The inside front cover page of the offering materials used in 
the offer and sale in the United States of a Qualified French Security 
shall prominently display a statement in substantially the following 
form, subject to appropriate modification where circumstances require. 
Such statement shall be in capital letters, printed in bold-face roman 
type at least as large as ten-point modern type and at least two points 
leaded:

IN CONNECTION WITH THIS OFFERING, CERTAIN PERSONS MAY ENGAGE IN 
TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS IN 
(IDENTIFY RELEVANT SECURITIES) PURSUANT TO EXEMPTIONS FROM RULES 10b-6, 
10b-7 AND 10b-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE 
``[IDENTIFY SECTION OF OFFERING MATERIALS THAT DESCRIBES THE 
TRANSACTIONS TO BE EFFECTED].''

    (ii) In addition, there shall be included in the identified section 
of the offering materials a comprehensive description of the activities 
that may be undertaken by the Relevant Parties in the Relevant 
Securities during the distribution in substantially the form of Exhibit 
A.
    (d) Recordkeeping and Reporting.
    (i) Each Relevant Party will keep the following information with 
respect to transactions during the covered Period in Relevant 
Securities, provided, however, that in the case of a distribution made 
pursuant to a right offering, such information is only required to be 
kept during the period or periods (a) commencing at any time during the 
Covered Period that the rights exercise price does not represent a 
discount of at least 10% from the current market price of the security 
underlying the rights and (b) continuing until the end of the Covered 
Period or until the rights exercise price represents a discount of at 
least 12 percent from the current market price of the security 
underlying the rights;\22\
---------------------------------------------------------------------------

    \22\For purposes of this exemption, unless stated otherwise, the 
market price for a security shall be the closing price at the end of 
the trading session on the Paris Bourse.
---------------------------------------------------------------------------

    (aa) Name of the security, date, time of execution and reporting, 
where available to the Relevant Party, price and volume of each 
transaction; provided however that no information regarding a customer 
transaction need be provided unless such transaction has a value of FF 
1500000 or more;
    (bb) The exchange or inter-dealer quotation system on which the 
transaction was effected;\23\
---------------------------------------------------------------------------

    \23\The members of the SBR currently have a monopoly for trading 
on French securities in France.
---------------------------------------------------------------------------

    (cc) An indication whether such transaction was for a proprietary 
account or the account of a customer, provided however that any 
transaction effected by an underwriter for a customer account for which 
it has exercised discretionary authority shall be reported as 
proprietary trade and;
    (dd) The identity of the counterparty only where the counterparty 
is an underwriter or a selling group member.
    (ii) The lead underwriter will communicate the list of the Relevant 
Parties to the COB;
    (iii) The Relevant Parties shall keep all documents prepared 
pursuant to paragraph 3.d.i for a period of no less than two years;
    (iv) Upon the request of the Division made pursuant to the 
Administrative Agreement executed between the SEC and the COB on 
December 14, 1989, the COB will require the production and the 
information referred to in paragraph 3.d.(i) from the Relevant Parties 
through the lead underwriter. The Relevant Parties will provide this 
information to the COB in a Comma Delimited ASCII (American Standard 
Code for Information Interchange) within 10 days of the request by the 
COB and the COB shall transmit it to the Division within 30 days from 
the date of the request.
    (v) If the Division has inquiries relating to the records provided 
by such Relevant Parties, it will transmit these inquiries to the COB 
pursuant to the Administrative Agreement. Representatives of the 
affected Relevant Party will be made available to respond to the 
inquiries of the COB.
    The proposed exemption to rules 10b-6, 10b-7 and 10b-8 shall also 
apply unconditionally to all transactions on the SEAQ International and 
any other securities market in a single country outside France and the 
United States to which a French issuer has applied for listing the 
relevant Qualified French Securities if the volume in such relevant 
Qualified French Security as published by SEAQ International or such 
other relevant securities markets is less than 10% of the aggregate 
worldwide trading volume in that security during the Reference Period.
4. General Conditions
    (1) For purposes of this exemption a two business day cooling-off 
period shall apply under rule 10b-6(a)(4)(v), (xi) and (xii) in the 
United States and in each Significant Market,\24\ provided that trading 
in Relevant Securities in any Significant Market shall be subject to 
the exemptive relief then available in such markets, if any or the 
record maintenance and record production requirements contained in the 
letter regarding Application of cooling-off Periods under rule 10b-6 to 
Distributions of foreign securities (April 4, 1994) are satisfied by 
Relevant Parties in such significant market.
---------------------------------------------------------------------------

    \24\A ``Significant Market'' shall mean (i) (aa) SEAQ 
International or (bb) any other dealer market outside France and the 
United States for which price and volume information is published by 
an FFRA or (ii) any other securities markets in a single country 
other than France or the United States to which a French Issuer has 
applied for listing the relevant Qualified French Security and been 
accepted, if during the Reference Period the volume in either (i) 
(aa) or (bb) or (ii) in such relevant Qualified French Security, as 
published by the relevant FRRA(s), in such securities markets (as 
the case may be), is 10% or more of the aggregate worldwide trading 
volume in that security published by all FFRAs in (i) and (ii), 
FFRAs in France, and US securities markets to which such French 
Issuer has applied for listing such relevant Qualified French 
Security and been accepted, during the Reference Period.
---------------------------------------------------------------------------

    (b) The lead underwriter or the global coordinator shall promptly, 
but in any event before the commencement of the Covered Period, provide 
a written notice (``Notice'') to the Division of the following 
information: (i) the name of the issuer and the Qualified French 
Securities; (ii) whether the Qualified French Security is a CAC 40 
component security or information with respect to the market 
capitalization and the average daily trading volume of the Qualified 
French Securities to be distributed; (iii) the identity of the 
Significant Markets where the Qualified French Security trades; (iv) if 
the Notice is for more than one entity, the identity of all 
underwriters and selling group members relying on these exemptions; and 
(v) a statement that the Relevant Parties are aware of the terms and 
conditions of these exemptions.
    We believe this proposed exemption would make it possible to 
maintain liquidity for shares of French companies throughout a public 
offering or private placement in the United States, while minimizing 
the risk of abuses of the kind at which rules 10b-6, 10b-7 and 10b-8 
are aimed.
    Thank you for your assistance and the assistance of your staff in 
this matter.
        Sincerely,
        Pierre Fleuriot.

Exhibit A

    The French underwriters (and their affiliates) will, and the other 
Underwriters (and their affiliates) may, continue to engage in the 
transactions and other activities described below, in France and 
elsewhere outside the United States, in respect of the securities being 
distributed, securities of the same class and series as the securities 
being distributed, and securities convertible into, exchangeable for, 
or giving a right to acquire, the foregoing securities, and derivatives 
thereof (collectively, the ``Relevant Securities''), during the 
distribution period, in accordance with exemptions obtained from the 
Securities and Exchange Commission (the ``Commission'') from the 
application outside the United States of rules 10b-6, 10b-7 and 10b-8 
under the US Securities Exchange Act of 1934. Such exemptions are 
subject to certain exceptions, limitations and conditions set out in 
the Commission's exemption, including compliance with French law.
    The activities referred to above are (a) buying and selling 
Relevant Securities for the accounts of such Underwriters (or their 
affiliates), whether for purposes of risk management in connection with 
the offering, arbitrage or otherwise, (b) buying and selling Relevant 
Securities on behalf of customers, (c) advising customers as to the 
purchase or sale of Relevant Securities, including publication of 
specific company and industry research reports, (d) engaging in 
securities lending transactions in Relevant Securities and (e) 
stabilizing the market (as described below). As a result of these 
activities, the Underwriters may at any time be short or long in 
Relevant Securities.
    It is general market practice in France for the Underwriters, and 
the lead Underwriter in particular, to maintain an orderly market in 
subscription rights and existing shares, and it is expected that the 
lead Underwriter will take measures to avoid extreme price fluctuations 
during the distribution period.
    The activities referred to above may result in the market prices of 
the Relevant Securities being different from those that might otherwise 
have prevailed in the open market if rules 10b-6, 10b-7 and 10b-8 had 
applied in France and elsewhere outside the United States.

United States Securities and Exchange Commission; Division of Market 
Regulation

June 7, 1994.
M. Pierre Fleuriot,
Directeur General,
Commission des Operations de Bourse,
39-43 Quai Andre Citroen,
75739 Paris cedex 15,
France

Re: Distributions of Certain French Securities, File No. TP 94-199

Dear Monsieur Fleuriot:

    In regard to your letter dated June 7, 1994, as supplemented by 
conversations with the staff, this response thereto is attached to 
the enclosed photocopy of your correspondence. By doing this, we 
avoid having to recite or summarize the facts set forth in your 
letter. Each defined term in this letter has the same meaning as 
defined in your letter, unless otherwise noted herein.

Response

    On the basis of your representations and the facts presented, 
the Commission hereby grants exemptions from rules 10b-6, 10b-7, and 
10b-8 to distribution participants, as defined in rule 10b-
6(c)(6)(ii), including issuers of Qualified French Securities (as 
defined below), and their affiliated purchasers, as defined in rule 
10b-6(c)(6)(i) (collectively, ``Relevant Parties''), in connection 
with transactions in Relevant Securities (as defined below) outside 
the United States during distributions of Qualified French 
Securities subject to the following terms, conditions, and 
limitations:

I. Securities

    A. The security being distributed (``Qualified French 
Security'') must:
    1. be issued by: (i) a ``foreign private issuer'' within the 
meaning of rule 3b-4 under the Exchange Act incorporated under the 
laws of France, which issuer (``French Issuer'') has outstanding a 
component security of the CAC 40 Index;1 or (ii) a subsidiary 
of a French Issuer; and
---------------------------------------------------------------------------

    \1\References to the CAC 40 Index refer to the composition of 
the index on the date of this letter; provided, however, that any 
security added to the CAC 40 Index after the date of this letter 
also will be treated as a Qualified French Security if its issuer 
satisfies the requirements in paragraph I.A.1. and such security has 
an aggregate market value that equals or exceeds the equivalent of 
FF6 billion (which exceeded US$1 billion as of June 6, 1994) and an 
average daily trading volume that equals or exceeds the equivalent 
of FF30 million (which exceeded US$5 million as of June 6, 1994) as 
published by ``foreign financial regulatory authorities'' (as 
defined below) and any U.S. securities exchanges or automated inter-
dealer quotation systems, during a period (``Reference Period'') 
that is 20 consecutive business days in Paris within 60 consecutive 
calendar days prior to the commencement of the Covered Period as 
defined in paragraph III.A. below.
---------------------------------------------------------------------------

    2. Satisfy one of the following:
    i. Be a CAC 40 Index component security; or
    ii. Be an equity security of a French Issuer having an average 
daily trading volume that equals or exceeds the equivalent of FF30 
million (which exceeded US$5 million as of June 6, 1994), as 
published by foreign financial regulatory authorities 
(``FFRAs'')2 and any U.S. securities exchanges or automated 
inter-dealer quotation systems during the Reference Period; or
---------------------------------------------------------------------------

    \2\An FFRA is defined in Section 3(a)(51) of the Exchange Act, 5 
U.S.C. 78(c)(51), as any: (A) foreign securities authority; (B) 
other governmental body or foreign equivalent of a self-regulatory 
organization empowered by a foreign government to administer or 
enforce its laws relating to the regulation of fiduciaries, trusts, 
commercial lending, insurance, trading in contracts of sale of a 
commodity for future delivery, or other instruments traded on or 
subject to the rules of a contract market, board of trade, or 
foreign equivalent, or other financial activities; or (C) membership 
organization a function of which is to regulate participation of its 
members in the activities listed above. For purposes of this letter, 
the Societe des Bourses Francaises is considered to be an FFRA.
---------------------------------------------------------------------------

    iii. Be a security that is convertible into, exchangeable for, 
or a right to acquire a security of a French Issuer described in 
paragraph I.A.2.(i) or (ii) above.
    B. ``Relevant Security'' means:
    1. A Qualified French Security; or
    2. A security of the same class and series as, or a right to 
purchase, a Qualified French Security.

II. Transactions Effected in the United States

    All transactions in Relevant Securities effected in the United 
States shall comply with rules 10b-6, 10b-7, and 10b-8.

III. Transactions Effected in France

    A. All transactions during the Covered Period (as defined below) 
in Relevant Securities effected in France shall be conducted in 
compliance with French law. For purposes of these exemptions, 
``Covered Period'' means: (i) in the case of a rights distribution, 
the period commencing when the subscription price is determined in 
the United States and continuing until the completion of the 
distribution in the United States; and (ii) in the case of any other 
distribution, the period commencing three business days in Paris 
before the price is determined in the United States and continuing 
until the completion of the distribution in the United States; 
provided, however, that the Covered Period shall not commence with 
respect to any Relevant Party until such person becomes a 
distribution participant.
    B. All transactions in Relevant Securities during the Covered 
Period effected in France on a principal basis shall be effected or 
reported on the trading facilities of the Societe des Bourses 
Francaises.
    C. Disclosure of Trading Activities.
    1. The inside front cover page of the offering materials used in 
the offer and sale in the United States of a Qualified French 
Security shall prominently display a statement in substantially the 
following form, subject to appropriate modification where 
circumstances require. Such statement shall be in capital letters, 
printed in bold-face roman type at least as large as ten-point 
modern type and at least two points leaded:

IN CONNECTION WITH THIS OFFERING, CERTAIN PERSONS MAY ENGAGE IN 
TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS IN 
(IDENTIFY RELEVANT SECURITIES) PURSUANT TO EXEMPTIONS FROM RULES 10b-6, 
10b-7, and 10b-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE 
``[IDENTIFY SECTION OF OFFERING MATERIALS THAT DESCRIBES THE 
TRANSACTIONS TO BE EFFECTED].''

    2. In addition, there shall be included in the identified 
section of the offering materials a comprehensive description of the 
activities that may be undertaken by the Relevant Parties in the 
Relevant Securities during the distribution.3
---------------------------------------------------------------------------

    \3\The staff of the Division of Market Regulation (``Division'') 
and the Division of Corporation Finance have reviewed Exhibit A 
attached to your request letter and believe that the disclosure 
contained therein would satisfy the requirement of this 
subparagraph.
---------------------------------------------------------------------------

    D. Recordkeeping and Reporting.
    1. Each Relevant Party shall keep and provide to the Commission 
des Operations de Bourse (``COB''), upon request, the information 
described in paragraph III.D.2. below with respect to its 
transactions in Relevant Securities in France; provided, however, 
that in the case of a distribution made pursuant to rights, such 
information is only required to be kept and reported to the COB 
during the period or periods commencing at any time during the 
Covered Period that the rights exercise price does not represent a 
discount of at least 10 percent from the then current market price 
of the security underlying the rights and continuing until: (i) the 
end of the Covered Period; or (ii) until the rights exercise price 
represents a discount of at least 12 percent from the then current 
market price of the security underlying the rights.4
---------------------------------------------------------------------------

    \4\For purposes of these exemptions, unless stated otherwise, 
the market price for a security shall be the closing price at the 
end of the trading session on the Paris Bourse.
---------------------------------------------------------------------------

    2. When required pursuant to paragraph III.D.1. above, the 
Relevant Parties will provide the following information to the COB 
in a Comma Delimited ASCII (American Standard Code for Information 
Interchange) format including a common record layout acceptable to 
the COB and the Division, with respect to transactions during the 
Covered Period in Relevant Securities:
    i. Name of the security, date, time (of execution and reporting, 
where available to the Relevant Party), price, and volume of each 
transaction; provided, however, that no information regarding a 
customer transaction need be provided unless such transaction has a 
value of FF1,500,000 or more;
    ii. The exchange or inter-dealer quotation system on which the 
transaction was effected, if any;
    iii. An indication whether such transaction was for a 
proprietary account or the account of a customer, provided that any 
transaction effected by a Relevant Party for a customer account for 
which it has exercised discretionary authority shall be reported as 
a proprietary trade; and
    iv. The identity of a counterparty only where such counterparty 
is a Relevant Party.
    3. The Relevant Parties shall keep all documents produced or 
prepared pursuant to paragraph III.D.2. for a period of not less 
than two years.
    4. Upon the request of the Division, made pursuant to the 
Administrative Agreement executed between the SEC and the COB on 
December 14, 1989, the COB will require the production of the 
information referred to in paragraph III.D.2. above from the 
Relevant Parties through the lead underwriter. The Relevant Parties 
will provide this information to the COB within 10 days of the 
request by the COB and the COB shall transmit the information to the 
Division within 30 days from the date of the request.
    5. Representatives of a Relevant Party will be made available to 
respond to inquiries of the COB relating to its records.

IV. Transactions Effected in Significant Markets

    A. All transactions in Relevant Securities in a ``Significant 
Market,'' as defined below, shall be effected in accordance with the 
requirements of rules 10b-6, 10b-7, and 10b-8, except as permitted 
by paragraph IV.B. below or by other available exemptions. For 
purposes of these exemptions, ``Significant Market'' means: (i) SEAQ 
International or any other dealer market outside the United States 
and France for which price and volume information is published by an 
FFRA; or (ii) any other securities market(s) in a single country 
other than the United States or France to which a French Issuer has 
applied for listing the Qualified French Security and been accepted, 
if during the Reference Period the volume in either (i) or (ii) in 
such Qualified French Security, as published by the relevant FFRA(s) 
in such securities market, is 10 percent or more of the aggregate 
worldwide trading volume in that security published by all FFRAs in 
(i) and (ii), FFRAs in France, and U.S. securities markets to which 
such French Issuer has applied for listing such Qualified French 
Security and been accepted.
    B. In the case of a distribution of Qualified French Securities 
made pursuant to rights (``rights distribution''), the Relevant 
Parties located in the United Kingdom (``U.K. Relevant Parties''): 
(a) in connection with the rights distribution, may purchase or 
solicit the purchase of Relevant Securities in transactions solely 
in response to orders for the accounts of their customers in the 
ordinary course of their business in the United Kingdom (``customer 
facilitation activities''); and (b) may bid for or purchase Relevant 
Securities as principal in market making transactions through SEAQ 
International during the rights distribution, in each case subject 
to the following conditions:
    1. During the period from five business days prior to the 
expiration date of the rights distribution and until the expiration 
date, inclusive, at any time at which the difference between the 
rights exercise price and the market price of the security 
underlying the rights (which for this purpose will be taken to mean 
the mid-price between the highest bid and lowest offer quoted on 
SEAQ International for the security underlying the rights) does not 
represent a discount of at least 10 percent from the then current 
market price of the security underlying the rights, the U.K. 
Relevant Parties will effect ``passive market making'' transactions 
in the Relevant Securities subject to the terms and conditions of 
Letter regarding Distributions of SEAQ and SEAQ International 
Securities (July 12, 1993) (``LSE Letter'');
    2. The U.K. Relevant Parties, in accordance with Item 502(d)(1) 
of Regulation S-K under the Securities Act, shall include a 
statement regarding transactions which stabilize or maintain the 
market price of the Relevant Securities with appropriate 
modification, to reflect the possibility that the U.K. Relevant 
Parties may engage in market making, including passive market 
making, and customer facilitation activities that otherwise would be 
prohibited by rule 10b-6, and shall include pursuant to rule 408 
under the Securities Act in the ``Plan of Distribution'' or similar 
section of the prospectus, a brief description of such proposed 
market making and customer facilitation activities in the Relevant 
Securities; and
    3. The recordkeeping and production requirements set forth by 
the Commission in the LSE Letter shall apply to all transactions 
effected by or on behalf of the U.K. Relevant Parties' accounts, or 
for the accounts of customers in connection with customer 
facilitation activities during the rights distribution.

V. General Conditions

    A. For purposes of these exemptions, a two business day cooling-
off period shall apply under Rule 10b-6(a)(4)(v), (xi) and (xii) in 
the United States and each Significant Market, provided that trading 
in Relevant Securities in Significant Markets shall be subject to 
the exemptive relief then available in such market, if any, or the 
record maintenance and record production requirements contained in 
Letter regarding Application of Cooling-Off Periods Under Rule 10b-6 
to Distributions of Foreign Securities (April 4, 1994) are satisfied 
by Relevant Parties in such Significant Market.
    B. The lead underwriter or the global coordinator shall 
promptly, but in any event before the commencement of the Covered 
Period, provide a list of the Relevant Parties to the COB and 
written notice (``Notice'') to the Division containing the following 
information: (i) the name of the issuer and the Qualified French 
Security; (ii) whether the Qualified French Security is a CAC 40 
Index component security or information with respect to the market 
capitalization and the average daily trading volume of the Qualified 
French Security to be distributed; (iii) the identity of the 
Significant Markets where the Qualified French Security trades; (iv) 
if the Notice is for more than one entity, the identity of all 
underwriters and selling group members relying on these exemptions; 
5 and (v) a statement that the Relevant Parties are aware of 
the terms and conditions of these exemptions.
---------------------------------------------------------------------------

    \5\Supplemental Notices shall be provided for underwriters and 
selling group members identified after a Notice has been filed.
---------------------------------------------------------------------------

    C. Any person who fails to comply with the conditions of the 
exemptions, including a failure to provide requested information, 
would not be permitted to rely on the exemptions in future 
distributions. Upon a showing of good cause, however, the Commission 
or the Division may determine that it is not necessary under the 
circumstances that the exemptions be denied.
    The foregoing exemptions from rules 10b-6, 10b-7, and 10b-8 are 
based solely on your representations and the facts presented, and 
are strictly limited to the application of those rules to the 
proposed transactions. Any different facts or representations might 
require a different response. Responsibility for compliance with any 
other applicable provisions of the federal securities laws must rest 
with the Relevant Parties. The Division expresses no view with 
respect to any other questions that the proposed transactions may 
raise, including, but not limited to, the adequacy of disclosure 
concerning, and the applicability of any other federal or state laws 
to, the proposed transactions.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Robert L.D. Colby,
Deputy Director.
[FR Doc. 94-14738 Filed 6-16-94; 8:45 am]
BILLING CODE 8010-01-P