[Federal Register Volume 60, Number 24 (Monday, February 6, 1995)]
[Rules and Regulations]
[Pages 6965-6966]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-2892]



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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 230

[Release No. 33-7132; International Series Release No. 780; File No. 
S7-36-94]
RIN 3235-AG26


Adoption of Amendments To Clarify Safe Harbors for Broker-Dealer 
Research Reports

AGENCY: Securities and Exchange Commission.

ACTION: Final rules.

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SUMMARY: The Commission is announcing the adoption of amendments 
relating to the safe harbor provisions of Rules 138 and 139 under the 
Securities Act of 1933. The amendments clarify the availability of the 
safe harbor provisions of Rule 138 relating to broker-dealer research 
reports on individual domestic and foreign companies and the 
availability of the safe harbor provisions of Rule 139 for broker-
dealer industry research reports which include sizable, first-time 
foreign registrants.

EFFECTIVE DATE: February 6, 1995.

FOR FURTHER INFORMATION CONTACT: Annemarie Tierney, (202) 942-2990, 
Office of International Corporate Finance, Division of Corporation 
Finance, U.S. Securities and Exchange Commission, 450 Fifth Street NW., 
Washington, D.C. 20549.

SUPPLEMENTARY INFORMATION: As described in detail below, the Commission 
is adopting amendments to Rule 1381 and Rule 1392 under the 
Securities Act of 1933 (the ``Securities Act'')3. The amendments 
adopted today were proposed by the Commission on December 13, 
1994.4

    \1\17 CFR 230.138.
    \2\17 CFR 230.139.
    \3\15 U.S.C. 77a et seq.
    \4\See Release No. 33-7120 (Dec. 13, 1994), 59 FR 31038. One 
comment letter, which expressed support for the proposal, was 
received. That letter is available for public inspection and copying 
in File Number S7-36-94 at the Commission's Public Reference Room in 
Washington, D.C.
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I. Availability of Research Report Safe Harbors

    Rule 138 under the Securities Act permits publication of 
information, opinions and recommendations concerning qualifying issuers 
by broker-dealers that are participants in a distribution, so long as 
the reports contain information, opinions or recommendations regarding 
a specified class of the issuer's securities which is not the subject 
of the offering in which the broker-dealer is a participant. The 
amendments adopted today clarify that Rule 138 is available for 
offerings registered on Form S-3. The amendments also clarify that Form 
F-3 eligible issuers qualify for the rule, as do sizable first-time 
foreign issuers that meet the alternative offshore trading history test 
adopted for Rule 139.
    In addition, in light of the fact that shelf registration 
statements often register both debt and equity securities (on an either 
allocated or unallocated basis), the Commission is amending Rule 138 to 
add an instruction codifying the staff interpretation that the rule 
should be applied on an offering-by-offering basis for issuers which 
are eligible to use Forms S-3 or F-3 and are using the Commission's 
shelf registration procedures. Thus, the filing of a shelf registration 
statement covering different classes of securities does not impede the 
availability of the rule.
    Rule 139 under the Securities Act provides safe harbor protection 
from the registration requirements of that Act for the distribution by 
broker-dealers of information, opinions or recommendations concerning 
issuers in the process of registering securities under the Securities 
Act. The amendments adopted today make clear that the expanded 
eligibility requirements adopted last year5 for sizable foreign 
issuers that satisfy the alternative offshore trading history test in 
Rule 139 are also available for those issuers' initial public offerings 
in the United States.

    \5\Release No. 33-7053 (Apr. 19, 1994), 59 FR 21644.
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II. Cost-Benefit Analysis

    No information was provided in response to the Commission's request 
regarding the costs and benefits of the amendments being adopted today. 
The Commission believes that the adoption of these amendments will 
benefit both issuers and broker-dealers without imposing any additional 
costs.

III. Statutory Bases

    The Commission's rules are being amended pursuant to sections 6, 7, 
8, 10 and 19(a) of the Securities Act of 1933, as amended.

IV. Effective Date

    The final amendments to the Commission's rules shall be effective 
immediately upon publication in the Federal Register, in accordance 
with the Administrative Procedure Act, which allows effectiveness in 
less than 30 days after publication for, inter alia, ``a substantive 
rule which grants or recognizes an exemption or relieves a 
restriction.'' 5 U.S.C. Sec. 553(d)(1).

List of Subjects in 17 CFR Part 230

    Reporting and recordkeeping requirements, Securities.

Text of Proposed Amendments

    In accordance with the foregoing, Title 17, chapter II of the Code 
of Federal Regulations is amended as follows:

PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

    1. The general authority citation for Part 230 continues to read in 
part as follows:

    Authority: 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77s, 77sss, 78c, 
78l, 78m, 78n, 78o, 78w, 78ll(d), 79t, 80a-8, 80a-29, 80a-30, and 
80a-37, unless otherwise noted.
* * * * *
    2. By revising Sec. 230.138 to read as follows:


Sec. 230.138  Definition of ``offer for sale'' and ``offer to sell'' in 
sections 2(10) and 5(c) in relation to certain publications.

    (a) Where a registrant which meets the requirements of paragraph 
(c)(1), (c)(2) or (c)(3) of this section proposes to file, has filed or 
has an effective registration statement under the Act relating solely 
to a nonconvertible debt security or to a nonconvertible, 
nonparticipating preferred stock, publication or distribution in the 
regular course of its [[Page 6966]] business by a broker or dealer of 
information, opinions or recommendations relating solely to common 
stock or to debt or preferred stock convertible into common stock of 
such registrant shall not be deemed to constitute an offer for sale or 
offer to sell the security to which such registration statement relates 
for purposes of sections 2(10) and 5(c) of the Act (15 U.S.C. 77a et 
seq.) even though such broker or dealer is or will be a participant in 
the distribution of the security to which such registration statement 
relates.
    (b) Where a registrant which meets the requirements of paragraph 
(c)(1), (c)(2) or (c)(3) of this section proposes to file, has filed or 
has an effective registration statement under the Act relating solely 
to common stock or to debt or preferred stock convertible into common 
stock, the publication or distribution in the regular course of its 
business by a broker or dealer of information, opinions or 
recommendations relating solely to a nonconvertible debt security, or 
to a nonconvertible nonparticipating preferred stock shall not be 
deemed to constitute an offer for sale or offer to sell the security to 
which such registration statement relates for purposes of sections 
2(10) and 5(c) of the Act (15 U.S.C. 77a et seq.), even though such 
broker or dealer is or will be a participant in the distribution of the 
security to which such registration statement relates.
    (c)(1) The registrant meets all of the conditions for the use of 
Form S-2 [Sec. 239.12 of this chapter] or Form F-2 [Sec. 239.32 of this 
chapter];
    (2) The registrant meets the registrant requirements of Form S-3 
[Sec. 239.13 of this chapter] or Form F-3 [Sec. 239.33 of this 
chapter]; or
    (3) The registrant is a foreign private issuer which meets all the 
registrant requirements of Form F-3 [Sec. 239.33 of this chapter], 
other than the reporting history provisions of paragraph A.1. and 
A.2.(a) of General Instruction I of such form, and meets the minimum 
float or investment grade securities provisions of either paragraph 
B.1. or B.2. of General Instruction I. of such form and the 
registrant's securities have been traded for a period of at least 12 
months on a designated offshore securities market, as defined in 
Sec. 230.902(a).

Instruction to Rule 138

    When a registration statement relates to securities which are 
being registered for an offering to be made on a continuous or 
delayed basis pursuant to Rule 415(a)(1)(x) under the Act 
(Sec. 230.415(a)(1)(x)) and the securities which are being 
registered include classes of securities which are specified in both 
paragraphs (a) and (b) of this section on either an allocated or 
unallocated basis, a broker or dealer may nonetheless rely on:
    1. Paragraph (a) of this section when the offering in which such 
broker or dealer is or will be a participant relates solely to 
classes of securities specified in paragraph (a) of this section, 
and
    2. Paragraph (b) of this section when the offering in which such 
broker or dealer is or will be a participant relates solely to 
classes of securities specified in paragraph (b) of this section.
    3. By revising the introductory text to Sec. 230.139 and 
paragraph (a)(2) to read as follows:


Sec. 230.139  Definition of ``offer for sale'' and ``offer to sell'' in 
sections 2(10) and 5(c) in relation to certain publications.

    Where a registrant which is required to file reports pursuant to 
section 13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 
78a et seq.) or which is a foreign private issuer meeting the 
conditions of paragraph (a)(2) of this section proposes to file, has 
filed or has an effective registration statement under the Securities 
Act of 1933 (15 U.S.C. 77a et seq.) relating to its securities, the 
publication or distribution by a broker or dealer of information, an 
opinion or a recommendation with respect to the registrant or any class 
of its securities shall not be deemed to constitute an offer for sale 
or offer to sell the securities registered or proposed to be registered 
for purposes of sections 2(10) and 5(c) of the Act (15 U.S.C. 77a et 
seq.), even though such broker or dealer is or will be a participant in 
the distribution of such securities, if the conditions of paragraph (a) 
or (b) of this section have been met:
    (a) * * *
    (2) The registrant is a foreign private issuer that meets all the 
registrant requirements of Form F-3 (Sec. 239.33 of this chapter), 
other than the reporting history provisions of paragraphs A.1. and 
A.2.(a) of General Instruction I of such form, and meets the minimum 
float or investment grade securities provisions of either paragraph 
B.1. or B.2. of General Instruction I of such form, and the 
registrant's securities have been traded for a period of at least 12 
months on a designated offshore securities market, as defined in 
Sec. 230.902(a), and such information, opinion or recommendation is 
contained in a publication which is distributed with reasonable 
regularity in the normal course of business.
* * * * *
    By the Commission.

    Dated: February 1, 1995.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-2892 Filed 2-2-95; 8:45 am]
BILLING CODE 8010-01-P