[Federal Register Volume 63, Number 233 (Friday, December 4, 1998)]
[Proposed Rules]
[Pages 67174-67331]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-31045]



[[Page 67173]]

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Part II





Securities and Exchange Commission





_______________________________________________________________________



17 CFR Part 200, et al.



The Regulation of Securities Offerings and of Takeovers and Security 
Holder Communications; Proposed Rules

  Federal Register / Vol. 63, No. 233 / Friday, December 4, 1998 / 
Proposed Rules  

[[Page 67174]]



SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 200, 202, 210, 228, 229, 230, 232, 239, 240 and 249

[Release No. 33-7606A; 34-40632A; IC-23519A; International Series 
Release No. 1167A; File No. S7-30-98]
RIN 3235-AG83


The Regulation of Securities Offerings

AGENCY: Securities and Exchange Commission.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: The Commission is proposing to modernize and clarify the 
regulatory structure for offerings under the Securities Act of 1933 
while maintaining investor protection. The proposals cover five major 
topics: Registration system reform; communications around the time of 
an offering; prospectus delivery requirements; integration of private 
and public offerings; and periodic reporting under the Securities 
Exchange Act of 1934.
    Under the proposals, larger seasoned issuers could offer securities 
at any time as long as they file a registration statement before sale. 
Other seasoned issuers could do the same when they make offerings to 
relatively sophisticated or informed investors. The Commission staff 
would not review these registration statements before effectiveness. 
Those issuers and their underwriters would designate the effective 
dates and have complete control over when they offer and sell in those 
registered offerings. Their communications to the market and to 
investors, while governed by antifraud and civil liability provisions, 
would no longer be limited based on the filing or effectiveness of 
their registration statements.
    The proposals also would provide predictability to medium-sized 
seasoned issuers that register offerings. The registration statements 
they file to raise capital would become effective when they designate. 
Those registration statements would not be subject to pre-effective 
review by the Commission staff. Seasoned companies of any size would 
benefit from the proposals as well. We would allow them to incorporate 
Exchange Act disclosure in registration statements earlier than the 
current rules permit. To provide greater certainty to small and medium-
sized issuers planning a registered offering, we also are proposing new 
communication rules. One rule would provide that communications made by 
or for such an issuer more than 30 days before the registration 
statement is filed would not be treated as offers. Other proposed rules 
would guide those issuers as to the types of communications that we 
permit within that 30-day period.
    Our proposals also would give issuers of all sizes and their 
underwriters greater freedom to communicate with investors in writing 
during the offering process. The proposed exemptive rules would allow 
use of any document (not just the traditional prospectus) at any time 
during an offering by a larger seasoned issuer or an offering to 
sophisticated or informed investors by a smaller seasoned issuer. Those 
``free writing'' communications would be subject to antifraud and civil 
liability provisions. In all other offerings, the proposed exemptions 
would allow an issuer and underwriter the same flexibility after the 
issuer has filed a registration statement. The free writing proposals 
would allow use of documents tailored specifically for the investors 
reading them. Other proposed revisions would increase investor access 
to analyst research reports. We would allow their distribution around 
the time of an offering in more cases than permitted today.
    The proposals affecting prospectus delivery in registered offerings 
would re-focus those requirements for the benefit of investors. 
Delivery of a prospectus or a term sheet would be required before 
investors make their investment decisions rather than at the time a 
sale is confirmed.
    The proposals addressing the integration of offerings would provide 
flexibility for issuers that have difficulty assessing the extent of 
market interest in a planned offering. Those revisions would enable an 
issuer to change an unregistered private offering into a registered 
public offering, or vice versa, after it commences the offering. Small 
companies that begin a registered public offering would still have the 
option to make an unregistered, exempt offering to qualified buyers 
even though they broadly solicited potential investors.
    Finally, we are proposing various revisions to expedite and expand 
some of the disclosure required in periodic reports filed under the 
Exchange Act. Investors would have more timely access to company 
disclosure.

DATES: You should send us your comments so that they arrive at the 
Commission by April 5, 1999.

ADDRESSES: You should send 3 copies of your comments to Jonathan G. 
Katz, Secretary, U.S. Securities and Exchange Commission, 450 Fifth 
Street, N.W., Stop 6-9, Washington, D.C., 20549. You also may submit 
your comments electronically to the following electronic mail address: 
[email protected]. All comment letters should refer to File No. S7-
30-98; this file number should be included in the subject line if you 
use electronic mail. Comment letters will be available for public 
inspection and copying at the Commission's Public Reference Room, 450 
Fifth Street, N.W., Washington, D.C. 20549. We will post electronically 
submitted comment letters on the Commission's Internet Web site (http:/
/www.sec.gov).

FOR FURTHER INFORMATION CONTACT: Anita Klein at (202) 942-2980, Julie 
Hoffman, Joseph Babits, Patricia Miller or Rani Doyle at (202) 942-
2900, or, with respect to small business issuer aspects, John Reynolds 
at (202) 942-2950, Division of Corporation Finance, U.S. Securities and 
Exchange Commission, Washington, D.C. 20549.1
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    \1\ The Commission also wishes to recognize the contributions to 
this release of Jennifer Bethel.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Executive Summary
    A. Registration System Reforms
    1. Contents of Prospectuses
    2. Timing of Registration
    3. Underwriter Guidance
    4. Small Business Issuers
    B. Easing Restrictions on Communications
    1. Issuer Communications
    2. Safe Harbors for Research Reports
    C. Prospectus Delivery Reforms
    D. Public and Private Offering Flexibility
    E. Periodic Reporting
II. History of Registration Under the Securities Act
    A. Evolution of the Registration System
    B. Review of the Capital Formation Process
III. Recent Reform Initiatives
    A. Task Force Report
    B. The Advisory Committee on Capital Formation
    C. The Commission's Concept Release
    D. The National Securities Markets Improvement Act
IV. Scope of the Proposals
V. Proposals Altering the Securities Act Registration Process
    A. Form B Offerings
    1. How Form B Works
    a. Registration Statement Contents
    i. Company Disclosure
    ii. Transactional Disclosure
    b. Free Writing Materials
    c. Time of Filing
    d. Becoming Effective
    e. Delayed Shelf Offerings and Form B
    2. Offerings Eligible for Registration on Form B
    a. Offerings by Larger Seasoned Issuers
    b. Offerings to QIBs
    i. Advantages of Registered Offerings
    ii. Limitations on QIB Purchases
    iii. QIB Definition
    iv. Other Reporting and Non-Reporting Issuers

[[Page 67175]]

    c. Offerings to Certain Existing Security Holders
    i. Dividend or Interest Reinvestment Plans
    ii. Offerings to Existing Common Stock Holders
    iii. Convertible Securities, Transferable Warrants and Rights 
Offerings
    iv. Exercise of Outstanding Transferable Options
    d. Non-convertible Investment Grade Securities
    e. Market Making Transactions by Affiliated Broker-Dealers
    f. Small Business Issuers
    g. Form B Disqualifications
    h. Secondary Offerings
    B. Form A Offerings
    1. Structure of Form A
    a. Part I--Information Required in the Prospectus
    i. Cover Pages
    ii. Transactional Information
    iii. Company Information
    (A) ``Seasoned'' Form A Issuers
    (B) ``Unseasoned'' Issuers
    b. Part II--Information Not in the Prospectus
    2. Timing of Form A Offerings
    a. Seasoned Issuers
    b. Unseasoned Issuers
    3. Solicitation of Comments on Definition of Form A Seasoned 
Issuer
    4. Disqualification for Seasoned Form A Companies
    5. Real Estate Companies
    C. Applicability of Civil Liability Provisions to Offerings 
Registered on Proposed Forms A and B
    1. Form A Offerings
    2. Form B Offerings
    a. Section 11
    b. Section 12(a)(2)
    c. Section 17(a) and Exchange Act Section 10(b)
    D. Form C Offerings
    1. Use of Form C
    2. Relationship with Exchange Act Rules
    3. Timing of Form C
    4. Structure of Form C
    a. Part I--Information Required in the Prospectus
    i. Information About the Transaction
    ii. Information About the Registrant
    (A) Form B Eligible Registrants
    (B) Seasoned Form A Registrants
    (C) All Other Registrants
    iii. Information About the Company Being Acquired
    iv. Voting and Management Information
    b. Part II--Information Not Required in the Prospectus
    5. General Instruction G. of Form S-4
    6. Small Business--Business Combinations
    E. Small Business Issuers
    1. Small Business Issuers' System
    2. Re-defining ``Small Business Issuer''
    3. Proposed Changes to Form SB-2
    a. Conditions for Using Incorporation by Reference
    b. How to Incorporate by Reference
    c. Delivery of Exchange Act Reports
    d. Other Changes to the Forms
    4. Form SB-3
    a. Use and Timing of Form SB-3
    b. Structure of Form SB-3
    i. Part I--Information Required in the Prospectus
    (A) Information About the Transaction
    (B) Information About the Registrant
    (1) Transitional Small Business Issuers
    (2) Seasoned Small Business Issuers
    (3) All Other Small Business Issuers
    (C) Information About the Company Being Acquired
    (D) Voting and Management Information
    ii. Part II--Information Not Required in the Prospectus
    c. Request for Comments
    5. Small Business Issuers that Become Reporting Companies
    6. Small Business Issuer Registration Fees
    F. MJDS Issuers
    G. Foreign Government Issuers
    H. Exxon Capital Transactions
    I. The Offset of Filing Fees and Other Technical Changes to the 
Calculation of Filing Fees
    J. Solicitation of Comments Regarding Offerings Asset-Backed 
Securities Offerings
VI. Concurrent Exchange Act Registration
VII. Communications During the Offering Process
    A. Issuer Communications Relating to a Registered Offering
    1. The Pre-Filing Period
    a. Form B Registrants
    b. Foreign Governments
    c. All Other Registrants
    i. Bright Line Communications Safe Harbor
    ii. Communications Safe Harbor
    (A) Factual Business Communications
    (B) Regularly Released Forward-Looking Information
    (C) Notice of Proposed Offerings
    2. Communications During the Waiting Period
    B. Filing Under EDGAR
    C. Technology Implications of the Communications Proposals
    D. Research Reports
    1. Proposals in Connection With Registered Offerings
    a. Rule 137
    b. Rule 138
    c. Rule 139
    i. Form B and Schedule B Offerings
    ii. All Other Offerings
    iii. Focused Reports
    iv. Consideration to Expand Rule 139 to IPOs and Offerings by 
Unseasoned Issuers
    v. Industry-Related Reports
    vi. Section 17(b)
    2. Proposals and Interpretation in Connection With Regulation S 
and Rule 144A Offerings
    3. Research and Proxy Solicitation
VIII. Prospectus Delivery
    A. Congressional History
    B. Commission History
    C. Prospectus Delivery Proposals
    1. Adequacy of Current Rules
    2. Prospectus Delivery and Developments in Communications
    3. Final Prospectus Delivery Exemption
    a. Conditions to the Exemption
    b. Business Combination and Exchange Offers
    c. Rule 434 Final Prospectus Delivery Method
    4. Delivery of Preliminary Prospectus Information
    a. Form B Offerings
    b. Offerings by Small or Unseasoned Issuers
    c. Foreign Government Issuers
    d. Canadian MJDS Issuers
    e. Effectiveness and Prospectus Delivery
    f. Secondary Offerings
    5. Aftermarket Prospectus Delivery
    a. Background of Aftermarket Prospectus Delivery
    b. Aftermarket Underwriter Activities
    c. Recent Case Law Relating to Aftermarket Delivery Obligations
    d. Aftermarket Prospectus Delivery Proposals
    6. Proposed Repeal of Rule 153
    7. Record Keeping of Prospectus Delivery
IX. The Role of Underwriters
    A. Legislative Shaping of the Underwriters' Role
    B. Case Law Interpretation of the Underwriter's Role
    C. Commission Interpretation of the Underwriters' Role
    D. Proposed Guidance on Underwriter Due Diligence
    1. Proposed Practices Reflect Current Practice
    2. The Role of Analysts
    3. Other Due Diligence Practices
    a. Disclosure Review by an Issuer's Independent Accountants
    b. Disclosure Review by an Independent Qualified Professional
    E. Interpretation of the Guidance
    F. Investment Grade Debt Offerings
    G. Requests for Comment on the Proposed Guidance
    H. Liability Safe Harbor
X. Integration of Registered and Unregistered Offerings
    A. The Integration Doctrine
    B. Rule 152
    C. Proposed Safe Harbors for Completed and Abandoned Offerings; 
Related Rule Proposals
    1. Completed Offerings
    a. Issuer Transactions
    b. Resale Transactions
    c. Lock-up Agreements
    2. Abandoned Offerings
    a. Private to Public
    b. Public to Private
    3. Definition of Private Offering
    D. Proposed Changes to Rule 477
XI. Proposals Relating to Exchange Act Disclosure
    A. Annual and Quarterly Reports
    1. Risk Factor Disclosure
    2. Due Dates for Annual Reports of Foreign Private Issuers
    3. Treating Quarterly Information as ``Filed''
    4. Request for Comment on Management Report to Audit Committee
    B. Interim Reports on Form 8-K
    1. Timely Disclosure of Annual and Quarterly Results of Domestic 
Companies
    a. Form 8-K Requirement for Item 301 Information
    b. Solicitation of Comment on Whether Accelerate Due Dates
    2. Other Reporting Events
    a. Material Modifications to the Rights of Security Holders

[[Page 67176]]

    b. Departure of the CEO, CFO, COO or President
    c. Material Defaults on Senior Securities
    d. Reliance on Prior Audit
    e. Name Changes
    f. Due Dates for Reporting Events
    C. Signatures
    1. Exchange Act Reports and Registration Statements
    2. Securities Act Filings
    D. Form 6-K Submissions
    E. Solicitation of Comment Regarding Plain English in Exchange 
Act Reports
XII. Staff Review Policy
    A. Notification of Selection for Review
    B. Voluntary Pre-Review of Filings
XIII. Request for Comments About Investment Company
    Issuers and Market Value Adjustment Contracts
    A. Investment Company Issuers
    B. Market Value Adjustment Contracts
XIV. Cost-Benefit Analysis
    A. Impact on Investors
    B. Impact on Issuers
    C. Impact on Other Parties
XV. Initial Regulatory Flexibility Analysis
    A. Reasons and Objectives for Proposed Action
    B. Objectives and Legal Basis
    C. Small Entities Subject to the Rules
    D. Reporting, Recordkeeping and Other Compliance Requests
    E. Significant Alternatives
    F. Overlapping or Conflicting Federal Rules
XVI. Paperwork Reduction Act
XVII. General Request for Comments
XVIII. Statutory Basis

I. Executive Summary

    Through the Securities Act registration system, issuers and 
underwriters reach out to the public and sell securities. The 
registration system provides investors with the dual benefits of: full 
and fair disclosure (or effective remedies if there is faulty 
disclosure), and freely tradeable securities. Registration also 
benefits the markets at large by providing everyone with access to the 
most up-to-date information about the company making the offering. This 
disclosure is significant both to the market, for accuracy in pricing, 
and to the individual investor, for determining the suitability of the 
investment. Today's proposals are based on a recognition that investors 
will receive these benefits of registration only if the Commission 
continues to make the registration system flexible enough to be a 
viable alternative in the capital markets of today and the future.

A. Registration System Reforms

    Our reforms to the registration system are designed to make 
registration more attractive to issuers without compromising investor 
protection. We believe that registration benefits all participants: 
issuers, by lowering their cost of capital; investors, by enhancing 
disclosure and providing remedies; and the marketplace, by increasing 
depth and liquidity.
    In 1990, the Commission adopted Rule 144A which permits 
unregistered sales to and by qualified institutional buyers 
(``QIBs'').2 Since then, this institutional market, which 
exists virtually side-by-side with the public market, has expanded 
significantly. Recent data illustrates the size of this parallel 
market: in 1997, Rule 144A offerings comprised 17% of all offerings on 
a dollar basis, including 21% of all equity and 16% of all 
debt.3 In some types of securities, the Rule 144A market has 
become predominant. In 1997, 76% of the high-yield debt, 72% of the 
convertible investment grade debt, and 10% of the non-convertible 
investment grade debt were issued for the Rule 144A market.4
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    \2\ ``Qualified institutional buyers'' is defined in Securities 
Act Rule 144A(a)(1), 17 CFR 230.144A(a)(1). Even though some 
proportion of the Rule 144A securities are eventually registered, 
the investor benefits of registration are not maximized. It is not 
uncommon for securities sold in Rule 144A transactions to end up in 
the public market because they are registered for resale or 
exchanged for registered securities in ``Exxon Capital'' 
transactions (named after the Commission staff interpretive letter 
sanctioning the practice).
    \3\ Securities Data Corp's New Issues Database. Virtually all of 
that market share has moved to the Rule 144A market in the last 5 
years. Rule 144A is not available for securities listed on a 
national securities exchange or quoted on a U.S. automated inter-
dealer quotation system.
    \4\ Non-convertible investment grade debt is eligible for short-
form registration under our current system, whereas the other two 
categories are not.
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    Our proposed reforms seek to apply the issuer advantages of 
offering securities in the private and Rule 144A markets--timing and 
disclosure flexibility--to the public market. We believe that, as a 
result, more offerings will be registered.
    We propose to create a three-tiered registration system for 
offerings consisting of: Form A, Form B and Form C. Form A offerings 
generally would be those made by smaller or unseasoned companies. Form 
B offerings would be those made by larger, seasoned, well-followed 
issuers and those made to relatively informed or sophisticated 
investors. Form C offerings would relate to business combinations or 
exchange offers. Today the Commission also is publishing a companion 
release regarding the regulation of takeovers, including tender offers, 
mergers and other extraordinary transactions. You should read that 
release for a detailed discussion of the regulation of business 
combinations and exchange offers registered on Form C.5
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    \5\ Exchange Act Release No. 40633 (Nov. 3, 1998).
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1. Contents of Prospectuses
    Current requirements strictly mandate the content of an offering 
prospectus. Because we believe that larger seasoned issuers attract a 
large market following and operate in an efficient market, we are 
considering providing them with a larger measure of flexibility to 
craft disclosure about their offerings. We are asking for comment on 
two alternative proposals for Form B offerings. The first, while 
requiring all material transactional disclosure, would limit the 
itemized requirements for such disclosure. The second would continue to 
require all itemized transactional disclosure. Under both proposals, we 
would continue to mandate that issuers incorporate by reference the 
current itemized company information in their periodic reports. Thus, 
we would maintain the same standards for information about the company 
while we seek comment on the level of freedom to allow the issuer and 
the underwriter when crafting information about the offering itself.
    Where the issuer or its representative uses disclosure to promote 
sales in the offering, it would have to file that disclosure, which 
would be subject to civil liability provisions prohibiting material 
misstatements and omissions. This ``inclusive prospectus'' approach 
would reflect the reality that investment decisions in these offerings 
would be based on more than the information contained in a single 
disclosure document.
    By shifting some itemized disclosure requirements to materiality-
based requirements, as one of our proposals would permit, we seek to 
discourage drafters from just routinely providing the boilerplate 
transactional disclosure that some have suggested the standardized 
disclosure items have evoked. This alternative would re-focus drafters 
on analyzing and including the information particular to that deal that 
is material to investors. More focused disclosure could result.
    On the other hand, under our alternative proposal, all current 
transactional disclosure requirements specified in Regulation S-K that 
are in Form S-3 and/or Form F-3 would continue to apply. This 
alternative would provide investors with more certain core 
transactional information.
    Under either proposal, issuers and third party participants such as 
underwriters and auditors would continue to ensure the quality of 
disclosure due to both market pressures and their legal responsibility 
to do so. We believe that analysts and the financial press, among 
others, also will

[[Page 67177]]

test the accuracy of disclosure by larger, seasoned 
issuers.6 By allowing issuers some more freedom to craft 
their transactional disclosure and communicate with investors in Form B 
offerings for which there is evidence of an efficient market, we also 
hope to reduce selective disclosure by allowing access to more 
information.
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    \6\ We recognize that analysts, especially so-called ``sell-
side'' analysts, have inherent conflicts of interest. There is a 
risk that impartiality may be compromised when their firms seek to 
participate in the issuers' distributions. We believe, nevertheless, 
that analysts in general, and the expanding ``buy side'' analysts in 
particular, are in a unique position to gather and analyze 
information about issuers. They represent an undeniably significant 
method of corporate disclosure and dissemination.
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    We are considering the same alternative approaches to disclosure in 
offerings limited to sophisticated investors and in offerings to 
investors with a pre-established relationship with the issuer. 
Historically, we have given issuers more flexibility in these types of 
offerings on the theory that these purchasers are able to fend for 
themselves.
    For smaller issuers or unseasoned issuers of any size, we believe 
that the current strict itemization of transactional information in the 
prospectus remains important to the dissemination of adequate offering 
information. Some of those issuers would have little experience with 
crafting offering disclosure and the same market scrutiny is not 
present. We would therefore maintain all current itemized offering 
disclosure requirements in Form A. We would, however, allow more 
freedom for seasoned smaller issuers to rely on their periodic reports 
for disclosure about their companies in an offering. In the case of 
business combinations and exchange offers on Form C, we would maintain 
the itemized requirements for transactional disclosure.
2. Timing of Registration
    Under the revised registration system, issuers would have complete 
flexibility in timing the registration of Form B offerings. By 
operation of rule, those registration statements would become effective 
at the issuer's discretion, either immediately upon filing or at 
whatever later date and time the issuer chooses. The staff would not 
review these registration statements before the offering or take action 
to make the registration statement effective. Form B registration 
statements would be screened by the Commission staff shortly after 
receipt by the Commission to determine whether the offering was 
eligible for registration on Form B and whether the disclosure raises 
any ``red flags'' concerning the antifraud provisions of the federal 
securities laws. Therefore, the only timing constraint for Form B 
offerings would be the statutory requirement that the registration 
statement must be effective before the first sale. We are not proposing 
to exempt issuers from that requirement because, among other reasons, 
filing of a final prospectus would ensure prompt disclosure to the 
market about the offering.
    We would continue to require that issuers registering offerings on 
Form A file a registration statement before making their first offer. 
The Commission staff would continue to review all initial public 
offerings and selectively review repeat offerings by smaller, 
unseasoned issuers. We would, however, allow seasoned medium-sized 
issuers to control the timing of registration in their Form A 
offerings. We also would allow certain other Form A issuers that 
incorporate recent Exchange Act reports that have been fully reviewed 
by the Commission staff to control the timing of their offerings. Those 
filings, like Form B offerings, would be screened (but not reviewed) by 
the staff shortly after receipt.
    We believe that this increased flexibility in the timing of 
registration will encourage issuers to register more offerings and thus 
extend the investor protection benefits of registration to more 
purchasers. Further, although offerings by these issuers that we would 
not review under the proposed system are currently subject to staff 
review, these reforms essentially mirror current practice with respect 
to review of what would be Form B-type filings and recently examined 
Form A-type filings.
3. Underwriter Guidance
    In connection with the proposed registration system, we would add a 
new provision to the Securities Act rule concerning due diligence. That 
rule currently lists circumstances to consider in deciding whether a 
person has met the ``reasonable investigation'' and ``reasonable ground 
for belief'' standards that apply in defending against liability under 
Section 11 of the Securities Act. The new provision would cover only 
certain Form B offerings completed on an expedited basis and would 
expand upon the existing guidance in the rule to reflect current 
practices.
4. Small Business Issuers
    For purposes of registration and reporting, we are proposing to 
revise the definition of ``small business issuer'' to increase the 
number of companies qualifying as small business issuers. We would 
raise the annual revenues ceiling from $25 to $50 million and remove 
the public float limitation. We propose to update the definition to 
reflect significant economic and market changes that have occurred in 
the six years since we adopted the definition. Also, our successful 
experience with the small business disclosure system indicates that we 
could classify companies with higher revenues as small business issuers 
while at the same time maintaining investor protection. To provide 
small businesses with greater flexibility in raising capital, we also 
propose to delay the time at which they must pay registration fees, 
allow earlier incorporation by reference of their Exchange Act reports 
and allow increases in the size of their offerings in an expedited 
fashion.

B. Easing Restrictions on Communications

    Our proposals would loosen the strict controls that exist today on 
communications to investors and the market around the time of an 
offering. Our intent in proposing the communications reforms is to 
ensure that investors and the market have greater access to more timely 
information, which we believe is the foundation of investor protection. 
We are not proposing any diminution in the remedies that would be 
available to investors in the event of defective disclosure made by or 
on behalf of an issuer around the time of an offering.
1. Issuer Communications
    The extent to which we would ease communications by the issuer or 
deal participants depends on the type of offering. For Form B 
offerings, we would allow oral and written communications in any format 
at any time regardless of whether the offering is imminent or ongoing. 
Of course, the antifraud provisions and civil liability provisions of 
the securities laws would apply to those communications and provide the 
necessary investor protections.
    In Form A offerings on the whole, we have less reason to assume 
that plentiful, thoroughly scrutinized issuer information is available. 
A barrage of sales-related communications could affect prospective 
investors, especially if those communications are the only ones 
publicly available. The greatest need for investor protection in that 
case would occur before the investor has access to reliable, balanced 
prospectus disclosure. Thus, for these offerings, we propose to 
maintain the prohibition on offers prior to filing a registration 
statement. Once the issuer's prospectus is on file with

[[Page 67178]]

the Commission, however, our proposals would lift existing restrictions 
on written communications for Form A offerings because an investor 
would be able to test the sales materials against the registration 
statement. Moreover, our proposals on prospectus delivery would ensure 
timely delivery, not just access, to this more balanced information.
    For the period before filing the registration statement, we propose 
to create greater certainty about the timing and scope of remaining 
restrictions on communications. We are aware that the restrictions on 
communications before a filing have been criticized as unclear. This is 
especially true due to the recent increased use of the Internet. 
Consequently, we are proposing a bright-line rule that would define the 
30 days immediately before filing the registration statement as the 
period during which communications would be limited due to the upcoming 
offering. In addition, our proposed rules provide that, even during 
that 30-day limited communications period, issuers could disclose 
factual business information and regularly released forward-looking 
information. Our proposals also would permit issuers to announce 
limited offering information during the 30-day period without 
indicating whether the offering will be registered or exempt.
2. Safe Harbors for Research Reports
    For Form B offerings and many Schedule B offerings by foreign 
governments, the proposals would allow analysts to publish research 
reports without any interruption due to the registered offering. For 
other offerings, we propose expanded safe harbors to make it easier for 
analysts to report about foreign government issuers and smaller, 
unseasoned companies. We also are proposing to expand those safe 
harbors to address the distribution of research reports in connection 
with Regulation S and Rule 144A offerings.

C. Prospectus Delivery Reforms

    To provide investors with the maximum benefit from prospectus 
disclosure, the proposals re-focus prospectus delivery requirements on 
when the prospectus is needed most: before investors make an investment 
decision. Where we would require that offering participants deliver 
prospectus information earlier, we would allow them to decide whether 
or not to deliver a final prospectus. Where they do not deliver a final 
prospectus, we would require that they tell investors where they can 
obtain it free of charge.
    In Form B offerings, we would not require that offering 
participants deliver a full prospectus. We would, however, require 
earlier delivery of a ``securities term sheet'' outlining the key 
features of the securities. Delivery of that securities term sheet 
would precede the investment decision--when the investor gives its oral 
or written commitment to purchase. We also are considering, as an 
alternative for Form B offerings, requiring delivery of a prospectus 
containing all mandated transactional information listed in Subpart 500 
of Regulation S-K that would be contained in a short-form registration 
statement today.
    In Form A offerings by unseasoned issuers (issuers that have 
registered their initial public offerings within the past year), 
underwriters and dealers participating in the offering would have to 
deliver a preliminary prospectus at least 7 days before the date of 
pricing. In all other Form A offerings, issuers, underwriters and 
participating dealers would have to deliver a preliminary prospectus at 
least 3 days before the date of pricing. These requirements would 
ensure that investors that are offered securities of smaller, 
unseasoned issuers have more time in which to assess the disclosure. 
Issuers and other participants in Form A offerings also would have to 
inform investors no later than 24 hours before pricing about any 
material change that has occurred since they delivered prospectuses.

D. Public and Private Offering Flexibility

    Today's capital markets can change quickly. Companies, especially 
small businesses, may find that the desirability of making a public 
offering versus a private offering can change just as quickly. Current 
rules prevent most companies from changing their minds in a timely 
fashion once they have started an offering one way. Our proposals would 
remove most of those impediments. Under the proposed safe harbor, if an 
issuer started to register a public offering but then decided to 
abandon it, the issuer could withdraw the registration statement and 
either wait 30 days to sell privately or sell privately sooner and 
accept a higher liability standard for written disclosure provided to 
purchasers.
    Similarly, if an issuer started a private offering but then decided 
to abandon it, the issuer could file a registration statement for a 
public offering immediately unless it had offered the securities to 
persons that would not have been eligible to buy in a private offering 
under Securities Act Section 4(2). In that event, the issuer would have 
to wait for 30 days after abandoning the private offering to file its 
registration statement.
    This safe harbor would be particularly useful to small issuers. It 
would allow a small private company to ``test the waters'' for a public 
offering of its securities through this mechanism. Doing so would not 
prevent the small issuer from selling privately if it finds too few 
investors to make it worthwhile to become a public company. Similarly, 
small issuers that find more investor interest than expected could 
change from a private offering to a registered public offering.

E. Periodic Reporting

    We are proposing several changes to Exchange Act disclosure 
requirements, some of which the Advisory Committee on Capital Formation 
and Regulatory Processes recommended. These changes would require 
issuers to report annual and quarterly financial results sooner, to 
make and update risk factors disclosure in their Exchange Act reports, 
to accelerate the due dates for some Form 8-K reports and to expand the 
events about which Form 8-K requires a report. The changes also would 
require persons signing Exchange Act filings to indicate that they have 
reviewed the disclosure and, to their knowledge, the registration 
statement or report does not contain any untrue statement of a material 
fact or 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. These Exchange Act disclosure reforms would 
provide key investor protections in a further streamlined registration 
process. Additionally, if the proposed registration system is adopted, 
the Commission envisions shifting staff resources to the review of 
Exchange Act filings.

II. History of Registration Under the Securities Act

    The Securities Act and the regulations thereunder have long 
provided the foundation for a capital-raising system of unparalleled 
integrity, fairness, and liquidity. The regulatory scheme seeks to 
ensure that investors receive full and fair disclosure with respect to 
securities offerings by issuers and their affiliates.
    The Securities Act was adopted in response to the activities 
culminating in the 1929 market crash.7 President

[[Page 67179]]

Franklin D. Roosevelt articulated the underlying philosophy of 
regulating securities offerings which continues today:

    \7\ The Securities Act was the first of six securities statutes 
to be enacted during the 1933-1940 period. The other five acts 
include: the Securities Exchange Act of 1934, Pub. L. No. 73-291, 48 
Stat. 881 (1934) (codified as amended at 15 U.S.C. Secs. 78a-78kk 
(1994, Supplemented 1996)); the Public Utilities Holding Company Act 
of 1935, Pub. L. No. 74-333, 49 Stat. 803 (1935) (codified as 
amended at 15 U.S.C. Secs. 79-79z-6 (1994, Supplemented 1996)); the 
Trust Indenture Act of 1939, Pub. L. No. 76-253, 53 Stat. 1149 
(1939) (codified as amended at 15 U.S.C. Secs. 77aaa-77bbbb (1994, 
Supplemented 1996)); the Investment Company Act of 1940, Pub. L. No. 
76-768, 54 Stat. 789 (1940) (codified as amended at 15 U.S.C. 
Secs. 80a-1-80a-64 (1994, Supplemented 1996)); and the Investment 
Advisors Act of 1940, Pub. L. No. 76-768, 54 Stat. 847 (1940) 
(codified as amended at 15 U.S.C. Secs. 80b-1-80b-21 (1994, 
Supplemented 1996)).
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    [t]here is * * * an obligation upon us to insist that every 
issue of new securities to be sold in interstate commerce shall be 
accompanied by full publicity and information, and that no 
essentially important element attending the issue shall be concealed 
from the buying public.8

    \8\ H.R. Rep. No. 85, 73d Cong. 1st Sess., at 1-2 (1933).
---------------------------------------------------------------------------

    Congress has made relatively few broad-reaching amendments to the 
Securities Act since its inception. In administering the statute, we 
strive to be responsive to changing markets and capital-raising 
practices. Over the years, the Commission has interpreted the statute 
through rules and regulations to give continuing life to the original 
statute.

A. Evolution of the Registration System

    Modern efforts at reforming registration stem in part from a 
commentary on Securities Act regulation published in 1966. In his 
article, ``Truth in Securities,'' Milton H. Cohen theorized that the:

    Combined disclosure requirements of these statutes would have 
been quite different if the 1933 and 1934 Acts * * * had been 
enacted in opposite order, or had been enacted as a single, 
integrated statute* * *.9
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    \9\ Cohen, ``Truth in Securities'' Revisited, 79 Harv. L. Rev. 
1340, 1341 (1966).

Cohen argued for a coordinated disclosure system having as its basis 
the continuous disclosure system of the Exchange Act with the 
Securities Act disclosure requirements built upon it.\10\ The 
Commission soon thereafter instituted a study, chaired by Commissioner 
Francis M. Wheat, to examine disclosure to investors.11 The 
Wheat Report, published in 1969, recommended expanded periodic 
disclosure under the Exchange Act and the coordination of the 
disclosure requirements of the Securities Act and the Exchange 
Act.12
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    \10\ Id. at 1342.
    \11\ Disclosure to Investors--A Reappraisal of Administrative 
Policies Under the 1933 and 1934 Acts, Report and Recommendations to 
the SEC from the Disclosure Policy Study (Mar. 27, 1969) 
[hereinafter ``Wheat Report''].
    \12\ The securities bar also acted upon the ideas in Cohen's 
article. The American Law Institute commissioned several industry 
experts, led by Professor Louis Loss, to combine all six federal 
statutes into one comprehensive code, American Law Institute, 
Federal Securities Code (1980) (the ``ALI Code''). See also Loss, 
The American Law Institute's Federal Securities Code Project, 25 
Bus. Law. 27 (1969). Upon its completion ten years later in 1980, 
the Commission and many in the securities industry expressed support 
for the ALI Code. See Securities Act Release Nos. 6242 (Sept. 18, 
1980) [20 S.E.C. 1483 (1980)] and 6377 (Jan. 21, 1982) [24 S.E.C. 
Docket 788 (1961)] (releases stating and reaffirming support for the 
ALI Code). See also Coffee, Re-Engineering Corporate Disclosure: The 
Coming Debate Over Company Registration, 52 Wash. & Lee L. Rev. 
1143, 1145 (1995). The ALI Code was in turn presented to Congress. 
Congress, however, took no action with respect to the ALI Code.
---------------------------------------------------------------------------

    The Commission followed up on the Wheat Report by adopting a short-
form Securities Act registration statement. That registration statement 
permitted incorporation by reference of Exchange Act reports by larger 
issuers and in specified types of offerings.13 This approach 
allowed companies to avoid reiterating in their registration statements 
the company disclosure contained in annual and other periodic reports.
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    \13\ Securities Act Release No. 5117 (Dec. 23, 1970) [36 FR 
777].
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    In 1977, the Commission adopted Regulation S-K, which began the 
effort to establish a single set of disclosure requirements for issuers 
under both the Securities Act and the Exchange Act.14 That 
effort was substantially completed with the adoption of the 
``Integrated Disclosure System'' in 1982.15 The Commission's 
integrated disclosure system eliminated overlapping and unnecessary 
disclosure required by the Securities Act and the Exchange Act.
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    \14\ Securities Act Release No. 5893 (Dec. 23, 1977) [42 FR 
65554]. As originally adopted, Regulation S-K contained only two 
items: ``Description of Business'' and ``Description of Property.''
    \15\ Securities Act Release No. 6383 (Mar. 3, 1982) [47 FR 
11380]. In that release, the Commission stated that ``in reliance on 
the efficient market theory'' Form S-3 would allow for maximum use 
of incorporation by reference [47 FR at 11382].
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    The Commission also adopted the modern-day ``shelf registration'' 
system in connection with the integrated disclosure 
system.16 That permits registration of securities offerings 
that are conducted on a delayed basis sometime after the effective 
date.17 In 1992, the Commission extended short-form and 
shelf registration to smaller issuers and new offerings, including 
asset-backed securities offerings.18 The Commission also 
permitted registration of shelf offerings without requiring that the 
amount of securities be allocated upon registration to specific classes 
of the issuer's securities. This approach permitted issuers to decide 
as late as the point of sale which of its securities to use.
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    \16\ Temporary Rule 415 was adopted in March of 1982. Securities 
Act Release No. 6383 (Mar. 3, 1982). In November of 1983, the 
Commission announced the adoption of a revised shelf registration 
rule. Securities Act Release No. 6499 (Nov. 17, 1983) [48 FR 52889].
    \17\ See Securities Act Release No. 6499 (Nov. 17, 1983) and 
Securities Act Rule 415, 17 CFR 230.415. Short-form registration is 
used for delayed shelf offerings.
    \18\ Securities Act Release No. 6964 (Oct. 22, 1992) [57 FR 
32461].
---------------------------------------------------------------------------

    Another significant change in the registration system occurred with 
the Commission's adoption in 1990 of Rule 144A.19 Rule 144A 
provides a safe harbor from registration for resales of restricted 
securities to QIBs. By creating certainty about when registration is 
not required in these transactions, the Commission enhanced the 
attractiveness of alternatives to registration of 
securities.20
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    \19\ Securities Act Release No. 6862 (Apr. 23, 1990) [55 FR 
17933].
    \20\ According to Securities Data Co., the deal value of Rule 
144A private placements in 1997 was $254.4 billion, approximately 
$83 billion of which was raised by foreign issuers. Tibbitts, 
Private Placement Volume Explodes as Structured Deals Rule 144A 
Market, Investment Dealers' Digest, Feb. 2, 1998. The amount of non-
convertible bonds issued in the Rule 144A market in the first 
quarter of 1998 ($30 billion) is almost equal to the entire amount 
(equity, preferred and debt) placed in the Rule 144A market from its 
inception in 1990 to the end of 1992 ($31 billion).
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B. Review of the Capital Formation Process

    Both within and outside the Commission, debate periodically has 
centered on the Securities Act and the best way to regulate the 
securities offering process. Over the years, industry participants, 
academics and Commission members have voiced opinions that there are 
strains in the regulatory framework and have called for changes. Their 
proposed solutions have ranged from minor rule changes to the abolition 
of the Commission.
    There also has been recent discussion about the extent to which the 
regulatory system requires an overhaul in the face of the ever-changing 
market and offering practices.21 Factors identified as 
causing strain in the current regulatory regime include:
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    \21\ Compare Merrill Lynch comment letter (Oct. 31, 1996) 
(``[W]e believe that what the registration process needs today is a 
tune up, not an overhaul.'') with American Bar Ass'n comment letter 
(Dec. 11, 1996) (``[T]he time has come to recognize that the current 
jury-rigged system requires fundamental reforms.''). These letters 
are available for inspection and copying in the Commission's public 
reference room. Refer to File No. S7-19-96.
---------------------------------------------------------------------------

    1. Technological developments in the field of electronic 
communications; 22
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    \22\ See, e.g., Report to the Congress: The Impact of Recent 
Technological Advances on the Securities Markets, (Sept. 1997). That 
Report, like all Commission reports issued after 1996, is available 
on the Commission's Internet web site (http://www.sec.gov).

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[[Page 67180]]

    2. The gradual erosion of traditional distinctions between public 
and private offerings; 23
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    \23\ See, e.g., Keller, Securities Act Concepts: The Private/
Public Offering Dichotomy and Proposals for Reform, Mass. Continuing 
Legal Educ., 15 Ann. Bus. & Sec. L. Conf. (Oct. 31, 1997).
---------------------------------------------------------------------------

    3. Novel financing instruments, methods of capital-raising and risk 
management initiatives; 24 and
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    \24\ Seligman, The Obsolescence of Wall Street: A Contextual 
Approach to the Evolving Structure of Federal Securities Regulation 
93 Mich. L. Rev. 649, 666-72 (1995). See also Securities Act Release 
No. 7386 (Jan. 31, 1997) [62 FR 6044].
---------------------------------------------------------------------------

    4. Regulatory initiatives that reduce other market risks, such as 
the T+3 clearance and settlement system.25
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    \25\ See, e.g., Securities Act Release No. 7168 (May 11, 1995) 
[60 FR 26604].
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III. Recent Reform Initiatives

    The Commission has been cognizant of the call for change in the 
regulatory framework governing the capital formation process. For the 
last several years, the Commission has been actively reevaluating the 
current registration system. Recent Commission steps in that process 
have included: the March 1996 Report of the Task Force on Disclosure 
Simplification (the ``Task Force''); the July 1996 Report of the 
Commission-impaneled Advisory Committee on the Capital Formation and 
Regulatory Processes (the ``Advisory Committee''); and the Commission's 
Securities Act Concept Release in July 1996 (the ``Concept 
Release'').26
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    \26\ Securities Act Release No. 7314 (July 31, 1996) [61 FR 
40044].
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A. Task Force Report

    The Commission's Task Force was organized in August 1995 to conduct 
a broad-based review of existing disclosure requirements to identify 
outdated or unnecessary requirements that clutter the regulatory 
framework. That review encompassed the forms and rules relating to: 
capital-raising transactions; periodic reporting pursuant to the 
Exchange Act; proxy solicitations and tender offers; and beneficial 
ownership reports under the Williams Act. The goal was to simplify the 
disclosure process, consistent with investor protection, by eliminating 
unnecessary requirements.27 In its March 1996 report, the 
Task Force recommended that the Commission eliminate or modify a 
quarter of the rules and half the forms. To this end, the Commission 
has abolished 45 rules and 6 forms.28
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    \27\ The Task Force met with issuers, investor groups, 
underwriters, accounting firms, lawyers, and others who participate 
daily in the capital markets. The Task Force reported that none of 
the participants suggested wholesale deregulation, and virtually all 
emphasized the importance of the Commission's basic regulatory goals 
to preserve orderly markets. See Task Force Report at pp. 1-6.
    \28\ Securities Act Release No. 7300 (May 31, 1996) [61 FR 
30397] and Securities Act Release No. 7431 (July 18, 1997) [62 FR 
39755]. These releases are available on the Commission's Internet 
web site (http://www.sec.gov).
---------------------------------------------------------------------------

B. The Advisory Committee on Capital Formation

    The Advisory Committee was established in 1995 by the Commission 
and chaired by then-Commissioner Steven M.H. Wallman. The Advisory 
Committee's objective was to evaluate the efficiency and effectiveness 
of the regulatory process relating to public offerings of securities, 
secondary market trading, and corporate reporting. After 18 months of 
study, the Advisory Committee published a report in 1996 calling for 
reform. Its primary recommendation was that the Commission further its 
integrated disclosure system by implementing a ``company registration'' 
concept first envisioned by the ALI's Federal Securities Code. The 
report advocated refocusing the registration system on registration not 
of transactions, but of companies, with greater reliance on periodic 
disclosure than prospectus disclosure. The Advisory Committee suggested 
that the Commission implement the concept as a pilot program for larger 
companies.

C. The Commission's Concept Release

    In light of diverse developments in the markets and the work of the 
Advisory Committee and Task Force, the Commission published the Concept 
Release on offering regulation in July 1996. In the Concept Release, 
the Commission announced that it was reexamining the application of the 
Securities Act and the rules thereunder to securities offerings. The 
Concept Release sought comment on the best methods for eliminating 
unnecessary obstacles to capital formation while improving the quality 
and timing of disclosure and, therefore, investor protection. The 
Commission focused its questions in the Concept Release on broad 
concepts underlying Securities Act regulation. They included:
     Whether investors are receiving all material information 
in a timely manner in the offering process;
     Whether limitations on the use of written communications 
other than the statutory prospectus during the offering process ought 
to be eased;
     Whether the speed of takedowns of securities under the 
Commission's shelf registration system results in procedures that do 
not adequately inform the market;
     Whether the role of independent gatekeepers in the 
offering process needs to be reconfigured to work in conjunction with 
issuers' quick access to capital; and
     Whether the periodic disclosure under the Exchange Act 
needs improvement.

The Commission also asked questions in the Concept Release about the 
Advisory Committee's company registration idea and suggestions about 
regulatory reform that had been made by others. The Commission received 
55 comment letters in response to its requests.29
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    \29\ Those letters and a summary of them may be read and copied 
at the Commission's Public Reference Room, 450 Fifth Street N.W., 
Washington, D.C. 20549. Refer to File No. S7-19-96.
---------------------------------------------------------------------------

D. The National Securities Markets Improvement Act

    Following the publication of the Concept Release, the National 
Securities Markets Improvements Act of 1996 (``NSMIA'') was 
enacted.30 This legislation was designed to update the 
securities laws to promote investment, decrease the cost of capital, 
and encourage competition. To this end, Congress granted the Commission 
for the first time general exemptive authority under the Securities 
Act.31 In order to exercise our new exemptive authority, 
NSMIA requires us to find that such action is ``necessary or 
appropriate in the public interest and consistent with the protection 
of investors.'' 32 That exemptive authority gives the 
Commission substantial additional flexibility in administering the 
Securities Act. Congress believed that this additional flexibility 
would allow the Commission to adopt more easily new approaches to 
registration and disclosure in order to promote efficiency, competition 
and capital formation.33
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    \30\ Pub. L. No. 104-290, 104th Cong., 2d. Sess. (1996).
    \31\ See Section 28 of the Securities Act, 15 U.S.C. Sec. 77z-3.
    \32\ 15 U.S.C. Sec. 77z-3.
    \33\ H.R. Rep. No. 104-622, 104 Cong. 2d Sess. at (1996).
---------------------------------------------------------------------------

    After the enactment of NSMIA, the Commission began to study 
possible reform of the regulatory structure for offerings even more 
broadly. For the past two years, the Commission staff has researched 
and studied the existing regulatory system and possible improvements 
that could be made to it. Some of our proposals rely upon our new 
exemptive authority.

[[Page 67181]]

IV. Scope of the Proposals

    The Commission is proposing a variety of revisions to the current 
regulatory structure for securities offerings.34 While many 
revisions address problems identified by offering participants, the 
overall goal of the proposed reforms is to make the registration system 
more workable for issuers and underwriters and more effective for 
investors in today's capital markets. In the last decade, the 
Commission has seen the results of a registration structure that has 
been perceived as having too much rigidity to comport with the 
realities of modern global markets. Sellers have used to their fullest 
extent available methods of offering without registration. 
Increasingly, they have tried to create new ways around registration 
strictures. They also have stretched the boundary between registered 
and exempt offerings in seeking to acquire the benefits of both. Where 
registration has taken place, too many offerings have been accomplished 
with a divergence between the disclosure about the transaction in the 
registration statement and the disclosure actually used to convince 
investors to buy.
---------------------------------------------------------------------------

    \34\ The proposals do not purport to affect any rules or 
regulations imposed by self-regulatory organizations in connection 
with securities offerings.
---------------------------------------------------------------------------

    A large share of the stress on the registration structure in recent 
years has stemmed from the issuers' and underwriters' need to raise 
capital on a schedule that they can control. Our proposals seek to 
fulfill that need through the registration system where consistent with 
investor protection. In addition, the speed at which offerings are 
accomplished today, and the limitations on communications imposed by 
the statute, have called into question whether investors are being 
informed in a timely manner. Rather than continuing the statute's 
``exclusive prospectus'' approach to disclosure, our proposals take an 
``inclusive'' approach to disclosure. We seek to ensure that material 
information is within the reach of investors when they need it most. We 
also seek to lessen the gap in offerings done quickly between the 
disclosure about the offering actually being used to sell the 
securities and the disclosure that is filed with the Commission in a 
registration statement. Overall, the revisions should create a more 
flexible registration system under which public offerings proceed with 
benefits to both buyers and sellers.
    Our proposals are primarily focused on the structure of the 
regulation of offerings; they are not primarily focused on the contents 
of disclosure requirements. In the process of considering structural 
reform, however, the Commission has recognized that it needs to study 
whether the specific disclosure that is mandated both in Exchange Act 
periodic reports and Securities Act registration statements should be 
re-focused to serve the investing public better. As a result, the 
Commission's reform work is not done. The next step in our ongoing 
process will be to revisit the quantity and quality of required 
disclosure.

V. Proposals Altering the Securities Act Registration Process

    A principal premise of the existing Securities Act registration 
system is that a prospectus containing mandated disclosure should be 
virtually the exclusive written document used to offer the securities. 
In the years since adoption, especially with the recent explosion of 
information technology, this exclusivity premise is less a reality than 
a theory, at least for certain offerings and issuers. We believe that 
it is time to recognize that a different approach would be better for 
those offerings.
    For larger seasoned issuers, communications made around the time of 
a typical registered offering, whether or not part of a traditional 
prospectus, provide the basis for investment decisions in the offering. 
Those issuers are well followed by the market and the important 
statements that they make are quickly disseminated and considered by 
investors even when the issuers are not making an offering. When they 
are making an offering, any communication those issuers and other 
offering participants make is of even greater interest to the markets. 
For those issuers, therefore, we propose a transformation from the 
``exclusive'' prospectus approach to the ``inclusive'' prospectus 
approach as a means of facilitating informed investment decisions. That 
approach would embrace as part of the registration system all 
information used by or on behalf of the issuer during the offering 
period that would be material to an investor in the offering. All 
investors in the offering would receive or have access to such 
information as well as the required material company and transactional 
disclosure. The proposed system would maintain investor protection by 
subjecting this information to the antifraud and civil liabilities 
provisions of the Securities Act and the Exchange Act.
    For most offerings by smaller or unseasoned issuers, and in 
business combinations and exchange offers, we would primarily rely on 
the current mandated prospectus to provide written offering 
communication to investors, although there too we would allow them more 
freedom to communicate in any medium by means other than the 
prospectus.35
---------------------------------------------------------------------------

    \35\ See Section VII. of this release regarding proposed changes 
in the regulation of offering communications.
---------------------------------------------------------------------------

    The proposed system would have three main registration forms: Form 
A for smaller issuers and larger unseasoned issuers, Form B for larger 
seasoned issuers and offerings to relatively well-informed or 
sophisticated investors, and Form C for business combinations and 
exchange offers. Both domestic and foreign issuers would use each of 
these Forms.36 Small business issuers would continue to be 
permitted to use Form SB-1 and revised Form SB-2 for their offerings 
and would have to use new Form SB-3 for business combinations and 
exchange offers.
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    \36\ While disclosure for foreign private issuers currently is 
made through a separate set of registration forms, we believe that 
it would be simpler to formulate a single set of forms for both 
foreign and domestic issuers. In doing so, foreign private issuers 
registering on Form A would be subject to the same disclosure 
requirements as they are currently. In Form B, foreign private 
issuers would have at least as much flexibility as domestic issuers. 
Through designations on the front of the registration forms, it will 
be possible to track the use by foreign private issuers regardless 
of whether they register on the same forms as domestic issuers.
---------------------------------------------------------------------------

    The new forms reflect our understanding of when investors need 
more, or less, mandated disclosure and when investors benefit from 
access to information from more than one source. In addition, the 
proposed divisions of issuers and offerings would create a system that 
more accurately reflects when an efficient market exists and when an 
issuer has a significant market following. The new system also would 
enhance the use of Exchange Act disclosure to satisfy Securities Act 
disclosure requirements.

A. Form B Offerings

1. How Form B Works
a. Registration Statement Contents
    At the time of effectiveness, a Form B registration statement would 
consist of:
     A cover page with a calculation of registration fee table;
     A prospectus that contains:

--Offering information;
--The registrant's Exchange Act reports, via incorporation by 
reference;
--A foreign private issuer's Item 18 reconciliation (or Item 17, as 
applicable) to U.S. GAAP (if not already in an incorporated 
report);37
---------------------------------------------------------------------------

    \37\ See Items 17 and 18 of Form 20-F.

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[[Page 67182]]

--The securities term sheet; 38
---------------------------------------------------------------------------

    \38\ See Section VIII.C.4.a. of this release for a discussion of 
this securities term sheet and delivery requirements relating to it.
---------------------------------------------------------------------------

--Undertakings to provide investors upon their request, and free of 
charge, with information incorporated by reference but not delivered.

     Signatures;
     Selected exhibits: 39
---------------------------------------------------------------------------

    \39\ See proposed revisions to Item 601 of Regulation S-K, 17 
CFR 229.601.
---------------------------------------------------------------------------

--Any instrument that defines the rights of the security holders 
(incorporated by reference if previously filed);
--Consents; 40
---------------------------------------------------------------------------

    \40\ See infra note 73 for a discussion of consents of auditors 
in delayed shelf registration statements.
---------------------------------------------------------------------------

--Statement of eligibility of trustee, where applicable (Form T-1);
--Legal opinions; and
--A representation that underwriters concur with the issuer's 
designated effective date.41
---------------------------------------------------------------------------

    \41\ See Sections V.A.1.d. and V.B.2.a. of this release for a 
discussion of this underwriter concurrence.
---------------------------------------------------------------------------

    Form B issuers would be required to deliver promptly a prospectus, 
free of charge, to any investor who requests it. In addition to that 
obligation, Form B issuers would be required to deliver a securities 
terms sheet.42
---------------------------------------------------------------------------

    \42\ We discuss prospectus delivery obligations for Form B 
issuers at Section VIII.C.4.a. of this release.
---------------------------------------------------------------------------

i. Company Disclosure
    Investors, as always, will obtain company information from a 
variety of sources such as the Internet, television, newspapers and 
radio. They also may acquire company information from securities 
analysts or the company itself. While there are many possible sources 
of information about Form B issuers that investors can access 
today,43 one reliable source is the information that issuers 
make public through filing their Exchange Act reports with the 
Commission. Investors can rely on this information because it is 
subject to the regulatory and antifraud provisions of the federal 
securities laws as well as subject to review by the staff of the 
Commission. This structure compels issuers to come forward with 
information about their businesses that they might not choose to make 
public otherwise.
---------------------------------------------------------------------------

    \43\ We also believe our proposal to free communications by Form 
B registrants, discussed below, would spur diverse public discourse 
about the merits of the issuer and its offering, all of which would 
be open to the public investor.
---------------------------------------------------------------------------

    The proposed registration system takes account of this source of 
information by providing that an issuer must incorporate by reference 
into its effective registration statement on Form B:
    1. Its latest annual report 44 filed under the Exchange 
Act; and 45
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    \44\ We do not, however, permit incorporation by reference of 
annual reports on Form 40-F. See General Instruction I.B.7. of 
proposed Form B.
    \45\ Financial statements included in the Form must be no older 
than permitted in the age of financial statements requirements of 
Regulation S-X. See Rules 3-12 and 3-19 of Regulation S-X, 17 CFR 
210.3-12 and 210.3-19. Foreign issuers using Form B would be 
required to reconcile to U.S. GAAP any financial statements either 
incorporated by reference into or set forth in the Form. We would 
require reconciliation in accordance with Item 17 or Item 18 of Form 
20-F under the same standards used today.
---------------------------------------------------------------------------

    2. Any Exchange Act reports filed since the end of the fiscal year 
covered by its latest annual report.46
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    \46\ The proposed system would not permit Form B registrants to 
incorporate by reference any Exchange Act report filed after the end 
of the offering period. For delayed shelf offerings, each takedown 
would have its own separate offering period.

Issuers that use Forms S-3 or F-3 currently must incorporate their 
Exchange Act reports into those Forms. The 12-month reporting 
requirements under those Forms, however, do not assure that an issuer 
incorporates an annual report into either of those registration 
statements because annual reports are not due until three months (or 6 
months, for foreign private issuers) after the end of a company's 
fiscal year. In addition to this information, issuers would be required 
to disclose in their Form B registration statements updated company 
information that describes material changes not reflected in any 
Exchange Act reports incorporated by reference.
ii. Transactional Disclosure
    We are seeking comment on two alternatives on Form B transactional 
disclosure. The first would mandate the inclusion of ``offering 
information'' that includes some of the traditional items of 
transactional disclosure. This alternative would allow issuer 
discretion as to materiality and applicability of other traditional 
items of transactional disclosure. The second alternative would simply 
mandate that issuers set forth in Form B the items of transactional 
disclosure required today. Both alternatives would require that the 
registrant file any offering information disclosed by or on behalf of 
the issuer (including by the underwriter or participating dealer) 
during the offering period.47 Under the first proposal, the 
registrant would file offering information as part of the prospectus in 
the effective registration statement.48 ``Offering 
information'' consists of:
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    \47\ We would not permit a Form B registrant to file information 
that had not been disclosed during the offering period. See Form B 
``Information Required in the Prospectus that is Part of the 
Effective Registration Statement,'' paragraph 1.(c), and proposed 
Securities Act Rule 172(e), 17 CFR 230.172(e). Information 
communicated orally during that period could be reduced to writing 
and filed as part of the registration statement if the registrant so 
chooses.
    \48\ Information communicated orally would not have to be filed 
and would be subject to section 12(a)(2) liability.
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     The amount of securities being offered; 49
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    \49\ Under Rule 457(a), 17 CFR 230.457(a), a number of 
securities may be registered. Under Rule 457(o), 17 CFR 230.457(o), 
a dollar amount may be registered. The registrant may choose between 
these two alternatives in a typical capital-raising offering.
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     Material changes in the issuer's affairs since the end of 
the latest fiscal year that are not reflected in incorporated Exchange 
Act reports;
     The information required by Item 504 of Regulation S-K 
regarding use of proceeds;
     The information about underwriter's discounts and 
commissions required by Item 501(b)(3) of Regulation S-K;
     Information about the risks of the offering of the type 
described in Item 503 of Regulation S-K;
     Information concerning who is selling the securities of 
the type described in Item 507 of Regulation S-K;
     Material information about the terms of the securities 
offered as required by Item 202 of Regulation S-K, unless capital stock 
is to be registered and securities of the same class are registered 
pursuant to Section 12 of the Exchange Act;
     All information regarding the transaction that is 
material, which may include where applicable, but is not limited to:

--Information about dilution of the type described in Item 506 of 
Regulation S-K;
--Information about the determination of the offering price of the type 
described in Item 505 of Regulation S-K;
--Information about the plan of distribution of the type described in 
Item 508 of Regulation S-K;
--Ratio of earning to fixed charges, as described in Item 503 of 
Regulation S-K;

     Any offering information disclosed by or on behalf of the 
issuer during the offering period,50 other than information 
communicated orally; and
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    \50\ For purposes of this Form, ``offering period'' means the 
period beginning 15 days in advance of the first offer made by or on 
behalf of the issuer in connection with the offering and ending when 
the offering is completed.
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     Offering information communicated orally that the issuer 
chooses to file.
    This alternative could provide registrants, and those acting on 
their

[[Page 67183]]

behalf, more flexibility to craft a selling document shaped by their 
particular offering, the market demands for information, and the 
requirements to provide material information to investors. We believe 
the greater freedom may allow issuers to cut some boilerplate 
disclosure and to omit non-material disclosure from the prospectus. We 
solicit comment, however, with regard to whether issuers would use that 
freedom to accomplish those objectives. At the same time, the Form's 
requirements should ensure investor protection by requiring issuers to 
disclose all material offering information in the prospectus that is 
part of the effective Form B. We solicit comment on this point.
    We solicit comment on whether traditional transactional line items 
not included in Form B should be retained. If so, which of the items? 
Conversely, should we permit Form B issuers to craft their 
transactional disclosure based on what they believe is material 
information, and what the market and investors would demand, rather 
than based on traditional transactional line items? If so, should we 
limit that flexibility to a narrower class of Form B issuers, such as 
those with a minimum public float of $750 million or $1 billion?
    The second alternative would mandate that issuers disclose in Form 
B all the information required by the Regulation S-K transactional 
disclosure items currently required in Form S-3 and/or Form F-3. In 
addition to the information that would be required by the first 
alternative, this alternative would require the registrant to provide 
further information in accordance with Regulation S-K.51 
Should Form B include as mandated itemized information all of the 
topics listed under that requirement? Should mandated itemized 
disclosure be a different subset of the Regulation S-K information 
currently required in Form S-3 and/or Form F-3?
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    \51\ That additional information would be: certain portions of 
Item 501 of Regulation S-K (forepart of registration statement and 
outside front cover page of prospectus); Item 502 of Regulation S-K 
(inside front and outside back cover pages of prospectus); certain 
portions of Item 503 of Regulation S-K (prospectus summary and 
address and telephone number); Item 509 of Regulation S-K, where 
applicable (interests of named experts and counsel) and Item 510 of 
Regulation S-K, where applicable (disclosure of Commission position 
on indemnification for Securities Act liabilities).
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b. Free Writing Materials
    For Form B issuers, written information 52 disclosed 
during the ``offering period'' would be classified as either ``offering 
information'' or ``free writing'' materials.53 The 
``offering period'' with respect to a Form B offering would be defined 
as the period beginning 15 days before the first offer made by or on 
behalf of the issuer and ending at the time of completion of the 
offering. ``Free writing'' materials would include all written 
information disclosed by or on behalf of the issuer during the offering 
period, other than ``offering information,'' factual business 
communications 54 and limited notices of proposed 
offerings.55 Free writing could include, but would not be 
limited to, sales literature and selling documents that include 
forward-looking information.56 A document that contains both 
offering information and ``free writing'' would be treated as ``free 
writing,'' if the offering information was filed as part of the 
issuer's registration statement. If the offering information was not 
filed as part of the issuer's registration statement, the document, 
including the ``free writing'' portion, would be treated as offering 
information and would be required to be filed as part of the 
registration statement.
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    \52\ For these purposes, ``written'' includes all information 
disseminated otherwise than orally and therefore would include 
electronic communications and other future uses of changing 
communications technology.
    \53\ If a document includes offering information, whether or not 
it also contains free writing, it would be treated as an offering 
information document for all purposes unless that offering 
information is otherwise included in the registration statement.
    \54\ ``Factual business communications'' would be defined in 
proposed Securities Act Rule 169, 17 CFR 230.169.
    \55\ See proposed revisions to Securities Act Rule 135, 17 CFR 
230.135.
    \56\ Section 12(a)(2) would apply to free writing materials (and 
to all oral statements made by or on behalf of the issuer during the 
offering period).
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    The registrant would file, at the same time it files its Form B 
registration statement, the free writing materials it disseminated 
before filing its Form B.57 It would file free writing 
materials used after the filing of its Form B at the time of first 
use.58 The registrant would not file free writing materials 
as part of the effective registration statement, nor would it have to 
file information in the effective registration statement as free 
writing materials.59
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    \57\ See proposed Securities Act Rule 425(b)(2), 17 CFR 
230.425(b)(2). As proposed, Rule 425 would describe the materials 
that would not have to be filed. They consist of:
    1. Any factual business communication (as defined in proposed 
Rule 169) regardless of when it is made;
    2. Any research report used in reliance on Rules 137, 138 or 
139;
    3. Any information used in connection with an offering under 
Form S-8;
    4. Any information used in connection with an offering on Form B 
under a dividend or interest reinvestment plan;
    5. Any information used in connection with a direct stock 
purchase plan; or
    6. Any information filed or to be filed as part of an effective 
registration statement.
    For purposes of proposed Rule 425, ``direct stock purchase 
plan'' refers to a registrant-sponsored plan pursuant to which the 
registrant offers registered common stock for cash to only its 
existing common stock holders (``plan participants'') and in which 
there is no underwriter participation. The common stock registered 
pursuant to the plan may either be newly issued or purchased by the 
registrant for the account of plan participants at prices not in 
excess of current market prices at the time of purchase, or at 
prices not in excess of an amount determined under a pricing formula 
specified in the plan and based on average or current market prices 
at the time of purchase.
    \58\ See proposed Securities Act Rule 425(b), 17 CFR 230.425(b).
    \59\ See proposed Securities Act Rule 425, 17 CFR 230.425.
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    Given the significance of the offering period, should the 
Commission require the registrant to state on the front cover page of 
the registration statement the date of the first offer in connection 
with the offering being registered? Should the Commission require free 
writing materials to be filed at the time of their first use since 
investors might prefer access to them as they make their investment 
decisions?
c. Time of Filing
    A registrant could file a registration statement on Form B at any 
time before the first sale of the securities.60 Issuers 
wishing to file immediately before sale could do so.61 
Because issuers may wish to price Form B offerings before filing and 
because many offerings are currently priced after hours, we would allow 
registrants to file Form B registration statements with the Commission 
after hours via EDGAR or facsimile until 10:00 p.m.62 
Issuers would pay the filing fee under the same procedures used today 
by issuers filing Rule 462(b) registration statements after hours via 
facsimile.63
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    \60\ See Section VII of this release for a discussion of the 
restrictions on communications that are being eliminated for Form B 
offerings.
    \61\ Because Form B offerings would not have to be filed until 
the time of first sale, the payment of registration fees would also 
be delayed until the time of first sale.
    \62\ See proposed revisions to Securities Act Rules 110(d) and 
402, 17 CFR 230.110(d) and 230.402. In the usual case, a registrant 
may file a registration statement in paper format only until 5:30 
p.m. It may file on EDGAR between 5:30 p.m. and 10:00 p.m., but 
those registration statements are treated as if they were filed the 
following day. Form B registration statements filed after hours via 
EDGAR would be treated as filed the same day. See proposed revisions 
to Rule 13 of Regulation S-T, 17 CFR 232.13. We also have proposed 
revisions to Securities Act Rule 111(b), 17 CFR 230.111(b), to allow 
for special fee payment procedures for Form B filings made after 
hours.
    \63\ See Securities Act Rule 111, 17 CFR 230.111. That procedure 
is described in detail in Securities Act Release No. 7168 (May 11, 
1995).

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[[Page 67184]]

d. Becoming Effective
    A Form B and any amendment to a Form B would be effective by 
operation of rule at the issuer's discretion to give issuers maximum 
flexibility.64 The issuer would simply select one of three 
choices on the cover page:
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    \64\ See proposed Securities Act Rule 462(f)(1) and (f)(2), 17 
CFR 230.462(f)(1) and 230.462(f)(2).
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    (1) Effective upon filing;
    (2) Effective ____________ (date and time specified by the issuer); 
or
    (3) effective as specified in a later amendment to the registration 
statement.65 The Commission staff would not have to take 
action for the registration statement to become effective.
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    \65\ The later amendment could amount to no more than a cover 
page on which the registrant would check the appropriate box to 
designate immediate effectiveness or a specified effective date.
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    In most underwritten offerings under the current registration 
system, the Commission requires that a request for effectiveness of a 
registration statement be made by the underwriters in addition to the 
issuer.66 Both underwriters and issuers are subject to 
liability under Section 11 for the disclosure in an effective 
registration statement. A request for effectiveness is therefore an 
acknowledgment by each requester that it is aware of its obligations 
under the Securities Act.67
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    \66\ See Securities Act Rule 461(a), 17 CFR 230.461(a). The Rule 
requires the managing underwriters, or if there are no managing 
underwriters, the principal underwriters, to join in the issuer's 
request for acceleration of a registration statement.
    \67\ See Securities Act Rule 461(a), 17 CFR 230.461(a).
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    Because the issuer would have complete control over effectiveness 
by controlling the filing, we would include in Form B a requirement 
that the issuer obtain and file as an exhibit evidence of the managing 
underwriters' or principal underwriters' concurrence with the issuer's 
designation of effectiveness.68 The issuer would have to 
obtain that concurrence before it files the Form B registration 
statement in which it requests either immediate effectiveness or 
effectiveness at a specified date.
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    \68\ See proposed Form B ``Exhibits'' section and proposed 
revisions to Item 601 of Regulation S-K. Evidence of concurrence 
could be, for example, in a writing from the underwriter to the 
issuer or an electronic message to that effect.
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    Would the requirement to file the evidence of the underwriters' 
concurrence as an exhibit to Form B be unnecessarily burdensome? 
Alternatively, should we require the issuer to represent in the 
registration statement that it obtained the underwriters' concurrence, 
but not require it to file the concurrence, and require it to retain 
the concurrence for 5 years? Should we require that the issuer obtain 
the concurrence, but not require that the concurrence be evidenced in 
writing? Would an oral concurrence provide the issuer and the 
underwriters with sufficient assurance of agreement and protection 
against misunderstanding?
e. Delayed Shelf Offerings and Form B
    Form B would provide much the same flexibility to issuers that 
delayed shelf registration on Forms S-3 and F-3 has 
provided,69 and those benefits would be available to 
approximately the same issuers.70 Unlike current shelf 
registration, however, issuers using Form B would not need to file a 
base or core prospectus to be able to offer and sell at will. Base 
prospectuses today, particularly those used for unallocated delayed 
shelf registration statements, tend to describe in the broadest of 
terms the many different types of securities and offerings that might 
be done off the shelf. Thus, in offerings off the shelf, the key 
offering disclosure is usually filed in the Rule 424 prospectus 
supplement. Form B would allow an issuer to avoid writing transactional 
disclosure that covers ``everything but the kitchen sink'' and simply 
file whatever transactional disclosure it gives to investors at the 
time of the offering.
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    \69\ For convenience, we refer to Rule 415(a)(1)(x), 17 CFR 
230.415(a)(1)(x), offerings as delayed shelf offerings or shelf 
offerings in this release. Other types of Rule 415 shelf offerings, 
such as continuous offerings, generally are unaffected by the 
proposed system.
    \70\ Our research indicates that, of the 379 existing issuers 
who utilized the equity and unallocated shelf registration system 
between calendar year 1993 to the third quarter of 1996, only 37 
would be ineligible to use new Form B under the public float/ADTV 
tests (the tests are described at Section V.B.2.a. of this release). 
Of those, 23 issuers appear to be REITs. The 37 that are eliminated 
would be able to use Form B for offerings to QIBs and offerings of 
investment grade securities, among others.
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    There are also other Form B benefits as compared to the current 
delayed shelf system. First, the Form B registration statement would 
not be subject to pre-effective staff review. Under the existing 
delayed shelf system, the Form S-3 or F-3 containing the core 
prospectus is subject to the staff's selective pre-review. Second, 
issuers may have less concern about market overhang effects on its 
stock price under Form B.71 Under the current system, an 
issuer wishing to put equity securities on the shelf has to include 
them in the registration statement even before it intends to offer 
those securities. Under the proposed system, a registrant need only 
file a Form B registration statement before sale. The absence of a 
filing that signals an upcoming offering well before the time it can be 
completed may be welcomed by issuers, but may be of concern to 
secondary market participants.72
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    \71\ For a discussion of market overhang effects, see Securities 
Act Release No. 6383, (Mar. 16, 1992) (adopting integrated 
disclosure system and unallocated shelf registration rules).
    \72\ See Section XVII of this release for a solicitation of 
comment regarding the effect this proposal would have on the 
secondary market.
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    Another advantage for issuers in Form B as compared to existing 
shelf registration relates to fees. In shelf registration today, an 
issuer must file the base prospectus and pay the full filing fee at 
that time, even though it may not take down securities from the shelf 
until much later. An issuer using Form B other than for delayed 
offerings would pay upon filing but generally that would not occur 
until sale. There would be no need to register more than is needed for 
that offering at that time.
    We believe that the way Form B operates would largely eliminate the 
incentive for a registrant to set up a delayed shelf registration 
statement. We recognize, however, that some issuers are accustomed to 
doing shelf takedowns and do so on a frequent basis. As proposed, a 
registrant wishing to file some preliminary information could still do 
so on Form B and either become effective then and file the remaining 
disclosure concerning the offering in a post-effective amendment or 
delay effectiveness of the Form B until the rest of the information is 
available. The issuer could designate when those post-effective 
amendments become effective. The current delayed shelf does not require 
directors and officers to sign the Rule 424(b) supplements filed for 
each takedown.73 Under the proposal, registrants may use a 
power of attorney to avoid the inconvenience of obtaining multiple 
signatures upon the filing of a pre-effective or post-effective 
amendment. We also would provide in delayed shelf offerings that when 
the persons signing a Form B do not appoint a person to

[[Page 67185]]

sign via a power of attorney, a signature on a post-effective amendment 
by an authorized representative of the registrant shall be deemed to 
constitute signature by the persons signing the original filing unless 
otherwise specified in the amendment.74
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    \73\ Under the current system, auditors do not provide consents 
for prospectus supplements. They consent to inclusion of the 
financial statements in the registration statement and also consent 
at the time of filing most post-effective amendments. Subsequently 
filed Forms 10-K that are incorporated by reference include the 
auditor's consent to inclusion of the financial statements to update 
the shelf. Under the proposed system, post-effective amendments will 
be more common because transactional information will be filed in 
that manner.
    The consents of auditors are not required today with respect to 
the filing of prospectus supplements and certain post-effective 
amendments to shelf registration statements. The Commission 
similarly would not require an auditor's consent for post-effective 
amendments that amount to prospectus supplements and have no bearing 
on the financial statements.
    \74\ See Signatures section of Form B and proposed revisions to 
Securities Act Rule 471, 17 CFR 230.471. See also Section XI.C. of 
this release, the discussion of the proposal to require management 
to certify that to management's knowledge, the filings they sign 
contain no material misstatement or omission.
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    Delayed shelf offerings on Form B would, however, improve upon the 
Form S-3/F-3 shelf registration system in two ways that would enhance 
investor protection. First, we would provide clearly in Form B that any 
transactional disclosure used in connection with a Form B offering is 
within the effective registration statement. With Form B, transactional 
information disclosed to investors before the end of the offering 
period would have to be filed either as part of the effective 
registration statement or on a post-effective amendment that becomes 
effective whenever the issuer wishes before the time of sales. That 
information would be within the scope of Section 11 under the 
Securities Act. That transactional disclosure would include information 
filed under Rule 424 as prospectus supplements to shelf registration 
statements today. We also would provide clearly in Form B that 
historical and forward-incorporated Exchange Act reports would be part 
of the effective registration statement. That information also would be 
within the scope of Section 11. We recognize that certain commentators 
have questioned whether Section 11 applies to Rule 424 information 
75 and forward-incorporated Exchange Act 
reports.76 While we believe that under existing law such 
Section 11 liability applies, and do not accept the views of those 
commentators on these issues, we recognize that an explicit statement 
in the proposed Form would serve to eliminate any uncertainty 
practitioners may believe exists.
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    \75\ For example, the Advisory Committee expressed the belief 
that Section 11 may not apply and recommended that the Commission 
address this potential lapse in application of Securities Act 
protections. See Advisory Committee Report at p. 28.
    \76\ See, e.g., Johnson and McLaughlin, Corporate Finance and 
the Federal Securities Laws 2d ed. 508-09 (1997). But see proposed 
revisions to Item 512 of Regulation S-K, 17 CFR 229.512.
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    The other change to the way delayed shelf would operate relates to 
the time of filing with the Commission information about the offering 
off the shelf. Today, that information may be filed pursuant to Rule 
424 up to two business days after the earlier of pricing of the 
securities or first use of the prospectus supplement. Under the 
proposed registration system, we would require that Form B issuers file 
this information as part of the effective registration statement by the 
time of sale.77 We believe that both investors and the 
market are better served by having this disclosure filed promptly. 
Moreover, because the transactional information that may be filed as 
part of the Form B registration statement includes only information 
about which investors have been informed before committing to purchase 
the securities, there is less reason to contemplate a filing after the 
sale takes place. In addition, the Commission is aware that some 
investors trading in shelf registrants' securities after a takedown and 
before the filing have been troubled by the absence of disclosure 
during that period. We have concerns that some investors are aware of 
the shelf takedowns while others become aware days later when notice is 
filed with the Commission. Although a two-business-day wait may not 
have been considered a material delay at the outset of modern shelf 
registration, it appears to be one in today's market framework. 
Eliminating this delay would support our goal of reducing the risks of 
selective disclosure.
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    \77\ See proposed revisions to Rule 424(b)(2), 17 CFR 
230.424(b)(2).
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    We solicit comment on whether there is a continued need for a 
delayed shelf concept under Form B. Do registrants see advantages to 
delayed registration on Form B over and above what would be allowed on 
Form B without that concept? Does the delayed shelf concept needlessly 
complicate the system? Is there a reason to retain the two-year 
limitation on the amount registered? Would concerns about market 
overhang keep issuers from taking advantage of any extension? Should we 
limit the extension to 3 or 4 years? Would issuers benefit more if we 
remove completely any restrictions on the amount of securities that 
issuers could register for a delayed shelf? What if we extended the 
possible life of a shelf registration statement to 6, 7 or 10 years? 
Would issuers register securities to be offered over those periods of 
time?
2. Offerings Eligible for Registration on Form B
    An issuer may register on Form B only offerings that fit in one of 
the following categories.
a. Offerings by Larger Seasoned Issuers
    Given the envisioned disclosure and delivery aspects of Form B, we 
believe that only those issuers with a demonstrated market following 
should be eligible to use Form B to register primary and secondary 
offerings of any type to the general public. The current threshold for 
short-form registration (Forms S-3 and F-3) is a public float of $75 
million. Based on our research, we believe that the most accurate 
measurement to attain the goal of choosing issuers for which there is 
an efficient market is a combination of public float of the issuer's 
common equity securities 78 and average daily trading volume 
(``ADTV'') of the issuer's equity securities.79 We propose 
that an issuer able to use Form B should either have:
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    \78\ Public float is the aggregate market value of the issuer's 
outstanding voting and non-voting common equity held by non-
affiliates of the issuer. 17 CFR 228.10(a)(1). We used market 
capitalization information as a proxy for public float figures. 
Public float information is less readily available and would require 
a determination of the equity interests of affiliates of a company 
in order to derive it from market capitalization data.
    \79\ Our research showed that a public company's market 
capitalization, public float and ADTV are closely and positively 
associated with the number of analysts that follow firms. 
Combination tests of ADTV and either market capitalization or public 
float are more closely associated with the speed of price discovery 
than any of those tests alone. The proposed tests would preclude 
lesser followed companies from Form B registration eligibility. We 
use a similar combination in Regulation M. See Exchange Act Rules 
100-105, 17 CFR 242.100-242.105.
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     A public float of $75 million or more and an ADTV of $1 
million or more; 80 or
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    \80\ Our research indicates that, just taking into account ADTV 
levels, 4% of the companies with an ADTV of $1 million or more would 
have fewer than 3 analysts covering them. Our research also 
indicates that, just taking into account market capitalization, 14% 
of the companies with market capitalizations of $75 million or more 
would have fewer than 3 analysts covering them.
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     A public float of $250 million or more.81
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    \81\ Our research indicates that 5% of the companies that have 
market capitalizations of $250 million or more have fewer than 3 
analysts covering them. On average, companies of this size have 15 
analysts covering them.

Thus, if an issuer has a public float of less than $250 million then it 
must have an ADTV of at least $1 million in addition to a public float 
of $75 million.
    In determining these thresholds, we considered, among other things, 
the level of analysts coverage that would result at different public 
float and ADTV thresholds. Our research indicates that companies that 
meet the proposed combined public float/ADTV test would have an average 
of 14 analysts following them.

[[Page 67186]]

    We looked at analyst coverage not because we believe that analysts 
create market following or because we believe that analysts statements 
are wholly accurate and unbiased or because we believe that all 
investors would have access to or rely upon analysts reports. Instead, 
we looked to analyst coverage because we believe that the number of 
analysts that cover companies that fit a certain profile is indicative 
of the level of investor interest in companies within the profile. Like 
news organizations, analysts tend to cover companies that are of 
interest to their customers.82
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    \82\ Both issuers and investors suggest that multiple analysts 
are necessary to provide the public with broad, relatively unbiased 
information about a company. We obtained information concerning 
analyst coverage from Nelson Publications, publisher of Nelson's 
Directory of Investment Research (1996). The research that we 
conducted considered the number of analyst firms that follow a 
company rather than the number of individual analysts. In proposing 
thresholds, we have considered that not all analysts contained in 
that listing would be actively following the issuer at all times. 
Thus, we have chosen thresholds that provide a significant number of 
analysts following the issuer. Where an issuer has significant 
analyst following and the market operates efficiently with respect 
to price discovery, we believe it is fair to assume some level of 
investor awareness of company information. It is also fair to assume 
that investors would have access to multiple sources of information 
about a company, making short-form registration and elimination of 
communications restrictions appropriate.
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    For purposes of Form B, issuers would be required to measure their 
ADTV during the three full calendar months (or any 90 consecutive 
calendar days ending within 10 calendar days) immediately preceding the 
filing of the registration statement. They would measure their public 
float as of the end of their last fiscal quarter. While the alternative 
stand-alone public float test of $250 million may be used by both 
domestic and foreign issuers to qualify for Form B eligibility, we 
propose it primarily for the benefit of large foreign issuers whose 
shares trade principally on foreign markets.83 In comparison 
to current Form S-3 and F-3 public float levels, 1,175 fewer companies 
would be eligible to register on Form B due to size.84 Those 
companies, and even smaller ones, would, however, be eligible to 
register on Form B under other criteria discussed below, such as when 
offering only to QIBs or offering investment grade securities.
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    \83\ ADTV is measured for purposes of Form B on U.S. trading 
markets only. We believe that provides a better measure of U.S. 
market following than world-wide ADTV for these purposes. To avoid 
creating a test that would disproportionately exclude well followed 
foreign issuers with little or no U.S. trading market, we provide 
the alternative $250 million float test without an ADTV component.
    \84\ Of these companies, only 13 have taken advantage of 
unallocated shelf registration. This eligibility criteria includes 
801 more issuers than were eligible to register securities on Form 
S-3 when the Commission lowered the public float requirements from 
$150 million to $75 million in 1992. See Securities Act Release No. 
6943 (July 16, 1992) [57 FR 32461].
---------------------------------------------------------------------------

    In addition to the public float/ADTV criteria, Form B would be 
available only to issuers that have a history of reporting under the 
Exchange Act. The reporting history would ensure that issuers have been 
reporting long enough so that adequate information about them is 
publicly available. It also gives issuers enough time to adjust to the 
disclosure requirements applicable to reporting companies. We propose a 
one-year reporting history requirement coupled with the requirement 
that the issuer have filed at least one annual report. Because annual 
reports are due months after the end of a fiscal year, simply requiring 
that Form B issuers have a one-year reporting history would not 
necessarily ensure that all issuers using the Form had prepared and 
filed at least one annual report.85 We believe the annual 
report requirement would provide benefits to investors, due to the fact 
that they would have more Exchange Act information to use in evaluating 
the issuer and also because the issuer would have more reporting 
experience. In addition, an issuer would not qualify to use Form B 
unless it had filed all Exchange Act reports due and had filed all of 
its reports on a timely basis in the 12 months immediately before the 
filing.86
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    \85\ Form S-3 currently requires simply a one-year reporting 
history. Form F-3 requires a one-year reporting history and also 
imposes a requirement that the registrant previously filed an annual 
report on Form 20-F.
    \86\ Issuers also would be required to be in compliance with our 
EDGAR rules. These timeliness and EDGAR requirements currently apply 
to offerings registered on short-form registration statements on 
Forms S-3 and F-3.
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    We request your comment on this proposal. Should the $75 million 
threshold used in conjunction with the ADTV threshold be higher (e.g., 
$100 million, $150 million, $200 million or $250 million)? 
87 Should the ADTV test used with the public float test be 
higher (e.g., $1.5 million or $2 million)? 88 Should the 
ADTV test be lower (e.g., $750,000)? 89 Should we raise the 
proposed stand-alone public float test of $250 million (e.g., to $300 
million, $350 million, $400 million or $450 million)? Should we lower 
the stand-alone public float test (e.g., to $200 million)? 
90 Should we raise the one-year and one annual report 
reporting requirement to two years? 91 Is there any reason 
why the ADTV/public float test thresholds should be consistent with the 
thresholds used for the actively-traded security exception in Rule 
101(c)(1) of Regulation M? Instead of worldwide volume, which is used 
in Regulation M, would U.S. market volume, as proposed, be a better 
indicator of market following by U.S. investors? Unlike Regulation M 
and the proposals, should ADTV be calculated solely on the basis of 
trading conducted on the NYSE, AMEX or Nasdaq-NMS so as to exclude 
microcap companies? 92
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    \87\ At the $100 million market capitalization level, our 
research indicates that 5% of the companies have fewer than 3 
analysts covering them. At $150 million, 5% have fewer than 3 
analysts; at $200 million, 5% have fewer than 3 analysts; and at 
$250 million, 5% have fewer than 3. At the $100 million threshold, 
an average of 14 analysts follow the company. At $150 million, the 
average increases to 15, at $200 million the average increases is 
15, and at $250 million the average is 16.
    \88\ Our research indicates that companies with an ADTV between 
$1 million and $2.5 million have an average of 8 analysts following 
them.
    \89\ Our research shows that 33% of companies with an ADTV of 
less than $1 million have no analyst following.
    \90\ Companies with a market capitalization of at least $200 
million have an average of 14.5 analysts following them.
    \91\ We studied the impact of extending the reporting history by 
additional years and found no resulting statistically significant 
improvement in price discovery or analyst following.
    \92\ See Section V.A.2.g. of this release for a discussion 
relating to microcap companies.
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b. Offerings to QIBs
    As the Commission determined in adopting Rule 144A, larger 
institutional investors, or QIBs as denominated in the rule, are 
presumed to be sophisticated securities investors.93 Their 
investing experience and size purportedly puts them in a position to 
insist upon as much information as would be provided by 
registration.94 Also, their size, which may be viewed as 
signifying buying and bargaining power, should allow them to demand 
from issuers protective covenants and restrictions. In other words, 
their sophistication enables them to fend for themselves.95 
Rule 144A applies both with respect to securities of

[[Page 67187]]

reporting companies and non-reporting companies.96
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    \93\ Securities Act Release No. 6862 (Apr. 23, 1990). Rule 144A 
provides a safe harbor from the registration requirements of the 
Securities Act for resales of restricted securities to QIBs as 
defined in Securities Act Rule 144A(a)(1), 17 CFR 230.144A(a)(1).
    \94\ In many instances, issuers prepare materials that are 
almost identical in presentation and substance to registration 
statements. See, e.g., McGeehan, Money Raised in Private Placement 
of Issues Doubles as Companies Take Advantage of SEC's Rule 144A'' 
Wall St. J., Jan. 2, 1998, at 38, col. 1.
    \95\ See Securities Act Release No. 6808 (Oct. 25, 1988) [53 FR 
50038] Section IV.A.1. (institutional investors possess sufficient 
knowledge and experience in financial and business matters, and so 
are capable of evaluating the risks of an investment and are less in 
need of the protections of registration); see also Securities Act 
Release No. 6839 (July 11, 1989) [54 FR 30076], Section II.B.
    \96\ When the issuer of the securities to be resold under Rule 
144A is neither a reporting company nor exempt from reporting under 
Exchange Act Rule 12g3-2(b), availability of the Rule is conditioned 
on the right of the current or prospective holder of the issuer's 
securities to obtain specific information from the issuer. See Rule 
144A(d)(4), 17 CFR 230.144A(d)(4).
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    If QIBs can fend for themselves in unregistered transactions 
involving securities of both reporting and non-reporting companies, 
they certainly should be able to fend for themselves at least as easily 
in connection with an offering by a public company registered on Form 
B. Moreover, when QIBs fend for themselves in Form B offerings, they 
will share the benefit of the disclosure they acquire with the rest of 
the investing public through the filing of that disclosure. To 
encourage registration of offerings that otherwise would be made in 
reliance on Rule 144A, we propose to extend Form B for registration of 
offerings made solely to QIBs, as defined in Rule 144A, where the QIBs 
are purchasing for their own accounts or for the accounts of other 
QIBs.97 Those offerings could be made where the issuer has 
been a reporting company for at least one year, has filed at least one 
annual report under Section 13(a) of the Exchange Act and is current 
and timely in fulfilling its reporting requirements.
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    \97\ An issuer that wishes to register an offering on Form B 
made solely to QIBs may offer or sell only to persons it reasonably 
believes are QIBs. The Division of Corporation Finance has 
interpreted the filing of a registration statement as a general 
solicitation. The filing of a Form B registration statement could, 
in and of itself, be viewed as a general solicitation and therefore 
as making offers to non-QIBs. Therefore, under the proposals, the 
Division would reconsider the issue regarding filing as a general 
solicitation for the purposes of QIB-only Form B offerings.
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i. Advantages of Registered Offerings
    Domestic issuers and foreign issuers that are already reporting 
would have the same key advantage under Form B registration that they 
find today in making Rule 144A offerings: they would find it just as 
easy to time their offerings because the issuer would control when its 
registration statement becomes effective and it need only file before 
the first sale. We believe issuers and investors would realize two 
significant benefits from registration of securities that otherwise 
would be sold only in reliance on Rule 144A:
    1. Unlike Rule 144A, securities fungible with those that are listed 
on exchanges or quoted on NASDAQ could be offered and sold under Form B 
registration.
    2. Unlike Rule 144A securities, the securities generally would be 
freely resalable because they would be covered by a registration 
statement. Because the securities would not be restricted, some QIBs 
that otherwise would be subject to limitations on the amount of 
restricted securities they may hold would be permitted to purchase 
these registered securities freely.98
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    \98\ The fact that Rule 144A, 17 CFR 230.144A, offerings are 
frequently conditioned on the issuer's promise to register the 
offering with the Commission within three to six months evidences 
the attraction of holding registered securities even for QIBs.
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ii. Limitations on QIB Purchases
    Because the securities registered on Form B would not be restricted 
securities, there is some chance that investors and issuers would 
arrange to use the Form where the offering is not truly a QIB-only 
offering but instead is a distribution to the public using a QIB as a 
conduit.99 We therefore would provide that certain QIBs 
would be ineligible to purchase under a Form B QIB-only offering. 
Dealers and investment advisers would be excluded from those offerings. 
Those purchasers do not generally purchase securities for their own 
investment. Dealers are in the business of selling securities. 
Moreover, the size threshold in Rule 144A for dealers is significantly 
lower than the thresholds for other QIBs. Given those factors, we 
believe the risk of indirect distribution by QIBs in those categories 
is sufficient to warrant precluding their participation. Should other 
QIB groups be excluded? If so, which ones?
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    \99\ This kind of indirect distribution would deprive the 
ultimate public purchasers of the liability protections of 
Securities Act registration.
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    Furthermore, issuers and QIBs that attempt to effect an indirect 
public distribution of securities through a QIB-only offering on Form B 
would violate Section 5 absent an applicable exemption. The transaction 
that the issuer would register under this provision of Form B would be 
its sale of securities to QIBs, not a sale to the public. If the 
securities do not come to rest with the QIBs and the QIBs are mere 
conduits for sales to the public, the offering would be ineligible for 
registration on Form B.100 If a QIB purchases and effects a 
distribution, it will be acting as an underwriter as defined in Section 
2(a)(11) of the Securities Act. Its transaction would not be registered 
and likely would not be exempt and therefore would be illegal.
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    \100\ Securities Act Rule 401(g), 17 CFR 230.401(g), states that 
any registration statement or amendment is deemed to be filed on the 
proper form unless the Commission objects to the form before the 
effective date. The rule thus requires the Commission and the 
registrant to resolve disputes about form eligibility before 
effectiveness. We recently have proposed to amend Rule 401(g) to 
exclude from its scope all registration statements and post-
effective amendments that become effective automatically upon 
filing. See Securities Act Release No. 7506 (Feb. 17, 1998) (63 FR 
9648). In this release we propose to expand that exclusion to cover 
all registration statements in which the registrant could designate 
the effective date. See proposed revisions to Rule 401(g), 17 CFR 
230.401(g). This change would eliminate the presumption existing 
today that an effective Securities Act registration statement is on 
the appropriate form and therefore aid the Commission staff in 
asserting that securities are offered and sold in violation of 
Section 5 if anyone attempts to use QIBs as conduits in connection 
with a QIB-only Form B offering.
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iii. QIB Definition
    The current general QIB test, which was established with the 
adoption of Rule 144A, is whether the institution, acting for its own 
account or for that of other QIBs, in the aggregate owns and invests on 
a discretionary basis at least $100 million of securities of non-
affiliates.101 The QIB threshold differs for dealers and 
banks, savings associations and equivalent institutions. We solicit 
comment on whether the thresholds for defining ``qualified 
institutional buyer'' for purposes of Form B and Rule 144A should be 
revised upward in light of the length of time since Rule 144A was 
adopted and the changes that have occurred in the markets since 
then.102
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    \101\ See Securities Act Rule 144A(a)(1), 17 CFR 230.144A(a)(1). 
See also Securities Act Release No. 6862 (Apr. 23, 1990); Securities 
Act Release No. 6806 (Oct. 25, 1988) [53 FR 44016].
    \102\ In 1997, companies raised approximately $254 billion 
through 144A offerings. This figure represents a 94% increase from 
1996 and a 250% increase from 1995. McGeehan, supra, n. 94, at 38, 
col. 1.
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    Taking into account only inflation since 1990, use of the $100 
million threshold today would have been the same as if the Commission 
in 1990 had approved a 144A threshold of $81 million 
dollars.103 Taking into account only market changes since 
1990, our use of the $100 million QIB threshold today is equivalent to 
us adopting in 1990 a threshold of only $29.2 million.104 
Thus, taking into account market changes, the $100 million 1990 
threshold would translate to approximately $240 million today. Even 
with some adjustments, therefore, we believe more entities would 
qualify as QIBs today than could have qualified at the time we adopted 
Rule 144A in 1990.
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    \103\ This figure is based on changes in the consumer price 
index between January 1, 1990 and January 1, 1998.
    \104\ This figure is based on increases in the S&P 500 between 
January 1, 1990 and January 1, 1998.
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    We solicit comment on whether one should have to own and invest on 
a discretionary basis at least $125, $150 or $200 million in securities 
of non-affiliated issuers to qualify as a QIB. We also solicit comment 
on whether we

[[Page 67188]]

should increase the $10 million eligibility requirement for dealers 
acting for their own accounts or for the accounts of other QIBs. Should 
it be raised to $15, $20 or $25 million? Should we increase the net 
worth test for banks, savings associations and equivalent institutions? 
If so, should it be raised from $25 to $30, $35 or $50 million in order 
for them to qualify as QIBs? 105 Should a net worth test be 
applied to those institutions at all?
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    \105\ See Securities Act Rule 144A(a)(ii) and (a)(vi), 17 CFR 
230.144A(a)(ii) and (a)(vi).
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    Are upward revisions necessary to provide continued assurance that 
QIBs are sophisticated investors with some ability to require 
appropriate disclosure from the sellers? If so, should they be based on 
inflation only or should we revise them in accordance with market-
related measures?
    We also request your comment on whether we should expand the 
eligibility standards for Rule 144A QIB status. If so, what categories 
of entities should we make eligible as QIBs? For example, should we 
permit certain state pension funds to qualify as QIBs if they meet the 
current thresholds in Rule 144A?
iv. Other Reporting and Non-Reporting Issuers
    In light of the sophistication of QIB purchasers, we solicit 
comment about whether we should extend Form B to issuers subject to the 
Exchange Act reporting requirements that do not satisfy a one-year and 
one annual report reporting history. If we were to extend Form B in 
that way, an issuer could choose to register not long after registering 
for the first time another offering under the Securities Act or a class 
of securities under the Exchange Act. Even in that event, however, the 
issuer would have filed virtually the same company information in its 
prior registration statement that it otherwise would file in its 
periodic reports. That information, like periodic reports, could be 
incorporated into its Form B registration statement. In the case of 
offerings made only to QIBs, is a year of seasoning as a reporting 
company going to provide significant investor protections that the QIBs 
themselves could not attain? Alternatively, should we increase the 
reporting requirement to two years for offerings to QIBs on Form B by 
issuers that do not meet the public float/ADTV threshold?
    Non-reporting foreign issuers that currently make Rule 144A 
offerings would not be eligible for Form B even for QIB-only offerings. 
We solicit comment concerning whether the largest non-reporting foreign 
issuers (e.g., those with a public float over $500 or $750 million) 
should be permitted to use Form B to register offerings to QIBs of 
investment grade securities. These issuers would be required to 
reconcile their financial statements to conform to U.S. GAAP. This 
alternative would allow large foreign issuers to enter the U.S. markets 
in a registered context rather than through Rule 144A, and would give 
the initial investors freely tradeable securities.106
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    \106\ Through 1992, foreign issuers accounted for about 30% of 
the 144A market. See, e.g., Bostwick, The SEC Response to 
Internationalization and Institutionalization: Rule 144A Merit 
Regulation of Investors, 27 Law and Policy in Int'l. Bus. 423 
(Winter 1996); Devere, 144A Deal Volume Surges in Dynamic Second 
Quarter, 62 Investment Dealer's Digest 13 (July 22, 1996).
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    By registering, those companies would become reporting issuers. We 
would require reconciliation of their financial statements in the Form 
B registration statement. Also, because these issuers would not have 
Exchange Act reports to incorporate by reference, we would require that 
they disclose in the Form B registration statement the company 
information set forth in Regulation S-K. Under those circumstances, 
would allowing foreign issuers the opportunity to register investment 
grade securities on an expedited basis encourage them to enter the U.S. 
registration and reporting system? Would they be unlikely to register 
even on that basis due to the reporting and disclosure requirements, or 
for other reasons? Should we preclude non-reporting foreign issuers 
from registering even investment grade QIB-only offerings on Form B 
absent staff review?
c. Offerings to Certain Existing Security Holders
    We propose to extend Form B to smaller issuers that do not meet the 
Form's public float and ADTV threshold eligibility requirements for 
registration of offerings to certain existing shareholders. Under the 
proposed registration system, those issuers, which otherwise would be 
required to use Form A, may use Form B to register: rights offerings; 
offerings of securities pursuant to a dividend or interest reinvestment 
plan; offerings of common stock to existing common stock holders, such 
as under a direct stock purchase plan; offerings of securities upon 
exercise of either outstanding transferable options or outstanding 
transferable warrants; and offerings of securities upon conversion of 
outstanding convertible securities.
    Current short-form registration statements, Forms S-3 and F-3, may 
be used in some, but not all, of these cases.107 The 
Commission extended Forms S-3 and F-3 for registration of these kinds 
of offerings based on the premise that, despite the issuers' inability 
to meet the eligibility requirements and the possibility they may not 
be well known or widely followed by the market, these offerings would 
be directed to specific investors that previously invested in the 
issuer's securities and could therefore be expected to follow the 
issuer or to receive information from the issuer. Similarly, we propose 
to allow issuers that do not meet proposed Form B's public float and 
ADTV tests to register these and similar offerings on Form B as long as 
they meet the reporting requirements of the proposed Form and the 
transactional requirements described below.
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    \107\ See Instruction I.B.4. to Forms S-3 and F-3.
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i. Dividend or Interest Reinvestment Plans
    As early as 1977, we began relaxing registration requirements for 
dividend or interest reinvestment plans (``DRIPs'').108 We 
currently allow all issuers to use short-form registration for 
securities offered pursuant to their DRIPs even if they do not meet the 
Forms' public float tests.109 These registration statements 
become effective automatically upon filing without staff 
review.110
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    \108\ See Securities Act Release No. 5923 (Apr. 11, 1978) [43 FR 
16677].
    \109\ Most DRIPs are registered on Form S-3. For purposes of 
this discussion, we will refer to Form S-3 rather than Forms S-3 and 
F-3.
    \110\ Securities Act Release No. 6964 (Oct. 22, 1992).
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    Under the proposed registration system, we seek both to maintain 
the relaxed regulatory approach to registration of DRIP offerings and 
to prevent abuses of the registration system's investor 
protections.111 We therefore would extend Form B for DRIP 
offerings of seasoned issuers that do not otherwise meet the Form's 
eligibility requirements if:
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    \111\ Some issuers have been known to register DRIP offerings on 
Form S-3 as a pretext for making what are basically primary 
offerings to the public. Some issuers otherwise ineligible to use 
Form S-3 have registered DRIPs on the Form to raise amounts of 
capital that, in the worst cases, exceed the issuer's public float 
at the commencement of the offering.
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    1. The issuer has not discontinued or suspended dividend payments 
on the securities held by DRIP participants;
    2. The DRIP securities registered on Form B are offered only to 
existing security holders that have held the issuer's securities for at 
least 2 months;

[[Page 67189]]

    3. The dollar amount of the DRIP securities registered on Form B 
represents no more than 15% of the issuer's public float when 
aggregated with the dollar amount of securities previously registered 
by the issuer on Form B pursuant to any offering directed solely to 
common security holders, including a DRIP, within the 12 months before 
the start of, and during, the current offering; and
    4. The shareholder purchases in any 12-month period no more than 
the smaller of 100% of the value of the issuer's securities owned by 
the shareholder at the start of the 12-month period, or 5% of the total 
offering amount, except that any shareholder may purchase up to $10,000 
of securities in any 12-month period.
    We would preclude issuers from using DRIPs to sell securities 
directly to participants at a time when the issuer has discontinued or 
suspended dividend payments on the DRIP securities. A purchase is not 
merely a dividend reinvestment when the company is not paying 
dividends. This is consistent with the Division's current 
interpretation.112
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    \112\ See The Division of Corporation Finance Manual of Publicly 
Available Telephone Interpretations (July 1997), available on our 
web site (http://www.sec.gov).
---------------------------------------------------------------------------

    We also would set a limit on the amount of DRIP securities an 
issuer may register on Form B equal to an aggregate of 15% of the 
issuer's public float within the 12 months before the start of and 
during the offering.113 Under this proposal, issuers could 
make several DRIP offerings on Form B over the course of a 12-month 
period as long as the total amount registered within that period did 
not exceed 15%.114 While Form B would cover the offering of 
securities by a smaller issuer to its existing shareholders, if such an 
issuer uses its shareholders merely as conduits to distribute the 
securities to the public, the offering would not be eligible for Form 
B. If a shareholder purchases to effect a public distribution, it would 
be considered an underwriter and its sale would not be considered 
registered. To avoid the potential use of Form B in these conduit 
situations, we propose to restrict the amount of securities that may be 
purchased by any one shareholder and its affiliates. This provision, in 
addition to the 15% limitation, would protect against an unregistered 
distribution to the public.
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    \113\ Based on our research of DRIP offerings made during the 
last year, the 15% limit should not affect the amount of securities 
that the vast majority of issuers register for offerings pursuant to 
DRIPs. We specify this threshold in the instructions to proposed 
Form B.
    \114\ The issuer would refer to its most recently filed Form 10-
K to determine its public float for calculating how much it may 
register on Form B. This limitation also may allow issuers to avoid 
market overhang problems that may be associated with registering at 
one time a large amount of securities to be offered over a long 
period.
---------------------------------------------------------------------------

    Our proposal would limit the amount that an existing shareholder 
may purchase in any 12-month period. It could purchase the smaller of: 
100% of the value of the issuer's securities it owns at the start of 
the 12-month period; or 5% of the total offering amount. A shareholder 
would have to aggregate its securities purchases and ownership with 
those of its affiliates. The shareholder also would have to count its 
purchases in all Form B offerings to existing security holders within 
the 12-month period. Any one shareholder and its affiliates would be 
able to purchase at least $10,000 of the issuer's securities in any 12-
month period in Form B offerings to existing security holders, despite 
the percentage tests. For example, where a shareholder owned $5,000 of 
the issuer's securities at the start of a 12-month period, it would be 
able to purchase $10,000 of securities in the subsequent 12-month 
period in all Form B registered offerings to existing security holders.
    Finally, the Commission notes that investor eligibility to 
participate in a DRIP is often based on ownership of a certain amount 
of the issuer's securities. In many cases, ownership of just one share 
or even a partial share worth as little as $25 qualifies a person for 
participation in a DRIP. The Commission is concerned that where there 
may be little public information about an issuer and the investor does 
not have a significant ownership interest in the securities of an 
issuer, the investor may not have access to adequate issuer information 
or have the inclination to follow the issuer and its 
business.115 To help ensure that investors have a chance to 
learn about the issuer before deciding whether to participate in its 
DRIP, the Commission proposes to provide that small issuers may not use 
Form B to register their DRIPs unless the DRIP is limited to investors 
who have held securities of the issuer for at least two months.
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    \115\ Securities Act Rule 405, 17 CFR 230.405, defines the term 
dividend or interest reinvestment plan and states that such plans 
may allow participants to contribute additional cash amounts for the 
purchase of securities offered under the DRIP. Accordingly, once an 
issuer registers a DRIP, it may offer securities to participants in 
addition to or even in lieu of those purchased by the reinvestment 
of dividends or interest.
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    Should the proposed 15% threshold be lowered to 5% or 10%, or 
raised to 20%? Would the shareholder purchase limitations adequately 
protect against unregistered distributions to the public? Should the 
percentage limitations be lower (e.g., 75% of the securities owned at 
the start or 2% of the total offering) or higher (e.g., 150% of the 
securities owned at the start or 10% of the total offering)? Should the 
$10,000 minimum purchase amount during any 12-month period be lower 
(e.g., $5,000) or higher (e.g., $20,000)? Should we lengthen the 12-
month measurement period to two years? Should the two-month ownership 
period before participation be longer (e.g., 3, 4, 5 or 6 months) or 
should it be shorter (e.g., one month) or eliminated completely? 
Finally, would the holding period requirement make it overly burdensome 
for issuers to determine who is eligible to participate in the DRIP?
ii. Offerings to Existing Common Stock Holders
    For the same reasons we would permit small issuers to register on 
Form B securities issued pursuant to DRIPs, rights offerings, or in 
connection with convertible securities and exercise of transferable 
warrants, we would permit smaller issuers to use Form B to register 
offerings of common stock to existing common stock holders, without 
regard to whether the offering was pursuant to an ongoing plan. This 
proposal represents an extension of our current approach to offerings 
to existing security holders and reflects, in part, our recognition 
that more and more companies offer securities to existing security 
holders through direct stock purchase plans (``DSPPs'').
    To register on Form B, these offerings would have to meet the 
following conditions:
    1. The securities registered on Form B are offered only to existing 
common stock holders that have held the issuer's common stock for at 
least two months;
    2. The dollar amount of the securities registered on Form B 
represents no more than 15% of the issuer's public float when 
aggregated with the dollar amount of securities previously registered 
by the issuer on Form B pursuant to any offering directed solely to 
common security holders, including under DRIPs, within the 12 months 
before the start of, and during, the current offering; and
    3. The shareholder purchases in any 12-month period no more than 
the smaller of 100% of the value of the issuer's common stock owned by 
the shareholder at the start of the 12-month period, or 5% of the total 
offering amount, except that any shareholder may purchase up to $10,000 
of common stock in any 12-month period.

[[Page 67190]]

    We propose the first two conditions for the same reasons we propose 
them in connection with DRIPs. Just as with DRIPs, we seek to prevent 
small companies otherwise ineligible to use Form B from being overly-
aggressive in labeling a sale to the public as a sale to existing 
shareholders. Therefore, we impose these conditions. The first 
condition requires issuers to aggregate all their offerings of common 
stock to existing security holders, including those under DRIPs, to 
determine how much common stock they may register on the Form B for 
offerings to existing common stock holders. We believe the condition is 
appropriate because it would inhibit smaller issuers from circumventing 
the 15% public float mechanism designed to prevent smaller issuers from 
using DRIPs to raise excessive amounts of capital through a short-form 
registration statement that they would otherwise be ineligible to 
use.116 These common stock offerings raise concerns similar 
to offerings under DRIPs. We therefore propose to add the same kind of 
common stock shareholder purchase limitation as proposed for DRIP 
offerings registered on Form B.
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    \116\ Many issuers offer securities to existing security holders 
through DSPPs to qualify those holders to participate in their 
DRIPs. Depending on the circumstances, the two plans could work in 
the same ways and provide holders with the same benefits. 
Accordingly, at this time, we believe it is appropriate to limit the 
amount of securities a small issuer can register under either 
offering when registering them on Form B--no matter how the offering 
is characterized.
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    The Commission believes this proposal will make it easier for 
smaller issuers to publicly offer securities to its existing 
shareholders. The proposal also may benefit investors because extending 
Form B for offerings pursuant to DSPPs may encourage issuers to 
register them.
    We solicit your comment on this proposal. Should we narrow or 
expand the offering thresholds? Would the shareholder purchase 
limitations adequately protect against unregistered distributions to 
the public? Should the purchase limitations be the same as used in DRIP 
offerings or should they be lower or higher? Is two months a sufficient 
amount of time to ensure that investors would have time to familiarize 
themselves with the issuer? Is it a sufficient period of time to ensure 
the offering is truly one to existing shareholders and not simply an 
offering to the public at large? Should we have a minimum ownership 
requirement to ensure that investors have reason to keep informed about 
the company? If so, how much? Would a $1,000, $2,000, $5,000 or $10,000 
threshold be appropriate? Should we apply a minimum ownership 
requirement to DRIPs as well? If so, should the threshold be the same 
as for offerings of common stock to common stock holders?
    We are proposing to make Form B available for offerings to existing 
common stock holders of smaller issuers, in part, because we assume 
that those investors are following those issuers. Therefore, those 
investors would not need delivery of company information. Is our 
assumption correct that an existing common stock holder is likely to 
follow the issuer? Would it be more appropriate to move such offerings 
to Form A but permit small issuers to designate the effective date of 
their Form A registration statement? What additional costs, if any, 
would issuers incur as a result of requiring them to use Form A for 
these offerings, with the ability to designate their effective dates, 
instead of Form B?
iii. Convertible Securities, Transferable Warrants and Rights Offerings
    In 1972, we adopted amendments to our short-form registration 
statement to provide that seasoned issuers could use Form B to register 
securities to be offered upon the conversion of outstanding convertible 
securities and upon the exercise of outstanding transferable 
warrants.117 In 1978, we adopted, in the ``nature of an 
experiment,'' short-form registration to register rights offerings to 
existing shareholders.118 We determined not to require that 
issuers of rights offerings, or of the other kinds of offerings to 
existing shareholders, meet the newly adopted eligibility standards 
applied to primary offerings by large, seasoned 
companies.119 When we adopted Form S-3, we explained that 
offerees in offerings to existing shareholders pursuant to rights 
offerings, exercises of convertible securities, exercises of 
transferable warrants and dividend or interest reinvestment plans did 
``not need the additional assurances of wide information dissemination 
provided by the test for primary offerings'' because they already owned 
securities of the issuer and could be presumed to follow the issuer 
through corporate communications and Exchange Act 
reports.120
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    \117\ See Securities Act Release No. 5265 (June 27, 1972) [37 FR 
15989].
    \118\ Securities Act Release No. 5879 (Nov. 2, 1977) [42 FR 
58677].
    \119\ Securities Act Release No. 5923 (Apr. 11, 1978) [43 FR 
16672]; Securities Act Release No. 5931 (May 15, 1978) [43 FR 
21661].
    \120\ Securities Act Release No. 6331 (Aug. 6, 1981) [46 FR 
41902].
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    We believe that reasons that have historically supported a 
streamlined and relaxed approach to offerings by smaller seasoned 
issuers to existing shareholders would support extending the 
availability of proposed Form B to smaller reporting issuers that make 
offerings of securities pursuant to: rights offerings,121 
conversion of outstanding convertible securities and exercise of 
transferrable warrants.122 Those issuers would continue to 
realize the benefits of short-form registration for offerings to 
existing shareholders that had already made a decision to invest in the 
issuer. At the same time, the reporting requirement of Form B would 
ensure the public availability of at least 12 months of public 
information about the issuer.
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    \121\ In situations where securities underlying rights may be 
acquired by new investors because, for instance, the rights are 
transferable, an issuer may not use short-form registration unless 
it meets the eligibility requirements for a primary offering on the 
form. See, e.g., Securities Act Release No. 6943 (July 16, 1992). 
Our proposals would not alter this position. Accordingly, smaller 
issuers would be ineligible to use Form B to register securities 
underlying rights that may be acquired by new investors. We also 
would preclude smaller issuers from using Form B to register 
securities underlying rights that were not taken up by existing 
shareholders and that would be offered on a ``standby'' basis to new 
investors.
    \122\ Form B would not be available for the issuance of 
securities pursuant to a conversion of a convertible security or the 
exercise of a transferable warrant if the issuance of such 
securities could occur within one year of the company's issuance of 
the convertible security or transferable warrant. If the underlying 
security is issuable within one year of the company's issuance of 
the convertible security or transferable warrant, the underlying 
security would be part of the offering of the convertible security 
or transferable warrant. Consequently, the underlying securities 
must be registered with the convertible security or transferable 
warrant. In that case, unless the issuer is eligible to use Form B 
to register the convertible security or transferable warrant, it 
would not be eligible to register the underlying security on Form B. 
See The Division of Corporation Finance Manual of Publicly Available 
Telephone Interpretations, Section A.9. (July 1997).
---------------------------------------------------------------------------

    We seek your comment on this proposal. Do any of these three types 
of offerings present risks that should result in exclusion from Form B? 
Is there any reason to preclude such issuers from using Form B? Should 
we restrict availability of Form B to smaller issuers that have sent at 
least a glossy annual report to their shareholders 123 
within the twelve months before making their offering to existing 
shareholders? Is that requirement useful in light of the fact that the 
warrants or convertible securities are transferable, and therefore the 
shareholders to whom the issuer

[[Page 67191]]

would send that information may not be the same persons who exercise or 
convert? Are we correct in continuing to believe that existing 
investors would follow the issuer and keep informed of its business? 
Or, to ensure investor follow-up, should we limit Form B for offerings 
to existing security holders that hold a minimum amount or value of the 
issuer's securities (e.g., $2,000)?
---------------------------------------------------------------------------

    \123\ Throughout this release, all references to ``annual 
report'' or ``Exchange Act annual report'' refer to the annual 
report filed under Section 13(a) of the Exchange Act, generally on a 
Form 10-K or 20-F. All references to the ``glossy annual report to 
security holders'' or ``the annual report to security holders'' 
refer to the annual report filed under Rule 14a-3, 17 CFR 240.14a-3.
---------------------------------------------------------------------------

    Under current requirements, an issuer may not use Form S-3 to 
register securities pursuant to DRIPs, upon exercise of outstanding 
rights or transferable warrants, or upon conversion of outstanding 
convertible securities unless it has sent an annual report 
124 within the 12 months preceding the filing of the Form S-
3 to all record holders of those outstanding or DRIP 
securities.125 Foreign private issuers registering such 
offerings on Form F-3 are not subject to any prior information delivery 
requirement.126 We have not included a prior delivery 
requirement in the proposed system. These issuers would be ineligible 
to use Form B unless they had already filed with the Commission at 
least one annual report.127
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    \124\ Form S-3 states that the material that issuers must 
deliver to existing security holders must include the information 
required by Rule 14a-3(b), 17 CFR 240.14a-3(b). The information 
required under that Rule is most frequently included in companies' 
glossy annual reports, and is less detailed than the information 
required in an annual report filed under cover of Form 10-K. Form S-
3 also states that management-related information need only be 
delivered to existing security holders who may be issued common 
stock in connection with their exercises or conversions of 
securities or participation in a DRIP.
    \125\ See General Instruction I.B.4. of Form S-3.
    \126\ See General Instruction 1.B.4. of Form F-3. Foreign 
private issuers, however, are not permitted to use Form F-3 for 
these kinds of offerings if any of the securities are to be offered 
or sold in a standby or similar underwriting arrangement.
    \127\ Smaller issuers of securities under these kinds of 
offerings, whether domestic or foreign, would not be eligible to use 
Form B unless they: were seasoned (subject for at least 12 months to 
the reporting requirements of Section 12 or 15(d)); were timely in 
meeting their reporting obligations; and had filed at least one 
annual report under the Exchange Act. See General Instruction I.B. 
of proposed Form B.
---------------------------------------------------------------------------

    We solicit comment on whether to impose any information delivery 
requirement on smaller issuers that would use Form B to register 
securities issuable in connection with these kinds of securities 
offerings. Is it fair to assume that security holders would have 
adequate information about an issuer they already invested in if the 
issuer were not required to deliver annual report information to 
security holders? Should we require them to provide existing security 
holders with more information than would be required under current 
rules (e.g., information in an annual report on Form 10-K or 20-F)?
    In connection with this proposal, are there any reasons to continue 
to distinguish domestic issuers from foreign private issuers? Should we 
require foreign private issuers making these kinds of offerings to 
deliver information to their existing security holders? If so, should 
they be required to deliver the same kind of information required by 
Form 20-F, or should we allow them to deliver the level of information 
required by Rule 14a-3?
iv. Exercise of Outstanding Transferable Options
    We propose to allow smaller seasoned issuers to use Form B to 
register offerings to existing security holders of securities issuable 
upon exercise of outstanding transferable options. Issuer options are 
like warrants in that they entitle the holder to buy or sell securities 
at a fixed price, during a specified period in the future. In deciding 
whether to buy the option, an investor speculates about the future 
value of the security underlying the option. An option holder then 
either trades the option on the basis of the premium price, exercises 
it or lets it lapse.
    If an option holder has already made one investment decision about 
the underlying securities before exercising the option, we believe it 
is fair to presume that the holder has access to information about the 
issuer. (In the case of employee options, the employee may have simply 
received a grant of options.) To at least the same extent as existing 
shareholders, we believe that such investors may be expected to follow 
the issuer closely through corporate communications or Exchange Act 
reports. Therefore, we propose to extend Form B to smaller seasoned 
issuers for registration of securities issuable upon exercise of 
options.
    As in the case of conversions of convertible securities and 
exercises of transferable warrants, if the underlying security is 
issuable within one year of the company's issuance of the option, the 
underlying security would be part of the offering of the option. 
Consequently, the underlying securities must be registered with the 
option. In that case, unless the issuer is eligible to use Form B to 
register the option, it would not be eligible to register the 
underlying security on Form B.128
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    \128\ See The Division of Corporation Finance Manual of Publicly 
Available Telephone Interpretations, Section A.9. (July 1997).
---------------------------------------------------------------------------

    We seek comment on this proposal. Would allowing Form B 
registration for option exercises by smaller companies otherwise 
ineligible for Form B result in indirect distributions of common stock 
to the public? Does their ineligibility to use Form B for this purpose 
if exercisable within a year avoid that possibility? Should we preclude 
Form B registration for exercises of options by dealers to avoid the 
possibility of issuers entering into options with underwriters as a 
means to effect a delayed distribution by issuers that would be 
ineligible for delayed shelf registration?
    For domestic issuers that would use Form B for offerings to 
existing shareholders, should we, following Form S-3's current 
requirements, extend the Form only if within the 12 months preceding 
the filing on Form B the issuer sent out material company and financial 
information to all its existing shareholders to whom it would extend 
the Form B offering? 129 If so, would investors need more or 
less information than what Form S-3 currently calls for in order to 
make an informed investment decision? 130 Would 6 months be 
more appropriate because it would be more timely? What information, if 
any, should foreign companies using the Form be required to have 
provided? Would this registration option render Form S-8 unnecessary 
for exercises of employee stock options? Should we continue to require 
issuers to register employee stock option exercises on Form S-8 in 
light of the fact that employees may not have made an investment 
decision when acquiring the options?
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    \129\ Prior delivery of specific information to existing 
shareholders is not currently required on Form F-3.
    \130\ See General Instruction I.B.4. of Form S-3, citing to Rule 
14a-3(b) of the Exchange Act, 17 CFR 249.13a-3(b), and Items 401, 
402 and 403 of Regulation S-K, 17 CFR 229.401-229.403.
---------------------------------------------------------------------------

d. Non-Convertible Investment Grade Securities
    Today, companies that do not meet the public float requirement of 
Form S-3 may nevertheless register an offering of non-convertible 
investment grade securities on that Form. When the Commission adopted 
Form S-3 in 1982, we indicated that Form S-3 was appropriate for the 
registration of investment grade securities because investors purchase 
those securities on the basis of their interest rate and credit 
rating.131 The Commission continues to believe that 
investors rely on a security's credit rating, although investors may 
well seek more than just

[[Page 67192]]

rating information in order to evaluate the investment.
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    \131\ Securities Act Release No. 6383 (Mar. 3, 1982).
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    Given the historical precedent of using investment grade rating as 
an eligibility criterion for Form S-3 registration, we are proposing to 
allow non-convertible investment grade securities offerings to be 
registered on Form B by issuers that have been reporting under the 
Exchange Act for at least a year, have filed at least one annual report 
and are current and timely in filing those reports. We solicit comment, 
however, regarding whether we should continue to have a registration 
system in which Form eligibility turns solely on a credit rating, 
particularly in the case of Form B. A credit rating is one 
organization's judgment about the likelihood of default. That judgment 
is not a guarantee of no risk. Rather than allowing use of Form B on 
the sole basis of an investment grade rating for the securities being 
offered, should we provide for registration of those securities on Form 
A with its mandated transactional disclosure but allow for 
effectiveness of those Form A filings upon demand?
e. Market Making Transactions by Affiliated Broker-Dealers
    When a broker-dealer that is an affiliate of an issuer 
132 engages in market making transactions in that issuer's 
securities, registration under the Securities Act is 
required.133 The registration requirement arises under the 
statute due to either of two reasons. First, in the definition of 
``underwriter'' under the Securities Act, the term ``issuer'' includes 
any person affiliated with the issuer.134 Because of the 
affiliation between the broker-dealer and the issuer, the broker-dealer 
itself is considered an issuer. Thus, the exemption from Securities Act 
registration for persons other than ``issuers, underwriters and 
dealers'' would not be available.135
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    \132\ A broker-dealer is considered an affiliate of the issuer 
when the broker-dealer controls, or is controlled by, the issuer or 
when the broker-dealer and the issuer are under common control. See 
Rule 405 of Regulation C, 17 CFR 230.405. The determination of 
control is based on the facts and circumstances of the particular 
situation.
    \133\ Market-making transactions are principal transactions. A 
principal transaction is a transaction in which the broker-dealer 
purchases or sells for its own account, rather than the account of 
another party.
    \134\ Section 2(a)(11) of the Securities Act defines the term 
``underwriter'' to mean ``any person who has purchased from an 
issuer with a view to, or offers or sells for an issuer in 
connection with, the distribution of any security, * * * or 
participates or has a participation in the direct or indirect 
underwriting of any such undertaking. * * * As used in this 
paragraph the term ``issuer'' shall include, in addition to an 
issuer, any person directly or indirectly controlling or controlled 
by the issuer, or any person under direct or indirect common control 
with the issuer.'' 15 U.S.C. Sec. 77b(a)(11).
    \135\ See Section 4(1) of the Securities Act, 15 U.S.C. 
Sec. 77d(1).
---------------------------------------------------------------------------

    The second reason registration is required flows from the 
definition of ``dealer'' under the Securities Act. The Securities Act 
exempts from registration most securities transactions by 
dealers.136 ``Dealer,'' as defined under the Securities Act, 
means any person that engages in transactions in ``securities issued by 
another person.'' 137 If an issuer and its broker-dealer are 
affiliated, the broker-dealer would be considered to be an issuer. 
Hence, if it engages in a transaction in the issuer's securities, its 
transaction would not be in securities ``issued by another person.'' 
Thus, the affiliated broker-dealer is not a ``dealer'' under the 
Securities Act and the dealer's exemption is not available. Absent an 
exemption, registration under the Securities Act is required by Section 
5.
---------------------------------------------------------------------------

    \136\ See Section 4(3) of the Securities Act, 15 U.S.C. 
Sec. 77d(3).
    \137\ Section 2(a)(12) of the Securities Act defines the term 
``dealer'' to mean ``any person who engages either for all or part 
of his time, directly or indirectly, as agent, broker, or principal, 
in the business of offering, buying, selling, or otherwise dealing 
or trading in securities issued by another person.'' 15 U.S.C. 
Sec. 77b(a)(12).
---------------------------------------------------------------------------

    In accordance with Section 5, therefore, the broker-dealer must 
prepare and deliver ``market making prospectuses'' in market making 
transactions in securities of its affiliates. This prospectus discloses 
the affiliation between the issuer and broker-dealer, explains the use 
of the prospectus in offers and sales by the affiliated broker-dealer 
in market making activities, and provides information about the issuer.
    We have recognized that prospectus delivery in market making 
transactions imposes a burden on affiliated broker-
dealers.138 We seek to reduce that burden while maintaining 
investor protection. By allowing registration of these transactions on 
Form B, we would preserve the benefits for investors of registration, 
but alleviate much of the burden.139
---------------------------------------------------------------------------

    \138\ The Task Force recommended elimination of the affiliated 
broker-dealer's prospectus delivery obligation in ``regular way'' 
market making transactions in outstanding securities of a Section 12 
reporting company. Task Force Report at p. 42.
    \139\ See Sections VIII.C.3. and VIII.C.4.a. of this release for 
a discussion of when prospectus information must be delivered in 
Form B offerings.
---------------------------------------------------------------------------

    Certain other transactions are proposed to be allowed on Form B 
because of the nature of the purchasers, such as their financial 
sophistication or their pre-existing knowledge of the issuer. Because 
of their nature, these purchasers appear to have less need for 
prospectus delivery. Purchasers in market making transactions, on the 
other hand, may not have prior issuer knowledge or financial 
sophistication. Despite this difference, however, purchasers in market 
making transactions should not be adversely affected by registration on 
Form B. Buyers in this situation, like most buyers in the secondary 
markets, are likely to have made their investment decisions before 
contact with the market maker.
    We propose to permit registration of ordinary market making 
transactions by affiliated broker-dealers on Form B only if the issuer 
is a reporting company under the Exchange Act.140 That 
criterion would assure that information about the registrant is 
publicly available. We also would include two requirements to be sure 
that the transactions by affiliated broker-dealers are bona fide market 
making transactions. First, the broker-dealer must engage in the 
transactions only in its ordinary capacity as a market 
maker.141 Second, the securities must be outstanding 
securities that the broker-dealer did not acquire directly from the 
issuer or an affiliate of the issuer or indirectly by arrangement with 
those parties. Market making transactions that do not meet these 
requirements could not be registered on Form B.
---------------------------------------------------------------------------

    \140\ The same disqualifications that would apply to other types 
of offerings on Form B also would apply for registration of market 
making transactions. See Section V.A.2.g. of this release.
    \141\ Section 3(a)(38) of the Exchange Act defines the term 
``market maker'' to mean ``any specialist permitted to act as a 
dealer, any dealer acting in the capacity of block positioner, and 
any dealer who, with respect to a security, holds himself out (by 
entering quotations in an inter-dealer communications system or 
otherwise) as being willing to buy and sell such security for his 
own account on a regular or continuous basis.'' 15 U.S.C. 
Sec. 78c(a)(38).
---------------------------------------------------------------------------

    We request your views on this aspect of Form B eligibility. Should 
market making transactions by affiliated broker-dealers be permitted on 
Form B? If not, why should they be excluded? Are there reasons 
prospectus delivery should be retained for all market making 
transactions? Are the registrant requirements appropriate and adequate? 
Are there additional restrictions that would further ensure that only 
bona fide market making transactions are registered on Form B? Should 
the Commission consider extending Form B for this purpose to non-
reporting foreign private issuers whose securities are traded in 
designated offshore markets and who claim the exemption from 
registration under Rule 12g3-2(b)? Should we more specifically define 
the

[[Page 67193]]

types of market making transactions permitted? Should the Commission 
exempt all market making transactions from prospectus delivery 
requirements, or exempt certain market making transactions from the 
registration requirements entirely?
f. Small Business Issuers
    Most small business issuers that file Exchange Act reports provide 
disclosure based upon Regulation S-B. These issuers would be allowed to 
register certain offerings on Form B. If they meet the seasoned 
reporting requirements of Form B, they would be able to register on 
Form B offerings to certain existing security holders, offerings of 
non-convertible investment grade securities, offerings solely to QIBs 
and market making transactions.
    A small number of reporting small business issuers provide non-
financial statement disclosure based on Form 1-A, instead of Regulation 
S-B.142 The Form 1-A disclosure requirements are generally 
less extensive than those of Regulation S-B. These issuers are called 
``transitional small business issuers.'' 143 These companies 
continue to provide non-financial statement disclosure based on Form 1-
A in their Exchange Act reports.
---------------------------------------------------------------------------

    \142\ Form 1-A is the Form used to qualify securities under 
Regulation A, an exemption from registration under the Securities 
Act. Form 1-A contains two offering circular models, Model A and B, 
plus other parts. These offering circular models and Part F/S of 
Form 1-A provide the disclosure requirements for offering circulars 
used in Regulation A offerings.
    \143\ Transitional small business issuers are companies that 
either initially registered a securities offering on Form SB-1 under 
the Securities Act or initially registered on Form 10-KSB under the 
Exchange Act and provided certain Form 10-KSB disclosure based on 
the Form 1-A non-financial statement disclosure requirements.
---------------------------------------------------------------------------

    Proposed Form B would not be available for transitional small 
business issuers.144 We believe that these issuers should be 
excluded from using the Form for several reasons. First, the disclosure 
in their Exchange Act reports would be less detailed than disclosure 
provided by other Exchange Act reporting companies. Second, these 
issuers are likely to have less experience in preparing disclosure 
documents. Third, we believe that the disclosure document should be 
subject to possible staff review. Consequently, automatic effectiveness 
should be unavailable for these offerings.
---------------------------------------------------------------------------

    \144\ This approach is consistent with our approach under the 
proposed changes to Form SB-2 and proposed new Form SB-3. Proposed 
Form SB-2 and SB-3 would not permit incorporation by reference by 
transitional small business issuers.
---------------------------------------------------------------------------

    We request your comments on our treatment of small business issuers 
under proposed Form B. Should Form B be available for small business 
issuers? If not, why not? Should we expand the Form to permit offerings 
by transitional small business issuers? If so, what types of offerings 
should they be allowed to conduct under the Form?
g. Form B Disqualifications
    Given the freedom and flexibility provided to issuers that would 
register their offerings on Form B, we do not believe that all issuers 
that would meet the Form's reporting and other eligibility requirements 
would necessarily be suited to use the Form. We believe certain events 
and circumstances justify disqualification of otherwise eligible 
offerings from registration on Form B, no matter under which category 
of Form B offerings it would be eligible. For those offerings, 
investors need the additional protections that come with registration 
on other forms: mandated transactional disclosure standards; stricter 
prospectus delivery requirements; possible staff review; and greater 
Commission control over effectiveness.
    Under our proposal, the disqualifications generally would fall into 
four categories. The first category would include issuers whose 
offerings have been identified as potential vehicles for fraudulent and 
manipulative schemes that harm investors.145 Blank check 
companies 146 and companies offering penny stock 
147 would fall into this category. The second category would 
include issuers that appear more likely to face potentially significant 
liquidity problems, such as issuers that recently defaulted on material 
indebtedness. An issuer that is the subject of a ``going concern'' 
opinion from its independent auditor also would fall into this 
category, as would an issuer that recently was involved in a bankruptcy 
or insolvency proceeding.
---------------------------------------------------------------------------

    \145\ See, e.g., Securities Act Release No. 7006 (July 2, 1993) 
[58 FR 37445].
    \146\ Securities Act Rule 419(a)(2), 17 CFR 230.419(a)(2), 
defines blank check company.
    \147\ Exchange Act Rule 3a51-1, 17 CFR 240.3a51-1, defines penny 
stock.
---------------------------------------------------------------------------

    We also believe that an issuer should be disqualified from the 
privilege of using Form B if it abuses the registration system or other 
federal securities laws. The third category of Form B ineligible 
issuers would therefore include those issuers that within five years 
before the date of filing a Form B were found to have violated 
provisions of the federal securities laws or that were convicted of 
securities fraud or business-related fraud or perjury.148 It 
also would include issuers with executive officers, directors, general 
partners or nominees to such positions, or issuers using underwriters, 
that have done the same.
---------------------------------------------------------------------------

    \148\ See General Instruction I.B.6.(g) and (h) of Proposed Form 
B, 17 CFR 239.5.
---------------------------------------------------------------------------

    The issuers in these three categories have historically been viewed 
as unsuited to short-form registration or ineligible for certain 
disclosure-related relief. For instance, the Commission has repeatedly 
stated its belief that penny stock and blank check offerings give rise 
to disclosure abuses.149 In addition, Congress determined 
not to extend the safe harbors for forward-looking statements to: 
issuers of blank check and penny stock securities offerings; issuers 
previously convicted of certain felonies and misdemeanors; and, issuers 
that are subject to a decree or order involving a violation of the 
securities laws.150 Accordingly, we believe it is 
appropriate to preclude such issuers from registering their offerings 
on Form B.
---------------------------------------------------------------------------

    \149\ See, e.g., Securities Act Release No. 7024 (Oct. 25, 1993) 
[58 FR 58099] (the Commission stated that Congress found blank check 
companies to be common vehicles for fraud and manipulation in the 
penny stock market, and concluded that the Commission's disclosure-
based regulation and review of such offerings protects investors); 
Securities Act Release No. 7393 (Feb. 20, 1997) [62 FR 9276] (blank 
check and penny stock issuers would be ineligible to use proposed 
rule providing for delayed pricing because of ``prior substantial 
abuses'').
    \150\ Section 27A of the Securities Act, 15 U.S.C. Sec. 77z-2, 
and Section 21E of the Exchange Act, 15 U.S.C. Sec. 78u-5.
---------------------------------------------------------------------------

    The fourth category of issuers that we would disqualify from use of 
Form B would include issuers that fail to cooperate in good faith with 
the Commission's selective review system for Exchange Act reports. If 
the issuer has failed to resolve the Commission's staff's comments on 
an Exchange Act report that the issuer would be incorporating by 
reference into its Form B, we would not permit that issuer to use Form 
B.
    We seek comment on these proposals. Should other categories of 
issuers also be precluded from using Form B? For example, is there any 
reason we should disqualify certain entities from using Form B, such as 
partnerships, limited liability companies or direct participation 
investment programs? On the other hand, should any of the issuers noted 
in the four categories be permitted to use Form B? Should any of them 
be permitted to use Form B, but not be permitted to designate the 
effective time? Should we extend the look-back periods used to 
disqualify issuers in any other category to coincide

[[Page 67194]]

with the five-year look-back for issuers which have violated the law?
    More recently the Commission has identified offering abuses 
associated with very small capitalization issuers.151 We 
solicit comment on whether issuers more likely to be identified with 
microcap fraud should be disqualified from using Form B even though 
they do not fall into the blank check/penny stock category or the prior 
violations category. If we were to disqualify issuers more likely to 
engage in microcap offering fraud, how would we define such a category? 
What issuer or offering characteristics would be inclusive enough to 
meet our goal of preventing abuse but exclusive enough to avoid 
improperly stigmatizing smaller issuers that are not involved in fraud?
---------------------------------------------------------------------------

    \151\ See, e.g., Securities Act Release No. 7505 (Feb. 17, 1998) 
[63 FR 9632] (adopting amendments to Regulation S (17 CFR 230.901-
905)); Exchange Act Release No. 39670 (Feb. 17, 1998)[63 FR 9661] 
(proposing amendments to Exchange Act Rule 15c2-11 (17 CFR 240.15c2-
11)).
---------------------------------------------------------------------------

    Would disqualification from Form B use on the basis of a ``going 
concern'' opinion from the issuer's independent auditor cause undue 
pressure to be placed on auditors not to issue those opinions? Should 
the Commission replace that disqualification with one dependent on 
whether the issuer had: (1) net losses or negative cash flows from 
operations for two or more of the past three annual fiscal periods; or 
(2) a deficit in net worth at the date of the most recent balance 
sheet?
h. Secondary Offerings
    As proposed, registrants would not be able to register an offering 
on Form B without meeting other eligibility criterion simply because it 
is a secondary offering. Whether an equity offering is a primary or 
secondary one, the investment is in the securities of the issuer and it 
is the issuer's disclosure that is relevant to investors. In either 
offering, the issuer prepares the disclosure. The primary difference is 
that the issuer does not receive the proceeds in the secondary 
offering. Considered only from an investor's viewpoint, the same 
disclosure would be needed regardless of whether the issuer or an 
affiliate is selling the securities.
    For some time, however, we have made a distinction in eligibility 
for short-form registration between primary and secondary 
offerings.152 To register secondary offerings, issuers do 
not need to meet the Form S-3 or F-3 public float test. By allowing 
short-form registration for secondary offerings, we have inadvertently 
provided an incentive for issuers not to register primary sales and to 
distribute to the public indirectly through third parties. Some 
registrants have been particularly aggressive about casting what are 
actually primary distributions as secondary offerings by selling 
shareholders in order to use current short-form registration. This 
practice threatens the integrity of the registration process by 
permitting registrants to do indirectly what they would be precluded 
from doing directly. Given the attractions of Form B, we would expect 
that practice to continue if we were to allow secondary offering 
registration on Form B. We would avoid that abuse by not allowing 
registration of secondary offerings on Form B unless other offering 
eligibility criteria were met.
---------------------------------------------------------------------------

    \152\ See Securities Act Release No. 5265 (June 27, 1972).
---------------------------------------------------------------------------

    In 1981, we proposed to apply the same public float test for both 
primary and secondary offerings in Form S-3. Commenters were concerned 
that applying the additional float requirement to secondary offerings 
would adversely affect venture capital companies and their investors. 
In light of that concern, we chose to distinguish the two types of 
offerings in Form S-3. The proposed registration system, however, has 
several advantages over the existing system that could ease any 
concerns regarding venture capitalists. For example, under the 
eligibility requirements for use of Form B, a company may register its 
initial offering of common stock to the venture capitalists on Form B 
that are existing common stockholders of the company. We also would 
make Form B available for any offering to venture capitalists who are 
QIBs. Form B offerings could be completed as quickly as today's private 
offerings, because Form B would not be subject to staff pre-review and 
could be effective upon filing if the issuer chooses. Because Form B 
would permit companies to register their initial offerings to venture 
capitalists, as opposed to first completing a private placement and 
then registering those securities for a secondary offering, special 
treatment of secondary offerings for the sake of venture capitalists 
would no longer be needed.153
---------------------------------------------------------------------------

    \153\ Under this proposal, unlike in a registered secondary 
offering, venture capitalists would generally not be subject to the 
prospectus delivery requirements.
---------------------------------------------------------------------------

    Registrants would register secondary offerings not eligible for 
Form B under the proposed system on Form A which is described in detail 
below. Form A, unlike Form S-1 today, would permit companies to 
incorporate their Exchange Act filings by reference. Consequently, it 
should take a company less time to prepare its registration statement 
on Form A as compared to Form S-1 today. Additionally, the Commission 
is proposing to provide some Form A companies with the ability to 
designate the effective dates of their registration 
statements.154 Where applicable, the company's registration 
statement, therefore, would be effective significantly sooner than 
under the current system.155
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    \154\ See proposed revisions to Securities Act Rule 462, 17 CFR 
230.462.
    \155\ The holding period of Rule 144(d), 17 CFR 230.144(d), also 
is much shorter today than it was in 1981, thus making private 
placements more attractive as an alternative to registration than 
they were in 1981. We recently proposed to narrow the definition of 
``affiliate.'' Consequently, Rule 144 would be available to most 
venture capitalists. Securities Act Release No. 7391 (Feb. 20, 1997) 
[62 FR 9246].
---------------------------------------------------------------------------

    We are proposing to treat primary and secondary offerings the same 
on Form B. Thus, secondary offerings by affiliates 156 would 
need to qualify under the same public float/ADTV, QIB-only, existing 
shareholders, or investment grade eligibility criteria. Affiliates 
stand in the shoes of the issuer and should get no different or better 
treatment. Because issuers and others have relied upon the historical 
distinction between secondary and primary offerings, however, we 
solicit comment regarding whether the secondary nature of offerings by 
non-affiliates should be added as a separate eligibility criterion on 
new Form B.
---------------------------------------------------------------------------

    \156\ For purposes of this discussion, we assume that the 
narrower definition of ``affiliate'' proposed by the Commission in 
1997 would apply. We have not proposed that narrower definition in 
this release because we already have proposed it.
---------------------------------------------------------------------------

    Similarly, we are proposing to revise Form S-8 treatment of 
secondary offerings.157 Currently, affiliates and others may 
register on Form S-8 resales of control or restricted securities 
acquired pursuant to an employee benefit plan. The resale prospectus on 
Form S-8 must meet the requirements of Part I of Form S-3 or Form F-3. 
For the same reasons that we are not proposing special eligibility for 
secondary offerings on Form B, we propose to eliminate special 
eligibility for secondary (i.e., resale) offerings on Form S-8. Whether 
an offering is primary or secondary is of little importance to most 
investors. Investors tend to base their investment decision on an 
issuer's disclosures. Accordingly, we believe amending Form S-8 would 
further investor protection.
---------------------------------------------------------------------------

    \157\ Form S-8 would be largely unaffected by the proposed 
registration system. For example, no additional filing or delivery 
requirements would be added for Form S-8.
---------------------------------------------------------------------------

    Comment is solicited with respect to elimination of S-3 level 
registration of

[[Page 67195]]

secondary offerings on Form S-8. Are there compelling reasons to retain 
that treatment in an employee benefit context that would not apply in 
other secondary offerings?

B. Form A Offerings

    Form A would be the basic form for registration under the 
Securities Act.158 It would be available for any offering 
for which no other Form is authorized or prescribed. Initial public 
offerings and smaller reporting issuers' offerings ineligible for 
another form would be registered on Form A. Many of the offerings that 
issuers would register today on Form S-1, F-1, S-2 and F-2 would be 
registered under the proposed system on Form A. Just as in the case of 
Forms B and C, both domestic and foreign filers would use Form 
A.159
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    \158\ Form A also may be used to register concurrently under 
Section 12(b) or 12(g) of the Exchange Act. See Section VI. of this 
release for a discussion of concurrent Exchange Act registration.
    \159\ U.S. registrants must provide all information required by 
the Items of the Form except where the Item expressly identifies the 
requirement as applying only to foreign registrants. Similarly, 
foreign registrants must provide all information required by the 
Items of this Form except where the Item expressly identifies the 
requirement as applying only to U.S. registrants.
---------------------------------------------------------------------------

1. Structure of Form A
    In keeping with current Securities Act registration forms, there 
are two parts to Form A: information included in the prospectus (Part 
I) and information not included in the prospectus (Part II).
a. Part I--Information Required in the Prospectus
    Part I of Form A requires the following three categories of 
information: (1) standard disclosure on the cover and back pages of the 
prospectus and registration statement; (2) transactional information; 
and (3) company information. All issuers registering on Form A would 
set forth the first two types of information directly in the 
prospectus. Some Form A issuers would incorporate by reference their 
company information, while others would set forth that information 
directly in the prospectus.
i. Cover Pages
    All issuers using Form A must comply with Items 501, 502 and 503 of 
Regulation S-K relating to information on the front cover page of the 
registration statement, the cover pages of the prospectus and in the 
summary and risk factors sections, among others. This is the same 
requirement as in current Forms S-1, F-1, S-2 and F-2.
ii. Transactional Information
    All issuers using Form A also must provide information regarding:
     Summary risk factors and ratio of earnings to fixed 
charges;
     Use of proceeds;
     Determination of offering price;
     Dilution;
     Selling security holders;
     Plan of distribution;
     Description of securities;
     Interests of named experts and counsel; and
     The Commission's position on indemnification for 
Securities Act liabilities.

Again, this is the same information that is required in current Forms 
S-1, F-1, S-2 and F-2.
iii. Company Information
    Depending on whether the issuer is ``seasoned'' or not, it must 
present company-related disclosure either in full in the prospectus or 
incorporate it by reference into the prospectus that is part of the 
effective registration statement.
(A) ``Seasoned'' Form A Issuers
    For purposes of Form A, ``seasoned'' issuers would be:
     Issuers that have been reporting under the Exchange Act 
for at least 24 months, if they have a public float of $75 million or 
more; and
     Issuers that have been reporting under the Exchange Act 
for at least 24 months and have filed at least two annual reports.

Issuers that are ``seasoned'' would be eligible to incorporate their 
previously filed Exchange Act reports by reference unless they meet any 
of the disqualifications contained in General Instruction II.B. of the 
Form.160
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    \160\ Section 11 would apply to all documents incorporated by 
reference in Form A.
---------------------------------------------------------------------------

    A Form A registrant would incorporate by reference into the 
prospectus and deliver, along with the prospectus, its latest annual 
report filed pursuant to Section 13(a) or 15(d) of the Exchange Act and 
either deliver or include in the prospectus the information in Part I 
of Form 10-Q or 10-QSB for the most recent fiscal quarter. The 
registrant must deliver the information required by this option with 
the first prospectus it sends. It need not deliver that information 
with any subsequent prospectus it sends to the same person.
    Issuers relying on this option would not have to reiterate company 
information in the prospectus, although they would have to deliver 
those incorporated reports with the preliminary 
prospectus.161 The Form A eligibility requirements for 
incorporation by reference would reduce the length of time a registrant 
must be reporting. Under current Forms S-2 and F-2, a registrant must 
have a thirty-six month reporting history before it may incorporate by 
reference.162 We solicit comment on whether the seasoning 
test for incorporation by reference on Form A should be shortened 
(e.g., to where the issuer has been reporting under the Exchange Act 
for 12 months and has filed at least one annual report).
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    \161\ For a discussion of Form A prospectus delivery 
obligations, see Sections VIII.C.3. and VIII.C.4.b. and e. of this 
release.
    \162\ Those forms are available for smaller seasoned issuers, 
but are rarely used. In 1996, only 102 Forms S-2 were filed and only 
three Forms F-2 were filed.
---------------------------------------------------------------------------

    If a company incorporates by reference, investors would be required 
to review more than one document to obtain all the material 
information. We solicit comment as to whether this increases the 
analytical burden on investors. Additionally, does incorporation by 
reference of documents containing historical disclosure tend to obscure 
recent material information about the company? Would it be better for 
investors if incorporation by reference was limited to the most recent 
annual report with all subsequent information included in the 
prospectus? Today, some small issuers that are not well known to 
investors may include, for marketing purposes, information in their 
prospectuses that also is contained in the documents they have 
incorporated by reference. Is incorporation by reference useful for 
such small companies? Is incorporation by reference necessary in light 
of technological advances in financial printing? Does incorporation by 
reference reduce an issuer's cost of registration if the incorporated 
documents are required to be delivered to investors? If so, by how much 
are costs reduced?
    Current Forms S-2 and F-2 give a registrant two options for 
complying with the disclosure requirements of the Form when 
incorporating by reference. If the registrant elects to deliver the 
prospectus together with its Exchange Act reports incorporated by 
reference in the registration statement, it must provide in the 
prospectus updating financial information and describe any material 
changes in its affairs not previously disclosed in an incorporated and 
delivered Exchange Act report. If the registrant does not elect to 
deliver its incorporated Exchange Act reports together with the 
prospectus, it must

[[Page 67196]]

provide abbreviated company information in the prospectus 
itself.163 Proposed Form A would permit only the first 
option of providing company information when incorporating--a 
registrant may incorporate company information into its prospectus and 
deliver its Exchange Act reports together with the 
prospectus.164 Otherwise, it could not incorporate and must 
set forth the full company disclosure required in a Form A, just like 
an unseasoned Form A company.
---------------------------------------------------------------------------

    \163\ This disclosure is less comprehensive than what would be 
required on Form S-1 or F-1 today. It includes information 
regarding: the registrant's business, the registrant's common equity 
securities, management's discussion and analysis, changes in and 
disagreements with accountants on accounting and financial 
disclosure and market risk. Financial statements and other financial 
information, including selected financial data and supplementary 
financial information are also required to be presented in the 
prospectus.
    \164\ The disclosure required by seasoned Form A registrants 
includes a description of any material change in the registrant's 
affairs that is not already described in a filing with the 
Commission, incorporated by reference into Form A and delivered to 
investors.
---------------------------------------------------------------------------

    Current Form S-2 permits issuers to choose to incorporate and 
deliver their glossy annual and quarterly reports to security holders 
in lieu of incorporating and delivering their Exchange Act annual and 
quarterly reports. Proposed Form A would require issuers to incorporate 
and deliver their latest Forms 10-K and 10-Q, because those reports 
must contain more extensive disclosure about the company.165 
We solicit comment on whether Form A seasoned issuers should be given 
the option to incorporate and deliver their glossy annual and quarterly 
reports to shareholders in lieu of their reports on Forms 10-K and 10-
Q, with the additional provisions that those glossy annual and 
quarterly reports are incorporated by reference in their entirety (and 
are therefore subject to Section 11 liability under the Securities Act) 
and are filed with the Commission before their use in the Form A.
---------------------------------------------------------------------------

    \165\ A small business issuer may choose to register an offering 
on Form A rather than on Form SB-2 and incorporate and deliver its 
reports on Forms 10-KSB and 10-QSB. A small business issuer that 
registers an offering under Form A but that does not incorporate its 
Exchange Act reports must provide the company disclosure called for 
by Form A based on either Regulation S-K or Form 20-F (if a Canadian 
small business issuer).
---------------------------------------------------------------------------

    In certain circumstances, current Forms S-2 and F-2 permit 
registrants that are majority-owned subsidiaries but do not meet the 
Form eligibility requirements to register on those Forms instead of 
Form S-1 or F-1 if their parent satisfies certain requirements. This 
provision allows both the parent and the majority-owned subsidiary to 
register the offering on one form and incorporate by reference. 
Proposed Form A would not provide a similar option to those majority-
owned subsidiaries. Given that Form A encompasses both seasoned and 
non-seasoned issuers and that incorporation by reference on Form A 
would be available after 24 months, as opposed to the current 36-month 
requirement, we believe there would be little reason to extend the 
ability to incorporate by reference to majority-owned subsidiaries any 
sooner.
(B) ``Unseasoned'' Issuers
    In initial public offerings and offerings by all other issuers that 
are not ``seasoned,'' we would require that the registrant provide 
company information in the prospectus. The content of the company 
information in the registration statement would remain the same as it 
is in current Forms S-1 and F-1. We would not permit these issuers to 
incorporate by reference any Exchange Act reports.
b. Part II--Information Not in the Prospectus
    Just as in Forms S-1, F-1, S-2 and F-2, Part II of proposed Form A 
would require the following information in the registration statement 
but not in the prospectus that is delivered to investors: expenses of 
issuance and distribution, indemnification of directors and officers, 
recent sales of unregistered securities, exhibits and undertakings.
2. Timing of Form A Offerings
a. Seasoned Issuers
    Many commenters on the Concept Release noted that issuers would 
benefit from greater certainty of the time schedule of staff review. 
For example, a fixed offering schedule would promote efficiency in 
marketing efforts and the management of deal flow. We believe that we 
can achieve greater certainty in the timing of staff review without 
compromising investor protection. Proposed revisions to Securities Act 
Rule 462 166 would provide for effectiveness of registration 
statements and post-effective amendments of seasoned issuers on Form A 
whenever they request if:
---------------------------------------------------------------------------

    \166\ 17 CFR 230.462.
---------------------------------------------------------------------------

    1. The registrant's public float is or exceeds $75 million; or
    2. The Exchange Act annual report incorporated into the Form A 
recently has been reviewed fully by the Commission staff and has been 
amended in accordance with the staff's comments, if so 
requested.167
---------------------------------------------------------------------------

    \167\ Form A would not permit incorporation by reference of any 
Exchange Act report or other filing if the staff reviewed the filing 
and any comments remain unresolved.
---------------------------------------------------------------------------

    In addition to the reporting history requirement, issuers in all 
cases must be subject to the Exchange Act reporting requirements, 
current in filing their Exchange Act reporting requirements and timely 
in filing their Exchange Act reports during the last 12 months in order 
to be seasoned. A seasoned issuer that meets one of these criteria may 
choose when it wants its registration statement on Form A to be 
effective.168 The front cover of the Form would include 
three boxes, one of which the issuer would check to designate the date 
and time of effectiveness of the Form. Like Form B issuers, these 
seasoned Form A issuers may elect that the filing become effective: 
immediately upon filing, at the date and time specified on the front 
cover, or as specified in a later amendment. Even if an issuer met 
either of those criteria, the proposal would preclude it from 
designating the effectiveness of its Form A if the issuer fits the 
profile of any issuer disqualified in Form A from the provisions in the 
Form for incorporation by reference and automatic 
effectiveness.169
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    \168\ While these registration statements will not be reviewed 
by the staff, any request for confidential treatment regarding 
information required to be included in the registration statement 
may be received by the staff. Therefore, any request for 
confidential treatment should be submitted a reasonable period 
before the registration statement's designated effective date.
    \169\ See General Instruction II.B of proposed Form A and 
Section V.B.1.a.4. of this release.
---------------------------------------------------------------------------

    The basis of the public float test is to provide medium-sized 
seasoned issuers with certainty about the timing of their registered 
offerings. We believe that issuers would be more inclined to register 
their offerings if they knew they could take advantage of market 
windows or realize a need for quick capital by relying on Form A's 
provisions for automatic effectiveness.
    The $75 million public float criteria is the same float level 
required in our current short-form registration statements (Forms S-3 
and F-3). Our research indicates that approximately 1175 companies that 
are currently eligible to use those short-form registration statements 
would be ineligible to use Form B, at least with respect to offerings 
requiring the issuer to satisfy the public float/ADTV threshold. Those 
1175 companies generally would be able to avail themselves of Form A's 
provisions for automatic effectiveness if they had reported under the 
Exchange Act for at least 24 months. We propose the $75 million float 
requirement to ensure that the only registration statements on Form A 
that could become automatically

[[Page 67197]]

effective are those filed by issuers with some market following 
resulting from their size and at least 24 months experience filing 
Exchange Act reports.
    The basis of the recently reviewed test is that the staff will have 
reviewed the bulk of the issuer's disclosure. Pursuant to this test, 
any seasoned Form A issuer may designate effectiveness where it 
incorporates by reference into its Form A an annual report filed under 
Section 13(a) or 15(d) for its most recently completed fiscal year 
170 that has been reviewed fully by the Commission staff and 
the issuer has responded satisfactorily to the staff's 
comments.171 As discussed in greater detail below, the staff 
of the Division of Corporation Finance would consider requests that the 
staff review their Exchange Act reports.172 Because issuers 
may request that the staff review their Exchange Act annual reports 
before registering on Form A, this mechanism would allow an issuer 
further flexibility in controlling the timing of its registered 
offering.
---------------------------------------------------------------------------

    \170\ See proposed revisions to Securities Act Rule 
468(f)(1)(iv), 17 CFR 230.468(f)(1)(iv).
    \171\ Because Form A would not permit issuers to incorporate any 
Exchange Act report if any Commission staff comments on it are 
unresolved, issuers could only take advantage of this provision if 
the review of their annual report was completed.
    \172\ See Section XII.B. of this release.
---------------------------------------------------------------------------

    We solicit your comment on this proposal. Should we permit these 
registration statements on Form A to become effective per the issuer's 
discretion? Is the $75 million float too high? Should it be lowered to 
$60 million? Or should it be raised to $100 million or $200 million? 
Would the proposal to allow a Form A issuer incorporating a fully 
reviewed annual report provide particular flexibility in light of the 
proposal that the staff would review Exchange Act reports upon request 
to the extent it is able? Should the power to designate effectiveness 
when the staff has reviewed the issuer's annual report be limited to 
offerings of a class of securities the issuer has registered 
previously? Should there be any time frame within which the staff would 
have to review the report, for example, within three or six months 
before the offering? Should we exclude offerings of certain securities 
from that treatment? If so, what types of securities?
    Because the proposed rules provide these issuers with complete 
control over effectiveness of their filings, we would require that the 
issuer obtain evidence of the managing underwriters' or principal 
underwriters' concurrence with its designation of 
effectiveness.173 The issuer would have to file the evidence 
of concurrence as an exhibit to Form A.
---------------------------------------------------------------------------

    \173\ See proposed Form A, Item 21 and proposed revisions to 
Item 601 of Regulation S-K, 17 CFR 229.601.
---------------------------------------------------------------------------

    Would a requirement to file the concurrence be unnecessarily 
burdensome? Alternatively, should we require the issuer to obtain the 
underwriters' concurrence, but not require that the concurrence be 
evidenced in writing? Would an oral concurrence provide the issuer and 
the underwriters with sufficient assurance of agreement and protection 
against misunderstanding? Should we require that the issuer represent 
in the registration statement that it obtained the concurrence, not 
require filing, and require that the issuer retain the written 
concurrence for five years?
b. Unseasoned Issuers
    The timetable for effectiveness of registration statements filed by 
issuers making their initial public offerings or by issuers who do not 
meet the ``seasoned'' eligibility requirements of General Instruction 
II. of Form A would be similar to the filings on Forms S-1 and F-1 
today. All registration statements would be reviewed on a similar time 
table as current Forms S-1 and F-1 and the registration statement would 
become effective pursuant to a request for acceleration after the 
issuer addresses staff comments.
3. Solicitation of Comments on Definition of Form A Seasoned Issuer
    We use the same definition of seasoned issuer under Form A for 
purposes of permitting incorporation by reference of Exchange Act 
reports and timing of registration statement effectiveness, with one 
exception discussed below. We distinguish between issuers with a public 
float of $75 million or more and issuers with a public float of less 
than $75 million. Issuers with public floats of $75 million or more 
must have reported under the Exchange Act for 24 months or more. 
Issuers with smaller public floats must have reported for 24 months or 
more and filed at least two annual reports. For purposes of determining 
effectiveness (but not incorporation by reference), issuers with 
smaller public floats also must incorporate an Exchange Act annual 
report that was reviewed fully by Commission staff and amended for any 
staff comments. An issuer also must meet other conditions to be 
seasoned for purposes of incorporation by reference and timing of 
effectiveness.
    We solicit comment regarding the reporting history of companies 
with a public float of $75 million or more. Is 24 months the proper 
reporting history to permit companies with that amount of public float 
to determine the timing of their effectiveness? Would a 12-month 
reporting history be sufficient in this regard? Similarly, is 24 months 
the proper reporting history to permit these companies to incorporate 
by reference Exchange Act periodic reports? Would a 12-month reporting 
history be sufficient in this regard? For each of these purposes (i.e., 
timing of effectiveness and incorporation by reference), should we add 
an annual report filing requirement to the 24- or 12-month reporting 
periods? Finally, for each of these purposes, we have proposed that the 
company be timely in filing its Exchange Act reports for the most 
recent 12 months. Is this sufficient evidence of providing timely 
information to the market? Would a longer period, such as 24 months, be 
more appropriate?
    We also solicit comment regarding the reporting history of 
companies with a public float of less than $75 million. Is 24 months of 
Exchange Act reporting and the filing of at least two annual reports 
the proper reporting history to permit companies with that amount of 
public float to determine the timing of their effectiveness? Would 12 
months of Exchange Act reporting and the filing of at least one annual 
report be sufficient in this regard? Similarly, is 24 months of 
Exchange Act reporting and the filing of at least two annual reports 
the proper reporting history to permit these companies to incorporate 
by reference Exchange Act periodic reports? Would 12 months of Exchange 
Act reporting and the filing of at least one annual report be 
sufficient in this regard? For each of these purposes, should we simply 
require either a 24- or 12-month reporting history, without regard to 
how many annual reports had been filed by the registrant? Finally, for 
each of these purposes, we have proposed that the company be timely in 
filing its Exchange Act reports for the most recent 12 months. Is this 
sufficient evidence of providing timely information to the market? 
Would a longer period, such as 24 months, be more appropriate? For 
purposes of timing of effectiveness, should we require that the 
Exchange Act annual report incorporated by reference be reviewed fully 
by Commission staff and satisfactorily amended for any staff comments?
4. Disqualification for Seasoned Form A Companies
    As noted, Form A would permit smaller, reporting issuers to 
incorporate

[[Page 67198]]

by reference their Exchange Act reports and to have greater control 
over their effectiveness time schedule. We do not believe that all 
issuers that would meet proposed Form A's reporting and other 
eligibility requirements would necessarily be suited to incorporate by 
reference their company information or have expedited effectiveness. We 
believe certain events and circumstances justify disqualification of 
otherwise eligible issuers from taking advantage of those benefits on 
Form A. We propose to use the same factors that disqualify otherwise 
eligible issuers from using Form B.174 As we do with Form B 
issuers, we solicit comment on whether we should lengthen the ``look-
back'' periods we propose to use to disqualify Form A issuers from 
designating the effective date of their registration statements or 
incorporating by reference. If so, should the periods be independent of 
or match those in Form B?
---------------------------------------------------------------------------

    \174\ See General Instruction II.B. of proposed Form A, 17 CFR 
239.4. For a discussion of the nature of and reasons behind the 
disqualifications, see Section V.A.2.g. of this release.
---------------------------------------------------------------------------

5. Real Estate Companies
    Real estate entities that formerly registered on Form S-11 would 
now register on Form A, unless they meet the eligibility requirements 
of another form. Disclosure specifically required by Form S-11 instead 
has been added to Regulation S-K.175 Real estate entities 
that formerly provided such disclosure on Forms S-11 or S-4 would 
continue to be required to provide such disclosure on Forms A and C, 
respectively.
---------------------------------------------------------------------------

    \175\ See proposed Items 1101--1113 of Regulation S-K, 17 CFR 
229.1101--229.1113.
---------------------------------------------------------------------------

    These proposed disclosure requirements of Regulation S-K have been 
drafted in plain English and would codify certain staff practices 
regarding disclosure by real estate entities. These practices include 
disclosing:
    1. When finite life entities intend to sell their properties;
    2. The securities rating assigned by a nationally recognized 
statistical rating organization (``NRSRO'') to any securities in which 
the registrant has invested;
    3. Any cross default or cross collateralization provisions in 
mortgages; and
    4. Information about subsidiaries, such as operating partnerships.

Additionally, to provide uniformity on how registrants calculate 
occupancy rates, the Commission is proposing to require real estate 
entities to disclose occupancy rates as a percentage of rentable square 
footage or units.176 Finally, the new disclosure 
requirements of Regulation S-K would omit disclosure currently required 
by Item 35 of Form S-11, as it appears no longer applicable to most 
real estate companies.
---------------------------------------------------------------------------

    \176\ See proposed Item 1107 of Regulation S-K, 17 CFR 229.1107.
---------------------------------------------------------------------------

    We also propose to amend Forms 10 and Form 10-K to codify the 
staff's practice of requiring real estate entities to disclose:

     Operating and financing activities;177
---------------------------------------------------------------------------

    \177\ See proposed Item 1105 of Regulation S-K, 17 CFR 229.1105.
---------------------------------------------------------------------------

     Real estate and other investment activities;178 
and
---------------------------------------------------------------------------

    \178\ See proposed Item 1106 of Regulation S-K, 17 CFR 229.1106.
---------------------------------------------------------------------------

     A description of real estate and operating 
data.179
---------------------------------------------------------------------------

    \179\ See proposed Item 1107 of Regulation S-K, 17 CFR 229.1107.
---------------------------------------------------------------------------

    We also are proposing in certain offerings by real estate entities 
to eliminate the Guide 5 recommendation that a registrant 
supplementally provide the Commission staff, before use, sales 
materials it intends to furnish to investors.180 The 
Commission staff would no longer pre-review the sales materials in 
cases where an issuer has the power to designate the effective date of 
its registration statement or when the Commission staff has notified 
the issuer that it will not be reviewing its registration statement. 
The benefits provided by the ability to designate effectiveness would 
be significantly diminished if the issuer nevertheless had to delay its 
offering until the Commission staff had pre-reviewed its sales 
materials. Similarly, there would be little benefit to investors from 
Commission staff pre-review of sales materials where the staff would 
not also review the issuer's registration statement. Proposed Rule 425 
generally would require issuers and offering participants to file sales 
materials used in an offering. We request comment as to whether the 
Guide 5 recommendation to provide the Commission staff with sales 
materials supplementally should be eliminated for all offerings because 
sales materials generally would be filed under proposed Rule 425.
---------------------------------------------------------------------------

    \180\ See proposed revisions to Guide 5, referenced in 17 CFR 
229.801(e).
---------------------------------------------------------------------------

C. Applicability of Civil Liability Provisions to Offerings Registered 
on Proposed Forms A and B

    The proposals provide a liability structure that depends on the 
content of materials, as well as the manner and time in which materials 
are used. The following discussion describes this liability structure.
1. Form A Offerings
    A Form A offering either may involve, or must involve, the 
following materials used in connection with the offer or sale of 
securities:
     The Form A registration statement, including the 
prospectus;
     If the issuer is seasoned, the Exchange Act reports that 
it incorporates by reference into its registration statement;
     Free-writing materials, but only after the issuer files 
the Form A registration statement;
     A prospectus contained in a post-effective amendment to 
the Form A registration statement; and
     Prospectus supplements that the issuer uses after 
effectiveness of the Form A registration statement for shelf offerings.

The liability that applies to each of these types of materials is as 
follows.
    Section 11 liability would attach to the effective Form A 
registration statement, including the prospectus in it.181
---------------------------------------------------------------------------

    \181\ Section 12(a)(2) liability also would attach to any 
information in the registration statement that is part of a 
prospectus. Section 12(a)(2) also would attach to any oral 
communication used to offer or sell the securities.
---------------------------------------------------------------------------

    A Form A registrant relying on incorporation by reference would 
have to incorporate into the registration statement its last annual 
report filed under Section 13(a), and all Exchange Act reports that it 
files under Section 13(a) thereafter up to the date of effectiveness. 
Section 11 liability would attach to all information in those 
incorporated reports. 182 Section 11 also would attach to 
any Exchange Act report filed after the effective date that the issuer 
incorporates by reference through filing a post-effective 
amendment.183
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    \182\ The filed Exchange Act reports would also be subject to 
Section 18 liability. See Section XI.A.3 of this release for a 
discussion of Section 18 of the Exchange Act.
    \183\ A Form A issuer may not incorporate Exchange Act reports 
filed after the effective date except through a post-effective 
amendment. Forward incorporation is not available on Form A.
---------------------------------------------------------------------------

    A Form A registrant using free writing materials after it files its 
registration statement would file those materials in accordance with 
Rule 425. Section 12(a)(2) liability would attach to all free writing 
materials the registrant uses, whether or not they are filed under Rule 
425 as required.
    A Form A registrant could make additions or revisions to the 
prospectus by filing a post-effective amendment to the registration 
statement. The

[[Page 67199]]

prospectus in a post-effective amendment becomes the prospectus in the 
registration statement. 184 Accordingly, Section 11 would 
attach to any prospectus (and any other information) included in a 
post-effective amendment to Form A.
---------------------------------------------------------------------------

    \184\ See Securities Act Section 11(a), 15 U.S.C. Sec. 77k(a), 
and Item 512(a)(2) of Regulation S-K, 17 CFR 229.512(a)(2).
---------------------------------------------------------------------------

    As proposed, Form A registrants would not be permitted to undertake 
delayed shelf offerings of securities under Rule 415. Those registrants 
could, however, undertake other shelf offerings, such as continuous 
offerings. In those offerings, the registrant could use prospectus 
supplements to change the prospectus in the registration statement 
after effectiveness. Because prospectus supplements are not set forth 
in post-effective amendments, it has been argued that Section 11 
liability does not attach to them. It is our view that these 
supplements are part of that prospectus and Section 11 liability 
applies to the information in them.
    All of the materials described above would be subject not only to 
the civil liability provisions of the Securities Act, but also to the 
antifraud provisions of the Securities Act and the Exchange Act. The 
proposals would have no effect on the applicability of those 
provisions.185
---------------------------------------------------------------------------

    \185\ See Exchange Act Section 10(b), 15 U.S.C. Sec. 78j(b), 
Exchange Act Rule 10b-5, 17 CFR 240.10b-5 and Securities Act Section 
17(a), 15 U.S.C. Sec. 77q(a).
---------------------------------------------------------------------------

    Rule 167 defines any communication made more than 30 days before 
filing in a Form A-registered offering as not being an offer to sell or 
offer to buy securities for purposes of Section 5(c) of the Securities 
Act. Because of this definition, neither Section 11 nor Section 
12(a)(2) of the Securities Act would attach to these communications. 
However, these definitions do not affect the application of the anti-
fraud provisions of the Exchange Act or the Securities Act. For 
example, any communication ``in connection with the purchase or sale'' 
of a security would be subject to Exchange Act Section 10(b), 
regardless of Rule 167. Similarly, any ``offer or sale of any 
security'' would be subject to Securities Act Section 17(a).
2. Form B Offerings
    In a Form B-registered offering, the liability provisions would 
apply to written disclosures as follows:
     Section 11 would apply to all information in the 
registration statement, including: 186
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    \186\ Section 12(a)(2) liability also would attach to any 
information in the registration statement that is part of a 
prospectus and to any oral communication used to offer or sell the 
securities.
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     The term sheet,
     Offering information used during the offering 
period,187
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    \187\ The offering period would begin 15 days before the first 
offer is made and end at the completion of the offering.
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     The Exchange Act reports incorporated by reference into 
the registration statement,
     Material updates to the disclosure in the incorporated 
Exchange Act reports, and
     All other information included in the registration 
statement, including exhibits;
     Section 12(a)(2) liability would always apply to ``free-
writing'' materials that are used during the offering period, including 
regularly released forward-looking information;
     Section 12(a)(2) liability may apply to factual business 
communications during the offering period;
     Section 17(a) liability would apply to any communication 
that constitutes an offer of a security, regardless of whether that 
offer was made during the offering period; and
     Exchange Act Section 10(b) liability would apply to any 
communication in connection with the purchase or sale of a security, 
regardless of whether that communication was during the offering 
period.
a. Section 11
    Section 11 liability would attach to all information in the Form B 
registration statement. Offering information that is used during the 
offering period must be filed as part of the registration statement. 
Offering information used in the period beginning 15 days before the 
first offer and ending with the filing of the registration statement 
must be filed with that registration statement. Because the offering 
period runs through the completion of the offering, all offering 
information--including pricing information--used after filing of the 
registration statement would have to be filed as an amendment to the 
Form B registration statement.
    A Form B registrant must incorporate by reference into the 
registration statement its last annual report filed under Section 
13(a), and all Exchange Act reports that it files thereafter up to the 
date of effectiveness of the registration statement. A Form B 
registrant also must incorporate by reference into the registration 
statement all Exchange Act reports it files between effectiveness of 
the Form B registration statement and the completion of the offering.
    A Form B registrant must inform potential investors of material 
updates to its Exchange Act reports. The registrant would accomplish 
this through the use of offering information that is filed as part of 
the effective Form B registration statement.
b. Section 12(a)(2)
    Section 12(a)(2) liability would always apply to free writing 
materials that are used during the offering period. Among other 
communications, regularly released forward-looking information would be 
included in this category of information.188
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    \188\ Proposed Securities Act Rule 168, 17 CFR 230.168, would 
define ``regularly released forward-looking information'' and exempt 
it from the prohibition on pre-filing offers in Section 5(c). This 
exemption would be more significant for Form A-registered offerings, 
because all pre-filing offers in connection with offerings 
registered on Form B would be exempt from Section 5(c) under 
proposed Securities Act Rule 166, 17 CFR 230.166. Regularly released 
forward-looking information must be filed under proposed Securities 
Act Rule 425, 17 CFR 230.425.
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    Free writing materials used during the offering period would have 
to be filed in accordance with Rule 425. Free writing materials used in 
the period beginning 15 days before the first offer and ending with the 
filing of the registration statement must be filed under Rule 425. 
Because the offering period runs through the completion of the 
offering, free writing materials used after filing of the registration 
statement also must be filed under Rule 425. Section 12(a)(2) liability 
would attach to all free writing materials the registrant uses, whether 
or not they are filed under Rule 425 as required.
    While factual business communications are not ``free writing'' 
materials,189 Section 12(a)(2) may still apply to those 
communications during the offering period if they are made to offer 
securities.
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    \189\ Proposed Securities Act Rule 169, 17 CFR 230.169, would 
define ``factual business communications'' and exempt them from the 
prohibition on pre-filing offers in Section 5(c). This exemption 
would be more significant for Form A-registered offerings, because 
all pre-filing offers in connection with offerings registered on 
Form B are exempt from Section 5(c) under proposed Securities Act 
Rule 166, 17 CFR 230.166. Proposed Securities Act Rule 425, 17 CFR 
230.425, would state that registrants need not file ``factual 
business communications,'' regardless of when they are made.
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c. Section 17(a) and Exchange Act Section 10(b)
    Section 17(a) liability would apply to any communication in the 
offer or sale of a security, regardless of whether that communication 
was made during the offering period. Exchange Act Section 10(b) 
liability would apply to any communication in connection with the 
purchase or sale of a security, regardless

[[Page 67200]]

of whether that communication was during the offering period.
    Rule 167 defines any communication made more than 30 days before 
filing in a Form A-registered offering as not being an offer to sell or 
an offer to buy the securities being offered under the registration 
statement. Rule 167 has a similar treatment for communications made 
before the offering period in a Form B-registered offering. Because of 
this rule, neither Section 11 nor Section 12(a)(2) would attach to 
these communications. Rule 167 does not, however, affect the 
application of Section 17(a) or Exchange Act Section 10(b) to these 
communications.

D. Form C Offerings

1. Use of Form C
    Under the proposed system, business combinations and exchange 
offers would be registered exclusively on proposed Form 
C.190 Proposed Form C would permit all offerings that were 
available on Forms S-4 and F-4. One form would be available for both 
domestic and foreign issuers.191 A registrant must use Form 
C, or SB-3 if a small business issuer, to register an offering under 
the Securities Act that is:
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    \190\ Small business issuers, however, would register business 
combinations and exchange offers on proposed Form SB-3. For an 
explanation of Form SB-3, see Section V.E.4. of this release. A 
small business issuer's disclosure requirements would not differ 
substantially from Form S-4 today. Form C would thus provide no 
additional benefits to small business issuers than Form SB-3 and, 
for tracking purposes, small business issuers would be barred from 
using Form C. A small business issuer may, of course, provide more 
information on Form SB-3 than required by the small business 
disclosure regime.
    \191\ U.S. registrants must provide all information required by 
the Items of the Form except where the Item expressly identifies the 
requirement as applying only to foreign registrants. Similarly, 
foreign registrants must provide all information required by the 
Items of this Form except where the Item expressly identifies the 
requirement as applying only to U.S. registrants.
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    1. A business combination transaction of the type specified in Rule 
145(a);
    2. A merger in which the applicable law would not require the 
solicitation of the votes or consents of all of the security holders of 
the company being acquired;
    3. An exchange offer for securities of the issuer or another 
entity;
    4. A public reoffering or resale of any securities acquired 
pursuant to this registration statement; or
    5. More than one of the kinds of transactions listed in paragraphs 
1. through 4. registered on one registration statement.
2. Relationship with Exchange Act Rules
    Like Forms S-4 and F-4, the proposed Form C prospectus may serve as 
the proxy or information statement used in connection with the proposed 
transaction. Form C would be deemed to meet the informational and 
filing requirements of the proxy or information statement rules under 
Section 14 of the Exchange Act and Regulations 14A and 14C.
    In a companion release, the Commission is also proposing changes to 
the Exchange Act and Williams Act regulatory scheme applicable to 
extraordinary transactions, including the rules under Sections 13(e), 
14(a), 14(c), 14(d) and 14(e).192 For a more complete 
discussion of the rationale behind the extraordinary transactions 
proposals, you also should read that Release.
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    \192\ See Exchange Act Release No. 40633 (Nov. 3, 1998).
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3. Timing of Form C
    As proposed, a Form C registration statement would be subject to 
Commission staff review and would become effective in the same manner 
that Forms S-4 and F-4 become effective today. Although some Form C 
registration statements would be filed by large seasoned issuers 
acquiring large seasoned companies, we have not proposed automatic 
effectiveness for Form C under the theory that the market is not 
informed at the time of filing about the pro forma effects of the 
transaction. We solicit comment, however, regarding whether all 
registration statements filed on Form C (except Rule 13e-3 and roll-up 
transactions) should become effective automatically upon filing or on 
an expedited schedule (e.g., 20 days after filing). Should Form C 
registration statements filed by Form B-eligible companies become 
effective automatically upon filing, similar to the Form B registration 
statement? Should Form C registration statements become effective 
automatically or on an expedited schedule if the company to be acquired 
would meet the Form B public float/ADTV test? What if both the 
registrant and the company being acquired would meet that test? Should 
Form A registrants eligible to determine the timing of effectiveness of 
a Form A registration statement also be able to control timing of their 
Form C registration statements? Are there any categories of offerings 
on Form C that should be granted automatic or expedited effectiveness, 
such as exchange offers?
4. Structure of Form C
    In keeping with other Securities Act registration forms, there are 
two parts to Form C: information included in the prospectus (Part I) 
and information not included in the prospectus (Part II).
a. Part I--Information Required in the Prospectus
    Like current Forms S-4 and F-4, Part I is divided into four 
sections: information about the transaction, information about the 
registrant, information about the company being acquired, and voting 
and management information.
i. Information About the Transaction
    The first section requires the disclosure of information about the 
proposed transaction. In addition to other information, this section 
requires a prospectus summary, a summary of the material features of 
the proposed transaction and a presentation of pro forma financial 
information.193 This section is designed to elicit material 
information about a transaction that should be presented in a 
prospectus subject to Securities Act liabilities which is delivered to 
investors. We solicit comment on whether Form B-eligible registrants 
should be required to comply with the mandated disclosure requirements 
for transactional information as described in this section or whether 
these registrants should be permitted somewhat more freedom to develop 
their own transactional disclosure, much as they would on Form B.
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    \193\ Other information required by this section include: a 
description of material contacts between the registrant and the 
company being acquired; information required for reofferings by 
persons deemed to be underwriters; disclosure regarding the 
interests of named experts and counsel; and disclosure of the 
Commission's position on indemnification for Securities Act 
liabilities.
    Real estate entities would be required to provide additional 
information specific to that industry. That information includes 
disclosure regarding: risk factors; the organization; tax treatment; 
certain relationships and related transactions; selection, 
management and custody of investments; conflict of interest policy 
and limitations of liability.
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ii. Information About the Registrant
    The second section mandates the disclosure regarding the 
information required about the registrant and prescribes different 
levels of information required to be presented in the prospectus 
incorporated by reference, depending on which Securities Act form the 
registrant could use in making a primary offering of its securities. 
Current Forms S-4 and F-4 apply different levels of registrant 
disclosure based on the registrant's

[[Page 67201]]

eligibility for Forms S-1, S-2, S-3, F-1, F-2 and F-3. Proposed Form C 
continues this approach and reflects the proposed re-tiering of the 
registration forms.
(A) Form B Eligible Registrants
    If the registrant meets the registrant eligibility requirements of 
General Instruction I.B. and the public float/ADTV test of Form B, it 
may elect to satisfy company disclosure requirements through 
incorporation by reference. The registrant would provide substantially 
the same information that a Form S-3 or F-3 eligible issuer currently 
provides on Forms S-4 and F-4:
    1. A description of any material change in the affairs of the 
registrant that is not already described in a filing with the 
Commission which is incorporated by reference into the Form C;
    2. Incorporation by reference of its latest annual report filed in 
accordance with Section 13(a) or 15(d) of the Exchange Act and any 
other reports filed pursuant to Section 13(a) or 15(d) of the Exchange 
Act since the end of the fiscal year; and
    3. Under certain circumstances, incorporation by reference of the 
description of capital stock contained in an Exchange Act registration 
statement.194
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    \194\ The description of capital stock must be incorporated only 
if capital stock is being registered and securities of the same 
class are registered under Section 12 of the Exchange Act, and such 
stock is either listed for trading or admitted to unlisted trading 
privileges on a national securities exchange or bid and offer 
quotations for such stock are reported in an automated quotations 
system operated by a national securities association.
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(B) Seasoned Form A Registrants
    If the registrant meets the eligibility requirements for 
incorporation by reference in Form A, it may elect to comply with the 
incorporation by reference option in Form C. 195 A 
registrant choosing this option must incorporate by reference into the 
prospectus and deliver with the prospectus its latest annual report 
filed pursuant to Section 13(a) or 15(d) of the Exchange Act and either 
deliver or include in the prospectus the information in Part I of Form 
10-Q or 10-QSB for the most recent fiscal quarter. The registrant must 
deliver the information required by this option with the first 
prospectus it sends. As with Form A, it need not deliver that 
information with any subsequent prospectus it sends to the same person.
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    \195\ See Sections V.B.1.a.iii.(A) and V.B.4. of this release 
regarding Form A issuers eligible to incorporate by reference. 
Section 11 would apply to all documents incorporated by reference in 
Form C.
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    The disclosure required from seasoned Form A registrants would also 
include a description of any material change in the registrant's 
affairs that is not already described in a filing with the Commission 
and incorporated by reference into Form C.
    Unlike current Form S-4, Form C would not permit delivery of a 
company's glossy annual or glossy quarterly report to security holders 
in lieu of delivery of a Form 10-K or Form 10-Q report. Just as we are 
soliciting comment on whether to provide the option to incorporate and 
deliver a company's glossy annual and quarterly report in lieu of a 
company's Form 10-K and Form 10-Q for ``seasoned'' companies filing on 
Form A, we solicit comment on whether we should provide this option for 
seasoned Form A companies filing on Form C.
(C) All Other Registrants
    All registrants ineligible for Form C's two incorporation by 
reference options would disclose in the registration statement the same 
information as current Forms S-4 and F-4 require of Forms S-1 and F-1 
registrants. In addition, real estate entities would disclose the 
information required by the following proposed items of Regulation S-K: 
Item 1105, Operating and financing activities; Item 1106, Real estate 
and other investment activities; and Item 1107, Description of real 
estate and operating data.
iii. Information About the Company Being Acquired
    Similar to current Forms S-4 and F-4, proposed Form C would require 
presentation of disclosure about the company being acquired in the 
registration statement. Presentation of disclosure could be made under 
the same options that would be available to the registrant. Thus, a 
company to be acquired would refer to the ``Information About the 
Registrant'' section to determine whether and how it could incorporate 
by reference.
    Forms S-4 and F-4 give non-reporting companies to be acquired a 
choice about the amount of disclosure that they provide. They may 
either provide the full company information required by reporting 
companies 196 or provide abbreviated company information 
which only non-reporting companies are permitted to provide. 
197 Form C proposes different disclosure requirements than 
on current Forms S-4 and F-4. Form C would require a non-reporting 
company to provide the same non-financial disclosure as a reporting 
company 198 but would not require the company to provide the 
full financial statement disclosure that a reporting company would have 
to provide. 199 We solicit comment on what non-financial 
disclosure should be required by non-reporting companies. Would the 
requirement to provide the same information as reporting companies be 
unduly burdensome on these companies? If so, what information should be 
required by non-reporting companies?
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    \196\ See Item 17(a) of Form S-4 and Item 17(a) of Form F-4.
    \197\ See Item 17(b) of Form S-4 and Item 17(b) of Form F-4.
    \198\ Form S-4 does not require non-reporting companies to be 
acquired to provide the information required by Item 102 of 
Regulation S-K (description of property), Item 103 of Regulation S-K 
(legal proceedings) or Item 304(a) of Regulation S-K (changes in and 
disagreements with accountants on accounting and financial 
disclosure). Form C would require both reporting and non-reporting 
companies to provide this information. Similarly, Form F-4 does not 
require non-reporting companies to be acquired to provide the 
information required by Item 2 of Form 20-F (description of 
property), Item 3 of Form 20-F (legal proceedings), Item 6 of Form 
20-F (exchange controls) and Item 7 of Form 20-F (taxation). Form C 
would require both reporting and non-reporting companies to provide 
this information.
    \199\ See Items 18(c) and 21(b) of proposed Form C, 17 CFR 
239.6. For a more complete discussion of this proposal, see Exchange 
Act Release No. 40633 (Nov. 3, 1998).
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iv. Voting and Management Information
    Form C would require issuers to present much the same information 
in the Form C prospectus as they would be required to present in Forms 
S-4 and F-4 today. If either the registrant or the company to be 
acquired is soliciting proxies, consents or authorizations, Form C 
would require information about: the meeting, the vote required for 
approval, revocability of proxy, dissenters' rights, persons making the 
solicitation, persons with substantial interest in the matter and 
voting securities of principal holders.
    Whether or not proxies, consents or authorizations are being 
solicited, and in the case of exchange offers, Form C would require 
information concerning voting securities and the principal holders of 
such shares with respect to all directors and executive officers of 
both entities. Form C would require information about directors and 
executive officers of the surviving or acquiring company, certain 
relationships and related transactions and executive compensation. If 
eligible to incorporate by reference, the registrant or the company to 
be acquired could incorporate this information into the prospectus in 
lieu of presenting the information in the prospectus.

[[Page 67202]]

b. Part II--Information Not Required in the Prospectus
    Just as in Form S-4 and F-4, Part II of proposed Form C would 
require, in the registration statement but not in the prospectus that 
is delivered to shareholders, information about indemnification of 
directors and officers, exhibits and undertakings.
5. General Instruction G. of Form S-4
    Proposed Form C would not include any instruction to parallel 
General Instruction G. of Form S-4 regarding the formation of bank or 
savings and loan holding companies. This General Instruction is part of 
Form S-4, but is no longer needed in the business combination form 
because Congress has amended the Securities Act.200 Section 
3(a)(12) exempts from registration the vast majority of those 
transactions eligible for General Instruction G.201 In those 
limited situations in which an offering regarding the formation of a 
bank or saving and loan holding company falls outside of the Section 
3(a)(12) exemption, the registrant may still register the transaction 
on any form appropriate to the registrant and transaction. In addition, 
Staff Accounting Bulletin 50, which permits abbreviated financial 
statements, would still be available in this transaction.
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    \200\ Riegle Community Development and Regulatory Improvement 
Act, Pub. L. No. 103-325, Title III, Sec. 320, 108 Stat. 2225 (1994) 
amending Sec. 3(a) of the Securities Act (15 U.S.C. Sec. 77c(a)).
    \201\ Transactions in which the rights and interests of security 
holders in the holding company are not ``substantially the same'' as 
those in the bank or savings and loan association before the 
transaction are not exempted from registration by Section 3(a)(12) 
but would have satisfied General Instruction G. of Form S-4.
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6. Small Business--Business Combinations
    Small business issuers would not be permitted to register an 
offering involving a business combination on Form C. Instead, we are 
proposing a new form, Form SB-3, which is a small business combination 
form.202 Due to the necessary different requirements of 
larger domestic and foreign issuers and those issuers in the small 
business reporting regime, the use of two forms is necessary for 
business combinations to provide clarity for the registrant as to the 
requirements of the particular offering.
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    \202\ See Section V.E.4. of this release for a discussion of 
proposed Form SB-3.
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    In the event that a registrant filing on Form C is registering an 
acquisition of a company that is reporting pursuant to the small 
business issuer regime, the small business issuer need only provide the 
information in the registration statement that it would be required to 
provide if the offering was registered on Form SB-3.

E. Small Business Issuers

1. Small Business Issuers' System
    In 1992 and 1993, we adopted special registration forms under the 
Securities Act for smaller issuers: Forms SB-1 and SB-2.203 
We also adopted special forms for these issuers to use in registering 
and reporting under the Exchange Act.204 The disclosure 
requirements of those forms are less extensive than the ones that apply 
to larger issuers.
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    \203\ Securities Act Release No. 6949 (July 30, 1992) [57 FR 
36442] (adopting Form SB-2) and Securities Act Release No. 6996 
(Apr. 28, 1993) [58 FR 26509] (adopting Form SB-1).
    \204\ These Exchange Act forms are: Form 10-SB (the form used to 
register a class of securities under the Exchange Act); Form 10-KSB 
(the annual report form); and Form 10-QSB (the quarterly report 
form). We also revised the requirements for annual reports to 
security holders and proxy and information statements of small 
business issuers. See 17 CFR 240.14a-3(b), Note to Small Business 
Issuers; 17 CFR 240.14c-3(a)(2), Note to Small Business Issuers; and 
17 CFR 240.14a-101, Note G--Special Note for Small Business Issuers.
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    The small business issuer registration and reporting systems were 
designed to facilitate capital-raising by small businesses and reduce 
their costs in complying with the federal securities laws. A small 
business issuer generally is any issuer with less than $25 million in 
revenues and a public float of less than $25 million.205
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    \205\ 17 CFR 230.405. Other conditions also must be met. The 
issuer must be either a U.S. or Canadian issuer and must not be an 
investment company under the Investment Company Act of 1940. In 
addition, if the issuer is a majority-owned subsidiary of another 
company, the parent also must be a small business issuer.
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2. Re-defining ``Small Business Issuer''
    Since the Commission adopted the ``small business issuer'' 
definition in 1992, economic and market changes have occurred. While 
annual inflation rates have remained low, the nation's economy has 
experienced significant growth. Revenue levels of most public companies 
increased substantially, and their market capitalizations rose even 
more dramatically. This growth in revenues and market capitalization 
levels has effectively reduced the percentage and number of public 
companies qualifying as small business issuers.206 Many 
companies that would have met the definition of small business issuer 
in 1992 now do not qualify as small business issuers even though they 
remain relatively small. These companies must satisfy the more 
extensive disclosure requirements of Regulation S-K and S-X in 
preparing their registration statements and periodic reports.
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    \206\ In 1992, we indicated that 42% of public companies had 
revenues of less than $25 million and 63% had market capitalizations 
under $25 million. Securities Act Release No. 6924 (Mar. 20, 1992) 
[57 FR 9768]. Today, these percentages have fallen to 31% and 24%, 
respectively. (This data is derived from a Compustat database for 
9,698 public reporting companies as of June 24, 1998.) While about 
3,600 public companies met the $25 million revenues test in 1992, 
only about 3,000 public companies meet that test today. Our analysis 
necessarily excludes private companies as information for them is 
not generally available.
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    We have had six years of successful experience with the small 
business issuer disclosure system. Our experience indicates that small 
business issuers have incurred less cost, time and burden in preparing 
disclosure documents based on the streamlined disclosure requirements. 
The system has improved their access to capital and increased their 
competitiveness against larger companies without reducing investor 
protection. For these reasons, we are proposing to redefine ``small 
business issuer'' by revising the criteria in the 
definitions.207
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    \207\ See proposed revisions to Securities Act Rule 405, 17 CFR 
230.405; Exchange Act Rule 12b-2, 17 CFR 240.12b-2; and Item 10 of 
Regulation S-B, 17 CFR 228.10.
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    We are proposing to raise the revenues test to $50 million and 
eliminate the public float test. As a result, 1100 more public 
companies would meet that revenues test than satisfy the current $25 
million revenues test today.208 The $50 million revenues 
test also would reinstate the percentage of public companies that met 
the revenues test in 1992.209 While the percentages remain 
constant, 500 more public companies would meet the $50 million revenues 
test than met the $25 million revenues test in 1992.
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    \208\ Currently, almost 4,100 public companies have revenues 
below $50 million.
    \209\ Approximately 42% of public companies met the $25 million 
revenues test in 1992. The same percentage would meet the $50 
million test today.
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    Our proposal would aid non-reporting companies with revenues 
between $25 and $50 million that plan to register initial public 
offerings under the Securities Act or propose to register a class of 
securities under the Exchange Act. Also, reporting companies that are 
small business issuers would be able to remain in the small business 
disclosure system until their revenues grow to $50 
million.210
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    \210\ Currently, reporting companies that are not in the small 
business disclosure system are able to use that system only if they 
meet the revenues and public float tests for two consecutive years. 
See 17 CFR 228.10(a)(2)(iv). We would alter that treatment for 
purposes of the transition from the $25 million thresholds to the 
$50 million threshold. Under our proposals, we would allow a 
reporting company to switch to the small business issuer disclosure 
system immediately in the first year after the proposals become 
effective if it had revenues of less than $50 million for its last 
two fiscal years. That transition would be allowed even if the 
issuer's revenues for those years exceeded the current $25 million 
threshold or the issuer exceeded the current public float test in 
those years.

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[[Page 67203]]

    We would eliminate the public float test from the small business 
issuer definition. The small business system is designed to simplify 
and reduce the cost of raising capital for start-up, developing and 
small businesses. We believe that the size of a company's revenues may 
be a more indicative measure of whether a company needs the benefits of 
the small business system than a combined revenues and public float 
test. While the public float test for small businesses may be 
correlated with the size of a company's operations, it can, at times, 
penalize those small businesses that the market believes to have 
promising prospects. The elimination of the public float test also 
would simplify the regulatory scheme. Accordingly, we propose that a 
company that has less than $50 million in revenues would qualify as a 
small business issuer regardless of the size of its public float.
    We request your comments on the proposed revised definition of 
small business issuer.211 Should the proposed revenues level 
be higher (such as $60 or $70 million) or lower (such as $45 or $40 
million)? Why? Should the public float test be retained? If retained, 
should it also be set at $50 million or should it be retained at $25 
million or increased to $60 or 70 million? Should another measure, such 
as assets level or market capitalization, be used to define small 
business issuers? If another measure is used, what dollar level would 
be appropriate and why?
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    \211\ See proposed Item 10(a)(1) of Regulation S-B, 17 CFR 
228.10(a)(1).
---------------------------------------------------------------------------

    We are not proposing to change the time period over which revenues 
would be considered. Under the current definition, a non-reporting 
company would look at the amount of its revenues during its last fiscal 
year (and public float as of a date within 60 days before filing its 
registration statement). A reporting company would look at its revenues 
(and public float) as the end of its last two consecutive fiscal years. 
We would continue to apply this approach. Thus, a private company 
filing either an initial public offering under the Securities Act or 
registering a class of securities under the Exchange Act would look to 
its revenues during the its last fiscal year. A public reporting 
company that is in the small business disclosure system would be 
required to leave the system if it had revenues over $50 million in 
each of its last two consecutive fiscal years. A public reporting 
company which is not in the small business disclosure system would have 
to earn less than $50 million revenues in each of its last two 
consecutive fiscal years before it would be permitted to switch to the 
small business system. We solicit your comments as to whether a 
revenues test based on a longer time period, such as three years, or an 
average annual revenues test based on a three-year period, would be 
better.
3. Proposed Changes to Form SB-2
    We propose changes to Form SB-2 to permit seasoned small business 
issuers to incorporate their previously filed Exchange Act reports by 
reference.212 In most cases, the Exchange Act disclosure 
would satisfy the company disclosure requirements of Form SB-2. By 
delivering previously prepared documents, the small business issuer 
would avoid the expense, time and effort required in recreating this 
disclosure. Those issuers would continue to include the same 
information about the offering, such as use of proceeds and plan of 
distribution disclosure, in the prospectus.213 We believe 
there is no compelling reason to preclude the small business issuer 
from incorporating by reference to the same extent as a Form A issuer. 
If we extend this option to small business issuers, they will not need 
to leave the less extensive small business disclosure system in order 
to enjoy the benefits of incorporation by reference.214
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    \212\ Section 11 would apply to all documents incorporated by 
reference in Form SB-2.
    \213\ The offering disclosure requirements are contained in 
proposed Form SB-2, Items 1-10 and 14.
    \214\ Form S-2 currently permits incorporation by reference for 
small business issuers that meet certain requirements. See General 
Instruction II.C. of Form S-2. The proposed changes to Form SB-2 
would preserve this option for these issuers. While small business 
issuers would be eligible to use Form A, use of that Form would 
involve compliance with Regulation S-K rather than reliance on the 
small business issuer disclosure system.
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a. Conditions for Using Incorporation by Reference
    The conditions for using incorporation by reference in Form SB-2 
would be the same as those in Form A. By using the same criteria, we 
would treat equally all seasoned Exchange Act reporting companies that 
are not using Form B, regardless of their size. To use incorporation by 
reference, the small business issuer would have to have been subject to 
the Exchange Act reporting requirements for at least a twenty-four-
month period and have filed all required reports on a timely basis 
during the twelve months just before filing the Form SB-
2.215 Likewise, the issuer also must have filed at least two 
Exchange Act annual reports.
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    \215\ See proposed Form SB-2, General Instruction D.
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    Small business issuers would be subject to the same 
disqualifications applicable to Form A and Form B issuers relating to 
the issuer's financial condition, past violation of laws or status as a 
blank check or penny stock company.216 In addition, a small 
business issuer that used the less extensive Regulation A narrative 
disclosure requirements in its latest annual report on Form 10-KSB 
would not be allowed to incorporate its Exchange Act reports by 
reference. We solicit comment on whether we should extend any of Form 
SB-2's disqualification provisions' ``look-back'' 
periods.217
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    \216\ See Sections V.A.2.g., V.B.1.a.iii.(A) and V.B.4. of this 
release which discuss the disqualification provisions for Form A and 
Form B issuers. The disqualification provisions for those Forms are 
the same as we propose under Form SB-2.
    \217\ See General Instruction E.2. of proposed Form SB-2, 17 CFR 
239.10.
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    Similarly, we are not proposing to permit transitional small 
business issuers registering on Form SB-1 to use incorporation by 
reference.218 We believe it is important that issuers 
experience at least one cycle of reporting under a comprehensive (as 
opposed to a significantly streamlined) disclosure regime before 
graduating to a short-form approach.
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    \218\ Form SB-1 is available for certain small business issuers 
that register no more than $10 million of securities during any 
continuous twelve-month period. Form SB-1 permits these issuers to 
provide the non-financial statement disclosure required under 
Regulation A, 17 CFR 230.251-263. These narrative disclosure 
requirements are less extensive than those of Regulation S-B, which 
governs the disclosure in Form SB-2.
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    We solicit your views regarding whether incorporation by reference 
should be available to small business issuers. Should their smaller 
size preclude them from using incorporation by reference? Should we 
impose additional conditions on small business issuers regardless of 
what form they use given their smaller size? Should we shorten the 
reporting history requirement (e.g., to twelve months or twelve months 
and the filing of one annual report)? Does it take a longer period for 
those issuers to adjust to the reporting requirements and produce the 
expected Exchange Act disclosure? Should there be additional 
disqualifications? For example, should a Form SB-2 issuer not be able 
to incorporate by reference if a material retroactive restatement of 
its financial statements or a material disposition of assets is not 
reflected in its latest

[[Page 67204]]

Exchange Act annual report, even if that information is set forth in 
the prospectus?
b. How to Incorporate by Reference
    Under the proposals, a small business issuer choosing to 
incorporate by reference must incorporate its latest Exchange Act 
annual report and all Exchange Act reports filed after the end of the 
fiscal year covered by that form.219 It would not be 
permitted to incorporate Exchange Act forms filed after the effective 
date of the registration statement.
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    \219\ See proposed Form SB-2, Items 11 and 12. A small business 
issuer that was in the small business disclosure system during its 
last fiscal year would incorporate its annual report on Form 10-KSB. 
A reporting company that entered the small business disclosure 
system after the close of its latest fiscal year would be allowed to 
incorporate its annual report on Form 10-K or 20-F for its latest 
fiscal year.
    Small business issuers, like larger registrants, have the option 
of satisfying certain Exchange Act annual report requirements by 
incorporating portions of their glossy annual reports to security 
holders under Rule 14a-3 or 14c-3, 17 CFR 240.14a-3 or 240.14c-3, or 
definitive proxy or information statements filed under Regulations 
14A or 14C. See, for example, Form 10-KSB, General Instruction E. If 
a registrant's Exchange Act annual report incorporates from those 
documents, the incorporated portions also will become part of the 
Form SB-2 through incorporation of the Exchange Act annual report.
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    The issuer must list in the prospectus that is part of the 
effective registration statement all of the reports that are 
incorporated by reference.220 As part of the effective 
registration statement, all incorporated portions of these reports 
would be subject to Section 11. If an issuer wanted to incorporate an 
Exchange Act report filed after effectiveness of the Form SB-2, it 
would have to file a post-effective amendment to incorporate it into 
that prospectus.
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    \220\ See proposed Form SB-2, Item 12(a).
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    A small business issuer would have to state in the SB-2 prospectus 
that it will provide to investors any report that it is incorporating 
by reference but not providing with the prospectus.221 It 
also must identify the reports that it files with or submits to the 
Commission and describe how investors may obtain those 
reports.222
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    \221\ See proposed Form SB-2, Item 12(b). The issuer would have 
to:
    (i) Disclose that the information will be provided without cost 
upon oral or written request; and
    (ii) Name the contact person who should receive the request.
    \222\ See proposed Form SB-2, Item 12(c).
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    Small business issuers would have to update the company information 
in the prospectus if material changes occur after the end of the fiscal 
year covered by the annual report and are not reported in the Form 10-
QSB delivered with the prospectus.223 In addition, the small 
business issuer would have to include financial statements of 
businesses acquired or to be acquired or real estate operations 
acquired or to be acquired, and pro forma financial information, if 
that information is required by Regulation S-B 224 and was 
not in the latest annual report.225
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    \223\ See proposed Form SB-2, Item 11(e).
    \224\ 17 CFR 228.310(c)-(e). Item 310(c) requires the financial 
statements of certain businesses acquired or to be acquired. If 
those financial statements are required, pro forma financial 
information also must be provided under Item 310(d). Item 310(e) 
requires financial information about certain real estate operations 
acquired or to be acquired.
    \225\ See proposed Form SB-2, Item 11(d).
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    Comment is requested on the manner of incorporation of Exchange Act 
reports. Should issuers be permitted to incorporate reports filed after 
effectiveness of the Form SB-2 provided that they are deemed 
incorporated into the prospectus that is part of the effective 
registration statement?
c. Delivery of Exchange Act Reports
    A small business issuer would have to provide copies of its recent 
Exchange Act reports with the delivered prospectus when it incorporates 
by reference in the Form SB-2. It must deliver to investors a copy of 
its latest Exchange Act annual report and state in the prospectus that 
it is accompanied by that annual report.226 It also would 
have to deliver its Form 10-QSB for its most recent fiscal quarter 
227 or include that information in the prospectus. Those 
that choose to deliver the Form 10-QSB would have to state in the 
prospectus that it is accompanied by that Form.
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    \226\ See proposed Form SB-2, Item 11(a). An issuer that 
incorporates sections of its glossy annual report to security 
holders or definitive proxy or information statement into its Form 
10-KSB also would have to deliver those portions together with the 
prospectus.
    \227\ See proposed Form SB-2, Item 11(c). If, however, the 
report for the most recent fiscal quarter is not due before the 
effective date of the Form SB-2, the issuer would deliver the 
quarterly report for the fiscal quarter immediately before that one. 
It could also elect to deliver the later Form 10-QSB even though it 
is not yet due to be filed under Exchange Act rules.
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    The issuer would have to deliver the Exchange Act annual report and 
the Form 10-QSB with the prospectus delivered to investors under 
proposed Securities Act Rule 172. If the issuer delivers another 
prospectus to the same investor later on in the offering, it would not 
have to re-deliver the Exchange Act reports.228
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    \228\ See proposed revisions to Form SB-2, Note to Item 12.
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    Our proposals require delivery of the small business issuer's full 
Exchange Act annual report rather than an abbreviated glossy annual 
report to security holders. We believe that most small business issuers 
are not generally followed by the investment community and the 
information that they report is not widely disseminated. Because a 
typical annual report to security holders provides less information to 
investors than an annual report, we believe the latter would aid 
investors more.229 For example, an annual report to security 
holders does not include complete information about management, 
executive compensation, security ownership and transactions with 
related parties. We would require that the issuer deliver this 
disclosure, which is included in the Exchange Act annual report, with 
the prospectus.230
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    \229\ The annual report to security holders of small business 
issuers must contain the information required by Rule 14a-3(b), 17 
CFR 240.14a-3(b). This includes financial statements, changes in and 
disagreements with accountants, management's discussion and analysis 
or a plan of operations, a brief description of business, basic 
management information and market prices for the issuer's common 
equity and related information. 17 CFR 240.14a-3(b) and 17 CFR 
240.14c-3(b).
    \230\ For similar reasons, we do not propose that small business 
issuers deliver a quarterly report to security holders instead of 
the most recently filed Form 10-QSB.
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    We solicit comment on these delivery requirements. Should we expand 
the delivery requirements to require delivery not just of the annual 
report and most recent Form 10-QSB but also any other Form 10-QSB or 
Form 8-K filed since the end of the fiscal year covered by the annual 
report? Should we narrow the delivery requirements? For example, should 
we allow small business issuers to deliver their annual reports to 
security holders instead of their Exchange Act annual report 
disclosure?
d. Other Changes to the Forms
    In addition to amending Form SB-2 to permit incorporation by 
reference, we are rearranging that Form in order to accommodate the new 
provisions. Also, we are proposing correcting and technical changes to 
Form SB-2.231
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    \231\ General Instruction A.3. would be revised because it 
repeats General Instruction A.2. General Instruction B.1. would be 
amended to remove the reference to Form SR, which was eliminated in 
September 1997. See Securities Act Release No. 7431 (July 18, 1997).
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4. Form SB-3
a. Use and Timing of Form SB-3
    Small business issuers would register business combinations and 
exchange offers on proposed Form SB-3, rather than Form C. Under the 
present system, small business issuers must use Form S-4 for these 
transactions. A General Instruction to the Form lists the Items of Form 
S-4 with which small business filers are not required to comply. It 
also lists those Items of other forms that the

[[Page 67205]]

registrant must comply with in lieu of the Form S-4 Items. We are 
proposing a separate form for small business issuers to simplify and 
streamline their disclosure requirements when they register a business 
combination or exchange offer transaction.
    Only registrants that are small business issuers under Rule 405 
would be allowed to use proposed Form SB-3. Form SB-3 would be 
available for the same types of transactions as proposed Form C and 
current Form S-4.232 Form SB-3 may serve as the proxy or 
information statement used in the proposed transaction, like Form C. A 
Form SB-3 would be subject to Commission staff review and would become 
effective in the same manner as Form S-4 today.
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    \232\ See Section V.D.1. of this release for a discussion of the 
transactions required to be registered on Form C.
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b. Structure of Form SB-3
    In keeping with other Securities Act registration forms, there are 
two parts to Form SB-3: information included in the prospectus (Part I) 
and information not included in the prospectus (Part II).
i. Part I--Information Required in the Prospectus
    The Part I information of Form SB-3 would be the same as the Part I 
information required by Form C. It would consist of four sections: 
information about the transaction, information about the registrant, 
information about the company being acquired, and voting and management 
information.
(A) Information About the Transaction
    The registrant would have to provide the same information about the 
transaction as a registrant on Form C would.
(B) Information About the Registrant
    This section details the disclosure requirements that apply to the 
registrant. It includes three different disclosure formats, based upon 
the level of disclosure that the small business issuer would have to 
provide in a primary offering. We are proposing this approach with the 
larger issuers on Form C as well.
    (1) Transitional Small Business Issuers
    Certain small business issuers provide non-financial statement 
disclosure in their Exchange Act reports based on Form 1-
A.233 Those disclosure requirements are less detailed than 
the Regulation S-B requirements, which apply to all other small 
business issuers. Form S-4 now permits these registrants to provide the 
same non-financial statement disclosures as they would on Form 1-A, so 
long as the registrants provided the information required by Form 1-A 
in their most recent Form 10-KSB. Proposed Form SB-3 would preserve 
this option. This alternative would be available only if the registrant 
would be eligible to use Form SB-1. Form SB-3 requires the registrant 
to supplement the Form 1-A non-financial information with disclosure 
required by certain items of Regulation S-B. Also, the registrant would 
have to provide the financial statements called for by Item 310 of 
Regulation S-B.
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    \233\ Non-reporting companies use Form 1-A to qualify securities 
offered under Regulation A, an exemption from registration under 
Section 3(b) of the Securities Act.
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(2) Seasoned Small Business Issuers
    A registrant that would be able to incorporate by reference from 
its Exchange Act reports under the proposed changes to Form SB-2 also 
would be able to incorporate by reference its Exchange Act reports 
under proposed Form SB-3. Just like seasoned Form A issuers on Form C, 
if the registrant chooses this option, it must incorporate by reference 
into the prospectus, and deliver with the prospectus, its latest 
Exchange Act annual and quarterly reports. Like proposed Form C, Form 
SB-3 would not permit delivery of a company's glossy annual report to 
security holders or a quarterly report to security holders.
(3) All Other Small Business Issuers
    Registrants that are not transitional small business issuers or 
seasoned small business issuers would have to provide the same 
registrant information they are required to by Form S-4 today. A 
transitional small business issuer or a seasoned small business issuer 
also may elect to comply with this disclosure format.
(C) Information About the Company Being Acquired
    Proposed Form SB-3 would require the same information required by 
current Form S-4 and that would be required by proposed Form C. If the 
company being acquired is a small business issuer, information for that 
company would be provided under the same three options available to the 
registrant on Form SB-3. If the company being acquired is not a small 
business issuer, information for that company would be the same as if 
it were the registrant on Form C.
(D) Voting and Management Information
    This section of proposed Form SB-3 would mandate disclosure the 
same as that required by Form S-4 and proposed Form C. If the 
registrant or company being acquired is eligible to incorporate by 
reference, this information also may be incorporated.
ii. Part II--Information Not Required in the Prospectus
    Proposed Form SB-3 would require information about indemnification 
of directors and officers, exhibits and undertakings to be provided in 
Part II of the registration statement, as required by Form S-4 and 
proposed Form C.
C. Request for Comments
    We request your comments on proposed Form SB-3. Do you believe that 
a separate form for small business issuers registering a business 
combination or exchange offer is necessary? Would it be better to 
include small business issuers on proposed Form C? We propose to allow 
a small business issuer's acquisition of a company that is not a small 
business issuer on Form SB-3. Is this appropriate or should those 
transactions be filed on Form C?
5. Small Business Issuers that Become Reporting Companies
    Another way in which we would ease capital formation for small 
business issuers is to solve a dilemma that arises at times when they 
seek to register an offering for the first time. Generally, small 
business issuers have made exempt offerings of securities before they 
first register an offering. Sometimes those offerings are made under 
Rule 504 of Regulation D under the Securities Act.234 Rule 
504 states that an issuer subject to the reporting requirements of 
Section 13 or 15(d) may not rely on the Rule.
---------------------------------------------------------------------------

    \234\ 17 CFR 230.504. That Rule provides an exemption from 
registration for securities offerings not exceeding $1,000,000 
within a 12-month period.
---------------------------------------------------------------------------

    That prohibition on reliance by reporting companies has raised 
registration concerns for companies that issue convertible securities 
or warrants in compliance with Rule 504 and afterwards become reporting 
companies.235 If their convertible securities or warrants 
remain

[[Page 67206]]

outstanding at the time they become reporting companies, the ongoing 
offer and sale of the underlying securities would no longer be covered 
by Rule 504. Sometimes a reporting issuer can rely on another exemption 
with respect to the continuing offer and the sale of the underlying 
securities.236 If not, the reporting issuer can face the 
difficult situation of having no exemption and being unable to register 
the offering of the underlying securities because it has offered the 
securities before filing a registration statement.237
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    \235\ An issuer may become an Exchange Act reporting company in 
a number of ways. Usually, companies become subject to the reporting 
requirements either because they register an offering of securities 
under the Securities Act, they register a class of securities under 
the Exchange Act before listing or quotation, or they exceed the 
number of holders and assets tests in Exchange Act Section 12(g).
    \236\ Under many circumstances, the Section 3(a)(9) exemption 
would be available for the issuance of securities pursuant to a 
conversion. Section 3(a)(9) does not generally apply, however, to 
the exercise of warrants because the exemption is for exchanges by 
the issuer of securities with its existing security holders and is 
not available where a commission or remuneration is paid or given 
directly or indirectly for soliciting the exchange.
    \237\ Offers of the underlying securities occur upon issuance of 
the convertible security or warrant where convertible or exercisable 
within one year. Also, offers of the underlying securities continue 
until the conversion or exercise has occurred or the conversion or 
exercise period has ended.
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    We are concerned that an issuer would lose the Rule 504 exemption 
for the underlying securities in these circumstances solely because the 
issuer has become a reporting company. In fact, holders of convertible 
securities or warrants may benefit from that transition. They may have 
access to more information about the issuer if it is a reporting 
company. Greater access to information always assists investors that 
have to make investment decisions.
    Accordingly, we propose to revise Rule 504 to provide that the 
status of the issuer as a reporting company does not prevent it from 
relying on the Rule for the issuance of securities underlying 
convertible securities and warrants that it previously offered in 
compliance with the Rule when it was not a reporting 
company.238 If the issuer becomes unable to rely on Rule 504 
for any reason other than the fact that it became a reporting company, 
Rule 504 would not be available.
---------------------------------------------------------------------------

    \238\ See proposed revisions to Securities Act Rule 504(a), 17 
CFR 230.504(a).
---------------------------------------------------------------------------

    Under this proposal, a reporting company would be able to rely on 
Rule 504 only for the conversion or exercise of securities if they were 
offered pursuant to Rule 504. Thus, before the issuer became subject to 
the reporting requirements, the convertible securities or warrants 
would have to have been:
    1. Immediately convertible or exercisable; or
    2. Convertible or exercisable within a year.
    We solicit comment on this change to Rule 504. We seek comment 
about whether we should permit a reporting company to rely on Rule 504 
for the offer and sale of securities underlying convertible securities 
or warrants regardless of when they become convertible or exercisable. 
For example, should Rule 504 apply to the offer and sale of underlying 
securities if the issuer becomes a reporting company one year after 
issuing warrants under Rule 504 that were not exercisable for three 
years?
    Are there reasons to limit reliance on the Rule to a certain period 
of time after the issuer becomes a reporting company? Should we not 
allow an issuer to rely on the Rule for the exercise or conversion if 
the issuer sold the warrants or convertible securities when it could 
have foreseen that it was about to become a reporting company? For 
example, should we extend Rule 504 to securities underlying warrants 
and convertible securities only if the issuer sold them more than six 
months (or three months) before becoming a reporting company?
6. Small Business Issuer Registration Fees
    We also seek to ease the registration process for small business 
issuers in recognition of unique difficulties they may face due to 
their size. We are proposing rule revisions that would permit small 
business issuers filing on small business registration statement forms 
to delay payment of the Commission registration statement filing fee 
until shortly before effectiveness.239 These issuers often 
face substantial liquidity problems due to their smaller size. The cost 
of preparing and filing a registration statement is a relatively 
expensive endeavor for many small business issuers. Those costs may 
deplete the issuer's liquid resources. By delaying fee payment, these 
issuers will have extra time, at least for this portion of the offering 
expenses, to generate funds to pay the fees. This should help ease 
registration for these issuers.240
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    \239\ See proposed revisions to Securities Act Rule 456, 17 CFR 
230.456.
    \240\ Until recently, the Commission has had little flexibility 
to change the timing of registration fee payments under the 
Securities Act. Section 6(b)(2) of the Securities Act, 15 U.S.C. 
Sec. 77f(b)(2), provides that registration fees must be paid when a 
registration statement is filed. That section also says that a 
registration statement will not be deemed filed unless the fee has 
been paid. 15 U.S.C. Sec. 77f(c). NSMIA revised Section 4(e) of the 
Exchange Act, 15 U.S.C. Sec. 78d(e), to allow the Commission 
flexibility to specify the time that fee payments are due relative 
to filings with the Commission.
---------------------------------------------------------------------------

    The amount of securities that a small business issuer is able to 
sell in a registered offering may not be determined until well after 
the public offering begins and the issuer can assess investor interest. 
It is not uncommon that small business issuers have to scale back the 
amount of its offering. If the issuer were not required to pay the fee 
until shortly before effectiveness, it would more likely be able to pay 
only the fee on the amount of securities that will be sold in the 
offering.
    Under the proposals, a small business issuer that wishes to delay 
fee payment would have to include a Rule 473(a) delaying amendment in 
its registration statement. It also would have to include an 
undertaking in the registration statement to pay the fee no later than 
the day on which it submits a request for acceleration of effectiveness 
of the registration statement. If a small business issuer files a pre-
effective amendment stating that the registration statement shall 
thereafter become effective under Section 8(a) of the Securities Act 
(deleted the delaying amendment), it would have to pay the fee no later 
than the date the amendment is filed. If no fee is paid at that time, 
the pre-effective amendment would not be considered filed. Where a 
small business issuer makes an initial filing of a registration 
statement without the Rule 473(a) delaying amendment, it must pay the 
registration fee in order for the registration statement to be 
considered filed. If no fee is paid at that time, the registration 
statement would not be deemed filed.
    We request your comments on this proposed rule change. Should fee 
payments by small business issuers be delayed until shortly before 
effectiveness? If not, why not? Should this alternative be available to 
all small business issuers or only some category of those issuers, such 
as non-reporting small business issuers? Should this option be allowed 
for registration statements filed by blank check companies, blind pool 
companies, or other issuers? Should this option be allowed for all 
issuers that file on a registration form that is not effective at the 
issuer's discretion, whether or not the issuer is a small business 
issuer? 241 Would the Commission staff be inundated with 
filings by persons who were not necessarily sincere about going forward 
with offerings? If so, should we require a good faith down payment of 
the filing fee?
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    \241\ For example, Schedule B and the following Forms would not 
always become effective at the issuer's discretion: A, C, F-8, F-9, 
F-10 and F-80.
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F. MJDS Issuers

    In 1991, the Commission adopted rules and forms to create a 
multijurisdictional disclosure system (``MJDS'') with Canada. The

[[Page 67207]]

Commission's purpose was to facilitate cross-border securities 
offerings and periodic reporting by eligible Canadian 
issuers.242 The MJDS allows eligible Canadian issuers to 
satisfy registration and reporting requirements under the Securities 
Act and the Exchange Act by providing the Commission with disclosure 
documents prepared under Canadian securities law. At the time the 
Commission adopted the MJDS, Canada's securities administrators adopted 
a parallel multijurisdictional disclosure system for U.S. issuers. 
Together, the systems provide that issuers in the United States and 
Canada are principally subject to the specific disclosure requirements 
of only their home country when making securities offerings in the 
other country.
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    \242\ Securities Act Release No. 6902 (June 21, 1991) [56 FR 
30036].
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    The MJDS may be used only for certain kinds of 
transactions,243 and only by issuers that meet the issuer 
eligibility requirements related to those transactions. Issuer 
eligibility requirements under the MJDS vary depending on the 
transaction being registered. One requirement is that an issuer have a 
minimum public float. To register an exchange offer or business 
combination under the MJDS, an issuer must have a public float of (CN) 
$75 million (Canadian dollars).244 To use the MJDS to 
register an offering of investment grade securities or to register any 
securities offering by a larger issuer, the issuer must have a public 
float of at least (US) $75 million.245 Registration under 
the Exchange Act also may be accomplished under the MJDS by a Canadian 
issuer if it has a public float of at least (US) $75 million. The 
minimum float requirements were designed so that the MJDS would be used 
by issuers that were well-known and widely followed by the 
market.246 Those issuers are the same type we would allow to 
use proposed Form B for any offering. We are therefore proposing to 
replace the public float tests under the MJDS with the same public 
float/ADTV thresholds proposed for Form B.247
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    \243\ Generally, the transactions permitted under the MJDS 
include: issuance of securities upon exercise of rights offered to 
existing shareholders; issuance of securities pursuant to an 
exchange offer or business combination requiring shareholder vote; 
issuance of investment grade debt or preferred securities; and 
securities offerings by larger issuers.
    \244\ Issuer exchange offers do not require a minimum public 
float.
    \245\ That float test is not applicable for offerings of non-
convertible investment grade securities.
    \246\ When the Commission last revised the public float 
thresholds in the MJDS, we specifically noted that the MJDS public 
float test was meant to parallel the Form S-3 public float test. 
Securities Act Release No. 7025 (Nov. 3, 1993) [58 FR 62028].
    \247\ The proposed revisions would not add a public float 
requirement for any transaction registered under the MJDS that does 
not currently require one.
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    A Canadian foreign private issuer that meets the other issuer 
eligibility criteria under the MJDS therefore would be eligible to use 
it if:
    1. Its public float is (US) $75 million or more and the ADTV of its 
equity securities is $1 million or more; or
    2. The issuer's public float is (US) $250 million or more.
    With the combined public float/ADTV test, some issuers may find 
that the proposed thresholds are more difficult to satisfy than the 
current MJDS public float test. The proposed thresholds also would have 
an effect on issuers seeking to register an exchange offer or a 
business combination because the float would be measured in U.S. 
dollars instead of Canadian dollars. Because the other public float 
requirements under the MJDS are measured in U.S. dollars, the proposal 
would have less of an impact on those transactions.
    Despite the possibility that the new eligibility thresholds may 
preclude some Canadian issuers from using the MJDS, we believe that the 
reasons that support the proposed thresholds for Form B issuers, as 
explained above, also support the proposed thresholds for MJDS issuers. 
Accordingly, we propose to revise the public float tests in Forms F-8, 
F-9, F-10, F-80, and 40-F to conform to the proposed public float/ADTV 
thresholds for Form B.
    We solicit your comment on this proposal. Should we continue to 
express the proposed public float/ADTV requirements for business 
combinations and exchange offers in Canadian dollars rather than in 
U.S. dollars? Would the higher proposed thresholds allow too few 
Canadian companies to use the MJDS system? Should the proposed 
revisions apply to some but not all of the MJDS forms? If so, which 
ones?
    The proposals in this release also would affect MJDS issuers in 
another way. Form B requires that the issuer previously have filed at 
least one annual report on Form 10-K or Form 20-F and have registered 
an offering of securities under the Securities Act using a form other 
than those, such as the MJDS Securities Act forms, that become 
effective automatically upon filing. As a result of these requirements, 
Canadian issuers who file annual reports on Form 40-F or whose previous 
offerings have been registered under the Securities Act on MJDS forms 
will not be eligible to use Form B. If we permitted a Canadian issuer 
to use filings under MJDS as the basis for Form B eligibility, the 
issuer could access our markets both initially and on a continuing 
basis without the Commission staff ever reviewing any of its disclosure 
documents. Thus, we propose to exclude MJDS forms in determining 
eligibility. Consequently, Canadian issuers would need to plan in 
advance which registration or reporting forms to use under the 
Securities Act and the Exchange Act, because they would not be able 
move back and forth between the MJDS and non-MJDS systems as easily as 
is currently possible. We solicit comment on this aspect of Form B. In 
addition, in view of the fact that Form B will provide some of the same 
benefits as the MJDS, in terms of ease of access to the market, should 
some or all of the MJDS forms be eliminated in favor of the system 
proposed in this release? If only some MJDS forms should be eliminated, 
which ones?

G. Foreign Government Issuers

    Proposed Rule 462 would permit certain seasoned foreign government 
issuers that file registration statements on Schedule B to designate 
the date and time of the effectiveness of their registration statements 
by checking a box on the cover page of their Schedules.248 
The issuer could designate that the registration statement be effective 
automatically upon filing, upon any date and time it specifies, or as 
designated in a later amendment. Registration statements filed in 
reliance on the Rule would not be subject to Commission review.
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    \248\ See proposed Securities Act Rule 462(f)(1) and (f)(2), 17 
CFR 230.462(f)(1) and 230.462(f)(2).
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    Rule 462 would only be available to foreign government issuers that 
were registering on Schedule B an offering of at least $250 million 
that also was underwritten on a firm commitment basis.249 
These issuers also would be required to have a history of registering 
under the Securities Act. To use Rule 462, a foreign government issuer 
would have to have registered an offering under the Securities Act 
within the three most recent years.
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    \249\ For a delayed shelf offering, the $250 million would be 
measured based on what is registered at the outset, not what is 
offered in any single takedown.
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    The prior registration requirements would guarantee that some 
public information would be available before a foreign government 
issuer could rely on the Rule. It also would give the issuer an 
opportunity to become comfortable with the registration process and 
disclosure standards of the federal securities laws.

[[Page 67208]]

    The basis for extending automatic effectiveness to these issuers 
rests on the concept that offerings by seasoned, well-known issuers 
attract market, analyst and investor attention and recognition. We 
believe that most investors and analysts would have familiarity with 
these foreign governments due to their nature and size. The firm 
commitment underwritten $250 million offering criteria should ensure 
that their offering also attract significant market, analyst and 
investor attention. We believe the prior filing requirement would 
ensure that these issuers had some experience with registration under 
the Securities Act. These factors would result, we believe, in the 
generation and dissemination of current public information about the 
foreign government issuers and their offerings. In this respect, they 
would be similar to the classes of issuers to which we would extend 
Form B. We are therefore proposing that, like Form B issuers, these 
Schedule B issuers may designate the effectiveness of their 
registration statements.
    We seek comment on this proposal. Should we raise the proposed 
effectiveness rule's offering threshold to something around $500 
million or lower it to something around $150 million? Should we require 
that a foreign government issuer have registered an offering under the 
Securities Act within 5 years rather than within three years? Should we 
allow any filing by a foreign sovereign government issuer, other than 
its initial registered offering, to be effective immediately upon 
filing? Should other non-financial factors affect the foreign 
government issuer's ability to designate the effectiveness of its 
registration statement?

H. Exxon Capital Transactions

    If the Commission decides to adopt these proposals, the staff of 
the Division of Corporation Finance would repeal the line of 
interpretive letters concerning Exxon Capital exchange 
offers.250 These interpretive letters allow issuers to sell 
certain securities in a private offering and shortly thereafter 
register an offering of substantially identical securities in exchange 
for those securities privately placed. Issuers use this procedure, in 
part, because it allows them to avoid the delay associated with 
registration. Since July 1, 1998, more than one-third of all initial 
public offerings have been Exxon Capital exchanges.
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    \250\ See, e.g., Exxon Capital Holdings Corp. (May 13, 1988); 
Morgan Stanley & Co. Inc. (Mar. 27, 1991); Mary Kay Cosmetics, Inc. 
(June 5, 1991); Shearman & Sterling (July 2, 1993); Brown & Wood LLP 
(Feb. 5, 1997).
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    Under these interpretive letters, investors that participate in the 
exchange may resell their new securities without complying with 
registration or prospectus delivery requirements of the Securities Act. 
Prior to these letters, privately placed securities could be registered 
only for resale, which provides investors with the protection of 
prospectus delivery requirements and subjects the sellers to the 
liability provisions of Sections 12(a)(2) and 17(a) of the Securities 
Act and, if deemed underwriters, Section 11 of the Securities 
Act.251
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    \251\ The basic premise underlying the Exxon Capital line of 
interpretive letters is that the securities exchanged in reliance on 
those letters would remain in the institutional investor secondary 
market.
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    These proposals would create a registration system that captures 
the speed and flexibility associated with private offerings while 
retaining the benefits of registration for investors. Private 
placements would no longer be an issuer's main choice when needing to 
complete an offering quickly. Delays commonly associated with 
registration would no longer exist for Form B issuers and for medium 
size Form A issuers. Their registration statements would not be subject 
to prior staff review. Moreover, if such an issuer chooses, its 
registration statement could be effective upon filing.
    The proposed registration system does not exclude the small issuer 
from these benefits. Small issuers that do not meet the public float 
requirement of Form B or the float level on Form A to allow control 
over effectiveness would be able to use Form B to register an offering 
if they sell only to QIBs. Given the nature of the purchasers 
contemplated in the Exxon Capital line of letters, allowing small 
issuers to register sales to QIBs on Form B would allow those issuers 
much of the same flexibility the Exxon Capital structure gives them 
today.
    Elimination of this line of interpretive letters would eliminate 
the ability of these smaller issuers to rely on the Exxon Capital line 
of interpretive letters for sales to non-QIBs. This limitation seems 
appropriate, as it aligns with our views regarding registered offerings 
by these issuers to QIBs and the need for additional protections for 
non-QIBs in offerings by these smaller issuers. Accordingly, we concur 
with the belief of the Division of Corporation Finance that the Exxon 
Capital line of interpretive letters should be repealed upon adoption 
of reforms to the registration system. Comment is solicited with regard 
to whether the Exxon Capital line of letters should be repealed sooner 
or regardless of whether any reform to the registration statement is 
adopted.

I. The Offset of Filing Fees and Other Technical Changes to the 
Calculation of Filing Fees

    In 1995, the Commission expanded Rule 429 252 to provide 
a mechanism for issuers to offset the payment of a registration 
statement filing fee with fees that were previously paid.253 
The amount available for use as an offset under Rule 429 equals the 
portion of the filing fee previously paid that is associated with any 
unsold securities registered on an earlier registration statement. Once 
a filing fee has been used as an offset, those unsold securities on the 
earlier registration statement are deemed deregistered. This change has 
proved to be beneficial to issuers.
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    \252\ 17 CFR 230.429.
    \253\ Securities Act Release No. 7168 (May 11, 1995).
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    Rule 429, however, also provides for the use of a combined 
prospectus for multiple offerings. At times, the combination of fee 
offset procedures and combined prospectus procedures in the same rule 
has resulted in confusion as to whether an issuer is offsetting fees or 
is combining prospectuses. To avoid that confusion, we propose to move 
the fee offset procedures into Rule 457, which currently deals with fee 
payment.254
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    \254\ See proposed Rule 457(p), 17 CFR 230.457(p).
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    We also propose revisions to the fee offset procedures to allow 
issuers to offset filing fees on more occasions. Currently, fee offset 
is not possible if the issuer withdraws the earlier registration 
statement. Under the proposals, we would allow issuers to offset a 
registration statement filing fee in the same manner regardless of 
whether it withdraws the registration statement. To assist the 
Commission in tracking the payment of filing fees and allow for more 
accurate estimates of future filing fee payments, the proposals would 
provide that any offset must occur within five years of the completion 
or termination of the initial registration statement.
    We also are proposing to amend Rule 457 to codify certain staff 
interpretations as follows:
    (i) No additional filing fee would be required to be paid for a 
resale offering of securities, where such securities were received and 
a filing fee was paid, in connection with a registered offering 
involving an exchange, reclassification or recapitalization; 
255
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    \255\ See proposed Rule 457(f)(5), 17 CFR 230.457(f)(5).

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[[Page 67209]]

    (ii) We would not require payment of a filing fee for the 
registration of an indeterminate amount of securities to be offered 
solely for market making purposes by an affiliate of the issuer; 
256 and
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    \256\ See proposed Rule 457(q), 17 CFR 230.457(q).
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    (iii) In offerings by selling security holders, the issuer may 
calculate the filing fee using the total aggregate dollar amount to be 
offered, rather than setting forth the number of securities and 
information based on that just as in offerings where issuers are 
selling.257
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    \257\ See proposed Rule 457(o), 17 CFR 230.457(o).
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J. Solicitation of Comments Regarding Offerings of Asset-Backed 
Securities Offerings

    Currently, issuers (i.e., trusts or other limited purpose entities) 
and registrants (i.e., sponsors, servicers or depositors) may register 
an offering of investment grade asset-backed securities on Form S-3 
whether or not they are subject to the Exchange Act's reporting 
requirements. Form S-3 does not require an issuer or registrant of 
investment grade asset-backed securities to have been reporting under 
the Exchange Act because asset-backed securities are valued primarily 
on the pool of assets chosen, not on an issuer or registrant's limited 
operations.258 Moreover, historical Exchange Act reports 
filed by the issuer or registrant of asset-backed securities generally 
are viewed as of little assistance to investors since such reports 
would reflect the results of a different pool of assets than those 
backing the securities being offered. Investors of asset-backed 
securities often look to a nationally recognized statistical rating 
organization's (NRSRO) ratings when making their investment decisions.
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    \258\ See Securities Act Release 6964 (October 22, 1992) [57 FR 
56248].
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    As proposed, neither Form B nor Form A is designated for use in 
registering offerings of asset-backed securities.259 The 
Commission staff is engaged in an ongoing project to consider 
development of disclosure and registration requirements specifically 
related to asset-backed securities. The Commission staff intends to 
develop proposals with respect to asset-backed securities offerings in 
connection with that project. To gather more information, we solicit 
comment about the treatment of these types of offerings in relation to 
the proposals in this release.
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    \259\ Form S-3 has permitted the registration of investment 
grade asset-backed securities since 1992. See Securities Act Release 
No. 6964 (Oct. 22, 1992).
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    Overall, should treatment of asset-backed securities offerings be 
the same as or similar to treatment of Form A offerings or Form B 
offerings? Should we continue to distinguish asset-backed securities on 
the basis of whether or not they are investment grade securities? 
Should offerings of investment grade asset-backed securities be treated 
more like Form B offerings and other asset-backed securities offerings 
be treated more like Form A offerings? Should we require that one or 
more NRSROs have rated the securities?
    Should the Commission give registrants in some asset-backed 
offerings greater freedom to craft disclosure about the offering 
without binding them to all of the itemized disclosure in Regulation S-
K? If so, how should the mandated items differ from the ones mandated 
in Form B? Should the Commission craft a separate regulation setting 
forth mandated asset-backed offering disclosure items? Should 
communications restrictions applicable before filing a registration 
statement and during the registration process be more akin to those 
applicable to offerings on Form A, Form B or neither?
    Should the Commission preserve staff review for all asset-backed 
offerings or are there categories of such offerings that the Commission 
need not review for the purpose of investor protection? Should the 
Commission allow the registrant to control effectiveness in any 
category of asset-backed offerings? Should delivery requirements with 
respect to asset-backed offerings resemble delivery obligations of Form 
A offerings, Form B offerings or neither?

VI. Concurrent Exchange Act Registration

    We are proposing to permit an issuer to register concurrently both 
an offering under the Securities Act and a class of securities under 
the Exchange Act on Form A, Form B, Form C, Form SB-1, Form SB-2, Form 
SB-3 and Schedule B.260 A reporting company can register a 
class of securities under the Exchange Act on a short-form registration 
statement: Form 8-A.261 Form 8-A requires a description of 
the registrant's securities and the filing as exhibits of documents 
defining the rights of security holders.262 Current rules 
require companies that are registering both an offering of securities 
under the Securities Act and a class of securities under the Exchange 
Act to file two forms: the Securities Act registration statement and 
the Form 8-A. Because the proposed Securities Act forms should contain 
all of the necessary information, we propose to eliminate the Form 8-A 
filing requirement when the registrant files one of those Securities 
Act registration statements at that time.263
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    \260\ The Commission's Task Force recommended concurrent 
registration in its Report. Task Force Report at p. 86. We first 
proposed concurrent registration in May 1996 as part of the Phase 
Two proposals to implement certain recommendations contained in the 
Report. Exchange Act Release No. 37263 (May 31, 1996) [61 FR 30405]. 
When we adopted several of the Phase Two proposals in July 1997, we 
indicated that we would continue to consider the matter in our 
efforts to streamline the registration process. Exchange Act Release 
No. 38850 (July 18, 1997) [62 FR 39755]. That release adopted a 
companion proposal which revised Rule 12d1-2, 17 CFR 240.12d1-2, to 
permit automatic effectiveness of the Form 8-A as of the effective 
time of the Securities Act registration statement relating to the 
same class of securities. We continue to believe that concurrent 
registration would be beneficial for registrants and are now 
reproposing it. See proposed Exchange Act Rule 12d1-2, 17 CFR 
240.12d1-2.
    \261\ We also permit an issuer registering an initial public 
offering to use Form 8-A even though it is not a reporting company 
until after effectiveness of the Securities Act registration 
statement.
    \262\ The securities description must provide the information 
called for by either Item 202 of Regulation S-K or Regulation S-B, 
as applicable, 17 CFR 229.202 and 17 CFR 228.202. An issuer can 
incorporate by reference into Form 8-A information that is contained 
in other filings made with the Commission.
    \263\ We also propose a revision to clarify that Form 8-A is 
available for reporting companies only if they are current in their 
reporting. See proposed revisions to General Instruction A of Form 
8-A.
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    To allow concurrent registration, those registration Forms would 
have boxes on the facing page for registrants to check to indicate that 
Exchange Act registration should be concurrent. The registrant would 
include the title of the class of securities to be registered and the 
exchange or market on which the securities are to be listed or traded. 
We also are proposing a new rule to permit foreign governments and 
their political subdivisions that register securities offerings on 
Schedule B to register concurrently under the Exchange 
Act.264 If these issuers seek concurrent Exchange Act 
registration, they must include the same paragraph and table on the 
facing page of their Schedule B registration statements that appear on 
the Securities Act registration statements for which we will have 
adopted forms.
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    \264\ See proposed Securities Act Rule 499, 17 CFR 230.499.
---------------------------------------------------------------------------

    We request comment on these concurrent registration proposals. Are 
there offerings for which concurrent registration should not be 
available because the securities description in the Securities Act 
registration statement would not be adequate? 265
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    \265\ In the 1996 proposing release, we did not propose to allow 
concurrent registration for securities to be offered and sold on a 
delayed basis under Rule 415(a)(1)(x), 17 CFR 230.415(a)(1)(x), 
because of concerns about whether an adequate description of the 
securities would be contained in the Exchange Act registration 
statement.

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[[Page 67210]]

VII. Communications During the Offering Process

    The Securities Act restricts the types of offering communications 
that a registrant may use during the time it is engaged in a registered 
public offering of its securities.266 The level of 
restrictions depends on the period during which the communications 
occur. The Securities Act creates three distinct periods in the 
registered offering process. The first period occurs before a 
registrant files a registration statement with the Commission and is 
commonly called the ``pre-filing period.'' The second period starts 
with the filing of the registration statement and ends with the 
effectiveness of that registration statement and is commonly called the 
``waiting period.'' The third period follows the effective date of the 
registration statement. That period is commonly called the ``post-
effective period.''
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    \266\ Those acting on behalf of the registrant (such as an 
underwriter) are subject to the same restrictions as the registrant.
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    During the pre-filing period, the Securities Act prohibits the 
registrant from making any interstate offers or sales of the 
securities.267 During the waiting period, the registrant may 
make certain types of offers (but not sales). Offers made in writing, 
by radio or by television must conform to the information requirements 
of Section 10 of the Securities Act. Thus, the Securities Act prohibits 
the use of supplemental sales literature (``free writing'') during the 
waiting period. Generally, issuers and underwriters make written offers 
during the waiting period by means of a preliminary prospectus which 
must be filed with the Commission. Person-to-person oral offers also 
are allowed during this period and, unlike widely disseminated 
communications such as radio or television broadcasts, do not have to 
satisfy the informational requirements of Section 10. During the post-
effective period, the registrant may use any materials to offer the 
securities 268 but only if it delivers the final prospectus 
before or with those materials.269 It also may sell the 
securities.
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    \267\ Securities Act Rule 135, 17 CFR 230.135, allows an issuer 
to notify the public of a proposed offering as long as the contents 
of the notice do not exceed the limited items specified in the rule.
    \268\ These materials are still subject, of course, to the 
antifraud and civil liability provisions of the statute.
    \269\ Final prospectuses must satisfy the informational 
requirements of Section 10(a) of the Securities Act.
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    Congress designed these limitations so that the prospectus would be 
the primary means for investors to obtain information during the 
waiting period regarding an offering of securities. Congress' goal was 
to prevent high pressure sales practices and to provide investors with 
an opportunity to become familiar with the investment being 
offered.270 In fact, the Securities Act originally 
prohibited both oral and written offers during the waiting 
period.271 While that prohibition succeeded in limiting high 
pressure sales practices, it also limited the time in which investors 
could become familiar with the investment so as to make an unhurried 
decision regarding the merits of the securities.272 That 
limitation ultimately was revised by Congress in 1954 in favor of 
permitting certain offers during the waiting period.273
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    \270\ H.R. Rep. No. 85, 73rd Cong., 1st Sess. 3 (1933).
    \271\ Section 2(a)(3) of the Securities Act originally made no 
distinction between offers and sales. The term sale was defined to 
include any: ``offer to sell,'' ``offer for sale,'' ``attempt or 
offer to dispose of, or solicitation of an offer to buy.'' 
Consequently, Section 5(a) of the Securities Act prohibited at that 
time both interstate offers and sales of securities before a 
registration statement became effective. See also S. Report No. 
1036, 83rd Cong. 2d Sess. 4 (1954).
    \272\ Hearings on S. 2846 Before the Subcomm. of the Senate 
Comm. on Banking and Currency, 83rd Cong., 2d Sess. 23 (1954) 
(statement of Ralph H. Demmler, Chairman of the Securities and 
Exchange Commission). The regulators soon realized the importance of 
providing investors with information during the waiting period. The 
Federal Trade Commission (which administered the Securities Act 
before the creation of the Commission in 1934) published its view in 
1933 that it was permissible for issuers and underwriters to 
disseminate circulars during the waiting period if they described a 
security in the same manner a Section 10 prospectus would. See 
Securities Act Release No. 70 (Nov. 6, 1933) [11 FR 10948]; 
Securities Act Release No. 464 (Aug. 19, 1935) [11 FR 10953]. In 
1946, the Commission adopted Rule 131, 17 CFR 230.131, which 
expressly permitted the use of a preliminary prospectus or ``red 
herring.'' See Securities Act Release No. 3177 (Dec. 6, 1946) [11 FR 
14260]. See also Securities Act Rules 430 and 430A, 17 CFR 230.430 
and 230.430A.
    \273\ The 1954 amendments were intended to codify practices with 
regard to communications during the waiting period and finally 
resolve concerns that dissemination of preliminary information 
during the waiting period would breach the prohibition against 
offers. See Hearings Before the H.R. Comm. on Interstate and Foreign 
Commerce, 83rd Cong., 1st Sess. 66 (1953) (statement of Richard B. 
McEntire, Commissioner of the Securities and Exchange Commission). 
See also H.R. Rep. No. 1542, 83rd Cong., 2d Sess. 7 (1954).
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    The statutory regulation of communications during the pre-filing 
and waiting periods has not changed since those 1954 amendments. Our 
capital markets, however, have changed significantly. For example, 
there have been major advancements in technology and communication 
media since 1954. There have been many more offerings of increasingly 
complex and synthetic or hybrid securities. The trends towards 
globalization of securities markets and multinationalization of issuers 
and offerings have continued. Among others, these changes have 
increasingly created conflicts between communications mechanisms to 
which markets have become accustomed and the restrictions placed by the 
Securities Act on communications around the time of a registered 
offering.
    The Commission continues to believe that the Securities Act goals 
of preventing high pressure sales practices and providing investors 
with the time and opportunity to familiarize themselves with investment 
opportunities continue to be important today. We believe, however, that 
the means by which to effectuate those goals can be shaped to 
facilitate capital formation better and to provide more information on 
a more timely basis to investors. We do not believe it is appropriate 
to unnecessarily hinder communications when allowing them would provide 
benefits to investors and issuers as well as reflect current practices 
and realities.

A. Issuer Communications Relating to a Registered Offering

1. The Pre-Filing Period
a. Form B Registrants
    Today, the largest public companies are followed by numerous 
analysts that actively seek new information on a continual 
basis.274 Unlike smaller and less mature companies, large 
public companies tend to have a regular dialogue with investors and 
market participants through the press and other media. Companies in 
which there is a wide interest are called upon to release more 
information about their activities more often than is expected of 
lesser-known companies. The markets also absorb information disclosed 
about these companies at a rapid rate.275

[[Page 67211]]

Technological innovations that permit instantaneous communications are 
a driving force behind this decade's securities market.
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    \274\ For example, companies with a $250 million or higher 
market capitalization have, on average, 15 research analyst firms 
following them.
    \275\ A staff study on the market's absorption of information 
found that the speed of price discovery is positively associated 
with companies' market capitalizations, public floats and ADTVs. The 
staff found that combination tests of ADTV and either public float 
or market capitalization are more closely associated with the speed 
of price discovery than tests of only public float, only market 
capitalization or only ADTV. See Eligibility Requirements for Firms 
Receiving Preferred Registration Status in the Registration and 
Disclosure Reform Proposal (April 30, 1997).
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    Given the abundance of readily accessible information about large, 
seasoned public companies, any communications made by them while in the 
process of registering an offering are less likely to have a 
significant impact by conditioning the market or stimulating interest 
in a proposed offering.276 Accordingly, we are proposing to 
remove the restrictions on offering communications by those companies 
during the pre-filing period.277 We are proposing an 
exemption to provide that offers may be made in the pre-filing 
period.278
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    \276\ The Commission has long interpreted ``offer to sell'' 
broadly to encompass pre-filing publicity efforts that may not be 
phrased expressly in terms of an offer but condition the market or 
stimulate interest in the offering. See In the Matter of Loeb, 
Rhodes & Co., 38 SEC 843 (1959) and In the Matter of First Maine 
Corp., 38 SEC 882 (1959).
    \277\ Rules 101 and 102 of Regulation M, 17 CFR 242.101 and 
242.102, would continue to prohibit inducements to purchase 
securities that are the subject of a distribution during any 
applicable restricted period.
    \278\ See proposed Securities Act Rule 166, 17 CFR 230.166. 
Prospectuses used in reliance on this Rule during the period 
beginning 15 days before the first offer and ending with the 
offering completion would be filed under proposed Rule 425, 17 CFR 
230.425.
---------------------------------------------------------------------------

    For a large, seasoned company to rely on the proposed exemption for 
any offering, it must have filed all of its periodic reports under the 
Exchange Act for at least one year on a timely basis and have filed at 
least one annual report. It also must have either:
    1. A public float with a market value of at least $250 million; or
    2. A public float with a market value of at least $75 million and 
the average daily trading volume for its equity shares of at least $1 
million.
    These mirror the eligibility criteria for Form B registration by 
large well-followed issuers discussed earlier.
    The proposed registration system also contemplates use of Form B 
for offerings by smaller issuers that do not meet Form B's public float 
and ADTV eligibility tests. Those offerings would be limited to: 
offerings solely to QIBs; 279 offerings to certain existing 
shareholders; 280 offerings of investment grade securities; 
offerings of certain investment grade asset-backed securities; and 
offerings in connection with market making transactions. We propose to 
treat these Form B issuers in the same manner as we would treat large 
seasoned issuers that would register their offerings on Form B. 
Accordingly, their ability to offer registered securities also would 
not be contingent on the prior filing of the registration statement for 
the offering.281
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    \279\ See Securities Act Rule 144A(a)(1), 17 CFR 230.144A(a)(1).
    \280\ We propose that Form B allow registration of five kinds of 
offerings to existing shareholders, including: offerings of 
securities upon exercise of rights or conversion of convertible 
securities; offerings pursuant to dividend or interest reinvestment 
plans; offerings to existing common stock holders; and offerings of 
securities issuable upon exercise of transferable warrants or 
options. These offerings, and why we propose they be registered on 
Form B, are discussed in more detail in Section V.A.2.c. of this 
release.
    \281\ See proposed Securities Act Rule 166(a), 17 CFR 
230.166(a).
---------------------------------------------------------------------------

    These offerings would be directed mainly to existing shareholders 
of the issuer, such as under a DRIP, or to investors that, because of 
their status, have unique access to information about the issuer, such 
as a QIB. Offerees that have an existing connection with, or a prior 
investment in, the issuer could be presumed to follow the issuer in 
order to monitor their investment. 282
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    \282\ See General Instruction I.B.4. of Form S-3.
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    In the case of DRIPs, the participant already has made an 
investment decision about the issuer--to participate in the DRIP--thus, 
the investor would be likely to obtain information about the issuer 
both on its own and from the issuer. We believe the investors in these 
Form B offerings, due to their experience or nature, would be less 
susceptible than other investors to pre-filing hype about a new 
offering by the issuer.283 Thus, the investor protection 
concerns that are associated with the prohibition against offers before 
the registration statement is filed are lessened.
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    \283\ Under the proposed Form B, generally, a small issuer would 
not be permitted to make offerings to an existing security holder 
unless the investor held securities of the issuer for at least a 
two-month period. We set this requirement to ensure that the 
investor would have adequate time to assess its investment and 
determine whether to sell, hold or buy the issuer's securities.
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    Similarly, investors that are able to obtain information because 
they are able to influence the issuer to provide them with it, such as 
QIBs, may not need the protections that would flow from a prohibition 
of pre-filing communications. If an issuer makes statements about an 
upcoming offering before it files its Form B for the offering, the QIB 
is more likely than other investors to be in a position to insist that 
the issuer explain any information the issuer disseminated before 
filing. It also would be sophisticated enough to recognize the value of 
waiting until it has a prospectus before making an investment decision.
    Moreover, the free communications proposal would not extend to any 
issuer that had not previously registered with the Commission. We also 
would require that the issuer be reporting in a timely manner for at 
least the one year before filing an offering on Form B. The reporting 
requirements would serve the purpose of ensuring that material 
information about the issuer would be publicly available. An investor 
could use that, and whatever other information it may gather, to gauge 
any communications by the issuer before the registration statement 
filing.
    We solicit comment on the proposal to allow Form B registrants to 
communicate freely before filing a registration statement. Is Form B 
the proper standard or should the treatment be limited only to some 
subset of Form B offerings, such as those meeting the public float/ADTV 
tests? For these purposes, should a minimum average daily trading 
volume also be required for companies with a public float of at least 
$250 million? Should companies be subject to the reporting requirements 
for a longer period of time, such as two years?
    Does the likelihood of market conditioning based on pre-filing 
communications depend upon the security being issued or the transaction 
being registered? Does the likelihood of market conditioning depend on 
the trading market for the securities? If so, should the issuer's 
trading market be an element of the test for when pre-filing 
communications restrictions are lifted? Should the nature of the 
securities offered affect whether pre-filing communications should be 
restricted in any manner? If offering materials are used before filing 
a registration statement, should certain information be required to be 
disclosed therein?
    While Section 5 of the Securities Act prohibits both offers to sell 
and solicitations of offers to buy a security before a registration 
statement is filed, Section 2(a)(3) of the Act exempts preliminary 
negotiations or agreements between the issuer and any underwriter, and 
among underwriters. During that period, negotiation of the financing 
may proceed, but steps may not be taken to form a selling group. 
Dealers may not make offers to buy the securities and underwriters and 
issuers may not offer to sell them to dealers during that period. 
Congress created this limitation in part to limit the pressure it 
believed could be brought to bear on dealers to rush their 
orders.284 Congress also expressed its concern that market 
participants would overstimulate the demand for a company's securities 
and then pressure that company to issue

[[Page 67212]]

such securities.285 Consequently, Section 5 also prevents 
all pre-filing marketing of public offerings by underwriters and 
dealers.
---------------------------------------------------------------------------

    \284\ See H.R. Rep. No. 85, 73rd Cong., 1st Sess. 3 (1933).
    \285\ See H.R. Rep. No. 85, 73rd Cong., 1st Sess. 2 (1933).
---------------------------------------------------------------------------

    Under our proposal, before the filing of a Form B, dealers could 
make offers to buy, and issuers and underwriters could make offers to 
sell to dealers. Underwriters and dealers could market the securities 
before the filing of the Form B. Comment is requested on these aspects 
of the communications proposals. In today's markets, could issuers and 
underwriters unduly pressure dealers to accept an allotment of 
securities without the opportunity to scrutinize the registration 
statement? Similarly, could underwriters and dealers unduly pressure 
corporations to issue securities by marketing a company's securities 
before the issuer wished it to happen? If so, what other safeguards 
would protect against undue pressure?
b. Foreign Governments
    We also propose to allow a seasoned foreign government issuer to 
communicate freely before filing a registration statement for an 
offering of securities that exceeds $250 million and that is 
underwritten on a firm commitment basis.286 We would deem a 
foreign government issuer to be seasoned if one year has passed since 
the date of effectiveness of its initial public offering.287 
We believe that, generally, there is abundant public information, 
investor awareness and market following relating to seasoned foreign 
government issuers that make large public offerings. At and around the 
time of such an offering, sufficient market coverage appears virtually 
assured. Therefore, we propose to allow large and seasoned foreign 
government issuers to freely communicate during the pre-filing period.
---------------------------------------------------------------------------

    \286\ We propose the $250 million offering threshold as a proxy 
for size. The firm commitment underwriting requirement would provide 
greater assurance that the offering would proceed in an orderly 
fashion. And underwriting participation in the offering signals 
greater market interest in the offering and the presence of other 
investor protections due to the underwriters' gatekeeping function. 
As with Form B issuers, we believe the seasoning requirement would 
ensure a certain level of publicly available information.
    \287\ See proposed Securities Act Rule 166(a), 17 CFR 
230.166(a).
---------------------------------------------------------------------------

    Smaller offerings by unseasoned foreign government issuers may not 
attract significant market attention. Such an issuer should limit its 
pre-filing communications to avoid situations where the only public 
information available about the issuer or its offering before it files 
its registration statement is the information that the issuer 
disseminated for purposes of the offering. When the catalysts for 
public dissemination of information from sources like analysts or other 
securities experts are missing, we believe the best way for us to 
protect investors is to limit the communications of unseasoned foreign 
government issuers that make smaller offerings in the same way we would 
limit the communications of Form A issuers. If a foreign government 
issuer is registering its initial public offering or is registering an 
offering of securities that is less than $250 million or that is not 
being underwritten on a firm commitment basis, the issuer would be 
subject to the same 30-day limited communications period applicable to 
Form A registrants.288 Smaller unseasoned foreign government 
issuers may rely on safe harbors to make announcements during that 
period, such as factual business information 289 or Rule 135 
offering notices.290
---------------------------------------------------------------------------

    \288\ Proposed Securities Act Rule 167, 17 CFR 230.167, would 
provide that communications before the beginning of the 30-day 
period would not, for registration purposes, be deemed to be either 
an offer to sell or an offer to buy as long as the issuer takes 
reasonable steps to prevent further public dissemination of the 
information during the 30-day limited communications period. The 
rule would apply equally to unseasoned foreign sovereigns and all 
foreign political subdivisions that must observe the 30-day limited 
communications period.
    \289\ See proposed Securities Act Rule 169, 17 CFR 230.169.
    \290\ See proposed revisions to Securities Act Rule 135, 17 CFR 
230.135.
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c. All Other Registrants
    Under existing regulations, not all public communications by an 
issuer are prohibited before and during a registered offering. The line 
between communications that are permissible and those that are not, 
however, is not always easy to perceive. Over the years, the Commission 
has attempted to address this issue in several releases.
    In 1969, the Commission stated that, while a company is ``in 
registration'': disclosure of a material event would ordinarily not be 
subject to restrictions under Section 5 of the Securities Act if it is 
purely factual and does not include predictions or 
opinions.291
---------------------------------------------------------------------------

    \291\ Securities Act Release No. 5009 (Oct. 7, 1969) [34 FR 
16870].
---------------------------------------------------------------------------

    The release qualified that guidance, however, by stating that 
``[a]lthough the matters discussed herein reflect the policies and 
practices which the staff of the Commission will follow, they do not 
represent rules of the Commission. Accordingly, these interpretations 
are subject to change based on experience in their application. * * *''
    Two years later, the Commission published another release on 
communications.292 That release stated, in the context of 
companies refusing to answer legitimate inquiries, that ``the practice 
of non-disclosure of factual information by a publicly held company on 
the grounds that it has securities in registration'' 293 is 
not justified by securities laws or Commission policy. In the same 
release, however, the Commission indicated that neither a company in 
registration nor persons acting on its behalf ``should instigate 
publicity for the purpose of facilitating the sale of securities'' in 
the offering. The Commission also noted that:
---------------------------------------------------------------------------

    \292\ Securities Act Release No. 5180 (Aug. 6, 1971) [36 FR 
16506].
    \293\ The term ``in registration'' was used to mean the time 
starting before the filing of the registration statement and ending 
with the date the issuer ``reaches an understanding with a broker-
dealer that is to act as managing underwriter until the end of the 
aftermarket prospectus delivery period applicable to dealers.'' Id.
---------------------------------------------------------------------------

    [t]he determination of whether an item of information or publicity 
could be deemed to constitute an offer--a step in the selling effort--
in violation of Section 5 must be made by the issuer in the light of 
all the facts and circumstances surrounding each case.294
---------------------------------------------------------------------------

    \294\ Id.
---------------------------------------------------------------------------

    Given the generality of the statements made by the Commission 
through the years, and the difficulty of applying a ``facts and 
circumstances'' test that will be viewed by others in hindsight, 
cautious legal counsel today often judge it wiser to advise clients to 
apply significant restrictions on communications. In practice, they 
appear reluctant to rely on the Commission's general statement of 30 
years ago allowing disclosure of material factual information during 
the course of a registered offering.295 In the absence of 
Commission rules, the Commission's (or the staff's) statements have 
been viewed as providing only vague, general guidance. Securities law 
practitioners generally see applying that guidance as a practical 
problem. Many companies appear to be following the practice of shutting 
off communications of all types for the sake of eliminating the risk of 
being questioned about possible illegal offers and experiencing a delay 
in their offering. Those companies that wish to continue communications 
face the cost of seeking legal advice and review of virtually any 
communication during the period.296
---------------------------------------------------------------------------

    \295\ Among other results, issuers sometimes refrain from 
distributing routine reports to shareholders concerning the company 
during the quiet period. See Quiet, Please, Investor Relations, Dec. 
1997, at 49.
    \296\ For example, the Commission understands that legal counsel 
have advised issuers that all press releases, speeches to groups, 
product advertisements, announcements of developments, responses to 
inquiries by those who report to the public, changes in advertising 
policy, and public statements first be cleared by legal counsel 
during this period.

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[[Page 67213]]

    This difficulty of discerning the breadth and length of the 
limitations on communications is why we are proposing safe harbor rules 
for registrants other than Form B and Schedule B issuers we discussed 
above. The safe harbors should help to encourage open communication. 
Our proposed solution is two-fold.
i. Bright-Line Communications Safe Harbor
    The Commission seeks first to address uncertainty about whether 
communications made long before the filing of a registration statement 
will be viewed in hindsight as illegal offers. We believe that 
uncertainty has led to a chilling of issuer communications for a longer 
period before filing than is necessary for investor protection. The 
uncertainty also unnecessarily complicates the task of those planning 
the capital-raising process. We see little benefit to continuing it. We 
believe the purpose of prohibiting offers before a registration 
statement is filed, which we discussed above, can be fulfilled without 
the attendant uncertainty costs.
    Accordingly, we propose a safe harbor for all communications made 
by or on behalf of any issuer that take place during a specified period 
before it files a registration statement.297 In offerings 
registered on Form B, an issuer, and those acting on behalf of the 
issuer, may freely communicate before the offering period begins (i.e., 
15 days in advance of the first offer). For business combinations 
registered on Forms C, SB-3, F-8, F-80 or F-10 (when F-10 is used in 
connection with a business combination transaction), the offerors may 
freely communicate before the first communication related to the 
offering (except for communications, among the participants in the 
offering).298 For all other offerings, an issuer, and those 
acting on the issuer's behalf, may freely communicate at any time 
before the 30-day period before the date of filing the registration 
statement. Under the safe harbor, the issuer, underwriter and 
participating dealer must take all reasonable steps within their 
control to prevent further distribution or re-publication of the 
communication during those periods in which free communication is not 
permitted. We recognize that once a person makes information public it 
is no longer in full control over whether others will use that 
information at a later point in time. For example, an issuer may issue 
a press release on the 40th day before filing a registration statement 
on Form A and a monthly magazine that is published on the 29th day 
before filing may see fit to make reference to it. We would not view it 
as outside this safe harbor if the magazine published that information 
on the 29th day through no efforts of, or arrangement with, the issuer. 
If, however, the CEO or some other representative of the issuer gave an 
interview on the 40th day before filing without getting assurance that 
the interview article would not be published during the 30-day period, 
that communication would be outside the safe harbor.
---------------------------------------------------------------------------

    \297\ See proposed Securities Act Rule 167, 17 CFR 230.167. The 
bright line safe harbor would apply only to registered offerings. 
Accordingly, the safe harbor would not permit issuers to avoid the 
prohibition on general solicitation when conducting a private 
offering or avoid the Section 4(2) requirement that the 
``transaction not involve any public offering.'' See 15 U.S.C. 
Sec. 77d(2).
    \298\ For a discussion of other ``free communication'' 
provisions applicable to business combinations, see Exchange Act 
Release No. 40633 (Nov. 3, 1998).
---------------------------------------------------------------------------

    In addition, if an issuer places information on its Internet web 
site during a period in which it may freely communicate, we would view 
it as outside the safe harbor if it fails to remove information from 
its web site during the limited communications period, if the 
communication is not covered by one of the other proposed safe harbors 
discussed below (e.g., for factual business information or regularly 
released forward-looking information). An issuer may not circumvent the 
bright-line communications safe harbor by arranging for a third party 
to disseminate information on its behalf during the limited 
communications period. For example, if an agent or third party acting 
on behalf of the issuer posts information on a web site that does not 
fall within a safe harbor, we would view the posting as outside the 
bright-line communications safe harbor.299
---------------------------------------------------------------------------

    \299\ This position parallels advice we gave regarding third 
party web site postings in the context of offshore Internet 
offerings. See Securities Act Release No. 7516 (Mar. 23, 1998) [63 
FR 14806], Sections III.D. and IV.D.
---------------------------------------------------------------------------

    We recognize that there is a risk in creating a bright-line test. 
Some issuers and underwriters could decide to make all of their selling 
efforts before the bright-line period when a prospectus is not 
available. We propose to mitigate that risk through the prospectus 
delivery requirement (discussed below) that, regardless of when the 
selling efforts occur, investors will have time to review the balanced, 
accurate disclosure about the investment.300 We also 
mitigate that risk in offerings not registered on Form B and not 
involving business combinations through the use of a 30-day limited 
communications period. The 30 days will operate as a ``cooling off'' 
period with respect to any communications made to investors. We solicit 
comment, however, regarding whether a longer period, such as 90 days or 
60 days or 45 days, would mitigate the risk further while still 
providing a useful dividing line between communications likely to be 
undertaken as part of the sales effort and those that serve other 
purposes. Conversely, would a shorter period of time, such as 20 days, 
adequately serve that function? Are there other risks or benefits of 
creating a bright-line test?
---------------------------------------------------------------------------

    \300\ An issuer could not use the Section 10 prospectus at a 
point more than 30 days before filing and then fail to file it as 
part of the registration statement because it is not ``an offer.'' 
The registration statement would be materially deficient absent the 
prospectus.
---------------------------------------------------------------------------

    Would the condition that all reasonable steps be taken within the 
30 days by the issuer, underwriter or dealer to prevent further 
distribution or re-publication be adequate to ensure that there is a 
``cooling off'' period? Should we build in an automatic longer 
prospectus delivery period before pricing when issuers or others 
participating in the offering fall outside a safe harbor by 
communicating during the 30-day period? The proposed safe harbor would 
cover communications of any sort. Should we provide that the safe 
harbor does not apply to communications discussing the offering itself? 
Should we require that offering materials used more than 30 days in 
advance of filing a registration statement be filed with the Commission 
in the same way as free writing materials? 301 If so, should 
we require filing of such information if disseminated within 40, 50 or 
60 days before the issuer files its registration statement?
---------------------------------------------------------------------------

    \301\ See proposed Securities Act Rule 425, 17 CFR 230.425.
---------------------------------------------------------------------------

ii. Communications Safe Harbor
    While defining the pre-filing period during which these issuers 
must be concerned about the nature of their communications should help 
lessen uncertainty, we believe further proposals would do so even more. 
As the Commission stated almost three decades ago, ``[the] flow of 
normal corporate news, unrelated to a selling effort for an issue of 
securities, is natural, desirable and entirely consistent with the 
objectives of disclosure to the public which underlies

[[Page 67214]]

the federal securities laws.'' 302 We are proposing 
therefore to exempt factual business communications from communications 
restrictions.303 In addition, in offerings by reporting 
companies, we propose an exemption from communications restrictions for 
regularly released forward-looking information.304 We 
solicit comment on whether we should extend the limited communications 
period. Should it be 45, 50, 60 or 90 days in length?
---------------------------------------------------------------------------

    \302\ Securities Act Release No. 5009 (Oct. 7, 1969).
    \303\ See proposed Securities Act Rule 169, 17 CFR 230.169.
    \304\ See proposed Securities Act Rule 168, 17 CFR 230.168.
---------------------------------------------------------------------------

(A) Factual Business Communications
    For purposes of these proposals, ``factual business 
communications'' would include:

--factual information about the issuer or some aspect of its business;
--advertisement of the issuer's products or services;
--factual business or financial developments with respect to the 
issuer;
--dividend notices;
--factual information required to be set forth in any Exchange Act 
report the issuer is required to file; and
--factual information communicated in response to unsolicited inquiries 
from stockholders, analysts, the press and others with a legitimate 
interest in the issuer's affairs.

Factual business communications would not include information about the 
registered offering itself or forward-looking information. Information 
about the offering would continue to be limited to that which is 
permitted to be published under Securities Act Rule 135.305
---------------------------------------------------------------------------

    \305\ We propose to revise Rule 135, 17 CFR 230.135, to permit 
issuers to use it whether they plan to make a registered or private 
offering. See Section VII.A.1.c.ii.(C) of this release for a 
discussion of the proposed revisions to Rule 135.
---------------------------------------------------------------------------

(B) Regularly Released Forward-Looking Information
    We also propose a safe harbor for reporting companies that are 
accustomed to releasing forward-looking information to the markets so 
that those communications are not discouraged during the limited 
communications period 30 days before a registration statement is 
filed.306 The safe harbor would exempt the dissemination of 
that information from the Section 5 restrictions on offers in the pre-
filing period if the issuer is subject to the reporting requirements of 
Section 13(a) of the Exchange Act. In order to come within the safe 
harbor, the issuer must have customarily released this type of 
information in its ordinary course of business for the last two fiscal 
years (and any portion of a fiscal year) immediately before the 
communication. The time, manner and form in which the information is 
released must be consistent with past practice.307 The 
categories of forward-looking information that would be covered by the 
safe harbor are:
---------------------------------------------------------------------------

    \306\ See proposed Securities Act Rule 168, 17 CFR 230.168.
    \307\ This information generally would have to be filed with the 
Commission under proposed Securities Act Rule 425, 17 CFR 230.425.

    1. Projections of the issuer's revenues, income (loss), earnings 
(loss) per share, capital expenditures, dividends, capital structure 
or other financial items;
    2. Statements about the issuer management's plans and objectives 
for future operations, including plans or objectives relating to the 
products or services of the issuer;
    3. Statements about the issuer's future economic performance of 
the type contemplated by the management's discussion and analysis of 
financial condition and results of operation described in Item 303 
of Regulation S-K or Item 9 of Form 20-F; and
    4. Assumptions underlying or relating to any of the information 
described in paragraphs (1), (2) and (3).308
---------------------------------------------------------------------------

    \308\ These are essentially the same categories of statements 
that are defined as forward looking statements under Securities Act 
Section 27A(i)(1). In light of the offering context, we omitted the 
category of ``statements by an underwriter or participating dealer 
assessing any of the itemized information.''

    We recognize that projections have historically been viewed as the 
type of communication that would be particularly troublesome in the 
period before a registration statement is filed.309 For that 
reason, we propose to exclude these statements from the proposed safe 
harbor for factual business communications. We also, however, wish to 
encourage, where consistent with investor protection, the voluntary 
disclosure of forward-looking information. Given its value to 
investors, analysts, investment advisers and other securities 
professionals, the release of forward-looking information should not be 
constrained in circumstances that do not require constraint. Thus, 
where that information is regularly released by the issuer, we would 
presume that it is not being released around the time of the offering 
solely as a method of hyping the securities. Accordingly, we propose 
the safe harbor.
---------------------------------------------------------------------------

    \309\ Until the 1970s, the Commission prohibited disclosure of 
forward-looking information. In 1979, the Commission adopted a safe 
harbor for release of forward-looking information. See Securities 
Act Release No. 5362 (Feb. 2, 1973) [38 FR 7220]; Securities Act 
Release No. 6084 (June 25, 1979) [44 FR 38810]; see also Wheat 
Report, supra note 11, at 94; Securities Act Release No. 5180 (Aug. 
16, 1971).
---------------------------------------------------------------------------

    We solicit comment on the safe harbor for this forward-looking 
information. Are there other categories of forward-looking information 
that should be added to the list of exempted communications? Should any 
of the categories proposed in the exemption be deleted?
(C) Notice of Proposed Offerings
    As part of lifting communications restrictions, we propose to merge 
current Securities Act Rules 135 and 135c.310 The resulting 
rule, Rule 135, would provide issuers with a communications safe harbor 
for limited notice of their proposed offerings or business 
transactions. We propose to remove the reference found in current Rule 
135 that specifically states that issuers may not name the underwriters 
of its proposed offering in any notice published in reliance on the 
Rule. The proposed rule clearly pronounces that these notices may not 
include information beyond the subjects enumerated in the rule. Because 
the proposed rule does not include a provision that would allow issuers 
to name their underwriters, their Rule 135 notices may not name their 
underwriters. We solicit comment as to whether there are reasons to 
retain the specific prohibitions in the rule.
---------------------------------------------------------------------------

    \310\ See proposed revisions to Securities Act Rule 135, 17 CFR 
230.135.
---------------------------------------------------------------------------

    New Rule 135 would not require issuers to announce whether the 
offering would be public or private. Consequently, an issuer would not 
have to commit early on whether it is planning a registered or exempt 
offering. Thus an issuer may find more flexibility in assessing market 
demand through publication of the Rule 135 notice. Proposed Rule 135 
also would provide specifically that an issuer may issue a statement to 
correct inaccurate accounts or misstatements about its offering. An 
issuer's correction may not, however, include more information than 
would be needed to remedy the inaccuracy.
2. Communications During the Waiting Period
    Restrictions on communications during the waiting period differ 
according to the form the communication takes. During the waiting 
period, oral offers may be made without content restrictions other than 
due to liability concerns. Written offers, however, must have Section 
10 contents or they cannot be used. This distinction

[[Page 67215]]

appears to do little to enhance investor protection or facilitate the 
capital formation process. One can argue that it creates an incentive 
for issuers and underwriters to omit information or to provide it in a 
manner that is not readily available to investors for later reference. 
For instance, sellers may choose to omit matters that are not easily 
understood orally, or they may present that information orally anyway 
despite the risk that investors will have a less than perfect 
understanding of it. Issuers and their agents are known to deliberately 
provide some information during the waiting period only orally, and 
also limit the audience to avoid those communications being considered 
broadcasted. Perhaps the best example of how this current regulatory 
structure negatively affect investors is the ``road show'' structure. 
It is common for issuers and underwriters to conduct ``road show'' 
presentations during the waiting period for selected broker-dealers and 
large institutional investors. While these road shows are valuable to 
some investors because they provide a forum for investors' questions, 
their value is curtailed because of the limited audience invited to 
attend and the fact that issuers and underwriters do not allow 
participants to retain materials used during the presentation (other 
than the preliminary prospectus). These restrictions raise concerns 
regarding selective disclosure of material information. They also raise 
concerns about whether investors have been informed as well as they 
might have been absent those restrictions.311
---------------------------------------------------------------------------

    \311\ See, e.g., Pratt, The IPO Information Gap; Retail 
Investors are Always the Last to Know as Institutions Get Key Data 
Despite SEC Ban, Investment Dealers' Digest, May 18, 1992, at 14. 
See also Seely, In I.P.O.'s, the More Data the Better, N.Y. Times, 
April 26, 1992, Sec. 3, at 13, col. 2.
---------------------------------------------------------------------------

    We believe that the waiting period should be a time of open 
dialogue between the registrant and its potential investors, provided 
that the registrant is accountable for the accuracy and completeness of 
its communications. The medium in which disclosure is made should not 
be dictated by the regulatory structure but, rather, by the needs of 
investors.
    Under the proposal, we would allow companies to make offers and 
disseminate offering information during the waiting period in any form 
without each communication having to meet the informational 
requirements of Section 10.312 This would permit issuers to 
prepare presentations and disclose information in a variety of formats, 
available to all investors. 313 Through these changes, the 
Commission seeks to have sellers augment the information available to 
investors and thereby enhance investors' knowledge of the company and 
its securities.314
---------------------------------------------------------------------------

    \312\ See proposed Securities Act Rule 165, 17 CFR 230.165. Any 
prospectus disseminated in reliance on this Rule would be subject to 
Section 12(a)(2) of the Securities Act and would be filed under 
proposed Securities Act Rule 425, 17 CFR 230.425.
    \313\ For example, the Division of Corporation Finance has 
issued a line of no-action letters that permitted issuers and 
underwriters to conduct road show presentations over the Internet 
and through other electronic media. Access to these road shows 
presentations, however, has been restricted by the sponsor to 
institutional investors, investment advisers, broker-dealers, 
security analysts and others that customarily would attend the live 
presentation. See Staff no-action letters Private Financial Network 
(Mar. 12, 1997); Net Roadshow, Inc. (July 23, 1997); and Bloomberg 
L.P. (Oct. 22, 1997). We request comment on whether video road shows 
should be deemed free writing and therefore would be required to be 
filed under these proposals.
    \314\ The proposals also include modifications to various rules 
as a result of the restrictions on offering communications being 
lifted. Securities Act Rule 431, 17 CFR 230.431, permits an issuer 
that has been subject to the reporting requirements of the Exchange 
Act for more than 36 months to distribute a summary prospectus after 
it has filed the related registration statement. Our proposal to 
permit the use of ``free writing'' materials during the waiting 
period for all issuers would allow issuers to create and use summary 
prospectuses without complying with the strictures of Rule 431. 
Accordingly, we are proposing to eliminate Rule 431.
---------------------------------------------------------------------------

    Our communications proposals logically contemplate that larger 
seasoned issuers, including issuers eligible to use Form B and larger, 
seasoned foreign government issuers, that would have no pre-filing 
communications restrictions would also be able to freely communicate 
after filing a registration statement.315 While generally 
there may be very limited post-filing marketing periods for these 
issuers because no registration statement need be filed until the time 
of sale, some may choose to file earlier. Proposed Rule 165 therefore 
would permit those issuers to engage in post-filing free writing if 
they:
---------------------------------------------------------------------------

    \315\ See proposed Securities Act Rule 165, 17 CFR 230.165.
---------------------------------------------------------------------------

    1. Comply with the preliminary prospectus delivery requirements in 
proposed Rule 172;
    2. File free writing materials under proposed Rule 425; and
    3. File a final prospectus meeting the requirements of Section 
10(a) before the first sale.

Smaller issuers that would be likely to market the securities during 
the waiting period may also engage in post-filing free writing under 
the same proposed conditions. All free writing materials and term 
sheets, whether used by large or small issuers, would have to include a 
prominent legend advising investors to read the other disclosure 
documents filed with the Commission before making an investment 
decision. The legend also would describe how the investor could get 
copies of this information for free from the Commission's web site and 
explain which documents an investor could get for free from the 
issuer.316 Although free writing material would be required 
to be filed, it would not be required to be delivered. We believe that 
the filing requirement enhances investor protection by reducing 
selective disclosure. For example, road show materials not generally 
available to individual investors today would be available to the 
broader market on a real-time basis after the registration statement is 
filed.317 We solicit comment as to whether investors would 
have an increased analytical burden in collecting and evaluating 
various free writing materials.
---------------------------------------------------------------------------

    \316\ See proposed revisions to Securities Act Rule 421, 17 CFR 
230.421.
    \317\ For Form B offerings, road show materials used before the 
registration statement is filed would not be required to be filed 
until the registration statement is.
---------------------------------------------------------------------------

    In light of the free writing that would be granted by the proposed 
rules, we propose to revise Securities Act Rule 134 to narrow its 
application to investment companies. The Rule 134 safe harbor would not 
be needed by other issuers. The proposed Rule 134 amendments would not 
make substantive changes to the content of the Rule.318 We 
are, however, revising the Rule to make it more understandable. For 
example, the legends informing investors how to obtain more complete 
information about a fund would be simplified and combined into one 
legend. The amendments also would clarify that an investment company 
may identify its secretary, treasurer and any vice-president, in 
addition to its president, in a Rule 134 advertisement.319 
Finally, to reflect changes made by NSMIA, legend text referring to 
state registration of securities would be deleted.320
---------------------------------------------------------------------------

    \318\ We noted in our release adopting amendments to Form N-1A 
that we intend to re-evaluate fund advertising rules in the future. 
See Investment Company Act Release No. 23064 (Mar. 23, 1998) [68 FR 
13916, 13936].
    \319\ See paragraph (a)(3)(ii) and (a)(3)(x) of the proposed 
amendments to Securities Act Rule 134, 17 CFR 230.134.
    \320\ NSMIA, Section 102(a) (exempting certain securities 
offerings from state regulation).
---------------------------------------------------------------------------

    We request comment regarding whether a legend substantially similar 
to that required to appear in Rule 482 advertisements used with a 
profile should be required for Rule 134 advertisements that are used 
with a

[[Page 67216]]

profile.321 Are funds likely to use Rule 134 advertisements 
with a profile? Should such disclosure be permissive or mandatory?
---------------------------------------------------------------------------

    \321\ Rule 482(a)(3)(ii), 17 CFR 230.482(a)(3)(ii), requires 
Rule 482 advertisements that are used with a profile under Rule 498 
(``Profile'') to include a conspicuous statement that indicates that 
information is available in the Profile about the investment 
company, the procedures for investing in the investment company and 
the availability of the investment company's prospectus.
---------------------------------------------------------------------------

B. Filing Under EDGAR

    Communications filed under Rule 425 would be filed electronically, 
via the EDGAR system, to the same extent that the registration 
statements to which the communications relate are required to be filed 
under EDGAR.322 In some cases, issuers may wish to 
communicate with investors through multimedia prospectuses. These 
multimedia prospectuses may be presented in the form of videos, CD-
ROMs, streamed video or audio files that can be played over the 
Internet. Currently, EDGAR is not able to accept multimedia 
prospectuses. Instead, companies using multimedia prospectuses file a 
transcript of the material on EDGAR.323
---------------------------------------------------------------------------

    \322\ Foreign private issuers are not required to file on EDGAR.
    \323\ See Rule 304 of Regulation S-T, 17 CFR 232.304.
---------------------------------------------------------------------------

    We have awarded a contract to modernize EDGAR, which will enable 
filers to enhance the appearance of their documents by using graphics 
and different fonts. The system, however, may not be able to 
accommodate multimedia materials. We are considering whether some of 
these media could be included in the new system. Some of the factors we 
are considering include: security; development and maintenance costs of 
a system that will accept these media; costs of database storage; how 
these materials should be disseminated to the public; whether investors 
would have as ready access to these materials as to the current 
electronic filings; how to meet the archival requirements for storage 
of electronic documents; wide divergence in industry standards for most 
multi-media formats; how to assure that filed documents continue to be 
readable in the future, since applications that can present these media 
may change or even disappear over time.
    If at adoption EDGAR is unable to accept multimedia prospectuses, 
we would require that a transcript of the presentation be 
filed.324 Additionally, we would require that the issuer 
file five copies of the multimedia prospectus in the form used, so that 
we may make it available through our public reference rooms. We solicit 
comment on this approach and alternative approaches to the 
dissemination of multimedia prospectuses. For example, rather than have 
the issuer file five copies of the multimedia prospectus, should we 
require that the issuer include an address in the transcript where the 
multimedia prospectus can be obtained in its original form? Should we 
require that a summary of the multimedia prospectus be filed through 
EDGAR instead of a transcript?
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    \324\ Like today, issuers also would have to include a fair and 
accurate description of any graphical information presented that 
otherwise is not disclosed in the transcript.
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C. Technology Implications of the Communications Proposals

    The proposed communications rules would enable issuers and market 
participants to take significantly greater advantage of the Internet 
and other electronic media to communicate and deliver information to 
investors.325 Most notably, the proposals would permit all 
issuers, underwriters and their representatives to communicate during 
the waiting period with potential investors without having to conform 
their communications to the informational requirements of Section 10 of 
the Securities Act.326 Accordingly, after filing a 
registration statement, any issuer or underwriter could take full 
advantage of innovative media technology in stylizing its free writing 
materials. In that period, issuers and underwriters could use the 
Internet and other electronic media to, among other things:

    \325\ In October 1995, the Commission published its first 
interpretive release regarding the use of electronic media. At that 
time, the Commission noted its belief that the use of electronic 
media ``enhances the efficiency of the securities markets by 
allowing for the rapid dissemination of information to investors and 
financial markets.'' Securities Act Release No. 7233 (Oct. 5, 1995) 
[60 FR 53458]. The procedural requirements discussed in that release 
regarding notice, access and evidence of delivery would continue to 
be applicable under the proposed system. See also Securities Act 
Release No. 7288 (May 9, 1996) [61 FR 24644]. More recently, the 
Commission has provided additional guidance with regard to the use 
of Internet web sites in the offering of securities offshore. See 
Securities Act Release No. 7516 (Mar. 23, 1998).

    \326\ See proposed Rule 165, 17 CFR 230.165.
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     Conduct electronic roadshows to institutional and 
retail investors without the use of password protection;
     Use electronic mail to answer investors questions about 
the company and its offering; and
     Conduct ``chat room'' discussions or post messages on 
bulletin boards about its offering with potential 
investors.327
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    \327\ In the near future, the Commission intends to address 
specific technological issues that arise in the offering process. 
These issues exist under the current offering framework as well as 
the framework proposed in this release. Further guidance on these 
activities may be provided in that release.

    For offerings registered by well-followed, large issuers on Form B, 
the issuers and underwriters could use the Internet and other media for 
those purposes both before and after filing a registration 
statement.328 The ability to communicate before filing would 
allow issuers to use the Internet and other electronic media to 
determine investors' interest in a proposed public offering well before 
committing significant resources to its completion.
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    \328\ See proposed Rule 166, 17 CFR 230.166.
---------------------------------------------------------------------------

    The 30-day bright-line test would help smaller companies that have 
been concerned about when in relation to an offering they should 
monitor or limit their Internet use. They would know they have freedom 
to disseminate information on it at any time except during the 30 days 
just before filing their registration statements.329
---------------------------------------------------------------------------

    \329\ See proposed Rule 167, 17 CFR 230.167.
---------------------------------------------------------------------------

    The proposed safe harbor for factual business communications made 
within the 30 days before filing a registration statement would provide 
smaller issuers with more certainty when determining what information 
may be posted on their Internet Web sites during those 30 
days.330
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    \330\ See proposed Rule 169, 17 CFR 230.169.
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    Proposed Form B also would provide issuers with more flexibility in 
crafting transactional disclosure in their prospectuses. This 
additional flexibility also should allow issuers to take greater 
advantage of innovations in media technology.
    The Commission also is proposing to require issuers to identify 
their web site addresses and provide an e-mail contact on the cover 
page of every registration statement under the Securities Act. This 
requirement would make this information more accessible to investors, 
as well as ease investors' electronic communications with companies.

D. Research Reports 331
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    \331\ For convenience, we use the terms ``research reports'' and 
``reports'' in this section to cover not only formal reports 
published by analysts but also the broad range of analyst 
communications about issuers, whether or not formalized in a report. 
Rules 137, 138 and 139, 17 CFR 230.137, 230.138 and 230.139, refer 
to publication of ``information, opinions or recommendations.'' For 
purposes of this release we use the term ``research'' generically to 
cover all of those.
---------------------------------------------------------------------------

    Investors acquire useful information regarding companies from 
sources other than Commission-mandated disclosure. One such source is 
analysts' research reports. As the Commission has long acknowledged and 
the Supreme Court recognized in Dirks v. SEC,332 analysts

[[Page 67217]]

fulfill an important function by keeping investors informed. They 
digest information from Exchange Act reports and other sources, 
actively pursue new company information, put all of it into context, 
and act as conduits in the flow of information by publishing reports 
explaining the effect of this information to investors.333 
They also express opinions and recommendations about investment in 
issuers' securities. Unlike small investors, analysts can arrange to 
interact with key company insiders and ask them pertinent questions. 
Where analysts are acting independently and objectively, investors gain 
from the publication of their insights.
---------------------------------------------------------------------------

    \332\ 463 U.S. 646, 658-59 (1983).
    \333\ Investors benefit from being informed on an ongoing basis 
via analysts about particular securities and issuers. For instance, 
issuers' forward-looking information is disseminated indirectly 
through analyst reports. Analysts communicate with issuer 
representatives and then reflect their understanding about likely 
future results in the reports or updates they publish. The market's 
expectations of an issuer's future earnings can be gradually altered 
by issuers leading analysts away from incorrect predictions; less 
volatility in stock price would result.
---------------------------------------------------------------------------

    Analyst reports, however, also potentially can be misused to hype a 
company's securities. Because they could do so under the guise of 
providing objective, independent analysis, they could unduly influence 
investors. Often, firms that employ analysts and publish their research 
reports also act, or may act, as underwriters in connection with the 
offerings of companies that are the subject of the reports. Research by 
a broker or dealer about an issuer that proposes to register a public 
offering, or has registered an offering, may constitute an offer of 
those securities.334 This is particularly true when the 
broker-dealer is to participate in the distribution as an underwriter 
or selling group member.
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    \334\ See Sections 2(a)(3) and 5 of the Securities Act, 15 
U.S.C. Secs. 77b(a)(3), 77e.
---------------------------------------------------------------------------

    The Commission recognized both possible uses of analyst research 
reports--for hyping as well as for enhancing the free flow of 
information--when it adopted Rules 137, 138 and 139 under the 
Securities Act. Those safe harbor rules describe circumstances in which 
a broker-dealer may publish research in and around the time of a 
registered offering without concerns about violating Section 5 through 
making an illegal offer or using a non-conforming prospectus. In those 
rules, the Commission struck a balance between its concern about hyping 
and its concern for current information by restricting the situations 
in which the three safe harbors would apply.335 Commenters 
on the Concept Release asked the Commission to minimize the scope of 
restrictions on research in order to reflect rapid advances in 
communications technology and globalization of the markets, among other 
developments.336
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    \335\ These releases are discussed in Chiappinelli, Gun Jumping: 
The Problem of Extraneous Offers of Securities, 50 U. Pitt. L. Rev. 
457, 505-07 (1989).
    \336\ See, e.g., comment letters, in File No. S7-19-96, from the 
American Bar Ass'n (Dec. 11, 1996), Merrill Lynch (Oct. 31, 1996), 
Morgan Stanley (Dec. 9, 1996), PSA The Bond Market Ass'n (Nov. 8, 
1996), Shearman & Sterling (Dec. 13, 1996) and the Securities 
Industry Ass'n (Nov. 13, 1996).
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1. Proposals in Connection With Registered Offerings
    When a company is making a registered offering, investors 
particularly seek current information about the issuer and its 
securities. In general, we propose to allow investors to receive as 
much current information as possible with respect to companies that are 
in registration, where consistent with investor protection. This is 
true especially where the largest companies are involved. The 
narrowness of the current rules regarding research causes some 
analysts' research to be barred at a point at which investors may seek 
current research reports the most. The result is that investors may 
rely on research that does not reflect material changes or current 
data.
    In addition, the narrower rules put U.S. investors at a relative 
disadvantage because analyst firms may determine that current law would 
not allow them to give investors the current research that is 
distributed to investors outside the United States. While larger U.S. 
investors find out about research distributed offshore and arrange to 
receive it, the same cannot be said with assurance about smaller U.S. 
investors. Because of the benefits of analyst research, the proposals 
overall would create broader exemptions to allow publication of 
research in more instances around the time of an offering. This 
approach would allow investors to judge for themselves the value of the 
analysts' opinions set forth in those reports.
a. Rule 137
    When a broker or dealer is not otherwise participating in a 
distribution of securities, and does not propose to participate in a 
distribution, it is guided by Rule 137.337 That rule 
provides that research may be published by the broker or dealer in the 
regular course of its business where it is not receiving consideration 
of any kind from persons with an interest in the securities being 
registered. Rule 137 protects the broker or dealer from being 
considered an ``underwriter'' by virtue of its 
publication.338 It provides a safe harbor only with respect 
to reporting companies.
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    \337\ Even if the distribution of research constitutes an offer, 
a dealer may rely on Section 4(3) of the Securities Act which 
provides an exemption from registration for dealers that are not 
acting as underwriters. Section 4(3) is not available, however, 
during certain defined periods shortly after the commencement of an 
initial offering of a security or the effective date of a 
registration statement. It is during those periods that reliance on 
Rule 137, 17 CFR 230.137, may matter most.
    \338\ Rule 137, 17 CFR 230.137, provides that a broker or dealer 
satisfying the rule will not be ``participating'' in the offering 
for purposes of the definition of ``underwriter'' in Securities Act 
Section 2(11).
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    The release proposing Rule 137 in 1969 explained that ``[t]he need 
for such a rule is primarily evidenced in connection with actively 
traded securities of issuers concerning which adequate information is 
available to the public.'' 339 While the need for a safe 
harbor in 1969 may have been confined to reporting companies, it no 
longer appears to us that the need is so confined. Not all actively 
traded securities are issued by reporting companies, particularly in 
light of the market interest in securities of foreign issuers.
---------------------------------------------------------------------------

    \339\ Securities Act Release No. 5010 (Oct. 7, 1969) [34 FR 
18130].
---------------------------------------------------------------------------

    We propose to expand Rule 137 to cover non-reporting 
companies.340 We also propose to delete the condition in 
Rule 137 that the broker or dealer publish the report in the regular 
course of its business. As expanded, Rule 137 would provide a safe 
harbor with respect to registrants, such as foreign government issuers, 
that are less likely to be reporting under the Exchange Act. The new 
rule also would allow a broker or dealer to commence research coverage 
on private companies planning to make registered offerings, even where 
it had never before published a research report concerning that 
company. Where a broker or dealer is not connected to the registrant's 
distribution, we perceive limited risk that it will use its research 
about the registrant or its securities to hype the market for the 
securities being distributed. While the broker or dealer may seek to 
cover the registrant for purposes of attracting underwriting business 
from the registrant in the future, that motive for coverage is 
universal and is not limited to the distribution period. Investors 
should factor in that incentive when analyzing any research report. We 
do not believe the risk of analysts creating reports that are 
positively skewed to attract future business outweighs the benefits to

[[Page 67218]]

investors from having persons independent of the issuer and the 
underwriter publish their views about the investment opportunity at a 
time when investors would especially look for information. We solicit 
comment on the relative risks and benefits of this approach.
---------------------------------------------------------------------------

    \340\ See proposed revisions to Securities Act Rule 137, 17 CFR 
230.137. The proposed rule would not cover blank check companies, 
shell companies and companies making offerings of penny stock.
---------------------------------------------------------------------------

    We also solicit comment regarding our proposal to remove the 
``regular course of business'' condition in Rule 137. To avoid concerns 
that research preparation, absent that condition, would be an unusual 
activity for that broker or dealer, should it be replaced with a 
narrower requirement that the person who prepares the research must be 
employed by the broker or dealer to prepare research in the normal 
course of his or her duties? Would those concerns be lessened if we 
required that the person who prepares the research must be a registered 
person? Should other restrictions be imposed on who prepares the 
research? Should we mandate the manner in which the broker-dealer 
discloses the identity and affiliation of those who prepare research?
b. Rule 138
    Rule 138 permits a broker or dealer participating in a distribution 
of one type of an issuer's securities to publish research confined to 
another type of the issuer's securities if it publishes or distributes 
the research in the ordinary course of its business. For example, a 
dealer distributing non-convertible debt may publish under Rule 138 
research solely relating to the common stock of that issuer. A dealer 
distributing convertible debt could publish research limited to the 
issuer's non-convertible, non-participating preferred securities under 
Rule 138. When we proposed Rule 138 in 1969, we noted that the markets 
for non-convertible senior securities and common stock differ 
significantly. There is less opportunity to condition the market when a 
broker or dealer is underwriting one and reporting on the 
other.341 In addition, the investment conditions with 
respect to common stock and senior securities are significantly 
different.342
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    \341\ Securities Act Release No. 5010 (Oct. 7, 1969). The 
release noted specifically that the market for senior securities is 
largely institutional and that ``the investment conditions with 
respect to common stock and the senior securities of established 
corporations are significantly different.'' See also Securities Act 
Release No. 6492 (Oct. 6, 1983) [48 FR 46801].
    \342\ See Securities Act Release No. 5010 (Oct. 7, 1969).
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    Rule 138 is not available, however, for offerings by any type of 
issuer. The offering must relate to securities of an issuer that: has 
been reporting for 3 years (Form S-2 or F-2 issuers); has been 
reporting for one year and has a public float of $75 million (S-3 or F-
3 issuers); or is a foreign private issuer that has a public float of 
$75 million and a one-year trading history on a designated offshore 
securities market. In addition, the research must be published by the 
broker or dealer in the regular course of its business.
    Unlike Rule 137, which focuses on whether the broker or dealer 
becomes an underwriter by publishing research, the Rule 138 safe harbor 
relates specifically to those who are acting as underwriters. The Rule 
was designed to address the concern that the publication would violate 
Section 5. A broker or dealers' research could be viewed as an unlawful 
offer if it occurs before the filing of a registration statement. The 
publication could also be a non-conforming prospectus 343 
because the contents will not have the disclosure required by Section 
10 of the Securities Act. Rule 138 therefore provides that publication 
of research under the Rule will not be considered:

    \343\ A ``prospectus'' is defined in Section 2(a)(10) of the 
Securities Act to include any notice, circular, advertisement, 
letter or communication, written or by radio or television, which 
offers any security for sale or confirms the sale of any security.

--An offer during the pre-filing period, which would violate 
Securities Act Section 5(c); or
--a distribution of a ``prospectus'' that does not conform to the 
requirements of Section 10, which would violate Securities Act 
Section 5(b)(1).344
---------------------------------------------------------------------------

    \344\ Rule 138, 17 CFR 230.138, exempts the research covered by 
its terms from constituting an ``offer to sell'' for purposes of 
Securities Act Section 5 or an ``offer for sale'' for purposes of 
Securities Act Section 2(a)(10).

    Under the proposed registration system, offers may be made during 
the pre-filing period with respect to Form B offerings.345 
In addition, prospectuses used in connection with Form B offerings need 
not conform to the requirements of Section 10.346 Thus, a 
broker or dealer would not need the relief that Rule 138 provides in 
connection with Form B offerings.347
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    \345\ See proposed Securities Act Rule 166, 17 CFR 230.166.
    \346\ See proposed Securities Act Rule 165(a), 17 CFR 
230.165(a).
    \347\ Rule 138, 17 CFR 230.138, currently contains an 
instruction that the Rule's safe harbor is available when an issuer 
plans to file, files or has an effective shelf registration 
statement that includes both non-convertible securities and equity 
securities. See Securities Act Release No. 7132 (Feb. 1, 1995) [60 
FR 6965]. Under the proposed registration system this instruction 
would not be needed because these shelf offerings would be Form B 
offerings.
---------------------------------------------------------------------------

    Further, in registered business combinations, any communications 
before the first communication related to the offering, other than 
communications among participants, would not constitute an offer for 
the purposes of Section 5(c), provided that the parties take reasonable 
steps to prevent distribution of such communication after the 
announcement but before filing a registration statement. Thus, a broker 
or dealer would not need the relief that Rule 138 provides in 
connection with registered business combination transactions.
    Brokers and dealers would only rely on Rule 138 to a limited extent 
with respect to other registered offerings. In other offerings, a 
proposed rule would provide that communications made more than 30 days 
before the registration statement is filed would not constitute 
offers.348 Research materials distributed during that period 
would not constitute prospectuses.349 Thus, even in the 
absence of the Rule 138 safe harbor, underwriters and participating 
dealers would have no Section 5 concerns about publishing research 
reports during that period. Similarly, after a registration statement 
is filed, offers may be made and a proposed rule would provide that 
prospectuses do not have to conform to Section 10 disclosure 
standards.350 Thus, underwriters and participating dealers 
would have no Section 5 concerns about publishing research reports 
during that period. Thus, an underwriter or participating dealer's 
Section 5 concerns about research reports would be limited to the 30-
day period before filing a registration statement.
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    \348\ See proposed Securities Act Rule 167, 17 CFR 230.167.
    \349\ In order for a communication to be a ``prospectus'' as 
defined in Section 2(a)(10) of the Securities Act, the communication 
must either offer a security or confirm the sale of a security. 
Research reports do not confirm the sale of a security and proposed 
Rule 167, 17 CFR 230.167, would provide that they are not prohibited 
offers.
    \350\ See proposed Securities Act Rule 165(b), 17 CFR 
230.165(b).
---------------------------------------------------------------------------

    We propose to expand Rule 138 to cover research reports relating to 
securities of virtually all companies subject to the Exchange Act 
reporting requirements, rather than just larger foreign and domestic 
issuers with a one-year reporting history and other issuers with a 3-
year reporting history.351 Where Exchange Act reports are 
available, investors will have another source for information against 
which to compare the analyst's report. The only reporting issuers' 
securities that we would not cover are those that have historically 
posed certain risks of abuse. They include: blank check companies,

[[Page 67219]]

shell companies and companies making offerings of penny stock.
---------------------------------------------------------------------------

    \351\ See proposed revision to Securities Act Rule 138, 17 CFR 
230.138.
---------------------------------------------------------------------------

    We are not proposing that the Rule be limited to companies that 
have been reporting for a specific period of time. Companies generally 
become subject to the Exchange Act reporting requirements through 
registering under either the Securities Act or the Exchange Act and 
provide current disclosure in connection with that event. We solicit 
comment, however, regarding whether companies covered by Rule 138 
should have to have a specified reporting history (e.g., 6 months or a 
year).
    We are not currently proposing that Rule 138 be expanded to cover 
non-reporting companies other than foreign private issuers that would 
satisfy the public float/ADTV thresholds of Form B measured on a 
worldwide basis and whose equity securities trade on a designated 
offshore securities market.352 As the Commission explained 
in 1994 when it proposed to expand Rule 138 to cover certain non-
reporting foreign private issuers with an offshore trading history, 
there is a stream of corporate information available in the marketplace 
about those foreign private issuers due to their nature, even though 
they are not filing reports with the Commission.353 The same 
stream of information is not available about other non-reporting 
companies.
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    \352\ ``Designated offshore securities market'' is defined in 
Rule 902(b) of Regulation S, 17 CFR 230.902(b).
    \353\ See Securities Act Release No. 7120 (Dec. 13, 1994) [59 FR 
31038].
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    Comment is solicited with regard to the application of the proposed 
Rule 138 safe harbor to research reports regarding non-reporting 
issuers. Should we require the non-reporting foreign private issuers to 
have a specified trading history on a designated offshore securities 
market, as Rule 138 does today? If so, should that trading history be 
set at one year as in current Rule 138, or some shorter period (e.g., 6 
months)? Should we expand the safe harbor to cover cases where the 
issuer has issued debt in a public offering, but then terminated its 
status as a reporting company, if the broker or dealer is publishing 
research reports with respect to those debt securities? Are there 
reporting companies with respect to which Rule 138 should not apply?
c. Rule 139
    Rule 139 permits a broker or dealer participating in a distribution 
of securities by a larger, seasoned issuer or a larger foreign private 
issuer publicly traded abroad to publish research concerning the issuer 
or any class of its securities, if that research is in a publication 
distributed with reasonable regularity in the normal course of its 
business. Rule 139 also provides a safe harbor in those situations for 
distributions by smaller seasoned issuers, if the broker or dealer 
complies with additional restrictions on the nature of the publication 
and the opinion or recommendation expressed in it.
    Like Rule 138, Rule 139 was developed to create a safe harbor from 
Section 5 for a person acting as an underwriter for the issuer. It 
ensures that the research does not constitute an offer during the 
period before filing, or constitute a non-conforming prospectus. 
354 Unlike Rule 138, this Rule covers the situation where 
the broker or dealer's report covers the same securities that it is 
selling on the issuer's behalf in the registered offering.
---------------------------------------------------------------------------

    \354\ Rule 139, 17 CFR 230.139, exempts the research from 
constituting an ``offer to sell'' for purposes of Securities Act 
Section 5 or an ``offer for sale'' for purposes of Securities Act 
Section 2(a)(10).
---------------------------------------------------------------------------

    The greatest potential for blurring the objective analyst role and 
the underwriting role occurs when the analyst firm is publishing 
research directly about the security it is underwriting. The Commission 
has recognized that risk in the past by attaching more restrictions to 
the publication of research reports under the circumstances in Rule 
139.
i. Form B and Schedule B Offerings
    In the case of Form B offerings, we believe that the fact that many 
analysts would be covering the issuer, and that the investors would be 
relatively informed already, justifies allowing research to be 
published around the time of an offering without applying Section 5 
restrictions. Thus, the proposed communications rules allow research 
reports to be a part of the mix of information that investors may see 
around the time of a Form B registered offering regardless of who 
publishes those reports.355 Accordingly, the Rule 139 safe 
harbor would not be needed in those cases.
---------------------------------------------------------------------------

    \355\ See proposed Securities Act Rule 166, 17 CFR 230.166, and 
proposed Securities Act Rule 165(a), 17 CFR 230.165(a). As in the 
case of Rule 138, 17 CFR 230.138, brokers and dealers would not have 
a need to rely on Rule 139, 17 CFR 230.139, in connection with Form 
B offerings.
---------------------------------------------------------------------------

    We would provide the same freedom for a research report published 
around the time of an offering by a seasoned foreign government issuer 
that is registering an offering of securities that exceeds $250 million 
and that is underwritten on a firm commitment basis.356 
Because the proposed communications rules would provide that offers may 
be made before filing of such a registration statement, an underwriter 
or participating dealer would not have to be concerned about research 
during that period.357 Similarly, because prospectuses 
relating to offerings by those foreign government issuers would not 
have to satisfy the requirements of Section 10, underwriters and 
participating dealers would not have to be concerned about publishing 
research once a Schedule B registration statement is 
filed.358 The same would be true in a registered business 
combination in the period prior to the first communication about the 
transaction (other than among offering participants).
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    \356\ By ``seasoned'' we mean that the foreign government 
issuer's offering takes place one year or more after the effective 
date of its initial public offering.
    \357\ See proposed Securities Act Rule 166, 17 CFR 230.166.
    \358\ See proposed Securities Act Rule 165(a), 17 CFR 
230.165(a).
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ii. All Other Offerings
    As discussed in connection with Rule 138, in all other offerings, 
underwriters and participating dealers would have no Section 5 concerns 
about publishing research more than 30 days before the filing of a 
registration statement or after a registration statement is 
filed.359 Thus, an underwriter or participating dealer would 
rely on Rule 139 to address its Section 5 concerns about research 
reports only during the 30-day period before the filing of a 
registration statement.
---------------------------------------------------------------------------

    \359\ See proposed Securities Act Rule 167, 17 CFR 230.167, and 
proposed Securities Act Rule 165(b), 17 CFR 230.165(b).
---------------------------------------------------------------------------

    In offerings by these issuers, we have some concern that, absent 
restrictions, research reports published before the filing of a 
registration statement might evolve into selling documents distributed 
at a time when no prospectus is available. With appropriate 
restrictions, we generally believe that research should be able to 
continue during that time period. The proposed delivery rules would 
ensure that investors will have time to consider the prospectus 
disclosure before making a final investment decision.
iii. Focused Reports
    Proposed Rule 139 would continue to provide for two categories of 
reports, broad industry-related reports and reports more focused on the 
issuer and its securities.360 The companies about which 
brokers may prepare those two

[[Page 67220]]

categories of reports, however, would change. Where reporting issuers 
are making the offering, we would not continue to limit the focused 
issuer reports under the Rule to issuers that meet the Form S-3 or F-3 
minimum float/investment grade and reporting history. Instead, the 
proposed Rule would allow those reports in offerings of any type of 
securities by any size issuer that has a one-year reporting 
history.361
---------------------------------------------------------------------------

    \360\ See proposed Securities Act Rule 139, 17 CFR 230.139.
    \361\ We would continue to allow research concerning large 
foreign exchange-traded issuers that are not reporting if the Form B 
public float/ADTV threshold is satisfied.
---------------------------------------------------------------------------

    In addition, the proposed Rule would allow for focused reports 
relating to offerings by foreign government issuers that are 
registering on Schedule B for the first time as long as the issuer is 
registering on Schedule B an offering of more than $250 million on a 
firm commitment underwritten basis. We recognize that because of the 
nature of foreign government issuers, significant amounts of 
information likely would be available about them even though they may 
not have registered before in this country. We solicit comment 
regarding our extension of the focused reports safe harbor to these 
foreign government offerings. Should we do so only if the foreign 
government issuer has previously issued securities in a public offering 
or if the broker or dealer was reporting on the issuer regularly before 
the filing?
    One of the conditions that currently applies to focused research 
reports under Rule 139 is that the reports are distributed with 
reasonable regularity in the normal course of business. We propose to 
eliminate the ``reasonable regularity'' part of that condition but 
retain a requirement that the report be distributed in the broker or 
dealer's ordinary course of business. Where the issuer has been 
reporting under the Exchange Act for more than a year, investors will 
have public disclosure to refer to in weighing the contents of a 
focused research report. The same would be true of a large, well-
followed foreign issuer even if it is not reporting in the United 
States. The condition that the broker or dealer be distributing the 
report as part of its ordinary course of business (i.e., it has a 
history of distributing similar focused reports on other issuers or 
securities) should allay concern about hyping as well. We solicit 
comment about the elimination of the reasonable regularity condition. 
Are there any reasons we should retain the condition? Should we instead 
substitute a bright-line test that indicates more clearly just how long 
a broker or dealer must have been reporting about the issuer or its 
securities and with what frequency? If so, how long and how often?
iv. Consideration to Expand Rule 139 to IPOs and Offerings by 
Unseasoned Issuers
    We also solicit comment on whether to expand the focused reports 
aspect of Rule 139 to initial registered offerings and repeat offerings 
by large unseasoned issuers where research reports are published by 
brokers or dealers that have been following the issuers in the ordinary 
course of their business.362 Large issuers, even those that 
have not been reporting for a full year, may generate significant 
market and analyst attention. In some cases, the same would be true in 
initial registered offerings.
---------------------------------------------------------------------------

    \362\ For purposes of this discussion, a large company would be 
one that would meet the public float/ADTV tests in Form B.
---------------------------------------------------------------------------

    In cases involving repeat offerings by large unseasoned reporting 
companies, we believe it is possible that investors may benefit if 
research reports concerning these large companies were available around 
the time of their offerings. On the other hand, we see merit in 
limiting dissemination of research reports about unseasoned companies. 
A limitation helps ensure that the market is not mislead by subjective 
reports that are not balanced by regulated public disclosure made over 
a period of time. Given the risk of use of research reports as sales 
materials in the case of initial registered offerings and other 
offerings within a year of effectiveness, we would envision a safe 
harbor applying only if the research reports were required to be filed 
with the Commission in connection with the offering.
    What limitations should we consider if we were to extend the Rule 
139 focused reports safe harbor to IPOs? Should we limit extension to 
companies initially offering more than a certain dollar amount of 
securities? If so, at what level should we set the minimum offering 
amount: $250 million; $500 million; $600 million? Should we set other 
conditions? If so, what kinds?
    Do these same considerations apply to unseasoned reporting 
companies? Does the proposed Form B public float/ADTV criteria provide 
a good model for qualifying companies that should be able to rely on 
this aspect of Rule 139? Should we differentiate unseasoned reporting 
companies listed on a national securities exchange from ones that are 
not listed?
    Should we condition any extension of Rule 139 to cover focused 
reports about these companies on the broker or dealer having a 
specified history of following the company (e.g., two years)? Should we 
extend it only if the report was prepared by a broker or dealer that 
had issued research reports about the company before the time it 
announced its registered offering?
    Should we require that issuers file any research report prepared in 
reliance on any further extension of Rule 139 as part of their 
registration statements or as prospectus supplements? A filing 
requirement would assure that all investors would have equal access to 
the report, in furtherance of our goals to reduce selective disclosure 
whenever possible. If such reports are not filed, should issuers and 
underwriters be required to inform investors of the reports' 
availability and undertake to provide the reports upon request?
v. Industry-Related Reports
    We also would extend the industry-related report safe harbor. 
Instead of applying only to offerings of issuers that meet the Form S-3 
or F-3 minimum float/investment grade and reporting history, we would 
extend it to all issuers, regardless of size or reporting history. 
Where the report is not truly focused on the issuer of the securities, 
which the existing conditions ensure, there appears to be little risk 
of a report that is distributed regularly being distributed for the 
purpose of hyping the security. Even if the purpose of the broker-
dealer's distribution was hyping, that type of report is unlikely to 
have that effect, regardless of whether the issuer is reporting or not. 
We solicit comment, however, concerning whether the contents of such a 
report under the proposed safe harbor should be further limited with 
respect to non-reporting companies.
    We also propose to alter one of the conditions of the existing 
industry-related report safe harbor. We would eliminate the requirement 
that the report not contain a more favorable recommendation than the 
one made in the last publication by the broker or dealer about the 
issuer or its securities. That condition controls the recommendation 
being made by the analyst, not just the format in which it is made. 
While we recognize the risk involved in lifting that constraint, we 
believe it is possible to address the hyping concern by disclosure 
rather than by prohibiting a broker or dealer from stating what may be 
a legitimate change in its opinion. Our proposed Rule would provide 
simply that, when a broker or dealer wishes to make a more favorable 
recommendation than it made in the past, it also must disclose

[[Page 67221]]

in the report the last two opinions or recommendations it published 
while not participating in a distribution by the issuer.363 
Because the broker or dealer also must disclose its role in the 
distribution, investors will be aware of the potential conflict of 
interest and can judge the current recommendation accordingly.
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    \363\ If the broker or dealer has not made recommendations on 
two such occasions in the past, it may so state and provide its last 
recommendation.
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    As revised, Rule 139 also would require that the broker or dealer 
reporting on unseasoned or non-reporting issuers have distributed such 
reports with ``reasonable regularity.'' We solicit comment regarding 
the need to retain the reasonable regularity requirement for unseasoned 
or non-reporting issuers. We also solicit comment as to whether it is 
necessary that projections for unseasoned or non-reporting issuers have 
been published with reasonable regularity.
vi. Section 17(b)
    Section 17(b) of the Securities Act requires disclosure of any 
compensation received or expected to be received, directly or 
indirectly, form an issuer, underwriter or dealer for the publication 
or communication of information that describes a 
security.364 Brokers and dealers are reminded that 
compensation received from an issuer that could be attributed to the 
preparation of a research report should be prominently disclosed.
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    \364\ In adopting Section 17(b), Congress intended to address 
the ``evils of the `tipster sheet' as well as articles in 
newspaper[s] or periodicals that purport to give an unbiased opinion 
but which opinions in reality [were] bought and paid for.'' H.R. 
Rep. No. 85, 73rd Cong., 1st Sess. 24 (1933).
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2. Proposals and Interpretation in Connection With Regulation S and 
Rule 144A Offerings
    Where an issuer is offering securities outside the United States in 
reliance on Regulation S, it and those acting on its behalf are 
required to refrain from making ``directed selling efforts'' in the 
United States and must ensure that the transaction is an ``offshore 
transaction.'' ``Directed selling efforts'' is defined to encompass 
activities that are done for the purpose of, or could reasonably be 
expected to have the effect of, conditioning the market in the United 
States for the securities being offered under the Regulation. To 
satisfy the offshore transaction condition, no offer may be made to a 
person in the United States.
    A broker or dealer acting as an underwriter on behalf of an issuer 
in connection with a Regulation S offering may wish, around the same 
time, to publish or distribute in the United States its regular 
analysts' research reports that cover the issuer, its securities or its 
industry. In that event, questions arise regarding whether those 
actions would conflict with the prohibition against directed selling 
efforts or the offshore transaction condition.365 The 
concern stems from the analysis that those actions could be viewed as 
conditioning the market, which would constitute directed selling 
efforts, or offering the securities in the United States, which is 
prohibited under the ``offshore transaction'' requirement.
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    \365\ See, e.g., Braverman, U.S. Legal Considerations Affecting 
Global Offerings of Shares in Foreign Companies, 17 J. of Int'l. L. 
& Bus. 30, 79 (1996).
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    Similarly, when a broker or dealer is selling securities in 
reliance on Rule 144A, it is subject to the condition that it may not 
make offers to persons other than those it reasonably believes are 
QIBs. Where it distributes research about the issuer around the time of 
the Rule 144A transaction, it may be viewed as making offers to persons 
that receive it, including those who are not QIBs.
    We are concerned that these blanket restrictions have resulted in 
brokers and dealers withholding regularly published research that they 
have not prepared with a view towards promoting the offering to 
investors. We therefore have proposed amendments to Regulation S and 
Rule 144A. They provide that research may be published or distributed 
under new terms set forth in Rules 138 and 139 notwithstanding the 
Regulation S prohibition against directed selling efforts and offshore 
transaction requirements or the requirement that Rule 144A offers be 
limited to QIBs.
    In Rule 139, we would add an exemption in connection with these 
unregistered offerings. It would be limited to issuers about whom a 
broker or dealer may prepare focused reports (that is, seasoned 
issuers, larger foreign issuers and foreign government 
issuers).366 We are not proposing to create a Rule 139 
exemption for reports on small or unseasoned issuers making Regulation 
S or Rule 144A offerings. We solicit comment, however, concerning 
whether the proposed Rule 139 exemption for industry-type reports in 
registered offerings should be extended on equivalent terms to 
Regulation S or Rule 144A offerings.
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    \366\ See proposed revisions to Securities Act Rules 138(b), 17 
CFR 230.138(b); 139(b), 17 CFR 230.139(b); 144A(d)(1)(i), 17 CFR 
230.144A(d)(1)(i); and Rule 902 (c)(3)(viii) and (h)(4) of 
Regulation S, 17 CFR 230.902 (c)(3)(viii) and (h)(4).
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    With one exception, we propose to apply the same conditions in the 
Rule 138 and 139 exemptions for Regulation S and Rule 144A transactions 
that we would apply in connection with registered offerings. The 
additional condition would be that research could be published only in 
a publication that the broker or dealer distributes with reasonable 
regularity. We believe that restriction is appropriate given that our 
goal in these unregistered offerings is to allow for the continuation 
of research that the broker or dealer has regularly published, not the 
commencement of research. We solicit comment with regard to whether the 
research safe harbors for Regulation S and Rule 144A offerings should 
contain additional safeguards. Conversely, should only Rule 139 contain 
the reasonable regularity requirement for these offerings? We also 
solicit comment on whether a bright-line test should replace the 
``reasonable regularity'' requirement. If so, what publication 
intervals should the safe harbor substitute for the reasonable 
regularity requirement (e.g., annual or quarterly publication)? Would a 
bright-line test provide sufficient flexibility to cover differing 
practices among brokers and dealers?
    In its 1990 release adopting Regulation S, we stated that research 
reports of the nature described in Rule 139(b) would not be deemed to 
constitute directed selling efforts in offerings by reporting 
companies.367 Those reports are limited to ones that are not 
focused solely on the issuer or its securities but are more akin to 
industry reports. In addition, those reports are limited in how much 
prominence they can give to the issuer and whether they can provide a 
more favorable recommendation than last issued. In the same release, we 
warned brokers and dealers involved in Regulation S offerings by non-
reporting companies to exercise greater caution in publication of 
research. As a result, it generally has been viewed as not appropriate 
for participating brokers or dealers to publish research of the nature 
described in Rule 138 and Rule 139(a) while an issuer is conducting an 
offering under Regulation S.
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    \367\ Securities Act Release No. 6863 (Apr. 24, 1990) [55 FR 
18306, 18311-12].
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    The Commission believes that this interpretation currently limits 
the distribution of regularly published research reports by brokers and 
dealers. The Commission, therefore, is expressing the view today that 
brokers and dealers may publish and distribute research reports as 
described in current Rule 138 or Rule 139 without such

[[Page 67222]]

reports being deemed to constitute directed selling efforts.
3. Research and Proxy Solicitation
    We also are proposing to codify a Commission staff position 
368 that the publication or distribution of research under 
the conditions set forth in Rules 138 and 139 is permitted in 
connection with a registered securities offering that is subject to the 
proxy rules under the Exchange Act.369 The new rule would 
provide that distribution of research in accordance with Rule 138 or 
139 would be an exempt solicitation for purposes of the proxy 
rules.370
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    \368\ See Staff no-action letter Merrill, Lynch, Pierce, Fenner 
& Smith, Inc. (Oct. 24, 1997).
    \369\ See proposed Exchange Act Rule 14a-1(l)(2)(v), 17 CFR 
240.14a-1(l)(2)(v).
    \370\ See Exchange Act Rule 14a-2(a)(7), 17 CFR 240.14a-2(a)(7).
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    Recently adopted Exchange Act Regulation M also contemplated 
dissemination of research by distribution participants and their 
affiliates during the pendency of a distribution of securities if the 
conditions of Exchange Act Rule 138 or 139 are met.371 
Codification of the staff's position would further harmonize the 
treatment of research under the Securities Act and Exchange Act rules. 
We solicit comment on whether the proposed revisions would change 
analysts' approach to publishing research reports on ongoing business 
combinations.
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    \371\ Exchange Act Rule 101(b)(1), 17 CFR 242.101(b)(1).
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VIII. Prospectus Delivery

A. Congressional History

    Congress intended that the prospectus provide investors with ``the 
means of understanding the intricacies of the transaction. * * *'' 
372 From the outset of the Securities Act, therefore, 
Section 5 has required an issuer to send the investor a final 
prospectus no later than the time of sale. 373 When Congress 
recognized that the final prospectus would not always be available to 
investors at the time they make their investment 
decisions,374 it amended the Securities Act in 1954 to allow 
for the use of the preliminary prospectus. As the House Committee on 
Interstate and Foreign Commerce explained:
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    \372\ H.R. Rep. No. 85, 73rd Cong., 1st Sess. 8 (1933).
    \373\ A final prospectus is a prospectus that conforms to 
Section 10(a) of the Securities Act, 15 U.S.C. Sec. 77(j)(a).
    \374\ H.R. Report No. 1542, 83rd Cong., 2d Sess., 12 (1954).

    [h]ow the investor might have accurate information at the time 
it is useful to him is a problem that long has been recognized. The 
proposed amendment offers an approach to its solution in that it 
provides for the use of a processed document, or preliminary 
prospectus, prior to the effective date of the registration 
statement.375
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    \375\ Id.

While Congress permitted the use of preliminary prospectuses, it did 
not lift its mandate that final prospectuses be delivered. Thus, while 
the issuer has the option to deliver prospectus information to the 
investor before it makes its investment decision, the Act only requires 
that a final prospectus be delivered to investors prior to or with the 
confirmation. Because the confirmation arrives at the end of the 
offering process, investors' investment decisions generally have been 
made before the time of final prospectus delivery.

B. Commission History

    In the face of Congress' decision to treat the two kinds of 
prospectuses in that manner, the Commission's approach to preliminary 
prospectus delivery has been measured. Immediately after the adoption 
of the 1954 amendments, the Commission adopted Securities Act Rule 
460.376 Rule 460 states that the Commission may consider 
whether preliminary prospectuses have been adequately distributed 
before accelerating the effectiveness of a registration 
statement.377
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    \376\ 17 CFR 230.460; Securities Act Release No. 3519 (Oct. 11, 
1954) [19 FR 6727].
    \377\ Under Section 8(a) of the Securities Act, the Commission 
must give ``due regard to the adequacy of the information respecting 
the issuer theretofore available to the public * * *'' before 
accelerating the effectiveness of a registration statement. 15 
U.S.C. Sec. 77(h)(a).
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    In 1969, the Commission expressed its concern that investors were 
not receiving the necessary disclosure to make informed investment 
decisions in offerings by first time issuers.378 The 
Commission emphasized that ``the investing public should be aware that 
many such offerings of securities are of a highly speculative character 
and that the prospectus should be carefully examined before an 
investment decision is reached.'' 379 Accordingly, the 
Commission stated that, before accelerating the effectiveness of a 
registration statement for a first time issuer, it would consider 
whether the issuer had taken reasonable steps to send to investors a 
preliminary prospectus at least 48 hours before the mailing of 
confirmations.
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    \378\ Securities Act Release No. 4968 (Apr. 24, 1969) [34 FR 
7235].
    \379\ Securities Act Release No. 4968, 34 FR at 7235.
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    The Commission formalized that 48-hour requirement in offerings by 
new issuers in 1982 when it amended Exchange Act Rule 15c2-
8.380 Rule 15c2-8 requires a broker or dealer, in connection 
with offerings by first time issuers, to deliver a copy of the 
preliminary prospectus to anyone expected to purchase in the offering. 
They must deliver the prospectus at least 48 hours before sending a 
confirmation. Rule 15c2-8 also requires that a broker or dealer take 
reasonable steps to comply promptly with any written request for a 
preliminary or final prospectus. Additionally, under the rule, brokers 
and dealers must make copies of the preliminary and final prospectus 
available to their sales associates that are expected to solicit orders 
for such securities.381
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    \380\ 17 CFR 240.15c2-8; Securities Act Release No. 6383 (Mar. 
3, 1982) [47 FR 11380]. In the 1980 Rule 15c2-8 proposing release, 
the Commission noted that a preliminary prospectus delivery 
requirement may be appropriate for all issuers and solicited comment 
on extending it to every offering. Securities Act Release No. 6276 
(Dec. 23, 1980) [46 FR 78]. Commenters expressed concern that such 
an extension would create an artificial waiting period that would 
impose an undue burden on an issuer's ability to tap favorable 
securities markets. See Securities Act Release No. 6338 (Aug. 6, 
1981) [46 FR 42042].
    \381\ In the 1969 release proposing Rule 15c2-8, the Commission 
expressed its concern that salespersons were offering newly issued 
securities without seeing a copy of the preliminary prospectus. 
Exchange Act Release No. 8710 (Oct. 7, 1969) [34 FR 17034].
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C. Prospectus Delivery Proposals

    The Commission continues to believe that delivery of information to 
investors plays an integral role in their protection. In recognition of 
the importance of the prospectus to investors, we recently adopted 
rules that require the use of plain English in the 
prospectus.382 Among other benefits, the use of plain 
English eliminates arcane, unnecessarily complex and incomprehensible 
language from key sections of the prospectus. We adopted these rules in 
order to allow investors to understand the intricacies and risks of an 
offering better when making their investment decisions. If the plain 
English prospectus reaches investors only after they have made their 
investment decisions, the full benefit is not realized.
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    \382\ Securities Act Release No. 7497 (Jan. 28, 1998) [63 FR 
6370].
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1. Adequacy of Current Rules
    Under current market practices, the Commission is concerned that 
Rule 460 and Rule 15c2-8 do not provide adequate assurance that all 
investors who need it will have sufficient time to consider the 
prospectus disclosure before making their investment decisions. Our 
concern about the adequacy of current rules is multifold.

[[Page 67223]]

First, Rule 460 does not mandate delivery of preliminary prospectus 
information. Second, delivery of the preliminary prospectus information 
under Rule 15c2-8 covers only initial public offerings. While 
preliminary prospectus disclosure is essential in those offerings, 
investors' need for that disclosure before making investment decisions 
is not confined to those offerings.
    Third, because Rule 15c2-8 measures the timing of delivery from the 
date of confirmation and uses only a 48-hour period, we are concerned 
that the Rule does not ensure a sufficient amount of time for investors 
to consider fully the intricacies of an offering. For example, in the 
typical marketed underwritten offering today, investors appear to make 
their investment decisions on or before the ``circle date.'' This is 
the point at which investors are asked to ``firm up'' their orders in 
anticipation of pricing. On the circle date, an investor is asked to 
represent orally whether it will or will not purchase in the offering. 
The underwriter ``circles'' those indications of interest in its book 
that represent an affirmative response. The underwriters rely on these 
commitments in reaching final price and volume terms with the issuer. 
As a matter of practice, the investing public treats itself as 
committed at this point in time.383 The circle date or dates 
in an offering can occur days before pricing. Confirmations are sent to 
investors after pricing occurs. While issuers and underwriters can 
always choose to deliver preliminary prospectuses earlier than 
required, and sometimes do under current practices, the 48-hour 
delivery period in the Rule may not effectively guarantee that 
investors receive prospectuses when they need them most.384
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    \383\ According to offering participants with whom the staff 
spoke, the ``law of the Street'' operates to require an investor 
either to purchase the securities it orally committed to buy on the 
circle date or harm its reputation by breaking its commitment. To 
break the commitment made on the circle date also is to risk 
exclusion from future offerings.
    \384\ Arguments have been made to the staff that providing for 
delivery in these marketed deals at such a late point in the 
offering process would still be effective because underwriters will 
allow their favored customers, even then, to back out of the trade 
without repercussions. We are concerned that reliance on that 
practice would disadvantage smaller investors and not reflect 
current offering practices.
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    A fourth reason for concern that existing rules may not be 
sufficient relates to the fact that the Rule only applies to brokers 
and dealers. As the use of electronic media to make offerings becomes 
more prevalent, issuers may increasingly choose to offer their stock 
directly to the public.385 Issuers are not subject to Rule 
15c2-8's delivery obligation.386 In current offerings not 
involving a broker or dealer, Rule 15c2-8 has no effect on prospectus 
delivery.
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    \385\ See Grant, Small Firms Take Direct Route to Stock 
Offerings, USA TODAY, Apr. 29, 1979, at 4b; Kollar, Do-it-Yourself 
Public Offerings; The Internet Gives a New Dimension to an Old 
Financing Vehicle, Investment Dealers' Digest, Mar. 24, 1997 at 4; 
Barlas, Floating Stock on the Web; The Next Wave?, Investor's Daily, 
Feb. 5, 1998, at A9.
    \386\ Rule 15c2-8, 17 CFR 240.15c2-8, would apply if the issuer 
itself is a broker or dealer.
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2. Prospectus Delivery and Developments in Communications
    Investors' need for adequate time to review the preliminary 
prospectus may be particularly enhanced in marketed deals under the 
proposed system. Under today's proposals, we would permit the 
distribution of sales materials in addition to the preliminary 
prospectus. This may result in investors receiving much more sales 
literature in marketed offerings. In turn, investors may require more 
time with a preliminary prospectus in hand to evaluate all the 
materials they have. Providing investors with preliminary prospectuses 
sufficiently before their investment decisions would allow them to 
consider both the supplemental sales literature and the disclosure 
contained in the preliminary prospectus.
    In the 29 years since the Commission first formulated the 48-hour 
delivery period, advances in technology, changes in practices and 
regulatory developments have profoundly altered the transmission of 
prospectus information. Today, in a matter of minutes, issuers can 
disseminate documents across the country and to the far corners of the 
world. Many issuers have Internet web sites that provide investors with 
instantaneous access to their financial reports and other company 
information. Electronic delivery of prospectuses is becoming more 
common, as companies and investors become more familiar with that 
medium.387 Broker-dealers already make trade settlement 
information in connection with securities offerings available 
electronically on a real-time basis to institutional 
customers.388 Print media also has seen its share of 
technological advancements. In those 29 years, we have moved from 
typewriters and typesetting to everyday use of computers. Today, a 
prospectus can be printed in a fraction of the time it took when the 
48-hour period was formulated. In addition, regulatory changes such as 
shelf registration, unallocated shelf registration and, as proposed 
today, Form B registration have allowed and would allow issuers and 
underwriters to take advantage of any favorable changes in the 
securities markets quickly.
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    \387\ See Bagley & Tomkinson, Internet Is Seeing Its Share of 
Securities Offerings, The Nat'l L.J., Feb. 2, 1998, at C3; Weisul, 
The New Plumbing on Wall Street; Forget the Hype: The Internet is 
Now Being Used by Securities Firms to Solve Workaday Problems, 
Investment Dealers' Digest, Jun. 23, 1997, at 10.
    \388\ See, e.g., Depository Trust Company's Institutional 
Delivery System User Manual at 1 (1994). Electronic messages 
containing the key information about the trade made in the offering 
are often sent earlier so that the clearance and settlement process 
may begin. Paper confirmations are then mailed later.
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3. Final Prospectus Delivery Exemption
    We believe that requiring delivery of only a final prospectus at 
the time of sale does not completely fulfill the Securities Act goal of 
protecting investors through disclosure in all offerings. In firm 
commitment underwritten offerings, the final prospectus invariably 
arrives after the investor has made its investment decision. While 
delivery of final prospectuses in those offerings may be useful to 
investors who are considering litigation or resale, it does little to 
fulfill the prophylactic goals of the Securities Act. As Professor 
Louis Loss noted, ``[a] prospectus that comes with the security does 
not tell the investor whether or not he should buy. It tells him 
whether he has acquired a security or a lawsuit.'' 389
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    \389\ Loss, Fundamentals of Securities Regulation 93 (1988).
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    In addition, because the Securities Act requires delivery of a 
final prospectus before or at the same time the confirmation is sent, 
the successful completion of the clearance and settlement process is 
contingent on prompt completion and delivery of the final prospectus. 
Broker-dealers sometimes experience practical difficulties in trying to 
comply with the current T+3 settlement cycle. In some cases, Exchange 
Act 10b-10 confirmations have had to be delayed in order to await 
completion of the final prospectus.390 Any future shortening 
of the settlement cycle would simply exacerbate those difficulties.
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    \390\ See the comment letters, in File No. S7-19-96, from the 
American Bar Association (Dec. 11, 1996), Merrill Lynch (Oct. 31, 
1996), Morgan Stanley (Dec. 9, 1996), PSA The Bond Market 
Association (Nov. 8, 1996) and the Securities Industry Association 
(Nov. 13, 1996).
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    The cost of delivery of a final prospectus, where it is otherwise 
readily available to the public,391 may exceed

[[Page 67224]]

any marginal benefit to investors. To provide investors with the 
maximum benefit from the prospectus, our proposals would re-focus 
prospectus delivery requirements on a point in time before investors 
have made their investment decisions. Accordingly, the Commission is 
proposing to create a new exemption from the Securities Act requirement 
to deliver a final prospectus.392 The Commission is not 
proposing to change the final prospectus delivery requirement in 
Exchange Act Rule 15c2-8(d).393 That rule requires all 
brokers or dealers that participate in a distribution of securities 
registered under the Securities Act to take reasonable steps to comply 
promptly with the written request of any person for a copy of the final 
prospectus. The broker or dealer must comply with such request until 
the expiration of the applicable 40-day or 90-day period under Section 
4(3) of the Securities Act. We solicit comment on whether, as a 
condition to the exemption, issuers, like brokers and 
dealers,394 should be required to provide to a purchaser 
upon request, and free of charge, a copy of the final prospectus.
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    \391\ Domestic issuers file final prospectuses with the 
Commission electronically via EDGAR. The filings are available on a 
real-time basis through various services and after a 24-hour delay 
at the Commission's web site (http://www.sec.gov).
    \392\ See proposed Securities Act Rule 173, 17 CFR 230.173. This 
Rule would not apply in the case of offerings on Forms C, SB-3, F-8, 
F-80 or F-10 (when that Form is used in a business combination 
transaction) or offerings of investment company securities.
    \393\ 17 CFR 240.15c2-8(d).
    \394\ See 17 CFR 240.15c2-8(a).
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a. Conditions to the Exemption
    As a condition to the exemption, we would require that issuers, 
brokers and dealers tell investors, by the time investors receive their 
confirmations of sale, where they can acquire the information that 
constitutes the final prospectus free of charge.395 We also 
would require as a condition the delivery of preliminary prospectus 
information in accordance with the Commission's new rule.396
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    \395\ See proposed Securities Act Rule 173(c), 17 CFR 
230.173(c). In the case of Form B offerings, investors will be 
notified through the term sheet of where they can acquire this 
information.
    \396\ See proposed Securities Act Rule 172, 17 CFR 230.172.
---------------------------------------------------------------------------

    Comment is solicited with respect to the notification condition. 
Given the availability of the final prospectus in all cases via the 
Commission's Internet web site or the Commission's Public Reference 
Room, is there a need to tell investors where to find it? Should the 
notification instead state that the registrant will provide promptly a 
copy of the final prospectus upon request? Would the proposals shift 
too heavy a burden to investors by requiring them to take action to 
obtain a final prospectus rather than to receive it automatically? Is 
the burden on investors enough that, despite EDGAR, we should continue 
to require final prospectus delivery?
b. Business Combinations and Exchange Offers
    We are not planning to exempt offerings registered on the 
Securities Act forms for business combinations and exchange offers from 
the final prospectus delivery requirement.397 These 
offerings differ from the other offerings registered under the 
Securities Act because the proxy rules and tender offer rules in 
conjunction with state law impose informational and delivery 
requirements in those transactions. The information contained in the 
final prospectus therefore would be delivered regardless of Securities 
Act requirements. In order to ensure consistency among the various 
rules and regulations applicable to these business combinations and 
exchange offers, the final prospectus delivery requirement would remain 
intact.
---------------------------------------------------------------------------

    \397\ These Forms would include Forms C, SB-3, F-8, F-80 and F-
10 (when that Form is used in a business combination transaction).
---------------------------------------------------------------------------

    In addition to the Section 5(b)(2) requirement for final prospectus 
delivery, Forms S-4 and F-4 require the registrant, if it or the 
company to be acquired incorporates any documents into the prospectus, 
to deliver a prospectus no later than 20 business days before the date 
of the meeting or, if no meeting is held and proxies are solicited, 20 
days before the corporate action or transaction is effected. This time 
period was established by the Commission in 1984 to address investors' 
need for sufficient time to acquire the documents incorporated by 
reference and, presumably, consider them.398 Since 1984, we 
have witnessed the advent of EDGAR, the Internet and other sources of 
filed information. The Commission no longer believes that a 20-day time 
period is needed for that purpose. All of the documents that would be 
incorporated into proposed Form C would be available through the 
Commission's Internet web site, as well as other sources, before the 
time the registration statement becomes effective. We propose to 
eliminate the 20-day period. We solicit comment, however, on whether we 
should retain a set period and, if so, how long that period should be. 
Would delivery under the requirements applicable to these offerings not 
ensure sufficient time to obtain and consider the disclosure without 
one?
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    \398\ Securities Act Release No. 6578 (Apr. 23, 1985) [50 FR 
18990].
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c. Rule 434 Final Prospectus Delivery Method
    In 1995, the Commission adopted Rule 434 399 to ease the 
burden of prospectus delivery within the new T+3 settlement 
cycle.400 At that time, four investment firms and the 
Securities Industry Association (SIA) had expressed concern that there 
would be insufficient time to mass print and mail final Section 10(a) 
prospectuses in a T+3 settlement cycle. Rule 434 provides that delivery 
of a final prospectus may be made in multiple documents at different 
intervals in the offering process.
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    \399\ 17 CFR 230.434.
    \400\ Securities Act Release No. 7168 (May 11, 1995).
---------------------------------------------------------------------------

    Rule 434 allows issuers and other offering participants to meet 
their prospectus delivery requirement by delivering a preliminary 
prospectus and a term sheet or abbreviated term sheet before or at the 
time of sale. The information contained in the preliminary prospectus, 
confirmation and term sheet or abbreviated term sheet must in aggregate 
meet the informational requirements of Section 10(a). Therefore, only 
the Section 10(a) information not previously delivered to investors 
would have to appear in the term sheet or abbreviated term sheet. 
Consequently the term sheet or abbreviated term sheet could be printed 
and mass mailed quicker than the final integrated 
prospectus.401
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    \401\ It appears, however, that most issuers and participants 
continued to deliver the integrated final Section 10(a) prospectus 
at the time of sale. Since September of 1996, only four (non-
investment company) issuers have filed term sheets or abbreviated 
term sheets.
---------------------------------------------------------------------------

    As discussed earlier, the Commission is proposing to re-focus the 
prospectus delivery requirements on a point in time before investors 
have made their investment decision. If the proposed registration 
system is adopted, issuers and offering participants largely will be 
exempt from the requirement to deliver a final prospectus at the time 
of sale. Therefore, the printing and mailing of a final prospectus in 
time to meet the T+3 settlement cycle would not be required. 
Accordingly, the Commission is proposing to repeal Rule 434 for issuers 
other than investment companies as its purpose and usefulness to 
issuers and offering participants under the proposed registration 
system would be limited. The proposals do not exempt investment 
companies from the requirement to deliver a final prospectus at the 
time of sale. The

[[Page 67225]]

Commission therefore is proposing to retain Rule 434 for closed-end 
funds and unit investment trusts, which are currently covered by the 
Rule. We request comment on whether Rule 434 should be retained for 
these categories of investment companies.
4. Delivery of Preliminary Prospectus Information
    Under the proposed registration system, we seek to ensure that high 
quality disclosure is delivered to investors when they need it most--
before they make their investment decisions.402 The proposed 
prospectus delivery requirements, like the current prospectus delivery 
requirements, do not contemplate that an issuer demonstrate that the 
investors actually received the prospectus. The issuer would have to 
take steps to ensure that the means it chooses to deliver the 
prospectus would reasonably result in delivery to the issuer by a 
certain date. As with other reforms, what prospectus information is 
required to be delivered, and when, will depend upon the nature of the 
issuer and offering.403
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    \402\ See proposed Securities Act Rule 172, 17 CFR 230.172, and 
proposed revisions to Exchange Act Rule 15c2-8, 17 CFR 240.15c2-8.
    \403\ If it chooses to, the issuer, underwriting or 
participating broker or dealer may deliver a final prospectus in 
lieu of the preliminary prospectus, so long as the delivery of the 
final prospectus satisfies the required time frame.
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a. Form B Offerings
    In all offerings of securities on Form B, we propose to mandate the 
delivery of transactional information before the investment 
decision.404 We seek comment on two alternative proposals. 
Under the first proposal, we would mandate delivery of a securities 
term sheet. The securities term sheet would: (1) itemize the material 
terms of the securities in summary format; (2) identify a contact 
person to whom questions and requests for final documents may be 
directed; (3) name any person other than the issuer that is selling the 
securities and briefly identify any material relationship between such 
person and the issuer within the past three years; and (4) include a 
legend advising investors to read, before making an investment 
decision, the documents the issuer files with the Commission. We would 
require that the securities term sheet be delivered to investors before 
they make their investment decisions and be on file with the Commission 
before the first sale. Delivery of other information would not be 
mandated in proposed Rule 172 for Form B offerings.
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    \404\ A preliminary prospectus could be used to satisfy this 
obligation if an issuer so chooses. If a preliminary prospectus is 
delivered, delivery of a securities term sheet would not be 
required. Absent consent by the investor to electronic delivery, the 
issuer or underwriter would be required to send a paper copy of the 
securities term sheet.
---------------------------------------------------------------------------

    Under the second proposal, we would require delivery of a 
prospectus containing all transactional disclosure currently required 
in Form S-3/F-3. That prospectus would have to be on file before first 
sale. Just like the first proposal, delivery of other information would 
not be mandated in proposed Rule 172.
    We ask for comment on what kind of information should be mandated 
in the term sheet or prospectus. For example, should the term sheet 
include all ``offering information'' 405 filed in Form B 
offerings? Should the term sheet be more like a profile prospectus? 
Should mandated term sheet disclosure be a different subset of offering 
information? If so, should the term sheet include only categories of 
transactional information that must be disclosed in every Form B 
registration statement (e.g., use of proceeds, changes in the 
registrant's affairs, etc.)? Should the term sheet include any of the 
categories of disclosure that must be included in the Form B filing if 
applicable (e.g., transactional risk factors, dilution, etc.)? Should 
we require that the term sheet be written in plain English? Should we 
require in the prospectus fewer items of mandated disclosure? If so, 
which items should be excluded?
---------------------------------------------------------------------------

    \405\ See Section V.A.1.a.ii. of this release for a discussion 
of what constitutes ``offering information.''
---------------------------------------------------------------------------

    Similarly, should material changes in the issuer's affairs not 
previously reported be required on either the term sheet or the 
prospectus? Would there already be sufficient information available to 
investors and the market regarding certain securities such that 
delivery of a securities term sheet or prospectus would be unlikely to 
enhance investor protection significantly? Should we require delivery 
of a securities term sheet or prospectus in any Form B offering, 
regardless of whether or not the class of securities was previously 
registered?
b. Offerings by Small or Unseasoned Issuers
    Delivery of information contained in the prospectus is especially 
important when the registrant is a new or relatively new public 
company. In those cases, there is comparatively little information 
available about the company. Due to the general lack of familiarity by 
investors with companies that are smaller or unseasoned, it is 
important that prospectus information be delivered early enough for 
investors to have sufficient time to assess the disclosure and, if 
necessary, seek further information in light of it. In these 
situations, we would not limit the requirement to deliver a preliminary 
prospectus to non-reporting companies, as Rule 15c2-8 does today. We 
are proposing to require the delivery of a Section 10 prospectus for 
all filings of small or unseasoned offerings.406 The timing 
aspect of the delivery requirement would be dependent upon whether the 
offering was the registrant's initial public offering (or registered 
within a year of the registrant's initial public offering). If so, we 
propose to require that a Section 10 prospectus be delivered in a 
manner reasonably designed to be received by each investor no later 
than 7 calendar days before the date of pricing in a firm commitment 
underwritten offering. In a best efforts offering, or direct public 
offering, we would mandate delivery in a manner reasonably designed to 
be received by each investor no later than 7 calendar days before the 
investor signs a subscription agreement or other document in which it 
commits to purchase securities. For more seasoned 
issuers,407 we would require that the prospectus (and any 
incorporated reports) be delivered so as to arrive at least 3 calendar 
days before the date of pricing, or the date the investor signs a 
subscription agreement or other document in which it commits to 
purchase the securities, as applicable.
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    \406\ This requirement would encompass all filings on Forms A, 
SB-1, SB-2, F-7, F-9, F-10 (not involving a business combination) 
and certain Schedule B offerings. These proposals do not contemplate 
that issuers must satisfy their prospectus delivery requirements by 
using any specific method of delivery. Whether issuers satisfy 
delivery requirements electronically or in more traditional ways, 
they would be required to deliver the prospectus in a manner 
reasonably designed to result in delivery by the applicable date.
    \407\ For purposes of this delivery requirement, seasoned 
issuers are those whose initial public offerings took place one year 
or more before the effective date of the registration statement for 
the current offering of securities.
---------------------------------------------------------------------------

    We solicit comment on whether we should require earlier prospectus 
delivery. Should we mandate delivery, for example, at 10 or 15 days 
(rather than 7 days) and 5 or 10 days (rather than 3 days) before the 
date of pricing or commitment to purchase? We solicit comment on 
whether the proposed 7 and 3 day delivery dates are shorter or longer 
than the dates by which issuers typically deliver red herring 
prospectuses under the current system. Would the proposal alter current 
delivery practices in offerings of the type that would be made on Form 
A or

[[Page 67226]]

the small business issuer system? If so, how?
    Because information would be delivered to the investor before the 
transaction is declared effective and sold, material changes to the 
transaction or the company information may arise that were not 
disclosed in the preliminary prospectus delivered to investors. If 
investors are not otherwise informed about those changes, the 
information must be set forth in a document sent in a manner reasonably 
designed to be delivered to each investor at least 24 hours before the 
pricing of securities or the date the investor signs a subscription 
agreement or otherwise commits to purchase the 
securities.408 Should we instead require delivery of 
material change information in 36 or 48 hours?
---------------------------------------------------------------------------

    \408\ For example, an issuer could choose to have the brokers 
tell investors orally about the changes when they call to determine 
if investors will commit to purchase.
---------------------------------------------------------------------------

c. Foreign Government Issuers
    We propose to exempt foreign government issuers 409 from 
the final prospectus delivery requirements and require them to deliver 
prospectus information under Rule 172 for the same reason we propose 
that treatment for other issuers: to provide more timely and efficient 
dissemination of information to investors.
---------------------------------------------------------------------------

    \409\ Securities Act Rule 405, 17 CFR 230.405, defines ``foreign 
government'' to mean the government of any foreign country or the 
government of any political subdivision of a foreign country.
---------------------------------------------------------------------------

    Foreign government issuers are exempt from the reporting 
requirements under the Exchange Act unless they list their securities 
on a U.S. exchange.410 Therefore, the proposed prospectus 
delivery requirements would serve a significant function in ensuring 
that investors have the information about foreign governments they 
need, at the time they need it, to make an informed investment 
decision. As in the case of corporate issuers, however, delivery may be 
needed more or less depending on the issuer and the offering. We 
believe that investors would need less time to review the prospectus 
information for a new offering by a seasoned issuer than it would that 
of an unseasoned one.
---------------------------------------------------------------------------

    \410\ Section 15(d) of the Exchange Act expressly states that it 
does not apply to foreign government issuers. Section 12(g) of the 
Exchange Act applies only to issuers of equity securities, and 
foreign government issuers never issue equity. Accordingly, Section 
12(b) is the only section under the Exchange Act that imposes a 
reporting requirement on foreign government issuers.
---------------------------------------------------------------------------

    When a foreign government issuer makes an initial registered 
offering in the United States, it files a Schedule B with the 
Commission. The Schedule is publicly available, and in many cases 
contains much more information than is mandated.411 
Investors can access this information through the Commission at any 
time after the registration statement becomes publicly available. 
Depending on the nature of the offering and the issuer, analysts may 
cover the issuer and disseminate information about it and its 
offerings. For purposes of prospectus delivery, therefore, we would 
define ``seasoned'' foreign government issuers as those that already 
have registered a public offering on Schedule B. In the absence of a 
reporting history, we believe that is the best measure of seasoning.
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    \411\ Typically, the registration statements will include 
information about the issuer's country, form of government, economy, 
monetary system, public finance and national debt. Foreign 
government issuers disclose this additional information for 
marketing purposes and due to concern about the antifraud provisions 
of the federal securities laws. See Greene & Adee, The Securities of 
Foreign Governments, Political Subdivisions and Multinational 
Organizations, 10 N.C.J. of Int'l L. and Com. Reg. 1 (Winter 1985).
---------------------------------------------------------------------------

    Under proposed Rule 172, foreign government issuers would be 
divided into two categories: (1) larger seasoned issuers; and (2) 
smaller/unseasoned issuers. Larger seasoned issuers would consist of 
those that:

     Had registered an initial public offering with the 
Commission that was declared effective more than one year before the 
registration of its current offering on Schedule B; and
     Are registering an offering of securities in excess of 
$250 million that is being underwritten on a firm commitment basis.

All other foreign government issuers would be within the smaller/
unseasoned category.
    Large seasoned foreign government issuers that registered their 
offerings on Schedule B would be treated like Form B registrants for 
purposes of prospectus information delivery requirements. We would 
mandate the delivery of a term sheet describing the material terms of 
the security being offered. We also would require that the term sheet 
be on file with the Commission before the first sale.412 
These foreign government issuers would have to send the term sheet by 
means that would reasonably result in delivery to the investor before 
it makes a binding investment decision.
---------------------------------------------------------------------------

    \412\ See proposed Securities Act Rule 230.493A, 17 CFR 
230.493A.
---------------------------------------------------------------------------

    Foreign government issuers in the smaller/unseasoned category would 
be treated like Form A registrants. A foreign government issuer, 
regardless of size, registering its initial public offering on Schedule 
B (or registering within 1 year of it) would be included in the 
smaller/unseasoned category. That issuer would be treated like an 
issuer registering its initial public offering on Form A. Thus, we 
would require it to send a prospectus that satisfies the requirements 
of Section 10 of the Securities Act, by means reasonably designed so 
that the investor receives the prospectus at least 7 days before:

     The date of pricing the securities (for offerings 
underwritten on a firm commitment basis); or
     The date the investor signs a document that commits it 
to purchase the securities or otherwise commits to purchase (for 
offerings underwritten on a best efforts basis and non-underwritten 
offerings).

    A seasoned foreign government issuer registering an offering of 
less than $250 million or registering an offering that is not 
underwritten on a firm commitment basis would be treated the same as a 
seasoned small issuer on Form A. It would have to deliver a prospectus 
3 days before the date of pricing or the date an investor commits to 
purchase, as applicable.
    We solicit comment on the prospectus delivery proposals as they 
relate to foreign government issuers. For unseasoned foreign 
governments, should we mandate prospectus delivery earlier than 7 days? 
Would 10 or 15 days be a better measure of time needed to digest the 
information and do any follow up inquiries. For other foreign 
government issuers in the smaller/unseasoned category, should we 
mandate prospectus delivery earlier than 3 days? Would 5 or 10 days be 
a better measure? For seasoned Schedule B issuers making smaller 
offerings or offerings not done on a firm commitment underwritten 
basis, should we mandate prospectus delivery earlier than 3 days? Would 
5 or 10 days be a better measure? Should our definitions of 
``seasoned'' for offerings by foreign government issuers require that 
the issuer have made its initial public offering more than 1 year 
earlier? Would two years earlier be a better test? Should we raise the 
offering threshold (e.g., to $400 or $500 million) or lower it (e.g., 
to $100 or $150 million)?
    As we do regarding the term sheet required for Form B offerings, we 
solicit comment on whether the term sheet for Schedule B offerings 
should include information in addition to the material terms of the 
securities.
d. Canadian MJDS Issuers
    We also would require earlier delivery with respect to offerings on 
Forms F-7, F-8, F-9, F-10 and F-80--the registration statements used in 
connection with the MJDS. Under the proposed registration system, 
issuers

[[Page 67227]]

that register offerings under the MJDS, other than business 
combinations and exchange offers, also would be required to comply with 
proposed Rule 172.413 We believe this requirement would be 
especially useful to U.S. investors who may need more time to 
familiarize themselves with the disclosure that Canadian companies 
prepare pursuant to the requirements of Canadian securities regulation, 
which would likely differ somewhat from disclosure generally prepared 
under U.S. federal securities laws.
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    \413\ Business combinations and exchange offers on Form F-8, F-
80, and F-10 (when that Form is used in a business combination 
transaction) like business combinations on Forms C and SB-3, would 
not be subject to proposed Rule 172, 17 CFR 230.172, preliminary 
prospectus delivery. Instead, due to the nature of the transactions, 
they would continue to be subject to the final prospectus delivery 
obligations of Section 5. The timing of that delivery would be 
dependent on state law.
---------------------------------------------------------------------------

    Issuers that register on MJDS Forms F-7, F-9 or F-10 (when that 
form does not involve a business combination) would be required to 
deliver a Section 10 prospectus under the proposed Rule. The delivery 
periods would mirror those applicable to Form A offerings. Seasoned 
issuers making offerings underwritten on a firm commitment basis would 
be required to deliver the prospectus to investors at least 3 days 
before the pricing date. For offerings underwritten on a best efforts 
basis, seasoned issuers would be required to deliver the prospectus to 
investors at least 3 days before the investor commits to purchase the 
securities. Unseasoned issuers would be required to deliver the Section 
10 prospectus at least 7 days before the date of pricing or the date an 
investor commits to purchase, depending on the type of underwriting. 
Because there would be less public information available for unseasoned 
issuers, the proposed Rule calls for them to give investors more time 
to read the prospectus.
    Comment is solicited with regard to these delivery obligations. 
Would the 7-day or 3-day delivery requirement provide investors with 
sufficient time to consider the issuer's disclosure? Should MJDS 
issuers be required to deliver sooner than proposed? Would 10 or 15 
days (instead of 7) or 5 or 10 days (instead of 3) be better measures? 
Should we provide that MJDS issuers eligible to register on Form B be 
treated for purposes of delivery the same as Form B issuers, even 
though they rely on Canadian disclosure requirements? Is there any 
reason to differentiate the business combinations and exchange offers 
on MJDS forms from those on Form C or Form SB-3 with respect to the 
delivery requirements?
e. Effectiveness and Prospectus Delivery
    In determining whether to accelerate effectiveness of registration 
statements, Section 8(a) of the Securities Act provides that the 
Commission consider whether there has been available adequate and 
understandable public information about an issuer and its offering. If 
not, the Commission may determine that it is not in the public interest 
to accelerate effectiveness of the registration statement. Under the 
proposed registration system, we would consider whether an issuer 
complied with its prospectus delivery obligations in evaluating any 
request for acceleration. We propose to amend Securities Act Rule 461 
to reflect the consideration of compliance with delivery obligations 
under proposed Rule 172. 414
---------------------------------------------------------------------------

    \414\See proposed Securities Act Rule 461(b)(2)(i), 17 CFR 
230.461(b)(2)(i).
---------------------------------------------------------------------------

f. Secondary Offerings
    The proposed prospectus delivery requirements also would apply to 
registered secondary offerings made by selling security holders. We 
believe this is appropriate because most registered secondary offerings 
would be made in a manner that is similar to registered primary 
offerings. We solicit comment regarding whether it is appropriate to 
apply the same delivery requirements to all secondary offerings made by 
selling security holders that we apply to primary offerings made by the 
issuer. If not, why not, and how should they differ?
    Are certain types of registered secondary offerings conducted in a 
sufficiently different manner from registered primary offerings that 
the delivery requirements are either not necessary or not appropriate? 
In particular, should the same delivery requirements apply to non-
underwritten secondary sales into an existing trading market?
5. Aftermarket Prospectus Delivery
    For a specified period of time after a registration statement 
becomes effective, the Securities Act requires dealers to deliver a 
final prospectus to persons who buy those securities. This aftermarket 
delivery obligation applies to all dealers, whether or not they 
participated in the offering itself.415 The obligation 
arises because Section 5 applies to the dealer's transactions. The 
exemption generally relied upon by dealers, Section 4(3) of the 
Securities Act, is not available during a 40-day or 90-day period after 
the later of the effective date of a registration statement or the 
first bona fide offer of the security.416 Thus, the 
aftermarket delivery period is defined primarily by the length of time 
Section 4(3) is unavailable.417
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    \415\ The obligation is in addition to the obligation of dealers 
to deliver a prospectus when acting as underwriters and with respect 
to their unsold allotments.
    \416\ The 90-day delivery period in Section 4(3) applies for 
securities of issuers that have not previously registered under the 
Securities Act. The 40-day delivery period in Section 4(3) applies 
to securities of issuers that previously registered under the 
Securities Act.
    \417\ As discussed below, Securities Act Rule 174, 17 CFR 
230.174, modifies the statutory delivery obligation.
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a. Background of Aftermarket Prospectus Delivery
    An exemption from registration for dealers is not available during 
those periods because Congress determined to mandate that information 
be delivered to investors by all dealers while the securities are ``in 
the stream of distribution.'' 418 Congress deemed protection 
of investors in the aftermarket important because: those investors are 
likely to be less sophisticated than the ones able to purchase in the 
initial sale, they frequently purchase at a higher price than the price 
of the initial offering, and they are solicited or influenced by the 
same selling efforts as the initial purchasers.419 The 
Section 4(3) period was created to distinguish between transactions 
during distributions and ordinary trading transactions.420
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    \418\ See S. Rep. No. 1036, 83rd Cong., 2d Sess. 7 (1954) 
(statement of Dr. Edward T. McCormick, former Commissioner of the 
Securities and Exchange Commission and then-current president of the 
American Stock Exchange).
    \419\ See S. Rep. 379, 88th Cong., 1st Sess. 28 (1963).
    \420\ The primary purpose of Section 4(3) was to exempt from the 
scope of Section 5 ``transactions by a dealer in securities not 
connected by time and circumstances with [the] distribution of a new 
offering.'' H.R. Rep. No. 85, 73rd Cong., 1st Sess. 6 (1933). The 
bright-line test Congress adopted was considered less ambiguous and 
less subject to ``easy evasion'' than any attempt to establish 
criteria distinguishing dealer activities which are distributive 
from those which are merely incidental to ordinary trading. Throop 
and Lane, Some Problems of Exemption Under the Securities Act of 
1933, 4 L. & Contemp. Problems 89, 120 (1937).
---------------------------------------------------------------------------

    Initially, Congress provided for a one-year aftermarket prospectus 
delivery period during which all dealers were obligated to deliver a 
prospectus. In 1954, Congress shortened the period to 40 days because 
it determined that distributions were completed well before the one-
year period. 421 In 1964, Congress extended the 40-day 
period to 90 days for those transactions where no securities of an 
issuer had previously

[[Page 67228]]

been sold pursuant to an earlier effective registration 
statement.422 At the same time, Congress gave the Commission 
the power to shorten the 40-day and 90-day delivery period by rule, 
regulation or order.
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    \421\ 1954 Amendments to the Securities Act of 1933, Pub. L. No. 
83-577, 68 Stat. 683 (1954).
    \422\ Securities Act Amendments of 1964, Pub. L. No. 88-467, 78 
Stat. 580 (1964). Congress extended the period for two reasons. 
First, it viewed 90 days as a ``more realistic appraisal of the time 
during which the distribution process continues in the case of many 
new issuers.'' See S. Rep. No. 379, 88th Cong., 1st Sess. 28 (1963). 
Second, it wished to protect investors from the ``hot issue'' allure 
characterized by a ``seemingly insatiable appetite'' for new issues 
with ``rapid rises in the prices of such securities to premiums over 
the initial offering.'' Id.
---------------------------------------------------------------------------

    In response to the 1964 legislative action, the Commission promptly 
shortened the aftermarket delivery period for some offerings via the 
adoption of Rule 174.423 Since 1964, the Commission has 
amended aftermarket delivery obligations in Rule 174 four 
times.424
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    \423\ Securities Act Release No. 4749 (Dec. 23, 1964) [29 FR 
19099].
    \424\ Securities Act Release No. 4886 (Nov. 29, 1967) [32 FR 
17933] (exempting securities registered on new Form S-7 from the 
prospectus delivery requirements of Section 4(3)); Securities Act 
Release No. 5101 (Nov. 19, 1970) [35 FR 18130] (eliminating the 
aftermarket delivery requirement for securities of reporting 
issuers); Securities Act Release No. 6763 (Apr. 4, 1988) [53 FR 
11841] (reducing the aftermarket delivery requirement for securities 
issued in initial public offerings that are exchange-listed or 
quoted on an automated inter-dealer quotation system) and Securities 
Act Release No. 6932 (April 4, 1992) [57 FR 18037] (adopting a 
longer delivery requirement for securities of blank check 
companies).
---------------------------------------------------------------------------

    Current Rule 174 exempts from aftermarket prospectus delivery any 
transaction relating to securities of a reporting 
company.425 If the transaction relates to securities of a 
non-reporting company that will be listed on a national securities 
exchange or quoted on an electronic inter-dealer quotation system, 
current Rule 174 sets an aftermarket delivery period of 25 
days.426 For offerings by blank check companies, Rule 174 
sets an aftermarket prospectus delivery period of 90 days after the 
funds are released from the escrow or trust account.427 
Where a registration statement relates to offerings to be made from 
time to time, Rule 174 provides that there is no aftermarket delivery 
requirement once the initial periodexpires.428
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    \425\ 17 CFR 230.174(b).
    \426\ 17 CFR 230.174(d). In establishing the 25-day period, the 
Commission considered how long it took for the market to be 
stabilized and to disseminate information. The Commission also 
studied the daily trading volume and relative prices changes in the 
aftermarket. Securities Act Release No. 6763 (Apr. 4, 1988).
    \427\ 17 CFR 230.174(g).
    \428\ 17 CFR 230.174(c).
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b. Aftermarket Underwriter Activities
    In practice, aftermarket activities by underwriters occur in 
connection with offerings both by reporting and non-reporting 
companies. For example, the Commission's Office of Economic Analysis 
surveyed aftermarket underwriter short covering in 236 offerings 
completed between May and July 1997.429 Short covering 
occurs when the underwriter creates a short position in the offering 
that it covers by exercising the over-allotment option, by purchases in 
the aftermarket or by a combination of the two.
---------------------------------------------------------------------------

    \429\ Of the 236 offerings studied, 114 were initial public 
offerings and 122 were primary, non-initial public offerings.
---------------------------------------------------------------------------

    In its survey, the Commission examined the frequency of short 
covering. Of the 236 offerings, underwriters in 54% of the initial 
public offerings and 73% of the non-initial public offerings covered 
short positions in the aftermarket.430 Of those initial 
public offerings, 42% had underwriters still covering short positions 
10 days after the offering. That percentage dropped to 13% at 25 days 
after the offering. Of the non-initial public offerings in which short 
position were taken, 28% had underwriters who were still covering short 
positions 10 days after the offering. That percentage dropped to 10% at 
25 days after the offering.431
---------------------------------------------------------------------------

    \430\ As a result of the findings of this research, the 
Commission also reviewed the frequency of short covering based on 
differing criteria, such as average daily trading volume, market 
capitalization, and proceeds of the offering, to determine if there 
were other factors indicative of aftermarket activity. The 
Commission found no statistically significant deviations resulting 
from the various objective criteria selected. Frequency of 
Aftermarket Price Stabilization, Memorandum of the Commission's 
Office of Economic Analysis (July 24, 1998).
    \431\ Id.
---------------------------------------------------------------------------

c. Recent Case Law Relating to Aftermarket Delivery Obligations
    Since the Gustafson v. Alloyd Co.432 decision by the 
Supreme Court, several federal district courts have concluded that the 
end of the prospectus delivery obligation also marks the end of the 
distribution for purposes of civil liability provisions under the 
Securities Act. Those decisions tie together the obligation to deliver 
a prospectus in the aftermarket with the existence of investor remedies 
in the aftermarket.
---------------------------------------------------------------------------

    \432\ 513 U.S. 561 (1995).
---------------------------------------------------------------------------

    In Gustafson, the Supreme Court stated that ``the liability imposed 
by Section 12[(a)](2) * * * cannot attach unless there is an obligation 
to distribute the prospectus in the first place (or unless there is an 
exemption).'' 433 District courts have interpreted this 
dicta to mean that Section 12(a)(2) protections apply only where there 
is an obligation under Section 5 (read in conjunction with Section 4(3) 
and Rule 174) to deliver a prospectus.434 Some courts have 
extended that reasoning by analogy to Section 11 as well.435
---------------------------------------------------------------------------

    \433\ Id. at 564.
    \434\ Stack v. Lobo, 903 F. Supp. 1361 (N.D. Cal. 
1995)(characterizing Gustafson as imposing ``prospectus liability 
only when the issuer is required to distribute a prospectus'' and 
applying the civil liability provisions based on the 25-day period 
created by Rule 174 for IPOs); Agryropoulous v. Mednet, 1997 U.S. 
Dist. LEXIS 10497 (C.D. Cal. 1997) (citing Gustafson for the holding 
that ``[S]ection 12(a)(2) imposes prospectus liability only when the 
issuer is required to distribute a prospectus'') and Gannon v. 
Continental Ins. Co., 920 F. Supp. 566 (D.N.J. 1996) (interpreting 
Gustafson to preclude liability under Section 12(a)(2) ``for 
anything other than a stock purchase on an initial offering''). See 
also Levitin v. A Pea in the Pod, 1997 U.S. Dist. LEXIS 4985 (N.D. 
Tex. 1997) (reasoning ``[a]ny redistribution of * * * stock within 
the statutory [mandatory prospectus delivery] period...takes on the 
characteristics of a new offering'' and thus liability attaches).
    \435\ See, e.g., In Re WRT Energy Securities Lit., 1997 U.S. 
Dist. LEXIS 14009 at *21 (S.D.N.Y. 1997); Gould v. Harris, 929 F. 
Supp. 353 (C.D. Cal. 1996); Murphy v. Hollywood Enter. Corp., 1996 
WL 393662 at *3 (D. Or. 1996); Gannon v. Continental Ins. Co., 920 
F. Supp. 566 (D.N.J. 1996) and Stack, 903 F. Supp. at 1361.
---------------------------------------------------------------------------

    Under the current delivery requirements, that interpretation could 
result, and in some cases has resulted, in findings that Section 11 and 
Section 12(a)(2) protections do not extend to the entire distribution 
because Rule 174 creates an exemption from the prospectus delivery 
aspect of Section 5. We believe such an outcome is inconsistent with 
the investor protection provisions of the Securities Act and therefore 
seek to eliminate any potential confusion that could arise from 
Commission rules relating to prospectus delivery obligations.
d. Aftermarket Prospectus Delivery Proposals
    We propose to continue the principle of applying a prospectus 
delivery obligation to transactions in the aftermarket. The concerns 
about aftermarket purchasers that caused Congress to apply Section 5's 
investor protections arguably remain just as valid today. We want to 
ensure that investors are suitably informed and protected in the 
aftermarket. When we adopted Rule 174, we intended simply to express 
when prospectus delivery was needed.436 We did not intend to 
delineate when the remedies provisions

[[Page 67229]]

in the Securities Act would or would not apply.
---------------------------------------------------------------------------

    \436\ Securities Act Release No. 4749 (Dec. 23, 1964).
---------------------------------------------------------------------------

    While we believe it is appropriate overall to continue to apply a 
prospectus delivery obligation in the aftermarket, we also recognize 
that the world of accessible investment information has changed in many 
respects since Congress last amended that obligation in 1964. We 
believe it is time to reassess how this particular delivery obligation 
may be satisfied. While the Gustafson Court stated that a prospectus 
delivery obligation must exist in order to apply Section 12(a)(2), 
Section 12(a)(2) does not speak to the method by which that obligation 
could be satisfied. Physical delivery of a prospectus would not 
necessarily be required for purposes of the section.
    Today, prospectuses are readily available during the aftermarket 
period through our Internet web site as well as other electronic 
sources. The Commission realizes that some investors are 
technologically sophisticated and are just as able as dealers to 
download the final prospectus from the Internet. We also recognize, 
however, that there are still many investors who do not have the 
capacity to obtain information in that manner. Given that the final 
prospectus delivery obligation in the aftermarket truly protects 
investors primarily after they have made their initial investment 
decisions, we believe that obligation could be satisfied through a 
means other than physical delivery.
    We propose to revise Rule 174 so that the prospectus delivery 
obligation would be satisfied if a final prospectus 437 is 
on file with the Commission and the dealer notifies each investor, 
before or at the same time it receives a confirmation, where it may 
promptly acquire, free of charge from the issuer, final prospectus 
information. For example, the dealer could notify investors that they 
can download a final prospectus in electronic form from our web site 
and request it in paper format by calling the dealer at the listed 
number. The notice may be in the form of a legend on the confirmation 
sent by the dealer under Exchange Act Rule 10b-10.
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    \437\ We would provide that the prospectus on file may omit 
price-related information in reliance on Securities Act Rule 430A, 
17 CFR 230.430A, which deems that information to be part of the 
effective registration statement upon filing.
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    The proposed Rule would maintain the twin goals of the aftermarket 
prospectus delivery that Congress created: informing investors and 
preserving investor remedies throughout the stream of distribution of 
securities. By directing investors to a web site where they are able to 
view and print the final prospectus, and by allowing investors to 
request physical delivery of a final prospectus, the Commission would 
ensure investor awareness of the availability of information in the 
aftermarket. At the same time, the burden on dealers would be minimized 
to only those cases where investors seek a paper prospectus.
    We propose to apply the Section 5 prospectus delivery obligation 
for transactions by all dealers for a period of 25 calendar days after 
the later of: the effective date of the registration statement, or the 
first date on which the security was bona fide offered to the 
public.438 The aftermarket delivery obligation would apply 
regardless of whether the offering is an initial public offering or a 
repeat offering. The frequency and nature of the underwriter trading 
behavior demonstrates that aftermarket distributive activities are 
clearly not confined to offerings that are initial public 
offerings.439
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    \438\ Proposed revisions to Rule 174, 17 CFR 230.174, would 
retain some of the provisions of current Rule 174: (1) we would 
continue to apply a 90-day prospectus delivery obligation to 
securities of blank check companies; (2) we would retain the 
provision that Rule 174 does not shorten the prospectus delivery 
obligation with respect to securities covered by any registration 
statement that was the subject of a stop order under Section 8(a) of 
the Act; and (3) we would retain the provision expressing the our 
authority to set a different aftermarket delivery obligation in a 
particular case, as appropriate.
    \439\ We have considered but rejected an outright exemption of 
dealers' transactions from the aftermarket prospectus delivery 
obligation. Among the reasons for doing so is the risk that it could 
have the unintended effect of limiting remedies for purchasers in 
aftermarket transactions. We believe that result would frustrate the 
legislative and Commission intent to protect investors who buy 
throughout the distribution period, including the aftermarket part 
of it.
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    The intent of Section 4(3) and Rule 174 was to provide Securities 
Act protection during the entire stream of distribution. Given our 
research and understanding of practices, we believe it is possible to 
set an appropriate delivery obligation period at 25 days for both 
initial public offerings and repeat offerings. The single period for 
all offerings would simplify compliance for dealers and provide a 
bright-line by which investors could set their expectations. Thus, the 
market should benefit from the clear definition of aftermarket 
transactions. While distributive activities continue in some offerings 
beyond that period, we believe the vast majority do not. We solicit 
comment, however, regarding whether the period should be shorter (e.g., 
20 days) or longer (e.g., 30 days) or vary according to some other 
aspect of the offering.
    We also solicit comment on whether dealers that were not members of 
the underwriting syndicate for an offering of a reporting company 
should have a prospectus delivery requirement. Would the cost of 
compliance by notification under proposed Rule 174 for those dealers be 
greater than the benefit of an informed aftermarket?
6. Proposed Repeal of Rule 153
    Under the proposed prospectus delivery regime, Securities Act Rule 
153 would not be necessary.440 Rule 153 addresses delivery 
of final prospectuses in transactions between brokers taking place over 
a national securities exchange. The Rule states that the Section 5 
delivery obligation of a final prospectus before or with a security 
will be satisfied if the issuer or underwriter delivers the final 
prospectus to the exchange. The Rule contemplates that these 
prospectuses will then be taken or copied by the members of the 
exchange that are on the buy side of the transaction and delivered to 
the beneficial purchaser.441 The Rule is limited in that it 
applies only to transactions between members of a national securities 
exchange and only where the transaction was effected on that 
exchange.442 The Rule is not applicable for transactions on 
an automated quotation system.
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    \440\ 17 CFR 230.153.
    \441\ Some commentators have questioned whether in practice the 
re-delivery to the purchaser would occur. See, e.g., Johnson & 
McLaughlin, supra note 76, at 548-49.
    \442\ See In the Matter of Hazel Bishop Inc., Securities Act 
Release No. 4371 (June 7, 1961) [40 S.E.C. Docket 718 (1961)].
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    Based on our staff's discussions with exchanges and market 
participants, it appears that Rule 153 is not relied on (or rarely 
relied on) to accomplish prospectus delivery. There are two 
explanations for this. First, Rule 153 is narrow in scope and therefore 
does not apply to many transactions. Second, from a procedural 
standpoint, an underwriter finds it easier to mail prospectuses to all 
purchasers rather than differentiating among them.
    Under the proposed aftermarket prospectus delivery system, Rule 153 
would not be necessary. As we propose to revise Rule 174, dealers would 
have a prospectus delivery requirement for transactions relating to a 
registered security for a period of twenty-five calendar days after the 
later of: the effective date of the registration statement, or the 
first date on which the security was bona fide offered to the public. 
That delivery obligation would be deemed satisfied, however, if a final 
prospectus is on file with the

[[Page 67230]]

Commission and each investor is notified where it can obtain the final 
prospectus information that satisfies Section 10(a). Thus, in the 
limited situations under the proposed system in which Rule 153 might 
apply, delivery is satisfied through another mechanism. We therefore 
propose to repeal Rule 153.
7. Record Keeping of Prospectus Delivery
    We solicit comment on whether the Commission should, by rule, 
specifically require broker-dealers to keep records of their 
distribution of information relating to an offering of securities under 
the Securities Act.443 For example, should the Commission 
require a broker-dealer to keep records on each offering regarding 
where and how prospectuses, term sheets and free writing material were 
disseminated? Should the Commission limit such a rule only to managing 
or principal underwriters or should the rule apply to every broker-
dealer? Should records be required concerning prospectuses only, or 
should the records reflect all information distributed? Should this 
requirement be limited to the ``offering period'' only or should it 
extend through the aftermarket delivery time period required by the 
proposed amendment to Rule 174? Should this requirement be limited only 
to those offerings that become effectively automatically? 
444 How long should these records be required to be kept? Is 
two years a long enough period? Is six years too long?
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    \443\ The Commission would promulgate such a rule under Section 
17 of the Exchange Act.
    \444\ The Act requires the Commission, in ruling upon requests 
for acceleration of the effective date of a registration statement, 
to consider whether adequate information is available to the public. 
See Securities Act Section 8(a). The Commission gives guidance as to 
what constitutes adequate information in Rule 460, 17 CFR 230.460. 
Many issuers provide the Commission with a description of their 
effort to satisfy the guidance set forth in Rule 460 in their 
requests for acceleration of the registration statement. Requests 
for acceleration are submitted pursuant to Securities Act Rule 461, 
17 CFR 230.461. Under the proposals, in Form B offerings and certain 
offerings on Form A, underwriters and issuers would no longer submit 
to the Commission a request for acceleration.
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    To enable easier tracking of compliance, should we require issuers 
that make offerings (other than Form B offerings) that are underwritten 
on a firm commitment basis disclose the pricing date? Should it be 
disclosed in the first quarterly report they would be required to file 
after the offering or in another Exchange Act report (e.g., a Form 8-
K)?

IX. The Role of Underwriters

A. Legislative Shaping of the Underwriters' Role

    In passing the Securities Act in 1933, Congress was acting on its 
concern that misleading disclosure and high pressure sales tactics had 
overstimulated investors' demand for securities.445 
Congress' remedy was to require that investors get complete and 
truthful information regarding the offered securities. To help ensure 
that result, Congress deliberately placed underwriters within the scope 
of the liability provisions.446 Congress recognized that 
underwriters occupied a unique position that enabled them to discover 
and compel disclosure of essential facts about the offering. 
447 Congress believed that subjecting underwriters to the 
liability provisions would provide the necessary incentive to ensure 
their careful investigation of the offering.448
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    \445\ During the 1920s, $25,000,000,000 in securities (half of 
all those issued) proved to be worthless. H.R. Rep. No. 85, 73rd 
Cong., 1st Sess. 2 (1933) (hereinafter H.R. Rep. No. 85).
    \446\ Congress placed some of the responsibility for investors' 
losses on the securities industry. The House of Representatives' 
Committee on Interstate and Foreign Commerce noted that ``the 
flotation of such a mass of essentially fraudulent securities was 
made possible because of the complete abandonment by many 
underwriters and dealers in securities of those standards of fair, 
honest and prudent dealing that should be basic to the encouragement 
of investment. * * *'' H.R. Rep. No. 85 at 2.
    \447\ ABA Committee on Federal Regulation of Securities, Report 
of Task Force on Sellers' Due Diligence and Similar Defenses Under 
the Federal Securities Laws, 48 Bus. Law. 1185, 1191 (May 1993).
    \448\ H.R. Rep. No. 85 at 5.
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    Congress' goal was not to have underwriters act as insurers of an 
issuer's securities.449 Accordingly, Congress provided 
underwriters and others with a ``due diligence'' defense. An 
underwriter is not liable under Section 11 for the non-expertised 
portions of the registration statement if, after reasonable 
investigation, it had reasonable grounds to believe (and did believe) 
that the statements in the registration statement ``were true and that 
there was no omission to state a material fact required to be stated 
therein or necessary to make the statements therein not misleading.* * 
*'' 450
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    \449\ H.R. Rep. No. 152, 73rd Cong., 1st Sess. 26 (1933). In 
order to remove any uncertainty with regard to the standard of 
reasonableness Section 11(c) of the Securities Act was amended in 
1934 to replace the term ``fiduciary'' with the common law 
definition of the duty of a fiduciary. H.R. Rep. No. 1383, 73rd 
Cong., 2d Sess. (1934). See also Escott, et al v. Barchris 
Construction Corp., 283 F. Supp. 643, 697 (S.D.N.Y. 1968) (``In 
order to make the underwriters' participation in this enterprise of 
any value to the investors, the underwriters must make some 
reasonable attempt to verify the data submitted to them.'').
    \450\ 15 U.S.C. Sec. 77(k)(b)(3). For expertised portions of the 
registration statement, an underwriter need only show that it had no 
reasonable ground to believe, and did not believe, that the 
statements in the registration statement were untrue or omitted to 
state a material fact. Id.
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B. Case Law Interpretation of the Underwriters' Role

    In the past, the courts also have recognized the important role 
underwriters play in the offering process. As the U.S. Court of Appeals 
for the Second Circuit noted, ``[n]o greater reliance in our self-
regulatory system is placed on any single participant in the issuance 
of securities than upon the underwriter.* * *'' 451 
Accordingly, courts have found that underwriters must conduct an 
investigation ``reasonably calculated to reveal all of those facts 
[that] would be of interest to a reasonably prudent investor.'' 
452 As the courts have noted, it is impossible to have a 
rigid rule defining what is a reasonable investigation or how far an 
underwriter must go in order to verify an issuer's 
statements.453
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    \451\ Chris-Craft Industries, Inc. v. Piper Aircraft Corp., 480 
F.2d 341, 370 (2d Cir. 1983).
    \452\ See, e.g., Feit v. Leasco Data Processing Equipment, 332 
F. Supp. 544, 582 (E.D.N.Y. 1971).
    \453\ Barchris, 283 F. Supp. at 643.
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C. Commission Interpretation of the Underwriters' Role

    We, too, have provided guidance with regard to underwriter due 
diligence. In 1982, as part of a comprehensive program to integrate the 
disclosure requirements of the Securities Act and the Exchange Act, we 
adopted Rule 176.454 Rule 176 identifies circumstances 
relevant in determining whether a person's conduct satisfies the due 
diligence standard in Section 11.\455\ They are:

    \454\ 17 CFR 230.176.
    \455\ The rule applies to persons other than the issuer. In the 
adopting release for Rule 176, the Commission acknowledged that 
there are other circumstances beyond those enumerated in the rule 
which may bear upon the reasonableness of an underwriter's 
investigation. See Securities Act Release No. 6383 (Mar. 3, 1982).

    1. The type of issuer;
    2. The type of security;
    3. The type of person;
    4. The office held when the person is an officer;
    5. The presence or absence of another relationship to the issuer 
when the person is a director or proposed director;
    6. Reasonable reliance on officers, employees and others whose 
duties should have given them knowledge of the particular facts;
    7. For underwriters, the type of underwriting arrangement, the 
role as

[[Page 67231]]

underwriter, and the availability of information with respect to the 
registration; and
    8. Where a fact or document is incorporated by reference, 
whether the person had any responsibility for the fact or document 
when filed.

We wrote this list in a general way to apply to virtually any kind of 
offering and to apply to any person that could claim a due diligence 
defense.
    We adopted Rule 176 to provide guidance to courts assessing the 
reasonableness of an investigation under the integrated disclosure 
system. 456 At that time, we expressly rejected the 
consideration of competitive timing and pressures when evaluating the 
reasonableness of an underwriter's investigation.457
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    \456\ The integrated disclosure system (and later shelf 
registration) allowed issuers to complete registered offerings 
faster than previously possible. Underwriters expressed concern that 
those accelerated time schedules would increase pressure on them to 
expedite their due diligence investigations. See Securities Act 
Release No. 6335 (Aug. 6, 1981) [46 FR 42015]. See also Feit, 332 F. 
Supp. at 582. The Commission stated that the integrated disclosure 
system was not designed to modify the responsibility of underwriters 
and others to make a reasonable investigation. See also Securities 
Act Release No. 6499 (Nov. 17, 1983).
    \457\ Securities Act Release No. 6335 (Aug. 6, 1981).
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    In proposing Rule 176, we also discussed techniques available to 
underwriters that would allow them to expedite their due diligence 
investigations.458 We stated that an underwriter could 
develop a ``reservoir of knowledge,'' before an offering, by carefully 
reviewing a company's Exchange Act filings, analysts' reports, and by 
attending the company's meetings with analysts and brokers. This 
``reservoir of knowledge'' would enable the underwriter to complete its 
due diligence investigations more quickly, because it would already be 
familiar with the company.
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    \458\ Securities Act Release No. 6335 (Aug. 6, 1981). These 
techniques were not codified as part of the rule but ``were 
presented to help facilitate the development of procedures 
compatible with integrated approach to registration.'' See 
Securities Act Release No. 6383 (Mar. 3, 1982).
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D. Proposed Guidance on Underwriter Due Diligence

    The registration system we are proposing, among other things, would 
allow more reporting issuers to register capital faster and more 
efficiently. Consequently, underwriters may experience marginal 
additional timing pressures in conducting their due diligence 
investigations. Under those circumstances, underwriters must take care 
not to allow competitive pressures and issuers' demands for speed to 
lessen their due diligence investigations. We have been advised that 
firms currently underwriting expedited offerings by reporting issuers 
perform a reasonable investigation despite the very short period 
between when they are named the underwriter and when the offering is 
commenced. They reportedly use a combination of real-time and 
anticipatory due diligence practices. Those practices should work as 
well in connection with expedited offerings under the proposed 
registration system.
    We believe that a court would, of its own accord, take into account 
all of the facts and circumstances that affect the ability of the 
underwriter to conduct a reasonable investigation or develop reasonable 
grounds for belief. Nevertheless, a rule that provides guidance with 
respect to expedited offerings by reporting companies could help those 
involved in the due diligence process and those assessing its adequacy. 
We believe we can identify several due diligence practices for those 
offerings that, if present, may be indicative of a ``reasonable 
investigation'' under Section 11 and ``reasonable care'' under Section 
12(a)(2).
    Accordingly, we are proposing to expand Rule 176.459 
First, we are proposing that Rule 176 address the reasonable care 
standard of Section 12(a)(2) as well as the reasonable investigation 
standard of Section 11. While Section 11 requires a more diligent 
investigation than Section 12(a)(2), any practices or factors that 
would be considered favorably under Section 11 also should be 
considered as favorably under the reasonable care standard of Section 
12(a)(2).460
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    \459\ See proposed revisions to Securities Act Rule 176, 17 CFR 
230.176.
    \460\ If our proposed expansion of Securities Act Rule 176, 17 
CFR 230.176, is adopted as proposed, we envision providing 
additional guidance in the adopting release as to the difference 
between the reasonable care standard of Section 12(a)(2) and the 
reasonable investigation standard of Section 11.
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    We also are proposing to add subsection (i) to the Rule. It would 
identify six due diligence practices that the Commission believes would 
enhance an underwriter's due diligence investigation when conducting an 
expedited offering. The Commission believes the courts should view 
these practices as positive factors when evaluating an underwriter's 
due diligence defense, though these practices in no way constitute an 
exclusive list or serve as a substitute for a court's analysis of all 
relevant circumstances. The absence of one or more of these practices, 
apart from the underwriter's review of the registration statement and 
inquiry into facts or circumstances that raise concerns about the 
adequacy or accuracy of the disclosure, should not be considered 
definitive in reaching a conclusion about the adequacy of the 
underwriter's investigation.
    Subsection (i) would apply only to offerings of equity and non-
investment grade debt securities that were marketed and completed in 
fewer than five days. Additionally, the proposed guidance would require 
that the issuer have registered the offering on Form B. These expedited 
offerings require the underwriter to perform the bulk of its due 
diligence on a compressed time schedule. For offerings conducted on a 
longer time schedule, the Commission believes that no additional 
guidance is required. For every offering, including expedited 
offerings, the courts would examine all the relevant circumstances. The 
six practices that the courts should consider as positive factors in 
expedited offerings are:

    1. Whether the underwriter reviewed the registration statement 
and conducted a reasonable inquiry into any fact or circumstance 
that would cause a reasonable person to question whether the 
registration statement contains an untrue statement of a material 
fact or omits to state a material fact required to be stated therein 
or necessary to make the statements therein not misleading;
    2. Whether the underwriter discussed the information contained 
in the registration statement with the relevant executive officer(s) 
of the registrant (including, at a minimum, the chief financial 
officer (``CFO'') or chief accounting officer (``CAO'') or his or 
her designee) and the CFO or CAO (or his or her designee) certified 
that he or she has examined the registration statement and that to 
the best of his or her knowledge, it does not contain an untrue 
statement of a material fact or omit to state a material fact 
required to be stated therein or necessary to make the statements 
therein not misleading;
    3. Whether the underwriter received a Statement on Auditing 
Standards (``SAS'') No. 72 comfort letter from the issuer's 
auditors;
    4. Whether the underwriter received a favorable opinion from 
issuer's counsel opining that nothing has come to its attention that 
has caused it to believe that the registration statement contains an 
unfair or untrue statement or omits to state a material fact;
    5. Whether the underwriter employed counsel that, after 
reviewing the issuer's registration statement, Exchange Act filings 
and other information, opined that nothing came to its attention 
that would lead it to believe that the registration statement 
contains an untrue statement or omits to state a material fact; and
    6. Whether the underwriter employed and consulted a research 
analyst that:
    (i) Has followed the issuer or the issuer's industry on an 
ongoing basis for at least the 6 months immediately before the 
commencement of the offering; and

[[Page 67232]]

    (ii) Has issued a report on the issuer or its industry within 
the 12 months immediately before commencement of the offering.

    The Advisory Committee on Capital Formation also recommended 
expanding the factors listed in Rule 176.461 We solicit 
comment on whether one of those factors, a management report to the 
audit committee of the board regarding procedures established to assure 
accurate and complete Exchange Act disclosure, be included in Rule 176 
as a basis for underwriter due diligence.462
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    \461\ See Advisory Committee Report at 65-70. That Committee 
primarily suggested that compliance with both mandatory and 
voluntary ``disclosure enhancements'' recommended in its Report be 
added as factors for underwriters. In addition to the management 
report to the audit committee, those included:
    --Senior management certification to the Commission regarding 
disclosure in Exchange Act reports;
    --Reviews by outside professionals including:
    --SAS 71 review by company's auditors
    --SAS 72 comfort letter
    --SAS 37 subsequent events procedures
    --Rule 10b-5 opinion letter
    --Existence of a disclosure review committee of the board of 
directors;
    --The extent of access to analysts; and
    --The size of the offering.
    \462\ See Section XI.A.4. of this release regarding Exchange Act 
disclosure.
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1. Proposed Practices Reflect Current Practice
    Various underwriters and issuers have identified to the Commission 
staff potential elements of current due diligence investigations for 
expedited offerings. All of the six practices identified in the 
proposal reportedly are being used to some degree by most underwriters 
for those offerings. For example, even in the speediest of offerings, 
an underwriter interested in establishing that it had done a reasonable 
investigation would: read the disclosure, talk about it with management 
of the issuer, document management's conclusion about its adequacy, and 
follow up on matters of concern that arise in connection with its 
inquiry. An underwriter doing a due diligence investigation in an 
expedited offering may seek assurance from third parties involved in 
the offering that they have not discovered inadequacies in the 
disclosure. Thus, they may arrange for opinions from both the issuer's 
counsel and their own. Additionally, underwriters may arrange for a SAS 
72 comfort letter from the issuer's auditor. Though we believe that 
underwriters' reliance on representations by third parties may, 
depending on the circumstances, be a factor in considering an 
underwriter defense in expedited offerings, in every instance we 
believe it is appropriate for underwriters to review the registration 
statement and make reasonable inquires about any suspicious statements 
or omissions. For that reason, we have indicated that a court could 
consider dispositive an underwriter's failure to do so. We request 
comment on whether reliance on third party representations alone could 
satisfy an underwriter's obligation.
2. The Role of Analysts
    An underwriter will sometimes employ its research analysts to help 
it conduct its due diligence investigation. We believe it is 
appropriate to recognize that research analysts working for an 
underwriter can play an important role in facilitating the due 
diligence process in expedited offerings. A research analyst that 
follows an issuer's industry would likely be aware of the risks and 
prospects of an issuer's business. An analyst is employed to search out 
and analyze not only the Commission filings but also any other 
information that is available about the issuer and its industry. While 
an analyst may not have the same degree of access to issuer information 
as an underwriter performing long-term due diligence, he or she 
generally has regular contact with the issuer or companies in the 
issuer's industry. As a result, the analyst would have acquired the 
necessary ``reservoir of information'' about the issuer that helps 
fulfill due diligence requirements in expedited offerings.
    Firms acting as underwriters in expedited offerings generally do so 
when they are already conducting a form of ``due diligence'' year round 
via their in-house analysts. Because of their analysts' prior work, 
these underwriters have less to do immediately before the 
offering.463 While some brokerage firms may have ``walled 
off'' analysts from the underwriting side of their businesses, that no 
longer appears to be uniformly the case at the time where an analyst's 
knowledge can be instrumental in expediting the due diligence 
process.464
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    \463\ While the rule contemplates that the analyst has been 
following the issuer or its industry as part of its employment 
responsibilities for a period of time, the rule does not require 
that the analyst be employed by the underwriter for that entire 
period. The fact that an analyst moves from one analyst position to 
another should not be relevant where the analyst's coverage of the 
issuer continues.
    \464\ While we recognize the varying practices with respect to 
maintaining a wall between the analyst and underwriting sides of the 
brokerage firm, we do not suggest that brokerage firms should remove 
or lower those walls. Although we recognize the helpful role 
analysts perform in facilitating due diligence, we also recognize 
the wisdom of maintaining legitimate walls between analysts and 
underwriters that work for the same brokerage firm and share an 
interest in the same issuers. See, e.g., AutoZone Holders Sold Stock 
in June After Goldman, Analysts Talked Up Issue, Wall St. J., Jan. 
15, 1997 at C1.
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    In this respect, we recognize that, in limited and controlled 
circumstances, cooperation between analysts and underwriters can be 
useful. The proposed system perceives the utility of a ``one-way'' wall 
between analysts and underwriters of the same firm, whereby information 
from the analysts who have a ``reservoir of information'' is available 
to the underwriters for purposes of Rule 176. We still would expect 
brokerage firms to maintain a wall between analysts and underwriters to 
prevent any flow of information from the underwriter to the analyst 
that would result in selective disclosure.
3. Other Due Diligence Practices
    The Commission also wishes to solicit comment on a number of other 
due diligence practices that are currently being conducted or discussed 
by underwriters.
a. Disclosure Review by an Issuer's Independent Accountants
    The role of the accountant in a due diligence investigation cannot 
be overlooked. Accountants are often the people most familiar with an 
issuer's financial standing and prospects. They play a vital role in 
the protection of investors. As noted earlier, underwriters also rely 
on accountants in performing their due diligence investigation. 
Underwriters often will request a SAS 72 comfort letter from an 
issuer's independent auditors as part of their due diligence 
investigation. Additionally, some issuers have their accountants 
conduct a SAS 71 review of their quarterly financial statements. We 
believe that this additional review of an issuer's quarterly financial 
statements augments compliance with our rules and regulations. 
Consequently, we request comment as to whether we should add to the 
proposed practices the fact that an independent accountant performed a 
timely review under SAS 71 of an issuer's quarterly financial 
information.
    Recently, the American Institute of Certified Public Accountants 
(``AICPA'') issued a Statement on Standards for Attestation Engagements 
No. 8 (``SSAE 8''). The SSAE 8 contemplates that an accountant may 
perform either an examination or a review of an issuer's management's 
and discussion and analysis (``MD&A'') disclosure. The examination is 
intended to result in the accountant's expression of an opinion as to 
whether:

[[Page 67233]]

    1. The issuer MD&A disclosure contains the required elements of 
Item 303 or Regulation S-K or Item 303 of Regulation S-B;
    2. The historical financial information included in the MD&A is 
accurately derived from the issuer's financial statements; and
    3. The issuer's underlying information, determinations, estimates 
and assumptions provide a reasonable basis for the disclosures 
contained in the MD&A.\465\
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    \465\ Statement on Standards for Attestation Engagement No. 8, 
American Institute of Certified Public Accountants.

We believe that a SSAE opinion may further our disclosure goals and 
help obtain greater compliance with our rules. Therefore, we also 
solicit comment as to whether a SSAE 8 review should be added to the 
proposed practices.
b. Disclosure Review by an Independent Qualified Professional
    We also request comment as to whether to include as one of the 
proposed practices an underwriter's review of a favorable report issued 
by a qualified independent professional to the issuer after the 
professional conducted a year-end disclosure review. The purpose of the 
qualified independent professional's review would be for the 
professional to assess the disclosure in the annual report the issuer 
is drafting before the issuer files it under the Exchange 
Act.466 Although this practice is not common today, we 
believe it could enhance the quality of Exchange Act disclosure that is 
typically incorporated by reference into registration statements in 
connection with expedited and other offerings. In the event that a 
qualified independent professional completed such a review, a 
reasonable underwriter should be allowed to factor that in when 
figuring out what steps it needs to take in its due diligence.
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    \466\ This annual report would be incorporated into the 
registration statement prepared for the offering.
---------------------------------------------------------------------------

    We anticipate that such a disclosure review generally would occur 
independent of the offering process during the period after the end of 
the issuer's fiscal year but before it has filed its annual report. In 
the course of the review, the professional would read all of the 
issuer's Exchange Act reports for the year, as well as last year's 
annual report, to assist it in evaluating the quality of the Exchange 
Act annual report not yet filed by the issuer for the year just ended. 
The qualified independent professional also would perform a reasonable 
investigation. 467 It would have to issue its report before 
the commencement of the offering in order for the underwriters to place 
reasonable reliance on the report.
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    \467\ We envision this investigation as akin to the type of 
reasonable investigation an underwriter would undertake if the 
disclosure were contained in a Securities Act registration 
statement.
---------------------------------------------------------------------------

    To issue a favorable report, the professional would have to state 
that, after reading those reports and doing a reasonable investigation, 
it believes that the disclosure in the non-expertised portions of the 
annual report to be filed is true and there were no omissions of 
material facts. As to the expertised portions (including the audited 
financial statements), the professional would have to state that it 
does not believe that the disclosure is untrue or there was an omission 
to state a material fact.
    We also request comment as to whether certain qualifications should 
be required of the independent professional. While we anticipate that 
different professions could perform the disclosure review, should such 
a review be limited to only certain professions such as the legal or 
accounting profession? Would we need to provide guidance as to what 
would constitute an adequate disclosure review? Would there be a 
sufficient number of qualified professionals willing to undertake such 
a review? Since these professionals would be subject to liability, 
would this prevent a market for such services from developing? Would 
issuers be willing to pay for such a review?
    Besides this proposed practice and the liability provisions of the 
Acts, are there more direct or better ways to enhance the underwriters' 
due diligence role with respect to an issuer's Exchange Act reports? If 
so, what are they?

E. Interpretation of the Guidance

    While we believe that the due diligence practices we propose to add 
to Rule 176 would enhance an underwriter's investigation, these 
practices should not be viewed as mandatory. We also are not suggesting 
that some or all of these practices are the exclusive way to establish 
adequate due diligence, even in an expedited offering. The absence of 
any one or more of the practices in a particular case, except for the 
underwriter's review of the registration statement and inquiry into 
facts or circumstances that raise concerns about the adequacy or 
accuracy of the disclosure, should not be considered definitive in 
reaching a conclusion about the adequacy of due diligence efforts. 
468 Each offering is unique, and therefore the underwriter 
must evaluate the surrounding circumstances and then choose the 
appropriate due diligence practices.
---------------------------------------------------------------------------

    \468\ We have reflected this position in proposed revisions to 
Rule 176, 17 CFR 230.176.
---------------------------------------------------------------------------

F. Investment Grade Debt Offerings

    The proposed guidance would not apply to offerings of investment 
grade debt. Issuers that offer investment grade debt under a medium 
term note program may conduct frequent offerings. Consequently, 
underwriters' due diligence is usually performed periodically rather 
than with each offering of investment grade debt. Periodic due 
diligence normally would not be completed under the same time pressures 
associated with an expedited offering of equity or non-investment grade 
debt securities. We solicit comment, however, as to whether investment 
grade debt offerings should be included in the proposed amendments to 
Rule 176. If so, are there certain due diligence practices that would 
not be applicable to investment grade debt? Are there specific due 
diligence practices that are performed only with regard to investment 
grade debt offerings? Should these practices be added to Rule 176? 
Would these practices allow for due diligence to be performed on an 
offering-by-offering basis? Would additional guidance regarding 
investment grade debt offerings be useful to the courts?

G. Requests for Comment on the Proposed Guidance

    The Commission requests comment on the proposed amendment to Rule 
176. Because the courts already consider the surrounding circumstances 
of the offering when determining whether an underwriter's investigation 
was reasonable, would adding these practices to Rule 176 materially 
assist courts in evaluating due diligence efforts? Would adding them 
assist underwriters in crafting their due diligence practices? Would 
any of the proposed practices cause some underwriters, such as those 
that do not employ analysts, to suffer unfair competitive 
disadvantages?
    Are there other due diligence practices that should be included in 
the proposed amendment? Are any of the practices not relevant to 
consider in assessing an underwriter's due diligence? Should the extent 
to which an underwriter has very recently underwritten another offering 
for the same issuer be explicitly identified as a relevant 
circumstance?

[[Page 67234]]

    Should the proposed 5-day marketing period be shortened (e.g., to 
two or three days) or lengthened (e.g., to five business days)? Should 
the proposed guidance be limited to offerings that are underwritten on 
a firm commitment basis? Should the proposed guidance be expanded to 
cover offerings that are registered on Form A, particularly those for 
which the underwriter designates effectiveness? Will the proposed 
changes provide an incentive for underwriters and issuers to complete 
their offerings earlier than today? Do we need to define when an 
offering is considered first marketed? In general, we solicit comment 
on whether the proposed practices, separately or as a package, provide 
underwriters with sufficient guidance to enable them to perform 
adequate due diligence investigations. Are the proposals too lenient to 
serve that purpose? Should we add other practices to proposed Rule 
176(i) to direct underwriters who participate in these offerings 
better? On the other hand, are the proposals overly burdensome?

H. Liability Safe Harbor

    Several commenters on the Concept Release suggested that reform is 
needed to ensure that an underwriter's exposure to liability under 
Section 11 mirrors its ability to affect disclosure.469 In 
expedited offerings, they argued, there is little time to conduct due 
diligence immediately before commencement. As a result, some commenters 
suggested that underwriters be protected from liability through a safe 
harbor in those offerings.470 We are not proposing such a 
safe harbor from potential liability. To grant one to underwriters 
would be to lessen significantly their incentive to test the quality of 
the issuer's disclosure in such offerings. We recognize the value that 
underwriters add to the disclosure process. In our view, investors 
require that protection. In addition, like the courts and past 
Commissions, we do not believe that it would be possible to craft a 
single, finite list of steps that will, without fail, constitute a 
reasonable investigation in every set of circumstances in many 
different offerings. We believe our proposal to include specific 
guidance in Rule 176 about expedited offerings will aid underwriters 
considering how to conduct due diligence in those circumstances and 
assist in the event a court needs to assess those steps.
---------------------------------------------------------------------------

    \469\ See, e.g., comment letters, in File No. S7-19-96, from 
Merrill Lynch (Oct. 31, 1996), Morgan Stanley (Dec. 9, 1996) and the 
Securities Industry Ass'n (Nov. 13, 1996).
    \470\ See, e.g., comment letters, in File Number S7-19-96, from 
Cleary, Gottlieb, Steen & Hamilton (Dec. 27, 1996) and Merrill Lynch 
(Oct. 31, 1996).
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X. Integration of Registered and Unregistered Offerings

A. The Integration Doctrine

    The integration doctrine reaches all the way back to 
1933.471 Put simply, integration is the process of combining 
separate transactions in securities as part of the same offering for 
purposes of analyzing whether the registration provisions of the 
Securities Act apply. It is what prevents an issuer from evading 
registration by artificially splitting what is in reality a single 
offering to make it appear that an exemption applies when no exemption 
for that offering was ever intended. When separate transactions are 
integrated into one offering, that offering must have an exemption from 
registration. If no exemption is available, then the transaction, if 
not registered, would be in violation of Section 5 of the Securities 
Act. Thus, integration is a concept that upholds the policies 
underlying both the registration system and the exemption system in the 
Securities Act.
---------------------------------------------------------------------------

    \471\ See Securities Act Release No. 97 (Dec. 28, 1933).
---------------------------------------------------------------------------

    The integration doctrine is not always easy for securities law 
practitioners to apply to offerings. The analysis generally is 
dependent on considering all the particular facts and circumstances for 
each offering. Over the years, however, the Commission has given 
guidance. In 1962, the Commission issued a release that established a 
framework for analyzing whether offerings should be 
integrated.472 The five-factor test established in that 
release continues to apply today.473 In addition, the 
Commission has created a number of safe harbors from integration in 
order to simplify the analysis in particular cases.474 The 
application of the integration doctrine also has been the subject of 
staff interpretive letters.475
---------------------------------------------------------------------------

    \472\ See Securities Act Release No. 4552 (Nov. 6, 1962) [27 FR 
11316].
    \473\ The five factors are:
    1. Are the offerings part of a single plan of financing?
    2. Do the offerings have the same general purpose?
    3. Are the offerings of the same class of securities?
    4. Are the offerings being made at or about the same time?
    5. Are the securities being sold for the same type of 
consideration?
    These factors also are noted in Rule 502 of Regulation D, 17 CFR 
230.502. The Commission has stated that any of the factors can be 
determinative. Securities Act Release No. 4552 (Nov. 6, 1962).
    \474\ For example, Rule 502(a), 17 CFR 230.502(a), provides that 
offers and sales made more than 6 months before the start of an 
offering under Regulation D or more than 6 months after the 
completion of an offering under Regulation D will not be integrated 
with the Regulation D offering if there were no non-Regulation D 
offers and sales of that class of securities (other than through 
employee benefit plans) during that period. See also Rule 147(b)(2), 
17 CFR 230.147(b)(2), which provides a similar safe harbor for 
exempt intrastate offerings; Rule 251(c), 17 CFR 230.251(c), which 
provides a similar safe harbor under Regulation A for small 
offerings by non-reporting issuers; Rule 701(b)(6), 17 CFR 
230.701(b)(6), which contains a non-integration provision in 
connection with exempt offerings to employees and consultants under 
compensation plans.
    \475\ See, e.g., Staff interpretive letters Squadron, Ellenoff, 
Pleasant and Lehrer (Feb. 28, 1992) and Black Box Inc. (June 26, 
1990).
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B. Rule 152

    In 1935, the Commission adopted Rule 152.476 It provides 
a safe harbor from integration when an issuer makes a private offering 
pursuant to Securities Act Section 4(2) and then decides to make a 
public offering and/or file a registration statement. The rule states 
that Section 4(2) shall be deemed to apply to transactions that did not 
involve any public offering at the time even though the issuer decides 
subsequently to make a public offering and/or file a registration 
statement.
---------------------------------------------------------------------------

    \476\ See Securities Act Release No. 305 (Mar. 2, 1935). See 
also Securities Act Release No. 4761 (Feb. 5, 1965) [30 FR 2022].
---------------------------------------------------------------------------

    Rule 152 has not been considered a model of clarity. Over the 
years, the scope of Rule 152 has been a matter of some uncertainty and 
the subject of Commission staff no-action letters. For example, 
questions have been raised about: whether the safe harbor is available 
to both completed private offerings and abandoned private offerings, 
whether the safe harbor is available when the registered offering was 
contemplated at the time of the private offering, and under what 
circumstances an offering is considered completed for purposes of the 
safe harbor.477
---------------------------------------------------------------------------

    \477\ See, e.g., Staff interpretive letters Quad City Holdings, 
Inc. (Apr. 8, 1993); Vulture Petroleum Corp. (Feb. 2, 1987); 
Verticom Inc. (Feb. 12, 1986).
---------------------------------------------------------------------------

C. Proposed Safe Harbors for Completed and Abandoned Offerings; Related 
Rule Proposals

    The integration doctrine and Rule 152 have received a great deal of 
attention in recent years from securities law practitioners. Their 
interest has reflected their clients' demand for speed in the offering 
process. One area in which frequent questions arise with respect to 
integration is the combination of private and public 
offerings.478
---------------------------------------------------------------------------

    \478\ Integration issues may relate to two or more private 
offerings, as well. Neither current nor proposed revisions to Rule 
152, 17 CFR 230.152, addresses these issues.

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

[[Page 67235]]

    We propose to revise Rule 152 to clarify and expand the integration 
safe harbor.479 First, the rule would address the 
circumstances under which a completed unregistered private offering 
would not be integrated with a subsequent registered offering. Second, 
the rule would set conditions under which an unregistered private 
offering that has been abandoned may be followed by a registered 
offering. Third, the rule would provide a safe harbor for issuers that 
wish to abandon a registered offering and follow it with an 
unregistered private offering. Fourth, the rule would codify some of 
the staff positions taken with respect to integration and registration 
of resales. Finally, the exempt offerings covered by the rule would be 
expanded to include other types of unregistered private offerings in 
addition to Section 4(2) offerings.
---------------------------------------------------------------------------

    \479\ See proposed revisions to Securities Act Rule 152, 17 CFR 
230.152.
---------------------------------------------------------------------------

    We also are proposing related rule changes. Proposed Rule 159 would 
codify a current staff position concerning lock-up agreements before 
business combinations.480 Rule 477 would be revised to 
facilitate withdrawals of registration statements.481
---------------------------------------------------------------------------

    \480\ See proposed Securities Act Rule 159, 17 CFR 230.159.
    \481\ See proposed revisions to Securities Act Rule 477, 17 CFR 
230.477.
---------------------------------------------------------------------------

1. Completed Offerings
a. Issuer Transactions
    Through revising Rule 152, we hope to avoid persistent interpretive 
questions concerning whether Section 5 problems arise if a private 
offering was completed within 6 months before the filing of a 
registration statement.482 As proposed, if the private 
offering is completed before the registration statement is filed, the 
private offering would not be integrated with the registered offering 
regardless of the length of time between the two offerings.
---------------------------------------------------------------------------

    \482\ The 6-month time period is found in Rule 502(a) of 
Regulation D, 17 CFR 230.502(a). Offers and sales within 6 months of 
the start or end of a Regulation D offering must be analyzed under 
the five-factor test to determine whether those offers and sales 
should be considered part of the Regulation D offering.
---------------------------------------------------------------------------

    The proposed rule would define the circumstances under which an 
offering would be considered completed for purposes of the safe harbor. 
An offering would be completed where all purchasers have fully paid the 
purchase price for the securities in the private offering. If certain 
conditions are met, an offering will be considered completed even if 
the purchase price for the securities has not been fully paid. For this 
exception to apply, the transaction may not be subsequently re-
negotiated. These conditions require that the purchaser be 
unconditionally obligated to pay for the securities. We would qualify 
that requirement to permit conditional obligations to purchase the 
securities as long as the obligation depends on a condition that is not 
within the direct or indirect control of any purchaser. Also, the 
purchase price in the private offering must be fixed and not contingent 
upon market prices around the time of the registered offering. This 
ensures that the purchaser assumes the market risk.
    A private offering may involve the offer and sale of convertible 
securities or warrants. These securities are generally convertible or 
exercisable into a class of underlying securities (e.g., common stock) 
over a period of time. While these securities are convertible or 
exercisable, the issuer, in effect, is conducting an offering of the 
underlying securities. During this time period, the issuer may file a 
registration statement under the Securities Act. The offering of the 
underlying securities concurrently with the registered offering has 
generated uncertainty about whether the offerings should be integrated. 
To address these concerns, we propose to expand the Rule 152 safe 
harbor to protect the offering of the underlying securities from 
integration with the registered offering. As proposed, the offering of 
the underlying securities would be considered completed when the 
offering of the convertible securities or warrants is completed.
    A special approach would apply to a private offering made before an 
initial public offering where the private offering does not raise 
capital for the issuer but is conducted only to modify the issuer's 
capital structure. For this approach to apply, the private offering 
must not be a roll-up transaction under Rule 901(c) of Regulation S-K. 
When these conditions are satisfied, the private offering would not be 
integrated with the later registered offering.
    We request your comments on our proposed safe harbor for completed 
offerings. Is our definition of completed offerings clear, especially 
those offerings where payment for the securities has not been made? 
Should other conditions be added for these offerings?
b. Resale Transactions
    We would clarify in Rule 152 that it is permissible for an issuer 
to register the resale of securities that were originally sold by the 
issuer in a completed bona fide private offering. The private offering 
would be considered completed if the proposed conditions discussed 
above are met. An offering would be considered completed even though 
payment for the securities has not been made, or the securities have 
not been issued, when the registration statement for the resales is 
filed. Under this approach, payment for the securities may be made 
following filing or effectiveness of the registration statement for the 
resales. Also, the payment obligation may be conditioned upon 
effectiveness of the registration statement, assuming the purchasers 
have no control over that condition.
    We would exclude from the safe harbor resales by affiliates of the 
issuer or a broker-dealer that has purchased directly from the issuer 
or an affiliate. In these transactions, there are questions as to 
whether the offering is a true resale transaction or a primary offering 
by the issuer. This determination may be made only after examining the 
facts and circumstances of each individual situation. Because of this 
uncertainty, we do not propose to extend the safe harbor for these 
resale offerings.
    For purposes of this provision, the definition of ``affiliate'' 
would have the same meaning as that term has under Rule 
144.483 We have proposed to change the definition of 
affiliate under Rule 144.484 If the Rule 144 definition is 
changed, the new definition also would apply to Rule 152.
---------------------------------------------------------------------------

    \483\ Rule 144(a)(1), 17 CFR 230.144(a)(1), defines an affiliate 
of an issuer as a person that directly, or indirectly through one or 
more intermediaries, controls, or is controlled by, or is under 
common control with, such issuer.
    \484\ See Securities Act Release No. 7391 (Feb. 28, 1997) [62 FR 
9246].
---------------------------------------------------------------------------

    We request your views on the safe harbor for resale offerings. 
Should the safe harbor cover resale offerings by affiliates? If it 
should, what conditions should be imposed to assure that the resales 
are bona fide secondary transactions and not part of a primary 
distribution? Should the Rule 144 definition of affiliate be used or 
would some subset of the persons that fall within that definition be 
more appropriate? If so, what?
c. Lock-up Agreements
    The use of lock-up agreements in business combinations has become 
common. As part of the negotiations for these combinations, the 
acquiring party usually requires that management and principal security 
holders of the company to be acquired commit to vote for the 
acquisition. These so-called ``lock-up'' agreements are made when the 
acquisition agreement is finalized, before any action by the public 
security holders. These agreements could be

[[Page 67236]]

considered investment decisions under the Securities Act. If they are, 
the offers and sales of securities were made to persons who entered 
into those agreements before the business combination is presented to 
the non-affiliated security holders for their vote. Under this 
reasoning, those offers and sales could not be included in the 
registration statement for the offering to the persons not entering 
into lock-up agreements.
    In recognition of the legitimate business reasons underlying the 
practice, the staff has permitted the registration of offers and sales 
under certain circumstances where lock-up agreements have been signed. 
We propose a rule that codifies this position.485 Our 
proposed rule would allow registration of those offers and sales when:
---------------------------------------------------------------------------

    \485\ See proposed Securities Act Rule 159, 17 CFR 230.159.
---------------------------------------------------------------------------

    (i) The lock-up agreements involve only executive officers, 
directors, affiliates, founders and their family members, and holders 
of 5% or more of the voting equity securities of the company being 
acquired;
    (ii) The persons signing the agreements own less than 100% of the 
voting equity securities of the company being acquired; and
    (iii) Votes will be solicited from shareholders of the company 
being acquired who have not signed the agreements and who would be 
ineligible to purchase in an offering under Section 4(2) or 4(6) of the 
Securities Act or Rule 506 of Regulation D.
    The first condition would assure that the only persons who signed 
the agreements were insiders with access to corporate information who 
arguably would not need the protections of registration and prospectus 
disclosure. The last two conditions would make certain that 
registration under the Securities Act is required to accomplish the 
business combination. Where no vote is required or 100% of the shares 
are locked up, no investment decision would be made by non-affiliated 
shareholders and the transaction would have been completed via the 
lock-up agreement. If the non-affiliated shareholders were able to 
purchase under one of the private offering exemptions from 
registration, the entire transaction would be more akin to a private 
placement and registration of only resales would follow from that 
characterization.
    We request your comments on proposed Rule 159. Should registration 
be permitted for securities under lock-up agreements? If no, why not? 
Are the proposed conditions sufficient or are different or additional 
conditions needed? Should some specified percentage lower than 100% 
(e.g., 75%) be used? Would it matter what percentage had been locked up 
if a significant number of shareholders had not been? Should the 
proposed rule, which applies to lock-ups in connection with mergers and 
similar transactions, also apply to lock-ups in connection with tender 
offers? If so, would different conditions be appropriate?
2. Abandoned Offerings
    An ongoing private offering may be abandoned by an issuer for any 
of a number of reasons. After commencement of a private offering, the 
issuer may discover that interest in the securities is soft and it is 
unable to sell the amount of securities it needs to sell. On the other 
hand, the issuer may encounter substantial interest from investors and 
wish to increase the size or scope of the offering. In the latter 
situation, the issuer may decide to switch the offering from a private 
one to a registered one.
    Likewise, a registered offering may be abandoned for various 
reasons. For example, the issuer and its underwriter may discover after 
filing the registration statement that there is less investor interest 
than required to complete the registered offering successfully. The 
issuer may encounter delays in getting the registration statement 
effective and need funding on a more expedited basis. Changes in the 
market may make a registered offering less attractive.
a. Private to Public
    Under Section 5 of the Securities Act, offers may not be made in 
registered offerings before filing a registration statement. Thus, an 
issuer generally is unable to begin a private offering by making offers 
and then decide to make the offering a registered one.
    Under the proposed registration system, Form B issuers would have 
no difficulty beginning an offering as a private one and completing it 
as a registered public offering. Because the issuer would not be 
required to file a Form B until the time of sale, and offers could be 
made before filing, the transition from a unregistered offering to a 
registered offering would not have the same regulatory consequences as 
it does today.
    Form A and other issuers, however, would not have the same freedom 
to proceed with offers in the absence of a filed disclosure document. 
486 Thus, the same issues that exist today under the 
registration system would need to be addressed for those issuers. We 
propose to expand Rule 152 to permit Form A issuers to abandon an 
ongoing private offering and then conduct a public offering under the 
following conditions:
---------------------------------------------------------------------------

    \486\ Issuers registering offerings on the small business issuer 
forms (i.e., Forms SB-1, SB-2 and SB-3) would face the same issues 
as issuers registering on Form A. They would receive the same 
treatment for this purpose.

    1. The issuer notifies all offerees in the private offering that 
the private offering is abandoned;
    2. No securities were sold in the private offering;
    3. Neither the issuer nor any person acting on its behalf 
offered the securities in the private offering by any form of 
general solicitation or general advertising; 487
---------------------------------------------------------------------------

    \487\ These terms would have the same meanings as used in Rule 
502(c) of Regulation D, 17 CFR 230.502(c).
---------------------------------------------------------------------------

    4. The issuer does not file the registration statement until at 
least 30 days after it notifies all offerees of abandonment if 
securities had been offered in the private offering to any person 
ineligible to purchase in an offering in accordance with Section 
4(2), Section 4(6) or Rule 506; and
    5. The issuer either files any selling materials used in the 
private offering as part of the registration statement or it informs 
all private offerees that the filed prospectus replaces the prior 
selling materials and any indications of interest are rescinded.

    These conditions would assure that persons offered the securities 
in the private offering are treated the same as offerees and purchasers 
in the registered offering. The prohibition against sales would make 
sure that all purchasers have the protections of Section 11 liability. 
The prohibition on any public offers in the private offering and the 
30-day waiting period (if applicable) would protect against issuers who 
had no intention of making a private offering abusing the safe harbor 
by making public offers before filing the registration statement 
containing the full and balanced disclosure. Because only Form B 
issuers are granted that freedom under the proposed communications 
rules, we would not want that distinction eroded by persons through the 
integration safe harbor. The 30-day waiting period also would be 
consistent with our communications proposals in that 30 days measures 
the limited communications period before a public offering.
    The notification condition in the safe harbor would assure that all 
private offerees are aware of the abandonment of the private offering. 
Offerees in the private offering would receive the benefit of Section 
11 liability on any selling materials used in the private offering 
where the issuer files those materials as part of the registration

[[Page 67237]]

statement. If the issuer chooses not to do that, those offerees would 
be informed that they should rely on the prospectus for the registered 
offering instead of the earlier selling materials.
    Assuming the 30-day waiting period does not apply, if all of these 
conditions are met, the issuer need not wait before filing the 
registration statement. We request your comments on this safe harbor. 
Are the conditions adequate to assure full protection of investors? Are 
different or additional conditions needed? Is the 30-day waiting period 
sufficiently long to provide a disincentive to abuse of the safe harbor 
or should it be longer (e.g., 45 or 60 days)? Would a company be able 
to condition the public market for its securities through beginning a 
private offering under this mechanism despite the 30-day waiting 
period? Should the offering materials used in the private offering 
always have to be filed either under proposed Rule 425 or as part of 
the effective registration statement?
b. Public to Private
    The filing of a registration statement for a specific securities 
offering constitutes a general solicitation for that 
offering.488 Thus, when an issuer wishes to convert an 
offering begun as a registered public offering into a private offering, 
or follow it soon after abandonment with a private offering, it is 
doubtful that a private offering exemption would be available. In 
addition, public offers under the registration statement may have been 
made to persons who would be ineligible to buy in the private offering. 
Issuers currently in this situation must wait a full six months to be 
certain that the public offering under the registration statement would 
not be integrated with the private offering. We are proposing a safe 
harbor that would shorten or eliminate that wait.
---------------------------------------------------------------------------

    \488\ See Division of Corporation Finance, Current Issues and 
Rulemaking Outline available on the Commission's web site (http://
www.sec.gov).
---------------------------------------------------------------------------

    An issuer, especially a private company or a small business issuer, 
may not know whether investors will be interested in its securities. 
Expecting that investors will be interested, these issuers may undergo 
the time and expense of preparing and filing a registration statement 
under the Securities Act. During the public offering period, they may 
discover only limited investor interest. Faced with soft investor 
interest, these issuers may have to abandon the registered offering, 
but they still may need funding. Our proposal would eliminate 
integration concerns and permit these issuers to offer and sell 
securities in the private offering to persons eligible to buy under the 
private offering exemption even if they expressed interest as a result 
of public offers in the registered offering.489 Thus, 
issuers faced with a soft market will receive at least some benefits 
from the time and expense incurred while pursuing registration.
---------------------------------------------------------------------------

    \489\ While the proposed revisions would provide for no 
integration, the subsequent private offering must satisfy all of the 
conditions of the relevant exemption to proceed on that basis.
---------------------------------------------------------------------------

    We propose a safe harbor that would permit switching from a public 
offering (started either by the filing of a registration statement or 
begun under Form B before filing a registration statement) to an 
unregistered private offering if the following conditions are met:

    1. If a registration statement has been filed, the issuer 
withdraws it under Rule 477;
    2. If no registration statement has been filed (i.e., Form B), 
the issuer notifies all offerees in a public offering that it is 
abandoning the public offering;
    3. No securities were sold in the public offering;
    4. Where the issuer first offers the securities in the private 
offering more than 30 days after abandonment or withdrawal, the 
issuer notifies each purchaser in the private offering that the 
offering is not registered, the securities are restricted, and that 
investors do not have the protections of Section 11 of the 
Securities Act; and
    5. Where the issuer first offers the securities in the private 
offering 30 or fewer days after abandonment or withdrawal of the 
public offering, the issuer and any underwriter agree to accept 
liability for material misstatements or omissions in the offering 
documents used in the private offering under the standards of 
Section 11 and Section 12(a)(2) of the Securities Act.

    The notification requirement for public offerings begun under Form 
B would assure that offerees are made aware of the termination of the 
public offering. If a registration statement has been filed, it must be 
withdrawn in order to end the public offering. Because the withdrawal 
of the registration statement is public information, it would signal to 
offerees that the public offering has been terminated.
    If the private offering is begun more than 30 days after 
abandonment or withdrawal of the public offering, the intervening time 
period should reduce concerns that offerees in the private offering 
would be influenced by the public offering. Offerees in the private 
offering likely will discount any offering materials they may have 
received in the public offering due to this passage of time. Instead, 
they are more likely to rely on the private offering documents. We 
would require that the issuer notify purchasers in the private offering 
that the offering is not registered, the securities would be restricted 
securities and that they do not have the benefits of Section 11 
liability. This disclosure requirement plus the intervening time period 
would assure that investors do not confuse the securities they are 
buying in the private offering with those offered in the public 
offering.
    An issuer may need funding immediately and may not be able to wait 
more than 30 days. We would provide an option for companies that need 
to raise capital within the 30-day period. The reduced time period 
between the public offering and the private offering raises more 
investor protections concerns, however, about the lingering effects of 
the public offering. Offerees in the private offering may still be 
influenced by the public offering. In addition, we do not want issuers 
to use the integration safe harbor merely as a mechanism to avoid the 
prohibition on general solicitation and general advertising. Allowing 
an immediate switch from registered to private would encourage that 
abuse, absent some disincentives.
    We propose as a condition that an issuer and any underwriter 
involved in the private offering enter into a binding agreement to 
apply Section 11 liability standards for any material misstatements or 
material omissions in the private offering materials with respect to 
any investor who purchases in the private offering within 30 days 
following the end of the public offering. These investors, who are 
likely to have been influenced by the public offering, should have the 
protections of Section 11 liability. We also would provide that 
investors who purchase in the private offering more than 30 days after 
the public offering ends would have the benefit of Section 12(a)(2) 
standards for liability for any material misstatements or material 
omission in the private offering materials.
    Are the proposed conditions adequate to assure that investors in 
the private offering are fully protected? Should different or 
additional conditions be required? Is a 30-day time period adequate or 
should the time period be longer (e.g., 45 or 60 days)? Should we 
permit private offerings to start within the 30-day period at all?
3. Definition of Private Offering
    Rule 152 currently provides a safe harbor only for transactions 
under Section 4(2) of the Securities Act. There are other exemptions 
under the Securities Act which prohibit public

[[Page 67238]]

offers. Section 4(6) 490 prohibits advertising or public 
solicitation in any transaction under that section. Rule 506, \491\ 
which was adopted under Section 4(2), prohibits offers or sales by any 
form of general solicitation or advertising. These exemptions also have 
other requirements, in addition to the ban on public offers.
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    \490\ 15 U.S.C. Sec. 77d(6). Section 4(6) exempts a transaction 
that does not exceed $5 million, if offers or sales are made to only 
accredited investors and other conditions are met. Accredited 
investor is defined in Rule 501(a) of Regulation D, 17 CFR 
230.501(a).
    \491\ 17 CFR 230.506. The Commission adopted Rule 506 to provide 
a safe harbor as to what type of offering would not be considered a 
public offering for purposes of Section 4(2). An issuer complying 
with Rule 506 is certain that it is conducting a valid Section 4(2) 
offering.
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    We propose to expand the private offerings covered by Rule 152 to 
include offerings under the Section 4(6) exemption and to specify in 
the Rule that it applies to the Rule 506 exemption. This would provide 
consistent treatment for Securities Act exemptions for private 
offerings. We request your views on the expansion of Rule 152 to these 
additional private offering exemptions. Are there reasons to continue 
to exclude either of these two exemptions?
    Rule 505 of Regulation D,\492\ unlike Rule 506, permits sales to 
persons who are neither accredited nor financially sophisticated.\493\ 
Because these persons may purchase in Rule 505 offerings, we have not 
included those offerings in Rule 152. We solicit comment, however, as 
to whether sufficient protections exist under the proposed safe harbor 
to justify inclusion of Rule 505 offerings.
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    \492\ 17 CFR 230.505. Rule 505 provides an exemption for 
offerings up to $5 million within a twelve-month period, if certain 
conditions are met. This exemption was created by the Commission 
under Section 3(b) of Securities Act, 15 U.S.C. Sec. 77c(b).
    \493\ Generally speaking, these investors must be limited to 35.
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D. Proposed Changes to Rule 477

    Rule 477 of Regulation C 494 contains the procedures to 
be followed by a registrant in order to withdraw a registration 
statement or an amendment filed under the Securities Act. The 
Commission must find that the withdrawal is consistent with the public 
interest and investor protection and affirmatively act to consent to 
the withdrawal. This finding requirement involves staff review of the 
withdrawal request and the time necessary for that review. The time 
needed for that review can vary. For a limited number of registration 
statements, the withdrawal request is deemed granted upon filing where 
the registration statement has not become effective.495
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    \494\ 17 CFR 230.477.
    \495\ Rule 477(b), 17 CFR 230.477(b), currently permits this 
procedure for registration statements on Form F-2, relating to a 
dividend or interest reinvestment plan, or on Form S-4 complying 
with General Instruction G. of that Form.
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    We propose to revise the rule to facilitate withdrawal of 
registration statements, particularly in light of the effect of 
withdrawals under proposed Rule 152. We would allow registration 
statements to be withdrawn automatically upon filing the request. The 
proposed changes would permit quick withdrawals for registration 
statements. These changes would expedite the use of proposed Rule 152 
in switching from a registered public offering to a private offering 
and provide predictability in other cases.
    We request your comments on the proposed change to Rule 477. Should 
we permit fewer types of registration statements to be withdrawn 
automatically upon filing? Should the rule be changed only to permit 
automatic withdrawal of any Form B registration statement, or any Form 
A registration statement where the registrant is eligible to 
incorporate by reference and become effective on an expedited basis? 
Should it be changed so that for all other registration statements, an 
application for withdrawal would become effective automatically ten 
days after filing, unless we grant the withdrawal earlier or notify the 
registrant during the ten-day period that the application will be 
reviewed? Are there reasons to limit the classes of registration 
statements that may be withdrawn automatically?

XI. Proposals Relating to Exchange Act Disclosure

    To improve Exchange Act disclosure, we propose revisions to enhance 
the quality and timeliness of information in the periodic reports filed 
by domestic reporting companies.496 Investors trading in the 
secondary markets look to Exchange Act reports for information. 
Moreover, seasoned issuers that file registration statements under the 
Securities Act incorporate information from their Exchange Act reports 
into their Securities Act filings. Investors buying in public offerings 
therefore also rely on Exchange Act disclosure. As we provide for 
further reliance on Exchange Act disclosure, we are particularly 
cognizant of the need to evaluate whether and how it can better serve 
investors.
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    \496 \Some of these proposed revisions were suggested in 
substance by the Advisory Committee. While the Advisory Committee 
envisioned them as operating only where a company was part of a 
company registration pilot system, we believe implementing these 
improvements makes sense for all issuers regardless of whether they 
are concurrently registering an offering. The proposals relating to 
Exchange Act disclosure do not precisely follow the suggestions of 
the Advisory Committee. However, they emphasize the significance of 
Exchange Act reporting and would provide investors with a more 
current and fuller stream of information. That end corresponds with 
the Advisory Committee's goals.
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    Under our proposals, we would extend risk factor disclosure to 
Exchange Act reports, expand the items of disclosure required to be 
reported on Form 8-K and add a provision for voluntary reporting of 
information on Form 6-K. We also would require top management that sign 
Exchange Act registration statements and reports to certify that they 
have reviewed the disclosure in them and that they know of no untrue 
statement of a material fact or omission of a material fact necessary 
in order to make the statements made, in light of the circumstances 
under which they were made, not misleading. In addition, we would 
require issuers to identify their web site addresses, if any, and an e-
mail address, if any, on the cover page of all registration statements 
and Exchange Act reports. This requirement would make this information 
more accessible to investors, as well as ease investors' electronic 
communications with public companies.
    Companies frequently issue press releases as a means of 
disseminating corporate information. In the case of quarterly and 
annual financial results, we are concerned that this manner of 
disclosure provides uneven results: some investors may learn of the 
information, others may not; some investors may have quicker access to 
the information than others. One of the purposes of the Commission's 
reporting system is to provide a single source where all investors can 
expect to find material company disclosure. To even the flow of 
disclosure to investors, we believe that companies should file material 
financial information that they may currently be making public only by 
press release.
    We also note reports that corporate managers make conference calls 
after issuing press releases in order to ``clarify'' the 
information.497 We are concerned that these conference calls 
exacerbate the problem of uneven disclosure, especially in the short-

[[Page 67239]]

term.498 This practice widens the information gap between 
large and small investors. Large investors, particularly institutional 
ones, may be on the conference call, or they frequently hire analysts 
that participate in conference calls and often obtain more detailed 
information about a company's earnings before the information is widely 
disseminated. While we believe analysts perform a valuable public 
function in filtering and passing on company information, we believe 
the small investors are the last to realize the benefits of this 
function. We think this is especially true when companies do not file 
with the Commission material information they issue in press releases 
or communicate by conference calls to analysts.499
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    \497\ See, e.g., Frankel, et al., An Empirical Examination of 
Conference Calls as a Voluntary Disclosure Medium (Dec. 1996) 
(unpublished manuscript) (U. of Mich. Bus. Sch.) [hereinafter 
Conference Call Study]. This study noted that companies typically 
hold conference calls with analysts because of the declining 
relevance of historical financial data.
    \498\ See Remarks by Arthur Levitt, Chairman of the Securities 
and Exchange Commission, A Question of Integrity: Promoting Investor 
Confidence by Fighting Insider Trading (Feb. 27, 1998), available on 
the Commission's web site (http://www.sec.gov).
    \499\ The Conference Call Study states that company managers 
often provide ``detailed segment data'' during the course of a 
conference call that is not available in the press release. They 
also make more forward-looking statements than in the press release. 
Conference Call Study supra note 497, at 9.
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    When there is a significant time lag between the occurrence of a 
material event and the reporting of that event, or the determination of 
the quarterly or annual results and the reporting of them, there is a 
greater chance that selected investors will learn about the information 
before others.\500\ We seek to minimize the gap of information between 
all investors. One way to do that is to require the quicker filing of 
material company information with the Commission. Although this will 
not eliminate entirely the information gap, it will decrease the amount 
of time during which there is a trading advantage. By requiring 
companies to speed their reporting of material information such as 
earnings announcements and other financial data, we hope to decrease 
the information gap between the ``have'' and ``have-not'' investors. 
Accordingly, we propose to shorten the due dates for material event 
reports and to accelerate the reporting of annual and quarterly 
selected financial data.
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    \500\ See, e.g., Trading Picks Up During Conference Calls, 
Evidently leaving Small Investors on Hold, Wall St. J., Mar. 6, 
1998, at C2; Small Investors Angered by Growth of After-Hours 
Profits Reports, Wall St. J., Jan. 21, 1997, at C1; The Price of 
Great Expectations, Wash. Post, Jan. 23, 1997, at E1.
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A. Annual and Quarterly Reports

1. Risk Factor Disclosure
    Most Securities Act registration statements currently require an 
analysis of the risks associated with an investment in a company's 
securities.501 Item 503 of Regulation S-K 502 
describes that required disclosure as a ``discussion of the most 
significant factors that make the offering speculative or risky.'' The 
Commission promulgated this requirement because it assists investors in 
comprehending more fully whether the securities present an appropriate 
level of risk for them as an investment.
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    \501\ See, e.g., Forms F-1, F-2, F-3, F-4, S-1, S-2, S-3, S-4 
and S-11. To provide uniformity, we also would mandate risk factor 
disclosure in Securities Act registration statements of foreign 
governments and their political subdivisions. Those are virtually 
the only Securities Act registration statements that do not 
currently mandate this disclosure. Because those investments are not 
free from risk, investors should benefit from a risk analysis by 
those issuers as well.
    \502\ 17 CFR 229.503.
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    We propose to extend risk factor disclosure to Exchange Act 
registration statements 503 and periodic reports 
504 of all issuers. The proposal would require issuers to 
articulate concisely the most significant risk factors relating to the 
company's future financial performance. This disclosure would be 
equally valuable whether investors are purchasing securities in a 
registered offering or trading in the secondary markets. Through the 
proposal, the Commission would ensure that timely disclosure about 
these types of risks does not depend on whether a public company 
decides to register an offering.
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    \503\ The Exchange Act registration forms affected are: Forms 
10, 10-SB and 18. Form 20-F registration statements already require 
risk factor disclosure. See Item 1(b) of Form 20-F.
    \504\ The Exchange Act periodic reports affected are: Forms 20-
F, 10-Q, 10-QSB, 10-K, 10-KSB and 18-K. The Advisory Committee 
suggested the use of risk factor disclosure in Form 10-K, with 
updates in Form 10-Q for any material change in the risk disclosure. 
Advisory Committee Report at Appendix B, p. 57.
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    The annual disclosure specifically would consist of an itemization 
of the most significant factors with respect to the public company's 
business, operations, industry or financial position that may have a 
negative impact on its future financial performance. A foreign 
government issuer would set forth the most significant risk factors 
with respect to its financial position and the most significant country 
risks that are unlikely to be known or anticipated by 
investors.505 The proposal would require that the issuer 
briefly explain how each risk affects it.
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    \505\ The forms used by foreign governments and their political 
subdivisions are Schedule B under the Securities Act and Forms 18 
and 18-K under the Exchange Act.
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    For public companies filing quarterly reports, we also are 
proposing that material changes in risk factor disclosure be reported 
quarterly. The company would disclose in the quarterly report only 
material risk factors that either:

    1. Were not included in the later of the registrant's most 
recent Securities Act registration statement or Exchange Act 
periodic report; or
    2. Had changed since the date of that registration statement or 
periodic report.

Foreign private issuers are not required to file reports on a quarterly 
basis under the Exchange Act; therefore, those companies would update 
their risk factors disclosure on an annual basis unless they choose to 
do so more frequently.506
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    \506\ We are proposing to amend Form 6-K to create an Item by 
which foreign private issuers would identify information they are 
filing under that Form at their option that is not based on foreign 
requirements.
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    A reporting company may incorporate risk factor disclosure into its 
Securities Act registration statement from its Exchange Act periodic 
reports. This Exchange Act disclosure may satisfy in whole or in part 
the risk factor disclosure required in the Securities Act registration 
statement. Where that is true, a registrant need not reiterate that 
risk factor disclosure in its Securities Act registration 
statement.507
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    \507\ In a Securities Act registration statement, the risk 
factors disclosure sometimes focuses on aspects of the particular 
security or the particular transaction that is the subject of the 
registration statement, in addition to company risk factors. The 
risk factor disclosure that issuers would include in Exchange Act 
reports would relate only to the risks that could affect the 
company's future financial performance. Thus, given the somewhat 
differing focus, the risk factor disclosure may vary.
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    Securities Act Rule 421(d) requires issuers to write and design 
their risk factor disclosure in registration statements using plain 
English principles. Where risk factor disclosure in Exchange Act 
reports currently is incorporated by reference into Securities Act 
registration statements, the Commission staff has advised issuers that 
the Exchange Act risk factor disclosure must comply with Rule 421(d). 
Under the proposals, registrants may more frequently incorporate 
Exchange Act risk factor disclosure into their Securities Act 
registration statements. In light of that, we are proposing an Exchange 
Act rule parallel to Rule 421(d) that would clarify that plain English 
requirements apply to Exchange Act risk factor 
disclosure.508
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    \508\ See proposed Exchange Act Rule 12b-24, 17 CFR 240.12b-24.
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    We seek comment on the proposals relating to risk factor 
disclosures for quarterly and annual reports. Should we require risk 
factor disclosure about specific matters that are in addition to those 
referred to in Item 503 of Regulation S-K? If so, what are they?

[[Page 67240]]

2. Due Dates for Annual Reports of Foreign Private Issuers
    Reporting companies that are foreign private issuers are required 
to file annual reports on Form 20-F.509 These reports are 
due within six months after the end of fiscal year.510 Like 
domestic issuers, foreign private issuers issue press releases 
containing their annual results before the due dates of their annual 
reports filed with the Commission. In fact, given the longer due date, 
they may do this far more frequently than domestic 
issuers.511
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    \509\ ``Foreign private issuer'' is defined in Exchange Act Rule 
3b-4(c), 17 CFR 240.3b-4(c).
    \510\ See General Instruction A.(b) of Form 20-F.
    \511\ Using electronic search databases, we found that foreign 
private issuers use Business Wire and PR Newswire and other services 
to issue press releases about their annual results, including 
detailed financial information. For comparative purposes, these 
companies disclose information about their most recent year end 
along with the same information for the prior year. While it appears 
that a minority of foreign companies issue these press releases as 
soon as two months after their fiscal year ends, others issue them 
within three or four months after the fiscal year end.
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    For the same reasons we propose to accelerate the reporting of 
annual results for domestic issuers through adding a Form 8-K filing, 
we also propose to accelerate the due date for annual reports of 
foreign private issuers. We propose that a foreign private issuer be 
required to file its annual report on Form 20-F within 5 months after 
its fiscal year end. Although that due date would remain significantly 
longer than the due date for annual reports of domestic companies, it 
would shorten the gap between the two. In light of the variety of 
foreign law requirements for annual reports, a gradual decrease in due 
dates for annual reports appears preferable. We believe foreign 
reporting companies should be able to prepare annual reports within 5 
months or less without an undue increase in cost. We also propose to 
change the filing period for the transition report that must be filed 
after a foreign private issuer changes its fiscal year. We would reduce 
the time period for filing this report from six to five 
months.512 We would not change the present three-month 
filing period where the transition period does not exceed six months 
and the issuer elects to file the abbreviated transition 
report.513
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    \512\ See proposed Exchange Act Rule 13a-10(g)(3), 17 CFR 
240.13a-10(g)(3) and proposed Exchange Act Rule 15d-10(g)(3), 17 CFR 
240.15d-19(g)(3).
    \513\ See Exchange Act Rule 13a-10(g)(4), 17 CFR 240.13a-
10(g)(4) and Exchange Act Rule 15d-10(g)(4), 17 CFR 240.15d-
10(g)(4).
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    We seek comment on this proposal. Should we accelerate the due date 
to 4 months? How would the 4-month or 5-month due date compare to 
foreign requirements to report annual results?
3. Treating Quarterly Information as ``Filed''
    Under current Exchange Act rules,514 the financial 
information required by Part I of Form 10-Q and Form 10-QSB is deemed 
not to be ``filed.'' 515 Part I information is therefore not 
subject to liability under Section 18 of the Exchange 
Act.516 Those rules originated in 1955 when the Commission 
proposed to require semi-annual reporting of certain financial 
information for the first time.517 At that time, the 
Commission determined that semi-annual reports should be deemed not to 
be filed for purposes of Section 18 because interim earnings figures 
included in those reports would often be based on ``reasonable 
estimates * * * or certain assumptions.'' 518
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    \514\ Exchange Act Rule 13a-13(d), 17 CFR 240.13a-13(d), and 
Exchange Act Rule 15d-13(d), 17 CFR 240.15d-13(d).
    \515\ Part I of Form 10-Q consists of: the financial statements; 
the Management's Discussion and Analysis of Financial Condition and 
Results of Operations; and the Quantitative and Qualitative 
Disclosures About Market Risk. Part I of Form 10-QSB contains only 
the first two of those three categories.
    \516\ Section 18 provides a remedy for those relying on false or 
misleading statements made in any application, report, document or 
registration statement filed with the Commission under the Exchange 
Act.
    \517\ Exchange Act Release No. 5129 (Jan. 27, 1955) [20 FR 771].
    \518\ Id. See also Exchange Act Release No. 5189 (June 23, 1955) 
[20 FR 4816] (adopting the semi-annual reports as proposed).
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    Since 1955, the Commission has taken a few steps to expand periodic 
financial reporting. In 1970, we required that public companies file 
quarterly financial information on Form 10-Q.519 In 1981, we 
expanded the information required by Form 10-Q to include disclosure of 
management's discussion and analysis of the registrant's financial 
condition and results of operations (``MD&A'').520 Most 
recently, we amended Form 10-Q in 1997 to require registrants to 
disclose qualitative and quantitative information about market 
risks.521
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    \519\ Exchange Act Release No. 9004 (Oct. 28, 1970) [35 FR 
17537].
    \520\ Exchange Act Release No. 17524 (Feb. 17, 1981) [46 FR 
12480].
    \521\ See Exchange Act Release No. 38223 (Jan. 31, 1997) [46 FR 
6044].
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    Both the existing registration system and the proposed registration 
system rely on Exchange Act disclosure. The rationale behind the rules 
granting relief from Section 18 seems out of place more than 40 years 
later in a market which now routinely relies on such reasonable 
estimates and assumptions. Furthermore, registrants have had 28 years 
of experience preparing quarterly financial statements and 17 years of 
preparing MD&A disclosures.
    Accordingly, we propose to revise rules to treat the financial 
statements and MD&A disclosure in Forms 10-Q and 10-QSB as 
filed.522 We would not extend the same treatment to market 
risk disclosure. Given the recent adoption of the rules requiring that 
disclosure, as well as the complex nature of that disclosure, we 
believe it would be appropriate to continue to treat that part of Form 
10-Q disclosure as not ``filed'' for purposes of Section 18.
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    \522\ See proposed revisions to Exchange Act Rules 13a-13d and 
15d-13(d), 17 CFR 240.13a-13(d) and 240.15d-13(d). Along with these 
proposed revisions to Rule 15d-13, we are correcting that Rule by 
removing paragraph (e), which is duplicative and was intended to be 
removed in a prior amendment to the Rule. See Exchange Act Release 
No. 13477 (Apr. 28, 1977) [42 FR 24062] and Exchange Act Release No. 
13156 (Jan. 13, 1977) [42 FR 4424].
---------------------------------------------------------------------------

    We solicit comment on whether applying Section 18 remedies to 
financial statements and MD&A disclosure would cause registrants to 
alter disclosure in quarterly reports that they make today. If so, what 
kinds of disclosure would change and how? Is there any reason to treat 
MD&A disclosure as ``filed'' but not the financial statements, or vice 
versa? How does the treatment of these parts as not ``filed'' affect 
investors? Should we also apply Section 18 remedies to quarterly market 
risk disclosures?
4. Request for Comment on Management Report to Audit Committee
    We solicit comment on the Advisory Committee's recommendation to 
require the filing of a management report to the audit committee of the 
board of directors.523 The report would disclose the 
procedures, if any, established to assure the accuracy and adequacy of 
Exchange Act reports. As the Advisory Committee envisioned it, the 
report would not specify a particular set of procedures to follow, nor 
would it require an assessment of the adequacy of the procedures. The 
report would be filed as an exhibit to the Form 10-K and would be 
refiled only when there was a material change in procedures. Would such 
a report enhance the quality of disclosure provided in Exchange Act 
reports?
---------------------------------------------------------------------------

    \523\ See Advisory Committee Report at Appendix B, pp. 52-54. 
See also Section IX.D. of this release regarding whether the report 
should be considered as a factor in evaluating an underwriter's due 
diligence obligation.

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[[Page 67241]]

B. Interim Reports on Form 8-K

1. Timely Disclosure of Annual and Quarterly Results of Domestic 
Companies
a. Form 8-K Requirement for Item 301 Information
    A domestic reporting company must file an annual report on Form 10-
K or Form 10-KSB within 90 days after the end of its fiscal 
year.524 A domestic reporting company must file a quarterly 
report on Form 10-Q or 10-QSB within 45 days of the end of its 
quarter.525
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    \524\ See General Instructions A of Forms 10-K and 10-KSB. 
Foreign companies that do not satisfy the foreign private issuer 
definition in Exchange Act Rule 3b-4(c), 17 CFR 240.3b-4(c), also 
must report on Forms 10-K or 10-KSB.
    \525\ See General Instruction A of Forms 10-Q and 10-QSB. 
Foreign private issuers, as defined in Exchange Act Rule 3b-4(c) 
have no quarterly reporting obligation. See Exchange Act Rule 13a-
13(b)(2), 17 CFR 240.13a-13(b)(2). Other non-governmental foreign 
issuers must file quarterly reports.
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    Hundreds of public companies issue press releases to announce 
annual and quarterly results well before they file their annual and 
quarterly reports with the Commission.526 We are cognizant 
that significant technological developments over at least the last 
three decades have simplified the process of preparing financial data 
and periodic reports. It appears that companies and their auditors have 
developed efficiencies over the years that allow them to generate basic 
financial data quickly.
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    \526\ Companies frequently issue press releases through Business 
Wire, PR Newswire and other publications. Through narrow searches of 
electronic databases, it is possible to find the press releases of 
hundreds of companies that relate to early annual and quarterly 
results or earnings information. Most companies seem to have 
included in their press releases the basic information that would be 
prepared for inclusion in a periodic report. Some companies also use 
press releases to announce the early filing of periodic reports with 
the Commission and to publish the same financial information that 
they include in their filings with the Commission.
---------------------------------------------------------------------------

    The timing and frequency with which companies issue press releases 
about their annual and quarterly results indicates that companies 
complete the preparation of at least their core financial data well 
before the due dates of their periodic reports. That practice also 
reflects the importance of that financial information and investors' 
demand for it at the earliest time it is available.
    While we applaud companies' practice of issuing press releases to 
keep investors informed, there are disadvantages to dissemination of 
information in this way. Not all investors subscribe to the 
publications that carry press release information. Not all publications 
report on every company's release or include all the information in the 
release.527 The unevenness of press release disclosure 
raises concerns that not all investors are informed of a company's 
financial results at the same time. Moreover, presentation of annual 
and quarterly information in press releases differs from company to 
company. Sometimes this variance appears to arise because a company 
wants to focus on the positive aspects of the financial 
information.528
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    \527\ Some services apparently publish verbatim almost any 
company press release (e.g., Business Wire or PR Newswire). Not all 
investors have access or know about these services.
    \528\ See, e.g., Antilla, Quarterly Reports Often Mask 
Companies' Ugly Truths, The Dallas Morning News, Apr. 12, 1998 at 
13A.
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    To ensure uniform and even disclosure by public companies, we 
propose to require domestic reporting companies to report selected 
financial data on Form 8-K. That report would be due on the earlier of 
the date they issue a press release containing earnings information or 
either the date that is 30 days after the end of each of the first 
three quarters of their fiscal year or 60 days after the end of their 
fiscal year.
    The Form 8-K would include the selected financial data required by 
Item 301 of Regulation S-K for both the most recently completed fiscal 
quarter and interim period or year. For comparative purposes, we also 
would require companies to disclose Item 301 financial data for the 
same periods of the prior year. For example, if a company issued an 
early press release announcing earnings results for its second quarter, 
its Form 8-K would include Item 301 information for the three months 
comprising the second quarter as well as for the six months ending the 
second quarter. The Form also would include Item 301 information for 
the corresponding periods of the prior year so investors could compare 
current results with last year's results.
    We believe the press releases of most companies include at least 
this level of basic material information. Accordingly, we do not 
believe the requirement would impose a significant burden on domestic 
reporting companies, particularly those that consistently issue press 
releases. As for companies that do not follow the press release 
practice, we believe that they nevertheless would be able to prepare 
Item 301 information by the 30th day after the end of their quarters or 
the 60th day after the end of their fiscal years.
    Regulation S-B does not contain a disclosure requirement comparable 
to Item 301 of Regulation S-K. Thus, small business issuers now are not 
required to provide Regulation S-K, Item 301 information in their 
disclosure documents. Also, transitional small business issuers are not 
required to provide this information. We propose to require all small 
business issuers, including transitional small business issuers, to 
provide Regulation S-K, Item 301 information in Form 8-K reports filed 
in advance of their quarterly or annual reports. We request your 
comments on whether small business issuers should be required to 
provide Regulation S-K, Item 301 information in these current reports. 
Should small business issuers providing disclosure based on Regulation 
S-B be subject to this requirement? Should transitional small business 
issuers be subject to this requirement? Would it be more difficult for 
small business issuers to comply with this requirement? Would the 
additional time and cost of this disclosure requirement outweigh the 
increase in investor protection?
    We believe that all investors and the market would benefit from 
being able to review selected financial data earlier than they can 
today. Would these benefits justify the cost associated with an 
additional filing? Should we require more or less than Item 301 
information? If more, what kinds of additional information should we 
require? Should we require companies to discuss factors that may affect 
the comparability of current results with last year's results? If less, 
what should we omit? Would current interim financial data be meaningful 
absent presentation of historical comparative information? Given the 
limited nature of the information required by Item 301, should we 
require companies to file the Form 8-K even earlier than proposed 
(e.g., 20 or 25 days after the end of the quarter and 45 or 50 days 
after the end of the year)?
b. Solicitation of Comment on Whether to Accelerate Due Dates
    Since 1970, annual reports have been due 90 days after a reporting 
company's fiscal year end.529 Quarterly reports, since they 
were first required in 1946, have always been due within 45 days after 
the end of a quarter.530 Many companies file, or ostensibly 
could file, their periodic reports before they are due.
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    \529\ See Exchange Act Release Nos. 9000 (Oct. 21, 1970) [35 FR 
16919] and 9004 (Oct. 28, 1970) [35 FR 17537]. Before 1970, the due 
date for filing annual reports was 120 days after a company's fiscal 
year end.
    \530\ See Exchange Act Release No. 3803 (Mar. 28, 1946) [11 FR 
10988].
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    In this age of computers, instantaneous communications and

[[Page 67242]]

electronic filing, we believe it is possible for reporting companies to 
file their annual and quarterly Exchange Act reports sooner than they 
are currently due. Public companies, as a group, have had decades of 
experience in preparing Exchange Act periodic reports within 90 and 45 
days.531
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    \531\ Since 1970, we have expanded the information required by 
Form 10-Q only twice to any notable extent. In 1981, we added the 
requirement for MD&A information. Exchange Act Release No. 17524 
(Feb. 17, 1981); see Item 2 of Part 2 of Form 10-Q. Last year we 
added a disclosure requirement relating to market risk. Exchange Act 
Release No. 38223 (Jan. 31, 1997); see Item 3 of Part 2 of Form 10-
Q.
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    As the proposed registration system makes clear, the securities 
markets move faster than they did before. Commentators have long 
remarked that because the due dates for quarterly reports are so 
lengthy, the information required by Form 10-Q or 10-QSB is stale by 
the time the reports are available.532 Annual information--
when provided 90 days after a fiscal year end--is also viewed as stale. 
We believe investors and the market would realize immediate and ongoing 
benefits if domestic reporting companies filed their annual and 
quarterly reports earlier than currently due. We also believe earlier 
due dates would provide investors with more timely disclosure as well 
as shorten the period during which periodic results would be available 
to only certain investors.
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    \532\ ``In a slower, paper-based world, quarterly reporting 
frames were deemed adequate for purposes of the 1934 Act's 
continuous disclosure system * * * [b]ut in an era of electronic 
reporting, it is possible to advocate a much more rapid reporting 
obligation.'' Coffee, Brave New World? The Impact(s) of the Internet 
on Modern Securities Regulation, 52 Bus. Law 1195, 1199 (Aug. 1997). 
In 1969, former Commission Chairman Manuel Cohen said: ``because 
companies need not file the [quarterly] report until 45 days after 
the end of the quarter, the information is often stale.'' See Brown, 
Corporate Communications and the Federal Securities Laws, 53 Geo. 
Wash. L. Rev. 741, (1985).
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    For these reasons, as an alternative to the proposal to add a 
financial reporting requirement to Form 8-K discussed above, we request 
comment on whether we should accelerate the due dates for annual and 
quarterly reports. Should we require companies to file quarterly 
reports on Forms 10-Q or 10-QSB within 30 days after their first three 
fiscal quarters? Should we require them to file annual reports within 
60 days after their fiscal year end? Would companies find it feasible 
to prepare their periodic reports within those periods? If we adopt 
this alternative, should the periods be lengthened (e.g., to 35 or 40 
days after the end of a quarter and 70 or 75 days after the end of a 
fiscal year)? Should small business issuers, because they may have 
fewer resources, be given more time to prepare periodic reports than 
larger issuers? Should larger issuers, because their accounting issues 
may be more complex, be given the same amount or more time than small 
business issuers to prepare their periodic reports? If we were to 
reduce the time period for filing annual and quarterly reports, should 
we also shorten the filing period for the transition report that must 
be filed after an issuer changes its fiscal year?
    We solicit comment on whether accelerated periodic reporting 
requirements would exacerbate the problems of selective disclosure by 
issuers to certain analysts or shareholders. Are there steps other 
than, or in addition to, accelerating the due dates of periodic and 
current reports that the Commission should take to address selective 
disclosure to institutional investors through conference calls, advance 
press releases or other methods?
2. Other Reporting Events
    We propose to expand the items of disclosure that reporting 
companies must report on Form 8-K to include: material modifications to 
the rights of security holders; departure of a CEO or CFO; material 
defaults on senior securities; certain auditor notifications; and 
company name changes. Some of the proposed items currently have to be 
disclosed only on a quarterly basis. Other proposed items may be 
reported if the company chooses to do so or feels compelled to do so 
because of concerns about antifraud provisions. We believe that prompt 
reporting by issuers of each of these events would enhance investor 
protection. We solicit comment on whether other disclosure should be 
required on Form 8-K. If so, what types of information? If companies 
disclose less information to the market when experiencing difficulties, 
is there a need for more frequent reports or updates when events such 
as those we propose to add take place?
    We also propose to accelerate the due date of reports that must be 
filed on Form 8-K. The longer the period of time between the occurrence 
of a material event and the public reporting of the event, the greater 
the likelihood that over the course of that period security holders 
will be selectively informed of that material information. The unfair 
trading advantage that may result can be significantly lessened if 
information about material events is reported earlier on Form 8-K.
a. Material Modifications to the Rights of Security Holders
    The Commission believes, as did the Advisory Committee, that 
reporting companies should promptly and publicly notify their security 
holders about material modifications in their rights.533 The 
Commission proposes to add an item to Form 8-K that would accelerate 
the disclosure of developments that materially modify the rights of 
security holders, favorably or unfavorably, to within five calendar 
days of the development or event causing the modification.
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    \533\ The Advisory Committee recommended that the Commission 
expand Form 8-K to require disclosure about developments that would 
result in material modifications to the rights of security holders. 
See Advisory Committee Report at p. 27 and Appendix B at p. 55.
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    Under current requirements, a reporting company must disclose the 
general effects of those modifications in the report on Form 10-Q or 
Form 10-QSB for the quarter in which the modifications 
occur.534 That requirement allows reporting companies to 
delay filing this information for up to four and a half months after 
changes to security holder rights have occurred. That timing is 
unnecessarily long given the significance of these matters to security 
holders and the possibility that modifications to their rights could 
have a dramatic effect on the value of the securities they own.
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    \534\ Item 2 of Part II of Form 10-Q and 10-QSB. Foreign private 
issuers are not required to file quarterly reports and therefore are 
not subject to this disclosure requirement.
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    Under our proposal, reporting companies would be required to 
promptly disclose on Form 8-K any modification of the instruments that 
define security holder rights, modifications to security holder rights 
resulting from the issuance of another class of securities, and 
modifications resulting because of restrictions on working capital or 
payment of dividends.
    We solicit comment on this proposal. Should it encompass other 
specific events that could materially affect security holder rights, 
such as reincorporation from one state to another, elimination of 
preemptive rights, or adoption of an anti-takeover plan.
b. Departure of CEO, CFO, COO or President
    The departure of a reporting company's chief executive officer, 
chief financial officer, chief operating officer, president, or any 
person serving equivalent functions, is a material event that often can 
cause changes in the

[[Page 67243]]

market price of the company's securities as well as changes to the 
company's business or goals. Today, reporting companies are not 
required to disclose these events on either a quarterly or current 
basis, although many do report them on a timely basis because the 
departure of a CEO, CFO, COO or president is usually viewed as a 
material event.535
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    \535\ Item 6 of Form 8-K currently requires prompt disclosure of 
a director's resignation or declination to stand for re-election. 
The Item does not require similar disclosure with respect to CEOs, 
CFOs, COOs or president.
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    The Advisory Committee recognized that general principles of 
materiality often cause reporting companies to promptly disclose the 
termination of their CEOs, CFOs, COOs or president; nonetheless, it 
recommended that the Commission expand Form 8-K to accelerate and 
mandate disclosure of the resignation or removal of a public company's 
top five executive officers.536
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    \536\ See Advisory Committee Report at p. 27 and Appendix B at 
p. 55. The Committee did not limit its recommendation to disclosures 
regarding the CEO, CFO, COO and president. It extended its 
recommendation to the ``top five'' or ``five most senior'' executive 
officers.
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    We believe it is important to investors and the market that public 
companies promptly report news of the departure of a CEO, CFO, COO, 
president or any person serving in those capacities. Whether the 
departure is the result of resignation or termination or another reason 
also would be of interest to investors. Accordingly, the Commission 
proposes to add an item to Form 8-K to require disclosure of that 
departure information. Given the significance of this information, we 
solicit comment on whether it should be reported within one business 
day of the departure.
    We also seek comment on whether the proposal should be extended to 
include more than just a company's CEO, CFO, COO and president. Should 
we require a company to disclose on Form 8-K the departure of any of 
its five most highly compensated executive officers? Are other 
positions, whether or not based on compensation, significant enough to 
justify mandating Form 8-K disclosure when they are vacated? For 
example, should Form 8-K require disclosure of the departure of key 
personnel who make significant contributions to the company, such as a 
chief technology officer or head of information systems, a scientist, 
researcher, or head of marketing or production?
c. Material Defaults on Senior Securities
    Any material default by a reporting company on payments of 
principal or interest or any other scheduled payment on its securities 
could have severe consequences to the reporting company, its business 
and its security holders. The default is especially significant when 
senior securities are involved, because a default on those securities 
may signal that the company faces imminent, serious financial 
difficulty.
    Under current reporting requirements, disclosure of material 
defaults on senior securities need be made only on a quarterly 
basis.537 The Commission believes quarterly reporting of 
such events is insufficient, as did the Advisory 
Committee.538 Reporting companies should be required to 
provide current public notice of all material defaults on senior 
securities so that investors have time to consider the possible effects 
of any default, including whether to sell or hold their securities. 
Further, the Commission and the Advisory Committee share concerns that, 
under current reporting standards, default information may become stale 
before it reaches all the security holders of a reporting company.
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    \537\ Item 3 of Part II of Form 10-Q and Item 3 of Part II of 
Form 10-QSB. Both Items require disclosure of defaults whether under 
the terms of a company's governing instruments or with respect to 
arrearages in the payment of a dividend or other delinquencies. 
Neither Item, however, requires disclosure of defaults or arrearages 
with respect to any class of securities held entirely by or for the 
account of the registrant or its wholly owned subsidiaries. See 
Instruction to Item 3 of Part II of Form 10-Q and Instruction to 
Item 3 of Part II of Form 10-QSB. Our proposal includes these same 
reporting exceptions.
    \538\ The Advisory Committee also recommended that the 
Commission accelerate disclosure of material defaults on senior 
securities. The Committee believed that prompt public disclosure 
would reduce the possibility of unfair trading based on selective 
disclosure and would improve market efficiency. See Advisory 
Committee Report at p. 27 and Appendix B at pp. 55-56.
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    For these reasons, we propose to revise 8-K to require current 
disclosure of material defaults under a company's governing instruments 
and material delinquencies in a company's payments of interest or a 
dividend preference due on its senior securities. Also, given the 
potentially grave consequences of a material default on senior 
securities, the Commission does not believe it would be appropriate to 
allow reporting companies to wait as much as five days to report the 
event. Instead, we believe that reporting companies should disclose 
this information as soon as possible, but certainly no later than the 
day following the material default. Accordingly, we propose to set the 
due date at one business day after the day the default occurred. Where 
the default occurred on a Saturday, Sunday or a federal holiday, we 
propose that the disclosure be due within two business days after the 
day the default occurred.
    As with other proposed changes to Form 8-K, we solicit your 
comment. Do reporting companies need as much as five days before they 
are prepared to file material default reports? Should we limit the due 
date to one business day, instead of two business days, for reporting 
of material defaults that occur on a Saturday, Sunday or federal 
holiday?
d. Reliance on Prior Audit
    Form 8-K already requires a reporting company to disclose promptly 
when its independent accountant resigns, declines to stand for 
reelection or is dismissed, as well as when it engages a new 
auditor.539 To supplement these items, the Commission is 
proposing that a reporting company promptly report when:
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    \539\ Item 4 of Form 8-K.

    (i) its independent auditor notifies it that it may no longer 
rely on the audit report included; and
    (ii) the independent auditor notifies it that the auditor will 
not consent to the use of its prior audit report or the company or 
one of its significant subsidiaries.

    The Commission believes that such announcements would be of 
interest and importance to investors and the market because they could 
signal a discrepancy in the company's audited financial 
reports.540 Further, announcements or dissemination of 
information about such auditor notices, as with announcements and 
information about the other events proposed to be added to Form 8-K, 
could have an immediate and significant impact on the market price of a 
company's securities. We are concerned about the potential for unfair 
trading on the basis of selective information. The Advisory Committee 
stated these same concerns, and also posited that timely disclosure 
about matters relating to certifying would reinforce the auditor's role 
as a gatekeeper.541
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    \540\ The Advisory Committee suggested that this kind of 
disclosure should be required on Form 8-K. See Advisory Committee 
Report at p. 27 and Appendix B at pp. 55-56. As noted, the 
Commission's proposals do not precisely follow the Committee's 
suggestions. The Committee did not expressly suggest expanding Form 
8-K to require disclosure of an accountant or auditor's refusal to 
consent to use of its prior audit report.
    \541\ See Advisory Committee Report, Appendix B at pp. 27-28 and 
55-56. The Committee explained that an auditor could provide a 
gatekeeping function when asked to furnish or update a consent to 
the use of its report. If the auditor does not satisfy itself that 
the report does not require any adjustments, it may withhold or 
refuse to consent to use of the report. By requiring companies to 
report when its auditor refuses to consent to use of its report, we 
elicit disclosure that may signal problems with the company's 
financials.
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    Accordingly, we propose to add these events to those that relate to 
a

[[Page 67244]]

company's accountants and auditors and that are already in Form 8-
K.542 We would require companies to report these events 
within one business day of their occurrence.
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    \542\ See proposed revisions to Item 304 of Regulation S-B, 17 
CFR 228.304, and proposed revisions to Item 304 of Regulation S-K, 
17 CFR 229.304.
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    We solicit comment about whether other events concerning an 
auditor's report should be included in the Form 8-K. For example, 
should companies report when they seek to have another auditor reaudit 
a prior audited period? The Committee did suggest we require disclosure 
of engagement of a new auditor to reaudit a prior audited period. We 
seek comment on this subject.
    With respect to the information about auditors already required by 
Item 4 of Form 8-K, we propose to accelerate the due date for reporting 
that information to one business day after the reporting event occurs. 
We believe the significance of that information warrants near immediate 
disclosure.
e. Name Changes
    We propose to add to Form 8-K a requirement that a reporting 
company report any change in its name. This disclosure is not 
specifically required in current periodic reports, although companies 
may report name changes because general principles of materiality may 
call for it. Under our proposal, companies would report their former 
and current names within five calendar days after the change. Prompt 
reporting of a change in a reporting company's name is important to 
keep investors informed of the status of the company. Also, for 
investors that are not otherwise aware, a change in a company's name 
often signals the occurrence of some significant event concerning the 
company about which they should educate themselves. Timely public 
notice of a name change also would allow investors to continue to 
follow or research the reporting company and avoid concern about its 
fate when its familiar name is replaced by an unfamiliar one.
    We solicit comment on this proposal. If the name change results 
from a business combination that was already publicly announced, should 
we nonetheless require name change reporting?
f. Due Dates for Reporting Events
    Currently, most reports filed on Form 8-K are due within 15 
calendar days after the occurrence of the event triggering the 
reporting requirement.543 Some reports are due within 5 
business days after the occurrence of the event.544
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    \543\ Events concerning changes in control of a registrant, 
acquisition or disposition by a registrant of a significant amount 
of assets, and a registrant's bankruptcy or receivership, as well as 
other events, must be reported within 15 calendar days of the 
occurrence of the event. See General Instruction B. of Form 8-K.
    \544\ Registrants must file reports on Form 8-K within 5 
business days of both changes in the registrant's certifying 
accountant and the resignation of any of the registrant's directors. 
See General Instruction B. of Form 8-K.
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    The Commission believes that, given the explosive growth of the 
secondary trading market and the importance of Exchange Act reporting 
to it, reporting companies should be required to disclose more 
information about material events and developments that concern them 
and their security holders sooner than they are required currently.
    The Advisory Committee suggested that the due date for mandated 
reports on Form 8-K be accelerated from 15 calendar days to 5 business 
days.545 The Commission believes it is appropriate to go 
further, however, and proposes to accelerate the general Form 8-K due 
date to 5 calendar days after occurrence of the events required to be 
reported on the Form.546 For disclosures of material 
defaults and notices that a company's independent accountant has 
resigned, declined to stand for reelection or been 
replaced,547 as discussed above, we generally would require 
companies to report within one business day after the date of the 
reportable event. We also propose to accelerate the reporting of 
resignations of any of the registrant's directors to within one 
business day of the reportable event.548
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    \545\ Advisory Committee Report at p. 27.
    \546\ As discussed above, this due date would not apply to the 
reporting of annual and quarterly financial results on Form 8-K.
    \547\ This information is currently required to be disclosed 
under Item 4 of Form 8-K, within 5 business days of the event.
    \548\ This information is currently required under Item 6 of 
Form 8-K and is due today within 5 business days of the event.
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    The Commission recognizes that acceleration of the due date may 
create some burdens for reporting companies; however, we believe that 
any burdens are outweighed by investors' and the market's need for 
current information. With respect to each proposed addition to or 
acceleration of reporting under Form 8-K, the Commission believes that 
security holders and the market have a need for prompt disclosure 
particularly because the events could impact the market price of the 
reporting company's securities. We also believe that the faster that 
material information is publicly disclosed, the less the potential for 
unfair trading on the basis of selective disclosure.
    We ask for your comment on this proposal. Does the proposed 5-day 
reporting period provide reporting companies with enough time to file 
their reports? If not, should the due dates be extended, as the 
Committee suggested, to 5 business days? Should material defaults be 
reported faster than other events required to be reported on Form 8-K? 
Should the due date of other required reports similarly be set at one 
business day?

C. Signatures

1. Exchange Act Reports and Registration Statements
    The Commission is proposing to revise the signatures section of all 
registration statements and periodic reports filed under the Exchange 
Act to mandate that the persons who are required to sign those reports 
must certify that they have read the registration statement or report 
and that they know of no untrue statement of a material fact or 
omission of a material fact necessary in order to make the statements 
made, in light of the circumstances under which they were made, not 
misleading.549 The proposal also would expand the number of 
persons required to sign Forms 8-A, 10, 10-SB, 20-F, 40-F, 10-Q and 10-
QSB, to include the principal executive officers of the registrant and 
a majority of the board of directors of the registrant.550 
Although we are not proposing to require that a majority of board 
members sign current reports filed under cover of Form 8-K and 6-K, we 
would require the signatory for the registrant to certify that he or 
she provided a copy of those reports to the registrant's board of 
directors. That certification should encourage board participation in 
the disclosures required to be made on those Forms.551
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    \549\ The proposal relates to Exchange Act Forms 8-A, 10, 10-SB, 
20--F, 40-F, 6-K, 8-K, 10-Q, 10-QSB, 10-K and 10-KSB. The Commission 
is not currently proposing to change the language in these Forms 
that direct the registrant to file a specified number of copies with 
the Commission. Of course, reporting entities that file the Forms 
electronically pursuant to Regulation S-T need not submit multiple 
copies electronically.
    \550\ Forms 10-K and 10-KSB already require those persons to 
sign those Forms. See Instruction D.(2)(a) of Form 10K and 
Instruction C.2. of Form 10-KSB. Forms 8-K and 6-K only require the 
signature of the officer signing on behalf of the registrant and in 
his or her capacity as an officer of the registrant. See Form 6-K 
and Form 8-K. We do not propose to revise either Form 6-K or 8-K to 
require more signatures.
    \551\ Although board members may not review the disclosures in 
those Forms before receiving them from the registrant, we believe 
that the delivery requirement would increase director awareness of 
the disclosure in the reports, and therefore possibly increase their 
participation. Moreover, the Commission has noted that certain 
companies may have no internal system by which to provide directors 
with significant corporate information. The Commission has indicated 
before that directors must assume some responsibility with respect 
to disclosures made by the companies on whose boards they sit. See, 
e.g., Exchange Act Release No. 17114 (Sept. 2, 1980) [45 FR 63630].

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[[Page 67245]]

    We believe that persons signing the report will be less likely to 
adopt the practice of simply signing blank signature pages without 
having even seen the report if they must affirmatively state that they 
have read the report and that they know of no untrue statement of a 
material fact or omission of a material fact necessary in order to make 
the statements made, in light of the circumstances under which they 
were made, not misleading.552 Requiring a signatory of 
current reports to provide a copy of those reports to the registrant's 
board of directors would, at a minimum, help ensure that the board is 
quickly informed about material current developments or events that 
concern the registrant.
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    \552\ The Advisory Committee noted in its Report that it was 
advised that senior management of reporting companies routinely 
execute the signature pages for Exchange Act reports without having 
or reviewing the report itself. See Advisory Committee Report, 
Appendix B at p. 50. The Advisory Committee learned in various 
meetings and through research that board members devote less 
attention to Exchange Act reports than they devote to reviewing 
Securities Act filings. See Advisory Committee Report, Appendix A at 
pp. 49-53.
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    This proposal is based in part on the Advisory Committee's finding 
that the disclosures made in Exchange Act reports tends to be of a 
lesser quality than the disclosures made in Securities Act filings. The 
Committee believed that, generally, one way to improve Exchange Act 
disclosures would be to require senior management to review the 
Exchange Act reports filed on behalf of the company they 
managed.553
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    \553\ The Committee also suggested that, the Commission require 
senior management to address and submit a report to the audit 
committee of the board of directors describing the procedures 
employed to ensure compliance with disclosure and accounting 
standards and requirements. See Advisory Committee Report, Appendix 
B at pp. 50-54.
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    The Commission concurs with the Committee's goal that management 
take a more active role in the disclosure the registrant makes in its 
Exchange Act reports as well as acknowledge more responsibility for the 
disclosure in their reports.554 We also note, as the 
Committee did, that revisions to enhance the disclosures in Form 8-K 
may improve disclosure for Securities Act purposes, because almost all 
seasoned issuers incorporate their Exchange Act reports into their 
Securities Act registration statements.
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    \554\ In 1980, the Commission amended Form 10-K to require that 
the Form be signed on behalf of the registrant by the registrant's 
principal executive officer(s), its principal financial officer, its 
controller or principal accounting officer and by at least a 
majority of the board of directors. Exchange Act Release No. 17114 
(Sept. 2, 1980). The Commission noted that, while commentators 
either did not address or object to the proposal to require 
executive officers to sign the Form 10-K, they did object to the 
proposal that board members be required to sign. The Commission 
adopted the proposal over the commentators' objections because it 
concluded that the requirement would help shift the focus to 
Exchange Act reporting. By shifting the focus, the Commission 
expected that officers and directors would pay more attention to the 
disclosures made in Forms 10-K and to participate more in their 
preparation. It believed then, as we do now, that the signature 
requirement would impose an added measure of discipline that would 
provide benefits that outweighed the potential impact, if any, of 
the signature on legal liability.
---------------------------------------------------------------------------

    We recognize that companies may find it inconvenient to obtain the 
additional signatures that would be necessary to file the report. 
However, we believe the instructions to the Forms, current or proposed, 
that provide for conformed signatures would significantly ease any 
logistical burdens associated with obtaining the signatures.
2. Securities Act Filings
    We also propose to revise the signature sections of certain 
registration statements under the Securities Act to mandate that any 
person signing the registration statements certify that he or she has 
read the registration statement and, to his or her knowledge, it does 
not contain an untrue statement of a material fact or omit to state a 
material fact required to be stated therein or necessary to make the 
statements therein not misleading.555 Unlike the Exchange 
Act proposals, we would not expand the number of persons required to 
sign the registration statements.556
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    \555\ We would revise existing Securities Act Forms SB-1 and SB-
2. Proposed Securities Act Forms A, B, C and SB-3 would include the 
same certification.
    \556\ Forms S-1, S-2, F-1, F-2, S-3, F-3, S-4, F-4 and S-11 
currently require the signatures of the same persons we would 
require to sign proposed Forms A, B and C.
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    We hope that the certification requirement would cause the 
signatories, who typically also manage and control the issuer, to read 
the disclosure and perhaps even participate more in the preparation of 
the filing. We seek your comment on this proposal. Would the proposed 
certification have any effect on the extent to which the signatories 
participate in overseeing the disclosure? Would it change the extent to 
which management of the companies are given draft disclosure or given 
time to read the disclosure before filing? Given that signatories are 
already responsible for the disclosure under the liability provisions 
of the Securities Act,557 would certification have any 
effect?
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    \557\ See Securities Act Section 11(a), 15 U.S.C. Sec. 77(k)(a).
---------------------------------------------------------------------------

D. Form 6-K Submissions

    Form 6-K is a critical part of the Exchange Act disclosure system 
for foreign private issuers. Form 6-K requires a foreign private issuer 
to furnish the Commission with all the material information that the 
foreign issuer:
    1. Discloses or is required to disclose under the laws of its 
domicile or place of incorporation;
    2. Files or is required to file with stock exchanges that list its 
securities; and
    3. Distributes or is required to distribute to its security 
holders.558
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    \558\ See General Instruction B to Form 6-K.
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    Unlike Form 8-K,559 Form 6-K does not explicitly 
encourage current voluntary disclosure that is not dependent upon 
foreign requirements. The Commission believes foreign issuers should be 
encouraged to keep their security holders and the market up-to-date, 
particularly because they may report less frequently than domestic 
issuers do under the Exchange Act system. Accordingly, the Commission 
proposes to add an instruction to Form 6-K to encourage foreign issuers 
to submit voluntarily current information that the issuer deems of 
importance to its security holders. Because the submission would be 
voluntary, we are not proposing a filing deadline, but we would 
recommend that foreign issuers promptly submit the Form 6-K after 
becoming aware of the information. We would deem information submitted 
voluntarily not to be filed for purposes of Section 18, just as we do 
all information under cover of Form 6-K.560
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    \559\ See Item 5 of Form 8-K.
    \560\ For internal tracking purposes, we propose to add a box to 
the cover of Form 6-K for issuers to check if they are voluntarily 
submitting the Form 6-K pursuant to the proposed instruction.
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    We solicit comment on the proposed instruction. Rather than 
encourage more disclosure by foreign private issuers, should we mandate 
particular disclosures not required under applicable foreign 
requirements? If so, what disclosures should be mandatory? For example, 
should we require issuers to report risk factor information similar to 
what would be required in Form 10-Q? Should we encourage reporting of 
other information about the issuer by enumerating in the proposed 
instruction areas of possible interest to investors?
    The Commission is also proposing to revise Form 6-K to include four 
new

[[Page 67246]]

items in the list of examples of what issuers would disclose on Form 6-
K if the information is disclosed under applicable foreign 
requirements. Those items are: (i) changes in the issuer's name; (ii) 
material modifications to the rights of security holders; (iii) any 
material defaults on indebtedness, material arrearages in dividends and 
other material delinquencies; and (iv) departure of the issuer's chief 
executive officer, chief financial officer, chief operating officer or 
president (or anyone serving those functions). The existing list on 
Form 6-K mirrors the events that domestic issuers must report on Form 
8-K. Because we are proposing to include these items on Form 8-K, we 
are proposing corresponding changes to the Form 6-K list. Each of the 
four relates to material events that all reporting issuers, foreign or 
domestic, should disclose to their security holders and the market of 
on a timely basis.
    We seek comment on this revision. Are there reasons to omit any of 
the four from the instruction? Should we consider adding other, more 
specific, informational items?

E. Solicitation of Comment Regarding Plain English in Exchange Act 
Reports

    The Commission recently adopted the requirement that Securities Act 
prospectuses be drafted in plain English. In the Securities Act 
registration system we propose today, investors would look increasingly 
to Exchange Act reports for information regarding the registrant. These 
proposals also would expand the documents that would be used in 
connection with an offering. The concerns that led to the plain English 
revisions included the need to read and understand easily the 
information that is the basis for the investment decision. Given 
today's proposals, these concerns would also seem to apply to Exchange 
Act documents that are incorporated by reference into the Securities 
Act prospectus. One proposal to require risk factor disclosure in 
Exchange Act registration statements and periodic reports also requires 
that disclosure be written using plain English principles. We solicit 
comment on whether we should extend the plain English requirement to 
all materials that are a part of the prospectus, including other parts 
of Exchange Act reports that are incorporated by reference into that 
document. Would it be more appropriate to extend the plain English 
requirements to all Exchange Act periodic reports, regardless of 
whether they are incorporated by reference into a Securities Act 
registration statement? Should we extend the plain English requirements 
only to certain parts of Exchange Act periodic reports, such as the 
description of the company's business or the MD&A section?

XII. Staff Review Policy

    The Commission staff would continue to review all IPO registration 
statements for sufficiency of disclosure. The staff would review Form A 
registration statements by certain repeat issuers and Form C 
registration statements if they are selected in accordance with its 
review criteria.
    Form B registration statements would not be reviewed by the staff 
before effectiveness. Although the Commission will continue to review 
their periodic reports on a regular basis, we see less need for 
regulatory supervision at the time of their offerings. We solicit 
comment, however, on whether the staff review should apply to Form B 
offerings of novel securities. If so, how should ``novel'' be defined 
so as to provide certainty as to the possibility of review? If the 
Commission staff reviews ``novel'' securities offerings, would those 
offerings tend to gravitate to the unregistered market?
    Form B registration statements would be screened by the staff 
promptly after being filed with the Commission. The staff will 
determine whether the offering was eligible to be registered on Form B 
561 and whether the disclosure raises any ``red flags'' 
concerning compliance with the antifraud provisions of the federal 
securities laws. If the offering filed on Form B is not eligible for 
registration on Form B, the issuer would have violated Section 5 of the 
Act and would be referred to the Division of Enforcement for 
appropriate action. If the disclosure raises ``red flags,'' the staff 
will conduct an immediate review of the registration statement and take 
further action as appropriate.
---------------------------------------------------------------------------

    \561\ The issuer and the offering must meet the eligibility 
requirements set forth in General Instruction I. of Form B.
---------------------------------------------------------------------------

    Filings on Form A would be divided into two categories: those 
subject to review and those not subject to review. Filings by smaller 
and unseasoned issuers would be reviewed by the staff in the same way 
they are today. However, medium-sized seasoned issuers may designate 
the time and date that their registration statements on Form A would 
become effective; these filings obviously would not be subject to staff 
review prior to effectiveness. Some commenters on the Concept Release 
suggested that the Division disclose its review criteria to provide 
more predictability in the offering process.562 They noted 
that, other than in the case of initial public offerings which are 
always reviewed by the staff, the Commission has not chosen to tell 
issuers planning an offering what criteria the staff will use to make 
its decision about reviewing their registration statements.
---------------------------------------------------------------------------

    \562\ See, e.g., comment letters, in File No. S7-19-96, from PSA 
The Bond Market Trade Ass'n (Nov. 8, 1996); Cleary, Gottlieb, Steen 
& Hamilton (Dec. 27, 1996); and the N.Y. State Bar Ass'n (Oct. 25, 
1996).
---------------------------------------------------------------------------

    We intend to resolve this uncertainty in the case of Form B 
offerings by announcing that the staff will not review those offerings. 
These registration statements either would be effective upon filing or 
would become effective when the issuer chooses. The same would be true 
of Form A offerings either made by issuers with a public float greater 
than $75 million or made by seasoned issuers incorporating an annual 
report on Form 10-K or Form 20-F that has been reviewed previously by 
the Commission staff. In addition, we propose not to review certain 
offerings by large seasoned foreign government issuers registering on 
Schedule B. In all other repeat offerings, we believe that the positive 
effects on registration statement disclosure that result from the 
possibility of staff review outweigh the cost of uncertainty. As a 
result, the Division will not make its review criteria for other 
offerings public.
    In order to increase efficiency and certainty for issuers, however, 
we propose several changes to the staff review process with respect to 
Exchange Act filings.

A. Notification of Selection for Review

    If the proposals are adopted, the Division staff will begin to 
notify the issuer as soon as its Exchange Act reports are selected for 
review. This practice would eliminate the concerns expressed by issuers 
that they are taken by surprise when they receive a comment letter from 
the staff on their Exchange Act filings. The staff also will indicate 
in those notification telephone calls approximately when comments, if 
any, can be expected to be communicated to the issuer by the staff.

B. Voluntary Pre-Review of Filings

    If the proposals are adopted, the Division staff will begin to 
consider requests by issuers for the staff to review their Exchange Act 
disclosure because the issuer is planning an offering in the near 
future. The Commission also reminds issuers that, as always, the 
Division is willing to discuss with issuers potential accounting 
problems that may arise either in due course or in connection with 
unusual transactions.

[[Page 67247]]

Resolution of those issues before filing benefits all interested 
parties. 563
---------------------------------------------------------------------------

    \563\ We would exclude from this policy Exchange Act reports 
filed in accordance with requirements of foreign law, such as Forms 
40-F and 6-K.
---------------------------------------------------------------------------

    This voluntary review option would be available to reporting 
issuers that are concerned about receiving a staff comment letter 
requesting an amendment to an Exchange Act report that is being 
incorporated into a registration statement or that will serve as the 
basis for company disclosure in a registration statement. Subject to 
obvious limitations on staff resources, the staff will make every 
effort to accommodate an issuer's request when made a reasonable period 
before an offering. If the staff is unable to accommodate a request, 
the issuer will be so advised promptly after the request is made. If 
the staff informs the issuer that it is unable to review the issuer's 
Exchange Act reports at that time, the staff would not select those 
reports for a routine review during the 30 days thereafter. At any time 
more than 30 days thereafter, the staff could choose to perform a 
routine review of that issuer's reports. At all times, the Commission 
staff would reserve the right to review those reports for cause.

XIII. Request for Comments About Investment Company Issuers and 
Market Value Adjustment Contracts

A. Investment Company Issuers

    Interested persons are asked to submit written comments on how any 
aspect of the proposals affects investment companies and on how the 
proposals should be modified to reflect the circumstances of investment 
companies. For example should the safe harbors for communications 
contained in proposed rules 167, 168 and 169 apply to investment 
companies or should investment companies be expressly excluded from 
these safe harbors? Do the proposals, which generally are tied to the 
form on which securities are registered, adequately address delivery 
obligations with respect to investment company securities, particularly 
the securities of closed-end investment companies?

B. Market Value Adjustment Contracts

    Life insurance companies sometimes issue so-called ``market value 
adjustment'' contracts, either alone or in combination with a variable 
annuity contract. Under a market value adjustment contract, an insurer 
promises a contractowner a fixed interest rate, subject to an 
adjustment based on prevailing interest rates in the event of early 
surrender of the contract. Market value adjustment contracts have been 
registered on Form S-1, S-2 or S-3. Under today's proposals, they would 
be registered on Form A or B.
    We solicit comment on how the proposals affect market value 
adjustment contracts and on how the proposals should be modified for 
these contracts. For example, what criteria should be used to determine 
whether a market value adjustment contract is registered on Form A or 
Form B? Is one of these forms more appropriate for all market value 
adjustment contracts? Should registration statements on Form B for 
market value adjustment contracts be subject to the same rules for time 
of filing and time of effectiveness as other Form B registration 
statements, or should they be treated similarly to investment company 
registration statements? Should the exemption permitting offers to be 
made in the pre-filing period apply to market value adjustment 
contracts registered on Form B? Should the same delivery requirements 
apply to market value adjustment contracts registered on Forms A and B 
as apply to other Form A and B offerings, or should market value 
adjustment contracts be treated similarly to investment company 
securities?

XIV. Cost-Benefit Analysis

    The proposed new rules and amendments should modernize and improve 
the Commission's regulatory system for offerings under the Securities 
Act. We believe our proposals would enhance communications between 
public companies and investors, and promote investor protection. In 
this section we examine the benefits and costs of the proposed 
revisions of the Securities Act and Exchange Act, focusing on the 
groups that might be affected. We request that commentators provide 
views and supporting information as to the benefits and costs 
associated with the proposals.

A. Impact on Investors

    We anticipate that the proposed rules and amendments would enhance 
investor protection by requiring issuers to deliver information to 
investors before they commit to purchasing securities.564 
Specifically, the proposed rules and amendments would require issuers 
registering securities on Form A to deliver preliminary prospectuses to 
potential buyers 7 days before pricing for initial public offerings and 
3 days before pricing for repeat offerings. Issuers would have to 
notify offerees of material changes at least 24 hours before pricing. 
For Form B offerings, issuers would be required to deliver term sheets 
outlining the key features of the securities before accepting purchases 
from customers. In contrast to the proposed rules, the final prospectus 
currently is required to be sent to investors before, or at the same 
time as, the securities purchased.565 Thus investors 
typically receive prospectuses after securities sales, rather than when 
they are considering the merits of investments. The proposed rules and 
amendments would accelerate the delivery of information to investors in 
some circumstances, thereby ensuring they receive written information 
before investing.
---------------------------------------------------------------------------

    \564\ See proposed Securities Act Rule 172, 17 CFR 230.172.
    \565\ In initial public offerings, issuers are required to 
deliver preliminary prospectuses to investors at least 48 hours 
before sending confirmations.
---------------------------------------------------------------------------

    The proposed rules and amendments would also enhance the 
timeliness, uniformity, and quality of disclosure in Exchange Act 
reports by:

     Requiring registrants to file summary financial 
information on Form 8-K before they file Forms 10-K and 10-Q;
     Shortening the period during which foreign private 
registrants may file Form 20-F;
     Reducing the 15-day filing period for Form 8-K to 5 
days, and reducing the 5-day filing period for disclosing 
independent accountant and director resignations, material defaults, 
dividend arrearages, and delinquencies filed on Form 8-K to 1 day;
     Requiring registrants to report additional events on 
Form 8-K, including:

--Material modifications to rights of security holders;
--Departures of CEO, CFO, COO or president (or persons in equivalent 
positions);
--Material defaults on senior securities (must be disclosed no later 
than one day following default);
--notices that reliance on prior audit is no longer permissible, or 
that auditor will not consent to use of its report in a Securities 
Act filing; 566 and
---------------------------------------------------------------------------

    \566\ See 17 CFR 228.304 and 17 CFR 229.304.
---------------------------------------------------------------------------

--change in company name.

     Altering Form 6-K to:

--Encourage registrants to voluntarily and promptly report current 
important information;
--Suggest that registrants report the same events that are reported 
pursuant to Form 8-K; and
--Include a signature requirement.

     Treating the information in Part I of Forms 10-Q and 
10-QSB as ``filed'' for purposes of Section 18 under the Exchange 
Act; 567 and
---------------------------------------------------------------------------

    \567\ See proposed revisions to Exchange Act Rules 13a-13(d) and 
15d-13(d), 17 CFR 240.13a-13(d) and 17 CFR 240.15d-13(d).

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

[[Page 67248]]

     Requiring risk factors disclosure in Forms 10-K and 10-
KSB with quarterly updating in Forms 10-Q and 10-QSB.568
---------------------------------------------------------------------------

    \568\ The proposed revisions would also require issuers to 
disclose risk factors in Forms 10, 10-SB, 18, 20-F, and 18-K.

Reducing filing periods and requiring firms to file summary financial 
information with the Commission before filing Forms 10-K and 10-Q would 
unify and in some instances accelerate the release of information to 
investors. The other requirements would enhance the uniformity and 
quality of information disseminated to the market and investors.
    The Commission is proposing to require that all persons who sign a 
firm's registration statements filed under the Securities Act and 
reports filed under the Exchange Act certify they have read the filing 
and do not know of any material misstatement or omissions of 
information in the filing.569 The proposals would expand the 
number of persons required to sign forms to include the registrant, the 
registrant's principal executive officer, principal financial officer, 
principal accounting officer, and at least a majority of the 
registrant's board.570 These revisions would help ensure 
that information is adequately reviewed both internally by a 
registrant's senior management (and by its board), thereby enhancing 
investors' confidence in the quality of the information.
---------------------------------------------------------------------------

    \569\ The proposed revisions would affect Forms A, B, C, SB-1, 
SB-2, and SB-3 under the Securities Act and Forms 10-K, 10-KSB, 10-
Q, 10-QSB, 10, 8-A, 10-SB, 20-F, 40-F, 18, 8-K, and 6-K under the 
Exchange Act.
    \570\ Foreign private issuers also would need to have an 
authorized representative in the United States sign. The proposed 
revisions would affect Forms A, B, C, SB-1, SB-2, and SB-3 under the 
Securities Act and Forms 10-K, 10-KSB, 10-Q, 10-QSB, 10, 8-A, 10-SB, 
20-F, 40-F, and 18 under the Exchange Act. For Forms 8-K and 6-K, we 
would require either the registrant's principal executive officer, 
principal financial officer, or principal accounting officer to sign 
a particular Exchange Act report and certify he or she provided a 
copy to board members.
---------------------------------------------------------------------------

    The proposed rules and amendments would also improve investors' 
access to information by allowing issuers to use ``free writing'' sales 
materials before the effectiveness of their registration 
statement.571 Current limitations on communications 
originally were intended to focus investors' attention on prospectuses, 
whose contents were specified by the Commission. We believe that by 
allowing issuers the additional flexibility to communicate with 
investors before the effectiveness of a registration statement, 
investors may become better informed before making their investment 
decisions. These additional communications made during the offering 
period would be subject to the provisions of Section 12(a)(2) under the 
Securities Act and the antifraud provisions of the Securities and the 
Exchange Acts.572 Additionally, investors would continue to 
have access to issuers' registration statements through the 
Commission's Internet web site and several non-governmental web sites. 
The Commission recognizes, however, that deregulating communications 
may impose an analytical burden on investors. For example, in some 
offerings, an investor may need to assemble and assimilate various free 
writing documents and Exchange Act materials in order to get the whole 
investment picture. We seek comment on whether investors would benefit 
overall from issuers communicating with investors during the waiting 
period.
---------------------------------------------------------------------------

    \571\ See proposed Securities Act Rule 165, 17 CFR 230.165, and 
Rule 166, 17 CFR 230.166.
    \572\ Under the proposals, Form B offering information would be 
subject to liability under Section 11 of the Securities Act.
---------------------------------------------------------------------------

    The proposed rules and amendments would improve investors' access 
to information by allowing issuers that register offerings on Form B to 
communicate with investors before they file a registration statement. 
573 The proposed rules and amendments would apply to:

    \573\ See proposed Securities Act Rule 166, 17 CFR 230.166.

     Large, seasoned companies;
     Offerings sold only to QIBs;
     Offerings to certain existing shareholders;
     Offerings of certain non-convertible investment 
securities; and
     Certain market making transactions by affiliated 
brokers/dealers.

    In these instances, the Commission anticipates investors would 
benefit from receiving information from issuers during the pre-filing 
period, and believes that doing so would not create an investor 
protection concern, given the information is subject to the provisions 
of Section 12(a)(2) under the Securities Act and the antifraud 
provisions of the Securities and the Exchange Acts. 574 
Moreover, given the abundance of readily accessible information about 
large, seasoned public companies, any communications made by them while 
in the process of registering an offering are less likely to have a 
significant impact by conditioning the market or stimulating interest 
in a proposed offering. The Commission, however, recognizes that 
deregulating communications may lead to issuers ``hyping'' securities 
more than today. We seek comment on whether such activities would 
interfere with investors' ability to evaluate offerings objectively.
---------------------------------------------------------------------------

    \574\ Under the proposals, Form B offering information would be 
subject to liability under Section 11 of the Securities Act.
---------------------------------------------------------------------------

    Offerings to QIBs and existing shareholders also may be registered 
on Form B. We believe that these investors, due to their experience or 
nature, would be less susceptible than other investors to pre-filing 
hype about a new offering. For example, under the proposed rules, 
issuers may register on Form B an offering of securities to QIBs. 
Because of their sophistication, we believe QIBs are more likely than 
other investors to be in a position to insist that issuers explain any 
information disseminated before the filing of a registration statement. 
Similarly, we believe that certain existing shareholders would benefit 
from issuers communicating more freely. These investors are likely to 
be knowledgeable about the investments in which they would be eligible 
to receive additional issuer disclosures during the pre-offering 
period. And finally, we believe purchasers of non-convertible 
investment grade debt are unlikely to need the additional protections 
offered by Form A registration. We understand these securities' 
investors buy largely based on ratings and maturities. We request 
comment on the accuracy of these views.
    The proposed new rules and amendments are designed to increase the 
amount of information provided to investors. For example, the proposals 
would allow analysts to distribute research reports around the time of 
offerings as long as they disclosed potential conflicts of 
interest.575 Facilitating communication between analysts and 
investors would enhance investors' ability to evaluate offerings and 
should increase the speed at which the market discovers prices.
---------------------------------------------------------------------------

    \575\ See proposed revisions to Securities Act Rules 137, 138, 
and 139, 17 CFR 230.137, 230.138, and 230.139.
---------------------------------------------------------------------------

    The proposed revisions also would reduce the effects of selected 
disclosure by requiring issuers to file all ``free writing'' materials 
with the Commission. These materials would then be available to all 
investors through our web site. In offerings today, many issuers and 
their representatives exclude some investors from roadshows and other 
issuer communications. The proposed rules and amendments should put 
investors with Internet access on a more equal footing with respect to 
receiving written information about the issuer, although issuers might 
continue or increase their selective disclosure of oral information. We 
request comment

[[Page 67249]]

on whether investors without access to the Internet may be 
disadvantaged.
    The proposed new rules and amendments would likely expand the 
registered investment opportunities available to investors. The 
proposed revisions would lower the cost of registering public offerings 
which in turn may motivate issuers to shift at least some securities' 
sales from the private to the public market. Investors that are 
eligible to purchase securities in private placements today would be 
able to purchase securities that would be similar to those before, but 
would be freely resalable. The information would be subject to the 
higher liability standards of Section 11 under the Securities Act. 
Investors currently ineligible to purchase securities in private 
placements may have new investment opportunities. Shifting securities 
offerings from the private to the public market also would likely 
increase the liquidity of the public market.
    Although it is difficult to estimate the number of offerings or 
aggregate amount of securities that might become available to the 
public market, we anticipate that larger seasoned issuers would 
register some offerings on Form B that otherwise would have been 
privately placed, resulting in more offerings becoming available to 
non-QIB investors. Smaller, less seasoned issuers would likely register 
at least some offerings on Form B that they offer exclusively to QIBs 
and to certain existing shareholders, or that are investment grade non-
convertible securities, rather than privately place them, resulting in 
more offerings being traded in the public market.576 The 
Commission recognizes that some smaller, less seasoned issuers, 
however, would choose today to register their securities on Form B as 
an offering exclusively to QIBs. In these instances, non-QIB investors 
under the proposals would not be able to participate in the initial 
distribution of securities. We request comment on the extent to which 
the proposed rules would integrate the private and public markets and 
bifurcate QIB versus non-QIB investment opportunities.
---------------------------------------------------------------------------

    \576\ In a study of non-convertible debt, we found that at least 
49% of the non-convertible debt issued in the 144A market in the 
first half of 1998 would have likely migrated to the public market 
under the proposed rules. The evidence indicates yields on privately 
placed investment grade securities and securities with registration 
rights are essentially the same as yields on registered securities 
with similar characteristics. The insignificant yield differential 
suggests that investors perceive few differences between these 
privately placed and publicly registered securities. Yet issuers pay 
as much as 100 basis points in extra issuance costs for privately 
placed investment grade securities and securities with registration 
rights. Presumably, issuers believe the additional expense is more 
than justified by the issuance and timing flexibility provided by 
the private market. Under the proposed rules, issuers would have 
much of the same flexibility when they register offerings on Form B 
that they currently have in the private market. We therefore 
anticipate that issuers would sell these securities in the public 
rather than private market. See Effects of Streamlined Registration, 
Memorandum by the Commission's Office of Economic Analysis (Sept. 
18, 1998).
---------------------------------------------------------------------------

    One cost to investors of the proposed revisions is that they might 
increase investors' analytical burden. The proposed new rules and 
amendments would allow Form A issuers with two years of reporting 
history to incorporate Exchange Act reports into prospectuses as long 
as they deliver the reports with prospectuses to investors. Investors 
in these offerings would have to physically compile the delivered 
integrated information. The Commission notes that investors have not 
complained they are unduly burdened when investing in offerings where 
company information is incorporated by reference from the issuer's 
Exchange Act reports. The Commission seeks comment from investors as to 
whether, as a practical matter, compiling delivered materials that are 
incorporated by reference into prospectuses is burdensome to investors. 
The Commission seeks comment from investors as to whether, in their 
experience, issuers or mutual fund companies have promptly delivered 
periodic reports incorporated by reference or, in the mutual fund 
context, the Statement of Additional Information, when such materials 
were requested. And we seek comment from companies on how often they 
receive requests from investors.
    The proposed new rules and amendments could also increase 
investors' analytical burden if they receive transactional information 
in Form B registration statements that is not uniform. In addition, 
investors would have the burden of identifying omitted information that 
today may be mandated. In general, however, we expect few problems. We 
anticipate that issuers and underwriters would use the opportunity to 
craft disclosure based on investors' demand and the requirement to 
provide material information to investors. The proposed rules do not 
change issuers' or underwriters' liability, thus we expect they would 
have incentives to present complete and correct transactional 
information. The Commission also is proposing to continue mandating the 
same company information as today, as well as certain transactional 
disclosure items. We request your comments on the accuracy of this 
view.
    The Commission recognizes that some fraction of the cost savings to 
issuers and underwriters reflects a shifting of costs from issuers to 
investors, including investment advisers, investment companies, and 
retail investors. These costs may include quantifiable costs (such as 
printing) and less quantifiable costs (such as time, effort, and 
inconvenience). Some portion of the printing costs that Form B 
companies would save by not printing and delivering final prospectuses 
might be shifted to investors. Under the proposals, prospectuses would 
be available to investors through the Commission's web site or issuers' 
toll-free telephone numbers. Investors could either rely on 
prospectuses' continued availability on the Internet (and not acquire 
hard copies), call issuers for free copies or download and print them.
    The Commission seeks comment on the assumptions and quantitative 
data that should go into estimating the costs to investors of acquiring 
prospectuses in Form B offerings. For example, would investors be less 
likely to read and use prospectuses if prospectuses are not delivered 
and investors have to take extra steps to receive them? What percentage 
of investors would contact issuers for free copies of prospectuses? 
What percentage of investors would obtain prospectuses through the 
Internet? How much does it cost investors in terms of paper, Internet 
connection costs, and telephone connection time to download information 
and print prospectuses? How likely is it that investors would read 
prospectuses ``on-line,'' and if they did so, how much in additional 
connection charges would they pay? What are the costs to issuers and 
underwriters of printing and delivering prospectuses? What are the 
costs of bulk printing of prospectuses through commercial printers 
relative to the cost of ``retail printing'' of prospectuses by 
individual investors? We request comment on the number of prospectuses 
that issuers and underwriters would no longer need to print and deliver 
to investors and the size of the resulting cost savings.
    The proposed new rules and amendments would allow companies that 
currently are ineligible to register offerings on Forms SB-1 and SB-2 
to use these forms, and to register business combinations on new Form 
SB-3.577 One issue that could arise is the quality of the 
newly eligible firms' disclosures might be lower than today, because 
the small issuer disclosure system, of which

[[Page 67250]]

Forms SB-1 and SB-2 are part, allows companies to register offerings 
with less extensive disclosure requirements than those required by 
Forms S-1 and S-2. We do not anticipate, however, that classifying 
companies with revenues up to $50 million as small business issuers 
would harm investors. The information that we have suggests allowing 
more firms to file on Forms SB-1 and SB-2 would not cause or allow 
firms that otherwise would register on Forms A or B to misrepresent or 
omit material information to investors. We request your comments on the 
accuracy of this view.
---------------------------------------------------------------------------

    \577\ See proposed revisions to Securities Act Rule 405, 17 CFR 
230.405.
---------------------------------------------------------------------------

    A final concern is that eliminating staff review of offerings 
registered on Form B would diminish issuers' incentives to fully and 
accurately disclose information in prospectuses. Although the 
Commission's staff currently reviews relatively few offerings that 
would be registered on Form B under the proposals,578 the 
possibility of review likely enhances the quality of disclosure. The 
Commission agrees that prospectus review is valuable, but believes the 
resources currently dedicated to prospectus review might better serve 
investors' interests if applied to reviews of Exchange Act reports. As 
discussed in the Advisory Committee report, the equity trading markets 
are approximately 35 times larger (approximately $5.5 trillion dollars 
in 1995) than the primary markets (approximately $155 billion dollars 
in 1995).579 Given that larger seasoned issuers are followed 
by analysts and other providers of information, we believe that 
focusing on Exchange Act report reviews would benefit investors. We 
request your comments on the accuracy of this view.
---------------------------------------------------------------------------

    \578\ See Advisory Committee Report at Appendix A, p. 9, Table 
2. The Commission reviewed approximately 15% of prospectuses of 
underwritten common equity registered in calendar years 1994 and 
1995 on Form S-3, which roughly parallels Form B.
    \579\ See Advisory Committee Report at p. 2 and at Addendum to 
Appendix A, Fig. 2.
---------------------------------------------------------------------------

B. Impact on Issuers

    The proposed rules and amendments would change the registration 
forms on which issuers register offerings and business combinations. 
Issuers would use Forms A, B, and C rather than Forms S-1, F-1, S-2, F-
2, S-3, F-3, S-4, and F-4. Form A would be available to all issuers: It 
would roughly parallel current Forms S-1, F-1, S-2, and F-2. Issuers 
that would have been reporting companies for at least two years and 
that used Form A would be able to incorporate Exchange Act reports by 
reference. Form B would be available to larger seasoned issuers; that 
is, issuers with either public floats of at least $75 million and ADTVs 
of $1 million or public floats of at least $250 million.580 
Alternatively, issuers could use Form B if they sell securities 
exclusively to QIBs and certain existing shareholders, or sell non-
convertible investment grade securities. Issuers would use Form C to 
register business combinations. The Commission also is proposing to 
revise the definition of small business issuer to increase the revenue 
test from $25 to $50 million and remove the public float 
test.581 Firms that meet this test would be eligible to 
register offerings on Forms SB-1 and SB-2, and business combinations on 
new Form SB-3.
---------------------------------------------------------------------------

    \580\ Public float is the aggregate market value of the issuer's 
outstanding voting and non-voting common equity held by non-
affiliates of the issuer. See 17 CFR 230.405.
    \581\ See proposed revisions to Securities Act Rule 405, 17 CFR 
230.405.
---------------------------------------------------------------------------

    In the table below, we estimate the impact of the proposed 
eligibility requirements on companies' form eligibility based on data 
from 1997. We apply the proposed Form A and Form B public float, ADTV, 
and reporting history form requirements to the companies that were 
publicly traded on the NYSE, AMEX, and NASDAQ market in 
1997.582 Of the 8,825 companies that were traded on these 
exchanges and market in 1997, 5,428 would have been required to 
register offerings on Form A under the proposals, unless they sold 
securities solely to QIBs and certain existing shareholders, or sold 
non-convertible investment grade securities.583 Of those 
5,428 companies, 1,075 of the companies would not have been allowed to 
incorporate Exchange Act reports by reference on Form A under the 
proposals, whereas 4,353 would have been permitted to incorporate 
Exchange Act reports by reference. Of the 4,353 companies that would 
have been permitted to incorporate Exchange Act reports by reference on 
Form A under the proposals, 2,526 were required to register offerings 
on Forms S-1 and F-1 in 1997, 400 were required to register offerings 
on Forms S-2 and F-2, and 1,427 were required to register offerings on 
Forms S-3 and F-3. Under the proposed rules and amendments, 3,397 
registrants would have been eligible to register offering on Form B 
based on their public floats and ADTVs. Not shown in the table are the 
4,087 companies, 1,050 more than today, that would have been eligible 
in 1997 to register offerings on Forms SB-1, SB-2, and SB-3 under the 
proposed rules.584 The impact of these changes on issuers is 
discussed below.
---------------------------------------------------------------------------

    \582\ Market capitalization was used as a proxy for public 
float. We use data from the Center for Research in Security Prices. 
We also are proposing to change the requirements for Canadian 
foreign private issuers to be eligible for MJDS to roughly conform 
with the requirements for Form B. These changes affect Forms F-7, F-
8, F-9, F-10, F-80 and 40-F. We request comment on the impact of the 
revisions on these issuers.
    \583\ The proposed rules would allow certain Form A issuers with 
at least $75 million in public float to go effective whenever they 
request. We estimate approximately 1,960 issuers would be eligible 
under the proposals.
    \584\ See 17 CFR 228.10.

                           Table: Impact of Proposed Form Requirements on Registrants
----------------------------------------------------------------------------------------------------------------
                                                    Form A, no        Form A,
                                                   incorporation   incorporation      Form B           Total
                                                   by reference    by reference
----------------------------------------------------------------------------------------------------------------
Form S-1/F-1....................................           1,075           2,526               0           3,601
Form S-2/F-2....................................               0             400               0             400
Form S-3/F-3....................................               0           1,427           3,397           4,824
                                                 ---------------------------------------------------------------
    Total.......................................           1,075           4,353           3,397           8,825
----------------------------------------------------------------------------------------------------------------

    We anticipate that the proposed rules and amendments would lower 
the cost of raising capital in the public market for many issuers. For 
the purposes of the Paperwork Reduction Act, the table in Section XV 
summarizes our preliminary estimates of the internal burden hours that 
parties would spend to comply with the proposals. We base these 
estimates on current burden hour estimates and the staff's experience 
with these filings. The estimates in the table

[[Page 67251]]

indicate that public companies would expend approximately 9,106,343 
internal burden hours/year complying with the proposals. If we assume 
70% of these burden hours would be expended by persons that cost the 
affected parties $85/hour and 30% of these burden hours would be 
expended by persons that cost $10/hour, then the proposals would cost 
approximately $573,699,609/year in internal staff time.585 
For the purposes of the Paperwork Reduction Act, we also estimate that 
parties would spend approximately $4,754,863,050/year on outside 
professional help to comply with the proposals. Thus we estimate that 
affected parties would spend approximately $5,328,562,659/year to 
comply with the proposals. Applying the same cost estimates to the 
burden imposed by the current rules, we estimate that issuers would 
spend approximately $5,581,739,205/year.586 Note that these 
estimates do not attempt to quantify the proposals' intangible 
benefits, such as the benefits to issuers and investors of enhanced 
communications and the greater likelihood that issuers would shift 
capital raising from the private to the public market, nor its 
intangible costs, such as the cost to security holders of identifying 
misleading or incomplete pre-filing information. We request comment on 
the reasonableness of our estimates.
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    \585\ These hourly rates translate to annual salaries of 
$170,000/year and $20,000/year.
    \586\ For the purposes of the Paperwork Reduction Act, we 
estimate in the table of Section XV the burden hours imposed on 
parties to comply with the current rules. Assuming (as we did for 
the proposed rules) that 25% of the hours required to comply with 
the rules are provided by corporate staff at a cost of $63/hour (70% 
of the expended corporate staff time cost $85/hour, whereas 30% of 
the expended corporate staff time cost $10/hour), and 75% of the 
hours required to comply with the rules are provided by external 
professional help at a cost of $175/hour, we estimate that affected 
parties spend approximately 37,971,015 burden hours/year * $147/hour 
= $5,581,739,205/year.
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    The proposed rules would allow issuers that otherwise would not be 
eligible to register securities on Form B to use Form B if they sold 
securities exclusively to QIBs and certain existing shareholders, or 
sold non-convertible investment grade securities. Consequently, they 
would be able to incorporate Exchange Act reports by reference without 
delivering them to investors, and would be able to craft transactional 
disclosure, subject to Section 11 liability standards, with fewer 
constraints than under the current regime. These changes would lower 
issuers' expenses to publicly raise capital. Although we cannot 
estimate the number of offerings or aggregate amount of securities that 
these issuers might register on Form B rather than on Form A, we 
anticipate that they would register at least some offerings on Form B. 
If they used Form B, they would also be allowed to communicate with 
investors during the pre-offering period. We request your comments, 
including any supporting empirical information, on the benefits and 
costs to smaller, less seasoned issuers of registering securities on 
Form B under the proposed rules.
    The proposed rules would simplify larger seasoned issuers' 
preparation of Form B by lifting restrictions on 
communications,587 enhancing these issuers' control over the 
timing of public offerings,588 and not requiring physical 
delivery of a prospectus.589 Under the proposed rules, we 
would require issuers in Form B offerings to deliver only a term sheet 
of the securities' most important features, instead of a full 
prospectus. We request comment on the number of Form B offerings in 
which issuers would not have to deliver prospectuses, the number of 
offerees in these deals, and the percentage of investors that would not 
request prospectuses. To the extent investors do not request the 
prospectus or information incorporated by reference, or obtain such 
information on the Internet, issuers would save mailings costs. 
Specifically, how does the difference in costs between the bulk mailing 
of prospectuses, under current law, and the on-request mailing of 
prospectuses as proposed, affect the potential cost to Form B issuers? 
How much would it cost Form B issuers to establish toll-free telephone 
numbers? How much would it cost Form B issuers to deliver term sheets? 
In Form A offerings, issuers would no longer have to deliver final 
prospectuses, but would have to deliver preliminary prospectuses. How 
many prospectuses would Form A issuers have to send to offerees? How 
does this number compare to the number of investors in these offerings? 
Would it cost more or less to send preliminary prospectuses relative to 
sending final prospectuses today? We request comment on the benefits 
and costs of these revisions to issuers.
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    \587\ See proposed Securities Act Rules 165 and 166, 17 CFR 
230.165 and 230.166.
    \588\ Offering materials would not be subject to staff review, 
and issuers could designate offerings' effective dates. Certain 
Schedule B filers also could designate the timing of their 
offerings' effectiveness.
    \589\ See proposed Securities Act Rules 172 and 173, 17 CFR 
230.172 and 230.173.
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    The proposed rules and amendments would increase all issuers' 
flexibility to raise capital in a number of ways. The proposals would 
allow issuers to ``test the waters'' to gauge investor interest in 
offerings, allowing them to withdraw unpopular offerings more quickly 
than under the current regime. Issuers would be able to convert more 
easily and with less regulatory uncertainty between public and private 
offerings,590 and would no longer be required to announce 
public or private status in ``limited content notices.'' 591 
The Commission would also credit issuers' registration fees if they 
withdraw registration statements, and would allow small business 
issuers to increase the amount of securities they register on a 
statement by 50%, up from 20% today. The Commission is proposing to 
permit issuers in the small business issuer system to delay paying 
registration statement filing fees until shortly before they sell 
securities.592 This provision is designed to help ease these 
issuers' liquidity concerns. We anticipate these changes would benefit 
issuers. We request comment on the reasonableness of this view.
---------------------------------------------------------------------------

    \590\ See proposed revisions to Securities Act Rule 152, 17 CFR 
230.152.
    \591\ See proposed revisions to Securities Act Rules 135c and 
135, 17 CFR 230.135c and 230.135.
    \592\ See 17 CFR 228.512.
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    These proposed new rules and amendments could slow issuers' access 
to the public market in quick offerings because issuers would be 
required to deliver preliminary prospectuses in some offerings and term 
sheets in others. The proposed rules and amendments would require 
issuers registering securities on Form A to deliver preliminary 
prospectuses to buyers 7 days before pricing for initial public 
offerings and 3 days before pricing for repeat offerings. In addition, 
issuers would have to notify offerees of material changes at least 24 
hours in advance of pricing. For Form B offerings, issuers would be 
required to deliver term sheets outlining the key features of 
securities being offered.593
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    \593\ See proposed Securities Act Rule 172, 17 CFR 230.172, and 
proposed revisions to Exchange Act Rule 15c2-8, 17 CFR 240.15c2-8.
---------------------------------------------------------------------------

    To assess the burden of the proposed Form A delivery requirements 
on issuers whose public floats, ADTVs, and reporting histories would 
otherwise require them to register offerings on Form A, we examine 
whether these issuers' offerings in 1996 would have been slowed by the 
proposed restrictions. In the case of non-shelf offerings, very few 
deals would have been affected.594 In the case of shelf

[[Page 67252]]

offerings, more deals, especially medium-term-note offerings, would 
have been slowed by the Form A prospectus delivery 
requirements.595 In general, however, these offerings are 
sold to institutional buyers, and issuers would be eligible to register 
offerings on Form B if securities were sold solely to QIBs and certain 
existing shareholders, or were non-convertible investment grade 
securities. Registration on Form B would eliminate regulatory 
uncertainty and Form B issuers would be required to deliver only a 
securities term sheet to investors.
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    \594\ We found that 14 non-shelf offerings by 13 issuers would 
have been slowed by the proposed Form A delivery requirements. In 
all but one case, the requirement to deliver notice of material 
changes at least 24 hours in advance of pricing would have caused 
the delay. Of course, the current registration regime encourages 
issuers to delay filing registration statement amendments, thus it 
is unclear as to whether these issuers could have filed their 
amendments earlier without incurring additional cost.
    \595\ In some cases, as discussed above, firms that currently 
use Forms S-3 and F-3 to issue securities from shelves would not 
have sufficient public float and ADTV to qualify to use Form B. 
These firms would have to meet the preliminary prospectus delivery 
requirements for Form A. Here we examine these firms' use in 1996 of 
unallocated shelf to see if the proposed prospectus delivery 
requirements would have slowed their offerings. In 1996, 187 firms 
that were eligible to use Forms S-3 and F-3, but which would not 
have been eligible to use Form B took securities off unallocated 
shelves. Not all of these offerings, however, would have been 
slowed. In roughly \2/3\ of equity deals and \1/3\ of non medium-
term-note (MTN) debt deals, firms file preliminary takedown 
prospectuses (red herrings) with the Commission because they market 
the deals. Marketing, not regulatory requirements slow these deals. 
Such marketing is rare, however, for takedowns in MTN programs.
---------------------------------------------------------------------------

    Under the proposals, we would require issuers to file post-
effective amendments for delayed shelf takedowns by the time of first 
sale. This requirement would accelerate issuers' filing obligation with 
respect to transactional disclosure in prospectus supplements relative 
to today. We do not, however, anticipate a substantial increase in 
burden on issuers. We ask comment on the reasonableness of this view.

C. Impact on Other Parties

    We anticipate that the proposed rules and amendments would on 
balance benefit underwriters. The proposed changes would clarify and 
expand the current safe harbors for research reports. Analysts would be 
allowed to distribute research reports around the time of an offering 
as long as potential conflicts of interest were 
disclosed.596 Thus analysts would be able to continue 
servicing their clients, even during offerings.
---------------------------------------------------------------------------

    \596\ See proposed revisions to Securities Act Rules 137, 138, 
and 139, 17 CFR 230.137, 230.138, and 230.139.
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    The proposed rules and amendments would also remove much of the 
burden on issuers and underwriters of delivering final 
prospectuses.597 We anticipate these parties would 
experience tremendous cost savings from this change. The proposed rules 
would also facilitate the Commission moving towards quicker clearing 
and settling cycles in the future, reducing clearance and settlement 
risk to clearing corporations, their members, and public investors. The 
proposed rules and amendments would lift the obligation on dealers to 
deliver final prospectuses to investors in sales after initial 
distributions if final prospectuses are on file with the Commission and 
dealers notify investors where they may acquire them.598
---------------------------------------------------------------------------

    \597\ See proposed Securities Act Rule 173, 17 CFR 230.173.
    \598\ See proposed revisions to Securities Act Rule 174, 17 CFR 
230.174.
---------------------------------------------------------------------------

    The proposed rules, however, could increase the pressure on 
underwriters to rapidly review offerings because more offerings would 
be eligible to come to market quickly. Although underwriters' 
techniques to review offerings have improved since the introduction of 
shelf registration in 1982, several commentators on the Concept Release 
noted that further deregulation of the registration process could 
undermine their ability to influence the contents of issuer disclosure, 
leaving them liable for prospectus content. The Commission is proposing 
to revise Rule 176 to provide courts better guidance as to whether a 
due diligence investigation meets a ``reasonable investigation'' and 
``reasonable ground for belief'' standard in a defense against 
liability under Sections 11 and 12(a)(2) in a quick offering. 
599 We also are proposing to extend Rule 176 to cover 
liability under Section 12(a)(2) as well as Section 11. We believe the 
revisions would provide guidance to underwriters and the courts while 
preserving underwriters' as ``gatekeepers.''
---------------------------------------------------------------------------

    \599\ See proposed revisions to Securities Act Rule 176, 17 CFR 
230.176.
---------------------------------------------------------------------------

    For purposes of the Small Business Regulatory Enforcement Fairness 
Act of 1996 (``SBREFA''),600 a rule is ``major'' if it has 
resulted, or is likely to result in:
---------------------------------------------------------------------------

    \600\ Pub. L. No. 104-121, Title II, 110 Stat. 857 (1996).
---------------------------------------------------------------------------

     An annual effect on the economy of $100 million or more;
     A major increase in costs or prices for consumers or 
individual industries; or
     Significant adverse effects on competition, investment or 
innovation.
    Commenters should provide empirical data on (a) the annual effect 
on the economy; (b) any increase in costs or prices for consumers or 
individual industries; and (c) any effect on competition, investment or 
innovation. We note that for purposes of the Paperwork Reduction Act, 
we estimate the proposals would create an annual information collection 
paperwork preparation savings to issuers of more than $100 million. We 
request your comments on the reasonableness of this estimate.
    In adopting rules under the Exchange Act, Section 23(a) requires 
the Commission to consider the impact that rules would have on 
competition and to not adopt any rule that would impose a burden on 
competition not necessary or appropriate in the public interest. 
Section 3(f) of the Exchange Act requires the Commission, when engaged 
in rulemaking and required to consider or determine whether the action 
is necessary or appropriate in the public interest, to also consider, 
in addition to the protection of investors, whether the action would 
promote efficiency, competition, and capital formation.601
---------------------------------------------------------------------------

    \601\ 15 U.S.C. Sec. 78c(f).
---------------------------------------------------------------------------

    We believe the proposals would lower companies' cost of capital 
raising relative to today which would enhance their efficiency and 
facilitate capital formation. We anticipate the proposals would promote 
investor protection and enhance communications between public companies 
and investors, thereby increasing investors' confidence in the 
integrity of the securities markets.
    To the extent that the proposals would lower the cost of raising 
capital in the United States, they could enhance the competitiveness of 
issuers that raise capital in the U.S. public capital markets. We 
anticipate the proposals also could reduce some of the competitive 
disadvantage of small issuers that today register offerings on Forms S-
1, SB-1, and SB-2 relative to larger firms. Given that the proposals 
would (1) allow small issuers to raise capital from QIBs and certain 
existing shareholders, or sell non-convertible investment grade 
securities using Form B; (2) allow small businesses to incorporate 
Exchange Act reports by reference into registration statements as long 
as they deliver the reports with prospectuses to investors; and (3) 
allow certain Form A issuers' registration statements to go effective 
immediately if they are reporting companies for at least two years and 
have public floats of at least $75 million, we believe small companies' 
competitiveness could be enhanced relative to today.
    The proposals to revise Rule 176 to provide courts better guidance 
as to whether a due diligence investigation meets a ``reasonable 
investigation'' and ``reasonable ground for belief'' standard

[[Page 67253]]

in a defense against liability under Sections 11 and 12(a)(2) in a 
quick offering could, however, put underwriters that do not have in-
house analysts at a competitive disadvantage relative to other 
underwriters. The revision would allow underwriters to cite the 
employment and consultation of research analysts that are actively 
involved in an issuer's industry as a positive factor for the courts to 
consider when deciding whether underwriters' investigations are 
reasonable. Underwriters that cannot rely on this factor may be 
somewhat at a competitive disadvantage in underwriting quick offerings. 
We request comment on the significance of this disadvantage.
    As discussed above, the Commission anticipates that the proposed 
rules and amendments would reduce the cost of raising capital in the 
public market, promoting efficiency, competition, and capital 
formation. The Commission requests comment on these preliminary views 
and encourages commentators to provide empirical data and other facts 
to support their views. We request data and analysis on the effect of 
the proposed changes on efficiency and capital formation. The 
Commission also requests comments on the competitive effects that may 
impact market participants under the proposed amendments.

XV. Initial Regulatory Flexibility Analysis

    We prepared this Initial Regulatory Flexibility Analysis under 5 
U.S.C. Sec. 603 concerning the new rules, forms, and amendments 
proposed today. We will consider your written comments in the 
preparation of the final analysis.

A. Reasons and Objectives for Proposed Action

    The purpose of the proposed new rules, forms, and amendments is to 
modernize, rationalize, and clarify the Commission's regulatory system 
for offerings under the Securities Act of 1933, enhance communications 
between public companies and investors, and promote investor 
protection.

B. Objectives and Legal Basis

    We propose the new rules, forms, and amendments to the Commission's 
existing rules and forms pursuant to Sections 2(b), 6, 7, 8, 10, 19(a), 
and 28 of the Securities Act, as amended and Sections 3, 4, 10, 12, 15, 
23, and 36 of the Exchange Act.

C. Small Entities Subject to the Rules

    The proposed rules and amendments would affect small entities that 
are required to file registration statements and reports under the 
Securities Act, Exchange Act, and the Investment Company Act. For the 
purposes of the Regulatory Flexibility Act, the Securities Act and 
Exchange Act define a ``small business'' issuer, other than an 
investment company, to be an issuer that, on the last day of its most 
recent fiscal year, had total assets of $5 million or 
less.602 When used with respect to an issuer that is an 
investment company, the term is defined as an investment company and 
any related investment company with aggregate net assets of $50 million 
or less as of the end of its most recent fiscal year.603
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    \602\ See 17 CFR 230.157 and 17 CFR 240.0-10.
    \603\ See 17 CFR 240.0-10.
---------------------------------------------------------------------------

    We currently are aware of approximately 1,100 reporting companies 
that are not investment companies with assets of $5 million or less. 
There are approximately 400 investment companies that satisfy the 
``small entity'' definition. All of these companies would be subject to 
the proposed rules, forms, and amended rules. We have no reliable way, 
however, to determine how many businesses may become subject to 
Commission reporting obligations in the future, or may otherwise be 
impacted by the changes.

D. Reporting, Recordkeeping, and Other Compliance Requirements

    For the most part, the proposals are deregulatory in nature, 
modernizing, rationalizing, and clarifying the Commission's regulatory 
system for offerings under the Securities Act and enhancing 
communications between public companies and investors. Under the 
proposed rules, small businesses would report and file essentially the 
same information as today, although more small companies would be 
eligible for the small business disclosure system's streamlined 
reporting. The Commission also is proposing a new small business 
combination form, Form SB-3. One exception to this generalization is 
the Commission would require issuers, both large and small, to file 
written communication used during the waiting period in a securities 
offering. The proposed rules and amendments also could change small 
issuers' recordkeeping of prospectus delivery to investors. Our 
preliminary view is that any additional recordkeeping burden resulting 
from our proposals for prospectus delivery would be minimal. To the 
extent that underwriters and issuers collect information to contact 
potential investors and collect information to send prospectuses and 
confirmations under the existing rules, we do not anticipate the 
proposals would impose a significant additional burden on underwriters 
and issuers. We request comment, however, on the accuracy of this view.

E. Significant Alternatives

    The Regulatory Flexibility Act directs the Commission to consider 
significant alternatives that would accomplish the stated objectives, 
while minimizing any significant adverse impact on small issuers. In 
connection with the proposed rules forms, and amendments, we considered 
several alternatives, including:
     Establishing different compliance and reporting 
requirements or timetables that take into account the resources of 
small businesses;
     Clarifying, consolidating or simplifying compliance and 
reporting requirements under the rule for small businesses;
     Using performance rather than design standards; and
     Exempting small businesses from all or part of the 
requirements.
    In a number of instances, the proposed rules, forms, and amendments 
would reduce the burden of complying with the Securities Act and 
Exchange Act to both large and small businesses. We propose to allow 
issuers to simultaneously register offerings under the Securities Act 
and classes of securities under the Exchange Act by checking a box on 
their Securities Act registration statements.604 The 
revision would reduce the number of issuer filings. And the proposed 
rules and amendments would reduce uncertainty regarding staff review of 
Exchange Act reports through notification of review and pre-review. The 
proposed rules would allow issuers, both large and small, to raise 
capital from QIBs and certain existing shareholders, or sell non-
convertible investment grade securities using Form B. These issuers 
would be able to incorporate Exchange Act reports by reference without 
necessarily delivering them to investors, and would be able to craft 
transactional disclosure, subject to Section 11 liability standards, 
with fewer constraints than under the current regime. These changes 
should lower issuers' expenses to publicly raise capital.
---------------------------------------------------------------------------

    \604\ See proposed Securities Act Rule 499, 17 CFR 230.499, for 
Schedule B filers and proposed revisions to Exchange Act Rule 12d1-
2, 17 CFR 240.12d1-2.
---------------------------------------------------------------------------

    The proposed rules and amendments would increase all issuers' 
flexibility to raise capital in a number of ways. The

[[Page 67254]]

proposals would allow issuers to ``test the waters'' to gauge investor 
interest in offerings, allowing them to withdraw unpopular offerings 
more quickly than under the current regime. Issuers would be able to 
convert more easily and with less regulatory uncertainty between public 
and private offerings,605 and would no longer be required to 
announce public or private status in ``limited content notices.'' 
606 The Commission would credit issuers' registration fees 
if they withdraw registration statements. We anticipate these changes 
would benefit small issuers.
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    \605\ See proposed revisions to Securities Act Rule 152, 17 CFR 
230.152.
    \606\ See proposed revisions to Securities Act Rules 135c and 
135, 17 CFR 230.135c and 230.135.
---------------------------------------------------------------------------

    The proposals would also relax many of the restrictions on 
communications between issuers and investors and clarify any remaining 
limitations. Issuers would be able to more freely promote and sell 
securities to investors, subject to the provisions of Section 12(a)(2) 
under the Securities Act and the antifraud provisions of Rule 10b-5 
under the Exchange Act.607 Specifically, the proposed rules 
and amendments would allow all issuers to communicate freely with 
investors after registration statements are filed.608 During 
the pre-filing period, issuers of offerings registered on Forms A, SB-
1, and SB-2 and unregistered offerings would be somewhat limited in 
their ability to communicate with investors, but the proposed rules 
would clearly define the length of the period and would delineate the 
types of communications permitted and prohibited.609 These 
changes would enhance small businesses' communications with investors 
and reduce regulatory uncertainty.
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    \607\ Under the proposals, Form B offering information would be 
subject to liability under Section 11 of the Securities Act.
    \608\ See proposed Securities Act Rule 425, 17 CFR 230.425.
    \609\ See proposed Securities Act Rules 167, 168, and 169, 17 
CFR 230.167, 230.168, and 230.169.
---------------------------------------------------------------------------

    The proposed rules and amendments explicitly would reduce the 
impact on small businesses complying with the provisions of the 
Securities Act by allowing seasoned small businesses to incorporate 
Exchange Act reports by reference into the small business registration 
forms as long as they deliver the reports with prospectuses to 
investors. This provision should save issuers time and money. For 
example, we estimate issuers would spend approximately 533, or 343 
fewer, burden hours preparing Form SB-2 registration statements under 
the proposed rules than today.610 The Commission is 
proposing to allow more issuers to qualify for the small business 
disclosure system and to allow small business issuers to register 
business combinations and exchange offers on a new form, Form SB-3. 
Form SB-3 is designed to simplify and streamline the information that 
small businesses must disclose when they combine with other firms. As 
discussed in detail in Section XV, we estimate small business issuers 
would expend approximately 1,095 burden hours to file business 
combinations on Form SB-3,611 or $163,155/filing in labor 
costs. Relative to filing on Forms S-4 or F-4 today, we estimate these 
issuers would save approximately 149 burden hours/filing or $22,201/
filing in labor costs. The Commission also is proposing to permit 
issuers in the small business issuer system to delay paying 
registration statement filing fees until shortly before they sell 
securities.612 This provision is designed to help ease these 
issuers' liquidity concerns. Small business issuers also would gain 
approximately $166/filing in interest because they would be able to 
defer paying registration fees.613 Finally, the Commission 
would allow small business issuers to increase the amount of securities 
they register on a statement by 50%, up from 20% today.
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    \610\ See the detailed discussion in Section XV of this release.
    \611\ We base this estimate on the number of burden hours 
required to file Form SB-2 under the proposals relative to the 
number of burden hours required to file Form A. We then reduce the 
number of burden hours required today to file Form C by this ratio. 
Specifically, we estimate the number of hours required to file Form 
SB-3 under the proposed rules would be [(533 burden hours/SB-2 
filing under the proposals / 606 burden hours/Form A filing under 
the proposals) * 1,244 burden hours/Form C filing under the 
proposals = 1,095 burden hours/SB-3 filing.
    \612\ See 17 CFR 228.512.
    \613\ In fiscal year 1998, small business issuers filed 
registration statements an average of 103 days before effectiveness. 
On average, these issuers raised $13,068,000/filing. At an interest 
rate of 15%/year, which the staff believes small firms could be 
required to pay, and Commission filing fees of 0.03% per dollar of 
capital raised, these issuers would have saved $166/filing on 
average in interest if they had been able to postpone paying their 
registration fee.
---------------------------------------------------------------------------

    The proposed rules and amendments could impose additional 
analytical burdens on investors that qualify as small entities, such as 
some investment companies and investment advisors. As discussed in 
Section XV, the proposed rules and amendments would allow issuers to 
communicate, including using written sales materials, with investors, 
both large and small, after registering offerings with the Commission. 
We seek comment on whether small investors would benefit overall from 
issuers communicating with investors during the waiting period. The 
proposed new rules and amendments also would allow Form A issuers with 
two years of reporting history to incorporate Exchange Act reports into 
prospectuses as long as they deliver the reports with prospectuses to 
investors. Investors in these offerings would have to physically 
compile the delivered integrated information. The Commission seeks 
comment from investors as to whether, as a practical matter, compiling 
delivered materials that are incorporated by reference into 
prospectuses would be burdensome to small investors. Finally, the 
proposals could also increase small investors' analytical burden if 
they receive transactional information in Form B registration 
statements that is not uniform in presentation from offering to 
offering. We request your comments on whether some issuer flexibility 
in crafting Form B transactional disclosure would unduly burden small 
investors.
    As discussed in Section XV, the Commission recognizes that some 
portion of the printing costs that Form B companies would save by not 
printing and delivering final prospectuses might be shifted to small 
investors. Under the proposals, prospectuses would be available to 
investors through the Commission's web site or through issuers' toll-
free telephone numbers. Small investors could either rely on 
prospectuses' continued availability on the Internet (and not acquire 
hard copies), call issuers for free copies or download and print them. 
The Commission seeks comment on whether the proposed revisions would 
unduly burden small investors.
    We did not propose all of the alternatives that we considered. In 
some instances, the alternatives we chose not to propose would be 
inconsistent with our statutory mandate to require prospectuses to 
disclose fully and fairly all material information to investors. In 
other instances, the alternatives would significantly reduce the 
quality and timeliness of Exchange Act report information, depriving 
shareholders of an important means to evaluate investments. We believe 
that except in the specific instances, such as in the case of the small 
business disclosure system and Form B disclosure requirements, the 
proposed rules, forms, and amendments should apply equally to all 
entities required to disclose information to enhance protection of all 
investors. For these reasons, we also believe there would be no benefit 
in providing separate requirements for small issuers based on the use 
of

[[Page 67255]]

performance rather than design standards.

F. Overlapping or Conflicting Federal Rules

    We do not believe any current federal rules duplicate, overlap or 
conflict with the rules, schedules, and amendments that we propose to 
amend.
    We request your written comments on any aspect of this Initial 
Regulatory Flexibility Analysis. We particularly seek comment on:
     The number of small entities that would be affected by the 
proposed rules, forms, and amendments;
     The expected impact of the proposals as discussed above; 
and
     How to quantify the number of small entities that would be 
affected by, and how to quantify the impact of, the proposed rules, 
forms, and amendments.

We ask commentators to describe the nature of any impact and provide 
empirical data supporting the extent of the impact.

XVI. Paperwork Reduction Act

    The proposed rules and amendments affect several regulations and 
forms that contain ``collection of information requirements'' within 
the meaning of the Paperwork Reduction Act of 1995.614 The 
Commission has submitted proposed revisions to those rules and Forms to 
the Office of Management and Budget (``OMB'') for review in accordance 
with 44 U.S.C. Sec. 3507(d) and 5 CFR 1320.11. An agency may not 
conduct or sponsor, and a person is not required to respond to, a 
collection of information unless it displays a currently valid OMB 
control number.
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    \614\ 44 U.S.C. Sec. 3501 et seq.
---------------------------------------------------------------------------

    The proposed new rules, forms, and amendments would modernize, 
rationalize, and clarify the Commission's regulatory system for 
offerings under the Securities Act of 1933, enhance communications 
between public companies and investors, and promote investor 
protection. The proposed forms and regulations set forth the 
disclosures that the Commission would require issuers to make about 
themselves and their securities offerings to the public. The 
requirements of the forms would largely be the same as today, except 
for a few changes that are discussed in detail below and in Section 
XIII. The information is needed so that prospective investors may make 
informed investment decisions both in registered offerings and in 
secondary transactions of registered securities. The information 
collection requirements imposed by the forms and regulations would be 
mandatory to the extent that companies are publicly owned and offer 
securities to the public. There would be no mandatory retention period 
for the information disclosed, and the information gathered would be 
made publicly available.
    Form S-1 under the Securities Act (OMB Control Number 3235-0065) is 
used by issuers that are not eligible to use other forms to register 
offerings of securities.615 The form sets forth the 
transactional and company information required by the Commission in 
securities offerings. Form S-2 under the Securities Act (OMB Control 
Number 3235-0072) is used by issuers that have reported under the 
Exchange Act for a minimum of three years and have timely filed all 
required reports during the 12 calendar months and any portion of the 
month immediately preceding the filing of the registration statement to 
register offerings of securities. The form sets forth the transactional 
and company information required by the Commission in securities 
offerings. It permits incorporation by reference of Exchange Act 
reports. Delivery of these incorporated documents as well as the 
prospectus to investors may be required. Form S-3 under the Securities 
Act (OMB Control Number 3235-0073) is used by issuers that have 
reported under the Exchange Act for a minimum of twelve months and have 
met the timely filing requirements set forth under Form S-3 (also, the 
offering and issuer must meet the eligibility tests prescribed by the 
form) to register offerings of securities. The form sets forth the 
transactional and company information required by the Commission in 
securities offerings. It permits incorporation by reference of Exchange 
Act reports. Form F-1 under the Securities Act (OMB Control Number 
3235-0258) is used by foreign private issuers that are not eligible to 
use other forms to register offerings of securities. The form sets 
forth the transactional and company information required by the 
Commission in securities offerings. Form F-2 under the Securities Act 
(OMB Control Number 3235-0257) is used by foreign private issuers that 
have reported under the Exchange Act for a minimum of three years or 
have an equity float of at least $75 million worldwide or are 
registering non-convertible investment grade securities to register 
offerings of securities. The form is somewhat shorter than Form F-1 
because it uses delivery of filings made by the issuer under the 
Exchange Act, particularly Form 20-F. Form F-3 under the Securities Act 
(OMB Control Number 3235-0256) is used by foreign private issuers that 
have reported under the Exchange Act for a minimum of twelve months and 
that have a worldwide public market float of more than $75 million (the 
form also may be used by eligible foreign private issuers to register 
offerings of non-convertible investment grade securities, securities to 
be sold by selling security holders, or securities to be issued to 
certain existing security holders) to register offerings of securities. 
The form allows issuers to incorporate Exchange Act reports by 
reference. Form SB-1 under the Securities Act (OMB Control Number 3235-
0423) is used by small business issuers, as defined in Rule 405 of the 
Securities Act, to register offerings of up to $10 million of 
securities in a continuous 12-month period. The form sets forth the 
transactional and company information required by the Commission in 
securities offerings. It requires less detailed information about the 
issuer's business than Form S-1. Form SB-2 under the Securities Act 
(OMB Control Number 3235-0418) is used by small business issuers, as 
defined in Rule 405 of the Securities Act, to register securities 
offerings. The form sets forth the transactional and company 
information required by the Commission in securities offerings. It 
requires less detailed information about the issuer's business than 
Form S-1. Form S-4 under the Securities Act (OMB Control Number 3235-
0324) is used by issuers to register securities offerings in connection 
with business combinations and exchange offers. The form sets forth the 
transactional and company information required by the Commission in 
securities offerings. Form F-4 under the Securities Act (OMB Control 
Number 3235-0325) is used by issuers to register securities offerings 
in connection with business combinations and exchange offers involving 
foreign private issuers. The form sets forth the transactional and 
company information required by the Commission in securities offerings. 
Form F-7 under the Securities Act (OMB Control Number 3235-0383) is 
used by publicly traded Canadian foreign private issuers to register 
rights offers extended to their U.S. holders. To be registered on Form 
F-7, the rights must be granted to U.S. shareholders on terms no less 
favorable than those extended to other shareholders. Form F-8 under the 
Securities Act (OMB

[[Page 67256]]

Control Number 3235-0378) is used by large publicly traded Canadian 
foreign private issuers to register securities offerings in connection 
with business combinations and exchange offers. To be registered on 
Form F-8, the securities must be offered to U.S. shareholders on terms 
no less favorable than those extended to other holders. Form F-9 under 
the Securities Act (OMB Control Number 3235-0377) is used by large 
publicly traded Canadian foreign private issuers to register non-
convertible investment grade securities. Form F-10 under the Securities 
Act (OMB Control Number 3235-0380) is used by large publicly traded 
Canadian foreign private issuers to register any securities offerings, 
except certain derivative securities. Unlike Forms F-7, F-8, F-9, and 
F-80, however, Form F-10 requires the Canadian issuer to reconcile its 
financial statements to U.S. GAAP. Form F-80 under the Securities Act 
(OMB Control Number 3235-0404) is used by large publicly traded 
Canadian foreign private issuers to register securities offerings in 
connection with business combinations and exchange offers. To be 
registered on Form F-80, the securities must be offered to U.S. holders 
on terms no less favorable than those extended to other holders. 
Schedule B under the Securities Act is used by Foreign governments or 
political subdivisions thereof to register securities offerings. 
Generally, it contains a description of the country and its government, 
the terms of the offering, and the uses of proceeds. Form S-8 under the 
Securities Act (OMB Control Number 3235-0066) is used by issuers to 
register securities for offer and sale to employees in a compensatory 
or incentive context. Form A under the Securities Act (OMB Control 
Number to be determined) would be used by issuers that are not eligible 
to use other forms to register offerings of securities. The form would 
set forth the transactional and company information required by the 
Commission in securities offerings. Form B under the Securities Act 
(OMB Control Number to be determined) would be used by issuers that 
have reported under the Exchange Act for a minimum of twelve months and 
that have public floats of at least $75 million and ADTVs of $1 million 
or public floats of at least $250 million (alternatively, issuers could 
use Form B if they sell securities exclusively to QIBs and certain 
existing shareholders or register non-convertible investment grade 
securities) to register offerings of securities. These issuers would be 
able to incorporate Exchange Act reports by reference without 
necessarily delivering them to investors, and would be able to craft 
transactional disclosure, subject to Section 11 liability standards and 
some itemized requirements, with fewer constraints than under the 
current Form S-3. Form C under the Securities Act (OMB Control Number 
to be determined) would be used by issuers to register securities 
offerings in connection with business combinations and exchange offers. 
The form would set forth the transactional and company information 
required by the Commission in securities offerings. Form SB-3 under the 
Securities Act (OMB Control Number to be determined) would be used by 
small business issuers, as defined in Rule 405 of the Securities Act, 
to register securities offerings in connection with business 
combinations and exchange offers. The form would set forth the 
transactional and company information required by the Commission in 
securities offerings. It would require less detailed information about 
the issuer's business than Form A.
---------------------------------------------------------------------------

    \615\ Regulations S-K and S-B do not impose reporting burdens 
directly on public companies. For administrative convenience, each 
of these regulations is currently assigned one burden hour. The 
burden hours imposed by the disclosure regulations are currently 
included in the estimates for the forms that refer to the 
regulations.
---------------------------------------------------------------------------

    Form 10 under the Exchange Act (OMB Control Number 3235-0064) is 
used by registrants to file classes of securities. It requires certain 
business and financial information about the issuer. Form 8-A under the 
Exchange Act (OMB Control Number 3235-0056) is an optional short form 
used by issuers to file classes of securities. Form 10-SB under the 
Exchange Act (OMB Control Number 3235-0419) is used by small business 
issuers, as defined in Rule 12b-2 of the Exchange Act, to file classes 
of securities. This form requires slightly less detailed information 
about the issuer's business than Form 10 requires. Form 20-F under the 
Exchange Act (OMB Control Number 3235-0288) is used by foreign private 
issuers to register securities or file annual reports. Form 40-F under 
the Exchange Act (OMB Control Number 3235-0381) is used by Canadian 
foreign private issuers to register securities or file annual reports. 
Form 18 under the Exchange Act (OMB Control Number 3235-0121) is used 
by foreign governments or political subdivisions thereof to register 
securities on a national securities exchange. Form 10-K under the 
Exchange Act (OMB Control Number 3235-0063) is used by registrants to 
file annual reports. It provides a comprehensive overview of the 
registrant's business. Form 10-KSB under the Exchange Act (OMB Control 
Number 3235-0420) is used by small business registrants, as defined in 
Rule 12b-2 of the Exchange Act, to file annual reports. It provides a 
comprehensive overview of the registrant's business, although its 
requirements call for slightly less detailed information than required 
by Form 10-K. Form 18-K under the Exchange Act (OMB Control Number 
3235-0120) is used by foreign governments or political subdivisions 
thereof to file annual reports. Form 10-Q under the Exchange Act (OMB 
Control Number 3235-0070) is used by registrants to file quarterly 
reports. It includes unaudited financial statements and provides a 
continuing view of the registrant's financial position during the year. 
The report must be filed for each of the first three fiscal quarters of 
the registrant's fiscal year. Form 10-QSB under the Exchange Act (OMB 
Control Number 3235-0416) is used by small business registrants, as 
defined in Rule 12b-2 of the Exchange Act, to file quarterly reports. 
It includes unaudited financial statements and provides a continuing 
view of the registrant's financial position during the year. The report 
must be filed for each of the first three fiscal quarters of the 
registrant's fiscal year. Form 8-K under the Exchange Act (OMB Control 
Number 3235-0060) is used by registrants to report the occurrence of 
material events or corporate changes. Form 6-K under the Exchange Act 
(OMB Control Number 3235-0116) is used by foreign private issuers to 
report information: (i) Required to be made public in the country of 
its domicile; (ii) filed with and made public by a foreign stock 
exchange on which its securities are traded; or (iii) distributed to 
security holders. The report must be furnished promptly after such 
material is made public. Issuers would also file under Rule 425 of the 
Securities Act (OMB Control Number to be determined) written 
communications (other than required registration statements) about 
pending offerings.
    In addition to affecting these collections of information, the 
proposed rules and amendments also could change issuers' recordkeeping 
of prospectus delivery to investors and impose a new burden of tracking 
their ``first offers'' in Form B offerings. Our preliminary view is 
that any additional recordkeeping burden resulting from our proposals 
for prospectus delivery would be minimal. To the extent that 
underwriters and issuers collect information to contact potential 
investors and collect information to send prospectuses and 
confirmations under the existing rules, we do not anticipate the 
proposals would impose a significant additional burden on underwriters 
and issuers. We request comment, however, on the accuracy of

[[Page 67257]]

this view. We also do not anticipate that requiring issuers to keep 
information provided to investors fifteen days before the first offer 
and any information used throughout the offering period would impose a 
significant burden on issuers. Issuers would only have to keep the 
information until they file it with us. Thus issuers might not have to 
keep it longer than the date of their first offer because they can file 
their registration statement with us at that time. The longest issuers 
would have to keep the information would be the length of the offering 
period, plus 15 days, since the latest they can file the registration 
statement is at first sale. We request comment and any supporting data 
on the burden that these requirements would impose on issuers and 
underwriters.
    We anticipate that the proposed rules and amendments would lower 
the cost of raising capital in the public market for many issuers. For 
the purposes of the Paperwork Reduction Act, the table below summarizes 
our preliminary estimates of the burden hours that parties would spend 
to comply with the proposals. We base these estimates on current burden 
hour estimates and the staff's experience with these filings. The 
estimates in the table indicate that parties would expend approximately 
9,106,343 burden hours/year to comply with the proposals. In addition, 
as discussed in more detail below, we estimate that parties would spend 
approximately $4,754,863,050/year on outside professional help to 
comply with the proposals. Note that these estimates do not attempt to 
quantify the proposals' intangible benefits, such as the benefits to 
issuers and investors of enhanced communications and the greater 
likelihood that issuers would shift capital raising from the private to 
the public market, nor its intangible costs, such as the cost to 
security holders of identifying misleading or incomplete pre-filing 
information. We request comment on the reasonableness of our estimates.

                                                              Table: Burden Hour Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Estimated burden hours/filing      Estimated filings/year        Estimated burden hours/year
                                                         -----------------------------------------------------------------------------------------------
                          Form                                                                                                Before           After
                                                              Before           After          Before           After      revisions  (E)  revisions  (F)
                                                          revisions  (A)  revisions  (B)  revisions  (C)  revisions  (D)       = A*C           = B*D
--------------------------------------------------------------------------------------------------------------------------------------------------------
S-1.....................................................           1,267               0           1,136               0       1,439,312               0
S-2.....................................................             470               0             152               0          71,440               0
S-3.....................................................             398               0           3,890               0       1,548,220               0
F-1.....................................................           1,868               0             139               0         259,652               0
F-2.....................................................             559               0               1               0             559               0
F-3.....................................................             166               0             172               0          28,552               0
SB-1....................................................             710             178               8               8           5,680           1,424
SB-2....................................................             876             138             414             559         362,664          77,142
S-4.....................................................           1,233               0           3,701               0       4,563,333               0
F-4.....................................................           1,308               0             677               0         885,516               0
F-7.....................................................               2               1               1               1               2               1
F-8.....................................................               2               1              16              16              32              16
F-9.....................................................             420             105              12              12           5,040           1,260
F-10....................................................             420             105              45              45          18,900           4,725
F-80....................................................               2               1               2               2               4               2
Schedule B..............................................               0               0              33              33               0               0
S-8.....................................................              46              12           5,597           5,261         257,462          63,132
A.......................................................               0             152               0           2,616               0         397,632
B.......................................................               0              75               0           3,067               0         230,025
C.......................................................               0             311               0           3,984               0       1,239,024
SB-3....................................................               0             280               0             394               0         110,320
10......................................................              95              24             124             124          11,780           2,976
8-A.....................................................               7               7           2,293               0          15,363               0
10-SB...................................................              90              23             162             162          14,580           3,726
20-F....................................................           1,991             498             908             908       1,807,828         452,184
20-FR...................................................              95              24              99              99           9,405           2,376
40-F....................................................           1,991             498             121             121         240,911          60,258
40-FR...................................................              95              24              15              15           1,425             360
18......................................................               8               2               0               0               0               0
10-K....................................................           1,723             431          10,392           9,342      17,905,416       4,026,402
10-KSB..................................................           1,179             295           2,591           3,641       3,054,789       1,074,095
18-K....................................................               8               2              38              38             304              76
10-Q....................................................             144              36          29,551          26,401       4,255,344         950,436
10-QSB..................................................             131              33           7,521          10,671         985,251         352,143
8-K.....................................................               5               5          27,519          69,087         137,595         345,435
6-K.....................................................               8               8          10,582          11,000          84,656          88,000
Filings under Rule 425..................................               0            0.25               0          10,628               0           2,657
                                                         -----------------------------------------------------------------------------------------------
Total...................................................  ..............  ..............  ..............  ..............      37,971,015       9,106,343
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The Commission's experience indicates that allowing small companies 
to register offerings on Forms SB-1 and SB-2 reduces issuers' 
disclosure burden hours and cost. The proposed rules and amendments 
would therefore save time and money for 1,050 companies--companies that 
would become newly eligible to register offerings on Forms SB-1, SB-2, 
and SB-3 under the proposed rules and amendments. 616 Among 
those affected would be (1) non-

[[Page 67258]]

reporting companies with revenues between $25 and $50 million that plan 
to register initial public offerings under the Securities Act or 
propose to register under the Exchange Act, (2) non-reporting companies 
with revenues under $25 million but public float over $25 million, 
because the public float test would be eliminated, and (3) reporting 
companies that would remain in the small business disclosure system 
longer than under the current system.
---------------------------------------------------------------------------

    \616\ See proposed revisions to Securities Act Rule 405.
---------------------------------------------------------------------------

    In fiscal year 1998, issuers registered eight offerings on Form SB-
1. Given the limited use of this form, we do not expect any additional 
filings on this form under the proposed rules and amendments. Under the 
proposed rules, we estimate issuers would require 710 hours to file 
Form SB-1, the same as today. 617 Of the 710 hours, we 
estimate that 25% (178 internal burden hours) would be provided by 
corporate staff, and 75% (532 hours) by external professional help. In 
addition, we anticipate filers would spend, at an estimated $175/hour, 
approximately $93,100/filing in professional labor costs to file Form 
SB-1.618 We request your comments and supporting empirical 
information on the reasonableness of these estimates.
---------------------------------------------------------------------------

    \617\ The numbers in Column B of the Table differ significantly 
from those in Column A of Table 2 because the estimated burden hours 
in Column A include the estimated corporate burden hours and outside 
labor hours that parties would require to file information 
statement. In Column B, we estimate only the corporate burden hours 
needed to file information statements (we estimate separately the 
expense, in dollar terms, of outside labor).
    \618\ We estimate filers would spend $93,100/filing in 
professional labor costs. We base this estimate on 532 hours of 
professional labor/Form SB-1 *$175/hour. In aggregate, we estimate 
that filers would spend $744,800/year to file 8 Form SB-1s/year.
---------------------------------------------------------------------------

    In fiscal year 1998, issuers registered 414 offerings on Form SB-2. 
In addition to these filings, we expect an additional 143 filings/year, 
for a total of 559 filings/year, on Form SB-2 because more firms would 
be eligible to use Form SB-2 under the proposed rules and 
amendments.619 Under the current rules, issuers expend 
approximately 876 hours to register securities on Form SB-2, which does 
not allow issuers to incorporate Exchange Act reports by reference. The 
proposed rules and amendments would allow seasoned issuers to 
incorporate Exchange Act reports by reference into Form SB-2 
registration statements as long as they deliver the reports with 
prospectuses to investors. We anticipate this provision would save 
issuers time and money. We anticipate approximately 330 (59%) of the 
559 filings/year would incorporate Exchange Act reports by reference 
under the proposed rules, whereas 229 (41%) would not.620 
Under the proposed rules, we estimate issuers would require 876 hours 
to file Form SB-2 if they cannot incorporate Exchange Act reports by 
reference under the proposals, and approximately 324 hours if they 
can.621 On average, we estimate small business issuers would 
spend approximately 550 hours preparing Form SB-2 registration 
statements under the proposed rules than today. 622 Of the 
550 hours, we estimate that 25% (138 internal burden hours) would be 
provided by corporate staff, and 75% (412 hours) by external 
professional help. We anticipate filers would spend, at an estimated 
$175/hour, approximately $72,100/filing in professional labor costs to 
file Form SB-2.623 We request your comments and supporting 
empirical information on the reasonableness of these estimates.
---------------------------------------------------------------------------

    \619\ We base this estimate on the number of firms that would be 
eligible to register offerings on Form SB-2 under the proposals 
relative to the number of firms that are eligible to register 
offerings on Form SB-2 today, and on the number of SB-2 filings in 
fiscal year 1998. Specifically, we estimate the number of SB-2 
filings under the proposals would be (4,087 firms eligible to 
register on Form SB-2 under the proposals/3,037 firms eligible to 
register on Form SB-2 today) *414 SB-2 filings/year today=559 SB-2 
filings/year.
    \620\ We base this estimate on the number of repeat offerings 
registered on Form SB-2 today relative to the number of offerings 
registered on Form SB-2 today, and on the number of offerings we 
expect would be registered on Form SB-2 under the proposals. 
Specifically, we estimate the number of SB-2 filings/year that would 
incorporate Exchange Act reports by reference under the proposals 
would be (246 repeat offerings registered on Form SB-2 today/414 
offerings registered on Form SB-2 today) *559 SB-2 filings/year 
under the proposals=330 SB-2 filings/year. We expect the remaining 
229 offerings (559 SB-2 filings/year under the proposals -330 SB-2 
filings/year that would incorporate Exchange Act reports by 
reference under the proposals) not to incorporate Exchange Act 
reports by reference.
    \621\ We base this estimate on the number of burden hours 
required today to file Form S-2 (which allows issuers to incorporate 
Exchange Act reports by reference, but requires them to deliver the 
reports to investors) relative to the number of burden hours 
required today to file Form S-1. We then reduce the number of burden 
hours we estimate issuers would require under the proposed rules to 
file Form SB-2 if they cannot incorporate Exchange Act information 
by reference by this ratio. Specifically, we estimate the number of 
hours required to file Form SB-2 under the proposed rules if an 
issuer cannot incorporate Exchange Act reports by reference would be 
(470 burden hours/S-2 filing today/1,267 burden hours/S-1 filing 
today) *876 burden hours/SB-2 filing under the proposals with no 
incorporation by reference=324 burden hours/SB-2 filing with 
incorporation by reference.
    \622\ We base this estimate on [(876 hours/SB-2 filing under the 
proposals with no incorporation by reference *229 SB-2 filings under 
the proposals with no incorporation by reference)+(324 hours/SB-2 
filing under the proposals with incorporation by reference *330 SB-2 
filings under the proposals with no incorporation by reference)]/559 
SB-2 filings under the proposals=550 hours/SB-2 filing on average 
under the proposed rules. Today, SB-2 filings require 876 hours/
filing or 326 more hours than under the proposed rules.
    \623\ We estimate filers would spend $72,100/filing in 
professional labor costs. We base this estimate on 412 hours of 
professional labor/Form SB-2 *$175/hour. In aggregate, we estimate 
that filers would spend $40,303,900/year to file 559 Form SB-2s/
year.
---------------------------------------------------------------------------

    The proposed rules would simplify larger seasoned issuers' 
preparation of Form B by allowing them greater flexibility to craft 
their transactional disclosure. In fiscal year 1998, approximately 
4,824 issuers registered 4,062 offerings on Forms S-3 and F-
3.624 Based on the proposed rule's public float and ADTV 
tests, approximately 3,397 or 70% of these issuers would be eligible to 
register offerings on Form B under the proposed rules.625 
The remaining 1,427 or 30% of issuers would be required to register 
offerings on Form A. Based on relative representation, and the total 
offerings registered on Forms S-3 and F-3 in fiscal year 1998, we 
estimate issuers would register approximately 2,843 offerings on Form B 
and 1,219 offerings on Form A.626 (We anticipate, however, 
that many Form A issuers would register at least some offerings on Form 
B by selling their securities exclusively to QIBs and certain existing 
shareholders, or selling non-convertible investment grade securities, 
and thus would achieve the savings associated with filing on Form B.) 
We estimate 224 additional secondary offerings would be filed on Form B 
under the proposals that currently are filed on Form S-8.627 
Thus, we anticipate 3,067 offerings would be filed on Form B under the 
proposals. We anticipate that these issuers would save burden hours and 
money from the simplification of Form B. We estimate that issuers would 
require 300 hours to register securities on Form B. Of the 300 hours, 
we estimate that 25% (75 internal burden

[[Page 67259]]

hours) would be provided by corporate staff, and 75% (225 hours) by 
external professional help. We anticipate filers would spend, at an 
estimated $175/hour, approximately $39,375/filing in professional labor 
costs to file Form B.cv628 We request your comments and 
supporting empirical information on the reasonableness of these 
estimates.
---------------------------------------------------------------------------

    \624\ In fiscal year 1998, issuers registered 3,890 offerings on 
Form S-3 and 172 offerings on Form F-3.
    \625\ We estimate the percentage of firms that currently are 
eligible to use Forms S-3 and F-3 that would be eligible under the 
proposals to register offerings on Form B based on their public 
floats and ADTVs would be (3,397 firms that would be required to 
register offerings on Form B under the proposals/4,824 firms that 
would be eligible to register offerings on Forms S-3 and F-3 
today)=70%.
    \626\ Specifically, 70% *4,062 offerings/year=2,843 offerings/
year on Form B under the proposals and 30% *4,062 offerings/
year=1,219 offerings/year on Form A.
    \627\ In a random sample of 50 offerings filed in 1996 and 1997 
on Form S-8, we found 6% would no longer be eligible to file on Form 
S-8 under the proposals. Under the proposed rules and based on our 
sample, we would require 4% (224) of the 5,597 offerings filed on 
Form S-8 in fiscal year 1998 to file on Form B, 1% (56) to file on 
Form A with automatic effectiveness and incorporation by reference, 
and 1% (56) to file on Form A with no automatic effectiveness.
    \628\ We estimate filers would spend $39,375/filing in 
professional labor costs. We base this estimate on 225 hours of 
professional labor/Form B* $175/hour. In aggregate, we estimate that 
filers would spend $120,763,125/year to file 3,067 Form Bs/year.
---------------------------------------------------------------------------

    The proposed rules and amendments also would simplify issuers' 
preparation of Form A prospectuses and reduce regulatory uncertainty. 
The proposals would allow certain Form A issuers' registration 
statements to go effective immediately if they are reporting companies 
for at least two years and have public floats of at least $75 million. 
We estimate approximately 1,960 Form A issuers would meet these 
criteria. The proposals would also allow Form A issuers to incorporate 
Exchange Act disclosure by reference in registration statements two 
years after becoming reporting issuers rather than after three years, 
as currently required. As discussed above, 2,526 companies that 
currently are required to register offerings on Forms S-1 and F-1 would 
become newly eligible to incorporate Exchange Act reports by reference. 
These firms would save burden hours and prospectus preparation costs 
when offering securities. Based on the number of offerings filed on 
Forms S-1, S-2, F-1, and F-2 in fiscal year 1998,629 the 
proposed availability of Forms SB-1 and SB-2 to certain of these 
issuers,630 the number of offerings by issuers that today 
would file on Forms S-3 and F-3 that would not be eligible for Form B, 
631 and the number of offerings currently filed on Form S-8 
that would be filed on Form A under the proposals,632 we 
estimate issuers would file approximately 2,616 offerings/year on Form 
A.633 We expect the 1,219 offerings/year that issuers 
registered in fiscal year 1998 on Forms S-3 and F-3 to incorporate 
Exchange Act reports by reference on Form A under the proposals. In 
addition, we expect approximately 978 of the 1,397 remaining filings on 
Form A to incorporate Exchange Act reports by reference each 
year.634 Thus we expect issuers would incorporate Exchange 
Act reports by reference into 2,197 Form A offerings/year under the 
proposed rules. The remaining 419 offerings on Form A would not be 
eligible to incorporate Exchange Act reports by reference. We estimate 
issuers filing on Form A under the proposed rules and amendments would 
expend approximately 1,333 burden hours/filing if they cannot 
incorporate Exchange Act reports by reference,635 and 471 
burden hours if they can.636 On average, we anticipate 
issuers would spend about 609 hours preparing Form A registration 
statements.637 Of the 609 hours, we estimate that 25% (152 
internal burden hours) would be provided by corporate staff, and 75% 
(457 hours) by external professional help. We anticipate filers would 
spend, at an estimated $175/hour, approximately $79,975/filing in 
professional labor costs to file Form B.638 We request your 
comments and supporting empirical information on the reasonableness of 
these estimates.
---------------------------------------------------------------------------

    \629\ Issuers registered 1,136 offerings on Form S-1, 152 
offerings on Form S-2, 139 offerings on Form F-1, and one offering 
on Form F-2, for a total of 1,428 offerings in fiscal year 1998.
    \630\ Under the proposed rules, issuers would register these 
offerings on Form A, except for the 143 offerings we anticipate 
issuers would register on Form SB-2.
    \631\ We estimate 30% of the firms currently eligible to use 
Forms S-3 and F-3 would be required to register offerings on Form A 
based on their public floats and ADTVs. Specifically, the percentage 
would be (1,427 firms that would be required to register offerings 
on Form A under the proposals/4,824 firms that would be eligible to 
register offerings on Forms S-3 and F-3 today) = 30%. If we adjust 
the 4,062 offerings issuers registered on Forms S-3 and F-3 in 
fiscal year 1998 by this percentage, we estimate issuers would 
register approximately 1,219 of these offerings/year on Form A under 
the proposals.
    \632\ In a random sample of 50 offerings filed in 1996 and 1997 
on Form S-8, we found 6% would no longer be eligible to file on Form 
S-8 under the proposals. Under the proposed rules and based on our 
sample, we would require 4% (224) of the 5,597 offerings filed on 
Form S-8 in fiscal year 1998 to file on Form B, 1% (56) to file on 
Form A with automatic effectiveness and incorporation by reference, 
and 1% (56) to file on Form A with no automatic effectiveness.
    \633\ Specifically, issuers would register on Form A under the 
proposed rules 1,428 offerings/year currently registered on Forms S-
1, S-2, F-1, and F-2-143 offerings/year registered on Form SB-2 + 
1,219 offerings/year currently registered on Form S-3 + 112 
offerings/year currently registered on Form S-8 = 2,616 offerings/
year.
    \634\ We base this conclusion on the number of firms that 
currently are required to register offerings on Forms S-1 and F-1 
that would become newly eligible to incorporate Exchange Act reports 
by reference under the proposals relative to the number of firms 
that currently are required to register offerings on Forms S-1 and 
F-1. Specifically, the number of filings on Form A that would 
incorporate Exchange Act reports by reference each year would be 
(2,526 firms that would be eligible to incorporate Exchange Act 
reports by reference on Form A under the proposals/3,601 firms that 
currently are eligible to register offerings on Forms S-1 and F-1) 
*(2,616 offerings/year on Form A -1,219 offerings/year on Form A 
that would incorporate Exchange Act reports by reference that are 
eligible to be registered on Form S-3 today) = 978 offerings/year 
(in addition to the 1,219 offerings/year on Form A that would 
incorporate Exchange Act reports by reference that are eligible to 
be registered on Form S-3 today).
    \635\ Both domestic and foreign issuers would be able to 
register offerings on Form A. Domestic issuers currently require 
1,267 hours to complete Form S-1 (which does not allow issuers to 
incorporate Exchange Act reports by reference), whereas foreign 
issuers require 1,868 hours to complete Form F-1 (which also does 
not allow issuers to incorporate Exchange Act reports by reference). 
In fiscal year 1998, issuers registered 1,136 offerings on Form S-1 
and 139 offerings on Form F-1. We estimate the number of hours that 
issuers would require to file Form A if they cannot incorporate 
Exchange Act reports by reference would be [(1,136 domestic Form A 
filings that previously would have been filed on Form S-1 *1,267 
hours/domestic Form A filing that previously would have been filed 
on Form S-1) + (139 foreign Form A filings that previously would 
have been filed on Form F-1 *1,868 hours/foreign Form A filing that 
previously would have been filed on Form F-1)]/1,275 filings on Form 
A = 1,333 hours/filing.
    \636\ Both domestic and foreign issuers would be able to 
register offerings on Form A. Domestic issuers currently require 470 
hours to complete Form S-2 (which allows issuers to incorporate 
Exchange Act reports by reference), whereas foreign issuers require 
559 hours to complete Form F-2 (which allows issuers to incorporate 
Exchange Act reports by reference). In fiscal year 1998, issuers 
registered 152 offerings on Form S-2 and one offering on Form F-2. 
We therefore estimate the number of hours that issuers would require 
to file Form A if they can incorporate Exchange Act reports by 
reference would be 471 hours/filing.
    \637\ As discussed above, we anticipate issuers would register 
419 offerings/year on Form A where Exchange Act reports would not be 
incorporated by reference and 2,197 offerings/year on Form A where 
Exchange Act reports would be incorporated by reference. The average 
hours to file Form A would be approximately 1,333 hours if they 
cannot incorporate Exchange Act reports by reference and 471 hours 
if they can incorporate Exchange Act reports by reference. On 
average we expect the number of hours issuers would expend to file 
Form A would be [(419 offerings/year on Form A where Exchange Act 
reports would not be incorporated by reference * 1,333 hours if they 
cannot incorporate Exchange Act reports by reference) + (2,197 
offerings/year on Form A where Exchange Act reports would be 
incorporated by reference * 471 hours if they can incorporate 
Exchange Act reports by reference)]/2,616 offerings/year on Form A = 
609 hours/filing.
    \638\ We estimate filers would spend $79,975/filing in 
professional labor costs. We base this estimate on 457 hours of 
professional labor/Form A * $175/hour. In aggregate, we estimate 
that filers would spend $209,214,600/year to file 2,616 Form As/
year.
---------------------------------------------------------------------------

    The proposed rules and amendments would also create new Form C for 
business combinations and new Form SB-3 for small business issuer 
combinations. In fiscal year 1998, issuers registered 4,378 business 
combinations on Forms S-4 and F-4. Of these, we estimate issuers would 
register approximately 3,984 on Form C and 394 on Form SB-3 under the 
proposed rules.639 We estimate issuers

[[Page 67260]]

would expend approximately 1,245 hours to complete Form C under the 
proposed rules and amendments.640 Of the 1,245 hours, we 
estimate that 25% (311 internal burden hours) would be provided by 
corporate staff, and 75% (934 hours) by external professional help. We 
anticipate filers would spend, at an estimated $175/hour, approximately 
$163,450/filing in professional labor costs to file Form 
C.641 We estimate small business issuers would expend 
approximately 1,121 hours to file business combinations on Form SB-
3.642 Of the 1,121 hours, we estimate that 25% (280 internal 
burden hours) would be provided by corporate staff, and 75% (841 hours) 
by external professional help. We anticipate filers would spend, at an 
estimated $175/hour, approximately $147,175/filing in professional 
labor costs to file Form B.643 We request your comments and 
supporting empirical information on the reasonableness of these 
estimates.
---------------------------------------------------------------------------

    \639\ Issuers registered 3,701 offerings on Form S-4 in fiscal 
year 1998 and 677 offerings on Form F-4, for a total of 4,378 
business combinations. Based on the number of offerings we expect 
issuers would register on Forms SB-1 and SB-2 under the proposals 
relative to the number of offerings registered on Forms SB-1, SB-2, 
A, and B, and the number of business combinations in fiscal year 
1998, we estimate the number of SB-3 filings issuers would file 
under the proposals would be (567 offerings registered on Forms SB-1 
and SB-2 under the proposals / 6,250 offerings registered in fiscal 
year 1998) * 4,378 filings/year under the proposals = 394 SB-3 
filings/year. The remaining 3,984 business combinations (4,378 
filings/year--394 SB-3 filings/year) would be filed on Form C.
    \640\ Both domestic and foreign issuers would be required to 
register business combinations on Form C. Domestic issuers currently 
require 1,233 hours to complete Form S-4, whereas foreign issuers 
require 1,308 hours to complete Form F-4. In fiscal year 1998, 
issuers registered 3,701 business combinations on Form S-4 and 677 
business combinations on Form F-4. We estimate the number of burden 
hours that issuers would require to file Form C would be [(3,701 
Form C filings that previously would have been filed on Form S-4 * 
1,233 hours/Form C filing that previously would have been filed on 
Form S-4) + (677 Form C filings that previously would have been 
filed on Form F-4 * 1,308 hours/Form C filing that previously would 
have been filed on Form F-4)]/4,378 filings on Form C = 1,245 hours/
filing on Form C.
    \641\ We estimate filers would spend $163,450/filing in 
professional labor costs. We base this estimate on 934 hours of 
professional labor/Form C * $175/hour. In aggregate, we estimate 
that filers would spend $651,184,800/year to file 3,984 Form Cs/
year.
    \642\ We base this estimate on the number of hours required to 
file Form SB-2 under the proposals relative to the number of hours 
required to file Form A. We then reduce the number of hours required 
today to file Form C by this ratio. Specifically, we estimate the 
number of hours required to file Form SB-3 under the proposed rules 
would be [(550 hours/SB-2 filing under the proposals / 609 hours/
Form A filing under the proposals) * 1,245 hours/Form C filing under 
the proposals = 1,121 hours/SB-3 filing.
    \643\ We estimate filers would spend $147,175/filing in 
professional labor costs. We base this estimate on 841 hours of 
professional labor/Form A* $175/hour. In aggregate, we estimate that 
filers would spend $57,986,950/year to file 394 Form As/year.
---------------------------------------------------------------------------

    The proposals also would relax many of the restrictions on 
communications between issuers and investors and clarify any remaining 
limitations. Issuers would be able to more freely promote securities to 
investors, subject to the provisions of Section 12(a)(2) under the 
Securities Act and the antifraud provisions of the Securities and the 
Exchange Acts.644 Specifically, the proposed rules and 
amendments would allow all issuers to communicate freely with investors 
after a registration statement was filed.645 During the pre-
filing period, issuers of offerings registered on Forms A, SB-1, and 
SB-2 and unregistered offerings would be somewhat limited in their 
ability to communicate with investors, but the proposed rules would 
clearly define the length of the period and would delineate the types 
of communications permitted and prohibited.646 The 
Commission would permit larger seasoned issuers and other issuers 
making particular kinds of offerings on Form B to communicate with 
investors both before and after registration statements are 
filed.647 Proposed Rule 425 would require issuers to file 
written communications (in addition to required registration 
statements) about pending offerings. The rule, which would have few 
specific information requirements, would require issuers to attach 
their written communications and include a prominent legend advising 
investors to read the registration statement. The Commission recognizes 
that companies would incur costs from filing sales literature used in 
public offerings. We estimate that a firm's corporate staff would 
expend approximately 15 burden minutes (0.25 internal burden hours) to 
file a written communication under the proposed rule.648 Not 
all issuers would use sales literature in offerings, especially those 
that occur quickly. In other offerings, however, issuers might 
communicate with investors using sales literature. Preliminarily, we 
estimate issuers would file, on average, one written communication 
(besides the required registration) for each offering. Thus, we 
anticipate issuers would register approximately 10,628 offerings on 
Forms A, B, C, SB-1, SB-2, and SB-3 per year. We estimate issuers would 
expend approximately 2,657 burden hours to file written communications 
under Rule 425. We request your comments and supporting empirical 
information on the reasonableness of these estimates.
---------------------------------------------------------------------------

    \644\ Under the proposals, Form B offering information would be 
subject to liability under Section 11 of the Securities Act.
    \645\ See proposed Securities Act Rule 165, 17 CFR 230.165.
    \646\ See proposed Securities Act Rules 167, 168, and 169, 17 
CFR 230.167, 230.168, and 230.169.
    \647\ See proposed Securities Act Rule 166, 17 CFR 230.166.
    \648\ We base this estimate on the burden imposed by a similar 
filing requirement under Item 901(c) of Regulation S-K for roll-up 
transactions.
---------------------------------------------------------------------------

    We anticipate that the proposed rules and amendments would 
streamline and simplify issuers' filing of Exchange Act reports in two 
ways. First, the Commission would allow issuers to simultaneously 
register an offering under the Securities Act and a class of securities 
under the Exchange Act by checking a box on their Securities Act 
registration statements.649 This change would not result in 
any loss of information to investors because the Securities Act 
registration forms would include any Exchange Act registration 
information currently not required by the Securities Act registration 
requirements. The revision, however, would reduce the number of issuer 
filings. As indicated in the Table, we anticipate that issuers would no 
longer need to file approximately 2,293 Form 8-As/year, saving 
approximately 7 burden hours/filing. Second, the proposed rules and 
amendments would reduce uncertainty regarding staff review of Exchange 
Act reports through notification of review and pre-review.
---------------------------------------------------------------------------

    \649\ See proposed Securities Act Rule 499, 17 CFR 230.499, for 
Schedule B filers and proposed revisions to Exchange Act Rule 12d1-
2, 17 CFR 240.12d1-2.
---------------------------------------------------------------------------

    These proposed new rules and amendments, however, would enhance and 
expedite some of the disclosure required in Exchange Act reports filed 
by reporting companies. These revisions could increase issuers' cost of 
disclosure. To help assess the costs, we asked representatives of the 
American Society of Corporate Secretaries (ASCS), two issuers, one 
accounting firm, and two law firms to assess the impact of the proposed 
rule changes. These parties did not anticipate substantial increases in 
registrant costs if the Commission required reporting companies to file 
summary financial information on Form 8-K within 30 days after quarter-
end and 45 days after fiscal year-end.650 They reported that 
most firms release earnings information before quarter end and hence 
the requirement would codify and unify financial reporting

[[Page 67261]]

practice. We estimate registrants would file 4 additional Form 8-Ks/
year. If each Form 8-K filing requires a registrant to expend 5 burden 
hours, companies would expend approximately 20 additional burden hours/
year.651 We request comment on the reasonableness of this 
estimate.
---------------------------------------------------------------------------

    \650\ In a 1998 survey of its members, the ASCS found that 
although only 10% of respondents file Form 8-K with quarterly 
financial information, over 99% issue quarterly press releases. Of 
those, approximately 90% issue a press release within 30 days after 
quarter-end. The results of the survey indicate that 38% of 
respondents issue a summary or complete balance sheet, 46% issue a 
summary or complete income statement, 24% issue a summary or 
complete cash flow statement, 69% issue information on revenues or 
sales (including those that issued an income statement), 80% issue 
earnings (including those that issued an income statement), and 12% 
issue segment financial information.
    \651\ The parties consulted generally indicated that Form 8-K 
filings are prepared by corporate counsel.
---------------------------------------------------------------------------

    The proposed rules and amendments would also reduce the Form 8-K 
filing period from 15 to 5 days, affecting only announcements of:
     Changes in control;
     Acquisitions or dispositions of assets;
     Bankruptcies or receiverships; and
     Changes of fiscal year.

The parties we contacted did not anticipate reducing the Form 8-K 
filing period for these events would substantially increase 
registrants' costs. They indicated that registrants typically issue 
press releases when these events occur, and thus would be able to file 
announcements on Form 8-K within 5 days at little additional cost. We 
request comment on the feasibility and cost of accelerating the filing 
deadline of Form 8-K for these events.
    The proposed rules and amendments would also reduce the Form 8-K 
filing period from 5 to 1 days for announcements of:
     Independent accountant resignations;
     Director resignations; and
     Material defaults, dividend arrearages, and delinquencies.

The Commission does not anticipate that reducing the Form 8-K filing 
period for these events would substantially increase registrants' 
costs, and believes the benefits to investors would outweigh the costs 
to registrants. We request comment, however, on the validity of this 
view.
    The proposed rules and amendments would require additional events 
required to be reported on Form 8-K, including:
     Material modifications to rights of security holders;
     Departures of CEO, CFO, COO or president (or persons in 
equivalent positions);
     Material default on senior securities (must be disclosed 
no later than one day following default);
     Notice that reliance on prior audit is no longer 
permissible, or that auditor will not consent to use of its report in a 
Securities Act filing; 652 and
---------------------------------------------------------------------------

    \652\ See 17 CFR 228.304 and 17 CFR 229.304.
---------------------------------------------------------------------------

     Change in company name.

As with the reduction in the Form 8-K filing period, the Commission 
anticipates the cost of these revisions to be low. After (or, in some 
cases, before) these events occur, registrants are likely to issue 
press releases and file a Form 8-K based on their more general 
obligation to release information about material events.653 
And most of these events are likely to be expected and thus issuers 
should be able to anticipate the need to file. We request your 
comments, including any supporting empirical information, on the costs 
that would be incurred by companies under the proposed revisions. We 
also view the proposed changes to Form 6-K as imposing little 
additional burden on foreign private issuers. In many instances, the 
firms that the Commission would ask to file a Form 6-K already are 
required to file similar information in their home countries. The 
proposed filings would also be voluntary, rather than required. We 
request comment on the burden of these revisions, along with the 
signature requirement, on foreign private issuers.
---------------------------------------------------------------------------

    \653\ See, e.g., the comment letter on the Concept Release, File 
No. S7-19-96, submitted by the American Bar Ass'n. (Dec. 11, 1996).
---------------------------------------------------------------------------

    We propose to treat the information in Part I of Forms 10-Q and 10-
QSB as ``filed'' for purposes of Section 18 under the Exchange Act. 
Although the revision would increase the liability associated with the 
financial information in Forms 10-Q and 10-QSB, we do not believe it 
would significantly increase registrants' costs. The reporting systems 
that generate this financial information also generate the financial 
information contained in Forms 10-K and 10-KSB, which currently is 
subject to liability under Section 18. We therefore do not anticipate 
that registrants would need to undertake substantial investments to 
generate information in quarterly reports that can withstand the 
heightened standard of liability. We request comment on this view.
    Another proposed rule would require registrants to disclose risk 
factors in Forms 10-K and 10-KSB and to update them quarterly in Forms 
10-Q and 10-QSB.654 Again the Commission does not anticipate 
that the rule would impose a substantial burden on reporting companies. 
The Commission already requires issuers to disclose risk factors in 
most Securities Act registration statements. Thus the proposed 
revisions would require firms that recently have raised capital just to 
update previously disclosed risk factors. In a 1998 ASCS survey of its 
members, only 20% of respondents indicated that the costs of disclosing 
risk factors would be significant, 54% estimated modest cost increases, 
and 26% estimated no cost increase. Of those respondents estimating 
costs to be significant, 19% believed the impact would be short term, 
rather than on-going. To reflect this cost, we added one hour to the 
estimates for Forms 10-K, 10-KSB, 10-Q, and 10-QSB.655 On 
average, we anticipate issuers would spend about 1,724 hours preparing 
Form 10-K.656 Of the 1,724 hours, we estimate that 25% (431 
internal burden hours) would be provided by corporate staff, and 75% 
(1,293 hours) by external professional help. We anticipate filers would 
spend, at an estimated $175/hour, approximately $226,275/filing in 
professional labor costs to file Form 10-K.657 We request 
your comments and supporting empirical information on the 
reasonableness of these estimates. Finally, the Commission is proposing 
to require that all persons who sign a firm's registration statements 
filed under the Securities Act and reports filed under the Exchange Act 
certify they have read the filing and do not know of any material 
misstatement or omissions of information in the filings.658 
The proposals would also

[[Page 67262]]

expand the number of persons required to sign forms to include the 
registrant, the registrant's principal executive officer, principal 
financial officer, principal accounting officer, and at least a 
majority of the registrant's board.659 The cost to 
registrants of these proposals would be the cost associated with having 
managers and board members spend additional time reading documents so 
that they can affirm having read them. Given the involvement of most 
firms' senior managers in the reporting process, we do not anticipate 
significant additional cost to registrants from these proposals. We 
request comment, however, on this view.
---------------------------------------------------------------------------

    \654\ The proposed revisions would also require issuers to 
disclose risk factors in Forms 10, 10-SB, 18, 20-F, and 18-K.
    \655\ We also added a burden hour to our estimates for Forms 10, 
10-SB, 18, 20-F, and 18-K.
    \656\ As discussed above, we anticipate issuers would register 
419 offerings/year on Form A where Exchange Act reports would not be 
incorporated by reference and 2,197 offerings/year on Form A where 
Exchange Act reports would be incorporated by reference. The average 
hours to file Form A would be approximately 1,333 hours if they 
cannot incorporate Exchange Act reports by reference and 471 hours 
if they can incorporate Exchange Act reports by reference. On 
average we expect the number of hours issuers would expend to file 
Form A would be [(419 offerings/year on Form A where Exchange Act 
reports would not be incorporated by reference * 1,333 hours if they 
cannot incorporate Exchange Act reports by reference) + (2,197 
offerings/year on Form A where Exchange Act reports would be 
incorporated by reference * 471 hours if they can incorporate 
Exchange Act reports by reference)]/2,616 offerings/year on Form A = 
609 hours/filing.
    \657\ We estimate filers would spend $226,275/filing in 
professional labor costs. We base this estimate on 1,293 hours of 
professional labor/Form 10-K* $175/hour. In aggregate, we estimate 
that filers would spend $2,113,861,050/year to file 9,342 Form 10-
Ks/year. In fiscal year 1998, registrants filed 10,392 Form 10-Ks 
and 2,591 Form 10-KSBs. Under the proposals 1,050 companies that 
currently file their annual report on Form 10-K would be eligible to 
file on Form 10-KSB. Thus we anticipate registrants would file 9,342 
Form 10-Ks and 3,641 Form 10-KSBs. In fiscal year 1998, registrants 
filed 29,551 Form 10-Qs and 7,521 Form 10-QSBs. Under the proposals 
1,050 companies that currently file their quarterly reports on Form 
10-Q would be eligible to file on Form 10-QSB. Thus we anticipate 
registrants would file 26,401 Form 10-Qs [29,551 Form 10-Qs today--
(3 quarterly reports on Form 10-QSB/year * 1,050 companies)], and 
10,671 Form 10-QSBs [7,521 Form 10-QSBs today + (3 quarterly reports 
on Form 10-QSB/year * 1,050 companies)].
    \658\ The proposed revisions would affect Forms A, B, C, SB-1, 
SB-2, and SB-3 under the Securities Act and Forms 10-K, 10-KSB, 10-
Q, 10-QSB, 10, 8-A, 10-SB, 20-F, 40-F, 18, 8-K, and 6-K under the 
Exchange Act. We also are proposing to require registrants to 
disclose their email address and web site on all registration 
statements and Exchange Act reports. We do not anticipate any 
additional burden from these requirements.
    \659\ Foreign private issuers also would need to have an 
authorized representative in the United States sign. The proposed 
revisions would affect Forms A, B, C, SB-1, SB-2, and SB-3 under the 
Securities Act and Forms 10-K, 10-KSB, 10-Q, 10-QSB, 10, 8-A, 10-SB, 
20-F, 40-F, and 18 under the Exchange Act. For Forms 8-K and 6-K, we 
would require either the registrant's principal executive officer, 
principal financial officer or principal accounting officer to sign 
a particular Exchange Act report and certify he or she provided a 
copy to board members.
---------------------------------------------------------------------------

    In accordance with 44 U.S.C. Sec. 3506c(2)(B), we solicit comment 
on the following:
     Whether the proposed changes in each collection of 
information are necessary for the proper performance of the function of 
the agency;
     The accuracy of our estimate of the burden of the proposed 
changes to each collection of information;
     The quality, utility, and clarity of the information to be 
collected; and
     Whether there are ways to minimize the burden of any of 
the collections of information on those who are required to respond, 
including through the use of automated collection techniques or other 
forms of information technology.

Anyone desiring to submit comments on any or all of the collection of 
information requirements should direct them to the Office of Management 
and Budget, Attention: Desk Officer for the Securities and Exchange 
Commission, Office of Information and Regulatory Affairs, Washington, 
D.C. 20503, and should also send a copy of their comments to Jonathan 
G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth 
Street, N.W., Washington, D.C. 20549, with reference to File No. S7-30-
98. The Office of Management and Budget is required to make a decision 
concerning the collection of information between 30 and 60 days after 
publication, so a comment to OMB is best assured of having its full 
effect if OMB receives it within 30 days of publication.

XVII. General Request for Comments

    Given the scope and significance of this proposal, the Commission 
is particularly eager to receive your comments. We solicit comment, 
both specific and general, upon each component of the proposal. We 
believe your comments will be very important in determining the course 
these proposals will take. The Commission therefore intends to review 
with great care all comments received.
    We also solicit comment on whether issuers would take advantage of 
some of the flexibility in registration or communication provided in 
the proposal to engage in fraudulent activities. If so, what elements 
of the proposal could be open to such abuse? How can we avoid abuse and 
continue to ensure investor protection, for example, in the proposals 
for automatic effectiveness and free communications, while at the same 
time provide issuers with timing certainty and allow market 
participants to take fuller advantage of today's technology?
    We believe our proposals would provide additional benefits for 
smaller companies (e.g., simpler and more flexible registration 
process, elimination of restrictions on post-filing communications and 
relaxed integration rules). We also believe that our proposals balance 
these benefits with enhanced protection for investors (e.g., earlier 
prospectus delivery, filing of free writing prospectuses). We solicit 
comment on the impact that our proposals may have on microcap companies 
and microcap fraud. Should we exclude microcap companies from some of 
our proposals as a precautionary measure against microcap fraud? If so, 
which proposals? By excluding microcap companies from certain proposals 
would we be providing a competitive advantage to their non-microcap 
competitors? Rather than excluding microcap companies, should we 
provide for enhanced monitoring of microcap companies?
    We encourage your comments on whether and how our proposal would 
affect the secondary trading markets for securities. How would our 
proposal affect public investors, broker-dealers and the companies 
whose securities are traded in the secondary markets? Our proposed 
changes to the Exchange Act disclosure system would enhance and speed 
corporate information to the marketplace, would add Commission 
resources to oversight of the secondary markets and should provide 
valuable benefits to investors. Besides the proposed Exchange Act 
reporting changes, our proposal relates primarily to the securities 
offering process, rather than secondary trading. Would these proposed 
changes adversely affect participants in secondary trading? Would 
investor protection in secondary market transactions be affected by our 
proposed changes? If so, how?
    Any interested person wishing to submit written comments on any 
aspect of the proposals, as well as on other matters that might have an 
impact on the proposals, is requested to do so. In addition, the 
Commission requests comment on whether any further changes to the 
Commission's rules and forms are necessary or appropriate to implement 
the objectives of the proposals. Comments should be submitted in 
triplicate to Jonathan G. Katz, Secretary, U.S. Securities and Exchange 
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 and should 
refer to file number S7-30-98.

XVIII. Statutory Bases

    The proposed new rules, forms and amendments to the Commission 
existing rules and forms are being proposed pursuant to Sections 2(b), 
6, 7, 8, 10, 19(a) and 28 of the Securities Act of 1933 as amended and 
Sections 3, 4, 10, 12, 15, 23 and 36 of the Securities Exchange Act of 
1934.

List of Subjects

17 CFR Part 200

    Administrative practice and procedure, Authority delegation 
(Government agencies).

17 CFR Part 202

    Administrative practice and procedure, Securities.

17 CFR Part 210

    Accountants, Accounting.

17 CFR Part 228

    Reporting and recordkeeping requirements, Securities, Small 
business.

17 CFR Parts 229, 239 and 249

    Reporting and recordkeeping requirements, Securities.

17 CFR Part 230

    Advertising, Investment companies, Reporting and recordkeeping 
requirements, Securities.

17 CFR Part 240

    Brokers, Reporting and recordkeeping requirements, Securities.

[[Page 67263]]

Text of Proposed Amendments

    In accordance with the foregoing, the Securities and Exchange 
Commission proposes to amend Title 17, chapter II of the Code of 
Federal Regulations as follows:

PART 200--ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND 
REQUESTS

    The authority citation for part 200 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77s, 78d-1, 78d-2, 78w, 78ll(d), 78mm, 79t, 
77sss, 80a-37, 80b-11, unless otherwise noted.

* * * * *


Sec. 200.30-1  [Amended]

    2. By removing paragraph (a)(4) in Sec. 200.30-1 and by 
redesignating paragraphs (a)(5), (a)(6), (a)(7) and (a)(8) as 
paragraphs (a)(4), (a)(5), (a)(6) and (a)(7).

PART 202--INFORMAL AND OTHER PROCEDURES

    3. The authority citation for part 202 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77s, 77t, 78d-1, 78u, 78w, 78ll(d), 79r, 
79t, 77sss, 77uuu, 80a-37, 80a-41, 80b-9, and 80b-11, unless 
otherwise noted.
* * * * *
    4. By revising the seventh sentence of the introductory text of 
Sec. 202.3a to read as follows:


Sec. 202.3a  Instructions for filing fees.

     * * * Filing fees paid pursuant to Section 6(b) of the Securities 
Act of 1933 ( 15 U.S.C. 77a et. seq.) or pursuant to Section 307(b) of 
the Trust Indenture Act of 1939 (15 U.S.C. 77aaa et. seq.) should be 
designated as ``restricted,'' except that filing fees paid with respect 
to registration statements filed in accordance with Form SB-1, SB-2 and 
SB-3 (Secs. 239.9, 239.10 and 239.11 of this chapter) or pursuant to 
Secs. 230.462(b), 230.462(e) and 230.462(f) of this chapter should be 
designated as ``unrestricted.'' * * *
* * * * *

PART 210--FORM AND CONTENT OF AND REQUIREMENTS FOR FINANCIAL 
STATEMENTS, SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 
1934, PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, INVESTMENT 
COMPANY ACT OF 1940, AND ENERGY POLICY AND CONSERVATION ACT OF 1975

    5. The authority citation for part 210 continues to read as 
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77aa(25), 
77aa(26), 78j-1, 78l, 78m, 78n, 78o(d), 78u-5, 78w(a), 78ll(d), 
79e(b), 79j(a), 79n, 79t(a), 80a-8, 80a-20, 80a-29, 80a-30, 80a-
37(a), unless otherwise noted.


Sec. 210.3-14  [Amended]

    6. By amending the Note following paragraph (a)(1) of Sec. 210.3-14 
by removing the words ``Item 15 of Form S-11'' and adding, in their 
place the words ``Item 1107(b) of Regulation S-K (Sec. 229.1107(b) of 
this chapter)''.

PART 228--INTEGRATED DISCLOSURE SYSTEM FOR SMALL BUSINESS ISSUERS

    7. The authority citation for part 228 continues to read as 
follows:

    Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2, 
77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77jjj, 77nnn, 77sss, 
78l, 78m, 78n, 78o, 78u-5, 78w, 78ll, 80a-8, 80a-29, 80a-30, 80a-37, 
80b-11, unless otherwise noted.

    8. By amending Sec. 228.10 by removing paragraph (b)(4); and 
revising paragraph (a) to read as follows:


Sec. 228.10 (Item 10)  General.

    (a) Application of Regulation S-B. Regulation S-B is the source of 
disclosure requirements for ``small business issuer'' filings under the 
Securities Act of 1933 (the ``Securities Act'') and the Securities 
Exchange Act of 1934 (the ``Exchange Act'').
    (1) Definition of small business issuer. A small business issuer is 
defined as a company that meets all of the following criteria:
    (i) Has revenues (including revenues of any consolidated 
subsidiaries) of less than $50,000,000;
    (ii) Is a U.S. or Canadian issuer;
    (iii) Is not an investment company;
    (iv) If a majority-owned subsidiary, the parent corporation is also 
a small business issuer; and
    (v) Each majority-owned subsidiary of the company, if any, meets 
the criteria of paragraphs (a)(1)(ii) and (a)(1)(iii) of this section.
    (2) Entering and exiting the small business disclosure system. (i) 
A company that meets the definition of small business issuer may use 
Form SB-1, SB-2 or SB-3 (Secs. 239.9, 239.10 and 239.11 of this 
chapter), whichever is appropriate, for registration of its securities 
under the Securities Act; Form 10-SB (Sec. 249.210b of this chapter) 
for registration of its securities under the Exchange Act; and Forms 
10-KSB and 10-QSB (Secs. 249.310b and 249.308b of this chapter) for its 
annual and quarterly reports.
    (ii) For a non-reporting company entering the disclosure system for 
the first time either by filing a registration statement under the 
Securities Act or a registration statement under the Exchange Act, the 
determination as to whether the company is a small business issuer is 
made with reference to its revenues during its last fiscal year.
    (iii) Once a small business issuer becomes a reporting company, it 
will remain a small business issuer until it exceeds the revenue limit 
at the end of two consecutive years (or until it fails to meet one of 
the other criteria in the small business issuer definition).
    (iv) A reporting company that is not a small business issuer must 
meet the definition of a small business issuer at the end of two 
consecutive fiscal years before it will be considered a small business 
issuer.
    (v) The determination as to the reporting category (small business 
issuer or other issuer) made for a non-reporting company at the time it 
enters the disclosure system governs all Exchange Act reports relating 
to the remainder of that fiscal year. The determination made for a 
reporting company at the end of its fiscal year governs all Exchange 
Act reports relating to the next fiscal year. An issuer may not change 
from one category to another with respect to reports under the Exchange 
Act for a single fiscal year. A small business issuer may, however, 
choose not to use Form SB-1 or SB-2 (Sec. 239.9 or Sec. 239.10 of this 
chapter) for registration under the Securities Act.
    (vi) Notwithstanding paragraph (a)(2)(v) of this section, a company 
that is a reporting company as of __________ [insert effective date of 
the final rule] may determine at any time between __________ [insert 
effective date of the final rule] and __________ [insert date one year 
after effective date of the final rule] to begin reporting under the 
Exchange Act on the forms available only to small business issuers if 
it satisfies the small business issuer definition through having 
revenues of less than $50 million in each of its last two fiscal years 
and satisfying the other criteria in paragraph (a)(1) of this section.
* * * * *
    9. By amending Sec. 228.304 by revising the introductory text of 
paragraph (a)(1), paragraphs (a)(1)(i), (a)(1)(iii), (a)(1)(iv)(A), 
(a)(1)(iv)(B) introductory text, (a)(1)(iv)(B)(2), (a)(1)(iv)(B)(3), 
(a)(1)(iv)(D) and (a)(1)(iv)(E); and by adding a sentence at the end of 
paragraph (a)(3) to read as follows:

[[Page 67264]]

Sec. 228.304  (Item 304) Changes in and disagreements with accountants 
on accounting and financial disclosure.

    (a)(1) The disclosure described below is required if the small 
business issuer, during its two most recent fiscal years or any 
subsequent interim period, dismissed its principal independent 
accountant or a significant subsidiary dismissed its independent 
accountant on whom the small business issuer's principal accountant 
expressed reliance in its report. The disclosure also is required if, 
during that time, any of those accountants: resigned; declined to stand 
for re-election after the current audit; notified the registrant or a 
significant subsidiary that reliance on the accountant's prior audit 
report is no longer permissible; or notified the registrant or a 
significant subsidiary that it will not consent to the use of the 
accountant's prior audit report in a filing with the Commission. State:
    (i) Which of the actions described in paragraph (a)(1) of this 
section occurred and when;
* * * * *
    (iii) If a change in accountants resulted, whether the decision to 
change accountants was recommended or approved by the board of 
directors or a committee thereof; and
    (iv)(A) Whether, during the small business issuer's two fiscal 
years and any subsequent interim period immediately preceding the date 
of the action described in paragraph (a)(1) of this section, there were 
disagreements with the accountant, whether or not resolved to the 
accountant's satisfaction, on any matter of accounting principles or 
practices, financial statement disclosure, or auditing scope or 
procedure;
    (B) The following information, if applicable. Indicate whether the 
accountant advised the small business issuer that:
* * * * *
    (2) Information has come to the attention of the accountant that 
made the accountant unwilling to rely on management's representations, 
or unwilling to be associated with the financial statements prepared by 
management; or
    (3) The scope of its audit should be expanded significantly, or 
that information has come to the accountant's attention that the 
accountant has concluded will, or if further investigated might, 
materially impact the fairness or reliability of a previously issued 
audit report or the underlying financial statements, or the financial 
statements issued or to be issued covering the fiscal period(s) 
subsequent to the date of the most recent audited financial statements 
(including information that might preclude the issuance of an 
unqualified audit report); and
* * * * *
    (D) Whether the board of directors or any committee thereof 
discussed the subject matter of each such disagreement with the 
accountant;
    (E) If a change in accountants resulted, whether the small business 
issuer has authorized the former accountant to respond fully to the 
inquiries of the successor accountant concerning the subject matter of 
each such disagreement. If not, describe the nature of any limitation 
on responses and the reason for that limitation.
* * * * *
    (3) * * * If the former accountant declines to furnish the 
registrant with a letter addressed to the Commission stating whether 
the accountant agrees with the statements made by the registrant in 
response to this Item 304(a), so state.
* * * * *
    10. By amending Sec. 228.512 by removing the words ``Form S-3 or S-
8 (Secs. 239.13 or 239.16b of this chapter)'' from the Note to 
paragraph (a)(1) and adding in their place the words ``Form B or S-8 
(Secs. 239.5 or 239.16b of this chapter)''; and by adding paragraphs 
(g), (h) and (i) to read as follows:


Sec. 228.512  (Item 512) Undertakings.

* * * * *
    (g) Registration on Form SB-3 of securities offered for resale. 
Include the following if the securities are being registered on Form 
SB-3 (Sec. 239.11 of this chapter) in connection with a transaction 
specified in paragraph (a) of Sec. 230.145 of this chapter:
    (1) Before a public reoffering of securities registered on this 
Form by any person who is considered an underwriter within the meaning 
of Sec. 230.145(c) of this chapter through use of a prospectus that is 
a part of this registration statement, [Name of registrant] will ensure 
that the reoffering prospectus contains all the information called for 
by the Form concerning the reoffering by the underwriter(s) (in 
addition to the information required by other items of the Form).
    (2) [Name of registrant] will file as part of an amendment to the 
registration statement any prospectus that is filed under paragraph 
(g)(1) of this Item or purports to meet the requirements of Section 
10(a)(3) of the Securities Act (15 U.S.C. 77j(a)(3)) and is used in 
connection with an offering of securities subject to Sec. 230.415 of 
this chapter. We will not use such prospectus until the amendment 
containing the prospectus is effective. For purposes of determining any 
liability under the Securities Act of 1933 (15 U.S.C. 77a et. seq.), we 
acknowledge that each amendment will be considered a new registration 
statement relating to the securities being offered, and the offering of 
those securities at that time will be considered the initial bona fide 
offering of those securities.
    (h) Delayed payment of registration fee. A small business issuer 
relying on Sec. 230.456 of this chapter to delay paying the 
registration fee, must include the following undertaking:

    [Name of registrant] will pay the required registration fee no 
later than the earlier of:
    (1) The date on which we request that the Commission grant 
effectiveness of this registration statement under Section 8(a) of 
the Act (15 U.S.C. 77h(a)); or
    (2) The date on which we file an amendment to the registration 
statement that contains the statement set forth in Sec. 230.473(b).

    (i) Registration on Form SB-1, SB-2 or SB-3. If the securities are 
being registered on Form SB-1 (Sec. 239.9 of this chapter), Form SB-2 
(Sec. 239.10 of this chapter) or on Form SB-3 (Sec. 239.11 of this 
chapter) include the following:

    The registrant will file with the Commission, on or before the 
date of first use, all free writing materials used in connection 
with the securities registered on this registration statement after 
effectiveness and before the offering is completed.

    11. By amending Sec. 228.601 by removing from paragraph (b)(1) the 
words ``Form S-3 (Sec. 239.13)'' and adding, in their place, the words 
``Form B (Sec. 239.5)''; by removing from paragraph (b)(10)(ii)(B)(5) 
the words ``, or registering debt or non-voting preferred stock on Form 
S-2 (Sec. 239.12)''; by removing from Note 2 to paragraph (c)(1)(ii) 
the words ``Form S-3 (Sec. 239.13 of this chapter)'' and adding, in 
their place, the words ``Form B (Sec. 239.5 of this chapter)''; by 
removing from Note 1 to paragraph (c)(1) the words ``Form S-2 
(Sec. 239.12 of this chapter), Form S-3 (Sec. 239.13 of this chapter)'' 
and adding, in their place, the words ``Items 11 and 12 of Form SB-2 
(Sec. 239.10 of this chapter), Form B (Sec. 239.5 of this chapter)''; 
by removing from the introductory text of paragraph (c)(3) the words 
``Form S-1 (Sec. 239.11 of this chapter)'' and adding, in their place, 
the words ``Form A (Sec. 239.4 of this chapter)''; and by revising the 
exhibit table to read as follows:


Sec. 228.601  (Item 601) Exhibits.

* * * * *

[[Page 67265]]



                                                  Exhibit Table
----------------------------------------------------------------------------------------------------------------
                                           Securities Act forms                     Exchange Act forms
                                 -------------------------------------------------------------------------------
                                      B       SB-2      SB-3       S-8      10-SB      8-K     10-QSB    10-KSB
----------------------------------------------------------------------------------------------------------------
(1) Underwriting agreement......        X         X         X   ........  ........        X   ........  ........
(2) Plan of acquisition,
 reorganization, arrangement,
 liquidation or succession......        X         X         X   ........        X         X         X         X
(3) (i) Articles of
 Incorporation..................  ........        X         X   ........        X   ........        X         X
(ii) By-Laws....................  ........        X         X   ........        X   ........        X         X
(4) Instruments defining the
 rights of security holders,
 including indentures...........        X         X         X         X         X         X         X         X
(5) Opinion re legality.........        X         X         X         X   ........  ........  ........  ........
(6) No exhibit required.........      N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A
(7) [Removed and reserved]......  ........  ........  ........  ........  ........  ........  ........  ........
(8) Opinion re tax matters......        X         X         X   ........  ........  ........  ........  ........
(9) Voting trust agreement......  ........        X         X   ........        X   ........  ........        X
(10) Material contracts.........  ........        X         X   ........        X   ........        X         X
(11) Statement re computation of
 per share earnings.............  ........        X         X   ........        X   ........        X         X
(12) No exhibit required........      N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A
(13) Annual or quarterly
 reports, Form 10-Q \1\.........  ........        X         X   ........  ........  ........  ........        X
(14) [Removed and reserved].....  ........  ........  ........  ........  ........  ........  ........  ........
(15) Letter re unaudited interim
 financial information..........        X         X         X         X   ........  ........        X   ........
(16) Letter re change in
 certifying accountant \3\......  ........        X         X   ........        X         X   ........        X
(17) Letter re director
 resignation....................  ........  ........  ........  ........  ........        X   ........  ........
(18) Letter re change in
 accounting principles..........  ........  ........  ........  ........  ........  ........        X         X
(19) Report furnished to
 security holders...............  ........  ........  ........  ........  ........  ........        X   ........
(20) Other documents or
 statements to security holders.  ........  ........  ........  ........  ........        X   ........  ........
(21) Subsidiaries of the
 registrant.....................  ........        X         X   ........        X   ........  ........        X
(22) Published report regarding
 matters submitted to vote of
 security holders...............  ........  ........  ........  ........  ........  ........        X         X
(23) Consents of experts and
 counsel........................        X         X         X         X   ........    \2\ X     \2\ X     \2\ X
(24) Power of attorney..........        X         X         X         X         X         X         X         X
(25) Statement of eligibility of
 trustee........................        X         X         X   ........  ........  ........  ........  ........
(26) Invitation for competitive
 bids...........................        X         X         X   ........  ........  ........  ........  ........
(27) Financial Data Schedule \4\        X         X         X   ........        X         X         X         X
(28) [Removed and reserved].....  ........  ........  ........  ........  ........  ........  ........  ........
(29) Underwriter Concurrence
 with Effective Date............        X   ........  ........  ........  ........  ........  ........  ........
[Reserved (30) through (98)]....  ........  ........  ........  ........  ........  ........  ........  ........
(99) Additional Exhibits........        X         X         X         X         X         X         X         X
----------------------------------------------------------------------------------------------------------------
\1\ Only if incorporated by reference into a prospectus and delivered to holders along with the prospectus as
  permitted by the registration statement; or in the case of a Form 10-KSB, where the annual report is
  incorporated by reference into the text of the Form 10-KSB.
\2\ Where the opinion of the expert counsel has been incorporated by reference into a previously filed
  Securities Act registration statement.
\3\ If required under Item 304 of Regulation S-K.
\4\ Financial Data Schedules must be filed by electronic filers only. Such Schedule must be filed only when a
  filing includes annual and/or interim financial statement that have not been previously included in a filing
  with the Commission. See Item 601(c) of Regulation S-B.

PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES 
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND 
CONSERVATION ACT OF 1975--REGULATION S-K

    12. The authority citation for part 229 continues to read in part 
as follows:

    Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2, 
77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 77nnn, 
77sss, 78c, 78i, 78j, 78l, 78m, 78n, 78o, 78u-5, 78w, 78ll(d), 79e, 
79n, 79t, 80a-8, 80a-29, 80a-30, 80a-37, 80b-11, unless otherwise 
noted.
* * * * *


Sec. 229.10  [Amended]

    13. By amending Sec. 229.10 by removing in paragraph (c)(1)(iii) 
the words ``Form S-3 (Sec. 239.13 of this chapter)'' and adding, in 
their place, the words ``Form B (Sec. 239.5 of this chapter)''.


Sec. 229.101  [Amended]

    14. By amending Sec. 229.101 by removing in paragraph (a)(2)(i) the 
words ``Form S-1 (Sec. 239.11 of this chapter)'' and adding, in their 
place, the words ``Form A (Sec. 239.4 of this chapter)'', and by 
removing in paragraph (a)(2)(iii)(B)(1) the words ``Form S-1'' and 
adding, in their place, the words ``Form A''.


Sec. 229.102  [Amended]

    15. By amending Sec. 229.102 by removing the words ``Office of 
Engineering'' in Instruction 4. to Instructions to Item 102 and adding, 
in their place, ``Office of Natural Resources''.


Sec. 229.201  [Amended]

    16. By amending Sec. 229.201 by removing in paragraph (a)(2) the 
words ``Form S-1 (Sec. 239.11 of this chapter)'' and adding, in their 
place, the words ``Form A (Sec. 239.4 of this chapter)''.
    17. By amending Sec. 229.304 by revising the introductory text of 
paragraph (a)(1), paragraph (a)(1)(i), the introductory text of 
paragraph (a)(1)(iii), paragraph (a)(1)(iv), the first sentence of the 
introductory text of paragraph (a)(1)(v), paragraph (a)(1)(v)(C)(2), 
paragraph (a)(1)(v)(D)(2); and by adding a sentence at the end of 
paragraph (a)(3) to read as follows:


Sec. 229.304  (Item 304) Changes in and disagreements with accountants 
on accounting and financial disclosure.

    (a)(1) The disclosure described below is required if the 
registrant, during its two most recent fiscal years or any subsequent 
interim period, dismissed its

[[Page 67266]]

principal independent accountant or a significant subsidiary dismissed 
its independent accountant on whom the registrant's principal 
accountant expressed reliance in its report. The disclosure also is 
required if, during that time, any of those accountants: resigned; 
declined to stand for re-election after the current audit; notified the 
registrant or a significant subsidiary that reliance on the 
accountant's prior audit report is no longer permissible; or notified 
the registrant or a significant subsidiary that it will not consent to 
the use of the accountant's prior audit report in a filing with the 
Commission.
    (i) State which of the actions described in paragraph (a)(1) of 
this section occurred and when;
* * * * *
    (iii) If a change in accountants resulted, state whether the 
decision to change accountants was recommended or approved by:
* * * * *
    (iv) State whether, during the registrant's two fiscal years and 
any subsequent interim period immediately preceding the date of the 
action described in paragraph (a)(1) of this section, there were 
disagreements with the accountant on any matter of accounting 
principles or practices, financial statement disclosure, or auditing 
scope or procedure. In addition:
    (A) Describe each such disagreement;
    (B) State whether the board of directors or any committee thereof 
discussed the subject matter of each such disagreement with the 
accountant; and
    (C) If a change in accountants resulted, state whether the 
registrant has authorized the former accountant to respond fully to the 
inquiries of the successor accountant concerning the subject matter of 
each such disagreement. If not, describe the nature of any limitation 
on responses and the reason for that limitation.
    Instructions to Item 304(a)(1)(iv).

    1. The registrant need only disclose information in response to 
this Item if the disagreement(s), if not resolved to the 
satisfaction of the accountant, would have caused it to make 
reference to the subject matter of the disagreement(s) in connection 
with its report.
    2. The disagreements required to be reported in response to this 
Item include both those resolved to the accountant's satisfaction 
and those not resolved to the accountant's satisfaction.
    3. Disagreements contemplated by this Item are those that occur 
at the decision-making level, i.e., between personnel of the 
registrant responsible for the presentation of its financial 
statements and personnel of the accounting firm responsible for 
rendering its report.

    (v) If, during the registrant's two fiscal years and any subsequent 
interim period immediately preceding the date of the action described 
in paragraph (a)(1) of this Item, any of the events listed in 
paragraphs (a)(1)(v)(A) through (a)(1)(v)(D) of this Item occurred, 
provide the information required by paragraph (a)(1)(iv) of this Item 
for each event (even if the registrant and the accountant did not 
express a difference of opinion regarding the event). * * *
* * * * *
    (C) * * *
    (2) Due to the action described in paragraph (a)(1) of this Item, 
or for any other reason, the accountant did not so expand the scope of 
its audit or conduct such further investigation; or
    (D) * * *
    (2) Due to the action described in paragraph (a)(1) of this Item, 
or for any other reason, the issue has not been resolved to the 
accountant's satisfaction prior to such action.
* * * * *
    (3) * * * If the former accountant declines to furnish the 
registrant with a letter addressed to the Commission stating whether 
the accountant agrees with the statements made by the registrant in 
response to this Item 304(a), so state.
* * * * *
    18. By amending Sec. 229.305 by revising Instruction 2.D. to 
General Instructions to Paragraphs 305(a), 305(b), 305(c), 305(d), and 
305(e), to read as follows:


Sec. 229.305  (Item 305) Quantitative and qualitative disclosures about 
market risk.

* * * * *
    General Instructions to Paragraphs 305(a), 305(b), 305(c), 305(d), 
and 305(e):
* * * * *
    2. * * *
    D. For purposes of Instruction 1. of the General Instructions to 
Paragraphs 305(a), 305(b), 305(c), 305(d), and 305(e), market 
capitalization is the aggregate market value of common equity. The term 
``common equity'' is as defined in Securities Act Rule 405 
(Sec. 230.405 of this chapter). The aggregate market value of the 
registrant's outstanding voting and non-voting common equity shall 
include the common equity held by affiliates and 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 as of January 28, 1997.
    19. By amending Sec. 229.404 by removing in the introductory text 
of paragraph (d) the words ``Form S-1 under the Securities Act 
(Sec. 239.11 of this chapter)'' and adding, in their place, the words 
``Form A under the Securities Act (Sec. 239.4 of this chapter)''.
    20. By amending Sec. 229.501 by revising the section heading to 
read as follows:


Sec. 229.501  (Item 501) Front cover page of the registration statement 
and outside front cover page of the prospectus.

* * * * *
    21. By amending Sec. 229.512 by removing in paragraph (a)(1)(iii) 
the words ``on Form S-3 (Sec. 239.13 of this chapter)'' and adding in 
their place the words ``on Form B (Sec. 239.5 of this chapter)''; in 
paragraph (a)(4), by removing in the third sentence the words ``on Form 
F-3 (Sec. 239.33 of this chapter)'' and adding, in their place, the 
words ``on Form B (Sec. 239.5 of this chapter)'', and removing the 
words ``in the Form F-3.'' and adding in their place ``in the Form 
B.''; by revising paragraph (b) and the introductory text of paragraph 
(g); and by adding paragraph (k) to read as follows:


Sec. 229.512  (Item 512) Undertakings.

* * * * *
    (b) Filings incorporating by reference subsequent Exchange Act 
documents. Include the following if the registration statement 
incorporates by reference any Exchange Act document filed subsequent to 
the initial effective date of the registration statement:

    The undersigned registrant hereby undertakes that, for 
determining liability under the Securities Act of 1933, each of the 
registrant's reports pursuant to Section 13(a) or Section 15(d) of 
the Securities Exchange Act of 1934 that is incorporated by 
reference in the registration statement shall be deemed to be a new 
registration statement relating to the securities offered therein, 
and the offering of such securities at that time shall be deemed to 
be the initial bona fide offering thereof.
* * * * *
    (g) Registration on Form C or Form SB-3 of securities offered for 
resale. Include the following if the registrant is registering an 
offering on Form C or Form SB-3 (Secs. 239.6 or 239.11 of this chapter) 
in connection with a transaction specified in paragraph (a) of Rule 145 
(Sec. 230.145 of this chapter).
* * * * *
    (k) Registration on Form A, Form B or Form C. If the securities are 
being registered on Form A (Sec. 239.4 of this chapter), Form B 
(Sec. 239.5 of this chapter) or on Form C (Sec. 239.6 of this chapter) 
include the following:

    The registrant will file with the Commission, on or before the 
date of first use, all free writing materials used in connection 
with the securities registered on

[[Page 67267]]

this registration statement after effectiveness and before the 
offering is completed.

    22. By amending Sec. 229.601 by removing from paragraph 
(b)(10)(iii)(B)(6) the words ``or registering debt instruments or 
preferred stock which are not voting securities on Form S-2''; and by 
removing from Note 1 to Paragraph (c)(1) the words ``Form S-2 
(Sec. 239.12 of this chapter), Form S-3 (239.13 of this chapter)'' and 
adding, in their place, the words ``Form B (239.13 of this chapter), 
General Instruction VIII of Form A (Sec. 239.4 of this chapter)''; by 
revising the Exhibit Table, paragraph (b)(4)(ii) and paragraph (b)(8); 
and by adding paragraph (b)(28) to read as follows:


Sec. 229.601  (Item 601) Exhibits.

* * * * *
    (b) * * *
    (4) Instruments defining the rights of security holders, including 
indentures
    (i) * * *
    (ii) Except as set forth in paragraph (b)(4)(iii) of this Item, for 
filings on Forms A and C under the Securities Act (Secs. 239.4 and 
239.6 of this chapter) and Forms 10 and 10-K (Secs. 249.210 and 249.310 
of this chapter) under the Exchange Act all instruments defining the 
rights of holders of long-term debt of the registrant and its 
consolidated subsidiaries and for any of its unconsolidated 
subsidiaries for which financial statements are required to be filed.
* * * * *
    (8) Opinion re tax matters. (i) Real estate entity registrants and 
roll-up transactions. The registrant must file an opinion of counsel, 
an opinion of an independent public or certified public accountant or a 
revenue ruling from the Internal Revenue Service supporting the tax 
matters and consequences to the investors it describes in its filing in 
the following circumstances:
    (A) The registrant is required to provide the information required 
by Item 1108 of Regulation S-K (Tax treatment) in its registration 
statement on Form A (Sec. 239.4 of this chapter);
    (B) Securities Act Industry Guide 5 applies to the offering; or
    (C) The transaction being registered is a roll-up as defined in 
Item 901 of Regulation S-K (Sec. 229.901).
    (ii) All other registrants. All other registrants must include this 
exhibit only when the tax consequences are material to an investor and 
the registrant includes a discussion of tax consequences in the filing. 
If a tax opinion is set forth in full in the filing, the exhibit may so 
state instead of repeating the full opinion. Any conditions or 
qualifications on the opinion must be adequately described in the 
filing.
* * * * *
    (28) Underwriter concurrence with effective date. A registrant 
filing a registration statement listed in Sec. 230.462(f)(1) of this 
chapter must file the written concurrence with the effective date, 
signed and dated by the managing underwriter(s), or if there are no 
managing underwriter(s), of the principal underwriter(s) of its 
offering. If the filed concurrence is not manually signed, a registrant 
must retain the manually signed underwriters' concurrence for a period 
of five years. Upon request, the registrant must provide a copy of that 
concurrence to the Commission or its staff.
* * * * *

                              Exhibit Table
------------------------------------------------------------------------
                                           Securities Act forms
                                 ---------------------------------------
                                      A         B       C \3\      S-8
------------------------------------------------------------------------
(1) Underwriting agreement......        X   ........        X   ........
(2) Plan of acquisition,
 reorganization, arrangement,
 liquidation or succession......        X   ........        X   ........
(3) Articles of Incorporation...        X   ........        X   ........
(ii) By-Laws....................        X   ........        X   ........
(4) Instruments defining the
 rights of security holders,
 including indentures...........        X         X         X         X
(5) Opinion re legality.........        X         X         X         X
(6) [Removed and reserved]......  ........  ........  ........  ........
(7) [Removed and reserved]......  ........  ........  ........  ........
(8) Opinion re tax matters......        X         X         X   ........
(9) Voting trust agreement......        X   ........        X   ........
(10) Materials contracts........        X   ........        X   ........
(11) Statement re computation of
 per share earnings.............        X   ........        X   ........
(12) Statements re computation
 of ratios......................        X   ........        X   ........
(13) Annual report to security
 holders, Form 10-Q or quarterly
 report to security holders\1\..        X   ........        X   ........
(14) [Removed and reserved].....  ........  ........  ........  ........
(15) Letter re unaudited interim
 financial information..........        X   ........        X         X
(16) Letter re change in
 certifying accountant..........    X \4\   ........    X \4\   ........
(17) Letter re director
 resignation....................  ........  ........  ........  ........
(18) Letter re change in
 accounting principles..........  ........  ........  ........  ........
(19) Report furnished to
 security holders...............  ........  ........  ........  ........
(20) Other documents or
 statements to security holders.  ........  ........  ........  ........
(21) Subsidiaries of the
 registrant.....................        X   ........        X   ........
(22) Published matters regarding
 matters submitted to vote of
 security holders...............  ........  ........  ........  ........
(23) Consents of experts and
 counsel \2\....................        X         X         X         X
(24) Power of attorney..........        X   ........        X         X
925) Statement of eligibility of
 trustee........................        X         X         X   ........
(26) Invitation for competitive
 bids...........................        X   ........        X   ........
(27) Financial Data Schedule \5\        X   ........        X   ........
(28) [Removed and Reserved].....  ........  ........  ........  ........
(29) Underwriter Concurrence
 with Effective Date............        X         X   ........  ........
[Reserved (30) through (98)]....  ........  ........  ........  ........
(99) Additional Exhibits........  ........  ........        X         X
------------------------------------------------------------------------
\1\ Where incorporated by reference into the text of the prospectus and
  delivered to security holders along with the prospectus as permitted
  by the registration statement; or, in the case of the Form 10-K, where
  the annual report to security holders is incorporated by reference
  into the text of the Form 10-K.

[[Page 67268]]

 
\2\ Where the opinion of the expert or counsel has been incorporate by
  reference into a previously filed Securities Act registration
  statement
\3\ An exhibit need not be provided about a company if
(a) the company meets the requirements of General Instruction I.A.,
  I.B., I.C.1 of Form B; and
(b) The Exhibit would not have been required to be filed if the Company
  was registering a primary offering on Form B.
\4\ If required pursuant to item 304 of Regulation S-K.
\5\ Financial Data Schedules shall be filed by electronic filers only.
  Such schedule shall be filed only when a filing includes annual and/or
  interim financial statements that have not been previously included in
  a filing with the Commission. See Item 601 of Regulation S-K.

    23. By amending Securities Act Industry Guide 5 (referenced in 
Sec. 229.801(e)) by removing from paragraph 16 the words ``Form S-1 or 
S-11'' and adding, in their place, the words ``Form A (Sec. 239.4 of 
this chapter)'' and by revising paragraph 19.D. to read as follows:

    Note: The text of Securities Act Industry Guide 5 does not and 
this amendment will not appear in the Code of Federal Regulations.
* * * * *

Guide 5

* * * * *

19. Summary of promotional and sales material

* * * * *
    D.(1) The registrant or any offering participant must, before its 
use, provide the Commission staff supplementally any written sales 
material that it intends to furnish investors. This includes all 
materials described in paragraph B. The registrant or the offering 
participant need not, however, supplementally provide the staff with 
sales material if:
    (i) the offering is registered on Form A and the registrant meets 
the requirements of General Instruction VIII. of that Form;
    (ii) the offering is registered on Form B;
    (iii) the staff has notified the registrant that its registration 
statement will not be reviewed; or
    (iv) the sales material is used only internally.
    (2) For purposes of this paragraph, sales material includes all 
marketing memoranda that are sent by the General Partner or its 
affiliates to broker/dealers or other sales personnel and may include 
material labeled ``for broker/dealers use only.'' Staff comments, if 
any, will be promptly communicated to the registrant. The registrant 
should contact the staff before using any sales material that has been 
submitted to the staff.

    Note to paragraph 19.D.: You should read Securities Act Rule 
425. Sales materials may be required to be filed under that Rule.

    24. By amending part 229 to add subpart 229.1100 to read as 
follows:

Subpart 229.1100--Real Estate Interests

229.1101  (Item 1101) Definitions.
229.1101 (Item 1102) Limitations on transfer.
229.1103 (Item 1103) Summary risk factor information.
229.1104 (Item 1104) Organization.
229.1105 (Item 1105) Operating and financing activities.
229.1106 (Item 1106) Real estate and other investment activities.
229.1107 (Item 1107) Description of real estate and operating data.
229.1108 (Item 1108) Tax treatment of you and your investors.
229.1109 (Item 1109) Certain relationships and related transactions.
229.1110 (Item 1110) Selection, management and custody of 
investments.
229.1111 (Item 1111) Conflict of interest policies.
229.1112 (Item 1112) Limitations of liability.
229.1113 (Item 1113) Sales to special parties.

Subpart 229.1100--Real Estate Interests


Sec. 229.1101  (Item 1101) Definitions

    For purposes of this subpart 229.1100 of Regulation S-K:
    (a) You are a real estate entity if you:
    (1) Are a real estate investment trust under Section 856 of the 
Internal Revenue Code (26 U.S.C. 856(a)); or (2) Invest in real estate, 
interests in real estate, or securities of other real estate investors 
as your primary business.

Instruction to Item 1101(a)

    ``Real estate entity'' does not include any issuer that is an 
investment company registered or required to register under the 
Investment Company Act of 1940.

    (b) Affiliated person means:
    (1) Your directors and officers;
    (2) Any person directly or indirectly controlling or under direct 
or indirect common control with you;
    (3) Any record owner who owns, or anyone you know who beneficially 
owns, 10 percent or more of any class of your equity securities;
    (4) Any promoter directly or indirectly connected with you in any 
capacity;
    (5) Principal underwriters of securities being registered;
    (6) People performing management or advisory services; and (7) Any 
associate of any of these people.


Sec. 229.1102  (Item 1102) Limitations on transfer.

    Disclose on the cover page of the prospectus any limitations on the 
transfer of the securities you are offering. If no market exists for 
the securities, so state on the cover page. If a market does exist, 
disclose in the prospectus the nature of the market and the market 
price as of the latest practicable date before the filing of the 
registration statement or an amendment to the registration statement.


Sec. 229.1103  (Item 1103) Summary risk factor information.

    In a series of concise bullets or paragraphs, present a summary of 
the risk factors of the offering. Address the following, if 
appropriate:
    (a) A comparison of the percentage of securities being offered to 
the public and those issued or to be issued to affiliated person;
    (b) The extent to which security holders can be liable for your 
acts or obligations;
    (c) The allocation of cash distributions between investors who are 
affiliated persons and those investors who are not affiliated persons; 
and
    (d) The compensation and benefits affiliated persons will receive, 
directly or indirectly. With respect to underwriters, include a 
comparison of the aggregate compensation and benefits to be received by 
them with the aggregate net proceeds from the sale of the securities 
being registered.


Sec. 229.1104  (Item 1104) Organization.

    (a) Provide the following information:
    (1) Your name and form of organization;
    (2) The State or other jurisdiction whose laws govern your 
organization;
    (3) The date your governing instruments became operative; and
    (4) The date on which your governing instruments will expire, if 
any and, if you may be finite life as defined in Item 901 of Regulation 
S-K, your planned time period for holding your assets.
    (b) Outline any provisions of your governing instruments that 
provide that your duration or planned investment holding period may be 
shortened or extended.
    (c) Summarize the provisions of your governing instruments, or any 
policy or proposed policy, relating to the holding of annual or other 
meetings of investors.
    (d) If you were organized within the last five years, name all 
promoters. Indicate whether each promoter holds any position or intends 
to hold any position with you.

[[Page 67269]]

Sec. 229.1105  (Item 1105) Operating and financing activities.

    For each of the following activities, describe your and your 
subsidiaries' policy or proposed policy, indicate if you may change 
each policy without a vote of investors, and indicate the extent to 
which you have engaged in each activity.
    (a) Issue securities senior to the securities you are offering;
    (b) Borrow money;
    (c) Make loans. Purchasing a portion of publicly distributed bonds, 
debentures or other securities, in the original distribution, or 
otherwise, is not making a loan;
    (d) Invest in another issuer's securities in order to exercise 
control;
    (e) Underwrite other issuer's securities;
    (f) Purchase, sell or trade investments;
    (g) Offer securities in exchange for property;
    (h) Repurchase or otherwise reacquire your securities; and
    (i) Provide annual or other reports to investors. Indicate what the 
reports will cover and whether they will include audited financial 
statements.
    Instruction to Item 1105.

    Include a separate description of your policy for each activity. 
If you will not engage in a particular activity, specifically state 
that you will not.


Sec. 229.1106  (Item 1106) Real estate and other investment activities.

    (a) Describe the types of real estate investments you intend to 
make and indicate whether you can change this plan without a vote of 
investors.
    (b) Describe the principles and procedures you and your 
subsidiaries will use in investing in the assets.
    (c) Disclose the percentage of your and your subsidiaries' assets 
you may invest in any one type of investment.
    (d) You should include the information below if you or your 
subsidiaries might invest in the following types of assets:
    (1) Investments in real estate or real estate interests. (i) 
Identify the geographic areas where you intend to invest;
    (ii) Describe the types of real estate in which you may invest, 
such as office buildings, apartment buildings, shopping centers, 
industrial and commercial properties, special purpose buildings or 
undeveloped land;
    (iii) Describe how you intend to operate and finance your real 
estate. Disclose any limit on the number or amount of mortgages you may 
place on any one piece of property;
    (iv) Specifically state whether your policy is to acquire assets 
primarily for income or capital gain; and
    (v) Disclose your policy as to the amount or percentages of your 
assets you may invest in any one property;
    (2) Investments in real estate mortgages and mortgage-backed 
securities. (i) Describe the types of mortgages you may invest in, such 
as first or second mortgages. Disclose whether the mortgages are 
guaranteed, and if so, by whom;
    (ii) Describe your policy as to the amount or percentage of assets 
you may invest in any single mortgage;
    (iii) Describe each type of mortgage activity in which you intend 
to engage, such as originating or servicing mortgages;
    (iv) Describe how long you anticipate holding these investments;
    (v) Indicate the types of properties subject to mortgages in which 
you intend to invest, such as, single family homes, apartment 
buildings, office buildings, bowling alleys, commercial properties or 
undeveloped land; and
    (vi) Identify the geographic areas where the property underlying 
the mortgages is located.
    (3) Securities of or interests in other real estate investors. (i) 
Describe the types of securities or other interests in persons engaged 
in real estate activities in which you may invest, such as common 
stock, limited partnership interests, interests in real estate 
investment trusts, mortgage-backed securities and joint venture 
interests;
    (ii) Disclose your policy as to the amount or percentage of your 
assets you may invest in each type of security or interest and the 
amount or percentage of your assets you may invest in any one issuer;
    (iii) Describe the investment policies and primary activities of 
persons in which you will invest, such as mortgage sales, investment in 
office buildings or investment in undeveloped land; and
    (iv) State your criteria for the purchase of these securities or 
interests, such as securities listed on a national securities exchange, 
minimum net income requirements, period of operation of issuer or 
rating of security.
    (e) Indicate the type of other securities (e.g., bonds, preferred 
stocks, common stocks) and the industry groups in which you may invest 
and the percentage of your assets which you may invest in each type or 
industry group. Describe how you will acquire these assets.


Sec. 229.1107  (Item 1107) Description of real estate and operating 
data.

    Provide the following information separately for each material real 
estate interest. For all other real estate interests, provide the 
following information by classes or groups of properties that 
reasonably convey the required disclosure:
    (a) For real estate interests in which you or your subsidiaries now 
invest or intend to invest:
    (1) State the location and describe the general character;
    (2) Identify the present and proposed use and discuss whether the 
real estate interests are suitable and adequate for the present or 
proposed use;
    (3) Describe your title to or interest in the real estate;
    (4) For each material mortgage, lien or other encumbrance:
    (i) Disclose the principal amount;
    (ii) Describe the interest and amortization provisions;
    (iii) Describe the prepayment provisions;
    (iv) Discuss any cross collateralization or cross default 
provisions;
    (v) Identify the maturity date; and
    (vi) Quantify the balance due at maturity assuming no prepayment of 
principal;
    (5) Disclose principal lease terms;
    (6) Outline the terms of any option or contract to purchase or sell 
the real estate interests;
    (7) Briefly discuss proposed renovation, development or improvement 
programs. Quantify the cost of these programs. If you do not have any 
plans, state that you have no plan and indicate why you are investing 
or will invest in the real estate;
    (8) Describe the general competitive conditions in the markets in 
which the real estate interests or the underlying properties are 
operated; and
    (9) State whether management believes that the real estate interest 
or the underlying properties are adequately covered by insurance.
    (b) For each improved material real estate interest in which you or 
your subsidiaries now invest or intend to invest:
    (1) Occupancy rate, as a percentage of rentable square footage or 
units, for each of the past five years;
    (2) Average annual effective rent paid per square foot or per unit 
for each of the past five years;
    (3) The following schedule of lease expirations in each of the next 
ten years:

[[Page 67270]]



----------------------------------------------------------------------------------------------------------------
                                                     (A) Total       (B) Area                     (D) Percentage
                                                     number of      covered by      (C) Annual       of gross
                      Year                         tenants with      expiring        rental of     annual rental
                                                      leases        leases (sq.      expiring      for expiring
                                                     expiring          feet)        leases ($)        leases
----------------------------------------------------------------------------------------------------------------
Year in which filing is made....................
Second Year.....................................
***.............................................
***.............................................
***.............................................
Tenth Year......................................
----------------------------------------------------------------------------------------------------------------

    (4) The number of tenants that occupy ten percent or more of the 
rentable square footage, the main business of those tenants and the 
principal provisions of their lease including, but not limited to, 
annual rent, the expiration date and any renewal option;
    (5) The principal businesses, occupations or professions conducted 
at the property underlying the real estate interest;
    (6) The Federal tax basis, rate, depreciation method and life 
claimed for each real estate interest or component for which you charge 
depreciation; and
    (7) The realty tax rate, annual realty taxes and estimated taxes on 
any proposed improvement.
    Instructions to Item 1107.

    1. You need not provide detailed legal and physical descriptions 
of your real estate interest. Rather, you should disclose all 
information necessary for an investor to evaluate and understand 
your real estate interests. We encourage tabular presentation.
    2. A material real estate interest is one that:
    (a) Has a book value representing ten percent or more of your 
total assets, including assets of your consolidated subsidiaries; or
    (b) Produced gross revenue in the last fiscal year that was ten 
percent or more of your total revenues for the last fiscal year, 
including revenues of your consolidated subsidiaries.


Sec. 229.1108  (Item 1108) Tax treatment of you and your investors.

    Describe material Federal income tax consequences for you, your 
subsidiaries and your investors including a discussion of:
    (a) Your and your subsidiaries' treatment under Federal income tax 
laws;
    (b) The treatment of distributions to investors under Federal 
income tax laws, including gains from the sale of securities or real 
estate interests in excess of annual net income; and
    (c) The tax treatment of any exchange of securities for real estate 
interests or other securities.


Sec. 229.1109 (Item 1109)  Certain relationships and related 
transactions.

    Disclose the aggregate depreciation claimed by the seller for 
Federal income tax purposes if:
    (a) You provide any information required by Instruction 5 to Item 
404(a) of Regulation S-K; and
    (b) The assets had been acquired by the seller within five years 
prior to the Item 404 of Regulation S-K transaction.


Sec. 229.1110  (Item 1110) Selection, management and custody of 
investments.

    (a) Describe any arrangements you or your subsidiaries have made or 
propose to make with respect to the following. If any of the persons 
performing these services is a corporation or other organization, 
include the name and principal occupations during the last five years 
of each principal executive officer of such corporation or other 
organization:
    (1) Management of your real estate interests, including arranging 
for purchases, sales, leases, maintenance and insurance;
    (2) The purchase, sale and servicing of your mortgages; and
    (3) Investment advisory services.
    (b) If any of these services in paragraph (a) of this Item will be 
performed by any affiliated person, other than an officer or director 
performing the services in that capacity with no additional 
compensation, furnish the following information about each person:
    (1) Name and address;
    (2) Nature of principal business;
    (3) Principal occupations during the last five years;
    (4) Nature of all existing direct or indirect material interests in 
or business connections with you or any of your affiliated person;
    (5) Nature of all services rendered to you; and
    (6) Compensation received from you and your subsidiaries, directly 
or indirectly, during your last fiscal year and the capacities in which 
this remuneration was received.


Sec. 229.1111  (Item 1111) Conflict of interest policies.

    Outline your policies and provisions of your governing instruments 
which limit any person from any of the following:
    (a) Having any financial interest in any investment you or any of 
your subsidiaries will acquire or dispose of or in any transaction to 
which you or any of your subsidiaries are a party or have an interest; 
and
    (b) Engaging for their own account in business activities of the 
types you and your subsidiaries conduct or will conduct.


Sec. 229.1112  (Item 1112) Limitations of liability.

    Outline the principal provisions of your governing instruments or 
of any contract or arrangement to which you or a subsidiary are a party 
that limit the liability of affiliated person or any of their 
directors, officers or employees. Indicate the effect of Section 14 of 
the Act (15 U.S.C. 77n) upon any provision broad enough to cover 
liability arising under the Act.


Sec. 229.1113  (Item 1113) Sales to special parties.

    Name each person or specify each class of persons (other than 
underwriters or dealers, acting in that capacity) to whom you or your 
subsidiaries have sold securities within the past six months or are 
going to sell securities at a different price than you are offering the 
same class of securities pursuant to this registration statement. Also 
provide this information with respect to any selling security holder 
registering securities pursuant to this registration statement. State 
the consideration given or to be given by each of these persons or 
class.

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

    By revising the general authority citation for part 230 to read in 
part as follows:

    Authority: 15 U.S.C. 77b, 77c, 77d, 77f, 77g, 77h, 77j, 77r, 
77s, 77sss, 77z-3, 78c, 78d,

[[Page 67271]]

78l, 78m, 78n, 78o, 78t, 78w, 78ll(d), 78mm, 79t, 80a-8, 80a-24, 
80a-28, 80a-29, 80a-30, and 80a-37, unless otherwise noted.
* * * * *
    26. By revising paragraph (d) of Sec. 230.110 to read as follows:


Sec. 230.110  Business hours of the Commission.

* * * * *
    (d) Filings by facsimile. Registration statements, post-effective 
amendments and prospectuses, filed pursuant to Secs. 230.425(c), 
230.462(a), (b), (e) or (f) may be filed by facsimile transmission with 
the Commission any day (except Saturdays, Sundays and federal holidays) 
from 5:30 p.m. to 10 p.m. Eastern Standard Time or Eastern Daylight 
Savings Time, whichever is currently in effect.
    By revising the introductory text of paragraph (b) of Sec. 230.111 
to read as follows:


Sec. 230.111  Payment of fees.

* * * * *
    (b) Notwithstanding paragraph (a) of this section, payment of 
filing fees for registration statements filed pursuant to 
Secs. 230.462(b), (e), or (f) between the hours of 5:30 p.m. and 10 
p.m. Eastern Standard Time or Eastern Daylight Savings Time, whichever 
is currently in effect may be made by:
* * * * *
    By amending Sec. 230.134 by revising the section heading and the 
introductory text, the introductory text of paragraph (a) and 
paragraphs (a)(3), (a)(13), (a)(14)(i), (b)(1), and (e) to read as 
follows:


Sec. 230.134  Registered investment company communications not deemed a 
prospectus.

    The term prospectus as defined in Section 2(10) of the Act (15 
U.S.C. 77b(10)) does not include a notice, circular, advertisement, 
letter, or other communication published or transmitted to any person 
after a registration statement has been filed by an investment company 
registered under the Investment Company Act of 1940 (15 U.S.C. 80a-1--
80(a)-64) (``fund'') if the communication contains only the statements 
required or permitted by this section.
    (a) The communication may include any one or more of the following 
items of information, in any order:
* * * * *
    (3)(i) The fund's classification and subclassification under the 
Investment Company Act of 1940, the type or category of fund and 
whether in the selection of investments emphasis is placed upon income 
or growth characteristics, and a general description of an investment 
company including its general attributes, methods of operation and 
services offered provided that such description is not inconsistent 
with the operation of the particular fund for which more specific 
information is being given, identification of the fund's investment 
adviser, any logo, corporate symbol or trademark of the fund or its 
investment adviser and any graphic design or device or an attention-
getting headline, not involving performance figures, designed to direct 
the reader's attention to textual material included in the 
communication pursuant to other provisions of this section; and, with 
respect to a fund issuing redeemable securities:
    (A) A description of the fund's investment objectives and policies, 
services, and method of operation;
    (B) Identification of the fund's principal officers;
    (C) The year of incorporation or organization or period of 
existence of the fund, its investment adviser, or both;
    (D) The fund's aggregate net asset value as of the most recent 
practicable date;
    (E) The aggregate net asset value as of the most recent practicable 
date of all funds under the management of the fund's investment 
adviser;
    (F) Any pictorial illustration that is appropriate for inclusion in 
the fund's prospectus and not involving performance figures;
    (G) Descriptive material relating to economic conditions, or to 
retirement plans or other goals to which an investment in the fund 
could be directed, but not directly or indirectly relating to past 
performance or implying achievement of investment objectives; and
    (H) Written notice of the terms of an offer made solely to all 
registered holders of the securities, or of a particular class or 
series of securities, issued by the fund proportionate to their 
holdings, offering to sell additional shares to such holders of 
securities at prices reflecting a reduction in, or elimination of, the 
regular sales load charged: Provided that, if any printed material 
permitted by paragraphs (a)(3)(i) (A) through (H) of this section is 
included, or if any material permitted by paragraphs (a)(3)(i) (A) 
through (G) of this section is used in a radio or television 
advertisement, the communication shall also contain the following 
legend given emphasis no less than that used in the major portion of 
the advertisement:

    For more complete information about [Name of Fund] including 
charges and expenses [get] [obtain] [send for] a prospectus [from 
(Name and Address)] [by sending this coupon]. Read it carefully 
before you invest or [pay] [forward funds] [send money].

    (ii) For purposes of paragraph (a)(3)(i)(B) of this section, 
principal officers means the president, secretary, treasurer, any vice-
president in charge of a principal business function and any other 
person who performs similar policy making functions for the fund on a 
regular basis.
    (iii) In the case of two or more funds having the same investment 
adviser or principal underwriter, the same information described in 
paragraph (a)(3)(i) may be included as to each such fund in a joint 
communication on the same basis as it is permitted in communications 
dealing with individual funds under paragraph (a)(3)(i).
* * * * *
    (13) Offers, descriptions and explanations of any products and 
services not constituting securities subject to registration under the 
Act, and descriptions of corporations. The offers, descriptions and 
explanations may not relate directly to the desirability of owning or 
purchasing a security issued by a fund and all direct references to a 
security issued by a fund may contain only the statements required or 
permitted to be included by the other provisions of this section and 
must be placed in a separate and enclosed area in the communication.
    (14)(i) With respect to any class of debt securities, any class of 
convertible debt securities or any class of preferred stock, the 
security rating or ratings assigned to the class of securities by any 
nationally recognized statistical rating organization and the name or 
names of the nationally recognized statistical rating organization(s) 
that assigned such rating(s).
* * * * *
    (b) * * *
    (1) If the registration statement has not yet become effective, the 
following statement:

    A registration statement relating to these securities has been 
filed with the Securities and Exchange Commission but has not yet 
become effective. These securities may not be sold nor may offers to 
buy be accepted prior to the time the registration statement becomes 
effective. This [communication] shall not constitute an offer to 
sell or the solicitation of an offer to buy.
* * * * *
    (e) In the case of a fund that holds itself out as a ``money market 
fund,'' a communication used under this section shall contain the 
disclosure required by Sec. 230.482(a)(7).

[[Page 67272]]

    By revising Sec. 230.135 to read as follows:


Sec. 230.135  Notice of proposed offerings.

    (a) All Offerings. For purposes of Section 5 of the Act (15 U.S.C. 
77e) only, an issuer or a selling security holder (and any person 
acting on behalf of either of them) that publishes through any medium a 
notice of a proposed offering will not be deemed to offer its 
securities for sale through that notice if:
    (1) Legend. The notice includes a statement to the effect that it 
does not constitute an offer of any securities for sale; and
    (2) Limited notice content. The notice otherwise includes no more 
than the following information:
    (i) The name of the issuer;
    (ii) The title, amount and basic terms of the securities offered;
    (iii) The amount of the offering, if any, to be made by selling 
security holders;
    (iv) The anticipated timing of the offering;
    (v) A brief statement of the manner and the purpose of the 
offering;
    (vi) Whether the issuer is directing its offering to only a 
particular class of purchasers;
    (vii) Any statements or legends required by the laws of any state 
or foreign country or administrative authority; and
    (viii) In the following offerings, the notice may contain 
additional information, as follows:
    (A) In a rights offering to existing security holders:
    (1) The class of security holders eligible to subscribe;
    (2) The subscription ratio and expected subscription price;
    (3) The proposed record date;
    (4) The anticipated issuance date of the rights; and
    (5) The subscription period or expiration date of the rights 
offering.
    (B) In an offering to employees of the issuer or an affiliated 
company:
    (1) The name of the employer;
    (2) The class of employees being offered the securities;
    (3) The offering price; and
    (4) The duration of the offering period.
    (C) In an exchange offer:
    (1) The basic terms of the exchange offer;
    (2) The name of the subject company; and
    (3) The subject class of securities.
    (b) Corrections of misstatements about the offering. A person that 
publishes a notice in reliance on this section may issue a notice that 
contains no more information than is necessary to correct inaccuracies 
published about the proposed offering.
    (c) Rule 145(a) offerings. For purposes of Section 5 of the Act (15 
U.S.C. 77e) only, an issuer or a selling security holder (and any 
person acting on behalf of either of them) that publishes through any 
medium a notice of a transaction described in paragraph (a) of 
Sec. 230.145 will not be deemed to offer its securities for sale 
through that notice if:
    (1) Legend. The notice includes a statement to the effect that it 
does not constitute an offer of any securities for sale;
    (2) Limited notice content. The notice otherwise includes no more 
than the following information:
    (i) The name of the issuer;
    (ii) The name of the person whose assets are to be sold in exchange 
for the securities to be offered;
    (iii) The names of any other parties to the transaction;
    (iv) A brief description of the business of the parties to the 
transaction;
    (v) The date, time and place of the meeting of security holders to 
vote on or consent to the transaction;
    (vi) A brief description of the transaction and the basis upon 
which the transaction will be made; and
    (vii) Any statements or legends required by the laws of any state 
or foreign country or administrative authority.


Sec. 230.135c  [Removed and Reserved]

    30. By removing and reserving Sec. 230.135c.
    31. By amending Sec. 230.135e by revising paragraph (b)(1) to read 
as follows:


Sec. 230.135e  Offshore press conferences, meetings with issuer 
representatives conducted offshore, and press-related materials 
released offshore.

* * * * *
    (b) * * *
    (1) State that:
    (i) The written press-related materials are not an offer of 
securities for sale in the United States;
    (ii) The securities may not be offered or sold in the United States 
absent registration or an exemption from registration; and
    (iii) Any registered public offering to be made in the United 
States will involve a registration statement that will contain 
information about the company and management, as well as financial 
statements.
* * * * *
    32. By revising Sec. 230.137 to read as follows:


Sec. 230.137  Publications by brokers or dealers that are not 
participating in a registrant's distribution of securities.

    Under the following conditions, a broker or dealer shall not be 
considered an underwriter as defined in Section 2(a)(11) of the Act (15 
U.S.C. 77b(a)(11)) solely because it publishes or distributes 
information, an opinion or a recommendation with respect to the 
securities of a registrant that proposes to file, has filed, or has an 
effective registration statement under the Act:
    (a) The broker or dealer is not participating, and does not propose 
to participate, in the distribution of the registered securities;
    (b) The issuer is not:
    (1) A development stage company that either has no specific 
business plan or purpose or has indicated that its business plan is to 
engage in a merger or acquisition with an unidentified entity or 
entities;
    (2) A shell entity having few or no assets, earnings or operations; 
or
    (3) Registering an offering of penny stock as defined in 
Sec. 240.3a51-1 of this chapter; and
    (c) In connection with its publication or distribution, the broker 
or dealer is not receiving consideration directly or indirectly from, 
or acting under any direct or indirect arrangement or understanding 
with:
    (1) The registrant;
    (2) A selling security holder;
    (3) Any participant in the distribution; or
    (4) Any other person with an interest in the securities that are 
the subject of the registration statement.
    Instruction to paragraph (c):

    This provision does not preclude payment of the regular 
subscription or purchase price of the document or other 
communication in which the broker or dealer's information, opinion 
or recommendation appears.

    33. By revising Sec. 230.138 to read as follows:


Sec. 230.138  Publications by a broker or dealer about securities other 
than those it is distributing or selling.

    (a) Registered offerings. Under the following conditions, a 
broker's or dealer's publication or distribution of information, an 
opinion or a recommendation shall be exempt from Section 5(b)(1) and 
Section 5(c) of the Act (15 U.S.C. 77e(b)(1) and (c)) even if the 
broker or dealer is participating or will participate in the 
distribution of the issuer's securities to which the registration 
statement relates:
    (1) The issuer is:
    (i) Subject to the requirements of Section 12 or 15(d) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78l or 78o(d)); or
    (ii) A foreign private issuer that satisfies the public float 
threshold in General Instruction I.C.1. of Form B (Sec. 239.5 of this 
chapter) or the public

[[Page 67273]]

float/average daily trading volume threshold in General Instruction 
I.C.1. of Form B (except measured on world-wide markets rather than 
only U.S. markets), and has equity securities trading on a designated 
offshore securities market as defined in Sec. 230.902(b);
    (2) The issuer is not:
    (i) A development stage company that either has no specific 
business plan or purpose or has indicated that its business plan is to 
engage in a merger or acquisition with an unidentified entity or 
entities;
    (ii) A shell entity having few or no assets, earnings or 
operations; or
    (iii) Registering an offering of penny stock as defined in 
Sec. 240.3a51-1 of this chapter;
    (3) The broker or dealer publishes or distributes the information, 
opinion or recommendation in the ordinary course of its business;
    (4) The publication prominently describes the capacity in which the 
broker or dealer is participating in the distribution; and
    (5) The information, opinion or recommendation relates to:
    (i)(A) An issuer's common stock, or debt or preferred stock 
convertible into common stock; and
    (B) The issuer proposes to file a registration statement, has filed 
a registration statement, or has an effective registration statement 
relating to non-convertible debt securities or non-convertible, 
nonparticipating preferred stock; or
    (ii)(A) An issuer's non-convertible debt securities or non-
convertible, nonparticipating preferred stock; and
    (B) The issuer proposes to file a registration statement, has filed 
a registration statement, or has an effective registration statement 
relating solely to common stock or debt or preferred stock convertible 
into common stock.
    (b) Certain unregistered offerings. (1) If the conditions set forth 
in paragraph (a)(1), (a)(2), (a)(3), (a)(4), (b)(2) and (b)(3) of this 
section are satisfied, a broker's or dealer's publication or 
distribution of information, an opinion or a recommendation:
    (i) Shall not constitute directed selling efforts as defined in 
Sec. 230.902(c);
    (ii) Shall not be inconsistent with an offshore transaction as 
defined in Sec. 230.902(h); and
    (iii) Shall be an exception to the prohibition against offers to 
persons other than qualified institutional buyers in 
Sec. 230.144A(d)(1)(i).
    (2) The broker or dealer publishes or distributes the information, 
opinion or recommendation in a publication that is distributed with 
reasonable regularity in the ordinary course of business.
    (3) The information, opinion or recommendation relates to:
    (i)(A) An issuer's common stock, or debt or preferred stock 
convertible into common stock; and
    (B) The issuer proposes to offer or is offering solely non-
convertible debt securities or non-convertible, nonparticipating 
preferred stock; or
    (ii)(A) An issuer's non-convertible debt securities or non-
convertible, nonparticipating preferred stock; and
    (B) The issuer proposes to offer or is offering solely common stock 
or debt or preferred stock convertible into common stock.
    34. By revising Sec. 230.139 to read as follows:


Sec. 230.139  Publications by brokers or dealers distributing 
securities.

    (a) Registered offerings. Under the following conditions, a 
broker's or dealer's publication or distribution of information, an 
opinion or a recommendation shall be exempt from Section 5(b)(1) and 
Section 5(c) of the Act (15 U.S.C. 77e(b)(1) and (c)) even if the 
broker or dealer is participating or will participate in the 
distribution of the issuer's securities to which a registration 
statement relates:
    (1) Seasoned issuers; larger foreign issuers; foreign government 
issuers. (i) The issuer:
    (A) Has been subject to the requirements of Section 13 or 15(d) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78l or 78o(d)) for at 
least one year and has filed all reports it was required to file 
pursuant to Section 13, 14 or 15(d) of such Act (15 U.S.C. 78m, 78n or 
78o(d)) during the last year;
    (B) Is a foreign private issuer that:
    (1) Is not subject to the requirements of Section 13 or 15(d) of 
the Exchange Act;
    (2) Satisfies the public float threshold in General Instruction 
I.C.1. of Form B (Sec. 239.5 of this chapter) or the public float/
average daily trading volume threshold in General Instruction I.C.1. of 
Form B (except measured on markets worldwide rather than only U.S. 
markets); and
    (3) Has had equity securities trading on a designated offshore 
securities market (as defined in Sec. 230.902(b)) for at least one 
year;
    (C) Is a foreign government issuer eligible to register on Schedule 
B (15 U.S.C. 77aa), if the offering is a firm commitment underwritten 
offering in excess of $250 million in securities;
    (ii) The issuer is not:
    (A) A development stage company that either has no specific 
business plan or purpose or has indicated that its business plan is to 
engage in a merger or acquisition with an unidentified entity or 
entities;
    (B) A shell entity having few or no assets, earnings or operations; 
or
    (C) Registering an offering of ``penny stock'' as defined in 
Sec. 240.3a51-1 of this chapter;
    (iii) The publication prominently describes the capacity in which 
the broker or dealer is participating in the distribution; and
    (iv) The information, opinion or recommendation is contained in a 
publication that is distributed in the ordinary course of business.
    (2) All other reporting and non-reporting issuers. (i) The 
conditions set forth in paragraphs (a)(1)(ii), (a)(1)(iii) and 
(a)(1)(iv) of this section are satisfied;
    (ii) The information, opinion or recommendation is contained in a 
publication that is distributed with reasonable regularity in the 
ordinary course of business;
    (iii) The information, opinion or recommendation is contained in a 
publication that includes similar information, opinions or 
recommendations with respect to a substantial number of issuers in the 
issuer's industry or sub-industry, or contains a comprehensive list of 
securities currently recommended by such broker or dealer;
    (iv) The information, opinion or recommendation is given no 
materially greater space or prominence in the publication than that 
given to other securities or registrants; and
    (v) If the publication contains an opinion or recommendation more 
favorable as to the issuer or any class of its securities than that 
last published by the broker or dealer prior to the commencement of 
participation in the distribution, the publication sets forth the last 
two opinions or recommendations published by the broker or dealer with 
respect to the issuer or its securities while not participating in a 
distribution by the issuer.
    (b) Certain unregistered offerings. If the conditions set forth in 
paragraph (a)(1) of this section are satisfied, a broker's or dealer's 
publication or distribution of information, an opinion or a 
recommendation, if contained in a publication that is distributed with 
reasonable regularity in the ordinary course of business:
    (1) Shall not constitute directed selling efforts as defined in 
Sec. 230.902(c);
    (2) Shall not be inconsistent with an offshore transaction as 
defined in Sec. 230.902(h); and

[[Page 67274]]

    (3) Shall be an exception to the prohibition against offers to 
persons other than qualified institutional buyers in 
Sec. 230.144A(d)(1)(i).
    Instructions to Sec. 230.139. 

    1. For purposes of paragraph (a)(2) of this section, a research 
report has not been distributed with ``reasonable regularity'' if it 
contains information, an opinion or a recommendation concerning a 
company with respect to which a broker or dealer currently is not 
publishing research.
    2. Projections constitute opinions within the meaning of this 
section.
    3. For purposes of paragraph (a)(2)(ii) of this section, where 
projections of an issuer's sales or earnings are included in a 
publication, the broker or dealer must have published the 
projections previously on a regular basis in order for the 
publication to have been distributed with reasonable regularity in 
the ordinary course of business.
    4. For purposes of paragraph (a)(2)(iii), the broker or dealer 
must have included projections with respect to either a substantial 
number of companies in the issuer's industry or sub-industry, or all 
companies represented in the comprehensive list of securities 
contained in the publication. Also, those projections may not cover 
significantly different periods with respect to the issuer as 
compared to the other companies.

    35. By amending Sec. 230.144A by redesignating paragraphs 
(d)(1)(i), (d)(1)(ii), (d)(1)(iii) and (d)(1)(iv) as paragraphs 
(d)(1)(ii)(A), (d)(1)(ii)(B), (d)(1)(ii)(C) and (d)(1)(ii)(D); and by 
adding new paragraphs (d)(1)(i) and (d)(1)(ii) introductory text to 
read as follows:


Sec. 230.144A  Private resales of securities to institutions.

* * * * *
    (d) * * *
    (1)(i) The securities are offered or sold only to a qualified 
institutional buyer or to an offeree or purchaser that the seller and 
any person acting on behalf of the seller reasonably believe is a 
qualified institutional buyer, except that if the seller is a broker or 
dealer, it may distribute information, an opinion or a recommendation 
in accordance with Sec. 230.138(b) or Sec. 230.139(b) while relying on 
this section.
    (ii) In determining whether a prospective purchaser is a qualified 
institutional buyer, the seller and any person acting on its behalf 
shall be entitled to rely upon the following non-exclusive methods of 
establishing the prospective purchaser's ownership and discretionary 
investments of securities:
* * * * *
    36. By amending Sec. 230.145 by revising the last sentence of the 
first paragraph of the Preliminary Note and paragraph (b) to read as 
follows:


Sec. 230.145  Reclassification of securities, mergers, consolidations 
and acquisitions of assets.

    Preliminary Note: * * * Issuers must register transactions 
described in paragraph (a) of Rule 145 on Form C (Sec. 239.6 of this 
chapter), Form SB-3 (Sec. 239.11 of this chapter) or Form N-14 
(Sec. 239.23 of this chapter).
* * * * *
    (b) Communications. Communications in connection with a registered 
transaction described in paragraph (a) of this section may be made in 
accordance with Secs. 230.135, 230.165, 230.166, 230.167, 230.168 or 
230.169.
* * * * *
    37. By revising Sec. 230.152 to read as follows:


Sec. 230.152  Integration of private and public offerings.

    (a) Completed private offerings; resales. (1) A completed bona fide 
private offering will not be considered part of an offering registered 
under the Act as long as the registration statement is filed after the 
completion of the private offering. At any time following the 
completion of a bona fide private offering, a registrant may register 
the securities sold in the private offering for purpose of resale by 
persons other than an affiliate or a dealer who has purchased directly 
from the issuer or an affiliate of the issuer.
    (2) For purposes of paragraph (a)(1) of this section, a private 
offering will be considered completed:
    (i) As of the date all purchasers in the private offering have paid 
the purchase price; or
    (ii) As of the date the following are true, provided that the 
transaction is not subsequently renegotiated:
    (A) All purchasers are unconditionally obligated to pay the 
purchase price, except that the purchase obligation may be contingent 
on a condition that is not within the direct or indirect control of any 
purchaser; and
    (B) The purchase price is fixed and is not contingent on the market 
price of the securities at or around the time of the registered 
offering.
    (3) For purposes of paragraph (a)(1) of this section, an offering 
of securities underlying convertible securities or warrants will be 
considered completed if the offering of the convertible securities or 
warrants to which it relates is completed. This is true regardless of 
when the convertible securities or warrants become convertible or 
exercisable.
    (4) For purposes of paragraph (a)(1) of this section, an offering 
of securities prior to the issuer's initial offering registered under 
Section 5 of the Act (15 U.S.C. 77e) will be considered completed if:
    (i) It does not raise capital for the issuer;
    (ii) It is undertaken for the sole purpose of modifying the capital 
structure of the issuer; and
    (iii) It does not involve a roll-up transaction as defined in 
Sec. 228.901(c) of this chapter.
    (b) Abandoned private offerings followed by offerings registered 
other than on Form B. A bona fide private offering of securities will 
not be considered part of an offering subsequently registered under 
Section 5 of the Act on a form other than Form B (Sec. 239.5 of this 
chapter) if:
    (1) The registrant notifies all offerees in the private offering of 
its abandonment of that offering;
    (2) The registrant does not file the registration statement for the 
registered offering until at least 30 days after it notified the 
offerees of abandonment, where the registrant (or any person acting on 
its behalf) offered securities in the private offering to any person 
ineligible to purchase in an offering in accordance with Section 4(2) 
or 4(6) of the Act (15 U.S.C. 77d(2) or 77d(6)) or Sec. 230.506;
    (3) Neither the issuer nor any person acting on its behalf offered 
the securities in the private offering by any form of general 
solicitation or general advertising (as those terms are used in 
Sec. 230.502(c));
    (4) No securities were sold in the private offering; and
    (5) One of the following conditions is met:
    (i) The registrant files any selling materials used in the private 
offering as part of the effective registration statement; or
    (ii) The registrant informs offerees in the private offering that:
    (A) The prospectus delivered in the registered offering supersedes 
any selling materials used in the private offering; and
    (B) Any indications of willingness to purchase offerees gave during 
the private offering are considered rescinded.
    (c) Abandoned public offerings followed by private offerings. An 
offering of securities for which a registration statement under the Act 
was filed or that would have been eligible to be registered on Form B 
(collectively, a ``public offering'') will not be considered part of a 
subsequent bona fide private offering if:
    (1) The issuer notifies all offerees in the public offering of its 
abandonment of that offering or, if the issuer filed a

[[Page 67275]]

registration statement for that offering, the issuer withdraws it under 
Sec. 230.477;
    (2) No securities were sold in the public offering; and
    (3) One of the following conditions is satisfied:
    (i) If the issuer (or any person acting on its behalf) first offers 
the securities in the private offering more than 30 days after 
notification of abandonment or withdrawal of the public offering, it 
notifies each purchaser in the private offering that:
    (A) The offering is not registered under the Act;
    (B) The securities are restricted and cannot be resold unless they 
are registered under the Securities Act or unless an exemption from 
registration is available; and
    (C) Investors do not have the protection of Section 11 of the Act 
(15 U.S.C. 77k).
    (ii) If the issuer (or any person acting on its behalf) first 
offers the securities in the private offering 30 or fewer days after 
notification of abandonment or withdrawal of the public offering, the 
issuer and any underwriter:
    (A) Agree in writing, in a manner enforceable by each investor 
committing to purchase in the 30-day period following abandonment or 
withdrawal of the public offering, that they will be liable for any 
material misstatements or omissions in the offering documents used in 
the private offering under the standards set by Section 11 of the Act; 
and
    (B) Agree in writing, in a manner enforceable by each investor 
committing to purchase after the 30-day period following abandonment or 
withdrawal of the public offering, that they will be liable for any 
material misstatements or omissions in the offering documents used in 
the private offering under the standards set by Section 12(a)(2) of the 
Act (15 U.S.C. 77l(a)(2)).
    (d) Definition of terms. For the purposes of this section only, a 
private offering means an unregistered offering of securities that is 
exempt from registration pursuant to Section 4(2) or 4(6) of the Act or 
Sec. 230.506 of Regulation D.


Sec. 230.153  [Removed and Reserved]

    38. By removing and reserving Sec. 230.153.
    39. By adding Sec. 230.159 to read as follows:


Sec. 230.159  Lock-up agreements.

    All offers and sales in a negotiated transaction described in 
Sec. 230.145(a) may be registered under Section 5 of the Act (15 U.S.C. 
77e) notwithstanding the fact that certain shareholders of the company 
to be acquired sign agreements with the acquiror to vote in favor of 
the transaction prior to the filing or the effective date of the 
registration statement, if:
    (a) The agreements are limited to executive officers, affiliates 
and directors of the company to be acquired, the founder(s) of that 
company and their family members, and holders of 5% or more of the 
voting equity securities of that company;
    (b) The persons signing the agreements own less than 100% of the 
voting equity securities of the company being acquired; and
    (c) Votes will be solicited from shareholders of the company to be 
acquired who:
    (1) Have not signed the agreements; and
    (2) Would be ineligible to purchase under an exemption from 
registration pursuant to Section 4(2) or 4(6) of the Act (15 U.S.C. 
77d(2) or 77d(6)) or Sec. 230.506 of Regulation D.
    40. By adding Sec. 230.165 to read as follows:


Sec. 230.165  Post-filing free writing.

    Notwithstanding Section 5(b)(1) of the Act (15 U.S.C. 77e(b)(1)), 
any prospectus used in connection with an offering after the filing of 
a registration statement need not satisfy the requirements of Section 
10 (15 U.S.C. 77j) of the Act if:
    (a) Prospectus information is delivered in accordance with 
Sec. 230.172, as applicable;
    (b) The registrant files with the Commission any prospectus used in 
reliance on this section when so required by Sec. 230.425; and
    (c) The registrant files with the Commission the information 
necessary to satisfy the requirements of Section 10(a) of the Act prior 
to the first sale in the offering.
    41. By adding Sec. 230.166 to read as follows:


Sec. 230.166  Offers made before filing a registration statement.

    (a) Form B and seasoned Schedule B offerings. Notwithstanding 
Section 5(c) of the Act (15 U.S.C. 77e(c)), an issuer, underwriter or 
participating dealer may make an offer to sell or solicit an offer to 
buy securities prior to the filing of a registration statement with 
respect to those securities if:
    (1) At the time of the offer, the registrant and the offering 
satisfy the Eligibility Requirements of Schedule B or General 
Instruction I of Form B (Sec. 239.5 of this chapter);
    (2) Either:
    (i) The offering is later registered on Form B; or
    (ii) The offering:
    (A) Is later registered on Schedule B (15 U.S.C. 77aa);
    (B) Is a firm commitment underwritten offering in excess of $250 
million in securities; and
    (C) Is registered 1 year or more after the effective date of the 
registrant's initial registered offering; and
    (3) The registrant files any prospectus used in reliance on this 
section in the period beginning 15 days before the first offer and 
ending with the filing of the registration statement when so required 
by Sec. 230.425.
    (b) Form C/SB-3 transactions. Notwithstanding Section 5(c) of the 
Act, the offeror of securities in a transaction to be registered on 
Form C, SB-3, F-8, F-80 or F-10 (Secs. 239.6, 239.11, 239.38, 239.41 or 
239.40 of this chapter) (when that form is used in a business 
combination transaction) may make an offer to sell or solicit an offer 
to buy securities before the filing of a registration statement with 
respect to those securities if:
    (1) Any prospectus relating to the transaction used in the period 
beginning with the first public announcement, and ending with the 
filing of the registration statement is filed in accordance with 
Sec. 230.425; and
    (2) In an exchange offer, the offers are made in accordance with 
the tender offer rules; and, in a transaction involving the vote of 
security holders, the offers are made in accordance with the proxy 
rules.
    42. By adding Sec. 230.167 to read as follows:


Sec. 230.167  Exemption from Section 5(c) for certain communications.

    (a) In offerings registered on Form B (Sec. 239.5 of this chapter), 
any communication made before the offering period shall not constitute 
an offer to sell or an offer to buy the securities being offered under 
the registration statement for purposes of Section 5(c) of the Act (15 
U.S.C. 77e(c)). ``Offering period'' is defined in Form B.
    (b) In offerings registered on Forms C (Sec. 239.6 of this 
chapter), SB-3 (Sec. 239.11 of this chapter), F-8 (Sec. 239.38 of this 
chapter), F-80 (Sec. 239.41 of this chapter) or F-10 (Sec. 239.40 of 
this chapter) (when Form F-10 is used in connection with a business 
combination transaction), any communication before the first 
communication related to the offering (except for communications among 
the participants in the offering) shall not constitute an offer to sell 
or an offer to buy the securities being offered under the registration 
statement for purposes of Section 5(c) of the Act, provided that the 
parties to the transaction take all

[[Page 67276]]

reasonable steps within their control to prevent further distribution 
or publication of such communication during the period between that 
first communication and the date of filing the registration statement.
    (c) In all offerings other than those described in paragraph (a) or 
(b) of this section or those registered on Form S-8 (Sec. 239.16b of 
this chapter), any communication made by an issuer, underwriter or 
participating dealer more than 30 days before the date of filing of the 
registration statement shall not constitute an offer to sell or offer 
to buy the securities being offered under the registration statement 
for purposes of Section 5(c) of the Act, provided that the issuer, 
underwriter(s) or participating dealer(s) take all reasonable steps 
within their control to prevent further distribution or publication of 
such communication during the 30 days immediately preceding the date of 
filing the registration statement.
    43. By adding Sec. 230.168 to read as follows:


Sec. 230.168  Regularly released forward-looking information.

    (a) Except in connection with offerings registered on Form S-8, C, 
SB-3, F-8, F-80 or F-10 (when that form is used in a business 
combination transaction), (Sec. 239.16b, 239.6, 239.11, 239.38, 239.41 
or 239.40 of this chapter) in a registered offering by an issuer that 
is subject to the requirements of Section 12 or 15(d) of the Exchange 
Act (15 U.S.C. 78l or 78o(d)), the dissemination of regularly released 
forward-looking information by an issuer, underwriter or participating 
dealer in the 30-day period immediately preceding the filing of a 
registration statement shall be exempt from the prohibitions on offers 
to sell or offers to buy set forth in Section 5(c) of the Act (15 
U.S.C. 77e(c)), if the registrant files any prospectus used in reliance 
on this section when so required by Sec. 230.425.
    (b) In an offering registered on Form S-8, C, SB-3, F-8, F-80 or F-
10 (when that form is used in a business combination transaction) by an 
issuer that is subject to the requirements of Section 12 or 15(d) of 
the Exchange Act, the dissemination of regularly released forward-
looking information by an issuer, underwriter or participating dealer 
in the period after the public announcement of the offering and prior 
to the filing of the registration statement shall be exempt from the 
prohibitions on offers to sell or offers to buy in Section 5(c) of the 
Act, if the registrant files any prospectus used in reliance on this 
section when so required by Sec. 230.425.
    (c) For purposes of this section, ``regularly released forward-
looking information'' includes the information listed in paragraphs 
(c)(1) through (c)(4) of this section, if the issuer customarily 
releases information of this type in the ordinary course of business on 
a regular basis, it has done so in the two fiscal years (and any 
portion of a fiscal year) immediately prior to the communication, and 
the time, manner and form in which it is released is consistent with 
past practice:
    (1) Projections of the issuer's revenues, income (loss), earnings 
(loss) per share, capital expenditures, dividends, capital structure or 
other financial items;
    (2) Statements about the issuer management's plans and objectives 
for future operations, including plans or objectives relating to the 
products or services of the issuer;
    (3) Statements about the issuer's future economic performance of 
the type contemplated by the management's discussion and analysis of 
financial condition and results of operation described in Sec. 229.303 
of this chapter or Item 9 of Form 20-F (Sec. 249.220f of this chapter); 
and
    (4) Assumptions underlying or relating to any of the information 
described in paragraphs (c)(1), (c)(2) and (c)(3) of this section.
    By adding Sec. 230.169 to read as follows:


Sec. 230.169  Factual business communications.

    (a) Except in connection with offerings registered on Form S-8, C, 
SB-3, F-8, F-80 or F-10 (when that form is used in a business 
combination transaction), (Secs. 239.16b, 239.6, 239.11, 239.38, 239.41 
or 239.40 of this chapter), factual business communications made by an 
issuer, underwriter or participating dealer in the 30-day period 
immediately preceding the filing of a registration statement with 
respect to a registered offering shall be exempt from the prohibitions 
on offers to sell and offers to buy in Section 5(c) of the Act (15 
U.S.C. 77e(c)).
    (b) In an offering registered on Form S-8, C, SB-3, F-8, F-80 or F-
10 (when that form is used in a business combination transaction), 
factual business communications made by an issuer, underwriter or 
participating dealer after the public announcement of the offering and 
prior to the filing of the registration statement shall be exempt from 
the prohibition on offers to sell and offers to buy in Section 5(c) of 
the Act.
    (c) For purposes of this section, factual business communications 
include:
    (1) Factual information about the issuer or some aspect of its 
business;
    (2) Advertisement of the issuer's products or services;
    (3) Factual business or financial developments with respect to the 
issuer;
    (4) Dividend notices;
    (5) Factual information set forth in any Exchange Act report the 
issuer is required to file; and
    (6) Factual information communicated in response to unsolicited 
inquiries by persons that are not affiliates of the issuer, underwriter 
or participating dealer.
    (d) For purposes of this section, factual business communications 
do not include:
    (1) Information about the registered offering; or
    (2) Forward-looking information.
    45. By adding Sec. 230.172 to read as follows:


Sec. 230.172  Delivery of prospectus information.

    The issuer, selling security holders, any underwriter, any 
participating broker or dealer, and any person acting on behalf of any 
of them, must deliver prospectus information to each person offered 
securities in connection with an offering registered under the Act as 
follows:
    (a) Form B and Schedule B seasoned registrants. If the registrant 
is offering securities as described in paragraph (a)(1) of this 
section, then delivery under paragraph (a)(2) of this section must be 
made.
    (1) Securities in an offering registered on:
    (i) Form B (Sec. 239.5 of this chapter), other than pursuant to 
General Instruction I.C.6. of Form B; or
    (ii) Schedule B (15 U.S.C. 77aa), where it is a firm commitment 
underwritten offering in excess of $250 million in securities that is 
registered more than one year after the effective date of the 
registrant's initial registered offering;
    (2) A term sheet prospectus that contains the following information 
must be sent in a manner reasonably designed to arrive before the date 
an investor makes a binding investment decision:
    (i) An itemization of the material terms of the securities in 
summary format;
    (ii) The name of any person, other than the issuer, for whose 
account securities are offered and a brief identification of any 
material

[[Page 67277]]

relationship such person has (or had within the past three years) with 
the issuer or any affiliate of the issuer;
    (iii) The identity and location of a contact person to whom 
questions may be directed; and
    (iv) The identity and location of a person who, upon request, will 
send promptly the documents that define the terms of the securities.
    (b) Other registrants--firm commitment underwritten offerings. If 
an offering is registered on Form A, Form SB-1, Form SB-2, Form F-7, 
Form F-9, Form F-10 (other than in a business combination transaction), 
(Secs. 239.4, 239.9, 239.10, 239.37, 239.39, 230.40 of this chapter) or 
on Schedule B (other than as described in paragraph (a) of this 
section), is underwritten on a firm commitment basis and the offering:
    (1) Is the registrant's initial offering registered in accordance 
with Section 5 of the Act (15 U.S.C. Sec. 77e) or is an offering 
registered within one year of the effective date of the registrant's 
initial registered offering, then a prospectus satisfying Section 10 of 
the Act (15 U.S.C. Sec. 77j) must be sent to each investor in a manner 
reasonably designed to arrive at least 7 calendar days before the 
pricing of the securities.
    (2) Takes place more than one year after the effective date of the 
registrant's initial offering registered in accordance with Section 5 
of the Act, then a prospectus satisfying Section 10 of the Act must be 
sent to each investor in a manner reasonably designed to arrive at 
least 3 calendar days before the pricing of the securities.
    (c) Other registrants--non-firm commitment underwritten offerings. 
If an offering is registered on Form A, Form SB-1, Form SB-2, Form F-7, 
Form F-9, Form F-10 (other than in a business combination), or on 
Schedule B (other than as described in paragraph (a) of this section), 
is not underwritten on a firm commitment basis and the offering:
    (1) Is the registrant's initial offering in accordance with Section 
5 of the Act or is an offering taking place within one year of the 
effective date of the registrant's initial registered offering, then a 
prospectus satisfying Section 10 of the Act must be sent to each 
investor in a manner reasonably designed to arrive at least 7 calendar 
days before the investor signs a subscription agreement or otherwise 
commits to purchase securities.
    (2) Takes place more than one year after the effective date of the 
registrant's initial registered offering in accordance with Section 5 
of the Act, then a prospectus satisfying Section 10 of the Act must be 
sent to each investor in a manner reasonably designed to arrive at 
least 3 days before the investor signs a subscription agreement or 
otherwise commits to purchase the securities.
    Note to paragraphs (b) and (c).

    The issuer, underwriter or participating broker or dealer may 
choose to deliver a prospectus meeting the requirements of Section 
10(a), instead of a prospectus meeting the requirements of Section 
10, if it does so in accordance with the terms of paragraphs (b) and 
(c) of this section.

    (d) Roll-ups. Notwithstanding paragraphs (a) through (c) of this 
section, if a registrant is registering a roll-up transaction as 
defined in Sec. 229.901(c) of this chapter, a prospectus that satisfies 
the requirements of Section 10 of the Act must be sent to each investor 
no later than the earlier of:
    (1) 60 calendar days before the meeting at which the roll-up 
transaction will be submitted to a vote or 60 calendar days before the 
earliest date on which partnership action could be taken by consent; 
and
    (2) The date calculated by applying the maximum number of days 
permitted for giving notice under applicable state law.
    (e) Material changes. If not previously disclosed by any other 
means to investors, material changes to the information reflected in 
the prospectus delivered must be set forth in a document sent to each 
investor in a manner reasonably designed to arrive at least 24 hours 
before:
    (1) The securities are priced, if the offering is subject to 
paragraph (b) of this section;
    (2) The investor signs a subscription agreement or otherwise 
commits to purchase securities, if the offering is subject to paragraph 
(c) of this section; or
    (3) The date of the meeting at which the transaction will be 
submitted to a vote or on which partnership action could be taken by 
consent, if the offering is subject to paragraph (d) of this section.
    (f) Rule 462 registration statements. Notwithstanding paragraphs 
(a) through (d) of this section, if an offering is registered in part 
through a registration statement filed under Sec. 230.462(b) or 
Sec. 230.462(e), a prospectus delivered with respect to the earlier 
registration statement to an investor in compliance with this 
Sec. 230.172 will be deemed to satisfy the delivery requirements with 
respect to that investor under this Sec. 230.172 with respect to the 
Sec. 230.462(b) or Sec. 230.462(e) registration statement for the 
offering, provided that the issuer, underwriter or participating dealer 
otherwise informs investors purchasing in the offering of the change in 
the size of the offering.
    46. By adding Sec. 230.173 to read as follows:


Sec. 230.173  Delivery of final prospectuses.

    Notwithstanding Section 5(b)(2) of the Act (15 U.S.C. 77e(b)(2)), a 
prospectus that meets the requirements of Section 10(a) of the Act (15 
U.S.C. 77j(a)) need not precede or accompany the carrying or delivery 
of any security by any person in an offering registered other than on 
Form S-8, Form C, Form SB-3, Form F-8, Form F-80 or F-10 (when that 
form is used in a business combination transaction) (Secs. 239.16b, 
239.6, 239.11, 239.38, 239.41 or 239.40 of this chapter) provided that:
    (a) Prospectus information that satisfies the requirements of 
Section 10(a) of the Act other than the price-related information that 
may be omitted pursuant to Sec. 230.430A is filed with the Commission 
prior to the transmission of any confirmation in connection with the 
offering;
    (b) Delivery of prospectus information in accordance with 
Sec. 230.172 or Sec. 230.174, as applicable, has been made;
    (c) At or before the time they receive any confirmation of sale, 
investors are informed where they can acquire promptly the prospectus 
information that meets the requirements of Section 10(a) of the Act, 
free of charge; and
    (d) The security being carried or delivered is not issued by an 
investment company.
    47. By revising Sec. 230.174 to read as follows:


Sec. 230.174  Aftermarket delivery of prospectuses by dealers.

    (a) For transactions that take place prior to the expiration of the 
40-day or 90-day period specified in Section 4(3) of the Act (15 U.S.C. 
77d(3)) in which a dealer is obliged to deliver a Section 10(a) (15 
U.S.C. 77j(a)) prospectus, the dealer need only satisfy that obligation 
in transactions occurring during a period of twenty-five calendar days 
after the later of:
    (1) The effective date of the registration statement; or
    (2) The first date on which the security was bona fide offered to 
the public.
    (b) For purposes of paragraph (a) of this section, the required 
prospectus is delivered if:
    (1) A prospectus satisfying the requirements of Section 10(a) 
(other than omitting price-related information pursuant to 
Sec. 230.430A) is on file with the Commission; and
    (2) Prior to or at the same time each investor receives a 
confirmation the

[[Page 67278]]

dealer notifies it as to where it may obtain promptly that prospectus, 
free of charge.
    (c) Paragraph (a) of this section shall not apply to any 
transaction relating to a blank check company (as defined in 
Sec. 230.419). In such transactions, all dealers must deliver a 
prospectus satisfying the requirements of Section 10(a) for ninety 
calendar days after the date the funds and securities are released from 
the escrow or trust account under Sec. 230.419.
    (d) If a registration statement relates to offerings made on a 
continuous basis, a dealer's prospectus delivery obligation expires 
after the initial prospectus delivery period specified in this section.
    (e) This section shall not apply to any transaction in which:
    (1) The registration statement is the subject of a stop order 
issued under Section 8 of the Act (15 U.S.C. 77h); or
    (2) The Commission provides, upon application or on its own motion, 
another aftermarket delivery obligation.
    (f) Nothing in this section shall affect any obligation to deliver 
a prospectus pursuant to the provisions of Section 5 of the Act (15 
U.S.C. 77e) by a dealer who:
    (1) Is acting as an underwriter with respect to the securities 
involved; or
    (2) Is engaged in a transaction as to securities constituting the 
whole or a part of an unsold allotment to, or subscription by, that 
dealer as a participant in the distribution of the securities by the 
issuer or by or through an underwriter.
    (g) No prospectus need be delivered in the 40-day or 90-day period 
specified in Section 4(3) of the Act (15 U.S.C. 77d(3)) if the 
registration statement is on Form F-6 (Sec. 239.36 of this chapter).
    48. By amending Sec. 230.176 by revising the section heading and 
the introductory text; by removing the word ``and'' at the end of 
paragraph (g); revising ``incorporated.'' at the end of paragraph (h) 
to read ``incorporated; and''; and by adding paragraph (i) to read as 
follows:


Sec. 230.176  Reasonable investigation and reasonable grounds for 
belief under Section 11 of the Act and reasonable care under Section 
12(a)(2) of the Act.

    In determining whether or not the conduct of a person, other than 
the issuer, constitutes a reasonable investigation or a reasonable 
ground for belief meeting the standard set forth in Section 11(c) of 
the Act (15 U.S.C. 77k(c)) or the exercise of reasonable care meeting 
the standard set forth in Section 12(a)(2) of the Act (15 U.S.C. 
77l(a)(2)), relevant circumstances to include:
* * * * *
    (i)(1) The circumstances listed in paragraph (i)(3) of this section 
if:
    (i) The person is an underwriter;
    (ii) Investment grade debt securities are not being offered;
    (iii) The offering is marketed and priced in fewer than five days;
    (iv) The issuer meets the requirements of General Instruction 
I.B.2. of Form B (Sec. 239.5 of this chapter); and
    (v) The offering is registered on Form B (Sec. 239.5 of this 
chapter) pursuant to either General Instruction I.C.1. or I.C.2.
    (2) The absence of any one or more of the circumstances listed in 
paragraph (i)(3) of this section, except for paragraph (i)(3)(i) of 
this section, should not be considered definitive in reaching a 
conclusion regarding whether the conduct of the underwriter met the 
standards set forth in Section 11(c) or 12(a)(2) of the Act.
    (3)(i) Whether the underwriter:
    (A) Reviewed the registration statement (which, for purposes of 
this section, includes all amendments and supplements to it and all 
documents incorporated by reference into it); and
    (B) Conducted a reasonable inquiry into any fact or circumstance 
that would have caused a reasonable person to question whether the 
registration statement contains an untrue statement of a material fact 
or omits to state a material fact required to be stated therein or 
necessary to make the statements therein not misleading;
    (ii) Whether the underwriter discussed the information contained in 
the registration statement with the relevant executive officer(s) of 
the issuer (including, at a minimum, its chief financial officer or 
chief accounting officer or that person's designee (or person 
performing those functions)) and the issuer's chief financial officer 
or chief accounting officer or that person's designee (or person 
performing those functions) certified to the underwriter that:
    (A) He or she has read the registration statement; and
    (B) To the best of his or her knowledge after reasonable 
investigation, the registration statement does not contain an untrue 
statement of a material fact or omit to state a material fact required 
to be stated therein or necessary to make the statements therein not 
misleading;
    (iii) Whether the underwriter received from the independent 
accountants responsible for the audited financial statements included 
in the registration statement a letter contemplated by Statement on 
Auditing Standards No. 72 of the American Institute of Certified Public 
Accountants;
    (iv) Whether the underwriter received an opinion from the issuer's 
legal counsel substantially to the effect that:
    (A) Counsel is of the opinion that the registration statement and 
prospectus (except for financial statements, financial data and 
schedules included therein as to which counsel need not express any 
opinion) comply as to form in all material respects with the Act and 
the rules and regulations of the Commission thereunder; and
    (B) Counsel has participated in the drafting and preparation of the 
registration statement and prospectus and nothing that has come to the 
attention of counsel that has caused it to believe that the 
registration statement (except for financial statements, financial data 
and schedules as to which counsel need not express any belief), 
contains an untrue statement of a material fact or omits to state a 
material fact required to be stated therein or necessary to make the 
statements therein not misleading;
    (v)(A) Whether the underwriter employed legal counsel that 
reviewed:
    (1) The issuer's registration statement and all periodic reports 
filed by the issuer with the Commission for the last full fiscal year 
ended prior to the offering and any portion of a fiscal year 
thereafter; and
    (2) The issuer's charter, by-laws, corporate minutes for the last 
full fiscal year ended prior to the offering and any portion of a 
fiscal year thereafter, and all material contracts entered into by the 
issuer in the last five years prior to effectiveness of the 
registration statement;
    (B) Whether underwriter's counsel opined substantially to the 
effect that nothing has come to its attention that would lead it to 
believe that the registration statement contains an untrue statement of 
a material fact or omits to state a material fact required to be stated 
therein or necessary to make the statements therein not misleading;
    (vi) Whether the underwriter employs a research analyst that:
    (A) For at least the 6 months immediately prior to the commencement 
of the offering, has followed the issuer or the issuer's industry on an 
ongoing basis;
    (B) Has issued a report on the issuer or the issuer's industry 
within the 12 months immediately prior to the commencement of the 
offering; and
    (C) Has been consulted by the underwriter in connection with the 
disclosure used in the offering.
    49. By amending Sec. 230.401 by revising paragraph (g) to read as 
follows:

[[Page 67279]]

Sec. 230.401  Requirements as to proper form.

* * * * *
    (g) Except for registration statements and post-effective 
amendments that become effective automatically pursuant to 
Sec. 230.462, Sec. 230.464 and 230.485(b) (including registration 
statements that become effective automatically at the time designated 
by the issuer in accordance with Sec. 230.462(f)(2)), a registration 
statement or any amendment thereto is deemed filed on the proper form 
unless the Commission objects to the form before the effective date.
    50. By revising paragraph (d) of Sec. 230.402 to read as follows:


Sec. 230.402  Number of copies; binding; signatures.

* * * * *
    (d) Notwithstanding any other provision of this section, if a 
registrant files a registration statement pursuant to Sec. 230.462(b), 
Sec. 230.462(e) or Sec. 230.462(f) by facsimile pursuant to 
Sec. 230.110(d), the registrant need only file one complete copy of the 
registration statement with the Commission. That copy must include all 
exhibits and other documents that are a part of it. That copy need not 
be bound. It may include facsimile versions of signatures in accordance 
with paragraph (e) of this section.
* * * * *
    51. By amending Sec. 230.405 by revising the definition of ``small 
business issuer'' to read as follows:


Sec. 230.405  Definitions of terms.

* * * * *
    Small Business Issuer. The term ``small business issuer'' means an 
entity that meets the following criteria:
    (1) Has revenues (including revenues of any consolidated 
subsidiaries) of less than $50,000,000;
    (2) Is a U.S. or Canadian issuer;
    (3) Is not an investment company;
    (4) If a majority-owned subsidiary, the parent corporation is also 
a small business issuer; and (5) Each majority owned subsidiary of the 
entity, if any, meets the criteria in paragraphs (2) and (3) of this 
definition.
* * * * *


Sec. 230.406  [Amended]

    52. By amending Sec. 230.406 by removing in paragraph (a) the words 
``Form S-3, F-2, F-3 (Sec. 239.13, 239.32 or 239.33 of this chapter) 
relating to a dividend or interest reinvestment plan, or on Form S-4 
(Sec. 239.25 of this chapter) complying with General Instruction G of 
that Form'' and adding, in their place, the words ``Form B (Sec. 239.5 
of this chapter), or on Form A (Sec. 239.4 of this chapter) complying 
with General Instruction VIII. of that Form where the issuer plans to 
have the registration statement become effective upon filing or fewer 
than 20 days thereafter''.


Sec. 230.415  [Amended]

    53. By amending paragraph (a)(1)(x) of Sec. 230.415 by removing the 
words ``Form S-3 or Form F-3 (Sec. 239.13 or Sec. 239.33 of this 
chapter)'' and adding, in their place, the words ``Form B (Sec. 239.5 
of this chapter)''.
    54. By amending Sec. 230.418 by revising the first sentence of the 
introductory text of paragraph to read as follows:


Sec. 230.418  Supplemental information.

    (a) The Commission or its staff may, where it deems appropriate, 
request supplemental information not otherwise filed with the 
Commission concerning the registrant, the registration statement, the 
distribution of the securities, market activities and underwriters' 
activities. * * *
* * * * *
    55. By removing in Sec. 230.418(a)(3) the words ``eligible to use 
Form S-2 or Form S-3 (Secs. 239.12 or 239.13 of this chapter)'' and 
adding, in their place, the words ``that meets the requirements of 
General Instructions II.A. and II.B of Form A (Sec. 239.4 of this 
chapter) or is eligible to use Form B (239.5 of this chapter)''.
    56. By amending Sec. 230.421 by adding paragraph (e) to read as 
follows:


Sec. 230.421  Presentation of Information in Prospectuses.

* * * * *
    (e) If a prospectus is not subject to the informational 
requirements of Section 10 of the Act, it must contain a prominent 
legend that urges investors to read filed documents because they 
contain important information. The legend must identify the other types 
of filings available about the offering, for example: free writing, 
term sheet, Exchange Act reports, and prospectus (registration 
statement). The legend must also explain that investors can get the 
document(s) for free at the SEC's web site and explain which documents 
are free from the issuer. You may adapt the following legend or write 
your own in plain English:

    Example: Before you invest, you should read the other 
document(s) that we have filed with the SEC. These documents 
[describe or name the documents] contain important information that 
you need to consider before making an investment decision. You may 
get these documents for free by visiting EDGAR on the SEC web site 
at www.sec.gov. We will send you [describe or name the documents] 
for free if you call us at 1 800 xxx-xxxx.

    57. By amending Sec. 230.424 by revising the section heading and 
paragraph (b)(2); revising Instruction 1 and redesignating it as 
``Instruction to Sec. 230.424''; and by removing paragraph (b)(7) and 
Instruction 2 to read as follows:


Sec. 230.424  Filing of Section 10 prospectuses; number of copies.

* * * * *
    (b) * * *
    (2) A prospectus used in connection with a primary offering of 
securities made on a delayed basis pursuant to Secs. 230.415(a)(1)(vii) 
or 230.415(a)(1)(viii) that discloses the public offering price, 
description of securities, specific method of distribution or similar 
matters shall be filed with the Commission no later than the second 
business day following the earlier of:
    (i) The date the offering price is determined; and
    (ii) The date the prospectus is first used after effectiveness in 
connection with a public offering or sale.
* * * * *
    Instruction to Sec. 230.424. Notwithstanding Secs. 230.424(b)(2) 
and 230.424(b)(5), a form of prospectus or prospectus supplement 
relating to an offering of mortgage-related securities on a delayed 
basis under Sec. 230.415(a)(1)(vii) that is required to be filed 
pursuant to paragraph (b) of this section shall be filed with the 
Commission no later than the second business day it is first used 
after effectiveness in connection with a public offering or sale.
* * * * *
    58. By adding Sec. 230.425 to read as follows:


Sec. 230.425  Filing of ``free writing'' and other prospectuses.

    (a) A registrant must file under this section the information 
described in paragraph (b) of this section except that it need not 
file:
    (1) Any factual business communication, as defined in Sec. 230.169, 
regardless of when it is made;
    (2) Any research report used in reliance on Sec. 230.137, 
Sec. 230.138, Sec. 230.139, Sec. 230.165 or Sec. 230.166;
    (3) Any information used in connection with an offering under Form 
S-8 (Sec. 239.16b of this chapter);
    (4) Any information used in connection with an offering on Form B 
(Sec. 239.5 of this chapter) under a dividend or interest reinvestment 
plan;
    (5) Any information used in connection with a direct stock purchase 
plan;
    (6) Any information filed or to be filed as part of an effective 
registration statement (except in a business combination transaction 
registered on

[[Page 67280]]

Form C, SB-3, F-8, F-10 or F-80 (Secs. 239.6, 239.11, 239.38, 239.40 or 
239.41)); or
    (7) Any confirmation described in Sec. 240.10b-10 of this chapter;
    (b)(1) Five copies of any prospectus used in reliance on 
Sec. 230.165 shall be filed with the Commission on or before the date 
of first use.
    (2) Five copies of any prospectus used prior to the filing of a 
registration statement in reliance on Sec. 230.166(a) shall be filed 
with the Commission at the time the related registration statement is 
filed.
    (3) Five copies of any prospectus used before the filing of a 
registration statement in reliance on Sec. 230.166(b) shall be filed 
with the Commission on or before the date of first use. Each copy of a 
prospectus filed under this section must identify the filer and the 
company that is the subject of the offering in the upper right corner 
of the cover page in addition to the information required by paragraph 
(c) of this section.
    (4) Five copies of any prospectus used in reliance on Sec. 230.168 
shall be filed with the Commission at the time the related registration 
statement is filed.
    (c) Each copy of a prospectus filed under this section shall 
contain, in the upper right corner of the cover page, the Commission 
file number for the related registration statement or, if that file 
number is unknown, a description sufficient to identify the related 
registration statement.


Sec. 230.428  [Amended]

    59. By removing in Sec. 230.428(b)(2)(iii) the words ``or F-1 
(Sec. 239.31 of this chapter)'' and adding, in their place, the words 
``or Form A (Sec. 239.4 of this chapter)''.
    60. By revising Sec. 230.429 to read as follows:


Sec. 230.429  Prospectus relating to several registration statements.

    (a) Where a registrant has filed two or more registration 
statements, it may file a single prospectus in the latest one in order 
to satisfy the requirements of the Act and the rules and regulations 
thereunder for that offering and any other offering(s) registered on 
the earlier registration statement(s). The combined prospectus in the 
latest registration statement must include all of the information that 
would currently be required in a prospectus relating to all offering(s) 
it covers. The combined prospectus may be filed as part of the initial 
filing of the latest registration statement, in a pre-effective 
amendment to it or in a post-effective amendment to it.
    (b) Where a registrant relies on paragraph (a) of this section, the 
registration statement containing the combined prospectus shall act, 
upon effectiveness, as a post-effective amendment to those registration 
statements whose offerings have been combined into the new or amended 
registration statement. The registrant must identify the earlier 
registration statement(s) to which the combined prospectus relates by 
setting forth the Commission file number(s) at the bottom of the facing 
page of the latest registration statement.
    61. By amending Sec. 230.430A by removing the word ``fifteen'' and 
adding, in each place it appears, the word ``five'' in paragraph (a)(3) 
and by revising the last sentence of Instruction to Paragraph (a) to 
read as follows:


Sec. 230.430A  Prospectus in a registration statement at the time of 
effectiveness.

* * * * *
    Instruction to Paragraph (a). * * * Notwithstanding the 
foregoing, any increase or decrease in volume (if the total dollar 
value of securities offered would not exceed that which was 
registered) and any deviation from the low or high end of the price 
range may be reflected in the form of prospectus filed with 
Commission pursuant to Sec. 230.424(b)(1) or Sec. 230.497(h) if, in 
the aggregate, the changes in volume and price result in no more 
than a 20% change in the amount of net proceeds disclosed in a 
prospectus that was delivered to investors in accordance with 
Sec. 230.172(b) or, if no prospectus was required to be delivered, 
in the prospectus that was part of the effective registration 
statement.
* * * * *


Sec. 230.431  [Removed and Reserved]

    62. By removing and reserving Sec. 230.431.
    63. By revising Sec. 230.434 to read as follows:


Sec. 230.434  Prospectus delivery requirements in firm commitment 
underwritten offerings by registered investment companies.

    (a) Where an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1 et seq.) registers an offering of 
securities on Form N-2 (Sec. 274.11a-1 of this chapter) or Form S-6 
(Sec. 239.16 of this chapter) and the conditions described in paragraph 
(b) are satisfied, then:
    (1) The prospectus subject to completion and the term sheet 
described in paragraph (b)(4), taken together, shall constitute a 
prospectus that meets the requirements of Section 10(a) of the Act (15 
U.S.C. 77j(a)) for purposes of Section 2(a)(10) of the Act (15 U.S.C. 
77b(a)(10)) and Section 5(b)(2) of the Act (15 U.S.C. 77e(b)(2)); and
    (2) The Section 10(a) prospectus described in paragraph (a)(1) 
shall have:
    (i) Been sent or given prior to or at the same time that a 
confirmation is sent or given for purposes of Section 2(a)(10) of the 
Act; and
    (ii) Accompanied or preceded the transmission of the securities for 
purpose of sale or for delivery after sale for purposes of Section 
5(b)(2) of the Act.
    (b) Conditions:
    (1) The securities are offered for cash in a firm commitment 
underwritten offering;
    (2) A prospectus subject to completion and any term sheet described 
in paragraph (b)(iv), together or separately, are sent or given prior 
to or at the same time with the confirmation;
    (3) The prospectus subject to completion and term sheet, together, 
are not materially different from the prospectus in the registration 
statement at the time of its effectiveness or an effective post-
effective amendment thereto (including, in both instances, information 
deemed to be a part of the registration statement at the time of 
effectiveness pursuant to Rule 430A(b) (Sec. 230.430A(b)); and
    (4) The term sheet under this paragraph (b) sets forth all 
information material to investors with respect to the offering that is 
not disclosed in the prospectus subject to completion or the 
confirmation.
    (c) The information contained in any term sheet described in this 
section shall be deemed to be a part of the registration statement as 
of the time such registration statement was declared effective.

    Instruction: Any form of prospectus or term sheet used in 
reliance on this section shall be filed in accordance with 
Sec. 230.497(h).

    (d) Any term sheet described under this section shall state, at the 
top center of its cover page, that the term sheet is a supplement to a 
prospectus and identify that prospectus by issuer name and date; 
clearly identify the document as a term sheet used in reliance on Rule 
434; set forth the approximate date of the term sheet's first use; and 
clearly identify the documents that, when taken together, constitute 
the Section 10(a) prospectus.
    (e) For purposes of this section, prospectus subject to completion 
shall mean any prospectus that is either a preliminary prospectus used 
in reliance on Rule 430 (Sec. 230.430) or a prospectus omitting 
information in reliance on Rule 430A (Sec. 230.430A).
    64. By revising Sec. 230.455 to read as follows:

[[Page 67281]]

Sec. 230.455  Place of filing.

    All registration statements and other papers filed with the 
Commission under the Act in paper format shall be filed at its 
principal office, except for registration statements and post-effective 
amendments thereto filed via facsimile pursuant to Sec. 230.110(d). 
Materials not filed electronically or via facsimile may be filed by 
delivery to the Commission through the mails or otherwise.
    65. By amending Sec. 230.456 by revising the section heading; 
designating the current text as paragraph (a); and adding paragraph (b) 
to read as follows:


Sec. 230.456  Date of filing, timing for fee payment by small business 
issuers.

* * * * *
    (b)(1) Notwithstanding Section 6 of the Act (15 U.S.C. 77f) and 
paragraph (a) of this section, a small business issuer filing a 
registration statement on Form SB-1, SB-2 or SB-3 (Secs. 239.9, 239.10 
or 239.11 of this chapter) that contains the delaying amendment 
described in Sec. 230.473(a) may defer payment of the registration fee 
required by Section 6, provided that it pays the fee no later than the 
first date to occur of the following:
    (i) The date on which the small business issuer requests that the 
Commission grant effectiveness of the registration statement under 
Section 8(a) of the Act (15 U.S.C. 77h(a)); or
    (ii) The date on which the small business issuer files an amendment 
to the registration statement that states that the registration 
statement shall thereafter become effective in accordance with the 
provisions of Section 8(a) of the Act, as described in Sec. 230.473(b).
    (2) Notwithstanding Section 6(c) of the Act, where the small 
business issuer defers payment of the registration fee in accordance 
with paragraph (b)(1) of this section, the registration statement (and 
any amendment thereto) will be considered filed when it is received by 
the Commission (assuming all requirements of the Act and the rules that 
apply to such filing have been complied with, other than payment of the 
registration fee).
    66. By amending Sec. 230.457 by adding paragraphs (f)(5), (p) and 
(q) and revising the first sentence of paragraph (o) to read as 
follows:


Sec. 230.457  Computation of Fee.

* * * * *
    (f) * * *
    (5) If a filing fee is paid pursuant to this paragraph for the 
registration of an offering and the registration statement also covers 
the resale of such securities, no additional filing fee is required to 
be paid with respect to the resale.
* * * * *
    (o) Where an issuer is registering an offering of securities, the 
registration fee may be calculated on the basis of the maximum 
aggregate offering price of all the securities listed in the 
``Calculation of Registration Fee'' table. * * *
    (p) Where all or a portion of the securities offered under a 
registration statement remain unsold after the offering's completion or 
termination, the dollar amount of the filing fee paid that is 
associated with the unsold securities may be used as an offset against 
the total filing fee due to be paid for a subsequent registration 
statement or registration statements. The subsequent registration 
statement(s) must be filed by the same registrant or a wholly-owned 
subsidiary of that registrant within five years of the completion or 
termination of the initial registration statement.
    (q) Notwithstanding any other provisions of this section, no filing 
fee is required for the registration of an indeterminate amount of 
securities to be offered solely for market making purposes by an 
affiliate of the issuer.
    67. By revising paragraph (b)(2) of Sec. 230.461 to read as 
follows:


Sec. 230.461  Acceleration of effective date.

* * * * *
    (b) * * *
    (2)(i) Where delivery of prospectus information to investors 
required by Sec. 230.172 is not accomplished, until the registrant, any 
underwriter and any participating dealer give the Commission adequate 
assurance that they have complied with Sec. 230.172; and
    (ii) Where the prospectus information delivered to investors is 
found to be inaccurate or inadequate in any material respect, until the 
registrant, any underwriter and any participating dealer give the 
Commission adequate assurance that they have informed investors that 
will purchase in the offering of the appropriate correcting 
information.
* * * * *
    68. By amending Sec. 230.462 by revising the section heading, 
paragraphs (a), (b)(2) and (c); and by adding paragraphs (e), (f) and 
(g) to read as follows:


Sec. 230.462  Effectiveness of certain registration statements and 
post-effective amendments.

    (a) A registration statement filed in accordance with Form S-8 
(Sec. 239.16b of this chapter) shall become effective upon filing with 
the Commission.
    (b) * * *
    (2) The registration statement is filed before the date 
confirmations are sent or given or, in an offering described in 
Sec. 230.145(a), before the meeting date at which security holders 
approved the transaction or, if no meeting was held, the date the 
transaction was approved by security holders' authorization or consent; 
and
* * * * *
    (c) A post-effective amendment shall become effective upon filing 
with the Commission if:
    (1) Other than price-related information previously omitted in 
reliance upon Sec. 230.430A, it contains no substantive changes from or 
additions to the prospectus previously filed:
    (i) As part of the effective registration statement; or
    (ii) As part of a post-effective amendment to that registration 
statement; and
    (2) The post-effective amendment is filed:
    (i) Prior to the time confirmations are sent or given; and
    (ii) No more than 30 days after the effectiveness of the 
registration statement or another post-effective amendment thereto that 
contains a prospectus.
* * * * *
    (e) A registration statement and any post-effective amendment 
thereto shall become effective upon filing with the Commission if:
    (1) The registration statement is filed on Form SB-1 (Sec. 239.9 of 
this chapter), Form SB-2 (Sec. 239.10 of this chapter) or Form SB-3 
(Sec. 239.11 of this chapter) and is registering additional securities 
of the same class(es) as were included in an earlier effective 
registration statement filed on Form SB-1, Form SB-2 or Form SB-3 for 
the same offering;
    (2) The registration statement is filed before the date 
confirmations are sent or given or, in an offering described in 
Sec. 230.145(a), before the meeting date at which security holders 
approved the transaction or, if no meeting was held, the date the 
transaction was approved by security holders' authorization or consent; 
and
    (3) The new registration statement registers additional securities 
in an amount and at a price that together represent no more than 50% of 
the maximum aggregate offering price set forth for each class of 
securities in the ``Calculation of Registration Fee'' table contained 
in the earlier registration statement.
    (f)(1) The following registration statements shall become effective 
in accordance with paragraph (e)(2) of this section:

[[Page 67282]]

    (i) A registration statement filed in accordance with Form B 
(Sec. 239.5 of this chapter);
    (ii) A registration statement filed in accordance with Schedule B 
(15 U.S.C. 77aa) by a foreign government issuer that:
    (A) Registered an offering under the Act within the 3 years before 
the filing date of the current offering; and
    (B) Is registering an offering of at least $250 million in 
securities that is underwritten on a firm commitment basis; and
    (iii) A registration statement filed in accordance with Form A 
(Sec. 239.4 of this chapter) by an issuer that:
    (A) Satisfies the requirements of General Instruction II.A. or 
II.C. of Form A and is not disqualified as specified in General 
Instruction II.B. of Form A.; and
    (B) Has a public float of $75 million or more as of the filing 
date; or
    (C) Incorporates into the Form A its annual report filed under 
Section 13(a) or 15(d) of the Securities Exchange Act (15 U.S.C. 78m or 
78o(d)) for the end of its most recently completed fiscal year and that 
annual report was reviewed fully by the staff of the Commission and was 
amended in accordance with the staff's comments (if so requested).
    (2) The registrant shall designate the effective date of the 
registration statement listed in paragraph (f)(1) of this section. It 
must indicate on the front page of the Form or Schedule that the 
registration statement will become effective either:
    (i) Upon filing with the Commission;
    (ii) At the date and time set forth on the front page of the Form 
or Schedule; or
    (iii) As specified in a later amendment to the Form or Schedule.
    (g) An issuer may file only one registration statement pursuant to 
either paragraph (b) or (e) of this section for any offering.
    69. By revising Sec. 230.464 to read as follows:


Sec. 230.464  Effective date of a post-effective amendment filed on 
Form A, Form B or Form S-8.

    (a) If at the time a registrant files a post-effective amendment on 
Form A, it meets the requirements set forth in General Instruction 
VIII. to Form A (Sec. 239.4 of this chapter):
    (1) Its post-effective amendment filed on Form A shall become 
effective in accordance with the registrant's designation on the front 
page of Form A either:
    (i) Upon filing with the Commission;
    (ii) On the date set forth on the front page of Form A; or
    (iii) As specified in a later post-effective amendment to the Form; 
and
    (2) The effective date of the registration statement shall be 
deemed to be the effective date of the post-effective amendment.
    (b) If at the time a registrant files a post-effective amendment on 
Form B (Sec. 239.5 of this chapter), it meets the eligibility 
requirements to file that post-effective amendment on Form B:
    (1) Its post-effective amendment filed on Form B shall become 
effective in accordance with the registrant's designation on the front 
page of Form B either:
    (i) Upon filing with the Commission;
    (ii) On the date set forth on the front page of Form B; or
    (iii) As specified in a later post-effective amendment to the Form; 
and
    (2) The effective date of the registration statement shall be 
deemed to be the effective date of the post-effective amendment.
    (c) If a registrant meets the eligibility requirement of Form S-8 
(Sec. 239.16b of this chapter), its post-effective amendment filed on 
Form S-8:
    (1) Shall become effective upon filing with the Commission; and
    (2) The effective date of the registration statement shall be 
deemed to be the filing date of the post-effective amendment.
    70. By revising the first sentence of paragraph (a) of Sec. 230.471 
and adding paragraph (c) to read as follows:


Sec. 230.471  Signatures to amendments.

    (a) Except as provided in paragraph (c) of this section or 
Sec. 230.478, every amendment to a registration statement shall be 
signed by the persons specified in Section 6(a) of the Act (15 U.S.C. 
77f(a)). * * *
* * * * *
    (c)(1) All persons who sign a registration statement on Form B 
(Sec. 239.5 of this chapter) will be deemed to have signed a post-
effective amendment to that registration statement where an authorized 
representative of the registrant signs that amendment if all the 
following are true:
    (i) The registration statement relates to an offering under 
Sec. 230.415(a)(1)(x);
    (ii) The person did not grant a power of attorney for another 
person to sign a post-effective amendment; and
    (iii) The post-effective amendment does not expressly state to the 
contrary.
    (2) Despite paragraph (c)(2) of this section, if any person who 
signed the registration statement no longer acts in the capacity in 
which such person signed the registration statement, the registrant 
must provide the signature of the person who currently acts in that 
capacity in the post-effective amendment.
    71. By revising paragraph (e) of Sec. 230.472 to read as follows:


Sec. 230.472  Filing of amendments; number of copies.

* * * * *
    (e) Notwithstanding any other provision of this section, if a 
registrant files a post-effective amendment pursuant to 
Sec. 230.462(b), Sec. 230.462(e) or Sec. 230.462(f) by facsimile 
pursuant to Sec. 230.110(d), the registrant need file only one complete 
copy of the registration statement with the Commission. That copy must 
include all exhibits and other documents that are a part of it. That 
copy need not be bound. It may include facsimile versions of signatures 
in accordance with Sec. 230.402(e).


Sec. 230.473  [Amended]

    72. By amending Sec. 230.473 by removing in paragraph (d) the words 
``Form S-3, F-2 or F-3 (Sec. 239.13, Sec. 239.32 or Sec. 239.33 of this 
chapter) relating to a dividend or interest reinvestment plan; or on 
Form S-4 (Sec. 239.25 of this chapter) complying with General 
Instruction G of that Form'' and adding, in their place, the words 
``Form B (Sec. 239.5 of this chapter) or on Form A (Sec. 239.4 of this 
chapter) complying with General Instruction VIII. of that Form''.


Sec. 230.475a  [Removed]

    73. By removing Sec. 230.475a.
    74. By amending Sec. 230.477 by revising paragraphs (b) and (c); 
and by adding paragraph (d) to read as follows:


Sec. 230.477  Withdrawal of registration statement or amendment.

* * * * *
    (b) Any application for withdrawal of an entire registration 
statement will be deemed granted upon filing of the application with 
the Commission if made prior to the effective date.
    (c) The registrant must sign any application for withdrawal and 
must state fully in it the grounds on which it is making the 
application. If the application for withdrawal is being made in 
anticipation of reliance on Sec. 230.152(c), the registrant must state 
in the application that no securities were sold in connection with the 
offering and that it may undertake a subsequent private offering in 
reliance on Sec. 230.152.
    (d) Any withdrawn document will remain in the Commission's files, 
but an indication of the date of withdrawal will be included in the 
file for the withdrawn document along with a notation that it was 
withdrawn upon the request of the registrant with the consent of the 
Commission.

[[Page 67283]]

    75. To add Sec. 230.493A to read as follows:


Sec. 230.493A  Filing of securities term sheet in certain offerings 
registered on Schedule B.

    Foreign government issuers must file with the Commission any 
securities term sheet they deliver pursuant to Sec. 230.172(a) as part 
of the prospectus in the related effective registration statement on 
Schedule B (15 U.S.C. 77aa). They must file the securities term sheet 
no later than the date of the first sale in the offering.
    76. By adding Sec. 230.499 to read as follows:


Sec. 230.499  Concurrent registration under the Exchange Act on 
Schedule B.

    (a) Any issuer filing a registration statement pursuant to Schedule 
B (15 U.S.C. 77aa) also may use that Schedule to register concurrently 
under Section 12(b) or 12(g) of the Exchange Act (15 U.S.C. 78l(b) or 
(g)). The issuer may register any class of securities that is the 
subject of the offering it is registering under the Securities Act. To 
register, the issuer must check the appropriate box(es) and identify 
the class(es) of securities it is registering under Section 12(b) or 
12(g) and the exchange or market for those securities. The issuer also 
must include the following paragraph and table on the facing page of 
the Schedule B registration statement:

    The issuer is using Schedule B to register concurrently under 
Section 12(b) or 12(g) of the Exchange Act one or more classes of 
securities that are the subject of the offering being registered 
under the Securities Act. The issuer has checked the appropriate 
box(es) and identified the class(es) of securities it is registering 
under Section 12(b) or 12(g) on the table below:
    {time} Securities being registered pursuant to Exchange Act 
Section 12(b):
    Title of each class:
----------------------------------------------------------------------
----------------------------------------------------------------------
    Name of exchange on which listed:
----------------------------------------------------------------------
----------------------------------------------------------------------
    {time} Securities being registered pursuant to Exchange Act 
Section 12(g):
    Title of each class:
----------------------------------------------------------------------
----------------------------------------------------------------------
    Name of market on which quoted:
----------------------------------------------------------------------
----------------------------------------------------------------------
    (b) Registration on Schedule B of a class of securities under 
Exchange Act Section 12(b) shall become effective upon the later of:
    (1) Receipt by the Commission of certification from the national 
securities exchange listed on the cover of the Schedule B that the 
securities have been approved for listing; or (2) Effectiveness of the 
Schedule B under the Securities Act.
    (c) Registration on this Schedule B of a class of securities under 
Exchange Act Section 12(g) shall become effective automatically upon 
the earlier of:
    (1) 60 days after the initial filing of this Schedule B; or
    (2) The effectiveness of this Schedule B.
    (d) The issuer must file at least one complete, signed copy of the 
registration statement on Schedule B with each exchange or market 
identified on the cover of the Schedule B.
    77. By amending Sec. 230.502 by removing in paragraph (b)(2)(ii)(B) 
the words ``Form S-1 (Sec. 239.11 of this chapter)'' and adding, in 
their place, the words ``Form A (Sec. 239.4 of this chapter)'', by 
removing ``SB-2 (Sec. 239.10 of this chapter) or S-11 (Sec. 239.18 of 
this chapter)'' and adding, in their place, the words ``or SB-2 
(Sec. 239.10 of this chapter)'', by removing in paragraph (b)(2)(ii)(D) 
the words ``Form F-1 (Sec. 239.31 of this chapter)'' and adding, in 
their place, the words ``Form A (Sec. 239.4 of this chapter)'' by 
removing in paragraph (c)(2) the words ``with Sec. 230.135c'' and 
adding, in their place, the words ``with Sec. 230.135''; revising the 
Note heading following paragraph (a) and adding a sentence at the end 
of that Note to read as follows:


Sec. 230.502  General conditions to be met.

* * * * *
    (a) Integration. * * *
    Note to Paragraph (a). * * * See also Sec. 230.152 which 
provides safe harbors from integration of public offerings and 
private offerings made around the same time, including offerings 
under Sec. 230.506.
* * * * *
    78. By revising paragraph (a) of Sec. 230.504 to read as follows:


Sec. 230.504  Exemption for limited offerings and sales of securities 
not exceeding $1,000,000.

    (a) Exemption. Offers and sales of securities that satisfy the 
conditions in paragraph (b) of this section shall be exempt from the 
provisions of Section 5 of the Act (15 U.S.C. 77e) under Section 3(b) 
of the Act (15 U.S.C. 77c(b)) if the issuer is not:
    (1) An investment company;
    (2) A development stage company that either:
    (i) Has no specific business plan or purpose; or
    (ii) Has indicated that its business plan is to engage in a merger 
or acquisition with an unidentified entity or entities; or
    (3) Subject to the reporting requirements of Section 13 or 15(d) of 
the Exchange Act (15 U.S.C. 78m or 78o(d)), except that an issuer may 
be subject to those requirements in connection with the offer and sale 
of securities underlying convertible securities or warrants if:
    (i) The issuer offered and sold the convertible securities or 
warrants in compliance with this section while it was not subject to 
those requirements; and
    (ii) The issuer offered the securities underlying the convertible 
securities or warrants in compliance with this section prior to 
becoming subject to those requirements.
* * * * *
    79. By amending Sec. 230.902 by removing the word ``and'' at the 
end of paragraph (c)(3)(v)(B); by revising paragraph (c)(3)(vi); by 
removing the period at the end of paragraph (c)(3)(vii) and adding in 
its place ``; and''; and by adding paragraphs (c)(3)(viii) and (h)(4) 
to read as follows:


Sec. 230.902  Definitions.

* * * * *
    (c) Directed selling efforts. * * *
    (3) * * *
    (vi) Publication by an issuer of a notice in accordance with 
Sec. 230.135;
* * * * *
    (viii) Publication or distribution of information, an opinion or a 
recommendation by a broker or dealer in accordance with Sec. 230.138 or 
Sec. 230.139.
* * * * *
    (h) Offshore transaction. * * *
    (4) Notwithstanding paragraph (h)(1) of this section, publication 
or distribution of information, an opinion or a recommendation in 
accordance with Sec. 230.138 or Sec. 230.139 by a broker or dealer at 
or around the time of an offering in reliance on Regulation S 
(Secs. 230.901 through 230.904) will not cause the transaction to fail 
to be an offshore transaction as defined in this section.
* * * * *

PART 232--REGULATION S-T--GENERAL RULES AND REGULATIONS FOR 
ELECTRONIC FILERS

    80. By revising the authority citation for part 232 to read as 
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s(a), 77sss(a), 77z-
3, 78c(b), 78d, 78l, 78m, 78n, 78o(d), 78w(a), 78ll(d), 78mm, 
79t(a), 80a-8, 80a-29, 80a-30 and 80a-37.

    81. By amending Sec. 232.13 by revising paragraphs (a)(1)(ii), 
(a)(1)(iii) and (a)(3) before the Note; and by adding paragraph 
(a)(1)(iv) to read as follows:

[[Page 67284]]

Sec. 232.13  Date of filing; adjustment of filing date.

    (a) * * *
    (1) * * *
    (ii) The filing conforms to the applicable technical standards 
regarding electronic format in the EDGAR Filer Manual;
    (iii) With respect to Securities Act filings, including filings 
under Section 24(f) of the Investment Company Act (15 U.S.C. 80a-
24(f)), the required fee payment:
    (A) For registration statements filed in accordance with Forms SB-
1, SB-2 or SB-3 (Secs. 239.9, 239.10 or 239.11 of this chapter) is made 
no later than the earlier of:
    (1) The date on which the small business issuer requests, under 
Sec. 230.461 of this chapter, that the Commission accelerate the 
effective date of its registration statement; or
    (2) The date on which the small business issuer files an amendment 
to the registration statement that contains the statement set forth in 
Sec. 230.473(b) of this chapter.
    (B) For registration statements other than those filed in 
accordance with Forms SB-1, SB-2 or SB-3 is confirmed upon filing; and
    (iv) Notwithstanding paragraph (a)(1)(iii) of this section, the 
failure to pay an insignificant amount of the fee at the required time, 
as a result of a bona fide error, shall not affect the filing.
    (2) * * *
    (3) Notwithstanding paragraph (a)(2) of this section, any 
registration statement or any post-effective amendment thereto filed 
pursuant to Secs. 230.462(b), 230.462(e) or 230.462(f) of this chapter 
by direct transmission commencing on or before 10:00 p.m. Eastern 
Standard Time or Eastern Daylight Savings Time, whichever is currently 
in effect, shall be deemed filed on the same business day.
* * * * *
    82. By amending Sec. 232.101 by revising the Note following 
paragraph (a)(3); by removing paragraph (c)(7); and by redesignating 
paragraphs (c)(8), (c)(9), (c)(10), (c)(11), (c)(12), (c)(13), (c)(14), 
(c)(15), (c)(16) and (c)(17) as paragraphs (c)(7), (c)(8), (c)(9), 
(c)(10), (c)(11), (c)(12), (c)(13), (c)(14), (c)(15) and (c)(16) to 
read as follows:


Sec. 232.101  Mandated  electronic submissions and exceptions.

    (a) * * *
    (3) * * *

    Note to Paragraph (a): Failure to submit a required electronic 
filing pursuant to paragraph (a) of this section, as well as any 
required confirming electronic copy of a paper filing made in 
reliance on a hardship exemption as provided in Secs. 232.201 and 
232.202, will result in the ineligibility to use Form B and S-8 
(Secs. 239.5 and 239.16b of this chapter), restrict incorporation by 
reference of the document submitted in paper (see Sec. 232.303), and 
toll certain time periods associated with tender offers (see 
Secs. 240.13e-4(f)(12) and 240.14e-1(e) of this chapter).
* * * * *
    83. By amending Sec. 232.201 revising Note 1 following paragraph 
(b) to read as follows:


Sec. 232.201  Temporary hardship exemption.

* * * * *
    (b) * * *

    Note 1 to Paragraph (b): Failure to submit the confirming 
electronic copy of a paper filing made in reliance on a temporary 
hardship exemption, as required in paragraph (b) of this section, 
will result in the ineligibility to use Form B and S-8 (Secs. 239.5 
and 239.16b of this chapter), restrict incorporation by reference of 
the document submitted in paper (see Sec. 232.303), and toll certain 
time periods associated with tender offers (see Secs. 240.13e-
4(f)(12) and 240.14e-1(e) of this chapter).
* * * * *
    84. By amending Sec. 232.202 by revising Note 3 following paragraph 
(d) to read as follows:


Sec. 232.202  Continuing hardship exemption.

* * * * *
    (d) * * *

    Note: 3 Failure to submit the confirming electronic copy of a 
paper filing made in reliance on a continuing hardship exemption 
granted pursuant to paragraph (d) of this section will result in the 
ineligibility to use Forms B and S-8 (Secs. 239.5 and 239.16b of 
this chapter), restrict incorporation by reference of the document 
submitted in paper (see Sec. 232.303), and toll certain time periods 
associated with tender offers (see Secs. 240.13e-4(f)(12) and 
240.14e-1(e) of this chapter).

    85. By adding a sentence at the end of paragraph (a) of 
Sec. 232.304 to read as follows:


Sec. 232.304  Graphic and image material.

    (a) * * * Additionally, five copies of any prospectus filed in 
accordance with Sec. 230.425 that contains graphic, imagine or audio 
material that cannot be reproduced in the electronic filing must be 
filed with the Commission in its original form.
* * * * *


Sec. 232.311  [Amended]

    86. By amending Sec. 232.311 by removing paragraph (i).
    87. By amending Sec. 232.401 by revising the last sentence of the 
Note to read as follows:


Sec. 232.401  Financial Data Schedule.

* * * * *
    Note: * * * Further, electronic filers that have not filed a 
required Financial Data Schedule will be ineligible to use Form B 
and Form S-8 (Secs. 239.5 and 239.16b of this chapter).

PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933

    88. By revising the general authority citation for part 239 to read 
as follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3, 
77sss, 78c, 78d, 78l, 78m, 78n, 78o(d), 78w(a), 78ll(d), 78mm, 78u-
5, 79e, 79f, 79g, 79j, 79l, 79m, 79n, 79q, 79t, 80a-8, 80a-24, 80a-
29, 80a-30 and 80a-37, unless otherwise noted.
* * * * *


Secs. 239.11, 239.12, 239.13, 239.18, 239.25, 239.31, 239.32, 239.33, 
239.34 and Forms S-1, S-2, S-3, S-4, S-11, F-1, F-2, F-3, and F-
4  [Removed and Reserved]

    89. By removing and reserving Sec. 239.11, Sec. 239.12, 
Sec. 239.13, Sec. 239.25, Sec. 239.18, Sec. 239.31, Sec. 239.32, 
Sec. 239.33, Sec. 239.34, and by removing Forms S-1, S-2, S-3, S-4, S-
11, F-1, F-2, F-3, and F-4.
    90. By adding Sec. 239.4 and Form A to read as follows:


Sec. 239.4  Form A, for registration under the Securities Act of 1933 
and optional concurrent registration under the Securities Exchange Act 
of 1934.

    (a) This form shall be used for registration under the Securities 
Act of 1933 (15 U.S.C. 77a et. seq.) (``Securities Act'') of any 
offering for which no other form is authorized or prescribed. 
Therefore, for example, this form shall not be used for:
    (1) Any offering for which Form C or Form SB-3 (Sec. 239.6 or 
239.11) is authorized; or
    (2) Any offering by a foreign government or a political subdivision 
thereof for which Schedule B (15 U.S.C. 77aa) is authorized.
    (b) A registrant also may use this form to register concurrently 
under Section 12(b) or 12(g) of the Securities Exchange Act of 1934 
(``Exchange Act''). It may register under the Exchange Act any class of 
securities that are the subject of the offering it is registering under 
the Securities Act. To register, the registrant must check the 
appropriate box(es) on the cover page of this form and identify which 
class(es) of securities it is registering under Section 12(b) or 12(g) 
of the Exchange Act.

    Note: The text of Form A will not appear in the Code of Federal 
Regulations.

U.S. Securities and Exchange Commission, Washington, D.C. 20549

Form A--Registration Statement Under The Securities Act of 1933 [and 
Optional Registration Pursuant to Section 12(b) or 12(g) of The 
Securities Exchange Act of 1934]

----------------------------------------------------------------------

[[Page 67285]]

(Exact name of Registrant as specified in its charter)

----------------------------------------------------------------------
(Translation of Registrant's name into English, if applicable)

----------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)

----------------------------------------------------------------------
(I.R.S. Employer Identification Number)

----------------------------------------------------------------------
(Address and telephone number of Registrant's principal executive 
offices)

----------------------------------------------------------------------
(Name, address and telephone number of Registrant's agent for 
service)

----------------------------------------------------------------------
(Web Site Address, if any)

----------------------------------------------------------------------
(E-mail Address, if any)

* * * * *
Approximate date of commencement of sales ________________

    If you are a foreign private issuer as defined in Securities Act 
Rule 405, check the following box. [  ]
    If you are not a foreign private issuer as defined in Securities 
Act Rule 405, check the following box. [  ]
    If any of the securities being registered on this Form are to be 
offered pursuant to Securities Act Rule 415, check the following 
box. [  ] __________
    If you are filing this Form to register additional securities 
for an offering in accordance with Securities Act Rule 462(b), check 
the following box and list the Securities Act registration number of 
the earlier effective registration statement for the same offering. 
[  ] ____________
    If this Form is a post-effective amendment filed in accordance 
with Securities Act Rule 462(c) to re-start the 15-business-day 
period during which pricing must occur under Securities Act Rule 
430A(a)(3) or to reflect a non-substantive change from, or addition 
to, the prospectus, check the following box and list the Securities 
Act registration number of the earlier effective registration 
statement for the same offering. [  ] ____________
    If this Form is a post-effective amendment filed in accordance 
with Rule 462(d) under the Securities Act solely to add exhibits, 
check the following box and list the Securities Act registration 
number of the earlier effective registration statement for the same 
offering. [  ] ____________
    If you are using this Form to register concurrently under 
Section 12(b) or 12(g) of the Exchange Act any class of securities 
that are the subject of the offering you are registering under the 
Securities Act, check the appropriate box and provide the 
information indicated below:

[  ] Securities being registered pursuant to Exchange Act Section 
12(b):
Title of each class:
----------------------------------------------------------------------

----------------------------------------------------------------------

Name of exchange on which listed:
----------------------------------------------------------------------

----------------------------------------------------------------------

    This Section 12(b) registration will become effective upon the 
later of (1) effectiveness of this Form A; or (2) receipt by the 
Commission of certification from the national securities exchange 
listed above.

[  ] Securities being registered pursuant to Exchange Act Section 
12(g):
Title of each class:
----------------------------------------------------------------------

----------------------------------------------------------------------

Name of market on which quoted:
----------------------------------------------------------------------

----------------------------------------------------------------------

    Section 12(g) registration statements become effective 
automatically 60 days after filing. You may check box 1 or 2, below, 
to shorten this time period. Also, you may check box 3, below, to 
preserve your option to shorten this time period. If you check box 3 
and do not file a later amendment, the registration of the class of 
securities listed above will become effective 60 days after filing 
of this Form A.
    We propose that this filing become effective (check appropriate 
box):
    1. [  ] upon filing with the Commission. By checking this box, 
the undersigned are certifying compliance with the delivery 
requirements of Securities Act Rule 172(b) in connection with the 
offering. In addition, in checking this box, any underwriter in 
connection with the offering also is requesting that the 
registration statement become effective upon filing.
    2. [  ] on __________ at __________. By checking this box, the 
undersigned are certifying compliance with the delivery requirements 
of Securities Act Rule 172(b) in connection with the offering. In 
addition, in checking this box, any underwriter in connection with 
the offering also is requesting that the registration statement 
become effective upon the date and time designated.
    3. [  ] as specified in a later amendment to this Form.

                                         Calculation of Registration Fee
----------------------------------------------------------------------------------------------------------------
                                                                            Proposed     Proposed
                                                              Amount to     maximum      maximum      Amount of
     Title of each class of securities to be registered           be        offering    aggregate   registration
                                                              registered   price per     offering        fee
                                                                              unit        price
----------------------------------------------------------------------------------------------------------------
 
 
 
 
 
----------------------------------------------------------------------------------------------------------------
Notes to the Fee Table:
1. Set forth any explanatory details relating to the fee table in footnotes to the table.
2. If the basis for calculating the fee is not evident from the information presented in this table, refer to
  the applicable provisions of Securities Act Rule 457 in a footnote.
3. If the fee is calculated under Rule 457(o), the ``Amount to be registered'' and the ``Proposed maximum
  offering price per unit'' need not appear in this table.
4. If any of the securities registered are not sold in connection with this offering, the registrant (or a
  qualifying wholly-owned subsidiary) may use the dollar amount of the fee paid with respect to the unsold
  securities to offset the total fee due on its subsequent registration statement. See Rule 457(p). When
  offsetting any part of the fee under Rule 457(p), the registrant must state the dollar amount being offset in
  a footnote to the fee table and must identify the file number of the registration statement and the amount and
  class of securities in connection with which the offsetting fee was previously paid. Use of Rule 457(p) to
  offset any fee automatically deregisters the securities in connection with which the fee was previously paid.

General Instructions

I. Rules as to Use of Form A

    A. This Form shall be used for registration under the Securities 
Act of 1933 (``Securities Act'') of any offering for which no other 
form is authorized or prescribed. Therefore, for example, this Form 
shall not be used for:
    1. any offering for which Form C or Form SB-3 is authorized; or
    2. any offering by a foreign government or a political 
subdivision thereof for which Schedule B is authorized.
    B. A registrant also may use this Form to register concurrently 
under Section 12(b) or 12(g) of the Securities Exchange Act of 1934 
(``Exchange Act''). It may register under the Exchange Act any class 
of securities that are the subject of the offering it is registering 
under the Securities Act. To register, the

[[Page 67286]]

registrant must check the appropriate box(es) on the cover page of 
this Form and identify which class(es) of securities it is 
registering under Section 12(b) or 12(g).

II. Registrant Information--Incorporation by Reference

    A. Registrants Eligible to Incorporate by Reference. Unless 
otherwise provided in General Instruction II.B., a registrant may 
comply with Items 12 and 13, instead of Item 14, if it meets the 
following requirements:
    1. the registrant:
    (a) has a class of securities registered pursuant to Section 
12(b) or 12(g) of the Exchange Act; or
    (b) is required to file reports pursuant to Section 15(d) of the 
Exchange Act;
    2. for a period of at least twenty-four full calendar months and 
any portion of a month immediately preceding the date of filing this 
Form, the registrant:
    (a) has been subject to the requirements of Section 12 or 
Section 15(d) of the Exchange Act;
    (b) has filed all material it was required to file pursuant to 
Sections 13, 14 and 15(d) of the Exchange Act; and
    (c) has filed two annual reports if its public float is less 
than $75 million.
    (3) for a period of at least twelve full calendar months and any 
portion of a month immediately preceding the date of filing this 
Form, the registrant has filed in a timely manner all materials it 
was required to file pursuant to Sections 13, 14 and 15(d) of the 
Exchange Act.
    Note to General Instruction II.A.2.(c):
    If a registrant filed a Form 12b-25 to delay filing any report 
(or portion of a report) during that time period, it must have filed 
the related report (or portion) within the time prescribed by Rule 
12b-25.
    B. Registrants Ineligible to Incorporate by Reference and Rely 
on Automatic Effectiveness. A registrant must comply with Item 14 
and is ineligible to rely on Securities Act Rule 462(f)(1)(iv) if it 
fails to meet any of the conditions of General Instruction II.A. or 
any of the following is true:
    1. within 2 years before the date of filing this Form, the 
registrant was a development stage company that either:
    (a) had no specific business plan or purpose; or
    (b) indicated that its business plan was to engage in a merger 
or acquisition with an unidentified entity or entities;
    2. within two years before the date of filing this Form, the 
registrant was a shell entity having few or no assets, earnings or 
operations;
    3. the registrant is registering an offering of ``penny stock'' 
as defined in Exchange Act Rule 3a51-1 or has issued it in the two 
years prior to the date of filing this Form;
    4. the registrant or any of its subsidiaries has, since the end 
of the last fiscal year for which the registrant included certified 
financial statements in an Exchange Act report:
    (a) failed to pay any dividend or sinking fund installment on 
preferred stock;
    (b) caused any material delinquency with respect to preferred 
stock that was not cured within 30 days; or
    (c) defaulted on any payment of principal, interest, a sinking 
fund installment, a purchase fund installment or any other 
installment on indebtedness, or defaulted on any rental on a long-
term lease, if such debt and lease defaults in the aggregate are 
material;
    5. the independent accountant that examined the registrant's 
financial statements for the most recent fiscal year expressed in 
its report substantial doubt about the registrant's ability to 
continue as a going concern;
    6. within three years before the date of filing, a petition 
under the federal bankruptcy laws or any state insolvency law was 
filed by or against the registrant, or a court appointed a receiver, 
fiscal agent or similar officer with respect to the business or 
property of the registrant. If true, however, this would not 
disqualify the registrant if it has filed an annual report with 
audited financial statements subsequent to its emergence from that 
bankruptcy, insolvency or receivership process;
    7. within five years before the date of filing, the registrant, 
any executive officer, director or general partner of the registrant 
or person nominated to any of those positions, or underwriter was 
convicted of any felony or misdemeanor described in clauses (i) 
through (iv) of Section 15(b)(4)(B) of the Exchange Act;
    8. within five years before the date of filing, the registrant, 
any executive officer, director or general partner of the registrant 
or person nominated to any of those positions, or underwriter was 
made the subject of a judicial or administrative decree or order 
arising out of a governmental action that:
    (a) prohibits future violations of any antifraud provision of 
the securities laws or Section 5 of the Securities Act;
    (b) requires that the registrant, any executive officer, 
director or general partner of the registrant or person nominated to 
any of those positions, or underwriter cease and desist from 
violating any antifraud provision of the securities laws or from 
violating Section 5 of the Securities Act; or
    (c) determines that the registrant, any executive officer, 
director or general partner of the registrant or person nominated to 
any of those positions, or underwriter violated any antifraud 
provision of the securities laws or Section 5 of the Securities Act;
    9. the registrant is a ``small business issuer,'' as defined in 
Securities Act Rule 405, that provided the ``Information Required in 
Annual Report of Transitional Small Business Issuers'' in its most 
recent annual report on Form 10-KSB; and
    10. the registrant would incorporate by reference into its Form 
A registration statement a report under the Exchange Act that:
    (a) the Commission, after review, requested that the registrant 
amend in accordance with its comments; and
    (b) either the registrant did not amend the report or, in the 
Commission's judgment, did not amend the report in accordance with 
the Commission's comments.
    C. Successor Registrants. We will deem a successor registrant to 
have satisfied the eligibility requirements of General Instruction 
II.A. of this Form if it satisfies either of the following 
requirements:
1.(a) taken together, the registrant and its predecessor(s) meet the 
eligibility requirements in General Instruction II.A. of this Form;
    (b) the primary purpose of the succession was to change the 
state or other jurisdiction of incorporation of the predecessor(s) 
or to form a holding company for the predecessor(s); and
    (c) the assets and liabilities of the successor at the time of 
succession were substantially the same as those of the predecessor; 
or
    2. the predecessor(s) met the eligibility requirements of 
General Instruction II.A. of this Form at the time of succession and 
the registrant has continued to meet them since the succession.

III. Domestic and Foreign Registrants

    A. Definitions. 
    1. As used in this Form, ``U.S. registrant'' includes all 
registrants other than foreign governments and foreign private 
issuers.
    2. As used in this Form, ``foreign registrant'' includes only 
registrants that are foreign private issuers.
    3. ``Foreign government'' and ``foreign private issuer'' are 
defined in Rule 405 of Regulation C.
    B. Information Required. 
    1. U.S. registrants must provide all information required by the 
Items of this Form except where the Item expressly identifies the 
requirement as applying only to foreign registrants.
    2. Foreign registrants must provide all information required by 
the Items of this Form except where the Item expressly identifies 
the requirement as applying only to U.S. registrants.

IV. Free Writing Prospectus Information

    You should read Securities Act Rule 165. That rule permits a 
Form A registrant and those acting on its behalf to use ``free 
writing'' offering materials that do not meet the requirements of 
Section 10 of the Act. Those offering materials may be used after 
the registrant has filed with the Commission a registration 
statement containing the Section 10 prospectus. If you use a 
prospectus in reliance on that Rule, you must file it when required 
to do so by Securities Act Rule 425.

V. Securities Act Rules and Regulations

    A. Prospectus delivery. You should read Securities Act Rule 172. 
That rule describes prospectus delivery obligations applicable to 
offerings registered on this Form.
    B. Preparation and filing of Form. You should read the other 
rules and regulations under the Securities Act (Part 230 of Title 17 
of the Code of Federal Regulations), particularly Regulation C, 
Regulation S-K and Form 20-F. Regulation C contains general 
requirements regarding the preparation and filing of registration 
statements. Regulation S-K contains non-financial statement 
disclosure requirements applicable to registration statements. Form 
20-F also contains non-financial statement disclosure requirements, 
but they apply only to foreign private issuers.

[[Page 67287]]

    C. Blank check companies. If the offering registered on this 
Form relates to a blank check company, you should read Securities 
Act Rule 419. Among other things, that Rule contains additional 
disclosure requirements.

VI. Foreign Registrant Financial Statements

    A. A foreign registrant must reconcile its financial statements 
included in or incorporated into this registration statement. It 
must reconcile them to Item 18 of Form 20-F, except as otherwise 
permitted in paragraph B of this General Instruction.
    B. A foreign registrant need only reconcile its financial 
statements to Item 17 of Form 20-F if:
    1. it is registering an offering of its non-convertible 
investment grade securities. A security is ``investment grade'' if, 
at the time of sale:
    (a) it is rated by at least one nationally recognized 
statistical rating organization (``NRSRO'') (as that term is used in 
Exchange Act Rule 15c3-1(c)(2)(vi)(F)) in one of the generic rating 
categories that signify investment grade; and
    (b) no other NRSRO rating the security has placed it in a 
category that does not signify investment grade;
    2. it is registering an offering of its securities to be issued 
upon the exercise of outstanding rights granted pro rata to all 
existing security holders of the class of securities to which the 
rights attach;
    3. it is registering an offering of its securities pursuant to a 
dividend or interest reinvestment plan;
    4. it is registering an offering of its securities upon the 
conversion of outstanding convertible securities that it (or its 
affiliate) issued; or
    5. it is registering an offering of its securities upon the 
exercise of outstanding transferrable warrants that it (or its 
affiliate) issued.
    C. Notwithstanding paragraphs B.2., B.3., B.4. and B.5. of this 
General Instruction, if securities are to be offered or sold in a 
standby underwriting in the United States or by similar arrangement, 
the registrant must reconcile its financial statements to Item 18 of 
Form 20-F.

VII. Roll-Up Transactions

    A. The registrant must comply with the disclosure provisions of 
Subpart 900 of Regulation S-K if it registers a roll-up transaction 
(as defined in Item 901(c) of Regulation S-K) on this Form, even if 
the registrant is a ``small business issuer'' as defined in 
Securities Act Rule 405. To the extent that the disclosure 
requirements of Subpart 900 are inconsistent with the disclosure 
requirements of this Form, the requirements of Subpart 900 control.
    B. If the registrant registers a roll-up transaction on this 
Form, special prospectus delivery requirements apply. See Securities 
Act Rule 172(e).
    C. You should read the proxy rules and Rule 14e-7 of the tender 
offer rules. They contain provisions specifically applicable to 
roll-up transactions. Those provisions apply whether or not the 
entities involved have registered securities under Section 12 of the 
Exchange Act.

VIII. Effectiveness of Registration Statement and Post-Effective 
Amendments

    A.1. Registration statements on this Form will become effective 
automatically pursuant to Securities Act Rule 462(f)(1)(iv) on the 
date designated by the registrant on the front page of the Form if:
    (i) the registrant meets the requirements of General Instruction 
II.A. or II.C. and is not disqualified as specified in General 
Instruction II.B.; and
    (A) the registrant has a public float of $75 million or more; or
    (B) the annual report filed by the registrant for its most 
recently completed fiscal year end was reviewed by the staff of the 
Commission, was amended in accordance with the staff's comments (if 
so requested) and is incorporated by reference into the Form A.
    2. ``Public float'' means the aggregate market value of the 
registrant's outstanding voting and non-voting common equity 
securities held by persons other than affiliates of the registrant, 
as of the end of the registrant's last fiscal quarter.
    3. Under Rule 462(f)(1)(iv), registrants may designate that the 
Form will become effective either:
    (i) upon filing with the Commission;
    (ii) at the date and time as set forth on the front page of the 
Form;
    (iii) as specified in a later amendment to the Form.
    4. Before filing this Form in reliance on Rule 462(f)(1)(iv), 
registrants must obtain the concurrence of the underwriter with the 
designated effective date.
    5. Registration statements on this Form filed in reliance on 
Securities Act Rule 462(f)(1)(iv) become public upon filing and are 
not reviewed by the Commission staff prior to the effective date 
designated by the issuer. Confidential treatment requests with 
respect to information that the registrant is required to file in 
this Form may, however, be reviewed by the staff. As a result, when 
the issuer plans to have the Form become effective upon filing or 
fewer than 20 days thereafter, it must furnish to the staff in 
advance of filing, any request it wishes to make for confidential 
treatment of information relating to the Form. See Securities Act 
Rule 406. The Commission must act on the confidential treatment 
request before this Form becomes effective.
    B. Any post-effective amendment filed on this Form by a 
registrant eligible to designate its effective date as described in 
General Instruction VIII.A. also shall become effective as 
designated by the registrant. See General Instruction VIII.A.2. and 
Securities Act Rule 464.

IX. Registration of Additional Securities.

    A. Under certain circumstances, the registrant may increase the 
size of an offering after the effective date through filing a short-
form registration statement under Securities Act Rule 462(b). A Rule 
462(b) registration statement may include only the following:
    1. the facing page;
    2. a statement that the earlier registration statement, 
identified by file number, is incorporated by reference;
    3. any required opinions and consents;
    4. the signature page; and
    5. any price-related information omitted from the earlier 
registration statement in reliance on Securities Act Rule 430A, if 
the registrant so chooses.
    B. The information contained in a Rule 462(b) registration 
statement is deemed to be a part of the earlier effective 
registration statement as of the date of effectiveness of the Rule 
462(b) registration statement.
    C. The registrant may incorporate by reference from the earlier 
registration statement any opinion or consent required in the Rule 
462(b) registration statement if:
    1. the opinion or consent expressly allows that incorporation; 
and
    2. the opinion or consent also relates to the Rule 462(b) 
registration statement.
    Note to General Instruction IX.C.
    You should read Securities Act Rule 411(c) regarding 
incorporation by reference of exhibits and Securities Act Rule 
439(b) regarding incorporation by reference of consents.

X. Concurrent Registration of Securities under the Exchange Act.

    A. Registration on this Form of a class of securities under 
Exchange Act Section 12(b) shall become effective upon the later of:
    1. receipt by the Commission of certification from the national 
securities exchange listed on the cover of this Form that the 
securities have been approved for listing; or
    2. effectiveness of this registration statement.
    B. Registration on this Form of a class of securities under 
Exchange Act Section 12(g) shall become effective upon the 
effectiveness of this registration statement.
    C. If the registrant is required to file an annual report under 
Exchange Act Section 15(d) for its last fiscal year, it must file 
that annual report within the time period specified in the 
appropriate annual report form even if the Exchange Act registration 
becomes effective before the annual report is due.
    D. The registrant must file at least one complete, signed copy 
of the registration statement with each exchange or market 
identified on the cover of this Form.

Part I--Information Required in the Prospectus

Item 1. Front Cover Page of the Registration Statement and Outside 
Front Cover Page of the Prospectus

    (a) Provide the information required by Item 501 of Regulation 
S-K.
    (b) If the registrant is a real estate entity as defined in Item 
1101 of Regulation S-K, provide the information required by Item 
1102 of Regulation S-K.

Item 2. Inside Front and Outside Back Cover Pages of Prospectus

    Provide the information required by Item 502 of Regulation S-K.

Item 3. Prospectus Summary, Risk Factors, and Ratio of Earnings to 
Fixed Charges

    (a) Provide the information required by Item 503 of Regulation 
S-K.
    (b) If the registrant is a real estate entity as defined by Item 
1101 of Regulation S-K,

[[Page 67288]]

provide the information required by Item 1103 of Regulation S-K.
    Note to Item 3.
    Information is required by this Item only to the extent that it 
is not already incorporated by reference from an Exchange Act 
report.

Item 4. Use of Proceeds

    Provide the information required by Item 504 of Regulation S-K.

Item 5. Determination of Offering Price

    Provide the information required by Item 505 of Regulation S-K.

Item 6. Dilution

    Provide the information required by Item 506 of Regulation S-K.

Item 7. Selling Security Holders

    Provide the information required by Item 507 of Regulation S-K.

Item 8. Plan of Distribution

    Provide the information required by Item 508 of Regulation S-K.

Item 9. Description of Securities

    Provide the information required by Item 202 of Regulation S-K.

Item 10. Interests of Named Experts and Counsel

    Provide the information required by Item 509 of Regulation S-K.

Item 11. Real Estate Entities

    If the registrant is a real estate entity as defined in Item 
1101 of Regulation S-K, provide the information required by Item 
1104 and Items 1108 through Item 1112 of Regulation S-K.

Item 12. Information Required for Seasoned Form A Companies

    If the registrant meets the requirements of General Instruction 
II. of this Form and elects to comply with this Item and Item 13 
(instead of Item 14), it must do the following:
    (a) Annual report. Deliver together with the prospectus a copy 
of its latest annual report filed pursuant to Section 13(a) or 15(d) 
of the Exchange Act.
    (b) Quarterly information. U.S. registrants: Provide the 
information required by Part I of Form 10-Q (or Form 10-QSB, if 
applicable) for the most recent fiscal quarter following the fiscal 
year covered by the annual report delivered pursuant to this Item. 
The registrant must:
    (1) include that information in the prospectus; or (2) deliver 
together with the prospectus a copy of its latest Form 10-Q (or 10-
QSB);
    Notes to Items 12(a) and 12(b).
    1. Indicate in the prospectus that it is accompanied by the 
reports that the registrant sends pursuant to paragraphs (a) and (b) 
of this Item.
    2. If the registrant incorporates by reference portions of any 
other document into a report it delivers under this Item, it also 
must deliver the incorporated portions with it.
    3. If the registrant's Form 10-Q (or 10-QSB) for the most recent 
quarter is not due to be filed prior to the effective date of the 
registration statement, it may provide the information for the 
previous fiscal quarter to satisfy Item 12(b). For this purpose, the 
due date is calculated without the extension provided by Exchange 
Act Rule 12b-25.
    (c) Current financial statements. Foreign registrants: If the 
financial statements you incorporate by reference in accordance with 
Item 13 of this Form are not sufficiently current to comply with 
Rule 3-19 of Regulation S-X, you must provide financial statements 
necessary to comply with that Rule. You must do so through one of 
the following means:
    (1) include that information in the prospectus; or
    (2) include that information in an amended or a newly filed 
Exchange Act report, disclose in the prospectus that you have done 
so, incorporate that report by reference into the effective 
registration statement, and deliver it together with the prospectus.
    (d) Other financial information. If not reflected in the 
registrant's annual report delivered to investors in accordance with 
paragraph (a) of this Item, provide:
    (1) financial information required by Rule 3-05 and Article 11 
of Regulation S-X with respect to transactions other than the one 
being registered;
    (2) restated financial statements prepared in accordance with or 
reconciled to U.S. GAAP and Regulation S-X where:
    (i) after the end of its most recent fiscal year, the registrant 
consummated one or more business combinations accounted for by the 
pooling of interest method of accounting; and
    (ii) the acquired businesses, considered in the aggregate, are 
significant pursuant to Rule 11-01(b) or Regulation S-X;
    (3) restated financial statements prepared in accordance with or 
reconciled to U.S. GAAP and Regulation S-X, if a change in 
accounting principles or correction of an error required a material 
retroactive restatement of financial statements; or
    (4) any financial information required because of a material 
disposition of assets outside the normal course of business. See 
Item 2 of Form 8-K and Instruction 3 to Rule 11-02(b) of Regulation 
S-X.
    Instructions to Item 12(d).
    1. You may incorporate by reference into the effective 
registration statement the information required by paragraph (d) of 
Item 12. If you incorporate it, you must deliver it together with 
the prospectus.
    2. Foreign registrants: You should read Rules 4-01(a)(2) and 10-
01 of Regulation S-X.
    (e) Material changes. Describe any material change in the 
registrant's affairs that:
    (1) has occurred since the end of the fiscal year covered by the 
annual report delivered pursuant to this Item; and
    (2) the registrant has not described in an Exchange Act report 
delivered together with the prospectus in accordance with this Item.
    Instructions to Item 12.
    1. The registrant must deliver information required by this Item 
with the first prospectus it delivers. It need not deliver that 
information with any subsequent prospectus sent to the same person.
    2. Any reports the registrant delivers together with the 
prospectus pursuant to this Item must be delivered without charge to 
the investor.
    3. Small business issuers. Small business issuers may provide 
the information required by Item 11 of Form SB-2, instead of the 
information required by this Item.

Item 13. Incorporation of Certain Information by Reference for Seasoned 
Form A Companies

    If the registrant provides information in accordance with Item 
12 of this Form:
    (a) it must incorporate by reference into the prospectus that is 
part of the effective registration statement:
    (1) its latest annual report filed in accordance with Section 
13(a) or 15(d) of the Exchange Act that contains audited financial 
statements;
    (2) any reports it filed pursuant to Section 13(a) or 15(d) of 
the Exchange Act since the end of that fiscal year covered by its 
annual report incorporated in this Form.
    Instructions to Item 13(a).
    1. List in the prospectus that is part of the effective 
registration statement all documents filed prior to effectiveness 
that are incorporated by reference.
    2. You should read Rule 439 regarding consent to the use of 
material incorporated by reference.
    (b) You must set forth the following undertakings in the 
prospectus:
    (1) that you will provide to each person, including any 
beneficial owner, to whom a prospectus is delivered, a copy of any 
information that has been incorporated by reference in the 
prospectus but not delivered with the prospectus;
    (2) that you will provide this information upon written or oral 
request;
    (3) that you will provide this information at no cost to the 
requester;
    (4) that you will send a copy of that information within one 
business day of any request for that information;
    (5) that you will send those incorporated documents in a manner 
that should result in delivery within three business days; and
    (6) that the name, address and telephone number to which the 
request for this information must be made is: [fill in information].
    Instructions to Item 13(b).
    1. The undertakings cover all documents incorporated by 
reference through the date of responding to the request.
    2. If you send any of the information that is incorporated by 
reference in the prospectus to security holders, you also must send 
any exhibits that are specifically incorporated by reference in that 
information.
    (c) In the prospectus, you must:
    (1) identify the reports and other information that you file 
with the Commission;
    (2) state that the public:
    (i) may read and copy materials you file with the Commission at 
the Commission's Public Reference Room at 450 Fifth Street, N.W., 
Washington, D.C. 20549; and
    (ii) may obtain information on the operation of the Public 
Reference Room by calling the Commission at 1-800-SEC-0330; and
    (3) if you are an electronic filer, state that the Commission 
maintains an Internet web site that contains reports, proxy and

[[Page 67289]]

information statements, and other information regarding issuers that 
file electronically with the Commission and state the address of 
that site (http://www.sec.gov). You are encouraged to give your 
Internet web site address, if available.

Item 14. Information Required for All Other Companies

    Any registrant that does not provide information in accordance 
with Items 12 and 13 must provide the following information:
    (a) Description of Business.
    (1) U.S. registrants: Item 101 of Regulation S-K.
    (2) Foreign registrants: Item 1 of Form 20-F.
    (b) Description of Property.
    (1) U.S. registrants: Item 102 of Regulation S-K.
    (2) Foreign registrants: Item 2 of Form 20-F.
    (3) If the registrant is a real estate entity as defined in Item 
1101 of Regulation S-K, provide the information required by Items 
1105, 1106 and 1107 of Regulation S-K in lieu of the information 
required by paragraph (b)(i) or (b)(ii) of this Item.
    (c) Legal Proceedings.
    (1) U.S. registrants: Item 103 of Regulation S-K.
    (2) Foreign registrants: Item 3 of Form 20-F.
    (d) Market Information.
    (1) U.S. registrants: If the registrant is offering common 
equity securities, Item 201 of Regulation S-K.
    (2) Foreign registrants: Item 5 of Form 20-F.
    (e) Financial Statements.
    (1) U.S. registrants:
    (i) financial statements meeting the requirements of Regulation 
S-X and any information required by Rule 3-05 and Article 11 of 
Regulation S-X;
    (ii) restated financial statements prepared in accordance with 
or reconciled to U.S. GAAP and Regulation S-X where:
    (A) after the end of its most recent fiscal year, the registrant 
consummated one or more business combinations accounted for by the 
pooling of interest method of accounting; and
    (B) the acquired businesses, considered in the aggregate, are 
significant pursuant to Rule 11-01(b) or Regulation S-X;
    (iii) restated financial statements prepared in accordance with 
or reconciled to U.S. GAAP and Regulation S-X, if a change in 
accounting principles or correction of an error required a material 
retroactive restatement of financial statements; and
    (iv) any financial information required because of a material 
disposition of assets outside the normal course of business. See 
Item 2 of Form 8-K and Instruction 3 to Rule 11-02(b) of Regulation 
S-X.
    (2) Foreign registrants: Item 18 of Form 20-F except if you may 
comply with Item 17 of Form 20-F pursuant to General Instruction VI.
    Instructions to Item 14(e).
    1. File schedules required by Regulation S-X as ``Financial 
Statement Schedules'' pursuant to Item 20 of this Form.
    2. Foreign registrants: Your financial statements must comply 
with Rule 3-19 of Regulation S-X. See also Rules 4-01(a)(2) and 10-
01 of Regulation S-X.
    (f) Exchange Controls.
    (i) U.S. registrants: Not applicable.
    (ii) Foreign registrants: Item 6 of Form 20-F.
    (g) Taxation.
    (i) U.S. registrants: Not applicable.
    (ii) Foreign registrants: Item 7 of Form 20-F.
    (h) Selected Financial Data.
    (i) U.S. registrants: Item 301 of Regulation S-K.
    (ii) Foreign registrants: Item 8 of Form 20-F.
    (i) Supplementary Financial Information.
    (i) U.S. registrants: Item 302 of Regulation S-K.
    (ii) Foreign registrants: Not applicable.
    (j) Management's Discussion and Analysis.
    (i) U.S. registrants: Item 303 of Regulation S-K.
    (ii) Foreign registrants: Item 9 of Form 20-F.
    (k) Changes In and Disagreements With Accountants.
    (i) U.S. registrants: Item 304 of Regulation S-K.
    (ii) Foreign registrants: Not applicable.
    (l) Quantitative and Qualitative Disclosures of Market Risk.
    (i) U.S. registrants: Item 305 of Regulation S-K.
    (ii) Foreign registrants: Item 9A of Form 20-F.
    (m) Directors and Executive Officers.
    (i) U.S. registrants: Item 401 of Regulation S-K.
    (ii) Foreign registrants: Item 10 of Form 20-F.
    (n) Executive and Officer Compensation.
    (i) U.S. registrants: Item 402 of Regulation S-K.
    (ii) Foreign registrants: Item 11 of Form 20-F.
    (o) Control of Registrant.
    (i) U.S. registrant: Item 403 of Regulation S-K.
    (ii) Foreign registrant: Item 4 of Form 20-F.
    (p) Options Issued by Registrant.
    (i) U.S. registrants: Not applicable.
    (ii) Foreign registrants: Item 12 of Form 20-F.
    (q) Interest of Management in Certain Transactions.
    (i) U.S. registrant: Item 404 of Regulation S-K.
    (ii) Foreign registrant: Item 13 of Form 20-F.

Item 15. Disclosure of Commission Position on Indemnification for 
Securities Act Liabilities

    Provide the information required by Item 510 of Regulation S-K.

Part II--Information Not Required in the Prospectus

Item 16. Other Expenses of Issuance and Distribution

    Provide the information required by Item 511 of Regulation S-K.

Item 17. Indemnification of Directors and Officers

    Provide the information required by Item 702 of Regulation S-K.

Item 18. Recent Sales of Unregistered Securities

    Provide the information required by Item 701 of Regulation S-K, 
unless incorporated by reference.

Item 19. Sales to Special Parties

    If the registrant is a real estate entity as defined in Item 
1101 of Regulation S-K, provide the information required by Item 
1113 of Regulation S-K.

Item 20. Exhibits

    (a) Provide the information required by Item 601 of Regulation 
S-K.
    (b) Provide the financial statement schedules required by 
Regulation S-X and Items 11 or 13 of this Form. List each schedule 
according to the number assigned to it in Regulation S-X.

Item 21. Undertakings

    Provide the information required by Item 512 of Regulation S-K.

Signatures

    The registrant certifies that it has duly caused and authorized 
the undersigned to sign this registration statement on its behalf. 
The undersigned certifies that he/she has read this registration 
statement and to his/her knowledge the registration statement does 
not contain an untrue statement of a material fact or omit to state 
a material fact required to be stated therein or necessary to make 
the statements therein not misleading.

(Registrant)-----------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    The following persons certify that they have read this 
registration statement and to their knowledge the registration 
statement does not contain an untrue statement of a material fact or 
omit to state a material fact required to be stated therein or 
necessary to make the statements therein not misleading. The 
following persons also certify that they are signing below on behalf 
of the registrant and in the capacities and on the dates indicated.

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    Signature Instructions.
    1. The following persons, or persons performing similar 
functions, must sign the registration statement:
    (a) the registrant;
    (b) its principal executive officer or officers;
    (c) its principal financial officer;
    (d) its controller or principal accounting officer; and
    (e) at least the majority of its board of directors.
    2. Where the registrant is a foreign issuer, its authorized 
representative in the United States also must sign the registration 
statement.

[[Page 67290]]

    3. Where the registrant is a limited partnership, its general 
partner must sign. Where the general partner is a corporation, the 
majority of the board of directors of the corporate general partner 
must sign the registration statement.
    4. Type or print the name and title of each person who signs the 
registration statement beneath the person's signature. Any person 
who occupies more than one of the specified positions must indicate 
each capacity in which that person signs the registration statement. 
See Securities Act Rule 402 concerning manual signatures and Item 
601 of Regulation S-K concerning signatures pursuant to powers of 
attorney.

    91. By adding Sec. 239.5 and Form B to read as follows:


Sec. 239.5  Form B, for registration under the Securities Act of 1933 
of certain offerings, and optional concurrent registration under the 
Securities Exchange Act of 1934.

    (a) A registrant may use this Form for registration of securities 
offerings under the Securities Act of 1933 (15 U.S.C. 77a et seq.) 
(``Securities Act'') if:
    (1) It is not a foreign government as defined in Sec. 230.405 of 
this chapter;
    (2) It meets all of the requirements of General Instruction I.B. of 
this Form, unless otherwise specified in General Instruction I.C.;
    (3) The offering is one of those described in General Instruction 
I.C. of this Form and is not a roll-up transaction as defined in Item 
901(c) of Regulation S-K (Sec. 229.901(c) of this chapter); and
    (4) Form C (Sec. 230.6 of this chapter) is not authorized for 
registration of the offering.
    (b) A registrant also may use this Form to register concurrently 
under Section 12(b) or 12(g) of the Securities Exchange Act of 1934 
(``Exchange Act''). It may register under the Exchange Act any class of 
securities that are the subject of the offering it is registering under 
the Securities Act. To register, the registrant must check the 
appropriate box(es) on the cover page of this Form and identify which 
class(es) of securities it is registering under Section 12(b) or 12(g) 
of the Exchange Act.

    Note: The text of Form B will not appear in the Code of Federal 
Regulations.

U.S. Securities and Exchange Commission, Washington, D.C. 20549

FORM B--Registration Statement Under The Act of 1933 [And Optional 
Registration Pursuant to Section 12(b) or 12(g) of the Securities 
Exchange Act of 1934]

----------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)

----------------------------------------------------------------------
(Translation of Registrant's name into English, if applicable)

----------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)

----------------------------------------------------------------------
(I.R.S. Employer Identification Number)

----------------------------------------------------------------------
(Address and telephone number of Registrant's principal executive 
offices)

----------------------------------------------------------------------
(Name, address and telephone number of Registrant's agent for 
service)

----------------------------------------------------------------------
(Web Site Address, if any)

----------------------------------------------------------------------
(E-mail Address, if any)

* * * * *
Approximate date of commencement of sales ________________
    If you are a foreign private issuer as defined in Securities Act 
Rule 405, check the following box. [  ]
    If you are not a foreign private issuer as defined in Securities 
Act Rule 405, check the following box. [  ]
    If any of the securities being registered on this Form are to be 
offered pursuant to Securities Act Rule 415, check the following 
box. [  ] __________
    If you are using this Form to register concurrently under 
Section 12(b) or 12(g) Exchange Act any class of securities that are 
the subject of the offering you are registering under the Securities 
Act, check the appropriate box and provide the information indicated 
below:
[  ] Securities being registered pursuant to Exchange Act Section 
12(b):
Title of each class:
----------------------------------------------------------------------

----------------------------------------------------------------------

Name of exchange on which listed:
----------------------------------------------------------------------

----------------------------------------------------------------------

    This Section 12(b) registration will become effective upon the 
later of (1) effectiveness of this Form B; or (2) receipt by the 
Commission of certification from the national securities exchange 
listed above.
[  ] Securities being registered pursuant to Exchange Act Section 
12(g):
Title of each class:
----------------------------------------------------------------------

----------------------------------------------------------------------

Name of market on which quoted:
----------------------------------------------------------------------

----------------------------------------------------------------------

    Section 12(g) registration statements become effective 
automatically 60 days after filing. You may check box 1 or 2, below, 
to shorten this time period. Also, you may check box 3, below, to 
preserve your option to shorten this time period. If you check box 3 
and do not file a later amendment, the registration of the class of 
securities listed above will become effective 60 days after filing 
of this Form B.
    We propose that this filing become effective (check appropriate 
box):
    1. [  ] upon filing with the Commission. By checking this box, 
the undersigned are certifying compliance with the delivery 
requirements of Securities Act Rule 172(a) in connection with the 
offering. In addition, in checking this box, any underwriter in 
connection with the offering also is requesting that the 
registration statement become effective upon filing.
    2. [  ] on (date) at (time) . By checking this box, the 
undersigned are certifying compliance with the delivery requirements 
of Securities Act Rule 172(a) in connection with the offering. In 
addition, in checking this box, any underwriter in connection with 
the offering also is requesting that the registration statement 
become effective upon the date and time designated.
    3. [  ] as specified in a later amendment to this Form.

                                         Calculation of Registration Fee
----------------------------------------------------------------------------------------------------------------
                                                                            Proposed     Proposed
                                                              Amount to     maximum      maximum      Amount of
     Title of each class of securities to be registered           be        offering    aggregate   registration
                                                              registered   price per     offering        fee
                                                                              unit        price
----------------------------------------------------------------------------------------------------------------
 
 
 
 
 
----------------------------------------------------------------------------------------------------------------
 ANotes to the Fee Table:
 A1. Set forth any explanatory details relating to the fee table in footnotes to the table.
 A2. If the basis for calculating the fee is not evident from the information presented in this table, refer to
  the applicable provisions of Securities Act Rule 457 in a footnote.

[[Page 67291]]

 
 A3. If the fee is calculated under Rule 457(o), the ``Amount to be registered'' and the ``Proposed maximum
  offering price per unit'' need not appear in this table.
 A4. If any of the securities registered are not sold in connection with this offering, the registrant (or a
  qualifying wholly-owned subsidiary) may use the dollar amount of the fee paid with respect to the unsold
  securities to offset the total fee due on its subsequent registration statement. See Rule 457(p). When
  offsetting any part of the fee under Rule 457(p), the registrant must state the dollar amount being offset in
  a footnote to the fee table and must identify the file number of the registration statement and the amount and
  class of securities in connection with which the offsetting fee was previously paid. Use of Rule 457(p) to
  offset any fee automatically deregisters the securities in connection with which the fee was previously paid.
 A5. Where two or more classes of securities are being registered pursuant to General Instruction I.C.1., I.C.2.
  or I.C.4. on a delayed or continuous basis pursuant to Securities Act Rule 415(a)(1)(x) and Rule 457(o), the
  registrant need only specify the ``Proposed maximum aggregate offering price'' and the ``Amount of
  registration fee'' for all classes listed in the fee table as a group, not for each individual class. The
  registrant must, however, list each of the classes of securities under the ``Title of each class of securities
  to be registered'' section of the fee table.

General Instructions

I. Eligibility Requirements for Form B

    A. General Requirement.
    1. A registrant may use this Form for registration of securities 
offerings under the Securities Act of 1933 if:
    (a) it is not a foreign government as defined in Securities Act 
Rule 405;
    (b) it meets all of the requirements of General Instruction 
I.B., unless otherwise specified in General Instruction I.C.;
    (c) the offering is one of those described in General 
Instruction I.C. and is not a roll-up transaction as defined in Item 
901(c) of Regulation S-K; and
    (d) Form C is not authorized for registration of the offering.
    2. A registrant also may use this Form to register concurrently 
under Section 12(b) or 12(g) of the Exchange Act. It may register 
under the Exchange Act any class of securities that are the subject 
of the offering it is registering under the Securities Act. To 
register, the registrant must check the appropriate box(es) on the 
cover page of this Form and identify which class(es) of securities 
it is registering under Section 12(b) or 12(g).
    B. Eligible Registrants.
    1. The registrant:
    (a) has a class of securities registered pursuant to Section 
12(b) or 12(g) of the Exchange Act; or
    (b) is required to file reports pursuant to Section 15(d) of the 
Exchange Act.
    2. For a period of at least 12 full calendar months and any 
portion of a month immediately preceding the date of filing this 
Form, the registrant:
    (a) has been subject to the requirements of Section 12 or 15(d) 
of the Exchange Act;
    (b) has filed all the material it was required to file pursuant 
to Sections 13, 14 and 15(d) of the Exchange Act;
    (c) has filed in a timely manner all materials it was required 
to file pursuant to Sections 13, 14 and 15(d) of the Exchange Act.
    Note to General Instruction I.B.2.(c): If a registrant filed a 
Form 12b-25 to delay filing any report (or a portion of a report) 
during that time period, it must have filed the related report (or 
portion) within the time prescribed by Exchange Act Rule 12b-25;
    3. The registrant filed at least one annual report on Form 10-K 
or Form 20-F prior to the date of filing this Form;
    4. Prior to the date of filing this Form, the registrant 
registered an offering of securities under the Securities Act other 
than on a Form B, Form F-7, Form F-8, Form F-9, Form F-10, Form F-80 
or on any form that became effective upon filing. A registrant need 
not satisfy this requirement, however, if it became a publicly held 
entity through an unregistered spin-off transaction whereby its 
parent company distributed equity shares of the registrant on a pro 
rata basis to the parent's shareholders;
    5. Successor Registrants. We will deem a successor registrant to 
have satisfied the eligibility requirements of General Instruction 
I.B.2, I.B.3. and I.B.4. of this Form if it satisfies either of the 
following requirements:
    (a)(1) taken together, the registrant and its predecessor(s) 
meet the eligibility requirements in General Instructions I.B.2, 
I.B.3. and I.B.4.;
    (2) the primary purpose of the succession was to change the 
state or other jurisdiction of incorporation of the predecessor(s) 
or to form a holding company for the predecessor(s); and
    (3) the assets and liabilities of the successor at the time of 
succession were substantially the same as those of the 
predecessor(s); or
    (b) the predecessor met the eligibility requirements of General 
Instructions I.B.2, I.B.3. and I.B.4. at the time of succession and 
the registrant has continued to meet them since the succession.
    6. Disqualifications. None of the following is true:
    (a) within two years before the date of filing this Form, the 
registrant was a development stage company that either:
    (1) had no specific business plan or purpose; or
    (2) indicated that its business plan was to engage in a merger 
or acquisition with an unidentified entity or entities;
    (b) within two years before the date of filing this Form, the 
registrant was a shell entity having few or no assets, earnings or 
operations;
    (c) the registrant is registering an offering of ``penny stock'' 
as defined in Exchange Act Rule 3a51-1 or has issued penny stock in 
the two years prior to the date of filing this Form;
    (d) the registrant or any of its subsidiaries has, since the end 
of the last fiscal year for which the registrant included certified 
financial statements in an Exchange Act report:
    (1) failed to pay any dividend or sinking fund installment on 
preferred stock;
    (2) caused any material delinquency with respect to preferred 
stock that was not cured within 30 days; or
    (3) defaulted on any payment of principal, interest, a sinking 
fund installment, a purchase fund installment or any other 
installment on indebtedness, or defaulted on any rental on a long-
term lease, if such debt and lease defaults in the aggregate are 
material;
    (e) the independent accountant that examined the registrant's 
financial statements for the most recent fiscal year expressed in 
its report substantial doubt about the registrant's ability to 
continue as a going concern;
    (f) within three years before the date of filing, a petition 
under the federal bankruptcy laws or any state insolvency law was 
filed by or against the registrant, or a court appointed a receiver, 
fiscal agent or similar officer with respect to the business or 
property of the registrant. If true, however, this would not 
disqualify the registrant if it has filed an annual report with 
audited financial statements subsequent to its emergence from that 
bankruptcy, insolvency or receivership process;
    (g) within five years before the date of filing, the registrant, 
any executive officer, director or general partner of the registrant 
or person nominated to any of those positions, or underwriter was 
convicted of any felony or misdemeanor described in clauses (i) 
through (iv) of Section 15(b)(4)(B) of the Exchange Act;
    (h) within five years before the date of filing, the registrant, 
any executive officer, director or general partner of the registrant 
or person nominated to any of those positions, or underwriter was 
made the subject of a judicial or administrative decree or order 
arising out of a governmental action that:
    (1) prohibits future violations of any antifraud provision of 
the securities laws or Section 5 of the Securities Act;
    (2) requires that the registrant, any executive officer, 
director or general partner of the registrant or person nominated 
any of those positions, or underwriter cease and desist from 
violating any antifraud provision of the securities laws or from 
violating Section 5 of the Securities Act; or
    (3) determines that the registrant, any executive officer, 
director or general partner of the registrant or person nominated to 
any of those positions, or underwriter violated any antifraud 
provision of the securities laws or Section 5 of the Securities Act; 
and
    (i) the registrant would incorporate by reference into its Form 
B registration statement a report under the Exchange Act that:
    (1) the Commission, after review, requested that the registrant 
amend in accordance with its comments; and
    (2) either the registrant did not amend the report or, in the 
Commission's judgment, did not amend the report in accordance with 
the Commission's comments; and
    (j) the registrant is a ``small business issuer,'' as defined in 
Sec. 230.405, that

[[Page 67292]]

provided the ``Information Required in Annual Report of Transitional 
Small Business Issuers'' in its most recent annual report on Form 
10-KSB.
    7. MJDS Filers. A registrant shall be ineligible to use Form B 
if the most recent annual report it filed pursuant to Section 13 or 
15(d) of the Exchange Act was on Form 40-F.
    C. Eligible Offerings.
    1. Offerings by Well-Followed Issuers.
    An offering of securities of a registrant that satisfies all of 
the registrant requirements in General Instruction I.B. is eligible 
where either the registrant's public float is $75 million or more 
and the average daily trading volume value of its equity securities 
is $1 million or more, or the registrant's public float is $250 
million or more.
    For purposes of this Instruction:
    (a) ``affiliate'' has the meaning set forth in Securities Act 
Rule 144(a)(1);
    (b) ``average daily trading volume'' means the average daily 
trading volume on U.S. markets during the three full calendar 
months, or any 90 consecutive calendar days ending within 10 
calendar days, immediately preceding the filing of the registration 
statement;
    (c) ``common equity'' has the meaning set forth in Securities 
Act Rule 405; and
    (d) ``public float'' means the aggregate market value of the 
registrant's outstanding voting and non-voting common equity 
securities held by persons other than affiliates of the registrant, 
as of the end of the registrant's last fiscal quarter. The aggregate 
market value of the registrant's outstanding voting and non-voting 
common equity shall be computed by use of the price at which the 
common equity was last sold before the end of the last fiscal 
quarter, or the average of the bid and asked prices in the principal 
market for such common equity, as of the last reported date before 
the end of the last fiscal quarter.
    2. Offerings Made Solely to QIBs.
    An offering of securities of a registrant that satisfies the 
registrant requirements in General Instruction I.B. is eligible 
where the securities are offered and sold only to persons that the 
seller, and any person acting on behalf of the seller, reasonably 
believe are qualified institutional buyers.
    Note to General Instruction I.C.2.: For purposes of this 
Instruction, ``qualified institutional buyer'' shall have the 
meaning set forth in Securities Act Rule 144A(a)(1) except that it 
shall not include dealers as defined in Section 2(a)(12) of the Act 
or investment advisers as defined in Section 202(a)(11) of the 
Investment Advisers Act of 1940. Rules 144A(a)(2)--(a)(5) shall 
apply to this Instruction. In determining whether an investor is a 
qualified institutional buyer, the registrant and any person acting 
on behalf of the registrant may rely on the non-exclusive methods 
set forth in Rule 144A(d)(1)(i)--(iv).
    3. Offerings to Certain Existing Shareholders.
    An offering by a registrant that satisfies all of the registrant 
requirements in General Instruction I.B. is eligible where the 
securities are offered and sold solely to existing security holders 
as follows:
    (a) Rights Offerings. Securities of the registrant to be offered 
upon the exercise of outstanding rights granted by the registrant 
pro rata to all its existing security holders of the class to which 
the rights attach;
    (b) DRIPS. Securities offered pursuant to a dividend or interest 
reinvestment plan, as defined in Securities Act Rule 405, provided 
that:
    (1) with respect to a dividend reinvestment plan, securities 
will be offered only while the registrant has not discontinued 
dividend payments on the securities held, and with respect to an 
interest reinvestment plan, securities will be offered only while 
the registrant has not discontinued payment of interest on the 
securities held;
    (2) the plan offering being registered on this Form represents 
no more than 15% of its public float (as defined in General 
Instruction I.C.1.(d)) when aggregated with the dollar amount of 
securities registered on this Form B by the registrant for offerings 
to its existing shareholders within the 12 months before the start 
of and during the offering on this Form. For purposes of determining 
the amount of 15% of the registrant's public float, the registrant 
should use the amount of public float reported on its most recently 
filed Form 10-K;
    (3) the plan offering being registered on this Form is extended 
only to existing shareholders of the registrant that have held 
securities of the registrant continuously for at least a two-month 
period prior to becoming a participant; and
    (4) the proposed aggregate purchase of securities by an existing 
shareholder and its affiliates in the offering registered on this 
Form and any other Form B offerings to existing shareholders made by 
the issuer during the preceding 12-month period, does not exceed the 
greater of:
    (i) $10,000; or
    (ii) whichever of the following amounts is smaller:
    (A) 100% of the aggregate value of the same class(es) of the 
issuer's securities owned by the existing shareholder and its 
affiliates at the start of the 12-month period; or
    (B) 5% of the total dollar amount of securities in the offering.
    (c) Common Stock Holders. Offerings of the registrant's common 
stock solely to the registrant's existing common stock holders, 
without regard to whether pursuant to an ongoing plan, provided 
that:
    (1) the offering being registered on this Form represents no 
more than 15% of the registrant's public float (as defined in 
General Instruction I.C.1.(d)) when aggregated with the dollar 
amount of securities registered by the registrant on Form B for 
offerings to its existing shareholders within the last 12 months 
before the start of and during the offering on this Form. For 
purposes of determining the amount of 15% of the registrant's public 
float, the registrant should use the amount of public float reported 
on its most recently filed Form 10-K;
    (2) the offering is extended only to existing shareholders of 
the registrant that have held its common stock continuously for at 
least a two-month period prior to being offered the securities; and
    (3) the proposed aggregate purchase of securities by an existing 
shareholder and its affiliates in the offering registered on this 
Form and any other Form B offerings to existing shareholders made by 
the issuer during the preceding 12-month period, does not exceed the 
greater of:
    (i) $10,000; or
    (ii) whichever of the following amounts is smaller:
    (A) 100% of the aggregate value of the same class(es) of the 
issuer's securities owned by the existing shareholder and its 
affiliates at the start of the 12-month period; or
    (B) 5% of the total dollar amount of securities in the offering.
    (d) Options Holders. Securities of the registrant issued upon 
the exercise of its outstanding transferable options;
    (e) Holders of Convertible Securities. Securities of the 
registrant issued upon conversion of its outstanding convertible 
securities; and (f)
    (f) Warrants Holders. Securities of the registrant issued upon 
the exercise of its outstanding transferable warrants.
    (g) Standby Underwriting Agreements. No portion of any offering 
registered pursuant to this paragraph 3. may be offered pursuant to 
a standby underwriting agreement, or similar arrangement, in the 
United States.
    4. Offerings of Non-Convertible Investment Grade Securities.
    (a) An offering of non-convertible investment grade securities 
of a registrant that satisfies the registrant requirements in 
General Instruction I.B. is eligible where the securities offered 
are, at the time of sale, investment grade securities.
    (b) For purposes of this Form, a security is ``investment 
grade'' if, at the time of sale:
    (1) it is rated by at least one nationally recognized 
statistical rating organization (``NRSRO'') (as that term is used in 
Exchange Act Rule 15c3-1(c)(2)(vi)(F)) in one of the generic rating 
categories that signify investment grade; and
    (2) no other NRSRO rating the security has placed it in a 
category that does not signify investment grade.
    5. Offerings by Majority-Owned Subsidiaries.
    If a registrant is a majority-owned subsidiary, it may register 
offerings of its non-convertible securities on this Form 
notwithstanding the fact that it does not satisfy a registrant 
eligibility requirement in General Instruction I.B.1., I.B.2., 
I.B.3. or I.B.4., or the public float/ADTV test in General 
Instruction I.C.1. if:
    (a) its parent satisfies all registrant eligibility requirements 
in General Instruction I.B. and the public float/ADTV test in 
General Instruction I.C.1.;
    (b) the offering satisfies the applicable transaction 
requirement; and
    (c) its parent fully and unconditionally guarantees the payment 
obligations on the securities being offered in the registered 
transaction.
    Note to General Instruction I.C.5.
    The parent must concurrently register its offering of the 
guarantee and may register that on the same registration statement 
used for the offering of the guaranteed securities. Rule 3-10 of 
Regulation S-X specifies the financial statements of the guarantor 
and its affiliates that are required.

[[Page 67293]]

    6. Market-Making Transactions.
    An offering by a registrant that satisfies the registrant 
requirements in General Instruction I.B.1. and I.B.6. is eligible 
if:
    (a) it registers transactions of a broker-dealer that is an 
affiliate of the issuer;
    (b) the broker-dealer engages in the transactions solely in its 
ordinary capacity as a market maker as defined in Exchange Act 
Section 3a-38; and
    (c) the transactions involve outstanding securities of the 
issuer that the broker-dealer has not acquired directly from the 
issuer or an affiliate of the issuer or indirectly by arrangement 
with the issuer or an affiliate of the issuer.

II. Securities Act Rules and Regulations

    A. You should read Securities Act Rule 172. That rule describes 
prospectus delivery obligations that may be applicable to offerings 
registered on this Form.
    B. You should read the other rules and regulations under the 
Securities Act (Part 230 of Title 17 of the Code of Federal 
Regulations), particularly Regulation C. That Regulation contains 
general requirements regarding the preparation and filing of 
registration statements.
    C. You should read Rules 101, 201 and 202 of Regulation S-T. 
Those rules require registrants subject to the electronic filing 
requirements to make all applicable filings through the Commission's 
EDGAR system. Those rules also provide that failure to submit a 
required electronic filing will result in ineligibility to use this 
Form and restrictions on use of incorporation by reference until the 
required electronic filing has been made.

III. Offering Materials

    A. You should read Securities Act Rule 166. That rule permits an 
eligible registrant to make offers prior to filing a Form B 
registration statement. If you use a prospectus to make offers in 
reliance on that rule in the offering period, you must file that 
prospectus when required to do so by Securities Act Rule 425.
    B. You should read Securities Act Rule 165. That rule permits a 
Form B registrant and those acting on its behalf to use ``free 
writing'' offering materials that do not meet the requirements of 
Section 10 of the Securities Act. If you use a prospectus in 
reliance on that Rule, you must file it when required to do so by 
Securities Act Rule 425.

IV. Foreign Issuer Financial Statements

    A. A foreign issuer must reconcile its financial statements 
included in or incorporated into this registration statement. It 
must reconcile them to Item 18 of Form 20-F, except as otherwise 
permitted in paragraph B of this General Instruction.
    B. A foreign issuer need only reconcile its financial statements 
to Item 17 of Form 20-F if:
    1. an offering of the registrant's non-convertible investment 
grade securities is being registered. See General Instruction I.C.4. 
for the definition of ``investment grade'' securities; `
    2. an offering of the registrant's securities upon the exercise 
of outstanding rights that it granted pro rata to all existing 
security holders of the class of securities to which the rights 
attach is being registered;
    3. an offering of the registrant's securities pursuant to a 
dividend or interest reinvestment plan is being registered;
    4. an offering of the registrant's securities upon the 
conversion of outstanding convertible securities that it (or its 
affiliate) issued is being registered; or
    5. an offering of the registrant's securities upon the exercise 
of outstanding transferrable warrants that it (or its affiliate) 
issued is being registered.
    C. Notwithstanding paragraphs B.2., B.3., B.4. and B.5. of this 
General Instruction, if securities are to be offered or sold in a 
standby underwriting in the United States or by similar arrangement, 
the registrant must reconcile to Item 18 of Form 20-F.

V. Requests for Confidential Treatment

    All registration statements on this Form become public upon 
filing. Registration statements filed on this Form are not reviewed 
by the Commission staff prior to the effective date. Confidential 
treatment requests with respect to information that the registrant 
is required to file in this Form may, however, be reviewed by the 
staff. As a result, when the issuer plans to have the Form become 
effective upon filing or fewer than 20 days thereafter, it must 
furnish to the staff in advance of filing, any request it wishes to 
make for confidential treatment of information relating to the Form. 
See Securities Act Rule 406. The Commission must act on that request 
before this Form becomes effective.

VI. Concurrent Registration of Securities Under the Exchange Act

    A. Registration on this Form of a class of securities under 
Exchange Act Section 12(b) shall become effective upon the later of:
    1. receipt by the Commission of certification from the national 
securities exchange listed on the cover of this Form that the 
securities have been approved for listing; or
    2. effectiveness of this registration statement.
    B. Registration on this Form of a class of securities under 
Exchange Act Section 12(g) shall become effective automatically upon 
the earlier of (1) 60 days after the initial filing of this 
registration statement; or (2) the effectiveness of this 
registration statement.
    C. If the registrant is required to file an annual report under 
Exchange Act Section 15(d) for its last fiscal year, it must file 
that annual report within the time period specified in the 
appropriate annual report form even if the Exchange Act registration 
becomes effective before the annual report is due.
    D. The registrant must file at least one complete, signed copy 
of the registration statement with each exchange or market 
identified on the cover of this Form.

Information Required in the Prospectus That Is Part of the Effective 
Registration Statement

    1. Offering Information.
    (a) Disclose the following information, all of which constitutes 
the ``offering information'' for purposes of this Form:
    (1) the amount of securities being offered;
    (2) material changes in the issuer's affairs since the end of 
the latest fiscal year that are not reflected in incorporated 
Exchange Act reports;
    (3) the information required by Item 504 of Regulation S-K 
regarding use of proceeds;
    (4) the information required by Item 507 of Regulation S-K 
regarding who is selling the securities;
    (5) material information about the terms of the securities 
offered as required by Item 202 of Regulation S-K, unless capital 
stock is to be registered and securities of the same class are 
registered pursuant to Section 12 of the Exchange Act;
    (6) information about the risks of the offering of the type 
described in Item 503 of Regulation S-K;
    (7) information about the underwriter's discounts and 
commissions required by Item 501(b)(3) of Regulation S-K; and
    (8) all information regarding the transaction that is material, 
which may include where applicable, but is not limited to:
    (i) information about dilution of the type described in Item 506 
of Regulation S-K;
    (ii) information about the determination of the offering price 
of the type described in Item 505 of Regulation S-K;
    (iii) information about the plan of distribution of the type 
described in Item 508 of Regulation S-K;
    (iv) ratio of earnings to fixed charges as described in Item 503 
of Regulation S-K.
    (b) You must include any offering information disclosed by or on 
behalf of the issuer during the offering period, other than 
information communicated orally.
    (c) You may include offering information communicated orally. 
You may not include offering information that has not been disclosed 
by or on behalf of the issuer during the offering period.
    (d) For purposes of this Form, ``offering period'' means the 
period beginning 15 days in advance of the first offer made in 
connection with the offering and ending when the offering is 
completed.
    2. Incorporation of Previously Filed Information.
    State that you are incorporating by reference into the 
prospectus that is part of the effective registration statement the 
following documents, and list them:
    (a) your latest annual report filed in accordance with Section 
13(a) or 15(d) of the Exchange Act that contains audited financial 
statements; and
    (b) any reports you filed pursuant to Section 13(a) or 15(d) of 
the Exchange Act since the end of the fiscal year covered by the 
annual report you incorporate in this Form;
    3. Incorporation of Subsequently Filed Information.
    (a) Subject to paragraph (b) of this instruction, state that all 
documents you subsequently file pursuant to Section 13(a), 13(c), 14 
or 15(d) of the Exchange Act during the offering period are deemed 
to be incorporated by reference into the prospectus that is part of 
the effective registration statement as of the date you file those 
documents.
    (b) You may incorporate Exchange Act documents filed after the 
time of delivery in

[[Page 67294]]

accordance with Securities Act Rule 172 only if you otherwise 
disclosed to investors the information contained in those documents 
prior to or at the same time as you delivered.
    (c) You may not incorporate Exchange Act documents filed after 
the end of the offering period. For offerings done as part of a 
delayed shelf under Securities Act Rule 415(a)(1)(x), each takedown 
will be treated as having its own offering period. In each takedown 
post-effective amendment on this Form you must state that you are 
incorporating the documents required by paragraph 2.(a) of this 
instruction and list them.
    (d) Securities Act Rule 424 is not available in connection with 
offerings registered on this Form. Material changes in disclosure 
must be reflected in pre-effective amendments, in post-effective 
amendments that the registrant may choose to designate as effective 
upon filing, or in Exchange Act documents where permitted to be 
incorporated by reference.
    4. Financial statements.
    (a) Foreign registrants: If the financial statements you 
incorporate by reference in accordance with paragraph 2 of this 
instruction of the Form are not sufficiently current to comply with 
Rule 3-19 of Regulation S-X, you must provide financial statements 
necessary to comply with that Rule. You must through one of the 
following means:
    (1) include that information in the prospectus; or
    (2) include that information in an amended or a new Exchange Act 
report, disclose in the prospectus that you have done so, 
incorporate that report by reference into the effective registration 
statement, and deliver it together with the prospectus.
    (b) Other financial information. Include the following 
information in the prospectus unless incorporated by reference:
    (1) financial information required by Rule 3-05 and Article 11 
of Regulation S-X with respect to transactions other than the one 
being registered;
    (2) restated financial statements prepared in accordance with or 
reconciled to U.S. GAAP and Regulation S-X where:
    (i) after the end of its most recent fiscal year, the registrant 
consummated one or more business combinations accounted for by the 
pooling of interest method of accounting; and
    (ii) the acquired businesses, considered in the aggregate, are 
significant pursuant to Rule 11-01(b) of Regulation S-X;
    (3) restated financial statements prepared in accordance with or 
reconciled to U.S. GAAP and Regulation S-X, if a change in 
accounting principles or correction of an error required a material 
retroactive restatement of financial statements; or
    (4) any financial information required because of a material 
disposition of assets outside the normal course of business.
    Instruction to paragraph 4.
    1. Foreign registrants: You should read Rules 4-01(a)(2) and 10-
01 of Regulation S-X.
    2. Small business issuers: You must provide the financial 
information specified in paragraph 4(b) if required by Item 310 of 
Regulation S-B.
    5. Securities Term Sheet. File as part of the prospectus in the 
effective registration statement the term sheet prospectus that must 
be delivered to investors under Securities Act Rule 172(a)(2). That 
term sheet need contain only:
    (a) an itemization of the material terms of the securities in 
summary format;
    (b) the name of any person, other than the issuer, for whose 
account securities are offered and a brief identification of any 
material relationship such person has (or had within the past three 
years) with the issuer or any affiliate of the issuer;
    (c) the identity and location of a contact person to whom 
questions may be directed; and
    (d) the identity and location of a person to whom requests for 
documents defining the terms of the securities, which shall be sent 
promptly upon request, may be made.
    6. Material Changes Term Sheet. File as part of the prospectus 
in the effective registration statement any document describing 
material changes that must be delivered to investors under 
Securities Act Rule 172(e).
    7. Undertakings. Set forth the following undertakings in the 
prospectus:
    (a) that you will provide to each investor, including any 
beneficial owner, a copy of any information that has been 
incorporated by reference in the prospectus but not delivered, as 
follows:
    (i) upon written or oral request;
    (ii) at no cost to the requester;
    (b) that you will send that incorporated information within one 
business day of any request for it;
    (c) that you will send that incorporated information in a manner 
that should result in delivery within three business days; and
    (d) that the name, address, and telephone number to which the 
request for that information must be made is: [ fill in information 
].
    Notes to Paragraph 7.
    (1) This undertaking covers all documents incorporated by 
reference through the date of responding to the request.
    (2) If you send any of the information that is incorporated by 
reference in the prospectus to investors, you must also send any 
exhibits that are specifically incorporated by reference in that 
information.
    8. Aftermarket Delivery. Include the legend required by Item 
502(b) of Regulation S-K.

Information not Required in the Prospectus That Is Part of the 
Effective Registration Statement

    1. Exhibits. Provide the exhibits required by Item 601 of 
Regulation S-K.
    2. Undertakings.
    (a) Include the undertakings required by Item 512 of Regulation 
S-K.
    (b) Aftermarket delivery period. If not contained in the 
prospectus that is part of the effective registration statement, 
undertake that you will file a post-effective amendment to insert 
the date the aftermarket delivery period ends in the legend required 
by Item 502(b) of Regulation S-K.

Other Offering Materials

    In addition to the offering information filed in the prospectus 
that is part of the effective registration statement, the 
registrant, any underwriter, any participating dealer or anyone 
acting on behalf of any of them may use free writing materials. 
``Free writing'' materials for purposes of this Form consist of all 
information disclosed by or on behalf of the issuer during the 
offering period, other than offering information, factual business 
communications as defined in Securities Act Rule 169 or information 
disclosed orally. You must file free writing materials by the time 
of first sale. Securities Act Rule 425 describes the procedures for 
filing those offering materials with the Commission.

Signatures

    The registrant hereby certifies that it meets all of the 
requirements for filing on Form B. The registrant also certifies 
that it has duly caused and authorized the undersigned to sign this 
registration statement on its behalf. The undersigned certifies that 
he/she has read this registration statement and to his/her knowledge 
the registration statement does not contain an untrue statement of a 
material fact or omit to state a material fact required to be stated 
therein or necessary to make the statements therein not misleading.
(Registrant)-----------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    The following persons certify that they have read this 
registration statement and to their knowledge the registration 
statement does not contain an untrue statement of a material fact or 
omit to state a material fact required to be stated therein or 
necessary to make the statements therein not misleading. The 
following persons also certify that they are signing below on behalf 
of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    Signature Instructions

    1. The following persons, or persons performing similar 
functions, must sign the registration statement:
    (a) the registrant;
    (b) its principal executive officer or officers;
    (c) its principal financial officer;
    (d) its controller or principal accounting officer; and
    (e) at least the majority of its board of directors.
    2. Where the registrant is a foreign issuer, its authorized 
representative in the United States also must sign the registration 
statement.
    3. Where the registrant is a limited partnership, its general 
partner must sign. Where the general partner is a corporation, the 
majority of the board of directors of the corporate general partner 
must sign the registration statement.
    4. Type or print the name and title of each person who signs the 
registration statement beneath the person's signature. Any person

[[Page 67295]]

who occupies more than one of the specified positions must indicate 
each capacity in which that person signs the registration statement. 
See Securities Act Rule 402 concerning manual signatures and Item 
601 of Regulation S-K concerning signatures pursuant to powers of 
attorney.
    5. Where eligibility for use of the Form is based on the 
assignment of a security rating, the registrant may sign the 
registration statement notwithstanding the fact that the security 
rating has not been assigned by the filing date, provided that the 
registrant reasonably believes, and so states in the registration 
statement, that the security rating requirement will be met by the 
time of sale.
    6. Rule 415(a)(1)(x) offerings.
    (a) All persons who sign this registration statement will be 
deemed by doing so to grant an authorized representative of the 
registrant the power to sign any post-effective amendment to the 
registration statement on their behalf if:
    (i) the registration statement relates to an offering pursuant 
to Rule 415(a)(1)(x);
    (ii) a power of attorney has not been granted by the person in 
connection with signatures of post-effective amendments; and
    (iii) the post-effective amendment does not provide otherwise.
    (b) If, at the time of filing a post-effective amendment, any 
person who signed the effective registration statement no longer 
acts in the capacity in which he or she signed it, the person who 
currently acts in that capacity must sign the post-effective 
amendment.

    92. By adding Sec. 239.6 and Form C to read as follows:


Sec. 239.6  Form C, for registration under the Securities Act of 1933 
of securities issued in business combination transactions, and for 
optional concurrent registration under the Securities Exchange Act of 
1934.

    (a) A registrant other than a small business issuer must use this 
Form to register an offering under the Securities Act of 1933 
(``Securities Act'') that is:
    (1) A transaction of the type specified in paragraph (a) of 
Sec. 230.145 of this chapter;
    (2) A merger in which the applicable law would not require the 
solicitation of the votes or consents of all of the security holders of 
the company being acquired;
    (3) An exchange offer for securities of the issuer or another 
entity;
    (4) A public reoffering or resale of any such securities acquired 
pursuant to this registration statement; or
    (5) More than one of the kinds of transactions listed in paragraphs 
(a)(1) through (a)(4) of this section registered on one registration 
statement.
    (b) A registrant also may use this Form to register concurrently 
under Section 12(b) or 12(g) of the Securities Exchange Act of 1934 
(``Exchange Act''). It may register under the Exchange Act any class of 
securities that are the subject of the offering it is registering under 
the Securities Act. To register, the registrant must check the 
appropriate box(es) on the cover page of this Form and identify which 
class(es) of securities it is registering under Section 12(b) or 12(g) 
of the Exchange Act.

    Note: The text of Form C will not appear in the Code of Federal 
Regulations.

U.S. Securities and Exchange Commission, Washington, D.C. 20549

Form C--Registration Statement Under the Securities Act of 1933 [And 
Optional Registration Pursuant to Section 12(b) or 12(g) of the 
Securities Exchange Act of 1934]

----------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)

----------------------------------------------------------------------
(Translation of Registrant's name into English, if applicable)

----------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)

----------------------------------------------------------------------
(I.R.S. Employer Identification Number)

----------------------------------------------------------------------
(Address and telephone number of Registrant's principal executive 
offices)

----------------------------------------------------------------------
(Name, address and telephone number of Registrant's agent for 
service)

----------------------------------------------------------------------
(Web Site Address, if any)

----------------------------------------------------------------------
(E-mail Address, if any)

* * * * *
Approximate date of commencement of sales ________________

    If you are a foreign private issuer as defined in Securities Act 
Rule 405, check the following box. [  ]
    If you are not a foreign private issuer as defined in Securities 
Act Rule 405, check the following box. [  ]
    If you are filing this Form to register additional securities 
for an offering in accordance with Securities Act Rule 462(b), check 
the following box and list the Securities Act registration number of 
the earlier effective registration statement for the same offering. 
[  ] ____________
    If this Form is a post-effective amendment filed in accordance 
with Securities Act Rule 462(c) to re-start the 15-business-day 
period during which pricing must occur under Securities Act Rule 
430A(a)(3) or to reflect a non-substantive change from, or addition 
to, the prospectus, check the following box and list the Securities 
Act registration number of the earlier effective registration 
statement for the same offering. [  ] ____________
    If this Form is a post-effective amendment filed in accordance 
with Securities Act Rule 462(d) solely to add exhibits, check the 
following box and list the Securities Act registration number of the 
earlier effective registration statement for the same offering. [  ] 
____________
    If you are using this Form to register concurrently under 
Section 12(b) or 12(g) of the Exchange Act any class of securities 
that are the subject of the offering you are registering under the 
Securities Act, check the appropriate box and provide the 
information indicated below:

[  ] Securities being registered pursuant to Exchange Act Section 
12(b):
Title of each class:
----------------------------------------------------------------------

----------------------------------------------------------------------

Name of exchange on which listed:
----------------------------------------------------------------------

----------------------------------------------------------------------

[  ] Securities being registered pursuant to Exchange Act Section 
12(g):
Title of each class:
----------------------------------------------------------------------

----------------------------------------------------------------------

Name of market on which quoted:
----------------------------------------------------------------------

----------------------------------------------------------------------


                                         Calculation of Registration Fee
----------------------------------------------------------------------------------------------------------------
                                                                            Proposed     Proposed
                                                              Amount to     maximum      maximum      Amount of
     Title of each class of securities to be registered           be        offering    aggregate   registration
                                                              registered   price per     offering        fee
                                                                              unit        price
----------------------------------------------------------------------------------------------------------------
 
 
 
 
 
----------------------------------------------------------------------------------------------------------------
Notes to the Fee Table:
1. Set forth any explanatory details relating to the fee table in footnotes to the table.

[[Page 67296]]

 
2. If the basis for calculating the fee is not evident from the information presented in this table, refer to
  the applicable provisions of Securities Act Rule 457 in a footnote.
3. If the fee is calculated under Rule 457(o), the ``Amount to be registered'' and the ``Proposed maximum
  offering price per unit'' need not appear in this table.
4. If any of the securities registered are not sold in connection with this offering, the registrant (or a
  qualifying wholly-owned subsidiary) may use the dollar amount of the fee paid with respect to the unsold
  securities to offset the total fee due on its subsequent registration statement. See Rule 457(p). When
  offsetting any part of the fee under Rule 457(p), the registrant must state the dollar amount being offset in
  a footnote to the fee table and must identify the file number of the registration statement and the amount and
  class of securities in connection with which the offsetting fee was previously paid. Use of Rule 457(p) to
  offset any fee automatically deregisters the securities in connection with which the fee was previously paid.

General Instructions

I. Rules as to Use of Form C

    A. A registrant other than a small business issuer must use this 
Form to register an offering under the Securities Act that is:
    1. a transaction of the type specified in Securities Act Rule 
145(a);
    2. a merger in which the applicable law would not require the 
solicitation of the votes or consents of all of the security holders 
of the company being acquired;
    3. an exchange offer for securities of the issuer or another 
entity;
    4. a public reoffering or resale of any securities acquired 
pursuant to this registration statement; or 5. more than one of the 
kinds of transactions listed in paragraphs A.1. through A.4. of this 
instruction registered on one registration statement.
    B. A registrant also may use this Form to register concurrently 
under Section 12(b) or 12(g) of the Exchange Act. It may register 
any class of securities that are the subject of the offering it is 
registering under the Securities Act. To register, the registrant 
must check the appropriate box(es) on the cover page of this Form 
and identify which class(es) of securities it is registering under 
Section 12(b) or 12(g).
    C. You may not use this Form if you are a registered investment 
company or a business development company as defined in Section 
2(a)(48) of the Investment Company Act of 1940.
    D. You may not use this Form if you are a ``small business 
issuer'' as defined in Securities Act Rule 405 (Sec. 230.405). Small 
business issuers use Form SB-3 to register the transactions listed 
in General Instruction I.A.

II. Registrant Information

    Provide information about the registrant as follows:
    A. Form B Registrants. If the registrant meets the requirements 
of General Instructions I.B. and I.C.1. of Form B, it must comply 
with:
    1. Items 11 and 12 of this Form;
    2. Items 13 and 14 of this Form; or
    3. Item 15 of this Form.
    B. Seasoned Form A Registrants. If the registrant meets the 
requirements of General Instruction II. of Form A for incorporation 
by reference, it must comply with:
    1. Items 13 and 14 of this Form; or
    2. Item 15 of this Form.
    C. All Other Registrants. All other registrants must comply with 
Item 15 of this Form.

III. Information With Respect to the Company Being Acquired

    Provide information about the company being acquired (which 
includes any entity whose securities are to be exchanged for 
securities of the registrant) as follows:
    A. Form B Companies. If the company being acquired meets the 
requirements of General Instructions I.B. and I.C.1. of Form B, 
provide information in accordance with:
    1. Item 16 of this Form;
    2. Item 17 of this Form; or
    3. Item 18 of this Form.
    B. Seasoned Form A Companies. If the company being acquired 
meets the requirements of General Instruction II. of Form A for 
incorporation by reference, provide information in accordance with:
    1. Item 17 of this Form; or
    2. Item 18 of this Form.
    C. All Other (Non-Small Business) Companies. For all other 
companies being acquired, provide information in accordance with 
Item 18 of this Form.
    D. Transitional Small Business Issuer Companies. If the company 
being acquired is a transitional small business issuer that meets 
the requirements of II.A.1. of Form SB-3, provide information in 
accordance with Item 19 of this Form.
    E. Seasoned Form SB-2 Companies. If the company being acquired 
meets the requirements of General Instruction E.1. of Form SB-2, 
provide information in accordance with:
    1. Item 20 of this Form; or
    2. Item 21 of this Form.
    F. All Other Small Business Issuers. All other companies being 
acquired that are small business issuers, including transitional 
small business issuers that choose to comply with this requirement, 
provide information in accordance with Item 21 of this Form.

IV. Securities Act Rules and Regulations

    You should read the rules and regulations under the Securities 
Act (Part 230 of Title 17 of the Code of Federal Regulations), 
particularly Regulation C. That Regulation contains general 
requirements regarding the preparation and filing of registration 
statements.

V. Free Writing Prospectus Information

    A. You should read Securities Act Rule 166. That Rule permits a 
registrant to make offers prior to filing a Form C registration 
statement. If you use a prospectus in reliance on that Rule, you 
must file that prospectus when required to do so by Securities Act 
Rule 425.
    B. You should read Securities Act Rule 165. That Rule permits a 
Form C registrant and those acting on its behalf to use ``free 
writing'' offering materials that do not meet the requirements of 
Section 10 of the Securities Act. If you use a prospectus in 
reliance on Rule 165, you must file it when required to do so by 
Securities Act Rule 425.

VI. U.S. and Foreign Registrants.

    A. Definitions.
    1. As used in this Form, ``U.S. registrant'' includes all 
registrants other than foreign governments and foreign private 
issuers. ``U.S. company being acquired'' includes all entities being 
acquired other than foreign governments and foreign private issuers.
    2. As used in this Form, ``foreign registrant'' includes only 
registrants that are foreign private issuers. ``Foreign company 
being acquired'' includes only entities being acquired that are 
foreign private issuers.
    3. ``Foreign private issuer'' is defined in Rule 405 of 
Regulation C.
    B. Information Required.
    1. U.S. registrants must provide all information required by the 
Items of this Form except where the Item expressly identifies the 
requirement as applying only to foreign registrants or foreign 
companies being acquired.
    2. Foreign registrants must provide all information required by 
the Items of this Form except where the Item expressly identifies 
the requirement as applying only to U.S. registrants or U.S. 
companies being acquired.

VII. Interaction With the Exchange Act

    A. If Regulation 14A or 14C under the Exchange Act applies to 
the transaction registered on this Form:
    1. the prospectus may be in the form of a proxy statement or 
information statement;
    2. the prospectus must contain the information required by this 
Form in lieu of that required by Schedule 14A or 14C; and
    3. material filed as a part of the registration statement shall 
be deemed filed also for purposes of Regulation 14A or 14C, as 
applicable.
    B. If neither Regulation 14A nor 14C applies to the transaction 
registered on this Form, any proxy or information statement material 
sent to security holders must be filed prior to use as a part of the 
effective registration statement.
    C. If you are registering an offering that is subject to Section 
13(e), 14(d) or 14(e) of the Exchange Act, the provisions of those 
Sections and the rules and regulations thereunder shall apply to the 
transaction in addition to the provisions of this Form.

VIII. Business Combinations Effected on a Delayed Basis

    A. A registrant may use this Form to register a transaction that 
will be effected on a delayed basis under Securities Act Rule 
415(a)(1)(viii). In that event, it need only furnish information 
about the contemplated transaction and the company being acquired to 
the extent practicable as of the effective date of the registration 
statement. It must file

[[Page 67297]]

a post-effective amendment to include the remaining required 
information about the transaction and the company being acquired in 
the registration statement.
    B. A registrant may use this Form to register a transaction that 
would qualify for an exemption from Section 5 of the Securities Act 
but for the proximity in time of other similar transactions. In that 
event, the registrant need only file a prospectus supplement to 
provide the required information about the transaction and the 
company being acquired.
    C. Unallocated Shelf. The registrant may register two or more 
classes of securities on this Form that it will offer on a delayed 
or continuous basis pursuant to Rule 415(a)(1)(viii). If the 
registrant meets the requirements of General Instruction I.B. of 
Form B and General Instruction I.C.1., I.C.2. or I.C.4. of Form B, 
it need only identify on an aggregate basis (and not by class) in 
the ``Calculation of Registration Fee'' table:
    1. the amount to be registered;
    2. the proposed maximum offering price per unit; and
    3. the proposed maximum aggregate offering price.

IX. Roll-Up Transactions

    A. Roll-up transactions (as defined in Item 901(c) of Regulation 
S-K) may be registered on this Form. In that event, the registrant 
must comply with the disclosure requirements of Subpart 900 of 
Regulation S-K. To the extent that the disclosure requirements of 
Subpart 900 are inconsistent with those in this Form, the 
requirements of Subpart 900 control.
    B. If the registrant registers a roll-up transaction on this 
Form, special prospectus delivery requirements apply. See Securities 
Act Rule 172(e).
    C. The proxy rules and Exchange Act Rule 14e-7 of the tender 
offer rules contain provisions specifically applicable to roll-up 
transactions. Those provisions apply whether or not the entities 
involved have registered securities pursuant to Section 12 of the 
Exchange Act.

X. Registration of Additional Securities

    A. Under certain circumstances, the registrant may increase the 
size of an offering after the effective date through filing a short-
form registration statement under Securities Act Rule 462(b). A Rule 
462(b) registration statement may include only the following:
    1. the facing page;
    2. a statement that the earlier registration statement, 
identified by file number, is incorporated by reference;
    3. any required opinions and consents;
    4. the signature page; and
    5. any price-related information omitted from the earlier 
registration statement in reliance on Securities Act Rule 430A, if 
the registrant so chooses.
    B. The information contained in a Rule 462(b) registration 
statement is deemed to be a part of the earlier effective 
registration statement as of the date of effectiveness of the Rule 
462(b) registration statement.
    C. The registrant may incorporate by reference from the earlier 
registration statement any opinion or consent required in the Rule 
462(b) registration statement if:
    1. the opinion or consent expressly allows that incorporation; 
and
    2. the opinion or consent also relates to the Rule 462(b) 
registration statement.
    Note to General Instruction X.
    You should read Securities Act Rule 411(c) regarding 
incorporation by reference of exhibits and Securities Act Rule 
439(b) regarding incorporation by reference of consents.

XI. Concurrent Registration of Securities Under the Exchange Act

    A. Registration on this Form of a class of securities under 
Exchange Act Section 12(b) shall become effective upon the later of:
    1. receipt by the Commission of certification from the national 
securities exchange listed on the cover of this Form that the 
securities have been approved for listing; or
    2. effectiveness of this registration statement.
    B. Registration on this Form of a class of securities under 
Exchange Act Section 12(g) shall become effective upon the 
effectiveness of this registration statement.
    C. If the registrant is required to file an annual report under 
Exchange Act Section 15(d) for its last fiscal year, it must file 
that annual report within the time period specified in the 
appropriate annual report form even if the Exchange Act registration 
becomes effective before the annual report is due.
    D. The registrant must file at least one complete, signed copy 
of the registration statement with each exchange or market 
identified on the cover to this Form.

Part I--Information Required in the Prospectus

A. Information About the Transaction

Item 1. Front Cover Page of the Registration Statement and Outside 
Front Cover Page of the Prospectus

    Provide the information required by Item 501 of Regulation S-K.

Item 2. Inside Front and Outside Back Cover Pages of Prospectus

    (a) Provide the information required by Item 502 of Regulation 
S-K.
    (b) If you incorporate information by reference into the 
prospectus, state on the inside front cover page:
    (1) that the prospectus incorporates by reference important 
business and financial information about the company that is not 
delivered with it;
    (2) that this information is available without charge to any 
person, including any beneficial owner, upon written or oral 
request;
    (3) that you will send those incorporated documents in a manner 
that should result in delivery within three business days of the 
request;
    (4) the name, address and telephone number to which persons must 
make this request; and
    (5) that to obtain timely delivery, persons must request this 
information no later than __________ [specify date five business 
days before the date on which the final investment decision must be 
made]. You must highlight this statement by print type or otherwise.
    Instruction to Item 2.
    1. The undertaking covers all documents incorporated by 
reference through the date of responding to the request.
    2. If you send any of the information that is incorporated by 
reference in the prospectus, you also must send any exhibits that 
are specifically incorporated by reference in that information.
    3. If information is incorporated by reference in any document 
you are sending upon request, you also must send the information 
incorporated by reference.

Item 3. Prospectus Summary and Other Information

    In the forepart of the prospectus, provide a summary of the 
information contained in the prospectus as described in Item 503(a) 
of Regulation S-K and the following information:
    (a) Contact information. The name, complete mailing address and 
telephone number of the principal executive offices of the 
registrant and the company being acquired;
    (b) Risk factors.
    (1) The information required by Item 503(c) of Regulation S-K;
    (2) If the registrant or the company to be acquired is a real 
estate entity as defined in Item 1101 of Regulation S-K, provide the 
information required by Item 1103 of Regulation S-K in addition to 
the information required by paragraph (b)(1) of this Item.
    (c) Ratio of earnings to fixed charges. The information required 
by Item 503(d) of Regulation S-K;
    (d) Business conducted. A brief description of the general 
nature of the business conducted by the registrant and by the 
company being acquired;
    (e) Transaction being registered. A brief description of the 
transaction in which the securities being registered will be 
offered;
    (f) Selected financial data. The selected financial data 
required by Item 301 of Regulation S-K for U.S. registrants and U.S. 
companies being acquired and Item 8 of Form 20-F for foreign 
registrants and foreign companies being acquired. To the extent this 
information is required to be presented in the prospectus pursuant 
to other Items of this Form, it need not be presented pursuant to 
this Item;
    (g) Pro forma selected financial data. If material, the 
information required by Item 301 of Regulation S-K for U.S. 
registrants and Item 8 of Form 20-F for foreign registrants, showing 
the pro forma effect of the transaction. To the extent the 
information is required to be presented in the prospectus pursuant 
to other Items of this Form, it need not be presented pursuant to 
this Item;
    (h) Pro forma information. In a table designed to facilitate 
comparison, historical and pro forma per share data of the 
registrant and historical and equivalent pro forma per share data of 
the company being acquired for the following items:
    (1) book value per share as of the date financial data is 
presented pursuant to Item 301 of Regulation S-K for U.S. 
registrants and U.S. companies being acquired and Item

[[Page 67298]]

8 of Form 20-F for foreign registrants and foreign companies being 
acquired;
    (2) cash dividends declared per share for the periods for which 
financial data is presented pursuant to Item 301 of Regulation S-K 
for U.S. registrants and U.S. companies being acquired and Item 8 of 
Form 20-F for foreign registrants and foreign companies being 
acquired; and
1(3) income (loss) per share from continuing operations for the periods 
for which financial data is presented pursuant to Item 301 of 
Regulation S-K for U.S. registrants and U.S. companies being acquired 
and Item 8 of Form 20-F for foreign registrants and foreign companies 
being acquired;
    Instructions to Item 3(g) and 3(h).
    1. For a business combination accounted for as a purchase, 
present the financial information required by paragraphs (g) and (h) 
only for the most recent fiscal year and interim period. For a 
business combination accounted for as a pooling, present the 
financial information required by paragraphs (g) and (h) (except for 
information with regard to book value) for the most recent three 
fiscal years and interim period. For a business combination 
accounted for as a pooling, present the book value information as of 
the end of the most recent fiscal year and interim period.
    2. Calculate the equivalent pro forma per share amounts for one 
share of the company being acquired by multiplying the exchange 
ratio times each of:
    (a) the pro forma income (loss) per share before non-recurring 
charges or credits directly attributable to the transaction;
    (b) the pro forma book value per share; and (c) the pro forma 
dividends per share of the registrant.
    3. Foreign Private Issuers: Instruction 7 to Item 8 of Form 20-F 
is applicable to the financial information presented hereunder to 
the extent that this Form requires reconciliation of financial 
statements of foreign private issuers to U.S. GAAP and Regulation S-
X.
    (i) Market value of securities. In a table designed to 
facilitate comparison, the market value of securities of the company 
being acquired (on a historical and equivalent per share basis) and 
the market value of the securities of the registrant (on a 
historical basis) as of the day before the date the public 
announcement of the proposed transaction. If no such public 
announcement was made, as of the day before the date the agreement 
with respect to the transaction was entered into;
    (j) Affiliates' voting shares. With respect to the registrant 
and the company being acquired, a brief statement comparing the 
percentage of outstanding shares entitled to vote held by directors, 
executive officers and their affiliates. State the vote required for 
approval of the proposed transaction;
    (k) Regulatory approval. A statement as to whether any 
regulatory requirements must be complied with or approval must be 
obtained in connection with the transaction, and if so, the status 
of such compliance or approval;
    (l) Dissenters' rights. A statement about whether or not 
dissenters' rights of appraisal exist, including a cross-reference 
to the information provided pursuant to Item 21 or 22 of this Form; 
and
    (m) Tax consequences. A brief statement about the tax 
consequences of the transaction or, if appropriate, a cross-
reference to the information provided pursuant to Item 4 of this 
Form.

Item 4. Terms of the Transaction

    (a) Provide a summary of the material features of the proposed 
transaction. The summary shall include, where applicable:
    (1) 3 the information required by Item 1004(a) of Regulation M-A 
(Sec. 229.1004(a) of this chapter); and
    (2) where not organized in the same country, a discussion of any 
material differences in the corporate laws applicable to the company 
being acquired and to the surviving entity. The discussion should 
include, but not necessarily be limited to: corporate governance, 
board structure, quorums, class action suits, shareholder derivative 
suits, rights to inspect corporate books and records, rights to 
inspect the shareholder list and rights of directors and officers to 
obtain indemnification from the company.
    (b) If a report, opinion or appraisal materially relating to the 
transaction has been received from an outside party and such report, 
opinion or appraisal is referred to in the prospectus, provide the 
information called for by Item 1015(b) of Regulation S-K 
(Sec. 229.1015(b) of this chapter).
    (c) Incorporate the acquisition agreement by reference into the 
prospectus.

Item 5. Pro Forma Financial Information

    Provide the financial information required by Article 11 of 
Regulation S-X with respect to this transaction.
    Instructions.
    1. Present any Article 11 information required by the other 
Items of this Form (where not incorporated by reference) together 
with the information provided under this Item. In presenting this 
information, you must clearly distinguish between this transaction 
and any other one.
    2. You need only show the pro forma effect that the registered 
transaction has on any pro forma financial information that:
    (i) is incorporated by reference; and
    (ii) reflects all prior transactions.

Item 6. Material Contacts With the Company Being Acquired

    Provide the information required by Items 1005(b) and 1011(a) of 
Regulation M-A for the registrant or its affiliates and the company 
being acquired or its affiliates. The information provided only need 
cover the periods for which financial statements are presented or 
incorporated by reference into this Form.

Item 7. Real Estate Entities

    If the registrant or the company to be acquired is a real estate 
entity as defined in Item 1101 of Regulation S-K, provide the 
information required by Item 1104 and Items 1108 through 1112 of 
Regulation S-K.

Item 8. Additional Information Required for Reoffering by Persons 
Deemed To Be Underwriters

    If any person who is deemed to be an underwriter of the 
securities is reoffering any of the securities to the public, 
provide the following information in the prospectus prior to its use 
for the reoffer:
    (a) The information required by Item 507 of Regulation S-K;
    (b) Information with respect to the consummation of the 
transaction in which the securities were acquired; and
    (c) A description of any material change in the registrant's 
affairs that occurred after the transaction in which the securities 
were acquired.
    Note to Item 8.
    You should read Item 512(g) of Regulation S-K regarding 
undertakings required in reoffering registration statements.

Item 9. Interests of Named Experts and Counsel

    Provide the information required by Item 509 of Regulation S-K.

Item 10. Disclosure of Commission Position on Indemnification for 
Securities Act Liabilities

    Provide the information required by Item 510 of Regulation S-K.

B. Information About the Registrant

Item 11. Information Required for Form B Companies

    If the registrant meets the requirements of General Instructions 
I.B. and I.C.1. of Form B and elects to comply with this Item and 
Item 12 (instead of Items 13 and 14 or Item 15), it must provide the 
following information:
    (a) Material changes. Describe any material change in the 
registrant's affairs that:
    (1) has occurred since the end of the latest fiscal year for 
which it incorporates by reference audited financial statements in 
accordance with Item 12 of this Form; and
    (2) the registrant has not described in an Exchange Act report.
    (b) Current financial statements. Foreign registrants: If the 
financial statements you incorporate by reference in accordance with 
Item 12 of this Form are not sufficiently current to comply with 
Rule 3-19 of Regulation S-X, you must provide financial statements 
necessary to comply with that Rule. You must through one of the 
following means:
    (1) include that information in the prospectus; or
    (2) include that information in an amended or a newly filed 
Exchange Act report, disclose in the prospectus that you have done 
so, incorporate that report by reference into the effective 
registration statement, and deliver it together with the prospectus.
    (c) Other financial information. Include the following 
information in the prospectus unless incorporated by reference:
    (1) financial information required by Rule 3-05 and Article 11 
of Regulation S-X with respect to transactions other than the one 
being registered;
    (2) restated financial statements prepared in accordance with or 
reconciled to U.S. GAAP and Regulation S-X where:
    (i) after the end of its most recent fiscal year, the registrant 
consummated one or more business combinations accounted for by the 
pooling of interests method of accounting; and

[[Page 67299]]

    (ii) the acquired businesses, considered in the aggregate, are 
significant pursuant to Rule 11-01(b) of Regulation S-X;
    (3) restated financial statements prepared in accordance with or 
reconciled to U.S. GAAP and Regulation S-X, if a change in 
accounting principles or correction of an error requires a material 
retroactive restatement of financial statements; or
    (4) any financial information required because of a material 
disposition of assets outside the normal course of business.
    Instruction.
    Foreign registrants: You should read Rules 4-01(a)(2) and 10-01 
of Regulation S-X.

Item 12. Incorporation of Certain Information by Reference for Form B 
Companies

    If the registrant provides information in accordance with Item 
11 of this Form:
    (a) It must incorporate by reference into the prospectus that is 
part of the effective registration statement the documents listed 
below:
    (1) its latest annual report filed in accordance with Section 
13(a) or 15(d) of the Exchange Act that contains audited financial 
statements;
    (2) any reports it filed pursuant to Section 13(a) or 15(d) of 
the Exchange Act since the end of the fiscal year covered by its 
annual report incorporated in this Form; and
    (3) the description of capital stock contained in an Exchange 
Act registration statement, including any amendments or reports 
updating such description, if:
    (i) capital stock is being registered and securities of the same 
class are registered under Section 12 of the Exchange Act; and
    (ii) such stock is listed for trading or admitted to unlisted 
trading privileges on a national securities exchange; or
    (iii) bid and offer quotations for such stock are reported in an 
automated quotations system operated by a national securities 
association.
    Instructions to Item 12(a).
    1. List in the prospectus that is part of the effective 
registration statement all documents that are filed prior to 
effectiveness and incorporated by reference.
    2. Notwithstanding Instruction 2 to Item 404 of Regulation S-K, 
you need only provide Item 404 information covering one year if you 
incorporate that information by reference pursuant to this Item.
    3. Foreign registrants: All annual reports or registration 
statements you incorporate by reference pursuant to this Item must 
contain financial statements that comply with Item 18 of Form 20-F 
except that your financial statements may comply with Item 17 of 
Form 20-F if the only securities you are registering are investment 
grade securities.
    A security is ``investment grade'' if, at the time of sale:
    (a) it is rated by at least one nationally recognized 
statistical rating organization (``NRSRO'') (as that term is used in 
Exchange Act Rule 15c3-1(c)(2)(vi)(F)) in one of the generic rating 
categories that signify investment grade; and
    (b) no other NRSRO rating the security has placed it in a 
category that does not signify investment grade.
    4. Foreign registrants: You may incorporate by reference any 
Form 6-K satisfying the requirements of Form C. See Rules 4-01(a)(2) 
and 10-01 of Regulation S-X and Item 18 of Form 20-F.
    (b) It must state in the prospectus that all documents it files 
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act 
are deemed to be incorporated by reference into the prospectus that 
is part of the effective registration statement if filed after 
effectiveness and before the latest of the following that is 
applicable:
    (1) the date of any meeting of security holders of either the 
registrant or the company being acquired relating to the transaction 
described in the prospectus;
    (2) the date on which the transaction described in the 
prospectus is consummated, if no meeting of security holders of 
either the registrant or the company being acquired is held;
    (3) the date of the termination of any exchange offer registered 
on this registration statement; or
    (4) the date of termination of any reoffering or resale of 
securities registered on this registration statement.
    Note to Item 12(b).
    You should read Securities Act Rule 439 regarding consent to the 
use of material incorporated by reference.
    (c) In the prospectus, you must:
    (1) identify the reports and other information that you file 
with the Commission;
    (2) state that the public:
    (i) may read and copy any materials you file with the Commission 
at the Commission's Public Reference Room at 450 Fifth Street, N.W., 
Washington, D.C. 20549; and
    (ii) may obtain information on the operation of the Public 
Reference Room by calling the Commission at 1-800-SEC-0330; and
    (3) if you are an electronic filer, state that the Commission 
maintains an Internet web site that contains reports, proxy and 
information statements, and other information regarding issuers that 
file electronically with the Commission and state the address of 
that site (http://www.sec.gov). You are encouraged to give your 
Internet web site address, if available.

Item 13. Information Required for Seasoned Form A Companies

    If the registrant meets the requirements of General Instruction 
II. of Form A and elects to comply with this Item and Item 14 
(instead of Item 15), it must do the following:
    (a) Annual report. Deliver together with the prospectus a copy 
of its latest annual report filed pursuant to Section 13(a) or 15(d) 
of the Exchange Act;
    (b) Quarterly information. U.S. registrants: provide the 
information required by Part I of Form 10-Q or Form 10-QSB for the 
most recent fiscal quarter following the fiscal year covered by the 
annual report delivered pursuant to this Item. The registrant must 
either:
    (1) include that information in the prospectus; or
    (2) deliver together with the prospectus a copy of its latest 
Form 10-Q or Form 10-QSB;
    Notes to Item 13(a) and 13(b).
    1. Indicate in the prospectus that it is accompanied by the 
reports that the registrant sends pursuant to paragraphs (a) or (b) 
of this Item.
    2. If the registrant incorporates by reference portions of any 
document into a report it delivers under this Item, it also must 
deliver the incorporated portions with it.
    3. If the registrant's Form 10-Q or Form 10-QSB for the most 
recent quarter is not due to be filed prior to the effective date of 
the registration statement, it may provide the information for the 
previous fiscal quarter to satisfy Item 13(b). For this purpose, the 
due date is calculated without the extension provided by Exchange 
Act Rule 12b-25.
    (c) Current financial statements. Foreign registrants: If the 
financial statements you incorporate by reference in accordance with 
Item 14 are not sufficiently current to comply with Rule 3-19 of 
Regulation S-X, provide financial statements necessary to comply 
with that Rule. You must do so by one of the following means:
    (1) include that information in the prospectus; or
    (2) inclose that information in an amended or newly filed 
Exchange Act report, disclose in the prospectus that you have done 
so, incorporate that report by reference into the effective 
registration statement, and deliver it together with the prospectus.
    (d) Other financial information. If not reflected in the 
registrant's annual report delivered to investors in accordance with 
paragraph (a) of this Item, provide:
    (1) financial information required by Rule 3-05 and Article 11 
of Regulation S-X with respect to transactions other than the one 
being registered;
    (2) restated financial statements prepared in accordance with or 
reconciled to U.S. GAAP and Regulation S-X where:
    (i) after the end of its most recent fiscal year, the registrant 
consummated one or more business combinations accounted for by the 
pooling of interests method of accounting; and
    (ii) the acquired businesses, considered in the aggregate, are 
significant pursuant to Rule 11-01(b) of Regulation S-X;
    (3) restated financial statements prepared in accordance with or 
reconciled to U.S. GAAP and Regulation S-X, if a change in 
accounting principles or correction of an error requires a material 
retroactive restatement of financial statements; and
    (4) any financial information required because of a material 
disposition of assets outside the normal course of business.
    Instructions to Item 13(d).
    1. You may incorporate by reference into the effective 
registration statement the information required by paragraph (d) of 
Item 13. If you incorporate it, you must deliver it together with 
the prospectus.
    2. Foreign registrants: You should read Rules 4-01(a)(2) and 10-
01 of Regulation S-X.
    (e) Material changes. Describe any material change in the 
registrant's affairs that:
    (1) has occurred since the end of the latest fiscal year for 
which it incorporates by reference audited financial statements in 
accordance with Item 14; and

[[Page 67300]]

    (2) the registrant has not described in an Exchange Act report 
delivered with the prospectus in accordance with this Item;
    Instructions to Item 13.
    1. The registrant must deliver information required by this Item 
with the first prospectus it delivers. It need not deliver that 
information with any subsequent prospectus sent to the same person.
    2. Any reports the registrant delivers together with the 
prospectus pursuant to this Item must be delivered without charge to 
the investor.

Item 14. Incorporation by Reference by Seasoned Form A Companies

    If the registrant provides information in accordance with Item 
13 of this Form:
    (a) It must incorporate by reference into the prospectus that is 
part of the effective registration statement:
    (1) its latest annual report filed in accordance with Section 
13(a) or 15(d) of the Exchange Act that contains audited financial 
statements;
    Note to Item 14(a)(1).
    The registrant may satisfy this obligation to incorporate its 
annual report by incorporating a Form 40-F if it meets the 
requirements of General Instruction A.(2) of Form 40-F.
    (2) any reports it filed pursuant to Section 13(a) or 15(d) of 
the Exchange Act since the end of the fiscal year covered by its 
annual report incorporated in this Form.
    Instructions to Item 14(a).
    1. List in the prospectus that is part of the effective 
registration statement all documents that are filed prior to 
effectiveness and incorporated by reference.
    2. Notwithstanding Instruction 2 to Item 404 of Regulation S-K, 
you need only provide Item 404 information covering one year if you 
incorporate that information by reference pursuant to this Item.
    3. Foreign registrants: All annual reports you incorporate by 
reference pursuant to this Item must contain financial statements 
that comply with Item 18 of Form 20-F, except that your financial 
statements may comply with Item 17 of Form 20-F if the only 
securities you are registering are investment grade securities as 
defined in Instruction 3 of Instructions to Item 12(a).
    4. Foreign registrants may incorporate by reference and deliver 
with the prospectus any Exchange Act report containing information 
meeting the requirements of Form A. See Rules 4-01(a)(2) and 10-01 
of Regulation S-X and Item 18 of Form 20-F.
    5. You should read Rule 439 regarding consent to the use of 
material incorporated by reference.
    (b) In the prospectus, you must:
    (1) identify the reports and other information that you file 
with the Commission;
    (2) state that the public;
    (i) may read and copy any materials you file with the Commission 
at the Commission's Public Reference Room at 450 Fifth Street, N.W., 
Washington, D.C. 20549; and
    (ii) may obtain information on the operation of the Public 
Reference Room by calling the Commission at 1-800-SEC-0330; and
    (3) if you are an electronic filer, state that the Commission 
maintains an Internet web site that contains reports, proxy and 
information statements, and other information regarding issuers that 
file electronically with the Commission and state the address of 
that site (http://www.sec.gov). You are encouraged to give your 
Internet web site address, if available.

Item 15. Information Required for All Other Companies

    Any registrant that does not provide information in accordance 
with Items 11 and 12 or Items 13 and 14 must provide the following 
information:
    (a) Description of Business.
    (i) U.S. registrants: Item 101 of Regulation S-K.
    (ii) Foreign registrants: Item 1 of Form 20-F.
    (b) Description of Property.
    (i) U.S. registrants: Item 102 of Regulation S-K.
    (ii) Foreign registrants: Item 2 of Form 20-F.
    (iii) If the registrant is a real estate entity as defined in 
Item 1101 of Regulation S-K, provide the information required by 
Items 1105, 1106 and 1107 of Regulation S-K in lieu of the 
information required by paragraph (b)(i) or (b)(ii) of this Item.
    (c) Legal Proceedings.
    (i) U.S. registrants: Item 103 of Regulation S-K.
    (ii) Foreign registrants: Item 3 of Form 20-F.
    (d) Common Equity Securities. If the registrant is issuing 
common equity securities:
    (i) U.S. registrants: Item 201 of Regulation S-K.
    (ii) Foreign registrants: Item 5 of Form 20-F. You must update 
such information to cover any subsequent interim periods for which 
financial statements are required pursuant to Rule 3-19 of 
Regulation S-X.
    (e) Financial Statements.
    (i) U.S. registrants: Regulation S-X.
    (ii) Foreign registrants: Item 18 of Form 20-F except if you are 
registering only investment grade securities as defined in the 
second instruction of Instructions to Item 11(a) of this Form. In 
that event, you may comply with Item 17 of Form 20-F instead of Item 
18.
    Instructions to Item 15(e).
    1. File schedules required by Regulation S-X as ``Financial 
Statement Schedules,'' as authorized by Item 25 of this Form.
    2. Provide any financial information required by Rule 3-05 and 
Article 11 of Regulation S-X with respect to transactions other than 
the one being registered.
    3. Foreign registrants: Your financial statements must comply 
with Rule 3-19 of Regulation S-X. See also Rules 4-01(a)(2) and 10-
01 of Regulation S-X.
    (f) Exchange Controls.
    (i) U.S. registrants: not applicable.
    (ii) Foreign registrants: Item 6 of Form 20-F.
    (g) Taxation.
    (i) U.S. registrants: not applicable.
    (ii) Foreign registrants: Item 7 of Form 20-F.
    (h) Selected Financial Data.
    (i) U.S. registrants: Item 301 of Regulation S-K.
    (ii) Foreign registrants: Item 8 of Form 20-F.
    (i) Supplementary Financial Information.
    (i) U.S. registrants: Item 302 of Regulation S-K.
    (ii) Foreign registrants: not applicable.
    (j) Management's Discussion and Analysis.
    (i) U.S. registrants: Item 303 of Regulation S-K.
    (ii) Foreign registrants: Item 9 of Form 20-F.
    (k) Changes in and Disagreements with Accountants.
    (i) U.S. registrants: Item 304 of Regulation S-K.
    (ii) Foreign registrants: not applicable.
    (l) Quantitative and Qualitative Disclosures of Market Risk.
    (i) U.S. registrants: Item 305 of Regulation S-K.
    (ii) Foreign registrants: Item 9A of Form 20-F.

C. Information About the Company Being Acquired

Item 16. Information Required for Form B Companies

    If the company being acquired meets the requirements of General 
Instructions I.B. and I.C.1. of Form B and compliance with this Item 
is elected, provide the information required by Items 11 and 12 of 
this Form as if the company being acquired were the registrant.
    Instruction.
    Foreign companies being acquired: Notwithstanding the 
requirements of Items 11 and 12, the financial statements of the 
company being acquired need only comply with the reconciliation 
requirements of Item 17 of Form 20-F.

Item 17. Information Required for Seasoned Form A Companies

    If the company being acquired meets the requirements of General 
Instruction II. of Form A and compliance with this Item is elected, 
provide the information required by Items 13 and 14 of this Form as 
if the company being acquired were the registrant.
    Instruction.
    Foreign companies being acquired: Notwithstanding the 
requirements of Items 13 and 14, the financial statements of the 
company being acquired need only comply with the reconciliation 
requirements of Item 17 of Form 20-F.

Item 18. Information Required for All Other (Non-Small Business) 
Companies

    If the company being acquired does not meet the requirements of 
General Instructions I.B. and I.C.1. of Form B or General 
Instruction II. of Form A, or compliance with this Item is elected, 
provide the information that would be required by Item 15 of this 
Form as if the company being acquired were the registrant, subject 
to the following:
    (a) Only those schedules required by Rules 12-15, 28 and 29 of 
Regulation S-X need be provided with respect to the company being 
acquired;
    (b) Notwithstanding the requirements of Item 14, the financial 
statements of any

[[Page 67301]]

foreign company being acquired need only comply with the 
reconciliation requirements of Item 17 of Form 20-F;
    (c) If the company being acquired is not subject to the 
reporting requirements of Exchange Act Section 13(a) or 15(d), or 
has not furnished an annual report to its security holders under 
Rule 14a-3 or Rule 14c-3 for the latest fiscal year because of 
Exchange Act Section 12(i), furnish the financial statements that 
would be required in an annual report sent to security holders under 
Rules 14a-3(b)(1) and (b)(2) if one was required.
    Instructions to paragraph (c).
    1. If the registrant's security holders will not be voting on 
the transaction, financial statements for the two fiscal years 
before the latest fiscal year need be provided only to the extent 
that security holders of the company being acquired were previously 
furnished with financial statements (prepared in conformity with 
GAAP) for those periods.
    2. The financial statements required by this paragraph for the 
latest fiscal year need be audited only to the extent practicable. 
The financial statements for the fiscal years before the latest 
fiscal year need not be audited if they were not previously audited.
    3. If the financial statements required by this paragraph 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.
    (d) Notwithstanding paragraph (c) of this Item, the financial 
statements of the company being acquired must be audited for the 
fiscal years required by paragraph (b)(2) of Rule 3-05 of Regulation 
S-X if this registration statement is used for resales by any person 
deemed to be an underwriter within the meaning of Securities Act 
Rule 145(c).
    (e) If the company being acquired is not subject to the 
reporting requirements of Exchange Act Section 13(a) or 15(d), 
provide the information required by Part I of Form 10-Q or Form 10-
QSB for the most recent quarter for which a quarterly report would 
be due if the company being acquired were subject to those reporting 
requirements.

Item 19. Information Required for Companies That Are Transitional Small 
Business Issuers

    If the company being acquired meets the requirements of General 
Instruction II.A.1. of Form SB-3, provide information in accordance 
with either Item 14 or 16 of Form SB-3.

Item 20. Information Required for Companies That Are Seasoned SB-2 
Issuers

    If the company being acquired meets the requirements of General 
Instruction E.1. of Form SB-2 and compliance with this Item is 
elected, provide the information required by Items 11 and 12 of Form 
SB-3 as if the company being acquired were the registrant on Form 
SB-3.
    Instruction to Item 20.
    Canadian small business issuers being acquired: Notwithstanding 
the requirements of Items 11 and 12 of Form SB-3, the financial 
statements of the company being acquired need only comply with the 
reconciliation requirements of Item 17 of Form 20-F.

Item 21. Information Required for All Other Small Business Issuers

    If the company being acquired does not meet the requirements of 
General Instruction E.1. of Form SB-2, or compliance with this Item 
is elected, provide the information required by Item 13 of Form SB-3 
as if the company being acquired were the registrant on Form SB-3, 
subject to the following:
    (a) Canadian small business issuers being acquired: 
Notwithstanding the requirements of Item 13 of Form SB-3, the 
financial statements of the company being acquired need only comply 
with the reconciliation requirements of Item 17 of Form 20-F.
    (b) If the company being acquired is not subject to the 
reporting requirements of Exchange Act Section 13(a) or 15(d), or 
has not furnished an annual report to its security holders under 
Rule 14a-3 or Rule 14c-3 for the latest fiscal year because of 
Exchange Act Section 12(i), furnish the financial statements that 
would be required in an annual report sent to security holders under 
Rules 14a-3(b)(1) and (b)(2) if one was required.
    Instructions to paragraph (b).
    1. If the registrant's security holders will not be voting on 
the transaction, financial statements for the two fiscal years 
before the latest fiscal year need be provided only to the extent 
that security holders of the company being acquired were previously 
furnished with financial statements (prepared in conformity with 
GAAP) for those periods.
    2. The financial statements required by this paragraph for the 
latest fiscal year need be audited only to the extent practicable. 
The financial statements for the fiscal years before the latest 
fiscal year need not be audited if they were not previously audited.
    3. If the financial statements required by this paragraph 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.
    (c) Notwithstanding paragraph (b) of this Item, the financial 
statements of the company being acquired must be audited for the 
fiscal years required by Item 310 of Regulation S-B if this 
registration statement is used for resales by any person deemed to 
be an underwriter within the meaning of Securities Act Rule 145(c).
    (d) If the company being acquired is not subject to the 
reporting requirements of Exchange Act Section 13(a) or 15(d), 
provide the information required by Part I of Form 10-QSB for the 
most recent quarter for which a quarterly report would be due if the 
company being acquired were subject to those reporting requirements.

D. Voting and Management Information

Item 22. Information if Proxies, Consents or Authorizations Will Be 
Solicited

    (a) If either the registrant or the company being acquired is 
soliciting proxies, consents or authorizations, provide the 
following information:
    (1) Date, Time and Place Information. Item 1 of Schedule 14A;
    (2) Revocability of Proxy. Item 2 of Schedule 14A;
    (3) Dissenters' Rights of Appraisal. Item 3 of Schedule 14A;
    (4) Persons Making the Solicitation. Item 4 of Schedule 14A;
    (5) Persons with a Substantial Interest in the Matter. Item 5 of 
Schedule 14A, with respect to both the registrant and the company 
being acquired;
    (6) Voting Securities and Principal Holders. Item 6 of Schedule 
14A, with respect to both the registrant and the company being 
acquired;
    Instructions to Item 22(a)(6).
    1. Foreign registrants and foreign companies being acquired: You 
may provide the information specified in Item 4 of Form 20-F in lieu 
of the information specified in Item 6(d) of Schedule 14A.
    2. Small business issuers being acquired: You may provide the 
information specified in the Instruction to Item 20(a)(6) of Form 
SB-3 instead of the information specified in Item 6(d) of Schedule 
14A.
    (7) Vote Required for Approval. Item 21 of Schedule 14A; and
    (8) Directors and Executive Officers. With respect to each 
person who will serve as a director or an executive officer of the 
surviving or acquiring company, the information required by:
    (i) U.S. registrants: Items 401, 402 and 404 of Regulation S-K; 
and
    (ii) Foreign registrants: Items 10, 11, 12 and 13 of Form 20-F.
    Instruction to Item 21(a)(8).
    Small business issuers being acquired: You may provide the 
information specified in Item 20(a)(8)(i) or (ii) of Form SB-3 
instead of the information specified in Item 21(a)(8) of this Form.
    (b) If the registrant or the company being acquired meets the 
requirements of General Instructions I.B. and I.C.1. of Form B, 
General Instruction II. of Form A or General Instruction E.1. of 
Form SB-2, any information required by paragraphs (a)(6) or (a)(8) 
of this Item with respect to it may be incorporated by reference 
from its latest annual report.

Item 23. Information if Proxies, Consents or Authorizations Will Not Be 
Solicited or in an Exchange Offer

    (a) If proxies, consents or authorizations will not be solicited 
in connection with the transaction or in an exchange offer, provide 
the following information:
    (1) Statement that Proxies are not to be Solicited. Item 2 of 
Schedule 14C;
    (2) Date, Time and Place Information. The date, time and place 
of the meeting of

[[Page 67302]]

security holders, unless such information is otherwise disclosed in 
material furnished to security holders with or preceding the 
prospectus;
    (3) Dissenters' Rights of Appraisal. Item 3 of Schedule 14A;
    (4) Affiliates' Interests in the Transaction. A brief 
description of any direct or indirect material interest of 
affiliates of the registrant and of the company being acquired in 
the proposed transaction;
    Instruction to Item 23(a)(4).
    You need not describe any interest arising from the ownership of 
securities where the affiliate receives no benefit not shared on a 
pro rata basis by all other holders of the same class.
    (5) Voting Securities and Principal Holders. Item 6 of Schedule 
14A, with respect to both the registrant and the company being 
acquired;
    Instructions to Item 23(a)(5).
    1. Foreign registrants and foreign companies being acquired: You 
may provide the information specified in Item 4 of Form 20-F in lieu 
of the information specified in Item 6(d) of Schedule 14A.
    2. Small business issuers being acquired: You may provide the 
information specified in the Instruction to Item 21(a)(5) of Form 
SB-3 instead of the information specified in Item 6(d) of Schedule 
14A.
    (6) Vote Required for Approval. Item 21 of Schedule 14A; and
    (7) Directors and Executive Officers. With respect to each 
person who will serve as a director or an executive officer of the 
surviving or acquiring company, the information required by:
    (i) U.S. registrants: Items 401, 402 and 404 of Regulation S-K; 
and
    (ii) Foreign registrants: Items 10, 11, 12 and 13 of Form 20-F.
    Instruction to Item 23(a)(7).
    Small business issuers being acquired: You may provide the 
information specified in Item 21(a)(7)(i) or (ii) of Form SB-3 
instead of the information specified in Item 22(a)(7) of this Form.
    Instruction to Item 23(a).
    If proxies, consents or authorizations will not be solicited in 
connection with the transaction because the transaction is an 
exchange offer, you need not provide the information required by 
paragraphs (a)(1), (a)(2) and (a)(3).
    (b) If the registrant or the company being acquired meets the 
requirements of General Instruction I.B. and I.C.1. of Form B or 
General Instruction II. of Form A, any information required by 
paragraphs (a)(5) and (a)(7) of this Item with respect to it may be 
incorporated by reference from its latest annual report.

Part II--Information Not Required in the Prospectus

Item 24. Indemnification of Directors and Officers

    Provide the information required by Item 702 of Regulation S-K.

Item 25. Exhibits and Financial Statement Schedules

    (a) Provide the exhibits required by Item 601 of Regulation S-K.
    Instruction to Item 25(a).
    Provide exhibits required by Item 601(b)(10) with respect to 
both the registrant and the company being acquired.
    (b) Provide the financial statement schedules required by 
Regulation S-X and Item 14(e) or Item 17(a) of this Form. List each 
schedule according to the number assigned to it in Regulation S-X.
    (c) If information is provided pursuant to Item 4(b) of this 
Form, provide the report, opinion or appraisal as an exhibit to this 
Form, unless it is included in the prospectus.

Item 26. Undertakings

    (a) Set forth in the effective registration statement the 
undertakings required by Item 512 of Regulation S-K.
    (b) Set forth the following undertaking if the registrant is 
using this Form for a transaction to be effected on a delayed basis:
    [Name of registrant] will file a post-effective amendment 
containing all required information concerning a transaction and the 
company being acquired that was not included in the registration 
statement when it became effective because it was not practicable to 
do so.

Signatures

    The registrant hereby certifies that it meets all of the 
requirements for filing on Form C. The registrant also certifies 
that it has duly caused and authorized the undersigned to sign this 
registration statement on its behalf. The undersigned certifies that 
he/she has read this registration statement and to his/her knowledge 
the registration statement does not contain an untrue statement of a 
material fact or omit to state a material fact required to be stated 
therein or necessary to make the statements therein not misleading.
(Registrant)-----------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    The following persons certify that they have read this 
registration statement and to their knowledge the registration 
statement does not contain an untrue statement of a material fact or 
omit to state a material fact required to be stated therein or 
necessary to make the statements therein not misleading. The 
following persons also certify that they are signing below on behalf 
of the registrant and in the capacities and on the dates indicated.

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    Signature Instructions.
    1. The following persons, or persons performing similar 
functions, must sign the registration statement:
    (a) the registrant;
    (b) its principal executive officer or officers;
    (c) its principal financial officer;
    (d) its controller or principal accounting officer; and
    (e) at least the majority of its board of directors.
    2. Where the registrant is a foreign issuer, its authorized 
representative in the United States also must sign the registration 
statement.
    3. Where the registrant is a limited partnership, its general 
partner must sign. Where the general partner is a corporation, the 
majority of the board of directors of the corporate general partner 
must sign the registration statement.
    4. Type or print the name and title of each person who signs the 
registration statement beneath the person's signature. Any person 
who occupies more than one of the specified positions must indicate 
each capacity in which that person signs the registration statement. 
See Securities Act Rule 402 concerning manual signatures and Item 
601 of Regulation S-K concerning signatures pursuant to powers of 
attorney.
    5. If the securities to be offered are those of an entity that 
is not yet in existence at the time the registration statement is 
filed, but which will be a party to a consolidation involving two or 
more existing entities, then each existing entity will be deemed a 
registrant and must be so designated on the cover page of the Form. 
In that case, each existing entity (and the applicable persons noted 
in Signature Instructions 1.--3.) must sign the registration 
statement as if it were the registrant.

    93. By revising Sec. 239.9 and amending Form SB-1 (referenced in 
Sec. 239.9) by revising the title of the Form and the facing page, 
General Instruction A.3., General Instruction B.3., General Instruction 
H. and the Signatures section; by removing in General Instruction 
A.1.(b) the words ``S-4'' and adding, in their place, the words ``SB-
3'' and by removing the words ``S-3 (if the issuer incorporates by 
reference transitional Exchange Act reports),''; and by adding General 
Instruction I. and General Instruction J. to read as follows:


Sec. 239.9  Form SB-1, optional Form for the registration under the 
Securities Act of 1933 of securities to be sold to the public by 
certain small business issuers, and for optional concurrent 
registration under the Securities Exchange Act of 1934.

    (a) A ``small business issuer,'' as defined in Rule 405 of the 
Securities Act of 1933 (the ``Securities Act''), may use this Form to 
register an offering of securities under the Securities Act. It may 
register up to $10,000,000 of securities to be sold for cash, if it has 
not registered more than $10,000,000 in securities offerings in any 
continuous 12-month period, including the transaction being registered. 
In calculating the $10,000,000 ceiling, the issuer must include all 
offerings that were registered under the Securities Act, other than any 
amounts registered on Form S-8 (Sec. 239.16b).
    (b) A small business issuer also may use this Form to register 
concurrently under Section 12(b) or 12(g) of the Securities Exchange 
Act of 1934 (``Exchange Act''). It may register under the Exchange Act 
any class of securities that are the subject of the offering it is

[[Page 67303]]

registering under the Securities Act. To register, the small business 
issuer must check the appropriate box(es) on the cover page of this 
Form and identify which class(es) of securities it is registering under 
Section 12(b) or 12(g) of the Exchange Act.

    Note: The text of Form SB-1 does not and this amendment will not 
appear in the Code of Federal Regulations.

U.S. Securities and Exchange Commission, Washington, D.C. 20549

FORM SB-1--Registration Statement Under the Securities Act of 1933 [and 
Optional Registration Pursuant to Section 12(b) or 12(g) of the 
Securities Exchange Act of 1934]

(Amendment No. ____)
----------------------------------------------------------------------
(Name of Small Business Issuer in its charter)

----------------------------------------------------------------------
(Translation of Small Business Issuer's name into English, if 
applicable)

----------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)

----------------------------------------------------------------------
(Primary Standard Industrial Classification Code Number)

----------------------------------------------------------------------
(I.R.S. Employer Identification Number)

----------------------------------------------------------------------
(Address and telephone number of Registrant's principal executive 
offices)

----------------------------------------------------------------------
(Address of principal place of business or intended principal place 
of business)

----------------------------------------------------------------------
(Name, address and telephone number of agent for service)

----------------------------------------------------------------------
(Web Site Address, if any)

----------------------------------------------------------------------
(E-mail Address, if any)

* * * * *
Approximate date of commencement of sales ________________

    If you include the Securities Act Rule 473(a) delaying legend on 
this registration statement when you first file it, and you are 
relying on Securities Act Rule 456(b) to delay payment of the 
registration fee, check the following box. [  ]
    If you do not include the Securities Act Rule 473(a) delaying 
legend on this registration statement when you first file it, or if 
you specifically state in a pre-effective amendment that this 
registration statement shall hereafter become effective in 
accordance with Section 8(a) of the Securities Act, check the 
following box. [  ]

    Note: If you check this box, you must pay the registration fee 
required by Section 6 of the Securities Act (unless previously paid) 
before the registration statement or pre-effective amendment will be 
considered filed.

    If you are filing this Form to register additional securities 
for an offering in accordance with Securities Act Rule 462(e), check 
the following box and list the Securities Act registration number of 
the earlier effective registration statement for the same offering. 
[  ] ____________
    If this Form is a post-effective amendment filed in accordance 
with Securities Act Rule 462(c) to re-start the 15-business-day 
period during which pricing must occur under Securities Act Rule 
430A(a)(3) or to reflect a non-substantive change from, or addition 
to, the prospectus, check the following box and list the Securities 
Act registration number of the earlier effective registration 
statement for the same offering. [  ] ____________
    If this Form is a post-effective amendment filed in accordance 
with Securities Act Rule 462(d) solely to add exhibits, check the 
following box and list the Securities Act registration number of the 
earlier effective registration statement for the same offering. [  ] 
____________
    If you are using this Form to register concurrently under 
Section 12(b) or 12(g) of the Exchange Act any class of securities 
that are the subject of the offering you are registering under the 
Securities Act, check the appropriate box and provide the 
information indicated below:

[  ] Securities being registered pursuant to Exchange Act Section 
12(b):
Title of each class:
----------------------------------------------------------------------

----------------------------------------------------------------------

Name of exchange on which listed:
----------------------------------------------------------------------

----------------------------------------------------------------------

[  ] Securities being registered pursuant to Exchange Act Section 
12(g):
Title of each class:
Name of market on which quoted:
----------------------------------------------------------------------

----------------------------------------------------------------------

Name of market on which quoted:
----------------------------------------------------------------------

----------------------------------------------------------------------


                                         Calculation of Registration Fee
----------------------------------------------------------------------------------------------------------------
                                                                            Proposed     Proposed
                                                              Amount to     maximum      maximum      Amount of
     Title of each class of securities to be registered           be        offering    aggregate   registration
                                                              registered   price per     offering        fee
                                                                              unit        price
----------------------------------------------------------------------------------------------------------------
 
 
 
 
 
----------------------------------------------------------------------------------------------------------------
Notes to the Fee Table:
1. Set forth any explanatory details relating to the fee table in footnotes to the table.
2. If the basis for calculating the fee is not evident from the information presented in this table, refer to
  the applicable provisions of Securities Act Rule 457 in a footnote.
3. If the fee is calculated under Rule 457(o), the ``Amount to be registered'' and the ``Proposed maximum
  offering price per unit'' need not appear in this table.
4. If any of the securities registered are not sold in connection with this offering, the registrant (or a
  qualifying wholly-owned subsidiary) may use the dollar amount of the fee paid with respect to the unsold
  securities to offset the total fee due on its subsequent registration statement. See Rule 457(p). When
  offsetting any part of the fee under Rule 457(p), the registrant must state the dollar amount being offset in
  a footnote to the fee table and must identify the file number of the registration statement and the amount and
  class of securities in connection with which the offsetting fee was previously paid. Use of Rule 457(p) to
  offset any fee automatically deregisters the securities in connection with which the fee was previously paid.

    The following delaying amendment is optional, but see Securities 
Act Rule 473 before omitting it:
    The registrant hereby amends this registration statement on such 
date or dates as may be necessary to delay its effective date until 
the registrant shall file a further amendment which specifically 
states that this registration statement shall thereafter become 
effective in accordance with Section 8(a) of the Securities Act of 
1933 or until the registration statement shall become effective on 
such date as the Commission acting pursuant to said Section 8(a) may 
determine.

Disclosure alternative used (check one): Alternative 1 ____________ 
Alternative 2 ____________

General Instructions

A. Use of Form and Place of Filing

* * * * *

[[Page 67304]]

    3. A small business issuer also may use this Form to register 
concurrently under Section 12(b) or 12(g) of the Exchange Act. It 
may register under the Exchange Act any class of securities that are 
the subject of the offering it is registering under the Securities 
Act. To register, the small business issuer must check the 
appropriate box(es) on the cover page of this Form and identify 
which class(es) of securities it is registering under Section 12(b) 
or 12(g).

B. General Requirements

* * * * *
    3. If you are engaged in real estate, oil and gas, or mining 
activities, you should read the Industry Guides in Item 801 or 
Regulation S-K. Real estate entities should also read Items 1105 
(Real Estate and Other Investment Activities) and 1106 (Description 
of Real Estate and Operating Data) of Regulation S-K.
* * * * *

H. Registration of Additional Securities

    1. Under certain circumstances, a small business issuer may 
increase the size of an offering after the effective date through 
filing a short-form registration statement under Securities Act Rule 
462(b) or 462(e). That type of registration statement may include 
only the following:
    (a) the facing page;
    (b) a statement that the earlier registration statement, 
identified by file number, is incorporated by reference;
    (c) any required opinions and consents;
    (d) the signature page; and
    (e) any price-related information omitted from the earlier 
registration statement in reliance on Securities Act Rule 430A, if 
the registrant so chooses.
    2. The information contained in a Rule 462(b) or Rule 462(e) 
registration statement is deemed to be a part of the earlier 
effective registration statement as of the date of effectiveness of 
the Rule 462(b) or Rule 462(e) registration statement.
    3. The small business issuer may incorporate by reference from 
the earlier registration statement any opinion or consent required 
in the Rule 462(b) or Rule 462(e) registration statement if:
    (a) the opinion or consent expressly allows that incorporation; 
and
    (b) the opinion or consent also relates to the Rule 462(b) or 
Rule 462(e) registration statement.
    Note to General Instruction H.
    You should read Securities Act Rule 411(c) regarding 
incorporation by reference of exhibits and Securities Act Rule 
439(b) regarding incorporation by reference of consents.

I. Free Writing Prospectus Information

    You should read Securities Act Rule 165. That rule permits the 
small business issuer and those acting on its behalf to use ``free 
writing'' offering materials that do not meet the requirements of 
Section 10 of the Securities Act. Those offering materials may be 
used after the small business issuer has filed that Section 10 
prospectus with the Commission in the registration statement. If you 
use a prospectus in reliance on that Rule, you must file it when 
required to do so by Securities Act Rule 425.

J. Concurrent Registration of Securities Under Exchange Act

    1. Registration on this Form of a class of securities under 
Exchange Act Section 12(b) shall become effective upon the later of:
    (a) receipt by the Commission of certification from the national 
securities exchange listed on the cover of this Form that the 
securities have been approved for listing; or
    (b) effectiveness of this registration statement.
    2. Registration on this Form of a class of securities under 
Exchange Act Section 12(g) shall become effective automatically upon 
the earlier of (1) 60 days after the initial filing of this 
registration statement; or (2) the effectiveness of this 
registration statement.
    3. If the registrant is required to file an annual report under 
Exchange Act Section 15(d) for its last fiscal year, it must file 
that annual report within the time period specified in the 
appropriate annual report form even if the Exchange Act registration 
becomes effective before the annual report is due.
    4. The registrant must file at least one complete, signed copy 
of the registration statement with each exchange or market 
identified on the cover of this Form.
* * * * *

Signatures

    The registrant hereby certifies that it meets all of the 
requirements for filing on Form SB-1. The registrant also certifies 
that it has duly caused and authorized the undersigned to sign this 
registration statement on its behalf. The undersigned certifies that 
he/she has read this registration statement and to his/her knowledge 
the registration statement does not contain an untrue statement of a 
material fact or omit to state a material fact required to be stated 
therein or necessary to make the statements therein not misleading.

(Registrant)-----------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    The following persons certify that they have read this 
registration statement and to their knowledge the registration 
statement does not contain an untrue statement of a material fact or 
omit to state a material fact required to be stated therein or 
necessary to make the statements therein not misleading. The 
following persons also certify that they are signing below on behalf 
of the registrant and in the capacities and on the dates indicated.

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    Signature Instructions.
    1. The following persons, or persons performing similar 
functions, must sign the registration statement:
    (a) the small business issuer;
    (b) its principal executive officer or officers;
    (c) its principal financial officer;
    (d) its controller or principal accounting officer; and
    (e) at least the majority of its board of directors.
    2. Where the small business issuer is a foreign issuer, its 
authorized representative in the United States also must sign the 
registration statement.
    3. Where the small business issuer is a limited partnership, its 
general partner must sign. Where the general partner is a 
corporation, the majority of the board of directors of the corporate 
general partner must sign the registration statement.
    4. Type or print the name and title of each person who signs the 
registration statement beneath the person's signature. Any person 
who occupies more than one of the specified positions must indicate 
each capacity in which that person signs the registration statement. 
See Securities Act Rule 402 concerning manual signatures and Item 
601 of Regulation S-B concerning signatures pursuant to powers of 
attorney.

    94. By revising Sec. 239.10 and amending Form SB-2 by revising the 
title of the Form and the facing page, General Instruction A., General 
Instruction B.1. and B.2., and General Instruction C; by adding General 
Instructions B.4. and B.5., General Instruction D., General Instruction 
E., and General Instruction F.; by removing Items 9-11 and 15-23; by 
redesignating Items 12 and 13 as Items 9 and 10; by adding Items 11, 12 
and 13; by redesignating Items 24-28 as Items 14-18; and by revising 
the Signatures section to read as follows:


Sec. 239.10  Form SB-2, optional Form for the registration under the 
Securities Act of 1933 of securities to be sold to the public by small 
business issuers, and for optional concurrent registration under the 
Securities Exchange Act of 1934.

    (a) A ``small business issuer,'' as defined in Sec. 230.405 of 
this chapter, may use this Form to register under the Securities Act 
of 1933 (15 U.S.C. 77a et. seq.) (``Securities Act'') an offering of 
securities for cash. See also Item 10(a) of Regulation S-B 
(Sec. 228.10(a) of this chapter).
    (b) A small business issuer must file this registration 
statement in the Commission's Washington, D.C. office.
    (c) A small business issuer also may use this Form to register 
concurrently under Section 12(b) or 12(g) of the Securities Exchange 
Act of 1934 (``Exchange Act''). It may register under the Exchange 
Act any class of securities that are the subject of the offering it 
is registering under the Securities Act. To register, the small 
business issuer must check the appropriate box(es) on the cover page 
of this Form and identify which class(es) of securities it is 
registering under Section 12(b) or 12(g) of the Exchange Act.

    Note: The text of Form SB-2 does not and this amendment will not 
appear in the Code of Federal Regulations.

[[Page 67305]]

U.S. Securities and Exchange Commission, Washington, D.C. 20549

Form SB-2--Registration Statement Under the Securities Act of 1933 [and 
Optional Registration Pursuant to Section 12(b) or 12(g) of the 
Securities Exchange Act of 1934] (Amendment No. ____)

----------------------------------------------------------------------
(Name of Small Business Issuer in its charter)

----------------------------------------------------------------------
(Translation of Small Business Issuer's name into English, if 
applicable)

----------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)

----------------------------------------------------------------------
(Primary Standard Industrial Classification Code Number)

----------------------------------------------------------------------
(I.R.S. Employer Identification Number)

----------------------------------------------------------------------
(Address and telephone number of Registrant's principal executive 
offices)

----------------------------------------------------------------------
(Address of principal place of business or intended principal place 
of business)

----------------------------------------------------------------------
(Name, address and telephone number of agent for service)

----------------------------------------------------------------------
(Web Site Address, if any)

----------------------------------------------------------------------
(E-mail Address, if any)

* * * * *
Approximate date of commencement of sales ________________

    If you include the Securities Act Rule 473(a) delaying legend on 
this registration statement when you first file it, and you are 
relying on Securities Act Rule 456(b) to delay payment of the 
registration fee, check the following box. [  ]
    If you do not include the Rule 473(a) delaying legend on this 
registration statement when you first file it, or if you 
specifically state in a pre-effective amendment that this 
registration statement shall hereafter become effective in 
accordance with Section 8(a) of the Securities Act, check the 
following box. [  ]

    Note: If you check this box, you must pay the registration fee 
required by Section 6 of the Securities Act (unless previously paid) 
before the registration statement or pre-effective amendment will be 
considered filed.

    If you are filing this Form to register additional securities 
for an offering in accordance with Securities Act Rule 462(e), check 
the following box and list the Securities Act registration number of 
the earlier effective registration statement for the same offering. 
[  ] ____________
    If this Form is a post-effective amendment filed in accordance 
with Securities Act Rule 462(c) to re-start the 15-business-day 
period during which pricing must occur under Securities Act Rule 
430A(a)(3) or to reflect a non-substantive change from, or addition 
to, the prospectus, check the following box and list the Securities 
Act registration number of the earlier effective registration 
statement for the same offering. [  ] ____________
    If this Form is a post-effective amendment filed in accordance 
with Securities Act Rule 462(d) solely to add exhibits, check the 
following box and list the Securities Act registration number of the 
earlier effective registration statement for the same offering. [  ] 
____________
    If you are using this Form to register concurrently under 
Section 12(b) or 12(g) of the Exchange Act any class of securities 
that are the subject of the offering you are registering under the 
Securities Act, check the appropriate box and provide the 
information indicated below:

[  ] Securities being registered pursuant to Exchange Act Section 
12(b):
Title of each class:
----------------------------------------------------------------------

----------------------------------------------------------------------

Name of exchange on which listed:
----------------------------------------------------------------------

----------------------------------------------------------------------

[  ] Securities being registered pursuant to Exchange Act Section 
12(g):
Title of each class:
----------------------------------------------------------------------

----------------------------------------------------------------------

Name of market on which quoted:
----------------------------------------------------------------------

----------------------------------------------------------------------


                                         Calculation of Registration Fee
----------------------------------------------------------------------------------------------------------------
                                                                            Proposed     Proposed
                                                              Amount to     maximum      maximum      Amount of
     Title of each class of securities to be registered           be        offering    aggregate   registration
                                                              registered   price per     offering        fee
                                                                              unit        price
----------------------------------------------------------------------------------------------------------------
 
 
 
 
 
----------------------------------------------------------------------------------------------------------------
Notes to the Fee Table:
1. Set forth any explanatory details relating to the fee table in footnotes to the table.
2. If the basis for calculating the fee is not evident from the information presented in this table, refer to
  the applicable provisions of Securities Act Rule 457 in a footnote.
3. If the fee is calculated under Rule 457(o), the ``Amount to be registered'' and the ``Proposed maximum
  offering price per unit'' need not appear in this table.
4. If any of the securities registered are not sold in connection with this offering, the registrant (or a
  qualifying wholly-owned subsidiary) may use the dollar amount of the fee paid with respect to the unsold
  securities to offset the total fee due on its subsequent registration statement. See Rule 457(p). When
  offsetting any part of the fee under Rule 457(p), the registrant must state the dollar amount being offset in
  a footnote to the fee table and must identify the file number of the registration statement and the amount and
  class of securities in connection with which the offsetting fee was previously paid. Use of Rule 457(p) to
  offset any fee automatically deregisters the securities in connection with which the fee was previously paid.

    The following delaying amendment is optional, but see Securities 
Act Rule 473 before omitting it:
    The registrant hereby amends this registration statement on such 
date or dates as may be necessary to delay its effective date until 
the registrant shall file a further amendment which specifically 
states that this registration statement shall thereafter become 
effective in accordance with Section 8(a) of the Securities Act of 
1933 or until the registration statement shall become effective on 
such date as the Commission acting pursuant to said Section 8(a) may 
determine.

General Instructions

A. Use of Form and Place of Filing

    1. A ``small business issuer,'' as defined in Sec. 230.405 of 
this chapter, may use this Form to register under the Securities Act 
of 1933 (``Securities Act'') an offering of securities for cash. See 
also Item 10(a) of Regulation S-B.
    2. A small business issuer must file this registration statement 
in the Commission's Washington, D.C. office.
    3. A small business issuer also may use this Form to register 
concurrently under Section 12(b) or 12(g) of the Exchange Act. It 
may register under the Exchange Act any class of securities that are 
the subject of the offering it is registering under the Securities 
Act. To register, the small business issuer must check the 
appropriate box(es) on the cover page of this Form and identify 
which

[[Page 67306]]

class(es) of securities it is registering under Section 12(b) or 
12(g).

B. General Requirements

    1. If you are registering securities for the first time, you 
should be aware of Rule 463 under the Securities Act concerning 
sales of registered securities and the use of proceeds.
    2. If you are engaged in real estate, oil and gas, or mining 
activities, you should read the Industry Guides in Item 801 of 
Regulation S-K.
* * * * *
    4. You should read Securities Act Rule 172. That Rule describes 
prospectus delivery obligations applicable to offerings registered 
on this Form.
    5. If the offering registered on this Form relates to a blank 
check company, you should read Securities Act Rule 419. Among other 
things, that Rule contains additional disclosure requirements.

C. Registration of Additional Securities

    1. Under certain circumstances, a small business issuer may 
increase the size of an offering after the effective date through 
filing a short-form registration statement under Rule 462(b) or Rule 
462(e). That type of registration statement may include only the 
following:
    (a) the facing page;
    (b) a statement that the earlier registration statement, 
identified by file number, is incorporated by reference;
    (c) any required opinions and consents;
    (d) the signature page; and
    (e) any price-related information omitted from the earlier 
registration statement in reliance on Rule 430A, if the registrant 
so chooses.
    2. The information contained in a Rule 462(b) or Rule 462(e) 
registration statement is deemed to be a part of the earlier 
effective registration statement as of the date of effectiveness of 
the Rule 462(b) or Rule 462(e) registration statement.
    3. The registrant may incorporate by reference from the earlier 
registration statement any opinion or consent required in the Rule 
462(b) or Rule 462(e) registration statement if:
    (a) the opinion or consent expressly allows that incorporation; 
and
    (b) the opinion or consent also relates to the Rule 462(b) or 
Rule 462(e) registration statement.
    Note to General Instruction C.
    You should read Securities Act Rule 411(c) regarding 
incorporation by reference of exhibits and Securities Act Rule 
439(b) regarding incorporation by reference of consents.

D. Free Writing Prospectus Information

    You should read Securities Act Rule 165. That Rule permits the 
small business issuer and those acting on its behalf to use ``free 
writing'' offering materials that do not meet the requirements of 
Section 10 of the Act. Those offering materials may be used after 
the small business issuer has filed that Section 10 prospectus with 
the Commission in the registration statement. If you use a 
prospectus in reliance on that Rule, you must file it when required 
to do so by Securities Act Rule 425.

E. Registrant Information--Incorporation by Reference

    1. Registrants Eligible to Incorporate by Reference. Unless 
otherwise provided in General Instruction E.2., a registrant will be 
eligible to use Items 11 and 12, instead of Item 13, of this Form if 
it meets the following requirements:
    (a) the registrant has a class of securities registered under 
Section 12(b) or 12(g) of the Exchange Act, or the registrant is 
required to file reports under Section 15(d) of the Exchange Act;
    (b) the registrant has been subject to the requirements of 
Section 12 or 15(d) of the Exchange Act for at least 24 full 
calendar months and any portion of a month immediately preceding the 
date of filing this Form;
    (c) the registrant has filed at least two annual reports under 
Section 13(a) or 15(d) of the Exchange Act; and
    (d) the registrant has filed in a timely manner all reports and 
materials required by Section 13(a), 14 or 15(d) of the Exchange Act 
for at least 12 full calendar months and any portion of a month 
immediately before the date of filing this Form.
    Note to General Instruction E.1.(d).
    If the registrant filed an Exchange Act Rule 12b-25 notice to 
delay filing any report (or portion of a report) during that time 
period, it must have filed the related report (or portion) within 
the time prescribed by Rule 12b-25.
    2. Registrants Ineligible to Incorporate by Reference. A 
registrant must comply with Item 13 if it fails to meet any of the 
conditions of General Instruction E.1. or any of the following is 
true:
    (a) the registrant is a small business issuer that provided the 
``Information Required in Annual Report of Transitional Small 
Business Issuers'' in its latest Form 10-KSB;
    (b) within 2 years before the date of filing this Form, the 
registrant was a development stage company that either:
    (1) had no specific business plan or purpose; or
    (2) indicated that its business plan was to engage in a merger 
or acquisition with an unidentified entity or entities;
    (c) within two years before the date of filing this Form, the 
registrant was a shell entity having few or no assets, earnings or 
operations;
    (d) the registrant is registering an offering of ``penny stock'' 
as defined in Exchange Act Rule 3a51-1 or has issued it in the two 
years prior to the date of filing this Form;
    (e) the registrant or any of its subsidiaries has, since the end 
of the last fiscal year for which the registrant included certified 
financial statements in an Exchange Act report:
    (1) failed to pay any dividend or sinking fund installment on 
preferred stock;
    (2) caused any other material delinquency with respect to 
preferred stock that was not cured within 30 days; or
    (3) defaulted on any payment of principal, interest, a sinking 
fund installment, a purchase fund installment or any other 
installment on indebtedness, or defaulted on any rental on a long-
term lease, if such debt and lease defaults in the aggregate are 
material;
    (f) the independent accountant that examined the registrant's 
financial statements for the most recent fiscal year expressed in 
its report substantial doubt about the registrant's ability to 
continue as a going concern;
    (g) within three years before the date of filing, a petition 
under the federal bankruptcy laws or any state insolvency law was 
filed by or against the registrant, or a court appointed a receiver, 
fiscal agent or similar officer with respect to the business or 
property of the registrant. If true, however, this would not 
disqualify the registrant if it has filed an annual report with 
audited financial statements subsequent to its emergence from that 
bankruptcy, insolvency or receivership process;
    (h) within five years before the date of filing, the registrant, 
any executive officer, director or general partner of the registrant 
or person nominated to any of those positions, or its underwriter 
was convicted of any felony or misdemeanor described in clauses (i) 
through (iv) of Section 15(b)(4)(B) of the Exchange Act;
    (i) within five years before the date of filing, the registrant, 
any executive officer, director or general partner of the registrant 
or person nominated to any of those positions, or its underwriter 
was made the subject of a judicial or administrative decree or order 
arising out of a governmental action that:
    (1) prohibits future violations of any antifraud provision of 
the securities laws or Section 5 of the Securities Act;
    (2) requires that the registrant, any executive officer, 
director or general partner of the registrant or person nominated to 
any of those positions, or its underwriter cease and desist from 
violating any antifraud provision of the securities laws or from 
violating Section 5 of the Securities Act; or
    (3) determines that the registrant, any executive officer, 
director or general partner of the registrant or person nominated to 
any of those positions, or underwriter violated any antifraud 
provision of the securities laws or Section 5 of the Securities Act; 
and
    (j) the registrant would incorporate by reference into its Form 
SB-2 registration statement a report under the Exchange Act that:
    (1) the Commission, after review, requested that the registrant 
amend in accordance with its comments; and
    (2) either the registrant did not amend the report or, in the 
Commission's judgment, did not amend the report in accordance with 
the Commission's comments.
    3. Successor Registrants. We will deem a successor registrant to 
have satisfied the eligibility requirements of General Instruction 
E.1. of this Item if it satisfies either of the following 
requirements:
    (a)(1) taken together, the registrant and its predecessor meet 
the eligibility requirements in General Instruction B.1. of this 
Item;
    (2) the primary purpose of the succession was to change the 
state of incorporation of the predecessor or to form a holding 
company for the predecessor; and
    (3) the assets and liabilities of the successor at the time of 
succession are

[[Page 67307]]

substantially similar to those of the predecessor; or
    (b) the predecessor met the eligibility requirements of General 
Instruction E.1. at the time of succession and the registrant 
continues to meet those requirements since the succession.
    4. Reporting Companies Recently Entering the Small Business 
Disclosure System.
    (a) If the small business issuer meets the requirements of 
General Instruction E.1. and its latest annual report was filed on 
Form 10-K or Form 20-F (rather than Form 10-KSB), it may use Items 
11 and 12 and incorporate that annual report. The annual report on 
Form 10-K or 20-F must be updated by the Form 10-QSB for its most 
recent quarter. See Item 10(a)(2) of Regulation S-B which explains 
when and how a reporting company may enter the small business 
disclosure system.
    (b) If a Canadian small business issuer incorporates an annual 
report on Form 20-F that includes financial statements prepared and 
presented under Item 17 of Form 20-F, it must include in the 
prospectus financial statements prepared and presented under Item 18 
of Form 20-F unless otherwise permitted under Note 2 of Item 310 of 
Regulation S-B.
    (c) If the small business issuer chooses not to incorporate 
information from its latest annual report on Form 10-K or 20-F, it 
must provide the information required by Item 13. Item 13 requires 
disclosure based upon Regulation S-B, including Item 310 financial 
statements.

F. Concurrent Registration of Securities Under the Exchange Act

    1. Registration on this Form of a class of securities under 
Exchange Act Section 12(b) shall become effective upon the later of:
    (a) receipt by the Commission of certification from the national 
securities exchange listed on the cover of this Form that the 
securities have been approved for listing; or
    (b) effectiveness of this registration statement.
    2. Registration on this Form of a class of securities under 
Exchange Act Section 12(g) shall become effective automatically upon 
the earlier of (1) 60 days after the initial filing of this 
registration statement; or (2) the effectiveness of this 
registration statement.
    3. If the registrant is required to file an annual report under 
Exchange Act Section 15(d) for its last fiscal year, it must file 
that annual report within the time period specified in the 
appropriate annual report form even if the Exchange Act registration 
becomes effective before the annual report is due.
    4. The registrant must file at least one complete, signed copy 
of the registration statement with each exchange or market 
identified on the cover of this Form.
* * * * *

Item 11. Information Required for Seasoned Form SB-2 Companies

    If you meet the requirements of General Instruction E.1. of this 
Form and elect to comply with this Item and Item 12 (instead of Item 
13), you must:
    (a) Annual Report. Deliver together with the prospectus a copy 
of your latest annual report filed pursuant to Section 13(a) or 
15(d) of the Exchange Act.
    (b) Canadian Annual Report. If you are a Canadian small business 
issuer and you incorporate an annual report on Form 20-F that 
includes financial statements prepared and presented pursuant to 
Item 17 of Form 20-F, include in the prospectus financial statements 
prepared and presented pursuant to Item 18 of Form 20-F.
    Notes to Item 11(b).
    1. You must state in the prospectus that it is accompanied by 
that annual report.
    2. Canadian small business issuers: You may not satisfy this 
obligation by delivering an annual report on Form 40-F.
    3. Canadian small business issuers: You do not need to include 
financial statements that comply with Item 18 of Form 20-F if the 
only securities offered are those listed in paragraphs (a) through 
(c) of Note 2 of Item 310 of Regulation S-B.
    (c) Quarterly Information. Provide the information required by 
Part I of Form 10-QSB for the most recent fiscal quarter following 
the fiscal year covered by the annual report delivered pursuant to 
this Item. You must either:
    (1) include that information in the prospectus; or
    (2) deliver together with the prospectus a copy of your latest 
Form 10-QSB.
    Notes to Item 11(c).
    1. If your Form 10-QSB for the most recent quarter is not due to 
be filed before effectiveness of the registration statement, it may 
provide the information for the previous fiscal quarter to satisfy 
Item 11(c). For this purpose, the due date is calculated without 
reference to the extension provided by Exchange Act Rule 12b-25.
    2. If you deliver your latest Form 10-QSB, you must state in the 
prospectus that it is accompanied by that report.
    (d) Financial statements and information. If not included in 
your latest annual report delivered to investors pursuant to this 
Item, provide:
    (1) financial statements and information required by Items 310 
(c)-(e) of Regulation S-B;
    (2) restated financial statements prepared in accordance with or 
reconciled to U.S. GAAP where:
    (i) after the end of its most recent fiscal year, the registrant 
consummated one or more business combinations accounted for by the 
pooling of interests method of accounting; and
    (ii) the acquired businesses, considered in the aggregate, are 
significant pursuant to Item 310(c) of Regulation S-B;
    (3) restated financial statements prepared in accordance with or 
reconciled to U.S. GAAP, if a change in accounting principles or 
correction of an error required a material retroactive restatement 
of financial statements;
    (4) disclosure required by Item 310(b)(2)(v) of Regulation S-B 
regarding any material accounting change; or
    (5) financial information required by Item 310(b)(2)(iv) of 
Regulation S-B regarding a significant disposition or purchase 
business combination;
    Instruction to Item 11(d).
    You may incorporate by reference into the effective registration 
statement the information required by paragraph (d) of Item 11. If 
you incorporate it, you must deliver it together with the 
prospectus.
    (e) Material changes. Describe any material changes in your 
affairs which occurred since the end of the latest fiscal year 
covered by the annual report and which were not described in an 
Exchange Act Report that was delivered with the prospectus.
    Instructions to Item 11.
    1. You must deliver the information required by this Item with 
the first preliminary prospectus you deliver. You do not need to 
redeliver those documents with any later prospectus sent to the same 
person.
    2. Any reports the registrant delivers together with the 
prospectus pursuant to this Item must be delivered without charge to 
the investor.

Item 12. Incorporation of Certain Information by Reference for Seasoned 
Form SB-2 Companies

    If you provide information pursuant to Item 11 of this Form:
    (a) You must incorporate by reference into the prospectus that 
is part of the effective registration statement:
    (1) Your latest annual report filed in accordance with Section 
13(a) or 15(d) of the Exchange Act that contains audited financial 
statements; and
    Note to Item 12(a)(1).
    Canadian small business issuers: You may not satisfy this 
obligation by incorporating an annual report on Form 40-F.
    (2) All other reports you filed pursuant to Section 13(a) or 
15(d) of the Exchange Act since the end of the fiscal year covered 
by the annual report incorporated in this Form;
    Instructions to Item 12(a).
    1. List in the prospectus that is part of the effective 
registration statement all documents filed prior to effectiveness 
that are incorporated by reference.
    2. You should read Rule 439 regarding consent to the use of 
material incorporated by reference.
    (b) You must provide the following undertakings in the 
prospectus:
    (1) that you will provide to each person, including any 
beneficial owner, to whom a prospectus is delivered, a copy of any 
information that has been incorporated by reference in the 
prospectus but not delivered with the prospectus;
    (2) that you will provide this information upon written or oral 
request;
    (3) that you will provide this information at no cost to the 
requester;
    (4) that you will send a copy of information incorporated by 
reference into the prospectus but not delivered with it within one 
business day of any request for that information;
    (5) that you will send these incorporated documents in a manner 
that should result in delivery within three business days; and
    (6) the name, address and telephone number to which the request 
for this information must be made is: [fill in information].
    Notes to Item 12(b).

[[Page 67308]]

    1. The undertaking covers all documents incorporated by 
reference through the date of responding to the request.
    2. If you send any of the information that is incorporated by 
reference in the prospectus to security holders, you must also send 
any exhibits that are specifically incorporated by reference in that 
information.
    (c) In the prospectus you must:
    (1) identify the reports and other information that you file 
with the Commission;
    (2) state that the public:
    (i) may read and copy materials you file with the Commission at 
the Commission's Public Reference Room at 450 Fifth Street, N.W., 
Washington, D.C. 20549; and
    (ii) may obtain information on the operation of the Public 
Reference Room by calling the Commission at 1-800-SEC-0330; and
    (3) if you are an electronic filer, state that the Commission 
maintains an Internet web site that contains reports, proxy and 
information statements, and other information regarding issuers that 
file electronically with the Commission and state the address of 
that site (http://www.sec.gov). You are encouraged to give your 
Internet web site address, if available.

Item 13. Information Required for all Other Small Business Issuer 
Registrants

    If you do not provide information in accordance with Item 10 or 
Items 11 and 12, you must provide the following information:
    (a) Description of Business. Item 101 of Regulation S-B;
    (b) Description of Property. Item 102 of Regulation S-B;
    (c) Legal Proceedings. Item 103 of Regulation S-B;
    (d) Market for Common Stock and Related Stockholder Matters. 
Item 201 of Regulation S-B;
    (e) Financial Statements. Item 310 of Regulation S-B;
    (f) Changes in and Disagreements with Accountants on Accounting 
and Financial Disclosure. Item 304 of Regulation S-B;
    (g) Management's Discussion and Analysis or Plan of Operation. 
Item 303 of Regulation S-B;
    (h) Directors, Executive Officers, Promoters and Control 
Persons. Item 401 of Regulation S-B;
    (i) Executive Compensation. Item 402 of Regulation S-B;
    (j) Security Ownership of Certain Beneficial Owners and 
Management. Item 403 of Regulation S-B; and
    (k) Certain Relationships and Related Transactions. Item 404 of 
Regulation S-B.
* * * * *
    Signatures
    The registrant hereby certifies that it meets all of the 
requirements for filing on Form SB-2. The registrant also certifies 
that it has duly caused and authorized the undersigned to sign this 
registration statement on its behalf. The undersigned certifies that 
he/she has read this registration statement and to his/her knowledge 
the registration statement does not contain an untrue statement of a 
material fact or omit to state a material fact required to be stated 
therein or necessary to make the statements therein not misleading.

(Registrant)-----------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    The following persons certify that they have read this 
registration statement and to their knowledge the registration 
statement does not contain an untrue statement of a material fact or 
omit to state a material fact required to be stated therein or 
necessary to make the statements therein not misleading. The 
following persons also certify that they are signing below on behalf 
of the registrant and in the capacities and on the dates indicated.

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    Signature Instructions.
    1. The following persons, or persons performing similar 
functions, must sign the registration statement:
    (a) the small business issuer;
    (b) its principal executive officer or officers;
    (c) its principal financial officer;
    (d) its controller or principal accounting officer; and
    (e) at least the majority of its board of directors.
    2. Where the small business issuer is a foreign issuer, its 
authorized representative in the United States also must sign the 
registration statement.
    3. Where the small business issuer is a limited partnership, its 
general partner must sign. Where the general partner is a 
corporation, the majority of the board of directors of the corporate 
general partner must sign the registration statement.
    4. Type or print the name and title of each person who signs the 
registration statement beneath the person's signature. Any person 
who occupies more than one of the specified positions must indicate 
each capacity in which that person signs the registration statement. 
See Securities Act Rule 402 concerning manual signatures and Item 
601 of Regulation S-B concerning signatures pursuant to powers of 
attorney.

    95. By revising Sec. 239.11 and adding Form SB-3 to read as 
follows:


Sec. 239.11  Form SB-3, for registration under the Securities Act of 
1933 of securities issued by small business issuers in business 
combination transactions.

    Small business issuers must use this Form for registration under 
the Securities Act of 1933 (15 U.S.C. 77a et seq.) of offerings of 
securities:
    (a) In a transaction of the type specified in paragraph (a) 
Sec. 230.145 of this chapter;
    (b) In a merger in which the applicable law would not require the 
solicitation of the votes or consents of all of the security holders of 
the company being acquired;
    (c) In an exchange offer for securities of the issuer or another 
entity;
    (d) In a public reoffering or resale of any securities acquired 
pursuant to this registration statement; or
    (e) In more than one of the kinds of transactions listed in 
paragraphs (a) through (d) of this section registered on one 
registration statement.

    Note: The text of Form SB-3 will not appear in the Code of 
Federal Regulations.

U.S. Securities and Exchange Commission, Washington, D.C. 20549

Form SB-3--Registration Statement Under the Securities Act of 1933

----------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)

----------------------------------------------------------------------
(Translation of Registrant's name into English, if applicable)

----------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)

----------------------------------------------------------------------
(I.R.S. Employer Identification Number)

----------------------------------------------------------------------
(Address and telephone number of Registrant's principal executive 
offices)

----------------------------------------------------------------------
(Name, address and telephone number of Registrant's agent for 
service)

----------------------------------------------------------------------
(Web Site Address, if any)

----------------------------------------------------------------------
(E-mail Address, if any)

    If you include the Securities Act Rule 473(a) delaying legend on 
this registration statement when you first file it, and you are 
relying on Securities Act Rule 456(b) to delay payment of the 
registration fee, check the following box. [  ]
    If you do not include the Rule 473(a) delaying legend on this 
registration statement when you first file it, or if you 
specifically state in a pre-effective amendment that this 
registration statement shall hereafter become effective in 
accordance with Section 8(a) of the Securities Act, check the 
following box. [  ]

    Note: If you check this box, you must pay the registration fee 
required by Section 6 of the Securities Act (unless previously paid) 
before the registration statement or pre-effective amendment will be 
considered filed.

    If you are filing this Form to register additional securities 
for an offering in accordance with Rule 462(e) under the Securities 
Act, check the following box and list the Securities Act 
registration number of the earlier effective registration statement 
for the same offering. [  ] __________
    If you are using this Form to register concurrently under 
Section 12(b) or 12(g) of the Exchange Act any class of securities 
that are the subject of the offering you are registering under the 
Securities Act, check the appropriate box and provide the 
information indicated below:

[  ] Securities being registered pursuant to Exchange Act Section 
12(b):
Title of each class:

[[Page 67309]]

----------------------------------------------------------------------

----------------------------------------------------------------------

Name of exchange on which listed:
----------------------------------------------------------------------

----------------------------------------------------------------------

[  ] Securities being registered pursuant to Exchange Act Section 
12(g):
Title of each class:
----------------------------------------------------------------------

----------------------------------------------------------------------

Name of market on which quoted:
----------------------------------------------------------------------

----------------------------------------------------------------------


                                         Calculation of Registration Fee
----------------------------------------------------------------------------------------------------------------
                                                                            Proposed     Proposed
                                                              Amount to     maximum      maximum      Amount of
     Title of each class of securities to be registered           be        offering    aggregate   registration
                                                              registered   price per     offering        fee
                                                                              unit        price
----------------------------------------------------------------------------------------------------------------
 
 
 
 
 
----------------------------------------------------------------------------------------------------------------
Notes to the Fee Table:
1. Set forth any explanatory details relating to the fee table in footnotes to the table.
2. If the basis for calculating the fee is not evident from the information presented in this table, refer to
  the applicable provisions of Securities Act Rule 457 in a footnote.
3. If the fee is calculated under Rule 457(o), the ``Amount to be registered'' and the ``Proposed maximum
  offering price per unit'' need not appear in this table.
4. If any of the securities registered are not sold in connection with this offering, the registrant (or a
  qualifying wholly-owned subsidiary) may use the dollar amount of the fee paid with respect to the unsold
  securities to offset the total fee due on its subsequent registration statement. See Rule 457(p). When
  offsetting any part of the fee under Rule 457(p), the registrant must state the dollar amount being offset in
  a footnote to the fee table and must identify the file number of the registration statement and the amount and
  class of securities in connection with which the offsetting fee was previously paid. Use of Rule 457(p) to
  offset any fee automatically deregisters the securities in connection with which the fee was previously paid.

General Instructions

I. Rules as to Use of Form SB-3

    A. A ``small business issuer'' as defined in Securities Act Rule 
405 may use this Form to register an offering under the Securities 
Act of 1933 (``Securities Act'') that is:
    1. a transaction of the type specified in Securities Act Rule 
145(a);
    2. a merger in which the applicable law would not require the 
solicitation of the votes or consents of all of the security holders 
of the company being acquired;
    3. an exchange offer for securities of the issuer or another 
entity;
    4. a public reoffering or resale of any securities acquired 
pursuant to this registration statement; or
    5. more than one of the kinds of transactions listed in 
paragraphs 1. through 4. registered on one registration statement.
    B. You also may use this Form to register concurrently under 
Section 12(b) or 12(g) of the Securities Exchange Act of 1934 
(``Exchange Act''). You may register any class of securities that 
are the subject of the offering you are registering under the 
Securities Act. To register, you must check the appropriate box(es) 
on the cover page of this Form and identify which class(es) of 
securities it is registering under Section 12(b) or 12(g) of the 
Exchange Act.
    C. You may not use this Form if you are a registered investment 
company or a business development company as defined in Section 
2(a)(48) of the Investment Company Act of 1940.

II. Registrant Information

    Provide information about the registrant as follows:
    A. Transitional Small Business Issuer Registrants. A registrant 
may comply with either Item 10(b) or (c) of this Form, as 
applicable, if it meets the following requirements:
    1. it is a reporting company under the Exchange Act;
    2. it provided the disclosure required by Alternative 1 or 2 of 
``Information Required in Annual Report of Transitional Small 
Business Issuers'' in its most recent Form 10-KSB; and
    3. it is eligible to use Form SB-1.
    B. Seasoned Form SB-2 Registrants. If the registrant meets the 
requirements of General Instruction E.1. of Form SB-2, it must 
comply with:
    1. Items 11 and 12 of this Form; or
    2. Item 13 of this Form.
    C. All Other Small Business Issuer Registrants. All other small 
business issuer registrants, including transitional small business 
issuers that choose not to rely on Item 10, must comply with Item 13 
of this Form.

III. Information With Respect to the Company Being Acquired

    Provide information about the company being acquired (which 
includes any entity whose securities are to be exchanged for 
securities of the registrant) as follows:
    A. Transitional Small Business Issuers. If the company being 
acquired is a transitional small business issuer that meets the 
requirements of General Instruction II.A.1., it may provide the 
information required by either Item 14 or 16 of this Form.
    B. Seasoned Form SB-2 Companies. If the company being acquired 
meets the requirements of General Instruction E.1. of Form SB-2, 
provide the information required by:
    1. Item 15 of this Form; or
    2. Item 16 of this Form.
    C. All Other Small Business Issuers. For all other small 
business issuers being acquired, provide the information required by 
Item 16 of this Form.
    D. Form B Companies. If the company being acquired meets the 
requirements of General Instructions I.B. and I.C.1. of Form B, 
provide information in accordance with:
    1. Item 17 of this Form;
    2. Item 18 of this Form; or
    3. Item 19 of this Form.
    E. Seasoned Form A Companies. If the company being acquired 
meets the requirements of General Instruction II. of Form A, provide 
information in accordance with:
    1. Item 18 of this Form; or
    2. Item 19 of this Form.
    F. All Other Companies. For all other companies being acquired, 
provide information in accordance with Item 19 of this Form.

IV. Securities Act Rules and Regulations

    You should read the rules and regulations under the Securities 
Act (Part 230 of Title 17 of the Code of Federal Regulations), 
particularly Regulation C. That Regulation contains general 
requirements regarding the preparation and filing of registration 
statements.

V. Free Writing Prospectus Information

    A. You should read Securities Act Rule 166. That Rule permits a 
registrant to make offers prior to filing a Form SB-3 registration 
statement. If you use a prospectus in reliance on that Rule, you 
must file that prospectus when required to do so by Securities Act 
Rule 425.
    B. You should read Securities Act Rule 165. That Rule permits 
the use of ``free writing'' offering materials that do not meet the 
requirements of Section 10 of the Act. If you use a prospectus in 
reliance on Rule 165,

[[Page 67310]]

you must file it when required to do so by Securities Act Rule 425.

VI. U.S. and Foreign Companies Being Acquired

    A. As used in this Form, ``larger U.S. company being acquired'' 
includes all entities being acquired other than U.S. small business 
issuers, foreign governments and foreign private issuers.
    B. As used in this Form, ``larger foreign company being 
acquired'' includes only entities being acquired that are foreign 
private issuers. It does not include Canadian small business 
issuers.
    C. ``Foreign private issuer'' is defined in Rule 405 of 
Regulation C.
    D. ``Small business issuer being acquired'' includes only those 
entities being acquired that are small business issuers, as defined 
in Rule 405.

VII. Interaction With the Exchange Act

    A. If Regulation 14A or 14C under the Exchange Act applies to 
the transaction registered on this Form:
    1. the prospectus may be in the form of a proxy statement or 
information statement;
    2. the prospectus must contain the information required by this 
Form in lieu of that required by Schedule 14A or 14C; and
    3. material filed as a part of the registration statement shall 
be deemed filed also for purposes of Regulation 14A or 14C, as 
applicable.
    B. If neither Regulation 14A nor 14C applies to the transaction 
registered on this Form, any proxy or information statement material 
sent to security holders must be filed prior to use as a part of the 
effective registration statement.
    C. If you are registering an offering that is subject to Section 
13(e), 14(d) or 14(e) of the Exchange Act, the provisions of those 
sections and the rules and regulations thereunder shall apply to the 
transaction in addition to the provisions of this Form.

VIII. Business Combinations Effected on a Delayed Basis

    A. A registrant may use this Form to register a transaction that 
will be effected on a delayed basis under Securities Act Rule 
415(a)(1)(viii). In that event, it need only furnish information 
about the contemplated transaction and the company being acquired to 
the extent practicable as of the effective date of the registration 
statement. It must file a post-effective amendment to include the 
remaining required information about the transaction and the company 
being acquired in the registration statement.
    B. A registrant may use this Form to register a transaction that 
would qualify for an exemption from Section 5 of the Securities Act 
but for the proximity in time of other similar transactions. In that 
event, the registrant need only file a prospectus supplement to 
provide the required information about the transaction and the 
company being acquired.
    C. A registrant may register two or more classes of securities 
on this Form that it will offer on a delayed or continuous basis 
pursuant to Rule 415(a)(1)(viii).

IX. Roll-Up Transactions

    A. Roll-up transactions (as defined in Item 901(c) of Regulation 
S-K) may be registered on this Form. In that event, the small 
business issuer registrant must comply with the disclosure 
requirements of Subpart 900 of Regulation S-K. To the extent that 
the disclosure requirements of Subpart 900 are inconsistent with 
those in this Form, the requirements of Subpart 900 control.
    B. If the registrant registers a roll-up transaction on this 
Form, special prospectus delivery requirements apply. See Securities 
Act Rule 172(e).
    C. The proxy rules and Exchange Act Rule 14e-7 of the tender 
offer rules contain provisions specifically applicable to roll-up 
transactions. Those provisions apply whether or not the entities 
involved have registered securities pursuant to Section 12 of the 
Exchange Act.

X. Registration of Additional Securities

    A. Under certain circumstances, a small business issuer may 
increase the size of an offering after the effective date through 
filing a short-form registration statement under Securities Act Rule 
462(b) or Rule 462(e). That type of registration statement may 
include only the following:
    1. the facing page;
    2. a statement that the earlier registration statement, 
identified by file number, is incorporated by reference;
    3. any required opinions and consents;
    4. the signature page; and
    5. any price-related information omitted from the earlier 
registration statement in reliance on Securities Act Rule 430A, if 
the registrant so chooses.
    B. The information contained in a Rule 462(b) or Rule 462(e) 
registration statement is deemed to be a part of the earlier 
effective registration statement as of the date of effectiveness of 
the Rule 462(b) or Rule 462(e) registration statement.
    C. The registrant may incorporate by reference from the earlier 
registration statement any opinion or consent required in the Rule 
462(b) or Rule 462(e) registration statement if:
    1. the opinion or consent expressly allows that incorporation; 
and
    2. the opinion or consent also relates to the Rule 462(b) or 
Rule 462(e) registration statement.
    Note to General Instruction X.
    You should read Securities Act Rule 411(c) regarding 
incorporation by reference of exhibits and Securities Act Rule 
439(b) regarding incorporation by reference of consents.

XI. Concurrent Registration of Securities Under the Exchange Act

    A. Registration on this Form of a class of securities under 
Exchange Act Section 12(b) shall become effective upon the later of:
    1. receipt by the Commission of certification from the national 
securities exchange listed on the cover of this Form that the 
securities have been approved for listing; or
    2. effectiveness of this registration statement.
    B. Registration on this Form of a class of securities under 
Exchange Act Section 12(g) shall become effective automatically upon 
the earlier of (1) 60 days after the initial filing of this 
registration statement; or (2) the effectiveness of this 
registration statement.
    C. If the registrant is required to file an annual report under 
Exchange Act Section 15(d) for its last fiscal year, it must file 
that annual report within the time period specified in the 
appropriate annual report form even if the Exchange Act registration 
becomes effective before the annual report is due.
    D. The registrant must file at least one complete, signed copy 
of the registration statement with each exchange or market 
identified on the cover to this Form.

Part I--Information Required in the Prospectus

A. Information About the Transaction

Item 1. Front of Registration Statement and Front Cover of Prospectus

    Provide the information required by Item 501 of Regulation S-B.

Item 2. Inside Front and Outside Back Cover Pages of Prospectus

    (a) Provide the information required by Item 502 of Regulation 
S-B.
    (b) If you incorporate information by reference into the 
prospectus, state on the inside front cover page:
    (1) that the prospectus incorporates by reference important 
business and financial information about the company that is not 
delivered with it;
    (2) that this information is available without charge to any 
person, including any beneficial owner, upon written or oral 
request;
    (3) that you will send those incorporated documents in a manner 
that should result in delivery within three business days of the 
request;
    (4) the name, address and telephone number to which persons must 
make this request; and
    (5) that to obtain timely delivery, persons must request this 
information no later than ____ [specify date five business days 
before the date on which the final investment decision must be made. 
You must highlight this statement by print type or otherwise.
    Instruction to Item 2.
    1. The undertaking covers all documents incorporated by 
reference through the date of responding to the request.
    2. If you send any of the information that is incorporated by 
reference in the prospectus, you also must send any exhibits that 
are specifically incorporated by reference in that information.
    3. If information is incorporated by reference in any document 
you are sending to a security holder upon request, you also must 
send the information incorporated by reference.

Item 3. Prospectus Summary and Other Information

    In the forepart of the prospectus, provide a summary of the 
information contained in the prospectus as described in Item 503(a) 
of Regulation S-B and the following information:
    (a) Contact information. The name, complete mailing address and 
telephone

[[Page 67311]]

number of the principal executive offices of the registrant and the 
company being acquired;
    (b) Risk factors. The information required by Item 503(c) of 
Regulation S-B;
    (c) Ratio of earnings to fix charges. The information required 
by Item 503(d) of Regulation S-K;
    (d) Business conducted. A brief description of the general 
nature of the business conducted by the registrant and by the 
company being acquired;
    (e) Transaction being registered. A brief description of the 
transaction in which the securities being registered will be 
offered;
    (f) Selected financial data. The selected financial data 
required by Item 301 of Regulation S-K for larger U.S. companies 
being acquired and Item 8 of Form 20-F for larger foreign companies 
being acquired. To the extent this information is required to be 
presented in the prospectus pursuant to other Items of this Form, it 
need not be presented pursuant to this Item;
    (g) Pro forma selected financial data. If material, the 
information required by Item 310 of Regulation S-B for the 
registrant showing the pro forma effect of the transaction. To the 
extent the information is required to be presented in the prospectus 
pursuant to other Items of this Form, it need not be presented 
pursuant to this Item;
    (h) Pro forma information. In a table designed to facilitate 
comparison, historical and pro forma per share data of the 
registrant and historical and equivalent pro forma per share data of 
the company being acquired for the following items:
    (1) book value per share as of the dates financial data is 
presented;
    (2) cash dividends declared per share for the periods for which 
financial data is presented; and
    (3) income (loss) per share from continuing operations for the 
periods for which financial data is presented.
    Instructions to Item 3(g) and 3(h).
    1. For a business combination accounted for as a purchase, 
present the financial information required by paragraphs (g) and (h) 
only for the most recent fiscal year and interim period. For a 
business combination accounted for as a pooling, present the 
financial information required by paragraphs (g) and (h) (except for 
information with regard to book value) for the most recent two 
fiscal years and interim period. For purposes of these paragraphs, 
book value information need only be provided for the most recent 
balance sheet date.
    2. Provide the per share data of the registrant and the company 
being acquired as of the dates that, or for the periods for which, 
financial data is presented pursuant to the applicable requirements 
of:
    (a) Item 310 of Regulation S-B for small business issuer 
registrants and companies being acquired that are small business 
issuers;
    (b) Item 301 of Regulation S-K for larger U.S. companies being 
acquired; and
    (c) Item 8 of Form 20-F for larger foreign companies being 
acquired;
    3. Calculate the equivalent pro forma per share amounts for one 
share of the company being acquired by multiplying the exchange 
ratio times each of:
    (a) the pro forma income (loss) per share before non-recurring 
charges or credits directly attributable to the transaction;
    (b) the pro forma book value per share; and
    (c) the pro forma dividends per share of the registrant.
    4. Larger foreign companies: Instruction 7 to Item 8 of Form 20-
F is applicable to the financial information presented hereunder to 
the extent that this Form requires reconciliation of financial 
statements of foreign private issuers to U.S. GAAP and Regulation S-
X.
    (i) Market value of securities. In a table designed to 
facilitate comparison, the market value of securities of the company 
being acquired (on a historical and equivalent per share basis) and 
the market value of the securities of the registrant (on an 
historical basis) as of the day before the date the public 
announcement of the proposed transaction. If no such public 
announcement was made, as of the day before the date the agreement 
with respect to the transaction was entered into;
    (j) Affiliates' voting shares. With respect to the registrant 
and the company being acquired, a brief statement comparing the 
percentage of outstanding shares entitled to vote held by directors, 
executive officers and their affiliates. State the vote required for 
approval of the proposed transaction;
    (k) Regulatory approval. A statement as to whether any 
regulatory requirements must be complied with or approval must be 
obtained in connection with the transaction, and if so, the status 
of such compliance or approval;
    (l) Dissenters' rights. A statement about whether or not 
dissenters' rights of appraisal exist, including a cross-reference 
to the information provided pursuant to Item 20 or 21 of this Form; 
and
    (m) Tax consequences. A brief statement about the tax 
consequences of the transaction or, if appropriate, a cross-
reference to the information provided pursuant to Item 4 of this 
Form.

Item 4. Terms of the Transaction

    (a) Provide a summary of the material features of the proposed 
transaction. The summary shall include, where applicable:
    (1) the information required by paragraphs (a)(1) and (a)(2) of 
Regulation M-A (Sec. 229.1004(a)(1) and (a)(2) of this chapter) and
    (2) where not organized in the same country, a discussion of any 
material differences in the corporate laws applicable to the company 
being acquired and to the surviving entity. The discussion should 
include, but not necessarily be limited to: corporate governance, 
board structure, quorums, class action suits, shareholder derivative 
suits, rights to inspect corporate books and records, rights to 
inspect the shareholder list and rights of directors and officers to 
obtain indemnification from the company.
    (b) If a report, opinion or appraisal materially relating to the 
transaction has been received from an outside party and such report, 
opinion or appraisal is referred to in the prospectus, provide the 
information called for by Item 1015(b) of Regulation M-A 
(Sec. 229.1015(b) of this chapter).
    (c) Incorporate the acquisition agreement by reference into the 
prospectus.

Item 5. Pro Forma Financial Information

    Provide the financial information required by Item 310(d) of 
Regulation S-B with respect to this transaction.
    Instructions.
    1. Present any Item 310(d) information required by the other 
Items of this Form (where not incorporated by reference) together 
with the information provided under this Item. In presenting this 
information, you must clearly distinguish between this transaction 
and any other one.
    2. You need only show the pro forma effect that the registered 
transaction has on any pro forma financial information that:
    (i) is incorporated by reference; and
    (ii) reflects all prior transactions.

Item 6. Material Contacts With the Company Being Acquired

    Provide the information required by Items 1005(b) and 1011(a) of 
Regulation M-A (Sec. 229.1005(b) and Sec. 229.1011(a) of this 
chapter) for the registrant or its affiliates and the company being 
acquired or its affiliates. The information provided only need cover 
the periods for which financial statements are presented or 
incorporated by reference into this Form.

Item 7. Additional Information Required for Reoffering by Persons 
Deemed To Be Underwriters

    If any person who is deemed to be an underwriter of the 
securities is reoffering any of the securities to the public, 
provide the following information in the prospectus prior to its use 
for the reoffer:
    (a) The information required by Item 507 of Regulation S-B;
    (b) Information with respect to the consummation of the 
transaction in which the securities were acquired; and
    (c) A description of any material change in the registrant's 
affairs that occurred after the transaction in which the securities 
were acquired.
    Note to Item 7.
    You should read Item 512(g) of Regulation S-K regarding 
undertakings required in reoffering registration statements.

Item 8. Interests of Named Experts and Counsel

    Provide the information required by Item 509 of Regulation S-B.

Item 9. Disclosure of Commission Position on Indemnification for 
Securities Act Liabilities

    Provide the information required by Item 510 of Regulation S-B.

B. Information About the Registrant

Item 10. Information Required for Transitional Small Business Issuers

    (a) The registrant may rely upon either paragraph (b) or (c), as 
applicable, of this Item (instead of Item 13), if it meets all of 
the following requirements:
    (1) it is a reporting company under the Exchange Act;
    (2) it relied upon Alternative 1 or 2 of ``Information Required 
in Annual Report of Transitional Small Business Issuers'' in its 
most recent Form 10-KSB; and
    (3) it is eligible to use Form SB-1.
    (b) A registrant that meets the requirements of paragraph (a) of 
this Item and relied upon

[[Page 67312]]

Alternative 1 in its most recent Form 10-KSB may provide the 
information required by:
    (1) Offering Circular Model A of Form 1-A. Questions 3, 4, 11, 
43 and 47-50;
    (2) Market for Common Equity and Related Stockholder Matters. If 
common equity securities are being issued, Item 201 of Regulation S-
B;
    (3) Changes in and Disagreements with Accountants on Accounting 
and Financial Disclosure. Item 304 of Regulation S-B; and
    (4) Financial Statements. Item 310 of Regulation S-B.
    (c) A registrant that meets the requirements of paragraph (a) of 
this Item and relied upon Alternative 2 in its most recent Form 10-
KSB may provide the information required by:
    (1) Offering Circular Model B of Form 1-A. Items 6 and 7;
    (2) Legal Proceedings. Item 103 of Regulation S-B;
    (3) Market for Common Equity and Related Stockholder Matters. If 
the registrant is issuing common equity securities, Item 201 of 
Regulation S-B;
    (4) Changes in and Disagreements with Accountants on Accounting 
and Financial Disclosure. Item 304 of Regulation S-B; and
    (5) Financial Statements. Item 310 of Regulation S-B.

Item 11. Information Required for Seasoned Form SB-2 Companies

    If you meet the requirements of General Instruction E.1. of Form 
SB-2 and elect to comply with this Item and Item 12 (instead of Item 
13), you must:
    (a) Annual Report. Deliver together with the prospectus a copy 
of your latest annual report filed pursuant to Section 13(a) or 
15(d) of the Exchange Act;
    (b) Canadian Annual Report. If you are a Canadian small business 
issuer and you incorporate an annual report on Form 20-F that 
includes financial statements prepared and presented pursuant to 
Item 17 of Form 20-F, include in the prospectus financial statements 
prepared and presented pursuant to Item 18 of Form 20-F.
    Notes to Item 11(a) and (b).
    1. You must state in the prospectus that it is accompanied by 
that annual report.
    2. Canadian small business issuers: You may not satisfy the 
requirement to deliver an annual report with an annual report on 
Form 40-F.
    3. Canadian small business issuers: You do not need to include 
financial statements that comply with Item 18 of Form 20-F if the 
only securities offered are those listed in paragraphs (a) through 
(c) of Note 2 of Item 310 of Regulation S-B.
    (c) Quarterly Information. Provide the information required by 
Part I of Form 10-QSB for the most recent fiscal quarter following 
the fiscal year covered by the annual report delivered pursuant to 
this Item. You must either:
    (1) include that information in the prospectus; or
    (2) deliver together with the prospectus a copy of your latest 
Form 10-QSB;
    Notes to Item 11(c):
    1. If your Form 10-QSB for the most recent quarter is not due to 
be filed before effectiveness of the registration statement, you may 
provide the information for the previous fiscal quarter to satisfy 
Item 11(c). For this purpose, the due date is calculated without 
reference to the extension provided by Exchange Act Rule 12b-25.
    2. If you deliver your latest Form 10-QSB, you must state in the 
prospectus that it is accompanied by that report.
    (d) Financial statements and information. If not included in 
your latest annual report delivered to investors pursuant to this 
Item, provide:
    (1) financial statements and information required by Items 
310(c)-(e) of Regulation S-B;
    (2) restated financial statements prepared in accordance with or 
reconciled to U.S. GAAP where:
    (i) after the end of its most recent fiscal year, the registrant 
consummated one or more business combinations accounted for by the 
pooling of interests method of accounting; and
    (ii) the acquired businesses, considered in the aggregate, are 
significant pursuant to Item 310(c) of Regulation S-B;
    (3) restated financial statements prepared in accordance with or 
reconciled to U.S. GAAP, if a change in accounting principles or 
correction of an error required a material retroactive restatement 
of financial statements;
    (4) disclosure required by Item 310(b)(2)(v) of Regulation S-B 
regarding any material accounting change; or
    (5) financial information required by Item 310(b)(2)(iv) of 
Regulation S-B regarding a significant disposition or purchase 
business combination.
    Instruction to Item 11(d).
    You may incorporate by reference into the effective registration 
statement the information required by paragraph (d) of Item 11. If 
you incorporate it, you must deliver it together with the 
prospectus.
    (e) Material Changes. Describe any material changes in your 
affairs that occurred since the end of the latest fiscal year 
covered by the annual report and were not described in an Exchange 
Act report that was delivered with the prospectus.
    Instructions to Item 11:
    1. You must deliver the information required by this Item with 
the first preliminary prospectus you deliver. You do not need to 
redeliver those documents with any later prospectus sent to the same 
person.
    2. Any reports the registrant delivers together with the 
prospectus pursuant to this Item must be delivered without charge to 
the investor.

Item 12. Incorporation of Certain Information by Reference for Seasoned 
Form SB-2 Companies

    If you provide information pursuant to Item 11 of this Form:
    (a) You must incorporate by reference into the prospectus that 
is part of the effective registration statement:
    (1) Your latest annual report filed in accordance with Section 
13(a) or 15(d) of the Exchange Act that contains audited financial 
statements; and
    Note to Item 12(a)(1).
    Canadian small business issuers: you may not satisfy this 
obligation by incorporating an annual report on Form 40-F.
    (2) All other reports you filed pursuant to Section 13(a) or 
15(d) of the Exchange Act since the end of the fiscal year covered 
by the annual report incorporated in this Form.
    Instructions to Item 12(a).
    1. List in the prospectus that is part of the effective 
registration statement all documents filed prior to effectiveness 
that are incorporated by reference.
    2. You should read Securities Act Rule 439 regarding consent to 
the use of material incorporated by reference.
    (b) In the prospectus you must:
    (1) identify the reports and other information that you file 
with the Commission;
    (2) state that the public:
    (i) may read and copy materials you file with the Commission at 
the Commission's Public Reference Room at 450 Fifth Street, N.W., 
Washington, D.C. 20549; and
    (ii) may obtain information on the operation of the Public 
Reference Room by calling the Commission at 1-800-SEC-0330; and
    (3) if you are an electronic filer, state that the Commission 
maintains an Internet web site that contains reports, proxy and 
information statements, and other information regarding issuers that 
file electronically with the Commission and state the address of 
that site (http://www.sec.gov). You are encouraged to give your 
Internet web site address, if available.

Item 13. Information Required for all Other Small Business Issuer 
Registrants

    If you do not provide information in accordance with Item 10 or 
Items 11 and 12, you must provide the following information:
    (a) Description of Business. Item 101 of Regulation S-B;
    (b) Description of Property. Item 102 of Regulation S-B;
    (c) Legal Proceedings. Item 103 of Regulation S-B;
    (d) Market for Common Stock and Related Stockholder Matters. 
Item 201 of Regulation S-B;
    (e) Financial Statements. Item 310 of Regulation S-B;
    (f) Changes In and Disagreements With Accountants on Accounting 
and Financial Disclosure. Item 304 of Regulation S-B;
    (g) Management's Discussion and Analysis or Plan of Operations. 
Item 303 of Regulation S-B;
    (h) Directors, Executive Officers, Promoters and Control 
Persons. Item 401 of Regulation S-B;
    (i) Executive Compensation. Item 402 of Regulation S-B;
    (j) Security Ownership of Certain Beneficial Owners and 
Management. Item 403 of Regulation S-B; and
    (k) Certain Relationships and Related Transactions. Item 404 of 
Regulation S-B.

C. Information About the Company Being Acquried

Item 14. Information Required for Companies That Are Transitional Small 
Business Issuers

    (a) If the company being acquired meets the requirements to use 
Item 10(b) of this Form and compliance with this Item is elected, 
provide the information required by

[[Page 67313]]

Item 10(b) as if the company being acquired were the registrant.
    (b) If the company being acquired meets the requirements to use 
Item 10(c) of this Form and compliance with this Item is elected, 
provide the information required by Item 10(c) as if the company 
being acquired were the registrant.

Item 15. Information Required for Seasoned SB-2 Issuers

    If the company being acquired meets the requirements of General 
Instruction E.1. of Form SB-2 and compliance with this Item is 
elected, provide the information required by Items 11 and 12 of this 
Form as if the company being acquired were the registrant.
    Instruction.
    Canadian small business issuers being acquired: Notwithstanding 
the requirements of Items 11 and 12, the financial statements of the 
company being acquired need only comply with the reconciliation 
requirements of Item 17 of Form 20-F.

Item 16. Information Required for all Other Small Business Issuers

    If the company being acquired does not meet the requirements of 
General Instruction E.1. of Form SB-2, or compliance with this Item 
is elected, provide the information required by Item 13 of this Form 
as if the company being acquired were the registrant, subject to the 
following:
    (a) Canadian small business issuers being acquired: 
Notwithstanding the requirements of Item 13 of this Form, the 
financial statements of the company being acquired need only comply 
with the reconciliation requirements of Item 17 of Form 20-F.
    (b) If the company being acquired is not subject to the 
reporting requirements of Exchange Act Section 13(a) or 15(d), or 
has not furnished an annual report to its security holders under 
Rule 14a-3 or Rule 14c-3 for the latest fiscal year because of 
Exchange Act Section 12(i), furnish the financial statements that 
would be required in an annual report sent to security holders under 
Rules 14a-3(b)(1) and (b)(2) if one was required.
    Instructions to paragraph (b).
    1. If the registrant's security holders will not be voting on 
the transaction, financial statements for the two fiscal years 
before the latest fiscal year need be provided only to the extent 
that security holders of the company being acquired were previously 
furnished with financial statements (prepared in conformity with 
GAAP) for those periods.
    2. The financial statements required by this paragraph for the 
latest fiscal year need be audited only to the extent practicable. 
The financial statements for the fiscal years before the latest 
fiscal year need not be audited if they were not previously audited.
    3. If the financial statements required by this paragraph 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.
    (c) Notwithstanding paragraph (b) of this Item, the financial 
statements of the company being acquired must be audited for the 
fiscal years required by Item 310 of Regulation S-B if this 
registration statement is used for resales by any person deemed to 
be an underwriter within the meaning of Rule 145(c).
    (d) If the company being acquired is not subject to the 
reporting requirements of Exchange Act Section 13(a) or 15(d), 
provide the information required by Part I of Form 10-QSB for the 
most recent quarter for which a quarterly report would be due as if 
the company being acquired were subject to those reporting 
requirements.

Item 17. Information Required for Form B Companies

    If the company being acquired meets the requirements of General 
Instructions I.B. and I.C.1. of Form B and compliance with this Item 
is elected, provide the information required by Items 10 and 11 of 
Form C as if the company being acquired were the registrant on Form 
C.
    Instruction.
    Larger foreign companies being acquired: Notwithstanding the 
requirements of Items 10 and 11 of Form C, the financial statements 
of the company being acquired need only comply with the 
reconciliation requirements of Item 17 of Form 20-F.

Item 18. Information Required for Seasoned Form A Companies

    If the company being acquired meets the requirements of General 
Instruction II. of Form A and compliance with this Item is elected, 
provide the information required by Items 12 and 13 of Form C as if 
the company being acquired were the registrant on Form C.
    Instruction.
    Foreign companies being acquired: Notwithstanding the 
requirements of Items 12 and 13 of Form C, the financial statements 
of the company being acquired need only comply with the 
reconciliation requirements of Item 17 of Form 20-F.

Item 19. Information Required for All Other Companies

    If the company being acquired does not meet the requirements of 
General Instructions I.B. and I.C.1. of Form B or General 
Instruction II. of Form A, or compliance with this Item is elected, 
provide the information required by Item 14 of Form C as if the 
company being acquired were the registrant on Form C, subject to the 
following:
    (a) Only those schedules required by Rules 12-15, 28 and 29 of 
Regulation S-X need be provided with respect to the company being 
acquired.
    (b) Notwithstanding the requirements of Item 14 of Form C, the 
financial statements of any foreign company being acquired need only 
comply with the reconciliation requirements of Item 17 of Form 20-F.
    (c) If the company being acquired is not subject to the 
reporting requirements of Exchange Act Section 13(a) or 15(d), or 
has not furnished an annual report to its security holders under 
Rule 14a-3 or Rule 14c-3 for the latest fiscal year because of 
Exchange Act Section 12(i), furnish the financial statements that 
would be required in an annual report sent to security holders under 
Rules 14a-3(b)(1) and (b)(2) if one was required.
    Instructions to paragraph (c).
    1. If the registrant's security holders will not be voting on 
the transaction, financial statements for the two fiscal years 
before the latest fiscal year need be provided only to the extent 
that security holders of the company being acquired were previously 
furnished with financial statements (prepared in conformity with 
GAAP) for those periods.
    2. The financial statements required by this paragraph for the 
latest fiscal year need be audited only to the extent practicable. 
The financial statements for the fiscal years before the latest 
fiscal year need not be audited if they were not previously audited.
    3. If the financial statements required by this paragraph 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.
    (d) Notwithstanding paragraph (c) of this Item, the financial 
statements of the company being acquired must be audited for the 
fiscal years required by paragraph (b)(2) of Rule 3-05 of Regulation 
S-X if this registration statement is used for resales by any person 
deemed to be an underwriter within the meaning of Rule 145(c).
    (e) If the company being acquired is not subject to the 
reporting requirements of Exchange Act Section 13(a) or 15(d), 
provide the information required by Part I of Form 10-Q or 10-QSB 
for the most recent quarter for which a quarterly report would be 
due as if the company being acquired were subject to those reporting 
requirements.

D. Voting and Management Information

Item 20. Information if Proxies, Consents or Authorizations Will Be 
Solicited

    (a) If either the registrant or the company being acquired is 
soliciting proxies, consents or authorizations, provide the 
following information:
    (1) Date, Time and Place Information. Item 1 of Schedule 14A;
    (2) Revocability of Proxy. Item 2 of Schedule 14A;
    (3) Dissenters' Rights of Appraisal. Item 3 of Schedule 14A;
    (4) Persons Making the Solicitation. Item 4 of Schedule 14A;
    (5) Persons with a Substantial Interest in the Matter. Item 5 of 
Schedule 14A, with respect to both the registrant and the company 
being acquired;
    (6) Voting Securities and Principal Holders. Item 6 of Schedule 
14A, with

[[Page 67314]]

respect to both the registrant and the company being acquired;
    Instruction to Item 20(a)(6).
    The following registrants and companies being acquired may 
provide the information required below instead of the information 
required by Item 6(d) of Schedule 14A:
    1. Transitional small business issuers that rely upon Item 10(b) 
(if a registrant) or 14(a) (if an acquiree) of this Form: the 
information required by Questions 37 and 38 of Offering Circular 
Model A of Form 1-A;
    2. Transitional small business issuers that rely upon Item 10(c) 
(if a registrant) or 14(b) (if an acquiree) of this Form: the 
information required by Item 10 of Offering Circular Model B of Form 
1-A;
    3. All other small business issuers, whether registrants or 
acquirees: the information required by Item 403 of Regulation S-B; 
and
    4. Larger foreign companies being acquired: the information 
specified in Item 4 of Form 20-F.
    (7) Vote Required for Approval. Item 21 of Schedule 14A; and
    (8) Directors and Executive Officers. For the following 
companies, with respect to each person who will serve as a director 
or an executive officer of the registrant:
    (i) Transitional Small Business Issuers:
    (A) Questions 29-36 and 39-42 of Offering Circular Model A of 
Form 1-A, if the registrant or acquiree relied upon Item 10(b) or 
14(a), respectively; or
    (B) Items 8, 9 and 11 of Offering Circular Model B of Form 1-A, 
if the registrant or acquiree relied upon Item 10(c) or 14(b), 
respectively;
    (ii) All other Small Business Issuers: Items 401, 402 and 404 of 
Regulation S-B;
    (iii) Larger U.S. companies being acquired: Items 401, 402 and 
404 of Regulation S-K; and
    (iv) Larger foreign companies being acquired: Items 10, 11, 12 
and 13 of Form 20-F.
    (b) If the registrant or the company being acquired meets the 
requirements of General Instruction E.1. of Form SB-2, General 
Instructions I.B. and I.C.1. of Form B or General Instruction II. of 
Form A, any information required by paragraphs (a)(6) or (a)(8) of 
this Item with respect to it may be incorporated by reference from 
its latest annual report.

Item 21. Information if Proxies, Consents or Authorizations Will Not Be 
Solicited or in an Exchange Offer

    (a) If proxies, consents or authorizations will not be solicited 
in connection with the transaction or in an exchange offer, provide 
the following information:
    (1) Statement that Proxies Are Not To Be Solicited. Item 2 of 
Schedule 14C;
    (2) Date, Time and Place Information. The date, time and place 
of the meeting of security holders, unless such information is 
otherwise disclosed in material furnished to security holders with 
or preceding the prospectus;
    (3) Dissenters' Rights of Appraisal. Item 3 of Schedule 14A;
    (4) Affiliates' Interests in the Transaction. A brief 
description of any direct or indirect material interest of 
affiliates of the registrant and of the company being acquired in 
the proposed transaction;
    Instruction to Item 21(a)(4).
    You need not describe any interest arising from the ownership of 
securities where the affiliate receives no benefit not shared on a 
pro rata basis by all other holders of the same class.
    (5) Voting Securities and Principal Holders. Item 6 of Schedule 
14A, with respect to both the registrant and the company being 
acquired;
    Instruction to Item 21(a)(5).
    The following registrants and companies being acquired may 
provide the information required below instead of the information 
required by Item 6(d) of Schedule 14A:
    1. Transitional small business issuers that rely upon Item 10(b) 
(if a registrant) or 14(a) (if an acquiree) of this Form: the 
information required by Questions 37 and 38 of Offering Circular 
Model A of Form 1-A;
    2. Transitional small business issuers that rely upon Item 10(c) 
(if a registrant) or 14(b) (if an acquiree) of this Form: the 
information required by Item 10 of Offering Circular Model B of Form 
1-A;
    3. All other small business issuers, whether registrants or 
acquirees: the information required by Item 403 of Regulation S-B; 
and
    4. Larger foreign companies being acquired: the information 
specified in Item 4 of Form 20-F.
    (6) Vote Required for Approval. Item 21 of Schedule 14A; and
    (7) Directors and Executive Officers. With respect to each 
person who will serve as a director or an executive officer of the 
registrant, the information required by:
    (i) Transitional Small Business Issuers:
    (A) Questions 29-36 and 39-42 of Offering Circular Model A of 
Form 1-A, if the registrant or acquiree relied upon Item 10(b) or 
14(a) of this Form, respectively; or
    (B) Items 8, 9 and 11 of Offering Circular Model B of Form 1-A, 
if the registrant or acquiree relied upon Item 10(c) or 14(b) of 
this Form, respectively;
    (ii) All other Small Business Issuers: Items 401, 402 and 404 of 
Regulation S-B;
    (iii) Larger U.S. companies being acquired: Items 401, 402 and 
404 of Regulation S-K; and
    (iv) Larger foreign companies being acquired: Items 10, 11, 12 
and 13 of Form 20-F.
    Instruction to Item 21(a).
    If proxies, consents or authorizations will not be solicited in 
connection with the transaction because the transaction is an 
exchange offer, you need not provide the information required by 
paragraphs (a)(1), (a)(2) and (a)(3).
    (b) If the registrant or the company being acquired meets the 
requirements of General Instruction E.1. of Form SB-2, General 
Instruction I.B. and I.C.1. of Form B or General Instruction II. of 
Form A, any information required by paragraphs (a)(5) and (a)(7) of 
this Item with respect to it may be incorporated by reference from 
its latest annual report.

Part II--Information Not Required in the Prospectus

Item 22. Indemnification of Directors and Officers

    Provide the information required by Item 702 of Regulation S-B.

Item 23. Exhibits and Financial Statement Schedules .

    (a) Transitional small business issuer registrants must provide 
the exhibits required by Part II of Form SB-1. All other small 
business issuer registrants must provide the exhibits required by 
Item 601 of Regulation S-B.
    Instruction to Item 23(a).
    For the following companies being acquired, provide the exhibits 
required below:
    (1) Transitional small business issuer being acquired: Item 2(6) 
of Part III--Exhibits of Form 1-A;
    (2) Any other small business issuer being acquired: Item 
601(b)(10) of Regulation S-B;
    (3) Larger U.S. company being acquired: Item 601(b)(10) of 
Regulation S-K; or (4) Larger foreign company being acquired: Item 
601(b)(10) of Regulation S-K.
    (b) Provide the financial statement schedules required by 
Regulation S-X and Item 19 of this Form. List each schedule 
according to the number assigned to it in Regulation S-X.
    (c) If information is provided pursuant to Item 4(b) of this 
Form, provide the report, opinion or appraisal as an exhibit to this 
Form, unless it is included in the prospectus.

Item 24. Undertakings

    (a) Set forth in the effective registration statement the 
undertakings required by Item 512 of Regulation S-B.
    (b) Set forth the following undertaking if the registrant is 
using this Form for a transaction to be effected on a delayed basis:
    [Name of registrant] will file a post-effective amendment 
containing all required information concerning a transaction and the 
company being acquired that was not included in the registration 
statement when it became effective because it was not practicable to 
do so.

Signatures

    The registrant hereby certifies that it meets all of the 
requirements for filing on Form SB-3. The registrant also certifies 
that it has duly caused and authorized the undersigned to sign this 
registration statement on its behalf. The undersigned certifies that 
he/she has read this registration statement and to his/her knowledge 
the registration statement does not contain an untrue statement of a 
material fact or omit to state a material fact required to be stated 
therein or necessary to make the statements therein not misleading.

(Registrant)-----------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    The following persons certify that they have read this 
registration statement and to their knowledge the registration 
statement does not contain an untrue statement of a material fact or 
omit to state a material fact required to be stated therein or 
necessary to

[[Page 67315]]

make the statements therein not misleading. The following persons 
also certify that they are signing below on behalf of the registrant 
and in the capacities and on the dates indicated.

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    Signature Instructions.
    1. The following persons, or persons performing similar 
functions, must sign the registration statement:
    (a) the registrant;
    (b) its principal executive officer or officers;
    (c) its principal financial officer;
    (d) its controller or principal accounting officer; and
    (e) at least the majority of its board of directors.
    2. Where the registrant is a foreign issuer, its authorized 
representative in the United States also must sign the registration 
statement.
    3. Where the registrant is a limited partnership, its general 
partner must sign. Where the general partner is a corporation, the 
majority of the board of directors of the corporate general partner 
must sign the registration statement.
    4. Type or print the name and title of each person who signs the 
registration statement beneath the person's signature. Any person 
who occupies more than one of the specified positions must indicate 
each capacity in which that person signs the registration statement. 
See Securities Act Rule 402 concerning manual signatures and Item 
601 of Regulation S-K concerning signatures pursuant to powers of 
attorney.
    5. If the securities to be offered are those of an entity that 
is not yet in existence at the time the registration statement is 
filed, but which will be a party to a consolidation involving two or 
more existing entities, then each existing entity will be deemed a 
registrant and must be so designated on the cover page of the Form. 
In that case, each existing entity (and the applicable persons noted 
in Signature Instructions 1.-3.) must sign the registration 
statement as if it were the registrant.

    96. By amending Form S-8 (referenced in Sec. 239.16b) by adding 
four lines immediately preceding the heading ``Calculation of 
Registration Fee''; Note 3 immediately preceding the General 
Instructions; by removing General Instruction C.; by redesignating 
General Instructions D. through G. as General Instructions C. through 
F.; and by revising newly designated General Instruction D. to read as 
follows:

    Note: The text of Form S-8 does not and this amendment will not 
appear in the Code of Federal Regulations.

Form S-8--Registration Statement Under the Securities Act of 1933

* * * * *
Telephone number, including area code, of agent for service 
________________

----------------------------------------------------------------------
(Web Site Address, if any)

----------------------------------------------------------------------
(E-mail Address, if any)

Calculation of Registration Fee

* * * * *
    Note 3: If any of the securities registered are not sold in 
connection with this offering, the registrant (or a qualifying 
wholly-owned subsidiary) may use the dollar amount of the fee paid 
with respect to the unsold securities to offset the total fee due on 
its subsequent registration statement. See Securities Act Rule 
457(p). When offsetting any part of the fee under Rule 457(p), the 
registrant must state the dollar amount being offset in a footnote 
to the fee table and must identify the file number of the 
registration statement and the amount and class of securities in 
connection with which the offsetting fee was previously paid. Use of 
Rule 457(p) to offset any fee automatically deregisters the 
securities in connection with which the fee was previously paid.

General Instructions

* * * * *

D. Registration of Additional Securities

    An issuer may register additional securities of the same class 
of securities that have been previously registered on this form. The 
registration statement for the additional securities shall consist 
only of the following:
    (1) a facing page;
    (2) a statement that the contents of the earlier registration 
statement, identified by its file number, is incorporated by 
reference;
    (3) all required opinions;
    (4) all required consents;
    (5) any information required in the new registration statement 
that is not in the earlier registration statement; and
    (6) a signature page; A filing fee required by the Act and Rule 
457 of this chapter shall be paid with respect to the additional 
securities only.
* * * * *
    97. By amending Form F-7 (referenced in Sec. 239.37) to add four 
lines to the cover page of the registration statement, to add one check 
box to the cover page of the registration statement immediately before 
the Calculation of Registration Fee table, a paragraph to appear as the 
last paragraph on the cover page of the registration statement, 
paragraph K to General Instruction II, and General Instruction IV. and 
in Part II following the center heading to add the heading 
``Exhibits;'' to designate the introductory text as paragraph (a); to 
add a heading ``Undertakings;'' and to add paragraph (b) to read as 
follows:

    Note: The text of Form F-7 does not and this amendment will not 
appear in the Code of Federal Regulations.

U.S. Securities and Exchange Commission, Washington, D.C. 20549

Form F-7--Registration Statement Under the Securities Act of 1933

* * * * *
----------------------------------------------------------------------
(Name, address (including zip code) and telephone number (including 
area code) of agent for service in the United States

----------------------------------------------------------------------
(Web Site Address, if any)

----------------------------------------------------------------------
(E-mail Address, if any)
* * * * *
    If you are filing this Form to register additional securities 
for an offering in accordance with Securities Act Rule 462(b), check 
the following box and list the Securities Act registration number of 
the earlier effective registration statement for the same offering. 
[  ] ____________

Calculation of Registration Fee*

* * * * *
    If any of the securities registered are not sold in connection 
with this offering, the registrant (or a qualifying wholly-owned 
subsidiary) may use the dollar amount of the fee paid with respect 
to the unsold securities to offset the total fee due on its 
subsequent registration statement. See Securities Act Rule 457(p). 
When offsetting any part of the fee under Rule 457(p), the 
registrant must state the dollar amount being offset in a footnote 
to the fee table and must identify the file number of the 
registration statement and the amount and class of securities in 
connection with which the offsetting fee was previously paid. Use of 
Rule 457(p) to offset any fee automatically deregisters the 
securities in connection with which the fee was previously paid.

General Instructions

* * * * *

II. Application of General Rules and Regulations

* * * * *
    K. You should read Securities Act Rule 172. That rule describes 
prospectus delivery obligations applicable to offerings registered 
on this Form.
* * * * *

IV. Registration of Additional Securities

    A. Under certain circumstances, the registrant may increase the 
size of an offering after the effective date through filing a short-
form registration statement under Securities Act Rule 462(b). A Rule 
462(b) registration statement may include only the following:
    1. the facing page;
    2. a statement that the earlier registration statement, 
identified by file number, is incorporated by reference;
    3. any required opinions and consents;
    4. the signature page; and
    5. any price-related information omitted from the earlier 
registration statement in reliance on Securities Act Rule 430A, if 
the registrant so chooses.
    B. The information contained in a Rule 462(b) registration 
statement is deemed to be a part of the earlier effective 
registration statement as of the date of effectiveness of the Rule 
462(b) registration statement.
    C. The registrant may incorporate by reference from the earlier 
registration statement any opinion or consent required in the Rule 
462(b) registration statement if:

[[Page 67316]]

    1. the opinion or consent expressly allows that incorporation; 
and
    2. the opinion or consent also relates to the Rule 462(b) 
registration statement.
    Note to General Instruction IV.
    You should read Securities Act Rule 411(c) regarding 
incorporation by reference of exhibits and Securities Act Rule 
439(b) regarding incorporation by reference of consents.

Part II--Information Not Required to be Sent to Shareholders

Exhibits

    (a) * * *
* * * * *
Undertakings

    (b) Include the following undertaking.
    The registrant will file with the Commission, on or before the 
date of first use, all free writing materials used in connection 
with the securities registered on this registration statement after 
effectiveness and before the offering is completed.
* * * * *
    98. By amending Sec. 239.38 to revise paragraph (d)(4) and the 
heading ``Instructions''; to add Instruction 5 to the Instructions to 
paragraph (d); and to revise paragraph (h)(3) to read as follows:


Sec. 239.38  Form F-8, for registration under the Securities Act of 
1933 of securities of certain Canadian issuers to be issued in exchange 
offers or a business combination.

* * * * *
    (d) * * *
    (4) Public Float/ADTV.
    (i) Satisfies either of the following thresholds:
    (A) The market value of the public float of the registrant's 
outstanding equity shares is $75 million or more and the average 
trading volume value is $1 million or more; or
    (B) The market value of the public float of the registrant's 
outstanding equity shares is $250 million or more; and
    (ii) A registrant conducting its own exchange offer need not meet 
either of the thresholds in paragraph (d)(4)(i) of this section.

    Instructions to Paragraph (d).
* * * * *
    5. For the purposes of this Form, ``average daily trading 
volume'' shall mean the average daily trading volume the 
registrant's equity securities on Canadian markets during the three 
full calendar months or any 90 consecutive calendar days ending 
within 10 calendar days immediately preceding the filing of the 
registration statement.
* * * * *
    (h) * * *
    (3) Public Float/ADTV.
    (i) Except for the successor registrant, each company participating 
in the business combination satisfies either of the following 
thresholds:
    (A) The market value of the public float of the company's 
outstanding equity shares is $75 million or more and the average 
trading volume value is $1 million or more; or
    (B) The market value of the public float of the company's 
outstanding equity shares is $250 million or more; and
    (ii) Any company participating in the business combination need not 
meet either of the thresholds in paragraph (h)(3)(i) of this section if 
the assets and gross revenues from continuing operations of the other 
companies participating in the business combination comprise at least 
80 percent of successor registrant's total assets and gross revenues 
from continuing operations, and each of the other participating 
companies meets either of the thresholds in paragraph (h)(3)(i) of this 
section. Measurement of the successor registrant's total assets and 
gross revenues from continuing operations must be based on the pro 
forma combined financial statements of all the participating companies' 
most recently completed fiscal years.
    (iii) Any company participating in a business combination will be 
deemed to have met either of the thresholds in paragraph (h)(3)(i) of 
this section if, within the last twelve months:
    (A) In connection with an exchange offer, the company's equity 
securities either were registered or could have been registered on Form 
F-8, F-9, F-10 or F-80 (Sec. 239.28, 239.39, 239.40 or 239.41) or, in 
connection with a terminated tender offer, the company filed or could 
have filed Schedule 13E-4F (Sec. 240.13e-102 of this chapter) or 
Schedule 14D-1F (Sec. 240.14d-102 of this chapter); and
    (B) The company would have satisfied either of the thresholds in 
paragraph (h)(3)(i) of this section immediately before commencing the 
exchange offer or tender offer.
* * * * *
    99. By amending Form F-8 (referenced in Sec. 239.38) by adding four 
lines to the cover page of the registration statement, by adding one 
check box to the cover page of the registration statement immediately 
before the Calculation of Registration Fee table, by adding a paragraph 
to appear as the last paragraph on the cover page of the registration 
statement, by revising paragraph (4) of General Instruction II.A., by 
adding Instruction 5 to the Instructions to General Instruction II.A., 
by revising paragraph (3) of General Instruction III.A, by adding 
General Instruction VI., by adding paragraph (c) to Part III. Item 1., 
to read as follows:

    Note: The text of Form F-8 does not and this amendment will not 
appear in the Code of Federal Regulations.

U.S. Securities and Exchange Commission, Washington, D.C. 20549

Form F-8--Registration Statement Under the Securities Act of 1933

* * * * *
----------------------------------------------------------------------
(Name, address (including zip code) and telephone number (including 
area code) of agent for service in the United States

----------------------------------------------------------------------
(Web Site Address, if any)

----------------------------------------------------------------------
(E-mail Address, if any)

* * * * *
    If you are filing this Form to register additional securities 
for an offering in accordance with Securities Act Rule 462(b), check 
the following box and list the Securities Act registration number of 
the earlier effective registration statement for the same offering. 
[  ] ____________

Calculation of Registration Fee *

* * * * *
    If any of the securities registered are not sold in connection 
with this offering, the registrant (or a qualifying wholly-owned 
subsidiary) may use the dollar amount of the fee paid with respect 
to the unsold securities to offset the total fee due on its 
subsequent registration statement. See Securities Act Rule 457(p). 
When offsetting any part of the fee under Rule 457(p), the 
registrant must state the dollar amount being offset in a footnote 
to the fee table and must identify the file number of the 
registration statement and the amount and class of securities in 
connection with which the offsetting fee was previously paid. Use of 
Rule 457(p) to offset any fee automatically deregisters the 
securities in connection with which the fee was previously paid.

General Instructions

* * * * *

II. Eligibility Requirements for Exchange Offers

    A. * * *
    (4) Public Float/ADTV.
    (i) Satisfies either of these thresholds:
    (A) The market value of the public float of the registrant's 
outstanding equity shares is $75 million or more and the average 
trading volume value is $1 million or more; or
    (B) The market value of the public float of the registrant's 
outstanding equity shares is $250 million or more.
    (ii) A registrant conducting its own exchange offer need not 
meet either of the thresholds in paragraph A.(4)(i).
    Instructions
* * * * *
    5. For the purposes of this Form, ``average daily trading 
volume'' shall mean the average daily trading volume of the 
registrant's equity securities on Canadian markets during the three 
full calendar months or any 90 consecutive calendar days ending 
within 10

[[Page 67317]]

calendar days immediately preceding the filing of the registration 
statement.
* * * * *

III. Eligibility Requirements for Business Combinations

    A. * * *
    (3) Public Float/ADTV.
    (i) Except for the successor registrant, each company 
participating in the business combination satisfies either of the 
following thresholds:
    (A) The market value of the public float of the company's 
outstanding equity shares is $75 million or more and the average 
trading volume value is $1 million or more; or
    (B) The market value of the public float of the company's 
outstanding equity shares is $250 million or more.
    (ii) Any company participating in the business combination need 
not meet either of the thresholds in paragraph A.(3)(i) of this 
instruction if the assets and gross revenues from continuing 
operations of the other companies participating in the business 
combination comprise at least 80 percent of successor registrant's 
total assets and gross revenues from continuing operations, and each 
of the other participating companies meets either of the thresholds 
in paragraph (A)(3)(i) of this section. Measurement of the successor 
registrant's total assets and gross revenues from continuing 
operations must be based on the pro forma combined financial 
statements of all the participating companies' most recently 
completed fiscal years.
    (iii) Any company participating in a business combination will 
be deemed to have met either of the thresholds in paragraph A.(3)(i) 
of this Instruction if, within the last twelve months:
    (A) In connection with an exchange offer, the company's equity 
securities either were registered or could have been registered on 
Form F-8, F-9, F-10 or F-80 or, in connection with a terminated 
tender offer, the company filed or could have filed Schedule 13E-4F 
or 14D-1F; and
    (B) The company would have satisfied either of the thresholds in 
paragraph A.(3)(i) immediately before commencing the exchange offer 
or tender offer.
* * * * *

VI. Registration of Additional Securities

    A. Under certain circumstances, the registrant may increase the 
size of an offering after the effective date through filing a short-
form registration statement under Securities Act Rule 462(b). A Rule 
462(b) registration statement may include only the following:
    1. the facing page;
    2. a statement that the earlier registration statement, 
identified by file number, is incorporated by reference;
    3. any required opinions and consents;
    4. the signature page; and
    5. any price-related information omitted from the earlier 
registration statement in reliance on Rule 430A, if the registrant 
so chooses.
    B. The information contained in a Rule 462(b) registration 
statement is deemed to be a part of the earlier effective 
registration statement as of the date of effectiveness of the Rule 
462(b) registration statement.
    C. The registrant may incorporate by reference from the earlier 
registration statement any opinion or consent required in the Rule 
462(b) registration statement if:
    1. the opinion or consent expressly allows that incorporation; 
and
    2. the opinion or consent also relates to the Rule 462(b) 
registration statement.
    Note to General Instruction VI.
    You should read Securities Act Rule 411(c) regarding 
incorporation by reference of exhibits and Securities Act Rule 
439(b) regarding incorporation by reference of consents.
* * * * *

Part III--Undertakings and Consent to Service of Process

Item 1. Undertakings

    (a) * * *
    (b) * * *
    (c) The registrant will file with the Commission, on or before 
the date of first use, all free writing materials used in connection 
with the securities registered on this registration statement after 
effectiveness and before the offering is completed.
* * * * *
    100. By amending Sec. 239.39 to revise paragraph (b)(4); and to add 
Instruction 7 to the Instructions to paragraph (b) to read as follows:


Sec. 239.39  Form F-9, for registration under the Securities Act of 
1933 of certain investment grade debt or investment grade preferred 
securities of certain Canadian issuers.

* * * * *
    (b) * * *
    (4) Public Float/ADTV.
    (i) Satisfies either of the following thresholds:
    (A) The market value of the public float of the registrant's 
outstanding equity shares is $75 million or more and the average 
trading volume value is $1 million or more; or
    (B) The market value of the public float of the registrant's 
outstanding equity shares is $250 million or more.
    (ii) A registrant need not meet either of the thresholds in 
paragraph (b)(4)(i) of this section if it is using this Form to 
register securities that are not convertible into another security.

Instructions

* * * * *
    7. For the purposes of this Form, ``average daily trading 
volume'' shall mean the average daily trading volume of the 
registrant's equity securities on Canadian markets during the three 
full calendar months or any 90 consecutive calendar days ending 
within 10 calendar days immediately preceding the filing of the 
registration statement.
* * * * *
    101. By amending Form F-9 (referenced in Sec. 239.39) to add four 
lines to the cover page of the registration statement, to add a check 
box to the cover page of the registration statement immediately before 
the ``Calculation of Registration Fee'' table, and one paragraph to 
appear as the last paragraph on the cover page of the registration 
statement; to revise paragraph (4) of General Instruction I.B.; to add 
Instruction 7 to the Instructions to General Instruction I.B., 
paragraph M. to General Instruction II., General Instruction IV.; and 
in Part III Item 1., to designate the existing text as paragraph (a) 
and to add paragraph (b) to read as follows:

    Note: The text of Form F-9 will not appear in the Code of 
Federal Regulations.

U.S. Securities and Exchange Commission, Washington D.C., 20549 Form F-
9--Registration Statement Under the Securities Act of 1933

* * * * *
----------------------------------------------------------------------
(Name, address (including zip code) and telephone number (including 
area code) of agent for service in the United States

----------------------------------------------------------------------
(Web Site Address, if any)

----------------------------------------------------------------------
(E-mail Address, if any)

* * * * *
    If you are filing this Form to register additional securities 
for an offering in accordance with Securities Act Rule 462(b) under 
the Securities Act, check the following box and list the Securities 
Act registration number of the earlier effective registration 
statement for the same offering. [  ] ____________

Calculation of Registration Fee *

* * * * *
    If any of the securities registered are not sold in connection 
with this offering, the registrant (or a qualifying wholly-owned 
subsidiary) may use the dollar amount of the fee paid with respect 
to the unsold securities to offset the total fee due on its 
subsequent registration statement. See Securities Act Rule 457(p). 
When offsetting any part of the fee under Rule 457(p), the 
registrant must state the dollar amount being offset in a footnote 
to the fee table and must identify the file number of the 
registration statement and the amount and class of securities in 
connection with which the offsetting fee was previously paid. Use of 
Rule 457(p) to offset any fee automatically deregisters the 
securities in connection with which the fee was previously paid.

General Instructions

I. Eligibility Requirements for Use of Form F-9

* * * * *
    B. * * *
    (4) Public Float/ADTV.
    (i) Satisfies either of the following thresholds:
    (A) The market value of the public float of the registrant's 
outstanding equity shares is $75 million or more and the average 
trading volume value is $1 million or more; or

[[Page 67318]]

    (B) The market value of the public float of the registrant's 
outstanding equity shares is $250 million or more.
    (ii) A registrant need not meet either of the thresholds in 
paragraph B.(4)(i) of this Instruction if it is using this Form to 
register securities that are not convertible into another security.

Instructions

* * * * *
    7. For the purposes of this Form, ``average daily trading 
volume'' shall mean the average daily trading volume on Canadian 
markets during the three full calendar months or any 90 consecutive 
calendar days ending within 10 calendar days immediately preceding 
the filing of the registration statement.
* * * * *

II. Application of General Rules and Regulations

* * * * *
    M. You should read Securities Act Rule 172. That rule describes 
prospectus delivery obligations applicable to offerings registered 
on this Form.
* * * * *

IV. Registration of Additional Securities

    A. Under certain circumstances, the registrant may increase the 
size of an offering after the effective date through filing a short-
form registration statement under Securities Act Rule 462(b). A Rule 
462(b) registration statement may include only the following:
    1. the facing page;
    2. a statement that the earlier registration statement, 
identified by file number, is incorporated by reference;
    3. any required opinions and consents;
    4. the signature page; and
    5. any price-related information omitted from the earlier 
registration statement in reliance on Rule 430A, if the registrant 
so chooses.
    B. The information contained in a Rule 462(b) registration 
statement is deemed to be a part of the earlier effective 
registration statement as of the date of effectiveness of the Rule 
462(b) registration statement.
    C. The registrant may incorporate by reference from the earlier 
registration statement any opinion or consent required in the Rule 
462(b) registration statement if:
    1. the opinion or consent expressly allows that incorporation; 
and
    2. the opinion or consent also relates to the Rule 462(b) 
registration statement.
    Note to General Instruction IV.
    You should read Securities Act Rule 411(c) regarding 
incorporation by reference of exhibits and Securities Act Rule 
439(b) regarding incorporation by reference of consents.
* * * * *

Part III--Undertakings and Consents to Service of Process

Item 1. Undertakings

    Include the following undertakings:
    (a) * * *
    (b) The registrant will file with the Commission, on or before 
the date of first use, all free writing materials used in connection 
with the securities registered on this registration statement after 
effectiveness and before the offering is completed.
* * * * *
    102. By amending Sec. 239.40 to revise paragraph (c)(4); and to add 
Instruction 5 to the Instructions to paragraph (c) to read as follows:


Sec. 239.40  Form F-10, for registration under the Securities Act of 
1933 of securities of certain Canadian issuers.

* * * * *
    (c) * * *
    (4) Public Float/ADTV.
    (i) Satisfies either of the following thresholds:
    (A) The market value of the public float of the registrant's 
outstanding equity shares is $75 million or more and the average 
trading volume value is $1 million or more; or
    (B) The market value of the public float of the registrant's 
outstanding equity shares is $250 million or more.
    (ii) Except for the successor issuer, any company participating in 
the business combination need not meet either of the thresholds in 
paragraph (c)(4)(i) of this section if the assets and gross revenues 
from continuing operations of the other companies participating in the 
business combination comprise at least 80 percent of successor 
registrant's total assets and gross revenues from continuing 
operations, and each of the other participating companies meets either 
of the thresholds in paragraph (c)(4)(i) of this section. Measurement 
of the successor registrant's total assets and gross revenues from 
continuing operations must be based on the pro forma combined financial 
statements of all the participating companies' most recently completed 
fiscal years.
    (iii) Any company participating in a business combination will be 
deemed to have satisfied either of the thresholds in paragraph 
(c)(4)(i) of this section if, within the last twelve months:
    (A) In connection with an exchange offer, the company's equity 
securities either were registered or could have been registered on Form 
F-8, F-9, F-10 or F-80 (Sec. 239.38, 239.39, 239.40 or 239.41) or, in 
connection with a terminated tender offer, the company filed or could 
have filed Schedule 13E-4F (Sec. 240.13e-102 of this chapter) or 
Schedule 14D-1F (Sec. 240.14d-102 of this chapter); and
    (B) The company would have satisfied either threshold in paragraph 
(c)(4)(i) of this section immediately before commencing the exchange 
offer or tender offer.

Instructions

* * * * *
    5. For the purposes of this Form, ``average daily trading 
volume'' shall mean the average daily trading volume of the 
registrant's equity securities on Canadian markets during the three 
full calendar months or any 90 consecutive calendar days ending 
within 10 calendar days immediately preceding the filing of the 
registration statement.
* * * * *
    103. By revising Form F-10 (referenced in Sec. 239.40) to add four 
lines to the cover page of the registration statement, to add one check 
box to the cover page of the registration statement immediately before 
the ``Calculation of Registration Fee'' table, one paragraph to appear 
as the last paragraph on the cover page of the registration statement; 
to revise paragraph (4) of General Instruction I.C.; to add Instruction 
5 to the Instructions to General Instruction I.C. and paragraph N. to 
General Instruction II, General Instruction IV.; and in Part III Item 
1., to designate the second paragraph as paragraph (a) and to add 
paragraph (b) to read as follows:
* * * * *
    Note: The text of Form F-10 does not and this amendment will not 
appear in the Code of Federal Regulations.

U.S. Securities and Exchange Commission, Washington, D.C. 20549

Form F-10--Registration Statement Under the Securities Act of 1933

* * * * *
----------------------------------------------------------------------
(Name, address (including zip code) and telephone number (including 
area code) of agent for service in the United States)

----------------------------------------------------------------------
(Web Site Address, if any)

----------------------------------------------------------------------
(E-mail Address, if any)
* * * * *
    If you are filing this Form to register additional securities 
for an offering in accordance with Securities Act Rule 462(b), check 
the following box and list the Securities Act registration number of 
the earlier effective registration statement for the same offering. 
[  ] ____________

Calculation of Registration Fee *

* * * * *
    If any of the securities registered are not sold in connection 
with this offering, the registrant (or a qualifying wholly-owned 
subsidiary) may use the dollar amount of the fee paid with respect 
to the unsold securities to offset the total fee due on its 
subsequent registration statement. See Securities Act Rule 457(p). 
When offsetting any part of the fee under Rule 457(p), the 
registrant must state the dollar amount being offset in a footnote 
to the fee table and must identify the file number of the 
registration statement and the amount and class of securities in 
connection with which the offsetting fee was previously paid. Use of 
Rule 457(p) to offset any fee automatically deregisters the 
securities in connection with which the fee was previously paid.

[[Page 67319]]

General Instructions

I. General Eligibility Requirements for Use of Form F-10

* * * * *
    C. * * *
    (4) Public Float/ADTV.
    (i) Satisfies either of the following thresholds:
    (A) The market value of the public float of the registrant's 
outstanding equity shares is $75 million or more and the average 
trading volume value is $1 million or more; or
    (B) The market value of the public float of the registrant's 
outstanding equity shares is $250 million or more.
    (ii) Any individual company participating in the business 
combination need not meet either of the thresholds in paragraph 
C.(4)(i) of this Instruction if the assets and gross revenues from 
continuing operations of the other companies participating in the 
business combination comprise at least 80 percent of successor 
registrant's total assets and gross revenues from continuing 
operations, and each of the other participating companies meets 
either of the thresholds in paragraph C.(4)(i). Measurement of the 
successor registrant's total assets and gross revenues from 
continuing operations must be based on the pro forma combined 
financial statements of all the participating companies' most 
recently completed fiscal years.
    (iii) Any company participating in a business combination will 
be deemed to have satisfied either of the thresholds in paragraph 
C.(4)(i) of this Instruction if, within the last twelve months:
    (A) In connection with an exchange offer, the company's equity 
securities either were registered or could have been registered on 
Form F-8, F-9, F-10 or F-80 or, in connection with a terminated 
tender offer, the company filed or could have filed Schedule 13E-4F 
or 14D-1F; and
    (B) The company would have satisfied either threshold in 
paragraph C.(4)(i) of this Instruction immediately before commencing 
the exchange offer or tender offer.

Instructions

* * * * *
    5. For the purposes of this Form, ``average daily trading 
volume'' shall mean the average daily trading volume of the 
registrant's equity securities on Canadian markets during the three 
full calendar months or any 90 consecutive calendar days ending 
within 10 calendar days immediately preceding the filing of the 
registration statement.
* * * * *

II. Application of General Rules and Regulations

* * * * *
    N. You should read Securities Act Rule 172. That rule describes 
prospectus delivery obligations applicable to offerings registered 
on this Form.
* * * * *

IV. Registration of Additional Securities

    A. Under certain circumstances, the registrant may increase the 
size of an offering after the effective date through filing a short-
form registration statement under Securities Act Rule 462(b). A Rule 
462(b) registration statement may include only the following:
    1. the facing page;
    2. a statement that the earlier registration statement, 
identified by file number, is incorporated by reference;
    3. any required opinions and consents;
    4. the signature page; and
    5. any price-related information omitted from the earlier 
registration statement in reliance on Securities Act Rule 430A, if 
the registrant so chooses.
    B. The information contained in a Rule 462(b) registration 
statement is deemed to be a part of the earlier effective 
registration statement as of the date of effectiveness of the Rule 
462(b) registration statement.
    C. The registrant may incorporate by reference from the earlier 
registration statement any opinion or consent required in the Rule 
462(b) registration statement if:
    1. the opinion or consent expressly allows that incorporation; 
and
    2. the opinion or consent also relates to the Rule 462(b) 
registration statement.
    Note to General Instruction IV.
    You should read Securities Act Rule 411(c) regarding 
incorporation by reference of exhibits and Securities Act Rule 
439(b) regarding incorporation by reference of consents.
* * * * *

Part III--Undertakings and Consent to Service of Process

Item 1. Undertakings

    Include the following undertakings:
    (a) * * *
    (b) The registrant will file with the Commission, on or before 
the date of first use, all free writing materials used in connection 
with the securities registered on this registration statement after 
effectiveness and before the offering is completed.
* * * * *
    104. By amending Sec. 239.41 to revise paragraph (d)(4); to add 
Instruction 5 to the Instructions to paragraph (d); and to revise 
paragraph (h)(3) to read as follows:


Sec. 239.41  Form F-80, for registration under the Securities Act of 
1933 of securities of certain Canadian issuers to be issued in exchange 
offers or a business combination.

* * * * *
    (d) * * *
    (4) Public Float/ADTV.
    (i) Satisfies either of the following thresholds:
    (A) The market value of the public float of the registrant's 
outstanding equity shares is $75 million or more and the average 
trading volume value is $1 million or more; or
    (B) The market value of the public float of the registrant's 
outstanding equity shares is $250 million or more.
    (ii) A registrant conducting its own exchange offer need not meet 
either of the thresholds in paragraph (d)(4)(i) of this section.

Instructions

* * * * *
    5. For the purposes of this Form, ``average daily trading 
volume'' shall mean the average daily trading volume of the 
registrant's equity securities on Canadian markets during the three 
full calendar months or any 90 consecutive calendar days ending 
within 10 calendar days immediately preceding the filing of the 
registration statement.
* * * * *
    (h) * * *
    (3) Public Float/ADTV.
    (i) Except for the successor registrant, each company participating 
in the business combination satisfies either of the following 
thresholds:
    (A) The market value of the public float of the company's 
outstanding equity shares is $75 million or more and the average 
trading volume value is $1 million or more; or
    (B) The market value of the public float of the company's 
outstanding equity shares is $250 million or more.
    (ii) Any company participating in the business combination need not 
meet either of the thresholds in paragraph (h)(3)(i) of this section if 
the assets and gross revenues from continuing operations of the other 
companies participating in the business combination comprise at least 
80 percent of successor registrant's total assets and gross revenues 
from continuing operations, and each of the other participating 
companies meets either of the thresholds in paragraph (h)(3)(i) of this 
section. Measurement of the successor registrant's total assets and 
gross revenues from continuing operations must be based on the pro 
forma combined financial statements of all the participating companies' 
most recently completed fiscal years.
    (iii) Any company participating in a business combination will be 
deemed to have met either of the thresholds in paragraph (h)(3)(i) of 
this section if, within the last twelve months:
    (A) In connection with an exchange offer, the company's equity 
securities either were registered or could have been registered on Form 
F-8, F-9, F-10 or F-80 (Sec. 239.38, 239.39, 239.40 or 239.41) or, in 
connection with a terminated tender offer, the company filed or could 
have filed Schedule 13E-4F (Sec. 240.13e-102 of this chapter) or 14D-1F 
(Sec. 240.14d-102 of this chapter); and
    (B) The company would have satisfied either threshold in paragraph 
(h)(3)(i) of this section immediately before commencing the exchange 
offer or tender offer.
    105. By amending Form F-80 (referenced in Sec. 239.41) to add four 
lines to the cover page of the registration

[[Page 67320]]

statement, to add one check box to the cover page of the registration 
statement immediately before the ``Calculation of Registration Fee'' 
table, one paragraph to appear as the last paragraph on the cover page 
of the registration statement; to revise paragraph (4) of General 
Instruction II.A.; to add Instruction 5 to the Instructions to General 
Instruction II.A.; to revise paragraph (3) of General Instruction 
III.A.; to add General Instruction VI.; and in Part III Item 1. to add 
paragraph (c) to read as follows:
* * * * *
    Note: The text of Form F-80 does not and this amendment will not 
appear in the Code of Federal Regulations.

U.S. Securities and Exchange Commission, Washington, D.C. 20549

Form F-80--Registration Statement Under the Securities Act of 1933

* * * * *
----------------------------------------------------------------------
(Name, address (including zip code) and telephone number (including 
area code) of agent for service in the United States)

----------------------------------------------------------------------
(Web Site Address, if any)
----------------------------------------------------------------------
(E-mail Address, if any)

* * * * *
    If you are filing this Form to register additional securities 
for an offering in accordance with Securities Act Rule 462(b), check 
the following box and list the Securities Act registration number of 
the earlier effective registration statement for the same offering. 
[  ] __________

Calculation of Registration Fee*

    If any of the securities registered are not sold in connection 
with this offering, the registrant (or a qualifying wholly-owned 
subsidiary) may use the dollar amount of the fee paid with respect 
to the unsold securities to offset the total fee due on its 
subsequent registration statement. See Securities Act Rule 457(p). 
When offsetting any part of the fee under Rule 457(p), the 
registrant must state the dollar amount being offset in a footnote 
to the fee table and must identify the file number of the 
registration statement and the amount and class of securities in 
connection with which the offsetting fee was previously paid. Use of 
Rule 457(p) to offset any fee automatically deregisters the 
securities in connection with which the fee was previously paid.

General Instructions

* * * * *

II. Eligibility Requirements for Exchange Offers

    A. * * *
    (4) Public Float/ADTV.
    (i) Satisfies either of these thresholds:
    (A) The market value of the public float of the registrant's 
outstanding equity shares is $75 million or more and the average 
trading volume value is $1 million or more; or
    (B) The market value of the public float of the registrant's 
outstanding equity shares is $250 million or more.
    (ii) A registrant conducting its own exchange offer need not 
meet either of the thresholds in paragraph A.(4)(i) of this 
Instruction.

Instructions

* * * * *
    5. For the purposes of this Form, ``average daily trading 
volume'' shall mean the average daily trading volume of the 
registrant's equity securities on Canadian markets during the three 
full calendar months or any 90 consecutive calendar days ending 
within 10 calendar days immediately preceding the filing of the 
registration statement.
* * * * *

III. Eligibility Requirements for Business Combinations

    A. * * *
    (3) Public Float/ADTV.
    (i) Except for the successor registrant, each company 
participating in the business combination satisfies either of the 
following thresholds:
    (A) The market value of the public float of the company's 
outstanding equity shares is $75 million or more and the average 
trading volume value is $1 million or more; or
    (B) The market value of the public float of the company's 
outstanding equity shares is $250 million or more.
    (ii) Any company participating in the business combination need 
not meet either of the thresholds in paragraph A.(3)(i) of this 
Instruction if the assets and gross revenues from continuing 
operations of the other companies participating in the business 
combination comprise at least 80 percent of successor registrant's 
total assets and gross revenues from continuing operations, and each 
of the other participating companies meets either of the thresholds 
in paragraph A.(3)(i) of this Instruction. Measurement of the 
successor registrant's total assets and gross revenues from 
continuing operations must be based on the pro forma combined 
financial statements of all the participating companies' most 
recently completed fiscal years.
    (iii) Any company participating in a business combination will 
be deemed to have met either of the thresholds in paragraph A.(3)(i) 
of this Instruction if, within the last twelve months:
    (A) In connection with an exchange offer, the company's equity 
securities either were registered or could have been registered on 
Form F-8, F-9, F-10 or F-80 or, in connection with a terminated 
tender offer, the company filed or could have filed Schedule 13E-4F 
or 14D-1F; and
    (B) The company would have satisfied either threshold in 
paragraph A.(3)(i) of this Instruction immediately before commencing 
the exchange offer or tender offer.
* * * * *

VI. Registration of Additional Securities

    A. Under certain circumstances, the registrant may increase the 
size of an offering after the effective date through filing a short-
form registration statement under Securities Act Rule 462(b). A Rule 
462(b) registration statement may include only the following:
    1. the facing page;
    2. a statement that the earlier registration statement, 
identified by file number, is incorporated by reference;
    3. any required opinions and consents;
    4. the signature page; and
    5. any price-related information omitted from the earlier 
registration statement in reliance on Securities Act Rule 430A, if 
the registrant so chooses.
    B. The information contained in a Rule 462(b) registration 
statement is deemed to be a part of the earlier effective 
registration statement as of the date of effectiveness of the Rule 
462(b) registration statement.
    C. The registrant may incorporate by reference from the earlier 
registration statement any opinion or consent required in the Rule 
462(b) registration statement if:
    1. the opinion or consent expressly allows that incorporation; 
and
    2. the opinion or consent also relates to the Rule 462(b) 
registration statement.
    Note to General Instruction VI.
    You should read Securities Act Rule 411(c) regarding 
incorporation by reference of exhibits and Securities Act Rule 
439(b) regarding incorporation by reference of consents.
* * * * *

Part III--Undertakings and Consent to Service of Process

Item 1. Undertakings

    (a) * * *
    (b) * * *
    (c) The registrant will file with the Commission, on or before 
the date of first use, all free writing materials used in connection 
with the securities registered on this registration statement after 
effectiveness and before the offering is completed.
* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

    106. By revising the general authority citation for part 240 to 
read as follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77eee, 
77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78f, 78i, 78j, 78j-1, 78k, 
78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll(d), 
78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4 and 
80b-11, unless otherwise noted.
* * * * *
    107. By amending Sec. 240.12b-2 by revising the definition of 
``small business issuer'' to read as follows:


Sec. 240.12b-2  Definitions.

* * * * *
    Small Business Issuer. The term ``small business issuer'' means an 
entity that meets the following criteria:
    (1) Has revenues (including revenues of any consolidated 
subsidiaries) of less than $50,000,000;
    (2) Is a U.S. or Canadian issuer;

[[Page 67321]]

    (3) Is not an investment company;
    (4) If a majority-owned subsidiary, the parent corporation is also 
a small business issuer; and
    (5) Each majority-owned subsidiary of the entity, if any, meets the 
criteria of paragraphs (2) and (3) of this definition.
* * * * *
    108. By adding Sec. 240.12b-24 to read as follows:


Sec. 240.12b-24  Plain English risk factor disclosure.

    (a) To enhance the readability of risk factor disclosure, you must 
use plain English principles in the organization, language and design 
of the risk factor section of any Exchange Act registration statement 
or report.
    (b) Any disclosure you provide in those registration statements or 
reports that relates to risk factors must, at a minimum, substantially 
comply with each of the following plain English writing principles:
    (1) Short sentences;
    (2) Definite, concrete, everyday words;
    (3) Active voice;
    (4) Tabular presentation or bullet lists for complex material, 
whenever possible;
    (5) No legal jargon or highly technical business terms; and
    (6) No multiple negatives.

    Note to this section.
    You should read Securities Act Release No. 7497 (January 28, 
1998) for more information on plain English principles.

    109. By adding two notes at the end of Sec. 240.12d1-2 to read as 
follows:


Sec. 240.12d1-2  Effectiveness of registration.

* * * * *

Notes to Rule 12d1-2

    (1) As established by Section 12(g) of the Exchange Act (15 
U.S.C. 78l(g)), a Form 8-A (Sec. 249.208a of this chapter) filed 
under paragraph (c) of this section becomes effective no more than 
60 days after the date that registration statement is filed with the 
Commission. The automatic effectiveness described in paragraph (c) 
permits earlier effectiveness of the Form 8-A only.
    (2) Registrants may use Forms A, B, C, SB-1, SB-2, or SB-3 or 
Schedule B (Sec. 239.4, 239.5, 239.6, 239.9, 239.10, or 239.11 or 15 
U.S.C. 77aa) to register a class of securities under Section 12 of 
the Exchange Act concurrently with the registration of a public 
offering of securities of that class under the Securities Act. The 
Exchange Act registration on Forms A, B, C, SB-1, SB-2 or SB-3 will 
become effective as described in those forms. The Exchange Act 
registration on Schedule B will become effective as described in 
Securities Act Rule 499. Securities Act Rule 499 also sets forth 
disclosure and procedural requirements for registrants using 
Schedule B for concurrent registration under the Exchange Act and 
the Securities Act.


Sec. 240.13a-10   [Amended]

    110. By amending Sec. 240.13a-10 by removing the word ``six'' and 
adding, in its place, the word ``five'' in paragraph (g)(3).
* * * * *
    111. By amending Sec. 240.13a-13 by revising paragraph (d) to read 
as follows:


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

* * * * *
    (d) Notwithstanding the foregoing provisions of this section, 
market risk disclosure required by Item 3 of Part I of Form 10-Q shall 
not be deemed to be ``filed'' for the purpose of Section 18 of the Act 
(15 U.S.C. 78r). That disclosure, therefore, shall not be subject to 
the liabilities of that Section. That disclosure shall, however, be 
subject to all other provisions of the Act.
    112. By amending Sec. 240.14a-2 by removing at the end of paragraph 
(a)(5) the words ``Act of 1935; and'' and adding, in their place, the 
words ``Act of 1935;'', at the end of paragraph (a)(6)(iii) the words 
``by security holders.'' and adding, in their place, the words ``by 
security holders; and''; and by adding paragraph (a)(7) to read as 
follows.


Sec. 240.14a-2  Solicitations to which Sec. 240.14a-3 to Sec. 240.14a-
15 apply.

* * * * *
    (a) * * *
    (7) Any solicitation by a broker or dealer made in accordance with 
Sec. 230.138 or Sec. 230.139 of this chapter in connection with an 
offering registered under the Securities Act of 1933.
    113. By amending Sec. 240.14a-101 by revising Note E., by revising 
paragraph (b)(1), and by revising the heading to paragraph (b)(2) of 
Item 13 to read as follows:


Sec. 240.14a-101  Schedule 14A. Information required in proxy 
statement.

* * * * *
    E. In Item 13 of this Schedule, the reference to ``meets the 
requirements of Form B'' shall mean a registrant who meets:
    (1) the requirements of General Instruction I.B. of Form B; and
    (2) one of the following:
    (a) General Instruction I.C.1. of Form B;
    (b) General Instruction I.C.4. of Form B, if action is to be 
taken as described in Item 11, 12 and 14 of this schedule that 
concerns non-convertible debt or preferred securities which are 
``investment grade securities.'' The time by which the rating must 
be assigned shall be the date on which definitive copies of the 
proxy statement are first sent or given to security holders; or
    (c) General Instruction I.C.5. of Form B.
* * * * *

Item 13. Financial and Other Information

(See Notes D and E at the Beginning of this Schedule.)
* * * * *
    (b) * * *
    (1) Form B registrants. If the registrant meets the requirements 
of Form B (as defined in Note E), 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 these requirements 
of Form B and has elected to furnish the required information by 
incorporation by reference, the registrant may elect to update the 
information incorporated by reference to information in subsequently 
filed documents.
    (2) All other registrants.
* * * * *
    114. By revising the section heading and paragraph (b) and by 
removing the words ``of paragraphs (b) and (d)'' in the last sentence 
of paragraph (d) of Sec. 240.15c2-8 to read as follows:


Sec. 240.15c2-8  Delivery of prospectus information.

* * * * *
    (b) A broker or dealer, and any person acting on behalf of them, 
must deliver prospectus information to each person offered securities 
in connection with an offering registered under the Securities Act as 
follows:
    (1) Form B and Schedule B Seasoned Issuers. If the issuer is 
offering securities as described in paragraph (b)(1)(i), then delivery 
under paragraph (b)(1)(ii) must be made.
    (i) Securities in an offering registered on:
    (A) Form B (Sec. 239.5 of this chapter), other than pursuant to 
General Instruction I.C.6. of that Form; or
    (B) Schedule B (15 U.S.C. 77aa) where a firm commitment 
underwritten offering in excess of $250 million in securities takes 
place more than one year after the effective date of the issuer's 
initial registered offering;
    (ii) A term sheet prospectus that contains the following 
information must be sent in a manner reasonably designed to arrive 
before the date an investor makes a binding investment decision:
    (A) An itemization of the material terms of the securities in 
summary format;
    (B) The name of any person, other than the issuer, for whose 
account securities are offered and a brief identification of any 
material relationship such person has (or had within the past three 
years) with the issuer or any affiliate of the issuer;
    (C) The identity and location of a contact person to whom questions 
may be directed; and
    (D) The identity and location of a person who, upon request, will 
send

[[Page 67322]]

promptly the documents that define the terms of the securities.
    (2) Other issuers--firm commitment underwritten offerings. If an 
offering is registered on Form A, Form SB-1, Form SB-2, Form F-7, Form 
F-9, Form F-10 (other than in a business combination), (Sec. 239.4, 
239.9, 239.10, 239.37, 239.39 or 239.40 of this chapter) or on Schedule 
B (other than as described in paragraph (b)(1) of this section), is 
underwritten on a firm commitment basis and the offering:
    (i) Is the issuer's initial offering registered in accordance with 
Section 5 of the Securities Act (15 U.S.C. 77e) or is an offering 
taking place within one year of the effective date of the issuer's 
initial registered offering, then a prospectus satisfying Section 10 
(15 U.S.C. 77j) of the Securities Act must be sent to each investor in 
a manner reasonably designed to arrive at least 7 calendar days before 
the pricing of the securities.
    (ii) Takes place more than one year after the effective date of the 
issuer's initial offering registered in accordance with Section 5 of 
the Securities Act, then a prospectus satisfying Section 10 of the 
Securities Act must be sent to each investor in a manner reasonably 
designed to arrive at least 3 calendar days before the pricing of the 
securities.
    (3) Other issuers--non-firm commitment underwritten offerings. If 
an offering is registered on Form A, Form SB-1, Form SB-2, Form F-7, 
Form F-9, Form F-10 (other than in a business combination), or on 
Schedule B (other than as described in paragraph (b)(1) of this 
section), is not underwritten on a firm commitment basis and the 
offering:
    (i) Is the issuer's initial offering in accordance with Section 5 
of the Securities Act or is an offering taking place within one year of 
the effective date of the issuer's initial registered offering, then a 
prospectus satisfying Section 10 of the Securities Act must be sent to 
each investor in a manner reasonably designed to arrive at least 7 
calendar days before the investor signs a subscription agreement or 
otherwise commits to purchase securities.
    (ii) Takes place more than one year after the effective date of the 
issuer's initial registered offering in accordance with Section 5 of 
the Securities Act, then a prospectus satisfying Section 10 of the 
Securities Act must be sent to each investor in a manner reasonably 
designed to arrive at least 3 calendar days before the investor signs a 
subscription agreement or otherwise commits to purchase securities.
    Note to paragraphs (b)(2) and (b)(3).
    A broker or dealer may choose to deliver a prospectus meeting 
the requirements of Section 10(a) of the Securities Act, instead of 
a prospectus meeting the requirements of Section 10 of the 
Securities Act, if it does so in accordance with the terms of 
paragraphs (b)(2) and (b)(3).

    (4) Roll-ups. Notwithstanding paragraphs (b)(1) through (b)(3) of 
this section, if an issuer is registering a roll-up transaction as 
defined in Sec. 229.901(c) of this chapter, a prospectus that satisfies 
the requirements of Section 10 of the Securities Act must be sent to 
each investor no later than the earlier of:
    (i) 60 calendar days before the meeting at which the roll-up 
transaction will be submitted to a vote or 60 calendar days before the 
earliest date on which partnership action could be taken by consent; 
and
    (ii) The date calculated by applying the maximum number of days 
permitted for giving notice under applicable state law.
    (5) Material changes. If not previously disclosed by any other 
means to investors, a broker or dealer must send to each investor a 
document setting forth material changes to the information in the 
prospectus delivered in a manner reasonably designed to arrive at least 
24 hours before:
    (i) The securities are priced, if the offering is subject to 
paragraph (b)(2) of this section;
    (ii) The investor signs a subscription agreement or otherwise 
commits to purchase securities, if the offering is subject to paragraph 
(b)(3) of this section; or
    (iii) The date of the meeting at which the transaction will be 
submitted to a vote or on which partnership action could be taken by 
consent, if the offering is subject to paragraph (b)(4) of this 
section.
    (6) Rule 462 registration statements. Notwithstanding paragraphs 
(b)(1) through (b)(4) of this section, if an offering is registered in 
part through a registration statement filed under Sec. 230.462(b) or 
Sec. 230.462(e), a prospectus delivered with respect to the earlier 
registration statement to an investor in compliance with this 
Sec. 240.15c2-8 will be deemed to satisfy the delivery requirements 
with respect to that investor under this Sec. 240.15c2-8 with respect 
to the Sec. 230.462(b) or Sec. 230.462(e) registration statement for 
the offering, provided that the broker or dealer otherwise informs 
investors purchasing in the offering of the change in the size of the 
offering.
* * * * *
    115. By amending Sec. 240.15d-10 by removing the word ``six'' and 
adding, in its place, the word ``five'' in paragraph (g)(3).
    116. By amending Sec. 240.15d-13 by revising paragraph (d) and 
removing paragraph (e) to read as follows:


Sec. 240.15d-13  Quarterly reports on Form 10-Q and Form 10-QSB 
(Sec. 249.308a and Sec. 249.308b of this chapter).

* * * * *
    (d) Notwithstanding the foregoing provisions of this section, 
market risk disclosure required by of Item 3 of Part I of Form 10-Q 
shall not be deemed to be ``filed'' for the purpose of Section 18 of 
the Act (15 U.S.C. 78r). That disclosure, therefore, shall not be 
subject to the liabilities of that Section. That disclosure shall, 
however, be subject to all other provisions of the Act.
* * * * *

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

    117. The authority citation for part 249 continues to read, in 
part, as follows:

    Authority: 15 U.S.C. 78a, et seq., unless otherwise noted;
* * * * *


Sec. 249.210  Authority Citation [Removed]

    118. The authority citations following Sec. 249.210 are removed.
    119. By amending Form 8-A (referenced in Sec. 249.208a) by revising 
the title of General Instruction A. and paragraph (a) of General 
Instruction A.; by designating Instruction D. of General Instructions 
as paragraph (a) of Instruction D. of General Instructions; by adding a 
sentence at the end of paragraph (a) of Instruction D. of General 
Instructions, paragraphs (b), (c), (d) and (e) to Instruction D. of 
General Instructions; and by revising the Signatures section to read as 
follows:

    Note: The text of Form 8-A does not and this amendment will not 
appear in the Code of Federal Regulations.

U.S. Securities and Exchange Commission, Washington, D.C. 20549

Form 8-A

* * * * *

General Instructions

* * * * *

A. Use of Form 8-A

    (a) Subject to paragraph (b), you may use this Form for 
registration pursuant to Section 12(b) or 12(g) of the Securities 
Exchange Act of 1934 of any class of securities of any issuer that:
    (1) Is required to file reports pursuant to Section 13(a) or 
15(d) of the Act, and has filed all material required to be filed 
under Section 13, 14 or 15(d) for a period of at least 12 full 
calendar months and any portion of

[[Page 67323]]

a month immediately preceding the date of filing this Form (or such 
shorter period that the issuer was subject to those requirements); 
or
    (2) Has securities listed on an exchange that is not registered 
as a national securities exchange, pursuant to an order exempting 
that exchange from such registration.
* * * * *

D. Signature and Filing of Registration Statement

    (a) * * * See Exchange Act Rule 12b-11(d) concerning manual 
signatures and Item 601 of Regulation S-K concerning signatures 
pursuant to powers of attorney.
    (b) The following persons, or persons performing similar 
functions, must sign the registration statement:
    (1) The registrant;
    (2) Its principal executive officer or officers;
    (3) Its principal financial officer;
    (4) Its controller or principal accounting officer; and
    (5) At least the majority of its board of directors.
    (c) Where the registrant is a foreign issuer, its authorized 
representative in the United States also must sign the registration 
statement.
    (d) Where the registrant is a limited partnership, its general 
partner must sign. Where the general partner is a corporation, the 
majority of the board of directors of the corporate general partner 
must sign the registration statement.
    (e) Type or print the name and title of each person who signs 
the registration statement beneath the person's signature. Any 
person who occupies more than one of the specified positions must 
indicate each capacity in which that person signs the registration 
statement.
* * * * *

Signatures*

    The registrant hereby certifies that it meets all of the 
requirements for filing on Form 8-A. The registrant also certifies 
that it has duly caused and authorized the undersigned to sign this 
registration statement on its behalf. The undersigned certifies that 
he/she has read this registration statement and to his/her knowledge 
the registration statement does not contain any untrue statement of 
a material fact or 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.
(Registrant)-----------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    The following persons certify that they have read this 
registration statement and to their knowledge the registration 
statement does not contain any untrue statement of a material fact 
or 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. The following persons also certify that they 
are signing on behalf of the registrant and in the capacities and on 
the dates indicated.

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    *See General Instruction D.
* * * * *
    120. By amending Form 10 (referenced in Sec. 249.210) by 
designating Instruction D. of General Instructions as paragraph (a) of 
Instruction D. of General Instructions; by adding a sentence at the end 
of paragraph (a) of Instruction D. of General Instructions, paragraphs 
(b), (c), (d) and (e) to Instruction D. of General Instructions, by 
adding four lines to the cover page of the registration statement, Item 
1A. to the ``Information Required in the Registration Statement'' 
section; and by revising the Signatures section to read as follows:

    Note: The text of Form 10 does not and this amendment will not 
appear in the Code of Federal Regulations.

U.S. Securities and Exchange Commission, Washington, D.C. 20549

Form 10

* * * * *

General Instructions

* * * * *

D. Signature and Filing of Registration Statement

    (a) * * * See Exchange Act Rule 12b-11(d) concerning manual 
signatures and Item 601 of Regulation S-K concerning signatures 
pursuant to powers of attorney.
    (b) The following persons, or persons performing similar 
functions, must sign the registration statement:
    (1) the registrant;
    (2) its principal executive officer or officers;
    (3) its principal financial officer;
    (4) its controller or principal accounting officer; and
    (5) at least the majority of its board of directors.
    (c) Where the registrant is a foreign issuer, its authorized 
representative in the United States also must sign the registration 
statement.
    (d) Where the registrant is a limited partnership, its general 
partner must sign. Where the general partner is a corporation, the 
majority of the board of directors of the corporate general partner 
must sign the registration statement.
    (e) Type or print the name and title of each person who signs 
the registration statement beneath the person's signature. Any 
person who occupies more than one of the specified positions must 
indicate each capacity in which that person signs the registration 
statement.
* * * * *

Form 10--General Form for Registration of Securities Pursuant to 
Section 12 (b) or (g) of the Securities Exchange Act of 1934

* * * * *
      
----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code---------------------

* * * * *

Information Required in Registration Statement

* * * * *

Item 1A. Company Risk Factors

    If the registrant is not required, as of the date of filing, to 
file reports pursuant to Section 13(a), set forth, under the caption 
``Company Risk Factors,'' the most significant factors with respect 
to the registrant's business, operations, industry, or financial 
position that may have a negative impact on the registrant's future 
financial performance. Explain briefly how the risk affects the 
registrant. Do not present risk factors that could apply to any 
registrant. Set forth each risk factor under a caption that 
adequately describes the risk. Provide the discussion of risk 
factors in plain English in accordance with Exchange Act Rule 12b-
24.
* * * * *

Signatures*

    The registrant certifies that it has duly caused and authorized 
the undersigned to sign this registration statement on its behalf. 
The undersigned certifies that he/she has read this registration 
statement and to his/her knowledge the registration statement does 
not contain any untrue statement of a material fact or 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.

(Registrant)-----------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    The following persons certify that they have read this 
registration statement and to their knowledge the registration 
statement does not contain any untrue statement of a material fact 
or 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. The following persons also certify that they 
are signing on behalf of the registrant and in the capacities and on 
the dates indicated.

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    *See General Instruction D.

    121. By amending Form 10-SB (referenced in Sec. 249.210b) by adding 
four lines to the cover page of the registration statement, by adding a 
sentence at the end of General Instruction B.2., General Instruction 
B.3., B.4., B.5. and B.6., and Item 1A. to Part II; and by revising the 
Signatures section to read as follows:

    Note: The text of Form 10-SB does not and these amendments will 
not appear in the Code of Federal Regulations.

[[Page 67324]]

U.S. Securities and Exchange Commission, Washington, D.C. 20549

Form 10-SB

* * * * *

General Instructions

* * * * *
Issuer's telephone number----------------------------------------------

----------------------------------------------------------------------
(Web Site Address, if any)

----------------------------------------------------------------------
(E-mail Address, if any)

* * * * *

B. Signature and Filing of Registration Statement

* * * * *
    2. * * * See Exchange Act Rule 12b-11(d) concerning manual 
signatures and Item 601 of Regulation S-B concerning signatures 
pursuant to powers of attorney.
    3. The following persons, or persons performing similar 
functions, must sign the registration statement:
    (a) The small business issuer;
    (b) Its principal executive officer or officers;
    (c) Its principal financial officer;
    (d) Its controller or principal accounting officer; and
    (e) At least the majority of its board of directors.
    4. Where the small business issuer is a foreign issuer, its 
authorized representative in the United States also must sign the 
registration statement.
    5. Where the small business issuer is a limited partnership, its 
general partner must sign. Where the general partner is a 
corporation, the majority of the board of directors of the corporate 
general partner must sign the registration statement.
    6. Type or print the name and title of each person who signs the 
registration statement beneath the person's signature. Any person 
who occupies more than one of the specified positions must indicate 
each capacity in which that person signs the registration statement.
* * * * *

Part II

* * * * *

Item 1A. Company Risk Factors

    If the registrant is not required, as of the date of filing, to 
file reports pursuant to Section 13(a), set forth, under the caption 
``Company Risk Factors,'' the most significant factors with respect 
to the registrant's business, operations, industry, or financial 
position that may have a negative impact on the registrant's future 
financial performance. Explain briefly how the risk affects the 
registrant. Do not present risk factors that could apply to any 
registrant. Set forth each risk factor under a caption that 
adequately describes the risk. Provide the discussion of risk 
factors in plain English in accordance with Exchange Act Rule 12b-
24.
* * * * *

Signatures*

    The registrant hereby certifies that it meets all of the 
requirements for filing on Form 10-SB. The registrant also certifies 
that it has duly caused and authorized the undersigned to sign this 
registration statement on its behalf. The undersigned certifies that 
he/she has read this registration statement and to his/her knowledge 
the registration statement does not contain any untrue statement of 
a material fact or 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.

(Registrant)-----------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    The following persons certify that they have read this 
registration statement and to their knowledge the registration 
statement does not contain any untrue statement of a material fact 
or 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. The following persons also certify that they 
are signing on behalf of the registrant and in the capacities and on 
the dates indicated.

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    *See General Instruction B.

    122. By amending Form 18 (referenced in Sec. 249.218) by revising 
the title of the Form, by adding four lines to the cover page of the 
registration statement, by revising the ``Rule as to the Use of Form 
18'' section and by adding paragraph 3A. after paragraph 3.(g) to the 
``Definitions'' section to read as follows:

    Note: The text of Form 18 does not and this amendment will not 
appear in the Code of Federal Regulations.

Form 18

* * * * *
(Name, address (including zip code) and telephone number (including 
area code) of agent for service in the United States)

----------------------------------------------------------------------
(Web Site Address, if any)

----------------------------------------------------------------------
(E-mail Address, if any)

* * * * *

Application for Registration Pursuant to Section 12(b) of the 
Securities Exchange Act of 1934

* * * * *

Rule as to the Use of Form 18

    Foreign governments and political subdivisions shall use Form 18 
for registration pursuant to Section 12(b) of the Securities 
Exchange Act of 1934.
* * * * *

Definitions

* * * * *
    3A. If the registrant is not required, as of the date of filing, 
to file reports pursuant to Section 13, set forth, under the caption 
``Risk Factors'': (i) the most significant factors with respect to 
the registrant's financial position; and (ii) country risks that are 
unlikely to be known or anticipated by investors. Explain briefly 
how the risk affects the registrant. Do not present risk factors 
that could apply to any registrant. Set forth each risk factor under 
a caption that adequately describes the risk. Provide the discussion 
of risk factors in plain English in accordance with Exchange Act 
Rule 12b-24.
* * * * *
    123. By amending Form 20-F (referenced in Sec. 249.220f) by adding 
four lines to the cover page of registration statement, by removing in 
General Instruction G.(c) the words ``Forms F-3 (Sec. 239.33 of this 
chapter) or F-2 (Sec. 239.32 of this chapter)'' and adding, in their 
place, the words ``Form B (Sec. 239.5 of this chapter) or Form A 
(Sec. 239.4 of this chapter)'', in Item 1(a)(2)(i) the words ``Form F-1 
(Sec. 239.31 of this chapter)'' and adding, in their place, the words 
``Form A (Sec. 239.4 of this chapter)'', in Item 1(a)(2)(iii)(B)(1) the 
words ``Form F-1'' and adding, in their place, the words ``Form A''; by 
revising paragraph (b) of General Instruction A. and General 
Instruction C.(a); by designating Instruction D. of General 
Instructions as paragraph (a) of Instruction D. of General 
Instructions; by adding a sentence at the end of paragraph (a) of 
Instruction D. of General Instructions, paragraphs (b), (c) and (d) to 
Instruction D. of General Instructions, by revising Item 1.(b); by 
redesignating the Instruction following Item 1.(b) as Instruction 
number 1; by adding Instruction number 2; by revising paragraph D. to 
General Instructions to Items 9A(a), 9A(b), 9A(c), 9A(d) and 9A(e); and 
by revising the Signatures section to read as follows:

    Note: The text of Form 20-F does not and this amendment will not 
appear in the Code of Federal Regulations.

U.S. Securities and Exchange Commission, Washington, D.C. 20549

Form 20-F

* * * * *
----------------------------------------------------------------------
(Address of principal executive offices)

----------------------------------------------------------------------
(Web Site Address, if any)

----------------------------------------------------------------------
(E-mail Address, if any)

* * * * *

General Instructions

A. Rule as to Use of Form 20-F

* * * * *
    (b) A foreign private issuer must file its annual report on this 
Form within five months after the end of the fiscal year covered by 
the report.
* * * * *

[[Page 67325]]

C. Preparation of Registration Statements and Reports

    (a) Do not use this Form as a blank form to be filled in; use it 
only as a guide in the preparation of the registration statement or 
annual report. See General Instruction G. as to the items to be 
responded to in the registration statement or annual report. Where 
any item requires information in tabular form, provide the 
information in substantially the tabular form specified in the item. 
The registration statement or report must contain the numbers and 
captions of all items. The text following each caption in this Form, 
which describes what must be disclosed under each item, may be 
omitted if the disclosure provided in response to each item 
indicates the coverage of the item without the necessity of 
referring to the text. Omit the text of all instructions in this 
Form. Unless expressly provided otherwise, if any item is 
inapplicable or the answer thereto is in the negative, make an 
appropriate statement to that effect.
* * * * *

D. Signature and Filing of Registration Statements and Reports

    (a) * * * See Exchange Act Rule 12b-11(d) concerning manual 
signatures and Item 601 of Regulation S-K concerning signatures 
pursuant to powers of attorney.
    (b) The following persons, or persons performing similar 
functions, must sign the registration statement or report:
    (1) the registrant;
    (2) its principal executive officer or officers;
    (3) its principal financial officer;
    (4) its controller or principal accounting officer;
    (5) at least the majority of its board of directors; and
    (6) its authorized representative in the United States.
    (c) Where the registrant is a limited partnership, its general 
partner must sign. Where the general partner is a corporation, the 
majority of the board of directors of the corporate general partner 
must sign the registration statement or report.
    (d) Type or print the name and title of each person who signs 
the registration statement or report beneath the person's signature. 
Any person who occupies more than one of the specified positions 
must indicate each capacity in which that person signs it.
* * * * *

Part I

    Item 1. Description of Business
* * * * *
    (b) Set forth, under the caption ``Company and Country Risk 
Factors'': (i) the most significant factors with respect to the 
registrant's business, operations, industry, or financial position 
that may have a negative impact on the registrant's future financial 
performance; and (ii) any material country risks that are unlikely 
to be known or anticipated by investors and could materially affect 
the registrant's operations. Explain briefly how the risk affects 
the registrant. Do not present risk factors that could apply to any 
registrant. Set forth each risk factor under a caption that 
adequately describes the risk. Provide the discussion of risk 
factors in plain English in accordance with Exchange Act Rule 12b-
24.

Instructions

    1. * * *
    2. If this Form is being used to register securities, 
registrants that are required, as of the date of filing, to file 
reports pursuant to Section 13(a) need not comply with the 
requirements of paragraph (b) of this Item.
* * * * *

Item 9A. Quantitative and Qualitative Disclosures About Market Risk

* * * * *
    General Instructions to Items 9A(a), 9A(b), 9A(c), 9A(d), and 
9A(e).
* * * * *
    2. * * *
    D. For purposes of paragraph 1. of this Instruction, market 
capitalization is the aggregate market value of common equity as set 
forth in General Instruction I.C.1. of Form B; provided, however 
that common equity held by affiliates is included in the calculation 
of market capitalization; and provided further that the market 
capitalization measurement date is January 28, 1997.
* * * * *

Signatures*

    The registrant hereby certifies that it meets all of the 
requirements for filing on Form 20-F. The registrant also certifies 
that it has duly caused and authorized the undersigned to sign this 
registration statement [report] on its behalf. The undersigned 
certifies that he/she has read this registration statement [report] 
and to his/her knowledge the registration statement [report] does 
not contain any untrue statement of a material fact or 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.
(Registrant)-----------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    The following persons certify that they have read this 
registration statement [report] and to their knowledge the 
registration statement [report] does not contain any untrue 
statement of a material fact or 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. The 
following persons also certify that they are signing below on behalf 
of the registrant and in the capacities and on the dates indicated.

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    *See General Instruction D.
* * * * *
    By amending Sec. 249.240f by revising paragraph (b)(4); and adding 
Instruction 7 to the Instructions following paragraph (b)(4) to read as 
follows:


Sec. 249.240f  Form 40-F, for registration of securities of certain 
Canadian issuers pursuant to Section 12(b) or (g) and for reports 
pursuant to Section 15(d) and Rule 15d-4 (Sec. 240.15d-4 of this 
chapter).

* * * * *
    (b) * * *
    (4) Public Float/ADTV.
    (i) The registrant meets either of the following thresholds:
    (A) The market value of the public float of the registrant's 
outstanding equity shares is $75 million or more and the average 
trading volume value is $1 million or more, or
    (B) The market value of the public float of the registrant's 
outstanding equity shares is $250 million or more.
    (ii) A registrant need not meet either of the thresholds in 
paragraph (b)(4)(i) of this section if it registered or is eligible to 
register non-convertible securities on Form F-9 (Sec. 239.39 of this 
chapter).

Instructions

* * * * *
    7. For the purposes of this Form, ``average daily trading 
volume'' shall mean the average daily trading volume of the 
registrant's equity securities on Canadian markets during the three 
full calendar months or any 90 consecutive calendar days ending 
within 10 calendar days immediately preceding the filing of the 
registration statement.
* * * * *
    125. By amending Form 40-F (referenced in Sec. 249.240f) by adding 
four lines to the cover page of the registration statement, by revising 
paragraph (2)(iv) of General Instruction A.; adding Instruction 7 to 
the Instructions following paragraph (2)(iv) of General Instruction A.; 
revising paragraph (8) and adding paragraph (10) (before the Notes) to 
General Instruction D.; by revising the Signatures section; by 
redesignating Instructions A and B following the Signatures section as 
Instructions D and E; and by adding Instructions A, B and C following 
the Signatures section to read as follows:

    Note: The text of Form 40-F does not and this amendment will not 
appear in the Code of Federal Regulations.

U.S. Securities and Exchange Commission, Washington, D.C. 20549

FORM 40-F--[ ] Registration Statement Pursuant to Seciton 12 of the 
Securities Exchange Act of 1934 or [ ] Annual Report Pursuant to 
Section 13(a) or 15(d) of the Securities Exchange Act of 1934

* * * * *
----------------------------------------------------------------------
(Name, address (including zip code) and telephone number (including 
area code) of agent for service in the United States)

(Web Site Address, if any)--------------------------------------------

(E-mail Address, if any)----------------------------------------------

* * * * *

[[Page 67326]]

General Instructions

* * * * *

A. Rules as to Use of Form 40-F

    (2) * * *
    (iv) Public Float/ADTV.
    (A) The registrant meets either of the following thresholds:
    (1) The market value of the public float of the registrant's 
outstanding equity shares is $75 million or more and the average 
trading volume value is $1 million or more, or
    (2) The market value of the public float of the registrant's 
outstanding equity shares is $250 million or more.
    (B) A registrant need not meet either of the thresholds in 
paragraph A.(2)(iv) of this Instruction if it registered or is 
eligible to register non-convertible securities on Form F-9 
(Sec. 239.39 of this chapter).

Instructions

* * * * *
    7. For the purposes of this Form, ``average daily trading 
volume'' shall mean the average daily trading volume of the 
registrant's equity securities on Canadian markets during the three 
full calendar months or any 90 consecutive calendar days ending 
within 10 calendar days immediately preceding the filing of the 
registration statement.
* * * * *

D. Application of General Rules and Regulations

* * * * *
    (8) At least one copy of every registration statement or report 
filed on this Form shall be signed manually. Unsigned copies shall 
be conformed.
* * * * *
    (10) Where this Form requires a manual signature on a document, 
the document may be manually signed, signed using typed signatures, 
or signed using duplicated or facsimile versions of manual 
signatures. Where typed, duplicated or facsimile signatures are 
used, each signatory must manually sign, no later than the time of 
filing, a signature page or other document authenticating, 
acknowledging or otherwise adopting the signature that appears in 
the filing. That manually signed page or document must be retained 
for five years by the registrant and must be furnished to the 
Commission or its staff upon request.
* * * * *

Signatures

    The registrant hereby certifies that it meets all of the 
requirements for filing on Form 40-F. The registrant also certifies 
that it has duly caused and authorized the undersigned to sign this 
registration statement [report] on its behalf. The undersigned 
certifies that he/she has read this registration statement [report] 
and to his/her knowledge the registration statement [report] does 
not contain any untrue statement of a material fact or 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.

(Registrant)-----------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    The following persons certify that they have read this 
registration statement [report] and to their knowledge the 
registration statement [report] does not contain any untrue 
statement of a material fact or 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. The 
following persons also certify that they are signing below on behalf 
of the registrant and in the capacities and on the dates indicated.

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

Instructions

    A. The following persons, or persons performing similar 
functions, must sign the registration statement or report:
    (1) the registrant;
    (2) its principal executive officer or officers;
    (3) its principal financial officer;
    (4) its controller or principal accounting officer;
    (5) at least the majority of its board of directors; and
    (6) its authorized representative in the United States.
    B. Where the registrant is a limited partnership, its general 
partner must sign. Where the general partner is a corporation, the 
majority of the board of directors of the corporate general partner 
must sign the registration statement or report.
    C. Type or print the name and title of each person who signs the 
registration statement or report beneath the person's signature. Any 
person who occupies more than one of the specified positions must 
indicate each capacity in which that person signs it. See Exchange 
Act Rule 12b-11(d) concerning manual signatures and Item 601 of 
Regulation S-K concerning signatures pursuant to powers of attorney.
* * * * *
    126. By amending Form 6-K (referenced in Sec. 249.306) by 
revising the second paragraph of General Instruction B., by revising 
General Instruction C., by adding General Instruction E., by adding 
four lines to the cover page, a sentence and a check box to the 
cover page immediately before ``Signatures''; and by revising the 
Signatures section to read as follows:

    Note: The text of Form 6-K does not and this amendment will not 
appear in the Code of Federal Regulations.

U.S. Securities and Exchange Commission, Washington, D.C. 20549

Form 6-K

* * * * *

General Instructions

* * * * *

B. Information and Document Required To Be Furnished

* * * * *
    The information required to be furnished pursuant to (i), (ii) 
or (iii) above is that which is material with respect to the issuer 
and its subsidiaries. The information may concern, for example:
    1. Changes in business;
    2. Changes in the issuer's name;
    3. Changes in control;
    4. Acquisitions or dispositions of assets;
    5. Bankruptcy or receivership;
    6. Changes in the issuer's certifying accountants;
    7. The financial condition and results of operations;
    8. Material legal proceedings;
    9. Changes in securities or in the security for registered 
securities;
    10. Material modifications to the rights of security holders;
    11. Material increases or decreases in the amount outstanding of 
securities or indebtedness;
    12. Material defaults on indebtedness, material arrearages in 
dividends and other material delinquencies;
    13. The results of the submission of matters to a vote of 
security holders;
    14. Transactions with directors, officers, or principal security 
holders;
    15. Departure of the issuer's chief executive officer, chief 
financial officer, chief operating officer or president (or anyone 
serving those functions);
    16. The granting of options or payment of other compensation to 
directors or officers; and
    17. Any other information that the issuer deems of importance to 
security holders.
* * * * *

C. Preparation and Filing of Report

    1. This report shall consist of: a cover page, the document or 
report furnished by the issuer and a signature page. Furnish to the 
Commission eight complete copies of each report on this Form. File 
with any national securities exchange or the Nasdaq stock market on 
which any class of the registrant's securities is listed at least 
one complete copy of the report.
    2. The following persons, or persons performing similar 
functions, must sign the report:
    (a) the principal executive officer or officers;
    (b) the principal financial officer;
    (c) the controller or principal accounting officer.
    3. Type or print the name and title of each person who signs the 
report beneath the person's signature. Any person who occupies more 
than one position must indicate each capacity in which that person 
signs it. See Exchange Act Rule 12b-11(d) concerning manual 
signatures and Item 601 of Regulation S-K concerning signatures 
pursuant to powers of attorney.
* * * * *

E. Voluntary Reporting of Other Events of Information

    A foreign private issuer also may use this Form to disclose 
voluntarily events and

[[Page 67327]]

information that it believes may be of interest or importance to its 
security holders. We encourage foreign private issuers to submit 
voluntary reports on this Form promptly after they learn about the 
information they are disclosing.
* * * * *

Form 6-K

----------------------------------------------------------------------
(Address of principal executive offices)

----------------------------------------------------------------------
(Web Site Address, if any)

----------------------------------------------------------------------
(E-mail Address, if any)

* * * * *
    If you are submitting information voluntarily pursuant to 
General Instruction E., check the following box. [  ]

Signatures *

    The registrant hereby certifies that it meets all of the 
requirements for filing on Form 6-K. The registrant also certifies 
that it has duly caused and authorized the undersigned to sign this 
report on its behalf. The undersigned certifies that he/she has read 
this report and to his/her knowledge the report does not contain any 
untrue statement of a material fact or 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. The 
undersigned also certifies that he/she has provided a copy of this 
report to each member of the registrant's board of directors.

(Registrant)-----------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    * See General Instruction C.

    By amending Form 8-K (referenced in Sec. 249.308) by adding four 
lines to the cover page, by revising General Instruction B.1.; by 
redesignating General Instructions B.3. and B.4. as General 
Instructions B.2. and B.3.; by revising General Instruction E., 
paragraph (a) and the Instruction following paragraph (b) of Item 4; by 
adding Items 10, 11, 12, 13 and 14; and by revising the Signatures 
section to read as follows:

    Note: The text of Form 8-K does not and these amendments will 
not appear in the Code of Federal Regulations.

U.S. Securities and Exchange Commission, Washington, D.C. 20549

Form 8-K--Current Report

* * * * *
Registrant's telephone number, including area code

----------------------------------------------------------------------
(Web Site Address, if any)

----------------------------------------------------------------------
(E-mail Address, if any)
* * * * *

General Instructions

* * * * *

B. Events To Be Reported and Time for Filing of Reports

    1. The date on which a report required by this Form is due is as 
follows:
    (a) With respect to Items 1-3, 6, 9, 10, and 13 of this Form, 
within 5 calendar days after the occurrence of the event;
    (b) With respect to Item 7 of this Form, in accordance with 
paragraph (a)(4) of that Instruction;
    (c) With respect to Item 8 of this Form, within 5 calendar days 
after the date on which the registrant makes the determination to 
use a fiscal year end different than that used in its most recent 
filing with the Commission; and
    (d) With respect to Items 4, 11 and 12 of this Form, within one 
business day after the reportable event occurred. In the case of 
Item 11, if the default occurred on a Saturday, Sunday or federal 
holiday, the due date would be within two business days after the 
day the default occurred.
    (e) With respect to Item 14 of this Form:
    (1) The date on which financial information for the registrant's 
most recent fiscal year is publicly released, but no later than 60 
calendar days after the end of that fiscal year; and
    (2) The date on which financial information for the registrant's 
most recent quarter (except for the last quarter of any fiscal year) 
is publicly released, but no later than 30 calendar days after the 
end of that quarter.
    Instruction to General Instruction B.1.(e):
    No report under Item 14 is due, however, if the registrant has 
filed its Form 10-Q (or Form 10-QSB) or Form 10-K (or Form 10-KSB) 
for the period that is required to be presented in the Item 14 
report.
* * * * *

E. Signature and Filing of Report

    1. File with the Commission three complete copies of the report, 
including any financial statements, exhibits or other papers or 
documents filed as a part thereof, and five additional copies which 
need not include exhibits. File with any national securities 
exchange or the Nasdaq stock market on which any class of the 
registrant's securities is listed at least one complete copy of the 
report, including any financial statements, exhibits or other 
documents filed as a part of it.
    2. The following persons, or persons performing similar 
functions, must sign the report:
    (a) The principal executive officer or officers;
    (b) The principal financial officer; and
    (c) The controller or principal financial officer.
    3. Type or print the name and title of each person who signs the 
report beneath the person's signature. Any person who occupies more 
than one position must indicate each capacity in which that person 
signs it. See Exchange Act Rule 12b-11(d) concerning manual 
signatures and Item 601 of Regulation S-K concerning signatures 
pursuant to powers of attorney.
* * * * *

Item 4. Changes in Registrant's Certifying Accountant

    (a) Provide the information required by Item 304(a)(1) of 
Regulation S-K, including compliance with the related instructions 
to Item 304 and with Item 304(a)(3), if the registrant's principal 
independent accountant or a significant subsidiary's independent 
accountant upon whom the registrant's principal accountant expressed 
reliance in its report:
    (1) resigns;
    (2) declines to stand for re-election after the current audit;
    (3) is dismissed;
    (4) notifies the registrant that reliance on its prior audit 
report with respect to the registrant or a significant subsidiary is 
no longer permissible; or
    (5) notifies the registrant that it will not consent to the use 
of its prior audit report with respect to the registrant or a 
significant subsidiary in a filing with the Commission.
    (b) * * *
    Instruction. The events described in paragraphs (a)(1)--(a)(5) 
are reportable events separate from the engagement of a new 
independent accountant. On some occasions involving a change in 
accountants, two reports on Form 8-K will be required. (For example, 
the registrant may file the first Form 8-K upon the accountant's 
resignation and the second Form 8-K upon the later engagement of a 
new accountant.) Under such circumstances, the registrant need not 
disclose information ordinarily required in the second Form 8-K if 
it was previously disclosed in the first Form 8-K.
* * * * *

Item 10. Material Modifications to the Rights of Security Holders

    (a) If the instruments defining the rights of holders of any 
class of registered securities have been materially modified, 
identify the class of securities involved and state briefly the 
general effect of the modification upon those holders' rights.
    (b) If the rights evidenced by any class of registered 
securities have been materially limited or qualified by the issuance 
or modification of any other class of securities, state briefly the 
general effect of the issuance or modification upon the rights of 
holders of the registered securities.
    Instruction. Working capital restrictions and other limitations 
upon the payment of dividends are to be reported pursuant to Item 9.

Item 11. Defaults, Dividend Arrearages and Delinquencies

    (a) Disclose the information required by paragraph (b) of this 
Item if, with respect to indebtedness of the registrant or any of 
its significant subsidiaries exceeding 5% of the total assets of the 
registrant and its consolidated subsidiaries, there has been:
    (1) any material default in the payment of principal, interest, 
a sinking or purchase fund installment; or
    (2) any other material default.
    (b) Identify the indebtedness and state the nature of the 
default. In the case of such a default under paragraph (a)(1), state 
the amount of the default and the total arrearage on the date of 
filing this report.

[[Page 67328]]

    Instruction. Paragraph (a) refers only to events that have 
become defaults under the governing instruments, i.e., after the 
expiration of any grace period and compliance with any notice 
requirements.
    (c) Disclose the information required by paragraph (d) of this 
Item if there is any material arrearage in the payment of dividends 
or any other material delinquency with respect to:
    (1) Any class of the registrant's preferred stock that is 
registered;
    (2) Any class of the registrant's preferred stock that ranks 
prior to any class of the registrant's securities that is 
registered; or
    (3) Any class of preferred stock of any significant subsidiary 
of the registrant.
    (d) State the title of the class and state the nature of the 
arrearage or delinquency. In the case of an arrearage in the payment 
of dividends, state the amount and the total arrearage as of the 
date of filing this report.
    Instruction to Item 11. You need not report under this Item 
defaults or dividend arrearages relating to any class of securities 
all of which is owned by, or for the account of, the registrant or 
its wholly-owned subsidiaries.

Item 12. Departure of Registrant's Key Officers

    If the registrant's chief executive officer, chief financial 
officer, chief operating officer, president or any person serving an 
equivalent function, has ceased serving the registrant in that 
capacity:
    (a) State the date when that occurred;
    (b) Indicate the reason for his or her departure; and
    (c) State the name of any person chosen, to date, as a 
replacement.

Item 13. Name Change

    If the registrant has changed its name, state both the former 
name and the current name of the registrant.

Item 14. Annual and Quarterly Financial Information

    (a) Provide the financial information required by Item 301 of 
Regulation S-K, in a table designed to facilitate comparison, for 
the following periods:
    (1) If the most recently completed fiscal period was the 
registrant's fiscal year:
    (i) The most recently fiscal year ended; and
    (ii) The preceding fiscal year (or for the life of the 
registrant and its predecessor, if less).
    (2) If the most recently completed fiscal period was one of the 
first three quarters of the registrant's fiscal year:
    (i) The most recent fiscal quarter ended;
    (ii) The quarterly periods between the end of the last fiscal 
year and the end of the most recent fiscal quarter; and
    (iii) The periods of the preceding fiscal year corresponding to 
the periods referred to in paragraphs (a)(2)(i) and (a)(2)(ii).
    Instructions to Item 14.
    The financial information required by this Item means the 
financial information for the registrant and its subsidiaries on a 
consolidated basis. The financial information may be unaudited.

Signatures*

    The registrant certifies that it has duly caused and authorized 
the undersigned to sign this report on its behalf. The undersigned 
certifies that he/she has read this report and to his/her knowledge 
the report does not contain any untrue statement of a material fact 
or 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. The undersigned also certifies that he/she has 
provided a copy of this report to each member of the registrant's 
board of directors.

(Registrant)-----------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    * See General Instruction E.

    128. By amending Form 10-Q (referenced in Sec. 249.308a) by 
revising General Instructions A., F., G., and H.2.b.; by adding four 
lines to the cover page, by adding Item 1A. to Part II; and in Part II, 
Item 2 by revising the heading, by removing paragraphs (a) and (b) and 
the Instruction following paragraph (d), and by redesignating 
paragraphs (c) and (d) as paragraphs (a) and (b); by removing Item 3 of 
Part II; by redesignating Items 4, 5 and 6 of Part II as Items 3, 4 and 
5 of Part II; and by revising the Signatures section to read as 
follows:

    Note: The text of Form 10-Q does not and this amendment will not 
appear in the Code of Federal Regulations.

U.S. Securities and Exchange Commission, Washington, D.C. 20549

Form 10-Q

* * * * *

General Instructions

A. Rule as to Use of Form 10-Q

    1. Unless eligible to use Form 10-QSB, a registrant must use 
Form 10-Q for quarterly reports under Section 13 or 15(d) of the 
Securities Exchange Act of 1934 as required by Exchange Act Rule 
13a-13 or Rule 15d-13. A registrant must file a quarterly report on 
this Form within 45 days after the end of each of the first three 
fiscal quarters of each fiscal year. It need not file a quarterly 
report for the fourth quarter of any fiscal year.
    2. Unless eligible to use Form 10-QSB, a registrant also must 
use Form 10-Q for transition and quarterly reports under Exchange 
Act Rule 13a-10 or Rule 15d-10. It must file those reports in 
accordance with the requirements set forth in those Rules which are 
applicable when a registrant changes its fiscal year end.
* * * * *

F. Filed Status of Market Risk Disclosure in the Form 10-Q

    Pursuant to Exchange Act Rule 13a-13(d) and Rule 15d-13(d), 
market risk disclosures required by Item 3 of Part I of this Form 
are not deemed to be ``filed'' for purposes of Section 18 of the 
Act. That disclosure is therefore not subject to the liabilities of 
Section 18. Disclosure required by other Items of the Form is 
``filed'' for purposes of Section 18, however, even if it is also 
required by Item 3 of Part I of the Form. Market risk disclosure 
required by Item 3 of Part I of this Form is subject to all other 
provisions of the Act.

G. Signature and Filing of Report

    1. File with the Commission three complete copies of the report, 
including any financial statements, exhibits or other papers or 
documents filed as a part thereof, and five additional copies which 
need not include exhibits. File with each exchange or the Nasdaq 
stock market on which any class of securities of the registrant is 
registered at least one complete copy of the report, including any 
financial statements, exhibits or other papers or documents filed as 
a part thereof. Manually sign at least one complete copy of the 
report filed with the Commission and with each exchange or market. 
Type or print signatures on copies not manually signed. See Exchange 
Act Rule 12b-11(d) concerning manual signatures and Item 601 of 
Regulation S-K concerning signatures pursuant to powers of attorney.
    2. The following persons, or persons performing similar 
functions, must sign the report:
    a. The registrant;
    b. Its principal executive officer or officers;
    c. Its principal financial officer;
    d. Its controller or principal accounting officer; and
    e. At least the majority of its board of directors.
    3. Where the registrant is a foreign issuer, its authorized 
representative in the United States also must sign the report.
    4. Where the registrant is a limited partnership, its general 
partner must sign. Where the general partner is a corporation, the 
majority of the board of directors of the corporate general partner 
must sign the report.
    5. Type or print the name and title of each person who signs the 
report beneath the person's signature. Any person who occupies more 
than one of the specified positions must indicate each capacity in 
which that person signs it.

H. Omission of Information by Certain Wholly-Owned Subsidiaries

* * * * *
    2. * * *
    b. Such registrants may omit the information called for by Item 
2 of Part II, Sales of Securities and Use of Proceeds, and Item 3. 
of Part II, Submission of Matters to a Vote of Security Holders.
* * * * *

Form 10-Q

* * * * *
----------------------------------------------------------------------
(Registrant's telephone number, including area code)

----------------------------------------------------------------------
(Web Site Address, if any)

----------------------------------------------------------------------
(E-mail Address, if any)

* * * * *

Part II--Other Information:

* * * * *

[[Page 67329]]

Item 1A. Updated Company Risk Factors

    Set forth any material disclosure regarding company risk factors 
(as described in Item 1A. of Part I of Form 10-K) that either was 
not included in the later of the registrant's most recent Securities 
Act registration statement or Exchange Act annual report, or has 
changed since the date of that registration statement or annual 
report. Set forth each risk factor under a caption that adequately 
describes the risk. Provide the discussion of risk factors in plain 
English in accordance with Exchange Act Rule 12b-24.

Item 2. Sales of Securities and Use of Proceeds

* * * * *

Signatures *

    The registrant certifies that it has duly caused and authorized 
the undersigned to sign this report on its behalf. The undersigned 
certifies that he/she has read this report and to his/her knowledge 
the report does not contain any untrue statement of a material fact 
or 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.

(Registrant)-----------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    The following persons certify that they have read this report 
and to their knowledge the report does not contain any untrue 
statement of a material fact or 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. The 
following persons also certify that they are signing below on behalf 
of the registrant and in the capacities and on the dates indicated.

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    * See General Instruction G.

    129. By amending Form 10-QSB (referenced in Sec. 249.308b) by 
adding four lines to the cover page; by removing General Instruction 
E.; by redesignating General Instructions F., G. and H. as General 
Instructions E., F. and G.; in newly designated General Instructions E, 
F and G, by revising the first sentence of E.1. and E.2.; by adding 
E.3., E.4., E.5. and E.6.; by revising General Instruction F.2.(b); by 
adding a title and removing the words ``Item 6(a)'' and adding, in 
their place, the words ``Item 5(a)'' in General Instruction G.; in Part 
II, by adding Item 1A; by revising the title in Item 2; by removing 
paragraphs (a) and (b) and the Instruction to Item 2 following 
paragraph (d) and redesignating paragraphs (c) and (d) as paragraphs 
(a) and (b); by removing Item 3; and redesignating Items 4, 5 and 6 as 
Items 3, 4 and 5; and by revising the Signatures section to read as 
follows:

    Note: The text of Form 10-QSB does not and this amendment will 
not appear in the Code of Federal Regulations.

U.S. Securities and Exchange Commission, Washington, D.C. 20549

Form 10-QSB

* * * * *
----------------------------------------------------------------------
(Registrant's telephone number, including area code)

----------------------------------------------------------------------
(Web Site Address, if any)

----------------------------------------------------------------------
(E-mail Address, if any)

* * * * *

General Instructions

* * * * *

E. Signature and Filing of Report

    1. File three ``complete'' copies and five ``additional'' copies 
of the report with the Commission and file at least one complete 
copy with each exchange or the Nasdaq stock market on which any 
class of securities of the registrant is registered. * * *
    2. Manually sign at least one complete copy of the report filed 
with the Commission and with each exchange or market. Type or print 
signatures on copies not manually signed. See Exchange Act Rule 12b-
11 concerning manual signatures and Item 601 of Regulation S-B 
concerning signatures pursuant to powers of attorney.
    3. The following persons, or persons performing similar 
functions, must sign the report:
    (a) The small business issuer;
    (b) Its principal executive officer or officers;
    (c) Its principal financial officer;
    (d) Its controller or principal accounting officer; and
    (e) At least the majority of its board of directors.
    4. Where the small business issuer is a foreign issuer, its 
authorized representative in the United States also must sign the 
report.
    5. Where the small business issuer is a limited partnership, its 
general partner must sign. Where the general partner is a 
corporation, the majority of the board of directors of the corporate 
general partner must sign the report.
    6. Type or print the name and title of each person who signs the 
report beneath the person's signature. Any person who occupies more 
than one of the specified positions must indicate each capacity in 
which that person signs.

F. Omission of Information by Certain Wholly-Owned Subsidiaries

* * * * *
    2. * * *
    b. Such registrants may omit the information called for by Items 
2 and 3 of Part II.

G. Exhibits

* * * * *

Part II--Other Information:

* * * * *

Item 1A. Updated Company Risk Factors

    Set forth any material disclosure regarding company risk factors 
(as described in Item 1A. of Form 10-KSB) that either was not 
included in the later of the registrant's most recent Securities Act 
registration statement or Exchange Act annual report, or has changed 
since the date of that registration statement or annual report. Set 
forth each risk factor under a caption that adequately describes the 
risk. Provide the discussion of risk factors in plain English in 
accordance with Exchange Act Rule 12b-24.

Item 2. Sales of Securities and Use of Proceeds

* * * * *

Signatures*

    The registrant hereby certifies that it meets all of the 
requirements for filing on Form 10-QSB. The registrant also 
certifies that it has duly caused and authorized the undersigned to 
sign this report on its behalf. The undersigned certifies that he/
she has read this report and to his/her knowledge the report does 
not contain any untrue statement of a material fact or 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.

(Registrant)-----------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    The following persons certify that they have read this report 
and to their knowledge the report does not contain any untrue 
statement of a material fact or 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. The 
following persons also certify that they are signing below on behalf 
of the registrant and in the capacities and on the dates indicated.

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    *See General Instruction F.

    130. By amending Form 10-K (referenced in Sec. 249.310) by 
revising General Instruction D.(1) and D.(2); by redesignating 
General Instruction D.(3) as General Instruction D.(7); by adding 
General Instructions D.(3), D.(4), D.(5) and D.(6); by revising the 
first two sentences of General Instruction G.(4); by adding four 
lines to the cover page; in Part I, by adding Item 1A. and by 
revising Item 2 and the Signatures section to read as follows:

    Note: The text of Form 10-K does not and this amendment will not 
appear in the Code of Federal Regulations.

U.S. Securities and Exchange Commission, Washington, D.C. 20549

Form 10-K

* * * * *

[[Page 67330]]

General Instructions

* * * * *

D. Signature and Filing of Report

    (1) File with the Commission three complete copies of the 
report, including any financial statements, exhibits or other papers 
or documents filed as a part thereof, and five additional copies 
which need not include exhibits. File with each exchange or the 
Nasdaq stock market on which any class of securities of the 
registrant is registered at least one complete copy of the report, 
including any financial statements, exhibits or other papers or 
documents filed as a part thereof.
    (2) Manually sign at least one complete copy of the report filed 
with the Commission and with each exchange or market. Type or print 
signatures on copies not manually signed. See Exchange Act Rule 12b-
11(d) concerning manual signatures and Item 601 of Regulation S-K 
concerning signatures pursuant to powers of attorney.
    (3) The following persons, or persons performing similar 
functions, must sign the report:
    (a) The registrant;
    (b) Its principal executive officer or officers;
    (c) Its principal financial officer;
    (d) Its controller or principal accounting officer; and
    (e) At least the majority of its board of directors.
    (4) Where the registrant is a foreign issuer, its authorized 
representative in the United States also must sign the report.
    (5) Where the registrant is a limited partnership, its general 
partner must sign. Where the general partner is a corporation, the 
majority of the board of directors of the corporate general partner 
must sign the report.
    (6) Type or print the name and title of each person who signs 
the report beneath the person's signature. Any person who occupies 
more than one of the specified positions must indicate each capacity 
in which that person signs it.
* * * * *

G. Information To Be Incorporated by Reference

* * * * *
    (4) Although Exchange Act Rule 12b-13 requires that this report 
contain the numbers and captions of all items, the material 
incorporated by reference into the report generally need not contain 
the numbers and captions. You must, however, caption the information 
provided in response to Item 1A. as ``Company Risk Factors'' even 
when incorporated by reference.
     * * *
* * * * *

Form 10-K

* * * * *
----------------------------------------------------------------------
(Issuer's telephone number, including area code)

----------------------------------------------------------------------
(Web Site Address, if any)

----------------------------------------------------------------------
(E-mail Address, if any)

* * * * *

Part I

* * * * *

Item 1A. Company Risk Factors

    Set forth, under the caption ``Company Risk Factors,'' the most 
significant factors with respect to the registrant's business, 
operations, industry, or financial position that may have a negative 
impact on the registrant's future financial performance. Explain 
briefly how the risk affects the registrant. Do not present risk 
factors that could apply to any registrant. Set forth each risk 
factor under a caption that adequately describes the risk. Provide 
the discussion of risk factors in plain English in accordance with 
Exchange Act Rule 12b-24.

Item 2. Properties

    (a) Furnish the information required by Item 102 of Regulation 
S-K; and
    (b) If the registrant is a real estate entity as defined in Item 
1101 of Regulation S-K, furnish the information required by Items 
1105, 1106 and 1107 of Regulation S-K in lieu of the information 
required by paragraph (a) of this Item.
* * * * *

Signatures*

    The registrant certifies that it has duly caused and authorized 
the undersigned to sign this report on its behalf. The undersigned 
certifies that he/she has read this report and to his/her knowledge 
the report does not contain any untrue statement of a material fact 
or 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.

(Registrant)-----------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    The following persons certify that they have read this report 
and to their knowledge the report does not contain any untrue 
statement of a material fact or 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. The 
following persons also certify that they are signing below on behalf 
of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    *See General Instruction D.

* * * * *
    131. By amending Form 10-KSB (referenced in Sec. 249.310b) by 
adding four lines to the cover page; in General Instruction C, by 
revising the first sentence and removing the last sentence of C.1.; 
by revising C.2.; by redesignating C.3. as C.7.; by adding General 
Instructions C.3., C.4., C.5. and C.6.; by revising the first two 
sentences of General Instruction E.4.; by removing the words ``S-4'' 
and adding, in their place, the words ``SB-3''; by removing the 
words ``S-3 (if the issuer incorporates by reference transitional 
Exchange Act reports)'' in General Instruction H.(b); by adding Item 
1A. to Part I, by adding Item 1A. to Part II of the ``Information 
Required in Annual Report of Transitional Small Business Issuers'' 
section; and by revising the Signatures section to read as follows:

    Note: The text of Form 10-KSB does not and this amendment will 
not appear in the Code of Federal Regulations.

U.S. Securities and Exchange Commission, Washington, D.C. 20549

Form 10-KSB

* * * * *
----------------------------------------------------------------------
(Registrant's telephone number, including area code)

----------------------------------------------------------------------
(Web Site Address, if any)

----------------------------------------------------------------------
(E-mail Address, if any)

* * * * *

General Instructions

* * * * *

C. Signature and Filing of Report

* * * * *
    1. File three ``complete'' copies and five ``additional'' copies 
of the report with the Commission and file at least one complete 
copy with each exchange or the Nasdaq stock market on which any 
class of securities of the registrant is registered. * * *
    2. Manually sign at least one complete copy of the report filed 
with the Commission and with each exchange or market. Type or print 
signatures on copies not manually signed. See Exchange Act Rule 12b-
11 concerning manual signatures and Item 601 of Regulation S-B 
concerning signatures pursuant to powers of attorney.
    3. The following persons, or persons performing similar 
functions, must sign the report:
    (a) The small business issuer;
    (b) Its principal executive officer or officers;
    (c) Its principal financial officer;
    (d) Its controller or principal accounting officer; and
    (e) At least the majority of its board of directors.
    4. Where the small business issuer is a foreign issuer, its 
authorized representative in the United States also must sign the 
report.
    5. Where the small business issuer is a limited partnership, its 
general partner must sign. Where the general partner is a 
corporation, the majority of the board of directors of the corporate 
general partner must sign the report.
    6. Type or print the name and title of each person who signs the 
report beneath the person's signature. Any person who occupies more 
than one of the specified positions must indicate each capacity in 
which that person signs.
* * * * *

[[Page 67331]]

E. Information To Be Incorporated by Reference

* * * * *
    4. Although Exchange Rule 12b-13 requires that this report 
contain the numbers and captions of all items, the material 
incorporated by reference into the report generally need not contain 
the numbers and captions. You must, however, caption the information 
provided in response to Item 1A. as ``Company Risk Factors'' even 
when incorporated by reference.
* * * * *

Part I

* * * * *

Item 1A. Company Risk Factors

    Set forth, under the caption ``Company Risk Factors,'' the most 
significant factors with respect to the registrant's business, 
operations, industry, or financial position that may have a negative 
impact on the registrant's future financial performance. Explain 
briefly how the risk affects the registrant. Do not present risk 
factors that could apply to any registrant. Set forth each risk 
factor under a caption that adequately describes the risk. Provide 
the discussion of risk factors in plain English in accordance with 
Exchange Act Rule 12b-24.
* * * * *

Information Required in Annual Report of Transitional Small Business 
Issues

* * * * *

Part II

* * * * *

Item 1A. Company Risk Factors

    Set forth, under the caption ``Company Risk Factors,'' the most 
significant factors with respect to the registrant's business, 
operations, industry, or financial position that may have a negative 
impact on the registrant's future financial performance. Explain 
briefly how the risk affects the registrant. Do not present risk 
factors that could apply to any registrant. Set forth each risk 
factor under a caption that adequately describes the risk. Provide 
the discussion of risk factors in plain English in accordance with 
Exchange Act Rule 12b-24.
* * * * *

Signatures *

    The registrant hereby certifies that it meets all of the 
requirements for filing on Form 10-KSB. The registrant also 
certifies that it has duly caused and authorized the undersigned to 
sign this report on its behalf. The undersigned certifies that he/
she has read this report and to his/her knowledge the report does 
not contain any untrue statement of a material fact or 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.

(Registrant)-----------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    The following persons certify that they have read this report 
and to their knowledge the report does not contain any untrue 
statement of a material fact or 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. The 
following persons also certify that they are signing on behalf of 
the registrant and in the capacities and on the dates indicated.

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

By (Signature and Title)-----------------------------------------------

Date-------------------------------------------------------------------

    * See General Instruction C.

* * * * *
    132. By amending Form 18-K (referenced in Sec. 249.318) by adding 
paragraph 1A., by revising the ``Rule as to Use of Form 18-K'' section 
of the Instruction Book for Form 18-K, and by revising Instructions 1. 
and 3.(a) of the ``Instructions as to the Preparation and Filing of the 
Report'' section to read as follows:

    Note: The text of Form 18-K does not and this amendment will not 
appear in the Code of Federal Regulations.

Form 18-K

* * * * *
    1A. Set forth, under the caption ``Risk Factors'': (i) the most 
significant factors with respect to the registrant's financial 
position; and (ii) country risks that are unlikely to be known or 
anticipated by investors. Explain briefly how the risk affects the 
registrant. Do not present risk factors that could apply to any 
registrant. Set forth each risk factor under a caption that 
adequately describes the risk. Provide the discussion of risk 
factors in plain English in accordance with Exchange Act Rule 12b-
24.
* * * * *

Instruction Book for Form 18-K

* * * * *

Rule as to Use of Form 18-K

    This Form is to be used for the annual reports of foreign 
governments and political subdivisions thereof.

Instructions as to the Preparation and Filing of the Report

    1. Registrants shall file annual reports on this Form within 
nine months of the close of each fiscal year of the registrant.
    2. * * *
    3.(a) The registrant shall file the report on good quality, 
unglazed, white paper no larger than 8\1/2\  x  11 inches in size. 
If reduction of larger documents would render them illegible, the 
registrant may file such documents on paper larger than 8\1/2\  x  
11 inches in size. The registrant may bind the report on the left.
* * * * *
    By the Commission.

    Dated: November 13, 1998.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-31045 Filed 12-3-98; 8:45 am]
BILLING CODE 8010-01-P