[Federal Register Volume 66, Number 183 (Thursday, September 20, 2001)]
[Notices]
[Pages 48494-48495]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-23463]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 44791]
Emergency Order Pursuant to Section 12(k)(2) of the Securities
Exchange Act of 1934 Taking Temporary Action To Respond to Market
Developments
September 14, 2001.
The United States securities markets are the world's strongest and
most vibrant. The Commission has full confidence that the attacks of
September 11, 2001, will have little lasting market impact. To that
end, the Commission seeks to serve investors and the markets through
all available means to facilitate the reopening of fair and orderly
markets.
Section 12(k)(2) of the Securities Exchange Act of 1934 (``Exchange
Act'') grants the Commission the authority, in the event of certain
major market disturbances, to issue summarily order to alter,
supplement, suspend, or impose requirements or restrictions with
respect to matters or actions subject to regulation by the Commission.
On September 11, 2001, the U.S. equities and options markets determined
not to open in light of the attacks that morning. The U.S. equities and
options markets have remained closed since then. Based on all available
information, the Commission has determined that:
(1) Uncertainty concerning the impact of the closure of the U.S.
equities and options markets constitutes a major market disturbance
characterized by ``sudden and excessive fluctuations of securities
prices generally, or a substantial threat thereof, that threatens fair
and orderly markets.'' \1\ In particular, the Commission seeks to
ensure that, when the U.S. equities and options markets reopen for
trading, they will not be confronted with undue order imbalances.
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\1\ This finding of an ``emergency'' is solely for purposes of
Section 12(k)(2) of the Exchange Act and is not intended to have any
other effect or meaning or to confer any right or impose any
obligation.
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(2) Purchases by registrants of their own securities can represent
an important source of liquidity during times of market volatility.
Registrants may be reluctant to engage in such purchases, however,
because of certain securities law requirements. In particular, Exchange
Act Rule 10b-18 provides registrants with a safe harbor to effect
repurchases, but only if the repurchases meet the conditions specified
in the Rule. Certain registrants that recently engaged in or initiated
business combinations that otherwise qualify for pooling-of-interests
treatment under generally accepted accounting principles also may be
reluctant to effect repurchases. In this regard, Regulation S-X,
Article 4 (Rules of General Application), Part 4-01, provides in
pertinent part that, ``Financial statements filed with the Commission
which are not prepared in accordance with generally accepted accounting
principles will be presumed to be misleading or inaccurate, despite
footnote or other disclosures, unless the Commission has otherwise
provided.''
(3) The Commission understands that some registrants may have
internal policies relating to purchases of the registrant's securities
during specific time periods. These policies are designed to prevent
violations of the antifraud provisions of the federal securities laws.
While the antifraud provisions remain in effect, a registrant's failure
to comply with those timing policies for purchases by the registrant of
its securities during the period covered by the Order will not by
itself be considered as any indication that the registrant may have
violated the antifraud provisions. In addition, certain persons may
refrain from purchase activity that otherwise serves the public
interest because of concern about potential profit recovery under
Section 16(b) of the Exchange Act.
(4) Temporary action with respect to the conditions of Rule 10b-18,
the application of Article 4 of Regulation S-X,\2\ and the operation of
certain other provisions of the federal securities laws will provide
additional flexibility and certainty to registrants and others that
consider engaging in purchases of securities when the U.S. equities and
options markets reopen for trading. Accordingly, these temporary
measures are in the public interest and for the protection of investors
in order to maintain or restore fair and orderly securities markets.
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\2\ While our authority to supplement Regulation S-X in this
context is derived from the Exchange Act, we acknowledge that our
action will affect filings under other provisions of the securities
laws that require filings to be in compliance with Regulation S-X.
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[[Page 48495]]
Therefore, It Is Ordered, pursuant to Section 12(k)(2) of the
Exchange Act, that,
In connection with a Rule 10b-18 purchase \3\ or with a Rule 10b-18
bid that is made during the period covered by this Order by the use of
any means or instrumentality of interstate commerce or of the mails, or
of any facility of any national securities exchange, an issuer, or an
affiliated purchaser of the issuer, shall not be deemed to have
violated Section 9(a)(2) of the Exchange Act or Rule 10b-5 under the
Exchange Act, solely by reason of the time or price at which its Rule
10b-18 bids or Rule 10b-18 purchases are made or the amount of such
bids or purchases or the number of brokers or dealers used in
connection with such bids or purchases if the issuer or affiliated
purchaser of the issuer meets all of the conditions in Rule 10b-18,
with the exception that:
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\3\ Terms used in this order have the same meanings as those
terms used in Exchange Act Rule 10b-18 unless stated otherwise.
Issuers repurchasing their shares pursuant to this Order may qualify
for the safe harbor notwithstanding the fact that they may have
shareholders selling shares pursuant to a shelf registration, so
long as any selling shareholder is not an affiliate of the issuer
or, if affiliated, the selling activity does not rise to the level
of a distribution under Regulation M. 17 CFR 242. 100 et seq.
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(i) The timing condition in paragraph (b)(2) may be satisfied if
the issuer makes Rule 10b-18 purchases without regard to whether any
such Rule 10b-18 purchase constitutes the opening transaction in a
reported or exchange traded security or whether any such purchase would
occur during the one-half hour before the scheduled close of trading on
the primary market for such security; and
(ii) The volume condition in paragraph (b)(4) may be satisfied if
the issuer makes all Rule 10b-18 purchases other than block purchases
of a reported or exchange traded security in an amount that, when added
to the amount of all other Rule 10b-18 purchases, other than block
purchases, from or through a broker or dealer effected by or for the
issuer or an affiliated purchaser of the issuer on that day, does not
exceed 100 percent of the trading volume (determined on the basis of
the 4 calendar weeks preceding the week beginning on September 10,
2001) for the security; and
It Is Further Ordered, That,
Notwithstanding the pooling-of-interests provisions in Accounting
Principles Board Opinion No. 16, Business Combinations, and the related
interpretations of the American Institute of Certified Public
Accountants, consensuses of the Financial Accounting Standards Board's
Emerging Issues Task Force, rules and regulations of the Commission and
interpretations by its staff, and other authoritative accounting
guidance, acquisitions by registrants of their own equity securities
during the period covered by this Order will not affect the
availability of pooling-of-interests accounting and, accordingly, a
registrant's financial statements will not be misleading or inaccurate
solely because the registrant has engaged in such purchases and has
accounted for its business combination transactions as a pooling of
interests; and
It Is Further Ordered, That,
Notwithstanding the profit recovery provisions of Section 16(b) of
the Exchange Act and the rules adopted under it, any purchase during
the period covered by this Order by a person subject to Section 16
shall be exempt from the operation of that section with respect to any
sale by that person during the preceding six months, and accordingly
shall not be matched with such sale. The purchase continues to be
reportable on Form 4 under Section 16(a) of the Exchange Act. The Form
4 should use transaction code ``J'' and describe the transaction in a
footnote, making specific reference to this Order; and
It Is Further Ordered, That,
Broker-dealers need not treat the 11th, 12th, 13th and 14th of
September, 2001 as business or calendar days for purposes of
calculating charges or taking actions under Rules 15c3-1 and 15c3-3
arising from failed transactions or imbalances in securities accounting
systems, or for the purposes of FOCUS reporting; and
It Is Further Ordered, That,
Broker-dealers that are required to do a reserve computation
(including PAIB) for the week ending September 14, 2001 under Rule
15c3-3 will not be required to do such a computation, provided they do
not withdraw money from their reserve bank account without first doing
a computation.
This Order shall be effective with respect to the five business
days beginning on the date of the first reopening of trading on the
U.S. equities and options markets after September 11, 2001.
By the Commission.
Jonathan G. Katz,
Secretary.
[FR Doc. 01-23463 Filed 9-19-01; 8:45 am]
BILLING CODE 8010-01-M