[Federal Register Volume 66, Number 188 (Thursday, September 27, 2001)]
[Rules and Regulations]
[Pages 49273-49274]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-24187]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 211, 231 and 241

[Release Nos. 33-8005A; 34-44820A; FR-58A]


Calculation of Average Weekly Trading Volume Under Rule 144 and 
Termination of a Rule 10b5-1 Trading Plan

AGENCY: Securities and Exchange Commission.

ACTION: Interpretation.

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SUMMARY: This release expresses the Commission's view on how to 
calculate the average weekly reported volume of trading in securities 
under Rule 144(e), given the lack of trading during the week of 
September 10, 2001. This release also expresses the Commission's view 
that termination of a Rule 10b5-1 trading plan during the period 
between September 11, 2001 and September 28, 2001, inclusive, does not, 
by itself, suggest that the plan was not ``entered into in good faith 
and not as part of a plan or scheme to evade'' the insider trading 
rules within the meaning of Rule 10b5-1(c).

EFFECTIVE DATE: September 21, 2001.

FOR FURTHER INFORMATION CONTACT: Robert Plesnarski, Special Counsel, or 
Paula Dubberly, Chief Counsel, Office of the Chief Counsel, Division of 
Corporation Finance, at (202) 942-2900, U.S. Securities and Exchange 
Commission, 450 Fifth Street, NW., Washington, DC 20549-0402.

SUPPLEMENTARY INFORMATION:

I. Introduction and Summary

    In light of the emergency closure of the U.S. equity and options 
markets from September 11, 2001 through September 14, 2001, law firms 
and registrants have asked the Commission how to calculate the average 
weekly reported volume of trading in an issuer's securities for 
purposes of Rule 144 \1\ under the Securities Act of 1933.\2\ Because 
the markets were open for only one day during the week beginning on 
September 10, 2001, the Commission believes that it is appropriate to 
use weeks preceding and subsequent to the week of September 10, 2001, 
but to not include that calendar week, in determining the average 
weekly reported volume of trading under Rule 144(e).
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    \1\ 17 CFR 230.144.
    \2\ 15 U.S.C. 77b(a) et seq.
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    The Commission also believes that termination of a written Rule 
10b5-1 \3\ plan between September 11, 2001 and September 28, 2001, 
inclusive, will not, by itself, call into question whether the plan was 
``entered into in good faith and not as part of a plan or scheme to 
evade'' the insider trading rules.
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    \3\ 17 CFR 240.10b5-1.
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II. Discussion

A. Average Weekly Reported Volume of Trading for Rule 144

    Rule 144 defines specific circumstances in which a person will be 
deemed not to be engaged in a distribution and, therefore, not to be an 
underwriter as defined in Section 2(a)(11) of the Securities Act.\4\ 
The

[[Page 49274]]

amount of securities that may be sold under this safe harbor is limited 
to a percentage of the shares outstanding or a percentage of the 
average weekly trading volume of an issuer's securities. Rule 144(e) 
prescribes that the average weekly trading volume for a class of 
securities will be calculated using the average weekly reported volume 
of trading in such securities on all national securities exchanges and/
or reported through the automated quotation system of a registered 
securities association during the four calendar weeks preceding the 
dates outlined in Rule 144(e). The markets were open for only one day 
during the week beginning on September 10, 2001. Accordingly, that week 
will not provide a representative trading volume. Therefore, the 
Commission believes that the week of September 10, 2001 should be 
excluded from the calculation of the average weekly reported volume of 
trading in an issuer's securities under Rule 144(e) during a four 
calendar week period, and an additional prior week should be included, 
for a total of four calendar weeks.
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    \4\ 15 U.S.C. 77b(a)(11).
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B. Rule 10b5-1  Plans

    In May 2001, the Commission staff issued interpretations regarding 
the termination of a written plan for trading securities that satisfies 
the affirmative defense conditions of Rule 10b5-1(c).\5\ The 
affirmative defense is available only for plans that are ``entered into 
in good faith and not as part of a plan or a scheme to evade'' the 
insider trading rules. Questions 15(b) and 15(c) of the staff's 
interpretations make clear that a written plan may be terminated 
through either the affirmative termination of the plan itself or the 
deemed termination of the plan through the cancellation of one or more 
plan transactions. Therefore, for example, if a plan previously had 
specified that sales be made during the week of September 17, 2001, a 
security holder would be terminating the plan if he or she cancelled 
that sale in order to continue to hold the securities. The 
interpretations also state that termination of a plan could affect the 
availability of the Rule 10b5-1(c) defense for prior plan transactions 
if the termination calls into question whether the plan was ``entered 
into in good faith and not as part of a plan or scheme to evade'' the 
insider trading rules within the meaning of Rule 10b5-1(c)(1)(ii). The 
absence of good faith or presence of a scheme to evade would eliminate 
the Rule 10b5-1(c) defense for prior transactions under the plan.
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    \5\ See, Division of Corporation Finance: Manual of Publicly 
Available Telephone Interpretations, Fourth Supplement (May 30, 
2001). These interpretations are available at www.sec.gov/interps/telephone/phonesupplement4.htm.
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    Due to the tragic events of September 11, 2001 and the subsequent 
closure of the U.S. equity and options markets, the Commission believes 
that termination of a written plan established prior to September 11, 
2001 will not, by itself, call into question whether the plan was 
``entered into in good faith and not as part of a plan or scheme to 
evade'' the insider trading rules within the meaning of Rule 10b5-
1(c)(1)(ii) if the plan is terminated between September 11, 2001 and 
September 28, 2001, inclusive. Thus, the Commission believes that 
availability of the Rule 10b5-1(c) defense for transactions under the 
written plan would not be affected solely by termination of that plan 
between September 11, 2001 and September 28, 2001.

List of Subjects in 17 CFR Parts 211, 231 and 241

    Securities.

Amendment of the Code of Federal Regulations

    For the reasons set forth in the preamble, we are amending title 
17, chapter II of the Code of Federal Regulations as follows:

PART 211--INTERPRETATIONS RELATING TO FINANCIAL REPORTING MATTERS

    1. Part 211, Subpart A, is amended by adding Release No. FR-58A and 
the release date of September 21, 2001 to the list of interpretive 
releases.

PART 231--INTERPRETIVE RELEASES RELATING TO THE SECURITIES ACT OF 
1933 AND GENERAL RULES AND REGULATIONS THEREUNDER

    2. Part 231, is amended by adding Release No. 33-8005A and the 
release date of September 21, 2001, to the list of interpretive 
releases.

PART 241--INTERPRETIVE RELEASES RELATING TO THE SECURITIES EXCHANGE 
ACT OF 1934 AND GENERAL RULES AND REGULATIONS THEREUNDER

    3. Part 241, is amended by adding Release No. 34-44820A and the 
release date of September 21, 2001, to the list of interpretive 
releases.

    Dated: September 21, 2001.

    By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-24187 Filed 9-26-01; 8:45 am]
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