[Federal Register Volume 70, Number 148 (Wednesday, August 3, 2005)]
[Rules and Regulations]
[Pages 44722-44831]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-14560]



[[Page 44721]]

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Part II





Securities and Exchange Commission





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17 CFR Parts 200, 228, 229, et al.



Securities Offering Reform; Final Rule

  Federal Register / Vol. 70, No. 148 / Wednesday, August 3, 2005 / 
Rules and Regulations  

[[Page 44722]]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 200, 228, 229, 230, 239, 240, 243, 249, and 274

[Release Nos. 33-8591; 34-52056; IC-26993; FR-75, International Series 
Release No. 1294 and File No. S7-38-04]
RIN 3235-AI11


Securities Offering Reform

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: The Securities and Exchange Commission is adopting rules that 
will modify and advance significantly the registration, communications, 
and offering processes under the Securities Act of 1933. Today's rules 
will eliminate unnecessary and outmoded restrictions on offerings. In 
addition, the rules will provide more timely investment information to 
investors without mandating delays in the offering process that we 
believe would be inconsistent with the needs of issuers for timely 
access to capital. The rules also will continue our long-term efforts 
toward integrating disclosure and processes under the Securities Act 
and the Securities Exchange Act of 1934. The rules will further these 
goals by addressing communications related to registered securities 
offerings, delivery of information to investors, and procedural aspects 
of the offering and capital formation processes.

EFFECTIVE DATE: December 1, 2005.

FOR FURTHER INFORMATION CONTACT: Amy M. Starr, Daniel Horwood, or Anne 
Nguyen, at (202) 551-3200, in the Division of Corporation Finance, U.S. 
Securities and Exchange Commission, 100 F Street, NE., Washington, DC 
20549 or, with respect to questions regarding investment companies, 
Kieran Brown in the Division of Investment Management, at (202) 551-
6784.

SUPPLEMENTARY INFORMATION: We are amending Rule 30-1 \1\ of the 
Administrative Practice and Procedure, Item 512 \2\ of Regulation S-
B,\3\ Item 512 \4\ of Regulation S-K,\5\ and Rules 134, 137, 138, 139, 
153, 158, 174, 401, 405, 408, 412, 413, 415, 418, 424, 426, 430A, 439, 
456, 457, 462, 473, 497, and 902 \6\ and eliminating Rule 434 \7\ under 
the Securities Act.\8\ We are adding Rules 159, 159A, 163, 163A, 164, 
168, 169, 172, 173, 430B, 430C, and 433 under the Securities Act. We 
are amending Forms S-1, S-3, S-4, F-1, F-3, and F-4 and eliminating 
Forms S-2 and F-2 \9\ under the Securities Act; amending Rule 100 \10\ 
of Regulation FD \11\ and Rule 14a-2 \12\ under the Securities Exchange 
Act of 1934; \13\ amending Forms 10, 10-K, 10-Q, 10-KSB, and 20-F \14\ 
under the Exchange Act; and amending Form N-2 \15\ under the Securities 
Act and the Investment Company Act of 1940.\16\
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    \1\ 17 CFR 200.30-1.
    \2\ 17 CFR 228.512.
    \3\ 17 CFR 228.10 et seq.
    \4\ 17 CFR 229.512.
    \5\ 17 CFR 229.10 et seq.
    \6\ 17 CFR 230.134; 17 CFR 230.137; 17 CFR 230.138; 17 CFR 
230.139; 17 CFR 230.153; 17 CFR 230.158; 17 CFR 230.174; 17 CFR 
230.401; 17 CFR 230.405; 17 CFR 230.408; 17 CFR 230.412; 17 CFR 
230.413; 17 CFR 230.415; 17 CFR 230.418; 17 CFR 230.424; 17 CFR 
230.426; 17 CFR 230.430A; 17 CFR 230.439; 17 CFR 230.456; 17 CFR 
230.457; 17 CFR 230.462; 17 CFR 230.473; 17 CFR 230.497; and 17 CFR 
230.902.
    \7\ 17 CFR 230.434.
    \8\ 15 U.S.C. 77a et seq.
    \9\ 17 CFR 239.11; 17 CFR 239.13; 17 CFR 239.25; 17 CFR 239.31; 
17 CFR 239.33; 17 CFR 239.34; 17 CFR 239.12; and 17 CFR 239.32.
    \10\ 17 CFR 243.100.
    \11\ 17 CFR 243.100 through 243.103.
    \12\ 17 CFR 240.14a-2.
    \13\ 15 U.S.C. 78a et seq.
    \14\ 17 CFR 249.210; 17 CFR 249.308a; 17 CFR 249.310; 17 CFR 
249.310b; and 17 CFR 249.220f.
    \15\ 17 CFR 239.14 and 17 CFR 274.11a-1.
    \16\ 15 U.S.C. 80a-1 et seq.
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Table of Contents

I. Introduction
    A. Overview
    B. Background
    1. Advances in Technology
    2. Exchange Act Reporting Standards
II. Well-Known Seasoned Issuers; Other Categories of Issuers
    A. Well-Known Seasoned Issuers
    1. Definition of Well-Known Seasoned Issuer
    a. Market Capitalization Threshold
    b. Registered Offerings of Non-Convertible Securities Threshold
    2. Timing of Determination of Well-Known Seasoned Issuer Status
    3. Well-Known Seasoned Issuers' Securities Offerings
    4. Comments Regarding the Definition of Well-Known Seasoned 
Issuer
    B. Other Categories of Issuers
III. Communications Rules
    A. Communications Requirements Prior to Today's Rules and 
Amendments
    B. Need for Modernization of Communications Requirements
    1. General
    2. Definition of Written Communication
    a. ``Written Communication'' and ``Graphic Communication''
    b. Comments Regarding Proposals
    C. Overview of Communications Rules
    D. Communications Rules
    1. Permitted Continuation of Ongoing Communications During an 
Offering
    a. Overview
    b. Exception for Regularly Released Factual Business and 
Forward-Looking Information--Available to Reporting Issuers
    i. Factual Business Information
    (A) Scope of the Safe Harbor
    (B) Comments on the Scope of the Safe Harbor
    ii. Forward-Looking Information
    (A) Scope of the Safe Harbor
    iii. Conditions of Safe Harbor in Rule 168
    (A) ``By or on Behalf of'' the Issuer
    (1) Definition
    (2) Comments on Definition
    (B) Regularly Released Information
    (1) Regularly Released Condition
    (2) Comments on Regularly Released Condition
    (C) Exclusion for Offering-Related Information
    (1) Scope of Exclusion
    (2) Comments on Exclusion
    c. Exception for Regularly Released Factual Business 
Information--Available to Non-Reporting Issuers
    i. Scope of the Safe Harbor
    ii. Comments on the Safe Harbor
    2. Other Permitted Communications Prior To Filing a Registration 
Statement
    a. 30-Day Bright-line Exclusion From the Prohibition on Offers 
Prior To Filing a Registration Statement--All Issuers
    i. Scope of Exclusion
    ii. Comments on 30-Day Bright-line Exclusion
    b. Permitted Pre-Filing Offers for Well-Known Seasoned Issuers
    i. Overview
    ii. Exemption for Pre-Filing Offers
    iii. Comments on Exemption for Pre-Filing Offers
    3. Relaxation of Restrictions on Written Offering-Related 
Communications
    a. Rule 134
    i. Expansion of Permitted Information
    ii. Section 10 Prospectus Requirement
    iii. Changes to Required Information
    b. Permissible Use of Free Writing Prospectuses
    i. Overview
    ii. Definition of Free Writing Prospectus
    (A) Scope of Definition
    (B) Comments on Definition
    iii. Permitted Use of a Free Writing Prospectus After the Filing 
of a Registration Statement Under Rule 433
    (A) Overview
    (B) Issuer Eligibility
    (1) Comments on Ineligible Issuer Definition
    (C) Conditions to Permitted Use of a Free Writing Prospectus
    (1) Prospectus Delivery or Availability
    (a) Prospectus Delivery Conditions for Non-Reporting Issuers and 
Unseasoned Issuers
    (b) Prospectus Availability Condition for Seasoned Issuers and 
Well-Known Seasoned Issuers
    (c) Comments on Prospectus Delivery or Availability Condition
    (2) Information in a Free Writing Prospectus
    (a) Information Conditions
    (b) Amendment to Rule 408
    (c) Legend Condition
    (i) Discussion
    (ii) Cure for Unintentional or Immaterial Failure to Include a 
Legend
    (iii) Impermissible Legends or Disclaimers

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    (3) Filing Conditions
    (a) General Conditions
    (i) Scope of General Conditions
    (ii) Conditions Specific to Final Terms of the Securities or 
Offering
    (iii) Asset-Backed Issuers
    (iv) Comments on Filing Condition
    (b) Immaterial or Unintentional Failures to File
    (i) Scope of Cure Provision
    (ii) Comments on Cure Provision
    (4) Record Retention Condition
    (a) Discussion
    (b) Immaterial or Unintentional Failure To Retain a Free Writing 
Prospectus
    (D) Road Shows
    (1) Definition of Electronic Road Show
    (2) Treatment of Electronic Road Shows
    (3) Comments on Electronic Road Shows
    (E) Treatment of Communications on Web Sites and Other 
Electronics Issues
    (1) General
    (2) Historical Information on an Issuer Web Site
    (3) Comments on Treatment of Communications on Web Sites and 
Other Electronics Issues
    (F) Media Publications or Broadcasts
    (1) Overview
    (2) Application of Rule 164 and Rule 433 to Media Publications
    (a) Prospectus Delivery or Availability
    (i) Where Media Publications Are Prepared or Consideration Paid 
by Issuer or Offering Participant
    (ii) Unaffiliated Media Publications
    (b) Filing
    (c) Issuers in the Media Business
    (3) Responses to Comments on Treatment of Media Publications
    (G) Liability Issues Affecting Free Writing Prospectuses
    (1) General
    (2) Filed Free Writing Prospectus Not Part of Registration 
Statement
    (3) Cross-Liability Issues
    c. Interaction of New Communications Rules with Regulation FD
    i. Amendments to Regulation FD
    ii. Comments on Amendments to Regulation FD
    4. Use of Research Reports
    a. Current Regulatory Treatment of Research Reports
    b. Amendments to Exemptions for Research
    i. Definition of Research Report
    (A) Definition
    (B) Comments on Definition of Research Report
    ii. Rule 137
    iii. Rule 138
    (A) Amendments to Rule 138
    (B) Comments on Rule 138 Amendments
    iv. Rule 139
    (A) Issuer-Specific Reports
    (1) Amendments Regarding Issuer-Specific Reports
    (2) Comments on Issuer-Specific Reports
    (B) Industry-Related Reports
    (1) Amendments Regarding Industry-Related Reports
    (2) Comments on Industry-Related Reports
    v. Rule 139a
    vi. Research Report Amendments in Connection With Regulation S 
and Rule 144A Offerings
    vii. Research and Proxy Solicitations
IV. Liability Issues
    A. Information Conveyed by the Time of Sale for Purposes of 
Section 12(a)(2) and Section 17(a)(2) Liability
    1. Interpretation and Rule
    2. Comments and Guidance Regarding Our Interpretation and Rule 
159
    a. The Section 12(a)(2) and Section 17(a)(2) Analysis of the 
Information Conveyed
    b. Determination of Time of Sale
    c. Termination of Old Contract and Creation or Reformation of a 
New Contract
    3. Rule 412 and Rule 430B
    4. Relationship of Section 12(a)(2) and Section 17(a)(2) 
Interpretation and Rule 159 to Section 11 Liability
    B. Issuer as Seller
    C. Due Diligence Interpretation
V. Securities Act Registration Rules and Amendments
    A. Overview
    B. Procedural Rules
    1. Procedural Changes Regarding Shelf Offerings
    a. Overview
    b. Information in a Prospectus
    i. Mechanics
    (A) Rule 430B
    (B) Means for Providing Information
    (C) Identification of Selling Security Holders Following 
Effectiveness
    (1) Scope of Provision
    (2) Comments on Identification of Selling Security Holders
    ii. Information Deemed Part of Registration Statement
    iii. Date of Inclusion of Prospectus Supplements in Registration 
Statements and New Effective Dates of Registration Statements
    (A) Scope of Provisions
    (B) New Effective Dates for Section 11 Purposes
    (C) Comments on Prospectus Supplements and New Effective Dates
    iv. Amendments to Rule 415
    (A) Elimination of Limitation on Amount of Securities Registered
    (1) Revised Provisions
    (2) Comments on Elimination of Limitation on Amount of 
Securities Registered
    (B) Immediate Takedowns From a Shelf Registration Statement 
Filed Under Rule 415(a)(1)(x)
    (C) Eliminating ``At-the-Market'' Offering Restrictions for 
Seasoned Issuers
    v. Rule 424 Amendments
    vi. Elimination of Rule 434
    vii. Issuer Undertakings
    (A) Treatment of Information in Prospectus Supplements
    (B) Prospectus Supplements Deemed Part of a Registration 
Statement and New Effective Dates
    c. Changes to Form S-3 and Form F-3
    2. Automatic Shelf Registration for Well-Known Seasoned Issuers
    a. Overview
    i. Rule Changes
    ii. Comments on Automatic Shelf Registration
    b. Automatic Shelf Registration Mechanics
    i. Eligibility
    ii. Information in a Registration Statement
    (A) Information That May be Omitted From the Base Prospectus
    (B) Mechanics for Including Information
    (C) Registration of Securities to be Offered
    (D) Pay-as-You-Go Registration Fees
    (1) Pay-as-You-Go Fee Rules
    (2) Comments on Pay-as-You-Go Fees
    (E) Registration Under Securities Act Sections 5 and 6
    (F) Immediate Effectiveness
    (G) Duration
    3. Unseasoned Issuers and Non-Reporting Issuers
    a. Overview
    b. Amendments to Form S-1 and Form F-1--Expanded Use of 
Incorporation by Reference
    i. Eligibility
    ii. Procedural Requirements
    iii. Comments on Form S-1 and Form F-1 Amendments
    c. Elimination of Form S-2 and Form F-2
VI. Prospectus Delivery Reforms
    A. Current Prospectus Delivery Requirements
    B. Prospectus Delivery Revisions
    1. Access Equals Delivery
    a. Rule 172
    (i) Scope of Rule
    (ii) Comments on Rule 172
    b. Exceptions to the Rule
    c. Notification
    (i) Rule 173
    (ii) Comments on Rule 173
    2. Written Confirmations and Notices of Allocations
    3. Transactions Taking Place on an Exchange or Through a 
Registered Trading Facility--Rule 153
    4. Aftermarket Prospectus Delivery--Rule 174
VII. Additional Exchange Act Disclosure Provisions
    A. Risk Factor Disclosure
    1. Scope of Requirement
    2. Comments on Risk Factor Disclosure Requirement
    B. Disclosure of Unresolved Staff Comments
    1. Disclosure Requirement
    2. Comments on Disclosure of Outstanding Comments
    C. Disclosure of Status as Voluntary Filer Under the Exchange 
Act
VIII. Paperwork Reduction Act
    A. Background
    B. Summary of Information Collections
    C. Summary of Comment Letters on the PRA Analysis
    D. Paperwork Reduction Act Burden Estimates
    1. Exchange Act Periodic Reports and Registration Statements
    2. Communications and Prospectus Delivery
    3. Securities Act Registration Statements
IX. Cost Benefit Analysis
    A. Background
    B. Summary of Rules
    1. Communications
    2. Securities Act Registration Rules
    3. Prospectus Delivery
    4. Exchange Act Reports
    C. Comments on the Proposals
    D. Benefits

[[Page 44724]]

    1. Increased Information Flow
    2. Investor Protection
    3. Facilitating Capital Formation
    4. Reduced Regulatory Uncertainty
    5. Lower Costs
    E. Costs
    1. Compliance Costs
    2. Potential for Increased Liability
    3. Other Potential Costs
X. Consideration of Burden on Competition and Promotion of 
Efficiency, Competition and Capital Formation
XI. Final Regulatory Flexibility Act Analysis
    A. Reasons for and Objectives of the Rules and Amendments
    B. Significant Issues Raised by Public Comment
    C. Small Entities Subject to the Rules
    D. Reporting, Recordkeping and Other Compliance Requirements
    E. Agency Action To Minimize Effect on Small Entities
XII. Statutory Authority--Text of the Rules and Amendments

I. Introduction

A. Overview

    On November 3, 2004, we issued proposed rule and form changes under 
the Securities Act and the Exchange Act that would modernize the 
securities offering and communication processes while maintaining 
protection of investors under the Securities Act.\17\ We received over 
130 comment letters on the proposals.\18\ While a large number of 
letters focused on only one area of the proposals,\19\ a significant 
number of the other letters addressed many aspects of the proposals. In 
general, commenters strongly supported the proposals and their 
objectives. A number of commenters believed that the proposals struck 
the appropriate balance between improving the capital formation process 
and modernizing offering communications, while preserving investor 
protection and avoiding unnecessary impediments to the capital 
formation process. As with other rulemakings, including those of the 
magnitude that the proposals represented, commenters provided many 
thoughtful comments and useful suggestions. We are adopting the rules 
and amendments as proposed with certain modifications to address a 
number of points that commenters raised.
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    \17\ Securities Offering Reform, Release No. 33-8501 (Nov. 3, 
2004) [69 FR 67392] (``Proposing Release'').
    \18\ The public comments we received are available for 
inspection in our Public Reference Room at 100 F Street, NE, 
Washington, DC 20549 in File No. S7-38-04, or may be viewed at 
http://www.sec.gov/rules/proposed/s73804.shtml.
    \19\ A large number of commenters submitted comments that 
addressed only issues regarding electronic road shows. See, e.g., 
letters from Robert Alpert; E. Price Ambler; Kenneth Arnot; Richard 
Barrera; Lisa Baudot; Thomas Bengtsson; Barry Bruner; Harold 
Candland; Nikita Chitnis; Herbert Chung; Rick Dowdle; Pat Gilbert; 
Ira Ginsburg; Naval Goel; Bernard Krieg; Francis Lanio; Jimmy Liu; 
Marvin Lutz; Peter Martin; Craig Millar; Piers Monckton; NetRoadshow 
Inc. (``NetRoadshow''); F. Thomas O'Halloran, Paul J. Rasplicka; Kim 
Redding; Eric Ribner; David Schumacher, Andre Shih; Susquehanna 
International Group, LLP (``SIG''); Steve Smart-O'Connor; Bob Smith, 
Forrest Tempel; Chris Wallis; and Adam White.
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    The rules we are adopting today continue the evolution of the 
offering process under the Securities Act that began as far back as 
1966, when Milton Cohen noted the anomaly of the structure of the 
disclosure rules under the Securities Act and the Exchange Act and 
suggested the integration of the requirements under the two 
statutes.\20\ Mr. Cohen's article was followed by a 1969 study led by 
Commissioner Francis Wheat \21\ and the Commission's Advisory Committee 
on Corporate Disclosure in 1977.\22\ These studies eventually led to 
the Commission's adoption of the integrated disclosure system, short-
form registration under the Securities Act, and Securities Act Rule 415 
permitting shelf registration of continuous offerings and delayed 
offerings.\23\
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    \20\ Milton H. Cohen, Truth in Securities Revisited, 79 Harv. L. 
Rev. 1340 (1966). (``It is my thesis 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--that is, if the 
starting point had been a statutory scheme of continuous disclosures 
covering issuers of actively traded securities and the question of 
special disclosures in connection with public offerings had then 
been faced in this setting. Accordingly, it is my plea that there 
now be created a new coordinated disclosure system having as its 
basis the continuous disclosure system of the 1934 Act and treating 
the `1933 Act' disclosure needs on this foundation.'')
    \21\ See Disclosure to Investors--A Reappraisal of Federal 
Administrative Policies under the '33 and '34 Acts, Policy Study 
(the ``Wheat Report''), www.sechistorical.org/museum/Museum_Papers/museum_Papers_Chron.php#1960 (Mar. 27, 1969).
    \22\ See Report of the Advisory Committee on Corporate 
Disclosure, Cmte. Print 95-29, House Cmte. On Interstate and Foreign 
Commerce, 95th Cong., 1st. Sess., Nov. 3, 1977 (Nov. 3, 1977). In 
addition, beginning in 1968, the American Law Institute (``ALI'') 
began its work on a Federal Securities Code, which was approved in 
1978 by the ALI membership. The ALI Federal Securities Code included 
company registration as a central component. See American L. Inst., 
Federal Securities Code (1980).
    \23\ See Adoption of Integrated Disclosure System, Release No. 
33-6383 (Mar. 3, 1982) [47 FR 11380] (``Integrated Disclosure 
Release''): Delayed or Continuous Offering and Sale of Securities, 
Release No. 33-6423 (Sept. 2, 1982) [47 FR 39799]; and Shelf 
Registration, Release No. 33-6499 (Nov. 17, 1983) [48 FR 52889].
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    The Commission's attention to the offering and communications 
processes under the Securities Act continued more recently. In 
particular, in March 1996, members of the Commission staff delivered 
the Report of the Task Force on Disclosure Simplification to the 
Commission.\24\ It recommended a number of areas where simplification 
and modernization of the registration and offering process could be 
accomplished. In July 1996, the Advisory Committee on the Capital 
Formation and Regulatory Processes delivered its report to the 
Commission.\25\ Its principal recommendation was that the Securities 
Act registration and disclosure processes be more directly tied to the 
philosophy and structure of the Exchange Act through the adoption of a 
system of ``company registration.'' Under company registration, the 
focus of Securities Act and Exchange Act registration and disclosure 
would move from transactions to issuers, and corollary steps would be 
taken to provide for disclosure and registration of individual 
offerings within the company registration framework.
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    \24\ Report of the Task Force on Disclosure Simplification, 
available at www.sec.gov/news/studies/smpl.htm (Mar. 5, 1996).
    \25\ Report of the Advisory Committee on the Capital Formation 
and Regulatory Process (the ``Advisory Committee Report''), 
available at www.sec.gov/news/studies/capform.htm (July 24, 1996).
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    Promptly after the Advisory Committee on the Capital Formation and 
Regulatory Processes delivered its report, the Commission issued a 
concept release regarding regulation of the securities offering 
process.\26\ The release sought input on a number of significant 
issues, including:
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    \26\ Securities Act Concepts and Their Effects on Capital 
Formation, Release No. 33-7314 (July 25, 1996) [61 FR 40044] (the 
``1996 Concept Release'').
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     Whether the concept of company registration should be 
pursued;
     Whether other methods of increasing the integration of 
Securities Act and Exchange Act disclosure and other processes should 
be considered;
     Whether existing or further reliance on Exchange Act 
filings should be accompanied by enhancements to Exchange Act 
reporting;
     Whether companies make information about their public 
securities offerings available to investors in an appropriate and 
timely manner, including:
    [cir] At what point in the offering process delivery of, or access 
to, information should be assured in connection with registered 
offerings under the Securities Act and whether current requirements 
ensure timely delivery of information to the secondary market in 
connection with such offerings;
    [cir] Whether prospectus supplements in shelf offerings should be 
made part of the registration statement;

[[Page 44725]]

    [cir] Whether and, if so, in what circumstances electronic access 
should replace actual delivery of information in connection with 
offerings registered under the Securities Act; and
    [cir] Whether restrictions on written offers under the Securities 
Act should be liberalized and what liability standards should attach to 
such communications;
     Whether adjustments to the roles and responsibilities of 
traditional ``gatekeepers'' in the Securities Act offering process, 
such as underwriters and accountants, should be made in light of 
increases in the speed of and other evolutions in the offering process;
     Whether changes should be made to address evolution in the 
relationships between the public and private offering processes, 
including:
    [cir] Whether changes in Rules 144A \27\ and 144 \28\ under the 
Securities Act should be considered; and
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    \27\ 17 CFR 230.144A.
    \28\ 17 CFR 230.144.
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    [cir] Whether there should be any relaxation in our prohibition 
against general solicitations of interest or offers in unregistered 
private offerings; and
     Whether the review process of issuer filings under the 
Securities Act and the Exchange Act by the staff of the Division of 
Corporation Finance should be modified to limit the impact of the 
process on access to capital markets, at least for some category of 
large seasoned issuers.\29\
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    \29\ In addition, the 1996 Concept Release sought input on a 
number of items suggested for consideration by the Task Force on 
Disclosure Simplification, including the following: Allowing smaller 
issuers that have been reporting for one year to make delayed 
offerings (without altering the disclosure requirements or 
permitting forward incorporation by reference); eliminating ``at-
the-market'' offering restrictions; allowing universal shelf 
registration for secondary offerings; allowing issuers and majority-
owned subsidiaries to be named as possible issuers on a shelf 
registration (without designating the issuer until takedown); 
allowing reallocation of securities on a shelf registration 
statement by post-effective amendment; allowing registration by 
seasoned issuers without any specification of the classes 
registered; and allowing seasoned issuers to pay registration fees 
at the time of the takedown.
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    In 1998, the Commission proposed new rules under the Securities Act 
that were intended to modernize the securities offering process.\30\ As 
we recognized in the Proposing Release, much of the comment in response 
to the 1998 proposals suggested that the system of regulating capital 
formation in the registered offering market provides a number of 
advantages that should be considered carefully and retained if we are 
to make other changes.
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    \30\ See The Regulation of Securities Offerings, Release No. 33-
7606A (Nov. 13, 1998 [63 FR 67174] (the ``1998 proposals''). The 
Commission proposed these new rules after it was granted general 
exemptive authority under the Securities Act. The National 
Securities Markets Improvement Act of 1996 (NSMIA) (Pub. L. 104-290, 
110 Stat. 3416 (Oct. 11, 1996)) provided the Commission with general 
authority to adopt exemptive rules under the Securities Act to the 
extent that such exemptive action is ``necessary or appropriate in 
the public interest and consistent with the protection of 
investors.'' See Securities Act Section 28 [15 U.S.C. 77z-3].
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    The rules we are adopting today are focused primarily on 
constructive, incremental changes in our regulatory structure and the 
offering process rather than the introduction of a far-reaching new 
system, as we believe that we can best achieve further integration of 
Securities Act and Exchange Act disclosure and processes by making 
adjustments in the current integrated disclosure and shelf registration 
systems. Further, consistent with our belief that investors and the 
securities markets will benefit from greater permissible communications 
by issuers while retaining appropriate liability for these 
communications, we have sought to address the need for timeliness of 
information for investors by building on existing statutory provisions 
and processes without mandating delays in the offering process that we 
believe would be inconsistent with the needs of issuers for timely 
access to the securities markets and capital.
    We are adopting the proposed revisions to the registration, 
communications, and offering processes for registered transactions 
under the Securities Act with certain modifications. We believe the 
rules we are adopting, while limited in scope, properly address the 
areas that are in need of modernization. The adopted rules involve 
three main areas:
     Communications related to registered securities offerings;
     Registration and other procedures in the offering and 
capital formation processes; and
     Delivery of information to investors, including delivery 
through access and notice, and timeliness of that delivery.
    Today's rules reflect our view that revisions to the Securities Act 
registration and offering procedures are appropriate in light of 
significant developments in the offering and capital formation 
procedures and can provide enhanced protection of investors under the 
statute. We believe that the rule changes we adopt today will:
     Facilitate greater availability of information to 
investors and the market with regard to all issuers;
     Eliminate barriers to open communications that have been 
made increasingly outmoded by technological advances;
     Reflect the increased importance of electronic 
dissemination of information, including the use of the Internet;
     Make the capital formation process more efficient; and
     Define more clearly both the information and the 
timeliness of the availability of information against which a seller's 
statements are evaluated for liability purposes.
    The rules we are adopting today reflect certain modifications from 
the proposals to address important points commenters raised. The 
modifications to the proposals include the following:
     The definitions of graphic communication and written 
communication (including as to road shows) exclude live, in real-time 
communications to a live audience that are transmitted graphically;
     The free writing prospectus rules address ``cross-
liability'' concerns among offering participants arising from the use 
of free writing prospectuses;
     The free writing prospectus rules clarify the filing 
conditions applicable to media publications, descriptions of the final 
terms of securities and offerings, and electronic and other road shows, 
and modify the record retention provisions;
     The shelf registration rules address issues regarding the 
liability of officers, directors, and accountants and other experts 
arising from the new effective dates triggered by the filing of 
prospectus supplements;
     The definition of ineligible issuer more closely conforms 
the definition to other ineligibility provisions in the Securities Act;
     The rule permitting specified written notices that are not 
prospectuses narrows the types of information for which a preliminary 
prospectus will have to include a price range as a condition;
     The definition of well-known seasoned issuer enables 
issuers to include all registered non-convertible securities, other 
than common equity, issued for cash in measuring the amount of 
registered fixed income securities over the prior three years; and
     The prospectus delivery rule addresses concerns about 
potential underwriter liability due to an issuer's failure to timely 
file its final prospectus.

We also have endeavored to provide more guidance to market participants 
regarding our interpretation of the liability provisions of Securities 
Act Sections 12(a)(2) and 17(a)(2).\31\
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    \31\ 15 U.S.C. 77l(a)(2) and 15 U.S.C. 77q(a)(2).

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[[Page 44726]]

B. Background

1. Advances in Technology
    As we noted in the Proposing Release, significant technological 
advances over the last three decades have increased both the market's 
demand for more timely corporate disclosure and the ability of issuers 
to capture, process, and disseminate this information. Computers, 
sophisticated financial software, electronic mail, teleconferencing, 
videoconferencing, webcasting, and other technologies available today 
have replaced, to a large extent, paper, pencils, typewriters, adding 
machines, carbon paper, paper mail, travel, and face-to-face meetings 
relied on previously. The rules we are adopting today seek to recognize 
the integral role that technology plays in timely informing the markets 
and investors about important corporate information and developments.
2. Exchange Act Reporting Standards
    The role that a public issuer's Exchange Act reports play in 
investment decision making is a key component of the rules we are 
adopting today. Congress recognized that the ongoing dissemination of 
accurate information by issuers about themselves and their securities 
is essential to the effective operation of the trading markets. The 
Exchange Act and underlying rules have established a system of 
continuing disclosure about issuers that have offered securities to the 
public, or that have securities that are listed on a national 
securities exchange or are broadly held by the public. The Exchange Act 
rules require public issuers to make periodic disclosures at annual and 
quarterly intervals, with other important information reported on a 
more current basis. The Exchange Act specifically provides for current 
disclosure to maintain the timeliness and adequacy of information 
disclosed by issuers, and we have significantly expanded our current 
disclosure requirements consistent with the provision in the Sarbanes-
Oxley Act of 2002 \32\ that ``[e]ach issuer reporting under Section 
13(a) or 15(d) * * * disclose to the public on a rapid and current 
basis such additional information concerning material changes in the 
financial condition or operations of the issuer * * * as the Commission 
determines * * * is necessary or useful for the protection of investors 
and in the public interest.'' \33\
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    \32\ Pub. L. 107-204, 116 Stat. 745 (2002).
    \33\ See Section 409 of the Sarbanes-Oxley Act, which added 
Section 13(l) to the Exchange Act (15 U.S.C. 78m(l)). See also 
Additional Form 8-K Disclosure Requirements and Acceleration of 
Filing Date, Release No. 33-8400 (Mar. 16, 2004) [69 FR 15594] and 
Additional Form 8-K Disclosure Requirements and Acceleration of 
Filing Date; Correction, Release No. 33-8400A (Aug. 4, 2004) [69 FR 
48370] (``Form 8-K Releases'').
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    A public issuer's Exchange Act record provides the basic source of 
information to the market and to potential purchasers regarding the 
issuer and its management, business, financial condition, and 
prospects. Because an issuer's Exchange Act reports and other publicly 
available information form the basis for the market's evaluation of the 
issuer and the pricing of its securities, investors in the secondary 
market use that information in making their investment decisions. 
Similarly, during a securities offering in which an issuer uses a 
short-form registration statement, an issuer's Exchange Act record is 
very often the most significant part of the information about the 
issuer in the registration statement.
    With the enactment of the Sarbanes-Oxley Act and our recent 
rulemaking and interpretive actions, we have enhanced significantly the 
disclosure included in issuers' Exchange Act filings and accelerated 
the filing deadlines for many issuers. The following are examples of 
recent regulatory actions that have improved the delivery of timely, 
high-quality information to the securities markets by issuers under the 
Exchange Act:
     Requiring the establishment of disclosure controls and 
procedures; \34\
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    \34\ See Certification of Disclosure in Companies' Quarterly and 
Annual Reports, Release No. 33-8124 (Aug. 28, 2002) [67 FR 57276] 
(``Certification Release'').
---------------------------------------------------------------------------

     Requiring a public issuer's top management to certify the 
content of periodic reports and highlight their responsibilities for 
and evaluation of the issuer's disclosure controls and procedures and 
internal control over financial reporting; \35\
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    \35\ See Management's Report on Internal Control Over Financial 
Reporting and Certification of Disclosure in Exchange Act Periodic 
Reports, Release No. 33-8238 (June 5, 2003) [68 FR 36636]; 
Certification Release, note 34.
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     Modifying the approach to current disclosure by increasing 
significantly the types of events that must be reported on a current 
basis and shortening the time for filing current reports; \36\
---------------------------------------------------------------------------

    \36\ See Form 8-K Releases, note 33.
---------------------------------------------------------------------------

     Approving listing standard changes intended to improve 
corporate governance and enhance the role of the audit committee of the 
issuer's board of directors with regard to financial reporting and 
auditor independence; \37\ and
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    \37\ See Standards Relating to Listed Company Audit Committees, 
Release No. 33-8220 (Apr. 9, 2003) [68 FR 18788].
---------------------------------------------------------------------------

     Providing further interpretive guidance regarding the 
content and understandability of Management's Discussion and Analysis 
of Financial Condition and Results of Operations (MD&A)--a disclosure 
item we believe is at the core of a reporting issuer's periodic 
reports.\38\
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    \38\ See Commission Guidance Regarding Management's Discussion 
and Analysis of Financial Condition and Results of Operations, 
Release No. 33-8350 (Dec. 19, 2003) [68 FR 75056] (the ``2003 MD&A 
Release'').
---------------------------------------------------------------------------

    Many of the recent changes to the Exchange Act reporting framework 
provide greater rigor to the process that issuers must follow in 
preparing their financial statements and Exchange Act reports. Senior 
management now must certify the material adequacy of the content of 
periodic Exchange Act reports. Moreover, issuers, with the involvement 
of senior management, now must implement and evaluate disclosure 
controls and procedures and internal controls over financial reporting. 
Further, we believe the heightened role of an issuer's board of 
directors and its audit committee provides a structure that can 
contribute to improved Exchange Act reports.
    As we recognized in the Proposing Release, the 1996 Concept Release 
and the 1998 proposals also considered the role of enhanced Exchange 
Act reporting as an important corollary to reform of the offering 
process under the Securities Act.\39\ We believe that the enhancements 
to Exchange Act reporting described above enable us to rely on these 
reports to a greater degree in adopting our rules to reform the 
securities offering process.
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    \39\ Enhanced Exchange Act reporting also was central to the 
recommendations of the Advisory Committee. See note 25.
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II. Well-Known Seasoned Issuers; Other Categories of Issuers

A. Well-Known Seasoned Issuers

    We are modifying the framework for communications in connection 
with public offerings for all issuers and the framework of the 
registration process for most issuers that report under the Exchange 
Act. As we explained in the Proposing Release, we believe that the most 
far-reaching revisions of our communications rules and registration 
processes should be considered for issuers that have a reporting 
history under the Exchange Act and are presumptively the most widely 
followed in the marketplace.\40\
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    \40\ Today's rules will provide a class of well-known seasoned 
issuers greater flexibility in registering their securities 
offerings under a more streamlined registration process known as 
automatic shelf registration. Under the automatic shelf registration 
process, eligible well-known seasoned issuers can register, on a 
more flexible basis than is currently the case, offerings of 
different types of securities using Form S-3 or Form F-3 
registration statements that are effective upon filing. See 
discussion in Section V.B.2. below under ``Automatic Shelf 
Registration for Well-Known Seasoned Issuers.''

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[[Page 44727]]

    Today, the largest issuers are followed by sophisticated 
institutional and retail investors, members of the financial press, and 
numerous sell-side and buy-side analysts that actively seek new 
information on a continual basis. Unlike smaller or less mature 
issuers, large seasoned public issuers tend to have a more regular 
dialogue with investors and market participants through the press and 
other media. The communications of these well-known seasoned issuers 
are subject to scrutiny by investors, the financial press, analysts, 
and others who evaluate disclosure when it is made.
1. Definition of Well-Known Seasoned Issuer
    We are adding a new category of issuer--a ``well-known seasoned 
issuer''--that will be permitted to benefit to the greatest degree from 
the modifications to our rules we are adopting today regarding 
communications and the registration processes.\41\ We are defining a 
well-known seasoned issuer as an issuer that is required to file 
reports pursuant to Section 13(a) or Section 15(d) the Exchange Act and 
satisfies the following requirements as of the date on which its status 
as a well-known seasoned issuer is determined:
---------------------------------------------------------------------------

    \41\ Except for expanding eligibility for certain majority-owned 
subsidiaries, as discussed below, we are not changing the existing 
eligibility standards for the use of Form S-3 and Form F-3.
---------------------------------------------------------------------------

     The issuer must meet the registrant requirements of Form 
S-3 or Form F-3; \42\
---------------------------------------------------------------------------

    \42\ Through the form requirements, the definition requires that 
a well-known seasoned issuer be current and timely in its Exchange 
Act reporting obligations.
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     The issuer either:
    [cir] As of a date within 60 days of its eligibility determination 
date must have a worldwide market value of its outstanding voting and 
non-voting common equity held by non-affiliates of $700 million or 
more; or
    [cir] As of a date within 60 days of its eligibility determination 
date, must have issued in the last three years, at least $1 billion 
aggregate principal amount of non-convertible securities, other than 
common equity,\43\ in primary offerings for cash, not exchange, 
registered under the Securities Act; \44\ and
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    \43\ ``Common equity'' is defined in Securities Act Rule 405 as 
``any class of common stock, or an equivalent interest, including 
but not limited to a unit of beneficial interest in a trust or a 
limited partnership interest.''
    \44\ As we discuss below, these issuers generally are limited in 
the types of securities they may register on an automatic shelf 
registration statement as a well-known seasoned issuer. See Section 
II.A.3 below under ``Well-Known Seasoned Issuers Securities 
Offerings.''
---------------------------------------------------------------------------

     The issuer must not be an ineligible issuer.\45\
---------------------------------------------------------------------------

    \45\ See definition of ``ineligible issuer'' added to Securities 
Act Rule 405 and discussed in Section III.D.3 below under ``Issuer 
Eligibility.'' Further, an issuer will not meet the definition of 
well-known seasoned issuer if it is an asset-backed issuer (as 
defined in Item 1101(b) of Regulation AB [17 CFR 229.1101(b)], an 
investment company registered under the Investment Company Act of 
1940, or a business development company. Business development 
companies are a category of closed-end investment companies that are 
not required to register under the Investment Company Act. See 
Section 2(a)(48) of the Investment Company Act of 1940 [15 U.S.C. 
80a-2(a)(48)].
---------------------------------------------------------------------------

    If it does not itself meet the conditions for eligibility as a 
well-known seasoned issuer, a majority-owned subsidiary of a well-known 
seasoned issuer will nonetheless be a well-known seasoned issuer in 
connection with the offer and sale of its own securities if:
     The securities are non-convertible securities, other than 
common equity, and the parent of the majority-owned subsidiary is a 
well-known seasoned issuer and fully and unconditionally guarantees 
those securities; \46\
---------------------------------------------------------------------------

    \46\ Whether a guarantee is full and unconditional is analyzed 
under the same principles as those used under Rule 3-10 of 
Regulation S-X [17 CFR 210.3-10] and Exchange Act Rule 12h-5 [17 CFR 
240.12h-5]. In addition, the guarantee may only be of securities 
that have a limited duration and are not perpetual. This analysis is 
not different from the current analysis under Form S-3 or Form F-3 
for registered guaranteed securities.
---------------------------------------------------------------------------

     The securities are guarantees of non-convertible 
securities, other than common equity, of (1) its well-known seasoned 
issuer parent or (2) another majority-owned subsidiary where those non-
convertible securities are fully and unconditionally guaranteed by the 
well-known seasoned issuer parent; \47\ or
---------------------------------------------------------------------------

    \47\ See amendments to Securities Act Rule 405. Unless the 
majority-owned subsidiary itself meets the eligibility conditions 
for a well-known seasoned issuer, it may, of course, only register 
securities as a well-known seasoned issuer on its parent's automatic 
shelf registration statement.
---------------------------------------------------------------------------

     The majority-owned subsidiary is offering non-convertible 
investment grade securities.\48\
---------------------------------------------------------------------------

    \48\ These offerings would be required to meet the conditions of 
General Instruction I.B.2 of Form S-3 or Form F-3.
---------------------------------------------------------------------------

    Overall, the issuers that will meet our thresholds for well-known 
seasoned issuers are the most active issuers in the U.S. public capital 
markets. In 2004, those issuers, which represented approximately 30% of 
listed issuers, accounted for about 95% of U.S. equity market 
capitalization. They have accounted for more than 96% of the total debt 
raised in registered offerings over the past eight years by issuers 
listed on a major exchange or equity market. These issuers, 
accordingly, represent the most significant amount of capital raised 
and traded in the United States. As a result of the active 
participation of these issuers in the markets and, among other things, 
the wide following of these issuers by market participants, the media, 
and institutional investors, we believe that it is appropriate to 
provide communications and registration flexibilities to these well-
known seasoned issuers beyond that provided to other issuers, including 
other seasoned issuers.
a. Market Capitalization Threshold
    As we discussed in the Proposing Release, we believe that non-
affiliate equity market capitalization, or ``public float,'' of a 
reporting issuer can be used as a proxy for whether the issuer has a 
demonstrated market following.\49\ We are adopting as a threshold a 
public float of $700 million or more. We have used market 
capitalization as a proxy for public float in evaluating this threshold 
and its implications.
---------------------------------------------------------------------------

    \49\ Public float also is one of the key determinants for 
eligibility for current short-form registration on Form S-3 or Form 
F-3.
---------------------------------------------------------------------------

    To determine whether an issuer meets the $700 million threshold 
under the definition, the issuer will calculate its public float in the 
same manner that it calculates its public float for purposes of 
determining Form S-3 or F-3 eligibility.\50\ We have revised the 
definition from the proposal to clarify that the non-affiliate equity 
market capitalization is determined on a worldwide basis, as it 
historically has been for purposes of eligibility to use Form F-3. In 
addition, for purposes of calculating public float of a non-U.S. issuer 
to determine eligibility as a well-known seasoned issuer and 
eligibility to use Form S-3 or F-3, we interpret

[[Page 44728]]

``common equity'' as defined in Securities Act Rule 405 as including a 
class of participating voting or non-voting preferred stock of a 
foreign issuer where the issuance of the preferred stock results from 
requirements of the applicable foreign jurisdiction or market and where 
the class of preferred stock has liquidation or dividend preferences 
and other terms that cause it to be the substantial economic equivalent 
of a class of common stock.
---------------------------------------------------------------------------

    \50\ The determination of public float is based on a public 
trading market. This is the same requirement in General Instruction 
I.B.1 of Form S-3 and Form F-3 that a registrant have a $75 million 
market value and in the definition of accelerated filer in Exchange 
Act Rule 12b-2 [17 CFR 240.12b2]. Therefore, an entity with $700 
million of common equity securities outstanding but not trading in 
any public trading market would not be a well-known seasoned issuer 
based on market capitalization. See Simplification of Registration 
Procedures for Primary Securities Offerings, Release No. 33-6964 
(Oct. 29, 1982) [57 FR 48970]; Simplification of Registration 
Procedures for Primary Securities Offerings, Release No. 33-6943 
(July 22, 1992) [57 FR 32461] (proposing release); Integrated 
Disclosure Release, note ; and Reproposal of Comprehensive Revision 
to System for Registration of Securities Offerings, Release No. 33-
6331 (Aug. 18, 1981) [46 FR 41902].
---------------------------------------------------------------------------

    To evaluate the implications of a $700 million public float 
threshold, staff in our Office of Economic Analysis (``OEA'') obtained 
data on the 12,551 registered offerings that were conducted from 1997 
to 2004 by 2,875 issuers that had public equity outstanding and were 
listed on a major exchange or equity market.\51\ Of these offerings, 
9,164 were debt offerings that raised proceeds of $1,927 billion, and 
3,387 were equity offerings that raised proceeds of $567 billion. The 
average issuer conducted 4.2 debt offerings and 1.1 equity offerings 
per calendar year, although as many as 209 debt offerings have been 
conducted by a single issuer within a calendar year.
---------------------------------------------------------------------------

    \51\ OEA compiled and analyzed the supporting data for the 
public float (using market capitalization) and outstanding debt 
thresholds.
---------------------------------------------------------------------------

    OEA also analyzed data on the financial market conditions under 
which these offerings were made. High levels of analyst coverage, 
institutional ownership, and trading volume are useful indicators of 
the scrutiny that an issuer receives from the market, although no one 
statistic can fully capture the extent to which an issuer is followed 
by the market.\52\ Issuers with market capitalization in excess of $700 
million that conducted offerings from 1997 to 2004 typically had an 
average of 12 analysts following them prior to the offering.\53\ This 
includes only sell-side analysts and is, we believe, a conservative 
indicator of analyst scrutiny. Institutional investors accounted for an 
average of 52% of equity ownership prior to offerings by issuers with 
market capitalization above $700 million. Those issuers had an average 
daily trading volume of nearly $52 million prior to offerings in this 
period and accounted for the following percentages of capital raised:
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    \52\ See, e.g., Harrison Hong, Terrence Lim, and Jeremy C. 
Stein, Bad News Travels Slowly: Size, Analyst Coverage and the 
Profitability of Momentum Strategies, 55 Journal of Finance 265 
(2000); Robert C. Merton, A Simple Model of Capital Market 
Equilibrium with Incomplete Information, 42 Journal of Finance 483 
(1987).
    \53\ Issuers with a market capitalization of between $75 million 
and $200 million, in most cases, have between zero to five analysts 
following them, with approximately 50% having zero to two analysts 
following them.
    \54\ Because the methodology includes only listed issuers, it 
excludes debt-only issuers (including companies that will be well-
known seasoned issuers), including those that are subsidiaries of 
companies with listed public equity but that are not themselves 
listed.

 Offering Proceeds, by Issuer Capitalization Primary Seasoned Offerings,
                               1997-2004 *
    [$Billions (%) Proceeds from Offerings, by Issuer Capitalization]
------------------------------------------------------------------------
                                       Market Capitalization of Issuers
                                     -----------------------------------
                                                            >$0 (All
                                           >$700mm          Issuers)
------------------------------------------------------------------------
Equity..............................        $396 (70%)       $567 (100%)
Debt \54\...........................       1,849 (96%)      1,927 (100%)
Total...............................       2,245 (90%)     2,494 (100%)
------------------------------------------------------------------------
* Source: OEA estimates using Center for Research in Securities Prices
  at the University of Chicago and Securities Data Corporation data.

b. Registered Offerings of Non-Convertible Securities Threshold
    Issuers that do not meet the public equity float test will be 
considered well-known seasoned issuers if they have issued for cash 
more than an aggregate of $1 billion in non-convertible securities, 
other than common equity, through registered primary offerings over the 
prior three years. These issuers also will have to satisfy the other 
conditions of the well-known seasoned issuer definition, such as the 
form eligibility requirement.\55\ In determining compliance with this 
threshold:
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    \55\ As we discuss below, these issuers generally are limited in 
the types of securities they may register on an automatic shelf 
registration statement as a well-known seasoned issuer. See Section 
II.A.3 below under ``Well-Known Seasoned Issuers Securities 
Offerings.''
---------------------------------------------------------------------------

     Issuers may aggregate the amount of non-convertible 
securities, other than common equity, issued in registered primary 
offerings during the prior three years;
     Issuers may include only such non-convertible securities 
that were issued in registered primary offerings for cash--they may not 
include registered exchange offers in this aggregation; and
     Parent company issuers only may include in their 
calculation the principal amount of their full and unconditional 
guarantees, within the meaning of Rule 3-10 of Regulation S-X,\56\ of 
non-convertible securities, other than common equity, of their 
majority-owned subsidiaries issued in registered primary offerings for 
cash during the three-year period.
---------------------------------------------------------------------------

    \56\ 17 CFR 210.3-10.
---------------------------------------------------------------------------

    The aggregate principal amount of non-convertible securities that 
may be counted toward the $1 billion issuance threshold may have been 
issued in any registered primary offering for cash, on any form (other 
than Form S-4 or Form F-4). Those non-convertible securities need not 
be investment grade securities to be included in the calculation. In 
calculating the $1 billion amount, issuers generally may include the 
principal amount of any debt and the greater of liquidation preference 
or par value of any non-convertible preferred stock that were issued in 
primary registered offerings for cash.\57\
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    \57\ Some commenters asked for clarification on how to value 
certain types of debt issuances, such as debt issuances involving 
original issue discount or debt issued in foreign currency 
denominations. See, e.g., letters from the American Bar Association 
(``ABA'') and the New York State Bar Association (``NYSBA''). We 
have not made any modifications to the definition in response to 
these comments. Issuers should use the same calculation that they 
use to determine the dollar amount of securities that they are 
registering for purposes of determining their filing fees under 
Securities Act Rule 457.
---------------------------------------------------------------------------

    Issuers may not include the principal amount of securities that 
were offered in registered exchange offers by the issuer when 
determining compliance with the $1 billion non-convertible securities 
threshold. A substantial portion of these offerings involve registered 
exchange offers of substantially identical securities for securities 
that were sold in private offerings. In those cases, the original sale 
to investors in the private offering, relying upon, for example, the 
exemptions of Securities Act Section 4(2) \58\ and Rule 144A, is not 
registered and is not carried out under the Securities Act's disclosure 
or liability standards. Moreover, in the subsequent registered exchange 
offers purchasers may not be able, in certain cases, to avail 
themselves effectively of the remedies otherwise available to 
purchasers in registered offerings for cash. While these exchange 
offers are permitted in some circumstances, the policy preference for 
registered offerings, in conjunction with the streamlining of the 
registration process we provide today, lead us to conclude that such 
exchange offers should not count towards the $1 billion threshold.
---------------------------------------------------------------------------

    \58\ 15 U.S.C. 77d(2).
---------------------------------------------------------------------------

    OEA analyzed statistics on issuers that did not meet the $700 
million public equity threshold. OEA found that very few issuers that 
had public common equity but did not meet the $700 million public float 
threshold would meet the $1 billion non-convertible securities 
threshold. However, OEA also found that a number of issuers without any 
public common equity would meet the $1 billion threshold. Based on 
OEA's analysis, from 1997 to 2004 the issuers of fixed

[[Page 44729]]

income securities that did not have outstanding public common equity 
but met the $1 billion threshold accounted for 16.7% of all of the 
issuers without public common equity that issued public debt, but 
accounted for 65% of total debt and preferred stock issued by all of 
such issuers. None of the debt offerings of issuers meeting the 
threshold was rated below investment grade, and 86% of their debt 
offerings were rated A or higher by a nationally recognized security 
rating organization (an ``NRSRO''). This group of issuers also on 
average had 19 basis points lower yield spread for their issues 
relative to issuers without public common equity that had issued less 
than $1 billion of fixed income securities in the past three years. We 
believe that this lower yield spread reflects lower default risk 
(higher ratings) and higher liquidity and transparency of the 
issuers.\59\
---------------------------------------------------------------------------

    \59\ See Gordon J. Alexander, William F. Sharpe, and Jeffrey V. 
Bailey, Fundamentals of Investments (2001 ed.) at 530.
---------------------------------------------------------------------------

2. Timing of Determination of Well-Known Seasoned Issuer Status
    Whether an issuer satisfies the eligibility requirements for being 
a well-known seasoned issuer generally will be determined on an 
approximately annual basis. We revised the timing of determination of 
status as a well-known seasoned issuer in response to comments.\60\ As 
adopted, the definition uses the 60-day window period used in Form S-3 
and Form F-3 and provides that the eligibility determination will be 
made as of the later of the time of filing of the issuer's most recent 
shelf registration statement or the time of its most recent amendment 
(by post-effective amendment, incorporated Exchange Act report, or form 
of prospectus) to a shelf registration statement for purposes of 
complying with Securities Act Section 10(a)(3).\61\ In the event that 
the issuer has not filed a shelf registration statement or amended a 
shelf registration statement for purposes of complying with Securities 
Act Section 10(a)(3) for sixteen months, the determination date will be 
the time of filing of the issuer's most recent annual report on Form 
10-K or Form 20-F. If the issuer does not accomplish its Section 
10(a)(3) update or file its annual report when due, the due date will 
become the date of determination and, because the issuer will be 
neither timely nor current in its reporting obligations under the 
Exchange Act at that time, it will cease to be a well-known seasoned 
issuer. It can of course become a well-known seasoned issuer again in 
the future if and when it meets applicable requirements.
---------------------------------------------------------------------------

    \60\ See, e.g., letters from Alston & Bird LLP (``Alston''); 
Davis Polk & Wardwell (``Davis Polk''); Ernst & Young LLP (``E&Y''); 
and the Association of the Bar of the City of New York (``NYCBA'').
    \61\ See 15 U.S.C. 77j(a)(3). Under Form S-3 and Form F-3, the 
Section 10(a)(3) update need not be made through a post-effective 
amendment. Rather, under these Forms, the Section 10(a)(3) update 
generally occurs when the issuer files its annual report on Form 10-
K or Form 20-F containing the issuer's audited financial statements 
for its most recently completed fiscal year by the due date of such 
annual report.
---------------------------------------------------------------------------

    A well-known seasoned issuer may not be an ineligible issuer on the 
date of determination of well-known seasoned issuer status. The date of 
determination of whether an issuer is an ineligible issuer for these 
purposes is the same date as that used for other purposes in 
determining the issuer's status as a well-known seasoned issuer.
3. Well-Known Seasoned Issuers' Securities Offerings
    An issuer that meets the definition of well-known seasoned issuer 
based on the $700 million public float threshold can use an automatic 
shelf registration statement, as discussed below, to register any 
offering of securities, other than those for business combination 
transactions.\62\ An issuer that meets the definition of well-known 
seasoned issuer based on the amount of registered non-convertible 
security issuances in the prior three years also may register any such 
offering for cash using automatic shelf registration if it is eligible 
to register a primary offering of its securities on Form S-3 or Form F-
3 pursuant to General Instruction I.B.1. of such forms.\63\ An issuer 
that meets the definition of well-known seasoned issuer based on the 
amount of registered non-convertible security issuances in the prior 
three years but is not eligible to register a primary offering of 
securities on Form S-3 or Form F-3 pursuant to General Instruction 
I.B.1 of such forms may use automatic shelf registration to register 
only offerings for cash of non-convertible securities, other than 
common equity, whether or not investment grade.
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    \62\ Under the Rule, business combination transactions are those 
defined in Rule 165(f)(1) [17 CFR 230.165(f)(1)]. Rule 165(f)(1) 
defines a business combination transaction to mean any transaction 
specified in Rule 145(a) [17 CFR 230.145(a)] or exchange offer.
    \63\ We believe that an eligible well-known seasoned issuer that 
can otherwise use Form S-3 or Form F-3 for registered primary 
offerings because it has a $75 million public float should not have 
to use two different registration statements for its securities 
offerings for cash.
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4. Comments Regarding the Definition of Well-Known Seasoned Issuer
    Commenters generally supported the addition of a class of well-
known seasoned issuers who will benefit the most from the new 
rules.\64\ Most of the comments related to the threshold for 
eligibility based on public equity float, the definition of ``debt 
security'' for purposes of the debt threshold calculation, the 
inclusion of securities issued in exchange offers, the frequency of 
eligibility determinations, and the inclusion or exclusion of Schedule 
B issuers, voluntary issuers, and asset-backed issuers.\65\ A number of 
commenters also suggested that the timing of the eligibility 
determination for well-known seasoned issuers be revised.\66\
---------------------------------------------------------------------------

    \64\ See, e.g., letters from Alston; The Bond Market Association 
(``TBMA''); Citigroup Global Corporate & Investment Bank 
(``Citigroup''); LaSalle Broker-Dealer Services Division of ABN-AMRO 
Financial Services, Inc. (``LaSalle''); NYSBA; and Reuters America 
LLC (``Reuters'').
    \65\ See, e.g., letters from ABA; the American Bar Association 
comment letter on asset-backed securities (``ABA-ABS''); Cleary 
Gottlieb Steen & Hamilton (``Cleary''); Fried, Frank, Harris, 
Shriver & Jacobson (``Fried Frank''); the International Bar 
Association (``IBA''); the Securities Industry Association 
(``SIA''); and TBMA.
    \66\ See, e.g., letters from Alston; Davis Polk; E & Y; NYCBA; 
and TBMA.
---------------------------------------------------------------------------

    Some commenters expressed the view that the $700 million threshold 
was too high, while others thought additional eligibility conditions 
should be included.\67\ None of the commenters provided any empirical 
data supporting their views to modify the thresholds. Other commenters 
suggested alternative ways to measure whether an issuer should be 
considered a well-known seasoned issuer, including average daily 
trading volume or institutional ownership measures.\68\ Many commenters 
requested that we clarify that the public float used in the calculation 
be the company's worldwide public float.\69\ A number of commenters on 
the definition requested that we direct the staff to reconsider the 
bases for the thresholds in two to three years.\70\
---------------------------------------------------------------------------

    \67\ See, e.g., letters from ABA; the American Institute for 
Certified Public Accountants (``AICPA''); BDO Seidman, LLP (``BDO 
Seidman''); Deloitte & Touche LLP (``Deloitte''); E & Y; Fried 
Frank; the National Association of Real Estate Investment Trusts 
(``NAREIT''); NYSBA; Reuters; Sullivan & Cromwell (``S&C''); and 
Students in Professor Samuel C. Thompson's Investment Banking Class, 
UCLA School of Law (``UCLA'').
    \68\ See, e.g., letters from ABA; Brinson Patrick Securities 
Corporation (``Brinson Patrick''); and S&C.
    \69\ See, e.g., letters from ABA; Alston; Cleary; Fried Frank; 
IBA; NYSBA; and S&C.
    \70\ See, e.g., letters from NYCBA; SIA; and UCLA.
---------------------------------------------------------------------------

    Commenters on the debt threshold were most concerned about the 
types of

[[Page 44730]]

securities included in the calculation and whether it was appropriate 
to include only debt issued in registered offerings.\71\ Some 
commenters requested that the debt calculation be based on a broader 
category of fixed income securities including debt securities and non-
convertible preferred securities.\72\ Commenters suggested that non-
investment grade debt be included in the calculation.\73\ These 
commenters also suggested that securities issued in exchange offers, 
such as ``Exxon Capital'' exchange offers, be included in the debt 
calculation. Some commenters suggested that the debt calculation be 
based on all debt and non-convertible preferred stock sold, whether or 
not in registered offerings.\74\ Finally, some commenters requested 
that issuers meeting the well-known seasoned issuer definition based on 
their debt offerings be allowed to use the automatic shelf registration 
procedure for registering offerings of equity securities as well as 
debt securities.\75\
---------------------------------------------------------------------------

    \71\ See, e.g., letters from ABA; Alston; Cleary; Davis Polk; 
S&C and TBMA.
    \72\ See, e.g., letters from ABA; Alston; Cleary; the Society of 
Corporate Secretaries & Governance Professionals (``SCSGP''); the 
Southern Company (``Southern''); and TBMA.
    \73\ See, e.g., letters from Alston; Davis Polk; the NYCBA; S&C 
and TBMA.
    \74\ See, e.g., letters from ABA; Alston; Fried Frank; IBA; and 
TBMA.
    \75\ See, e.g., letters from Alston; Fried Frank; and TBMA.
---------------------------------------------------------------------------

    We have retained the $700 million public float threshold and the $1 
billion debt threshold. As the discussion above reflects, in reaching 
our determination to use the $700 million public float amount, we 
considered trading volume, institutional ownership, and market 
capitalization.
    In response to comments, we have clarified that the basis for 
determining the public float calculation is worldwide public float of 
voting and non-voting common equity. In response to comments,\76\ we 
also are providing an interpretation, as set forth above, regarding the 
inclusion in the calculation of certain participating preferred stock 
of non-U.S. issuers that is substantially economically equivalent to 
common equity.
---------------------------------------------------------------------------

    \76\ See letters from Cleary and Shearman & Sterling 
(``Shearman'').
---------------------------------------------------------------------------

    While we are not revising the dollar amount of the thresholds for 
public equity float or for issued debt, the definition as adopted 
addresses a number of the other issues that commenters raised. For 
example, we have expanded the $1 billion debt threshold to include any 
non-convertible security, other than common equity, that has been 
issued in a registered offering for cash during the prior three 
years.\77\ Further, the offering of the security included in the 
calculation could have been registered on any form (other than Form S-4 
or Form F-4) and the security need not be investment grade. In 
addition, a parent issuer may count the aggregate amount of its 
registered full and unconditional guarantees of non-convertible 
securities, other than common equity, of its majority-owned 
subsidiaries issued for cash during the three-year period.
---------------------------------------------------------------------------

    \77\ We have not expanded the non-convertible security threshold 
to include the amount of securities issued in unregistered offerings 
or in exchange offers.
---------------------------------------------------------------------------

    While we have not changed the dollar amounts of the thresholds, we 
do agree with commenters that it would be appropriate to revisit the 
thresholds in a few years. We, therefore, are directing the staff of 
the Division of Corporation Finance and OEA to undertake a study in 
three years after full implementation of the rules to evaluate the 
operation of the definition we adopt today and any material changes in 
the data upon which the thresholds are based and report back to us and 
recommend any potential changes to the thresholds based on such new 
data.
    Although some commenters had suggested expanding the categories of 
eligible issuers beyond those contained in the proposed definition,\78\ 
and others suggested narrowing the categories of eligible issuers or 
otherwise imposing more stringent eligibility conditions,\79\ we have 
adopted the definition as proposed in that regard. As a result, well-
known seasoned issuer status is not available to voluntary filers, 
asset-backed issuers, or Schedule B issuers.\80\ Voluntary filers are 
not required to file reports under the Exchange Act, and we believe 
that such issuers should be required to register under the Exchange 
Act, and thus become subject to all of the results of registration for 
all purposes, if they wish to avail themselves of the benefits of 
reporting issuer, seasoned issuer, or well-known seasoned issuer 
status.\81\ For Schedule B issuers, we expect that the staff will 
continue to consider disclosure and other shelf issues affecting 
Schedule B issuers in the same manner that they do today. Finally, we 
have recently adopted rules and regulations covering the offering of 
and reporting by asset-backed issuers.\82\ This new regulatory 
structure is not yet fully operational. The advantages of a reporting 
history under the Exchange Act that influenced our decision to create 
the well-known seasoned issuer category are essentially absent for 
asset-backed issuers.
---------------------------------------------------------------------------

    \78\ See, e.g., letters from ABA; ABA-ABS; Allied Capital 
Corporation (``Allied''); IBA; and TBMA.
    \79\ See, e.g., letters from AICPA; BDO Seidman; Deloitte; and 
E&Y.
    \80\ As noted above, the definition of well-known seasoned 
issuer explicitly excludes investment companies registered under the 
Investment Company Act of 1940 and business development companies.
    \81\ As later discussed and consistent with our proposal, an 
issuer not subject to the reporting requirements of Exchange Act 
Section 13 or Section 15(d), but filing Exchange Act reports 
voluntarily, will not be a well-known seasoned issuer or a seasoned 
issuer. In addition, because voluntary filers are not required to 
report, they will not be treated as reporting issuers, for example, 
for purposes of Rule 138, Rule 168, or Rule 433.
    \82\ See Asset-Backed Securities, Release No. 33-8518 (Dec. 22, 
2004) [70 FR 1506] (the ``Asset-Backed Securities Adopting 
Release'').
---------------------------------------------------------------------------

    Commenters wanted market participants to have greater certainty 
that issuers were eligible as well-known seasoned issuers.\83\ We have 
modified the timing for determination of well-known seasoned issuer 
status to provide more certainty. We have provided generally for an 
approximately annual determination of well-known seasoned issuer 
status. We also are adopting a change to Form 10-K and Form 20-F that 
will modify the cover page of those forms to include a check box for 
issuers to indicate if they are considered well-known seasoned issuers 
at the time of the filing of the Form 10-K or Form 20-F.
---------------------------------------------------------------------------

    \83\ See, e.g., letters from ABA-ABS; American Securitization 
Forum (``ASF''); and Richard Hall.
---------------------------------------------------------------------------

B. Other Categories of Issuers

    We also are using existing categories of issuers, including 
seasoned issuers, unseasoned Exchange Act reporting issuers, and non-
reporting issuers, in the new rules regarding communications and the 
registration process. A seasoned issuer is an issuer that is eligible 
to use Form S-3 or Form F-3 to register primary offerings of securities 
pursuant to General Instruction I.B.1 of such Forms or is registering 
securities in reliance on General Instruction I.B.2, I.B.5, or I.C. of 
Form S-3 or General Instruction I.A.5 or I.B.2 of Form F-3.\84\ 
Majority-owned subsidiaries registering offerings of their securities 
on Form S-3 or Form F-3 pursuant to General Instruction I.C. of Form S-
3 or I.A.5. of Form F-3 also are considered seasoned issuers.\85\ As 
commenters requested, we are clarifying that issuers of asset-backed 
securities

[[Page 44731]]

eligible for registration on Form S-3 also are considered seasoned 
issuers.\86\
---------------------------------------------------------------------------

    \84\ See Form S-3 and Form F-3.
    \85\ We are expanding the majority-owned subsidiary eligibility 
in Form S-3 and Form F-3 to allow majority-owned subsidiaries to use 
the forms under the same circumstances in which majority-owned 
subsidiaries may be well-known seasoned issuers. For example, see 
General Instruction I.C. to Form S-3.
    \86\ Asset-backed securities (as defined in Item 1101 of 
Regulation AB [17 CFR 229.1101]) may be offered and sold on Form S-3 
if the issuer meets the requirements of General Instruction I.A.4 of 
Form S-3 and the transaction meets the requirements of General 
Instruction I.B.5 of such Form, including that the asset-backed 
securities are investment grade.
---------------------------------------------------------------------------

    An unseasoned issuer is an issuer that is required to file reports 
pursuant to Section 13 or Section 15(d) of the Exchange Act, but does 
not satisfy the requirements of Form S-3 or Form F-3 for a primary 
offering of its securities. A non-reporting issuer is an issuer that is 
not required to file reports pursuant to Section 13 or Section 15(d) of 
the Exchange Act, regardless of whether it is filing such reports 
voluntarily.
    A number of commenters suggested that the rules treat voluntary 
filers as seasoned issuers even though they are not required to file 
reports pursuant to Exchange Act Section 13 or Section 15(d).\87\ As we 
note above with respect to eligibility for well-known seasoned issuer 
status, voluntary filers are not required to file reports under the 
Exchange Act, and we believe that such issuers should be required to 
register under the Exchange Act if they wish to avail themselves of the 
benefits accorded seasoned issuers under the rules we are adopting 
today.
---------------------------------------------------------------------------

    \87\ See, e.g., letters from ABA; Alston; Fried Frank; and TBMA.
---------------------------------------------------------------------------

III. Communications Rules

A. Communications Requirements Prior to Today's Rules and Amendments

    The Securities Act restricts the types of offering communications 
that issuers or other parties subject to the Act's provisions (such as 
underwriters) may use during a registered public offering. The nature 
of the restrictions depends on the period during which the 
communications are to occur. The restrictions do not depend on the 
accuracy of the information contained in the communication. Before the 
registration statement is filed, all offers, in whatever form, are 
prohibited.\88\ Between the filing of the registration statement and 
its effectiveness, offers made in writing (including by e-mail or 
Internet), by radio, or by television are limited to a ``statutory 
prospectus'' that conforms to the information requirements of 
Securities Act Section 10.\89\ As a result, the only written material 
that is permitted in connection with the offering of the securities 
during the period between filing and effectiveness of a registration 
statement is a preliminary prospectus meeting the requirements of 
Section 10, which must be filed with us. Even after the registration 
statement is declared effective, offering participants still may make 
written offers only through a statutory prospectus, except that they 
may use additional written offering materials if a final prospectus 
that meets the requirements of Securities Act Section 10(a) is sent or 
given prior to or with those materials.\90\ Violations of these 
restrictions generally are referred to as ``gun jumping,'' and we use 
the term ``gun-jumping provisions'' in this release to describe the 
statutory provisions of the Securities Act that set forth these 
restrictions.
---------------------------------------------------------------------------

    \88\ See Securities Act Section 5(c) [15 U.S.C. 77e(c)]. 
Securities Act Section 2(a)(3) [15 U.S.C. 77b(a)(3)] defines 
``offer'' as any attempt or offer to dispose of, or solicitation of 
an offer to buy, a security or interest in a security, for value. 
The term ``offer'' has been interpreted broadly and goes beyond the 
common law concept of an offer. See Diskin v. Lomasney & Co., 452 
F.2d 871 (2d. Cir. 1971); SEC v. Cavanaugh, 1 F. Supp. 2d 337 
(S.D.N.Y. 1998). The Commission has explained that ``the publication 
of information and publicity efforts, made in advance of a proposed 
financing which have the effect of conditioning the public mind or 
arousing public interest in the issuer or in its securities 
constitutes an offer * * *.'' Guidelines for the Release of 
Information by Issuers Whose Securities are in Registration, Release 
No. 33-5180 (Aug. 16, 1971) [36 FR 16506].
    \89\ See Securities Act Section 5(b)(1) [15 U.S.C. 77e(b)(1)] 
and Securities Act Section 10 [15 U.S.C.77j].
    \90\ See Securities Act Section 2(a)(10) [15 U.S.C. 77b(a)(10)] 
and Section 5(b)(1).
---------------------------------------------------------------------------

B. Need for Modernization of Communications Requirements

1. General
    As we noted in the Proposing Release, the gun-jumping provisions of 
the Securities Act were enacted at a time when the means of 
communications were limited and restricting communications (without 
regard to accuracy) to the statutory prospectus appropriately balanced 
available communications and investor protection. The gun-jumping 
provisions were designed to make the statutorily mandated prospectus 
the primary means for investors to obtain information regarding a 
registered securities offering.
    The capital markets, in the United States and around the world, 
have changed very significantly since those limitations were enacted. 
Today, issuers engage in all types of communications on an ongoing 
basis, including, importantly, communications mandated or encouraged by 
our rules under the Exchange Act, rules or listing standards of 
national securities exchanges, and comparable requirements in foreign 
jurisdictions. Modern communications technology, including the 
Internet, provides a powerful, versatile, and cost-effective medium to 
communicate quickly and broadly.\91\ The changes in the Exchange Act 
disclosure regime and the tremendous growth in communications 
technology are resulting in more information being provided to the 
market on a more non-discriminatory, current, and ongoing basis. Thus, 
while investor protection remains a paramount interest, the gun-jumping 
provisions of the Securities Act impose substantial and increasingly 
unworkable restrictions on many communications that would be beneficial 
to investors and markets and would be consistent with investor 
protection.
---------------------------------------------------------------------------

    \91\ For example, the Internet provides a medium through which 
to deliver electronic documents, to broadcast radio and television 
programs, to issue press releases or print advertisements, to 
conduct telephone or videoconferences with investors, prospective 
investors, and other parties, and to send personal e-mails.
---------------------------------------------------------------------------

    The following factors, combined with the advances in technology 
described above, lead us to believe that investors and the market will 
benefit from access to greater permissible communications where 
protection for investors is maintained through the appropriate 
Securities Act liability standards for materially deficient disclosures 
in prospectuses and oral communications:
     Much of our recent rulemaking is intended to encourage 
reporting issuers to provide additional materially accurate and 
complete information to the market on a more current basis.\92\ The 
Securities Act's constraints on communications during an offering, 
however, have caused issuers to be concerned about the treatment of 
their ongoing communications and whether, if they are engaged or will 
soon be engaged in capital raising, their customary disclosures will be 
considered an impermissible offer of securities; \93\
---------------------------------------------------------------------------

    \92\ Other recent rulemaking initiatives addressing disclosure 
issues include those referenced in notes 33 through 38 and those 
contained in Disclosure Regarding Nominating Committee Functions and 
Communications Between Security Holders and Boards of Directors, 
Release No. 33-8340 (Nov. 24, 2003) [68 FR 66992]; and Disclosure in 
Management's Discussion and Analysis About Off-Balance Sheet 
Arrangements and Aggregate Contractual Obligations, Release No. 34-
47264 (Jan. 28, 2003) [68 FR 5982] (the ``Off-Balance Sheet 
Disclosure Release'').
    \93\ See, e.g. letter from the American Bar Association 
Committee on Federal Regulation of Securities to the Director of the 
Division of Corporation Finance, Aug. 22, 2001 (available at 
www.abanet.org); comment letters in File No. S7-30-98 from Gerald S. 
Backman, et. al.; Fried Frank; Service Employees International Union 
Master Trust; and S&C. See also Edward F. Greene and Linda C. Quinn, 
``Building on the International Convergence of the Global Markets: a 
Model for Securities Law Reform,'' presented at A Major Issues 
Conference: Securities Regulation in the Global Internet Economy, 
Washington, D.C., Nov. 14-15, 2001 (available at 
www.law.northwestern.edu).

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

[[Page 44732]]

     The multiplicity of means of communication has led us to 
recognize that restricting written offers to a statutory prospectus 
inhibits desirable methods of timely communication of information;
     There are many more offerings of increasingly complex 
securities where written communications, such as detailed descriptions 
of securities and offerings, would enhance significantly the offering 
process for the benefit of investors; \94\ and
---------------------------------------------------------------------------

    \94\ For example, we and the staff have already recognized the 
usefulness of descriptions of securities and related materials in 
offerings of asset-backed securities. See the Asset-Backed 
Securities Adopting Release, note 82.
---------------------------------------------------------------------------

     The continuing trends towards globalization of securities 
markets and multinationalization of issuers and offerings and 
corresponding increase in information and information requirements 
increase the need for a regulatory framework that accommodates more 
flexible communications.

As we discussed in the Proposing Release, in view of the many recent 
changes to the Exchange Act reporting system that are designed to 
produce more timely and extensive disclosures and greater scrutiny of, 
and confidence in, those reports, it is appropriate at this time to 
adopt communications and offering reforms.\95\
---------------------------------------------------------------------------

    \95\ We have considered communications reform in other contexts 
for a number of years. With our adoption of the communications 
reforms for business combination transactions in 1999, we reduced 
the regulation of offers and brought the regulatory structure closer 
to the practices in those offerings while ensuring continued 
investor protection. See Regulation of Takeovers and Security Holder 
Communications, Release No. 33-7760 (Oct. 22, 1999) [64 FR 61408] 
(the ``Regulation M-A Release''). We recently have adopted 
communications reforms for asset-backed securities offerings as 
well. See the Asset-Backed Securities Adopting Release, note 82.
---------------------------------------------------------------------------

2. Definition of Written Communication
a. ``Written Communication'' and ``Graphic Communication''
    As a starting point for reform, we are defining all methods of 
communication, other than oral communications, as written 
communications for purposes of the Securities Act. While we have 
addressed the issue of electronic communications in a number of 
different contexts, at this time we are adopting rules making it clear 
that all electronic communications (other than telephone and other 
live, in real-time communications to a live audience, as discussed 
below) are graphic and, therefore, written communications for purposes 
of the Securities Act. In this manner, we intend to encompass new 
technologies. Accordingly, we are adopting new definitions of ``graphic 
communication'' and ``written communication'' to promote consistent 
understanding of what constitutes such a communication in view of the 
technological developments since the enactment of the Securities Act 
and to significantly reduce remaining uncertainty regarding the 
permitted means for delivery of information under the Securities Act.
    We are adopting the proposed revisions to the definition of 
``graphic communication'' with some modifications. As adopted, the 
definition of ``graphic communication'' includes any form of electronic 
media, such as audiotapes, videotapes, facsimiles, CD-ROM, electronic 
mail, Internet web sites, and computers, computer networks, and other 
forms of computer data compilation.\96\
---------------------------------------------------------------------------

    \96\ The forms of media that are described in the definition 
encompass the forms of media that are addressed in our interpretive 
guidance on the use of electronic media. See, e.g., Use of 
Electronic Media, Release No. 33-7856 (Apr. 28, 2000) [65 FR 25843] 
(the ``2000 Electronics Release''). In recognition of continuing 
developments in technology, the forms of electronic media described 
in the definition are intended to be illustrative rather than 
exhaustive.
---------------------------------------------------------------------------

    The definition of graphic communication does not include a 
communication that, at the time of the communication, originates live, 
in real-time, to a live audience and does not originate in recorded 
form or otherwise as a graphic communication.\97\ Any such 
communication is not a graphic communication even if it is transmitted 
through a means of graphic communication. A basic concept of the 
definition we adopt today is that communications that are graphic 
communications when they are transmitted are treated as graphic 
communications under the definition and communications that are live, 
in real-time communications to a live audience when they are 
transmitted are not treated as graphic communications. We believe that 
live, in real-time communications to a live audience, including those 
transmitted by graphic means, have less of the permanence of 
communications that originate in graphic form or that appear on the 
printed page. Accordingly, we believe that the distinctions in the 
definitions we are adopting today are appropriate updatings of the 
Securities Act's distinctions between oral and written communications.
---------------------------------------------------------------------------

    \97\ Written communications will not include individual 
telephone voice mail messages from live telephone calls but will 
include broadly disseminated or ``blast'' voice mail messages, 
including those that originate in graphic form. The latter is 
included in the definition because we believe they are not to a live 
audience and therefore more closely resemble graphic communications 
than oral communications.
---------------------------------------------------------------------------

    As adopted, ``written communication'' means any communication that 
is written, printed, or television or radio broadcast (regardless of 
the transmission means), or a graphic communication. All communications 
that fall outside the definition are oral communications, including for 
purposes of Securities Act Section 12(a)(2). It also excludes live 
telephone calls (through whatever means by which they are transmitted, 
including the Internet) and, as discussed above, other live, in real-
time communications to a live audience transmitted by graphic means. 
The definition as adopted clarifies that television or radio broadcasts 
will be covered regardless of the transmission means.
    We thus make a clearer distinction between communications that are 
broadcast and those that are graphic communications. We have clarified 
that a television or radio broadcast in Securities Act Section 2(a)(10) 
and in our definition of written communication encompasses all radio or 
television broadcasts, regardless of the means of transmission of the 
signals. For example, a cable television show will be considered a 
television broadcast that is a written communication, and a television 
show or radio program that may be seen or heard through the Internet on 
a computer will also be considered a television or radio broadcast that 
is a written communication. A communication may fall outside the 
definition of graphic communication because it originates live, in 
real-time to a live audience but such communication (for example, a 
live business news program broadcast by traditional means or on cable) 
may be a television or radio broadcast. On the other hand, a live, in 
real-time communication that is transmitted by graphic means to a live 
audience would be an oral communication. Given the potentially 
unlimited and uncontrolled nature of dissemination of broadcast 
communications and the language of the Securities Act, we believe that 
this is an appropriate distinction.
    The following are examples of the application of these definitions:
     A live telephone call is not a written communication;
     A live telephone call that is recorded by the recipient is 
not a written communication;
     E-mails, facsimiles, and electronic postings on web sites, 
by their nature,

[[Page 44733]]

originate in graphic form and, therefore, are graphic communications;
     A live, in-person road show to a live audience is not a 
written communication;
     A live, in real-time road show to a live audience that is 
transmitted graphically is not a graphic communication;
     A live, in real-time road show to a live audience that is 
transmitted to an ``overflow room'' is not a graphic communication;
     A webcast or video conference that originates live and in 
real-time at the time of transmission and is transmitted through video 
conferencing facilities or is webcast in real-time to a live audience 
is not a graphic communication;
     The ability of a member of the audience to record a 
webcast or video conference that is presented live and in real-time to 
a live audience would not affect the status of that webcast or video 
conference;
     A live telephone call or video or webcast conference that 
is recorded by or on behalf of the originating party or parties and 
then transmitted, or is otherwise transmitted other than live and in 
real-time, will be a graphic communication and therefore a written 
communication;
     A live telephone call or video or webcast conference that 
is recorded by the recipient and then re-transmitted by the recipient 
is a graphic communication by the recipient when it is re-transmitted; 
and
     An interview with an issuer's chief executive officer 
conducted live as part of a television program is a written 
communication regardless of how the television signal is transmitted 
(whether over the airwaves, or through cable, satellite, or Internet) 
and regardless of how it is received by the recipient (whether a 
television set or a computer).
    With respect to road shows, as explained below, we also have added 
a Note to Rule 433 that states that a communication that is provided or 
transmitted simultaneously with a road show and is provided or 
transmitted in a manner designed to make the communication available 
only as part of the road show and not subsequently is deemed to be part 
of the road show.
b. Comments Regarding Proposals
    Commenters raised several questions about the proposed definitions, 
particularly as the definitions affected live audio transmissions, live 
telephone calls, and live road shows transmitted over the Internet.\98\ 
Commenters were concerned that the definitions of written communication 
and graphic communication did not explicitly address the treatment of 
live telephone calls, regardless of the medium of transmission, 
although the Proposing Release provided that live telephone calls 
(other than blast voice mails) would not be considered written 
communications.\99\
---------------------------------------------------------------------------

    \98\ See, e.g., letters from Citigroup; Cleary; Davis Polk; S&C 
and SIA.
    \99\ See, e.g., letters from Citigroup; Merrill Lynch & Co., 
Inc. (``Merrill Lynch''); S&C and SIA.
---------------------------------------------------------------------------

    We believe that the modifications that we made to the definitions 
of graphic communication and written communication will address 
commenters' issues regarding live, in real-time communications, 
including telephone calls, conference calls, videocasts, and live 
webcasts.

C. Overview of Communications Rules

    Today, we are adopting rules that relate to the following:
     Regularly released factual business information;
     Regularly released forward-looking information;
     Communications made more than 30 days before filing a 
registration statement;
     Communications by well-known seasoned issuers during the 
30 days before filing a registration statement;
     Written communications made in accordance with the safe 
harbor in Securities Act Rule 134; and
     Written communications (other than a statutory prospectus) 
by any eligible issuer after filing a registration statement.
    The following table provides a brief overview of the operation of 
the new and amended rules. While the table clearly does not include the 
level of detail necessary to explain the rules, we have included it to 
help readers in understanding the basic scope of the new communications 
scheme.

----------------------------------------------------------------------------------------------------------------
                                    Could it be an          Is it a       Is it a prohibited  Is it a prohibited
                                     ``offer'' as      ``prospectus'' as   pre-filing offer      prospectus for
                                  defined in Section  defined in Section    for purposes of       purposes of
                                       2(a)(3)?            2(a)(10)?         Section 5(c)?     Section 5(b)(1)?
----------------------------------------------------------------------------------------------------------------
Regularly Released Factual        Yes...............  No................  Rule defines it as  Section 5(b)(1)
 Business Information.                                                     not an offer for    relates only to
                                                                           Section 5(c)        ``prospectuses''-
                                                                           purposes.           -it is not
                                                                                               applicable.
Regularly Released Forward-       Yes...............  No................  Rule defines it as  Section 5(b)(1)
 Looking Information.                                                      not an offer for    relates only to
                                                                           Section 5(c)        ``prospectuses''-
                                                                           purposes.           -it is not
                                                                                               applicable.
Communications Made More than 30  Yes...............  Possibly, based on  Rule defines it as  Section 5(b)(1)
 Days Before Filing of                                 facts and           not an offer for    does not apply in
 Registration Statement.                               circumstances.      Section 5(c)        the pre-filing
                                                                           purposes.           period--it is not
                                                                                               applicable.
Well-Known Seasoned Issuers--     Yes...............  No................  Is exempted from    Section 5(b)(1)
 Oral Offers Made Within 30 Days                                           prohibition of      does not apply in
 of Filing of Registration                                                 Section 5(c).       the pre-filing
 Statement.                                                                                    period--it is not
                                                                                               applicable.
Well-Known Seasoned Issuers--     Yes...............  Yes. It also is a   Is exempted from    Section 5(b)(1)
 Written Offers Made Within 30                         free-writing        prohibition of      does not apply in
 Days of Filing of Registration                        prospectus.         Section 5(c).       the pre-filing
 Statement.                                                                                    period--it is not
                                                                                               applicable.

[[Page 44734]]

 
Well-Known Seasoned Issuers--     Yes...............  Yes...............  Is exempted from    Section 5(b)(1)
 Free Writing Prospectuses Used                                            prohibition of      does not apply in
 Before Filing of Registration                                             Section 5(c).       the pre-filing
 Statement.                                                                                    period--it is not
                                                                                               applicable.
Identifying Statements in         Yes...............  No................  Section 5(c) is     Section 5(b)(1)
 Accordance with Rule 134.                                                 not applicable,     relates only to
                                                                           as Rule 134         ``prospectuses''-
                                                                           relates only to     -it is not
                                                                           the period after    applicable.
                                                                           the filing of a
                                                                           registration
                                                                           statement.
All Eligible Issuers--Free        Yes...............  Yes...............  Section 5(c) is     Section 5(b)(1)
 Writing Prospectuses Used After                                           not applicable,     will be
 Filing of Registration                                                    as it does not      satisfied, as the
 Statement.                                                                apply in the post-  free writing
                                                                           filing period.      prospectus will
                                                                                               be a permitted
                                                                                               Section 10(b)
                                                                                               prospectus.
----------------------------------------------------------------------------------------------------------------

    The communications rules we are adopting recognize the value of 
ongoing communications as well as the importance of avoiding 
unnecessary restrictions on offers during a registered offering. In 
particular, the new and revised rules will eliminate requirements that 
can interrupt unnecessarily an issuer's normal and routine 
communications into the market while an issuer is engaging in a 
securities offering, and will enhance the ability of issuers and other 
offering participants to make written offers outside the statutory 
prospectus.
    The new and revised rules we are adopting establish a 
communications framework that, in some cases, will operate along a 
spectrum based on the type of issuer, its reporting history, and its 
equity market capitalization or recent issuances of fixed income 
securities. Thus, under the rules we are adopting, eligible well-known 
seasoned issuers will have freedom generally from the gun-jumping 
provisions to communicate at any time, including by means of a written 
offer other than a statutory prospectus. Varying levels of restrictions 
will apply to other categories of issuers. We believe these 
distinctions are appropriate because the market has more familiarity 
with large, more seasoned issuers and, as a result of the ongoing 
market following of their activities, including the role of market 
participants and the media, these issuers' communications have less 
potential for conditioning the market for the issuers' securities to be 
sold in a registered offering. Disclosure obligations and practices 
outside the offering process, including under the Exchange Act, also 
determine the scope of communications flexibility the rules give to 
issuers and other offering participants.\100\
---------------------------------------------------------------------------

    \100\ See, e.g., Regulation FD, Regulation G [17 CFR 244.100 et 
seq.], and Form 8-K [17 CFR 249.308].
---------------------------------------------------------------------------

    The cumulative effect of the rules under the gun-jumping provisions 
is the following:
     Well-known seasoned issuers are permitted to engage at any 
time in oral and written communications, including use at any time of a 
free writing prospectus,\101\ subject to enumerated conditions 
(including, in specified cases, filing with us).\102\
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    \101\ A ``free writing prospectus'' is defined in Securities Act 
Rule 405. This definition is discussed in Section III.D.3 below 
under ``Definition of Free Writing Prospectus.''
    \102\ See Rule 163.
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     All reporting issuers are permitted, at any time, to 
continue to publish regularly released factual business information and 
forward-looking information.\103\
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    \103\ See Rule 168. Certain asset-backed issuers and non-
reporting foreign private issuers also will be able to rely on the 
Rule.
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     Non-reporting issuers are permitted, at any time, to 
continue to publish regularly released factual business information 
that is intended for use by persons other than in their capacity as 
investors or potential investors.\104\
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    \104\ See Rule 169.
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     Communications by issuers more than 30 days before filing 
a registration statement are not prohibited offers so long as they do 
not reference a securities offering that is or will be the subject of a 
registration statement.\105\
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    \105\ See Rule 163A.
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     All issuers and offering participants are permitted to use 
free writing prospectuses after the filing of the registration 
statement, subject to enumerated conditions (including, in specified 
cases, filing with us).\106\
---------------------------------------------------------------------------

    \106\ See Rules 164 and 433.
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     A broader category of routine communications regarding 
issuers, offerings, and procedural matters, such as communications 
about the schedule for an offering or about account-opening procedures, 
are excluded from the definition of ``prospectus.'' \107\
---------------------------------------------------------------------------

    \107\ See amendments to Securities Act Rule 134.
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     The exemptions for research reports are expanded.\108\
---------------------------------------------------------------------------

    \108\ See amendments to Securities Act Rules 137, 138, and 139.
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    As discussed below, a number of these rules include conditions of 
eligibility. Most of the new and amended rules, for example, are not 
available to blank check companies, penny stock issuers, or shell 
companies.\109\
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    \109\ We have adopted rules that contain a definition of shell 
company. See Use of Form S-8, Form 8-K, and Form 20-F by Shell 
Companies, Release No. 33-8587 (July 15, 2005) (``Shell Company 
Release''). For purposes of the rules we are adopting today, we have 
excluded business combination related shell companies from the 
restrictions otherwise applicable to shell companies. Therefore, all 
references to shell companies in this release excludes business 
combination related shell companies.
---------------------------------------------------------------------------

    The rules we are adopting today ensure that appropriate liability 
standards are maintained. For example, all free writing prospectuses 
have liability under the same provisions as apply today to oral offers 
and statutory prospectuses.\110\ Written communications not 
constituting prospectuses will not be subject to disclosure liability 
applicable to prospectuses \111\ under Securities Act Section 12(a)(2). 
This result will not affect their status for liability purposes under 
other provisions of the federal

[[Page 44735]]

securities laws, including the anti-fraud provisions.\112\
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    \110\ These liability provisions include Securities Act Section 
12(a)(2) and 17(a), Exchange Act Section 10(b) [15 U.S.C. 78j(b)], 
and Exchange Act Rule 10b-5 [17 CFR 240.10b-5].
    \111\ See Securities Act Section 2(a)(10) and Rule 134.
    \112\ See, e.g., Securities Act Section 17(a), Exchange Act 
Section 10(b) and Exchange Act Rule 10b-5.
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D. Communications Rules

1. Permitted Continuation of Ongoing Communications During an Offering
a. Overview
    We are adopting substantially as proposed two separate, non-
exclusive safe harbors from the gun-jumping provisions for continuing 
ongoing business communications. The first safe harbor permits a 
reporting issuer's continued publication or dissemination of regularly 
released factual business and forward-looking information at any time, 
including around the time of a registered offering.\113\ The second 
safe harbor permits a non-reporting issuer's continued publication or 
dissemination of regularly released factual business information that 
is intended for use by persons other than in their capacity as 
investors or potential investors.\114\ The safe harbors are not 
exclusive and do not create a presumption that any communication that 
falls outside the safe harbor is an offer. Accordingly, reliance on one 
of the safe harbors does not affect the availability of any other 
exemption or exclusion under the Securities Act. Further, attempted 
compliance with one of the safe harbors does not act as an exclusive 
election. For example, attempted reliance on one of the exemptive rules 
or exclusions we adopt today will not preclude reliance on another 
available exemption or exclusion. In particular, it will not preclude 
reliance on the argument that under general securities law principles 
and our earlier interpretive guidance the communication in question is 
not an offer under Securities Act Section 2(a)(3).
---------------------------------------------------------------------------

    \113\ See Rule 168.
    \114\ See Rule 169.
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    Investment companies registered under the Investment Company Act of 
1940 and business development companies are ineligible to use the safe 
harbors for factual business information and forward-looking 
information. These issuers are subject to a separate framework 
governing communications with investors.\115\
---------------------------------------------------------------------------

    \115\ See, e.g., Securities Act Rules 156, 482, and 498 [17 CFR 
230.156; 17 CFR 230.482; 17 CFR 230.498]; Investment Company Act 
Rule 34b-1 [17 CFR 270.34b-1].
---------------------------------------------------------------------------

b. Exception for Regularly Released Factual Business and Forward-
Looking Information--Available to Reporting Issuers
    We are adopting substantially as proposed the safe harbor for 
reporting issuers, as well as asset-backed issuers and certain non-
reporting foreign private issuers, from the gun-jumping provisions for 
continued publication or dissemination of communications of regularly 
released factual business and forward-looking information.\116\ This 
safe harbor is a ``use'' safe harbor in that it applies to 
communications of factual business and forward-looking information that 
have been regularly released in the ordinary course by or on behalf of 
a reporting issuer.\117\
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    \116\ The safe harbor also covers communications that 
incorporate regularly released factual business or forward-looking 
information.
    \117\ See Rule 168.
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    Commenters supported the proposed safe harbor with certain 
suggested changes to its scope.\118\ Commenters suggested that the safe 
harbor should be available to voluntary filers, non-reporting foreign 
private issuers, asset-backed issuers, registered investment companies, 
and business development companies.\119\ As adopted, the rule is 
available to non-reporting foreign private issuers meeting certain 
conditions and to asset-backed issuers (and to a depositor, sponsor, 
servicer, or affiliated depositor, whether or not the issuer) with 
regard to registered offerings of asset-backed securities.\120\ We 
believe that non-reporting foreign private issuers qualifying under the 
safe harbors, like reporting issuers in the United States, are 
providing information to the markets even though they are not reporting 
companies in the United States. Similarly, asset-backed issuers and 
issuers that are affiliated depositors provide and are encouraged to 
provide information on an ongoing basis in a manner consistent with 
that covered by Rule 168. The reference to depositors, sponsors, 
servicers, and affiliated depositors, whether or not the issuer, is 
intended to permit communication of information regarding pre-existing 
transactions or asset pools within the safe harbor where its conditions 
are satisfied.
---------------------------------------------------------------------------

    \118\ See, e.g., letters from ABA; Cleary; Davis Polk; Fried 
Frank; NYSBA; and SCSGP.
    \119\ See, e.g., letters from ABA; ABA-ABS; Allied; Alston; the 
Commercial Mortgage Securities Association (``CMSA''); Davis Polk; 
Fried Frank; Richard Hall; NYCBA; NYSBA; and S&C.
    \120\ The eligibility conditions for non-reporting foreign 
private issuers will be the same as the eligibility conditions for 
such issuers contained in Securities Act Rules 138 and 139 as we are 
amending them today.
---------------------------------------------------------------------------

    As we note above, voluntary filers are not required to report under 
the Exchange Act and therefore do not fall within Rule 168. Voluntary 
filers will have available to them the safe harbor for non-reporting 
issuers in new Rule 169.\121\ We also note above that registered 
investment companies and business development companies are subject to 
a separate framework governing communications with investors, and we 
believe that it would be more appropriate to consider investment 
company issues in the context of a broader reconsideration of this 
separate framework.
---------------------------------------------------------------------------

    \121\ These issuers may, of course, continue to rely on existing 
Commission interpretations concerning ongoing business disclosures. 
See the discussion at note 122 below regarding the interpretive 
releases on factual business information.
---------------------------------------------------------------------------

i. Factual Business Information
(A) Scope of the Safe Harbor
    We believe it is important to provide increased certainty regarding 
when the gun-jumping provisions will be inapplicable to the continuing 
ongoing communication of specified factual business information. We are 
adopting Securities Act Rule 168, which provides a non-exclusive safe 
harbor that such a communication is not an impermissible prospectus and 
does not violate the prohibition on pre-filing offers.\122\ We want to 
encourage reporting issuers and other issuers eligible to rely on the 
safe harbor to continue to provide this information. For purposes of 
Rule 168,

[[Page 44736]]

factual business information is defined as: \123\
---------------------------------------------------------------------------

    \122\ Rule 168 is a safe harbor from the definition of 
``prospectus'' in Securities Act Section 2(a)(10) and, therefore, 
prevents the application of the prohibition in Securities Act 
Section 5(b)(1) on the use of a prospectus that is not a statutory 
prospectus. The Rule also is a safe harbor from the prohibitions on 
pre-filing ``offers'' in Securities Act Section 5(c).
    In general, as we recognized many years ago, ordinary factual 
business communications that an issuer regularly releases are not 
considered an offer of securities. See, e.g., the guidelines 
contained in the 2000 Electronics Release, note 96 at Section 
II.B.2; Guidelines for the Release of Information by Issuers Whose 
Securities are in Registration, Release No. 33-5180 (Aug. 16, 1971) 
[36 FR 16506]; Publication of Information Prior to or After the 
Filing and Effective Date of a Registration Statement Under the 
Securities Act of 1933, Release No. 33-5009 (Oct. 7, 1969) [34 FR 
16870]; Offers and Sales by Underwriters and Dealers, Release No. 
33-4697 (May 28, 1964) [29 FR 7317]; and Publication of Information 
Prior to or After the Effective Date of a Registration Statement, 
Release No. 33-3844 (Oct. 8, 1957) [22 FR 8359]. The non-exclusive 
safe harbors we are adopting today will not affect in any way the 
Securities Act analysis regarding ordinary course business 
communications that are not within the safe harbors and we have made 
that clear in the Preliminary Note to the Rule. Such communications 
will not be presumed to be offers, and whether they are offers will 
depend on the facts and circumstances.
    \123\ Under the Rule as adopted, regularly released factual 
business information does not include the release of information 
about the registered offering or the release of information as part 
of the offering activities in the registered offering.
---------------------------------------------------------------------------

     Factual information about the issuer, its business or 
financial developments, or other aspects of its business;
     Advertisements of, or other information about, the 
issuer's products or services; and
     Dividend notices.

This information includes without limitation in each case such factual 
business information contained in reports or materials filed with, 
furnished to, or submitted to us pursuant to the Exchange Act.\124\
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    \124\ As we discuss below, some commenters expressed concern 
about the treatment of information contained in Exchange Act reports 
at the time they are originally filed with, furnished to, or 
submitted to us. See, e.g., letters from ABA and Fried Frank. We 
believe this modification will make clear that all covered 
information within Exchange Act filings will be covered by the safe 
harbor.
    Factual business information that reporting issuers release or 
disseminate will continue to be subject to the provisions of 
Regulation FD, Regulation G, Item 10 of Regulation S-K and 
Regulation S-B [17 CFR 229.10 et seq. and 17 CFR 228.10 et seq.], 
and Item 2.02 of Form 8-K.
---------------------------------------------------------------------------

(B) Comments on the Scope of the Safe Harbor
    Some commenters suggested broadening the categories of factual 
business information,\125\ including the suggestion that only offering-
related information be excluded from the definition of factual business 
information.\126\ We are adopting the definition of factual business 
information that in substantive respects is substantially as proposed. 
The simplification of the definition in the Rule as adopted does not 
narrow the information included in the definition. We believe that the 
purpose of the safe harbor is to permit reporting issuers to continue 
their ordinary course factual business communications, not to define 
when an offer is considered to occur in all cases. As we have noted, 
whether or not a communication that is outside the safe harbor would be 
an offer is a facts and circumstances determination.
---------------------------------------------------------------------------

    \125\ See, e.g., letters from ABA and SCSGP.
    \126\ See, e.g., letters from Davis Polk and SCSGP.
---------------------------------------------------------------------------

    We have modified the definition from the proposal to make clear 
that factual business information may be communicated within the safe 
harbor by including it in any report or material filed with, furnished 
to, or submitted to us. The other conditions of the safe harbor, for 
example, the ``regularly released,'' condition of course also must be 
satisfied. In addition, in response to commenters' concerns, we have 
made clear in a preliminary note that the safe harbor addresses use and 
relates to a communication, and, therefore, that another communication 
of the information in an offering-related manner will not affect the 
ability to rely on the safe harbor for the protected communication.
ii. Forward-Looking Information
(A) Scope of the Safe Harbor
    As we stated in the Proposing Release, our view of the value of 
forward-looking information in the market has evolved through the 
years. Through the 1970's we were most concerned with the potentially 
misleading effect that forward-looking information could have on 
investors.\127\ Since the 1980's, we have encouraged issuers to 
disclose forward-looking information and, in some situations (such as 
the disclosures in MD&A), required them to do so.\128\ The existing 
safe harbors for the content of forward-looking statements are designed 
to encourage the provision of forward-looking information.\129\
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    \127\ Until the 1970's, the Commission prohibited disclosure of 
forward-looking information in any disclosure document. In 1979, the 
Commission adopted a safe harbor for release of forward-looking 
information. See Statement by the Commission on the Disclosure of 
Projections of Future Economic Performance, Release No. 33-5362 
(Feb. 2, 1973) [38 FR 7220]; Safe Harbor Rule for Projections, 
Release No. 33-6084 (June 25, 1979) [44 FR 38810]. See also, the 
Wheat Report, note 21, at 94.
    \128\ See Item 303 of Regulation S-K and Regulation S-B [17 CFR 
229.303 and 17 CFR 228.303]. In our 2003 MD&A Release discussed at 
note 38, we issued interpretive guidance on MD&A which stated:
    In addressing prospective financial condition and operating 
performance, there are circumstances, particularly regarding known 
material trends and uncertainties, where forward-looking information 
is required to be disclosed. We also encourage companies to discuss 
prospective matters and include forward-looking information in 
circumstances where that information may not be required, but will 
provide useful material information for investors that promotes 
understanding * * *
    [M]aterial forward-looking information regarding known material 
trends and uncertainties is required to be disclosed as part of the 
required discussion of those matters and the analysis of their 
effects. In addition, forward-looking information is required in 
connection with the disclosure in MD&A regarding off-balance sheet 
arrangements.
    \129\ See Securities Act Section 27A [15 U.S.C. 77z-2] and 
Securities Act Rule 175 [17 CFR 230.175]. Section 27A provides a 
safe harbor for certain forward-looking statements. See also, the 
Off-Balance Sheet Disclosure Release at note 92 (stating that any 
forward-looking information required pursuant to the off-balance 
sheet arrangement disclosure in Items 303(a)(4) and (a)(5) of 
Regulation S-K and Regulation S-B would be subject to the statutory 
safe harbor contained in Sections 27A of the Securities Act and 21E 
of the Exchange Act [15 U.S.C. 78u-5]). Rule 175 provides a limited 
safe harbor for the content of forward-looking statements contained 
in documents filed with us, including in registration statements and 
periodic reports.
---------------------------------------------------------------------------

    Where an issuer regularly releases forward-looking information in 
the ordinary course, we indicated in the Proposing Release that we 
believe that the purpose of such communication is to keep the market 
informed about the issuer and its future prospects and, thus, the 
continued release or dissemination of this information in the ordinary 
course is not for the purpose of offering securities or conditioning 
the market for new issuances of the issuer's securities. Many issuers 
disclose earnings forecasts and other forward-looking information 
publicly to provide more information to the markets and to enable them 
to continue to have discussions to which Regulation FD applies. We do 
not believe that it is beneficial to investors or the markets to force 
reporting issuers to suspend their ordinary course communications of 
regularly released information that they would otherwise choose to make 
because they are raising capital in a registered offering.
    We are adopting the definition substantially as proposed to provide 
for the use of such a communication a safe harbor from being an 
impermissible prospectus and from violating the prohibitions on pre-
filing offers. As adopted, the safe harbor in Rule 168 will apply to 
the release or dissemination of communications containing some or all 
of the following forward-looking information if the release or 
dissemination satisfies the other conditions of the Rule: \130\
---------------------------------------------------------------------------

    \130\ The listed categories of forward-looking information in 
the safe harbor are essentially the same categories of statements 
that are defined as forward-looking statements under the safe harbor 
in Securities Act Section 27A(i)(1) [15 U.S.C. 77z-2(i)(1)]. The 
safe harbor covering the release or dissemination is available for 
the regular release of earnings expectations and guidance 
information. Rule 168 provides a safe harbor for the use of such 
information, not the content of the communication. An issuer's 
communications of forward-looking information made in reliance on 
the safe harbor will still have to satisfy the conditions of 
Securities Act Section 27A if the issuer wishes to rely on the 
statutory safe harbor for the content of the information.
    The comments on the definition of forward-looking information 
related primarily to the interplay between such information and the 
exclusion of offering-related information from the scope of the safe 
harbor and the way in which newer issuers would establish a history 
of regular release of such information. See letter from ABA.
---------------------------------------------------------------------------

     Projections of the issuer's revenues, income (loss), 
earnings (loss) per share, capital expenditures, dividends, capital 
structure, or other financial items;
     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;

[[Page 44737]]

     Statements about the issuer's future economic performance, 
including statements of the type contemplated by MD&A described in Item 
303 of Regulation S-K and Regulation S-B, or Item 5 of Form 20-F; and
     Assumptions underlying or relating to any of the foregoing 
information.

    As with factual business information, we have clarified that any 
such information may be communicated by including it in a report filed 
with, or furnished to, or submitted to us. The safe harbor for forward-
looking information also addresses ``use,'' and the preliminary note 
discussed above applies.
iii. Conditions of Safe Harbor in Rule 168
(A) ``By or on Behalf of'' the Issuer
(1) Definition
    Under the Rule as adopted, factual business and forward-looking 
information will be considered released or disseminated by or on behalf 
of an issuer if the issuer or an agent or a representative of the 
issuer, other than an offering participant who is an underwriter or 
dealer, authorizes or approves the release or dissemination of the 
communication before it is made.\131\ Satisfaction of this condition is 
separate from the ``regularly released'' condition. The safe harbor is 
not available for information released in a manner intended to 
circumvent either the conditions to use or the permitted manner of use 
of the information.
---------------------------------------------------------------------------

    \131\ We are using a similar definition as contained in 
Securities Act Rule 146 [17 CFR 230.146].
    As we note above, for asset-backed securities offerings, the 
safe harbor is available to asset-backed issuers, depositors, 
affiliated depositors, sponsors, and servicers. We have included a 
provision regarding communication by or on behalf of such persons.
---------------------------------------------------------------------------

(2) Comments on Definition
    Commenters supported the concept of ``by or on behalf of'' the 
issuer.\132\ Commenters also supported placing the definition of the 
term in a single rule, rather than a separate definition in each safe 
harbor.\133\ Some commenters suggested further clarifications of the 
definition, such as identifying the persons authorized or approved to 
speak on behalf of the issuer, eliminating any issuer responsibility 
for communications by unauthorized persons, and providing that the 
communication either be authorized or approved but not both.\134\
---------------------------------------------------------------------------

    \132\ See, e.g., letters from ABA; Cleary; S&C and William J. 
Williams, Jr.
    \133\ See Id.
    \134\ See, e.g., letters from ABA; Alston; Cleary; Davis Polk; 
and S&C.
---------------------------------------------------------------------------

    We have considered these suggestions carefully and have made some 
revisions to the definition of ``by or on behalf of'' the issuer. We 
have determined not to provide a single definition, instead including 
an appropriate definition in each relevant rule. We also have not taken 
the suggestions that the Rule provide that issuers are responsible only 
for communications made by authorized or approved speakers. The 
circumstances under which issuers are responsible for the acts of 
individuals may be determined in accordance with principles not 
addressed in today's rules. In addition, we have not defined further 
who may be considered an agent or representative of the issuer, other 
than to specifically exclude offering participants who are underwriters 
and dealers. The definition could cover legitimate representatives or 
agents of the issuer such as, for example, advertising agencies and 
public relations companies who normally release or disseminate product 
advertising or promotional communications containing such information 
on behalf of an issuer. We also have modified the definition to provide 
that the communication does not have to be both approved and authorized 
for it to be considered to be made by or on behalf of the issuer.
    A few commenters suggested that the Rule not include the 
preliminary note that contains the ``scheme to evade'' language because 
they believed it would cause uncertainty about the ability to rely on 
the safe harbors.\135\ The preliminary note to the Rule is 
substantially the same preliminary note contained in a significant 
number of exemptions under the Securities Act upon which market 
participants have relied and we are adopting the Rule with the 
preliminary note regarding the ``scheme to evade'' language as 
proposed.\136\
---------------------------------------------------------------------------

    \135\ See, e.g., letters from ABA and William J. Williams, Jr.
    \136\ See, e.g., Regulation D [17 CFR 230.501 et seq.] and Rule 
155 [17 CFR 230.155].
---------------------------------------------------------------------------

(B) Regularly Released Information
(1) Regularly Released Condition
    As we discussed in the Proposing Release, the purpose of the safe 
harbor is to enable a reporting issuer to continue its past ordinary 
course practice of releasing or disseminating publicly factual business 
and forward-looking information. Communications of both factual 
business information and forward-looking information must satisfy the 
same conditions regarding regular release.
    We are adopting the regularly released condition substantially as 
proposed. Under Rule 168, information will be considered regularly 
released or disseminated if the issuer has previously released or 
disseminated the same type of information in the ordinary course of its 
business, and the release or dissemination is consistent in material 
respects in timing, manner, and form with the issuer's similar past 
release or dissemination of such information.\137\ The method of 
releasing or disseminating the information, thus, also must be 
consistent in material respects with prior practice. These conditions 
seek to ensure that the information is not being released to condition 
the market for the registered offering of the issuer's securities.
---------------------------------------------------------------------------

    \137\ In the case of asset-backed issuers, the regularly 
released requirement will be tested against the previous 
communications of those persons included in the Rule's provisions, 
taken together.
---------------------------------------------------------------------------

    While the Rule does not establish or require any minimum time 
period to satisfy the regularly released element, the safe harbor 
requires the issuer to have some track record of releasing the 
particular type of information. One prior release or dissemination 
could establish this track record. Issuers should consider the 
frequency and regularity with which they have released the same type of 
information. For example, an issuer's release of new types of financial 
information or projections just before or during a registered offering 
will likely prevent a conclusion that the issuer regularly released 
that type of forward-looking or financial information in the ordinary 
course of its business.
(2) Comments on Regularly Released Condition
    Commenters on the regularly released condition suggested that we 
further clarify the concept of regularly released information by 
elaborating on the meaning of timing, manner, and form.\138\ Some of 
these commenters were concerned about the availability of the safe 
harbor for non-scheduled releases of information and information 
distributed using new or different technologies.\139\ Other commenters 
on this point, however, desired greater flexibility with no definition 
of ``ordinary course.'' \140\
---------------------------------------------------------------------------

    \138\ See, e.g., letters from Davis Polk; the Investment Company 
Institute (``ICI''); and TBMA.
    \139\ See Id.
    \140\ Some commenters also expressed concern about offshore 
communications. See, e.g., letters from ABA and Fried Frank. 
Communications that are considered not to be offers because they are 
made offshore and meet other criteria we have previously discussed 
would be treated in the same manner as they are today. See Statement 
of the Commission Regarding Use of Internet Web Sites to Offer 
Securities, Solicit Securities Transactions or Advertise Investment 
Services Offshore, Release No. 33-7516 (Mar. 27, 1998) [63 FR 
14806]; Offshore Press Conferences, Meetings with Company 
Representatives Conducted Offshore and Press-Related Materials 
Released Offshore, Release No. 33-7470 (Oct. 17, 1997) [62 FR 
53948].

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[[Page 44738]]

    We have not changed the ``regularly released'' language from the 
proposal because we do not believe that a bright-line test of 
``regularly released'' is appropriate. We believe that it is more 
appropriate to provide issuers the flexibility to use the means and 
timing they believe is appropriate for their ongoing business 
communications. We would note, however, that there are circumstances in 
which communications made outside a predetermined schedule or not at 
regular intervals would be covered by the safe harbor. The Rule is not 
intended to cover only scheduled releases of information but also could 
cover communications, such as product advertising and product release 
information or earnings guidance changes, that are made on an 
unscheduled or episodic basis, provided that the issuer has previously 
provided such communications containing factual business and forward-
looking information in that manner. Thus, for unscheduled or episodic 
releases, the nature of the event triggering the communication would be 
taken into account in determining whether the regularly released 
condition is satisfied. For example, if an issuer only gives guidance 
upon the occurrence of certain types of developments, a release of 
guidance when a materially similar event occurs could be materially 
consistent, even if not done at regular intervals. As another example, 
if an issuer launches a product only episodically, disclosure or 
advertising of a product launch still could be materially consistent.
    Merely using new or different technologies will not be necessarily 
inconsistent in material respects under the conditions of the Rule. An 
issuer will have to determine whether its use of new or different 
technologies to release information falls within the safe harbor, 
including whether the release or dissemination is consistent in 
material respects with how the issuer is already releasing or 
disseminating its communications containing factual business or 
forward-looking information using analogous methods. For example, 
whether the new or different technology makes a material difference in 
terms of the breadth of dissemination to investors or other reach of 
the communication to investors is relevant in determining whether the 
manner or form is consistent in material respects.
(C) Exclusion for Offering-Related Information
(1) Scope of Exclusion
    We are adopting as proposed the exclusion from the safe harbor of 
any information about the registered offering itself. Publication of 
information about a registered offering outside the registration 
statement or a prospectus is limited to statements allowed under other 
exemptions or exclusions, including Rule 134 and Rule 135.\141\
---------------------------------------------------------------------------

    \141\ See 17 CFR 230.135. Our other rules address communications 
in the offering context. For example, we are amending Rule 134 to 
increase the amount of communication allowed under that rule about a 
registered offering without it being considered a prospectus.
---------------------------------------------------------------------------

    As we discussed in the Proposing Release, because the safe harbor 
is a ``use'' exemption intended to facilitate continued release or 
dissemination of regularly released ordinary course factual business 
and forward-looking communications, it also excludes the release of 
that information as part of the offering activities in the registered 
offering. For example, while the safe harbor could be available for 
factual business information contained in an Exchange Act report at the 
time it is initially filed, the safe harbor will not be available for 
the distribution of that information to investors or potential 
investors as part of offering activities, such as incorporation by 
reference into a prospectus that is part of a registration statement, 
disclosure at a road show, or disclosure in a free writing prospectus. 
As another example, as permitted by the ``regularly released'' 
condition, an issuer could rely on the safe harbor for the publication 
of an earnings release consistent with past practice, including the 
posting of and maintaining the release on an issuer's web site, whether 
or not located in a separate section of the web site for historical 
information. The distribution of that earnings release, however, as 
part of the marketing activities to potential investors will be outside 
the scope of the safe harbor.
(2) Comments on Exclusion
    Commenters requested further clarification that release of a 
communication containing information in reliance on the safe harbor 
will not be affected by release of the same information in offering-
related communications.\142\ We have made clear in a preliminary note 
in the adopted Rule that the release of communications containing 
information outside the safe harbor will not affect the availability of 
the safe harbor for any other release or dissemination of a 
communication containing the same information that is (or was) within 
the scope of the safe harbor.
---------------------------------------------------------------------------

    \142\ See, e.g., letters from Fried Frank and SCSGP.
---------------------------------------------------------------------------

    Some commenters requested that we define ``offering-related'' or 
``part of the offering activities.'' \143\ We decline to do so. An 
issuer must determine, based upon the particular facts and 
circumstances, whether or not a communication contains information 
about the registered offering or is being used as part of the offering 
activities.
---------------------------------------------------------------------------

    \143\ See, e.g., letters from Davis Polk and SCSGP.
---------------------------------------------------------------------------

    Certain commenters requested that we clarify the impact Rule 168 
and Rule 169 (as discussed below) would have on our guidance regarding 
the filing requirement for ordinary or routine business communications 
that refer to a business combination transaction in a non-substantive 
way.\144\ We believe that guidance is unaffected by the adoption of the 
safe harbors of Rule 168 and Rule 169, regardless of whether the 
communication falls within the scope of such safe harbors or our other 
interpretive guidance regarding ongoing factual and business 
communications.\145\
---------------------------------------------------------------------------

    \144\ See, e.g., letters from ABA; Alston; and S&C.
    \145\ See the Regulation M-A Release, note 95, at footnote 45.
---------------------------------------------------------------------------

c. Exception for Regularly Released Factual Business Information--
Available to Non-Reporting Issuers
i. Scope of the Safe Harbor
    We are adopting substantially as proposed a non-exclusive safe 
harbor from the gun-jumping provisions for regularly released factual 
business information that, unlike Rule 168, is available to all 
eligible issuers, including non-reporting issuers.\146\ The Rule 
provides a non-exclusive safe harbor for the issuer's release or 
dissemination of regularly released ordinary course factual business 
information intended for use by persons other than in their capacity as 
investors or potential investors, such as customers and suppliers.\147\ 
Under the safe harbor, a non-reporting issuer's release or 
dissemination of factual business

[[Page 44739]]

information that satisfies the conditions of the Rule would not be an 
impermissible prospectus and would not violate the prohibition on pre-
filing offers.\148\ As we noted in the Proposing Release, because a 
condition of the safe harbor involves the manner and timing of the 
communication, the same issuer employees or agents who historically 
have been responsible for providing the information for intended use by 
customers and suppliers must communicate the information provided in 
reliance on this safe harbor.
---------------------------------------------------------------------------

    \146\ See Rule 169. Because Rule 168 is available to reporting 
issuers and some non-reporting issuers (including asset-backed 
issuers and certain non-reporting foreign private issuers), the 
principal practical relevance of Rule 169 is to other non-reporting 
issuers.
    \147\ The fact that a customer also may be a potential investor 
in the issuer's securities or that the information may be received 
by other persons will not affect the availability of the safe harbor 
if the conditions are otherwise satisfied. For purposes of the safe 
harbor, the communication must be intended for use by an audience 
that is other than an investor audience.
    \148\ Rule 169 is a safe harbor from the definition of 
``prospectus'' in Securities Act Section 2(a)(10) and therefore 
disapplies the prohibition in Securities Act Section 5(b)(1) on the 
use of a prospectus that is not a statutory prospectus. The Rule 
also is a safe harbor from the prohibitions on pre-filing ``offers'' 
in Securities Act Section 5(c).
---------------------------------------------------------------------------

    Under the safe harbor, factual business information is defined as:
     Factual information about the issuer, its business or 
financial developments, or other aspects of its business; and
     Advertisements of, or other information about, the 
issuer's products or services.\149\
---------------------------------------------------------------------------

    \149\ We have not included dividend notices within the 
definition because the communications covered by the Rule are those 
intended for use by persons other than in their capacity as 
investors or potential investors.
---------------------------------------------------------------------------

    As with the safe harbor for reporting issuers, the safe harbor 
requires that the information be regularly released in the ordinary 
course of business, released or disseminated by or on behalf of the 
issuer, and not include information about the registered offering or 
information released or disseminated as part of the offering activities 
in the registered offering. We have made the same modifications to 
these conditions and to the preliminary note to Rule 169 as in new Rule 
168 for reporting issuers.
    As we discussed in the Proposing Release, because non-reporting 
issuers generally are not releasing information in connection with 
securities market activities, we believe it is appropriate to limit the 
scope of the safe harbor to the specified regularly released ordinary 
course factual business information.\150\ Further, we are not adopting 
a safe harbor for forward-looking information for non-reporting issuers 
because of the lack of such information or history for these issuers in 
the marketplace. In those circumstances, we believe that the potential 
for abuse in permitting a safe harbor for the continued release of 
forward-looking information as a way to condition the market for the 
issuer's securities outweighs the legitimate utility to the issuer of 
the safe harbor.
---------------------------------------------------------------------------

    \150\ These issuers will still be able to rely on our 
interpretive positions for the release of factual business 
information. See note 122. In addition, these issuers may still be 
able to rely on Securities Act Rules 134 and 135 and new Securities 
Act Rules 163A and 164.
---------------------------------------------------------------------------

ii. Comments on the Safe Harbor
    Commenters supported the proposed safe harbor and suggested certain 
expansions and clarifications.\151\ Commenters wanted us to clarify 
that information that was directed to customers, suppliers, etc., would 
be covered by the safe harbor even if the information became available 
to other persons, including investors or potential investors.\152\ As 
we discuss above, the Rule is aimed at assuring that the communication 
is intended for use by an audience that is other than an investor 
audience, not at ensuring that the communication is not received by or 
available to an investor or potential investor. We have modified the 
Rule to clarify this point. For example, a widely disseminated 
communication (such as a press release) intended for use by a non-
investor audience and otherwise meeting the conditions of the safe 
harbor will not lose protection if it is available to or received by 
investors or potential investors.
---------------------------------------------------------------------------

    \151\ See, e.g., letters from ABA; NYCBA; NYSBA; and Reuters.
    \152\ See, e.g., letters from ABA and NYSBA.
---------------------------------------------------------------------------

    We had requested comment in the Proposing Release as to whether the 
safe harbor also should cover forward-looking information and whether 
the safe harbor for forward-looking statements contained in Securities 
Act Section 27A should be extended to initial public offerings. We 
further requested comment on whether we should require projections or 
other forward-looking information to be included in initial public 
offering registration statements. In response, some commenters 
supported extending the Section 27A safe harbor for forward-looking 
statements to initial public offerings but did not support requiring 
projections to be included in registration statements.\153\ Some 
commenters were concerned that, because of the relatively untested 
nature of companies engaging in initial public offerings, there was 
limited basis to assess the reasonableness of assumptions underlying 
the projections about the issuer's business.\154\ We appreciate 
commenters' input on these points and, in light of the fact that these 
companies are generally untested, as commenters noted, we have 
determined not to include forward-looking statements in the Rule 169 
safe harbor we are adopting today or to extend the safe harbor for 
forward-looking statements in Securities Act Section 27A to initial 
public offerings.
---------------------------------------------------------------------------

    \153\ See, e.g., letters from AICPA; E & Y; KPMG LLP (``KPMG''); 
and PricewaterhouseCoopers LLP (``PwC'').

    \154\ See, e.g., letters from AICPA and E & Y.
---------------------------------------------------------------------------

2. Other Permitted Communications Prior to Filing a Registration 
Statement
    Beyond the continuing ongoing release of information discussed 
above, there is an increased amount of information disseminated to the 
market about issuers, including through the Internet. We believe that 
the availability of this information should be encouraged, subject to 
appropriate standards of liability. At times when the risk of 
conditioning the market for a securities offering is sufficiently 
remote, it is important to provide issuers with greater certainty that 
the release of information will not be considered an impermissible 
offer under the Securities Act. Such an approach will avoid hindering 
issuer communications except where necessary for investor protection. 
We are, therefore, adopting rules that clarify the Securities Act 
application to communications that might not fall within the safe 
harbors for regularly released factual business and forward-looking 
information.
a. 30-Day Bright-Line Exclusion From the Prohibition on Offers Prior to 
Filing a Registration Statement--All Issuers
i. Scope of Exclusion
    We are adopting, substantially as proposed, Rule 163A to provide 
all issuers a bright-line time period, ending 30 days prior to filing a 
registration statement, during which issuers may communicate without 
risk of violating the gun-jumping provisions. Such communications will 
be excluded from the definition of offer for purposes of Securities Act 
Section 5(c).\155\ As we noted in the Proposing Release, a bright-line 
test will provide greater certainty in the offering process and avoid 
unnecessary limitations on issuer

[[Page 44740]]

communications more than 30 days prior to the filing of the 
registration statement. Further, we believe that the 30-day timeframe 
adequately assures that these communications will not condition the 
market for a securities offering by providing a sufficient time period 
to cool any interest in the offering that might arise from the 
communication.\156\
---------------------------------------------------------------------------

    \155\ While communications made in reliance on the Rule could, 
depending on the particular facts, be an ``offer'' as defined in 
Securities Act Section 2(a)(3), the Rule provides that the 
communication is not an ``offer'' for purposes of Securities Act 
Section 5(c). See Rule 163A.
    As Rule 163A provides a safe harbor from the application of 
Securities Act Section 5(c), it necessarily applies only prior to 
the filing of a registration statement. This exclusion will thus not 
apply to issuers offering securities off a shelf registration 
statement on file, whether or not effective, as to which the 
prohibition in Section 5(c) does not apply to the offering of the 
securities covered by such shelf registration statement.
    See also Harold Bloomenthal and Samuel Wolff, Emerging Trends in 
Securities Laws [2003-2004 ed.], ``Securities Act Reform--
D[eacute]j[agrave] Vu All Over Again,'' Commissioner Roel C. Campos 
(the ``Campos Article'') at Sec.  1:28.
    \156\ We chose a 30-day timeframe because it is consistent with 
the timeframe in Securities Act Rule 155 regarding integration of 
abandoned offerings and Securities Act Rule 254 regarding pre-filing 
solicitations of interest in Regulation A offerings [17 CFR 
230.254].
---------------------------------------------------------------------------

    As adopted, the 30-day bright-line exclusion from the gun-jumping 
provisions is subject to the following conditions:
     A communication made in reliance on the Rule cannot 
reference a securities offering that is or will be the subject of a 
registration statement; \157\
---------------------------------------------------------------------------

    \157\ Securities Act Rule 155, relating to integration of 
abandoned offerings, permits issuers to register a securities 
offering immediately following the abandonment of a private offering 
made to accredited or sophisticated persons and not involving 
general solicitation and general advertising. The 30-day exclusion, 
on the other hand, applies to public communications made prior to a 
registered offering. Because Rule 155 treats any private offers made 
in the abandoned private offering as not part of the subsequent 
registered offering, issuers relying on Rule 155 in connection with 
a subsequently registered offering would continue to rely on Rule 
155 and need not rely on the 30-day bright-line exclusion for public 
communications before a registration statement is filed.
---------------------------------------------------------------------------

     A communication made in reliance on the Rule will have to 
be made ``by or on behalf of the issuer''; and
     The issuer will have to take reasonable steps within its 
control to prevent further distribution or publication of the 
communication during the 30-day period immediately before the issuer 
files the registration statement.
    We have made minor revisions to the Rule from the proposals. We 
have made clear that the exemption is non-exclusive. In addition, we 
have revised the definition of ``by or on behalf of'' the issuer in the 
same manner as in Rules 168 and 169 to explicitly exclude offering 
participants who are underwriters or dealers from being considered 
agents or representatives of the issuer for purposes of the Rule. We 
have narrowed the restriction on references to securities offerings to 
apply to a securities offering that is or will be the subject of a 
registration statement.
    The Rule is designed to preclude issuers and offering participants 
from circumventing the registration requirements of the Securities Act. 
Because the Rule does not permit information about a securities 
offering that is or will be the subject of a registration statement, 
the communications made in reliance on the Rule are less likely to be 
used to condition the market for the issuer's securities. In addition, 
the communications are still subject to provisions addressing deficient 
disclosure, including the anti-fraud provisions.\158\ Finally, the safe 
harbor is available only for communications made by or on behalf of the 
issuer so that other potential offering participants cannot use the 
exemption. Communications within the scope of Rule 163A made prior to 
the 30 days before filing are protected by the safe harbor. 
Communications made during the 30 days before the filing are outside 
the safe harbor. Because of these factors and the bright-line nature of 
the Rule, we have eliminated the proposed preliminary note that 
indicated that the exemption was not available for schemes to evade the 
registration requirements of the Securities Act because we do not 
believe it is necessary.
---------------------------------------------------------------------------

    \158\ Communications made in reliance on Rule 163A safe harbor 
also would not be made in connection with a registered securities 
offering for purposes of the exclusion in Regulation FD. See Rule 
100(b)(2)(iv) of Regulation FD.
---------------------------------------------------------------------------

    The 30-day bright-line exclusion is not available for enumerated 
categories of offerings and for specified issuers that pose the 
greatest risk of abuse of that exclusion. Specifically, Rule 163A is 
not available to communications made in connection with:
     Offerings by a blank check company;
     Offerings by a shell company; or
     Offerings of penny stock by an issuer.\159\
---------------------------------------------------------------------------

    \159\ See Securities Act Rule 419(a)(2) [17 CFR 230.419(a)(2)], 
Exchange Act Rule 3a51-1 [17 CFR 240.3a51-1], and amendments to Rule 
405 defining ``shell'' company. See the Shell Company Release, note 
109. The Rule also excludes issuers who were or any of whose 
predecessors in the prior three years were blank check companies, 
shell companies (other than business combination related shell 
companies), or issuers that issued penny stock. Other than for well-
known seasoned issuers, Rule 163A also excludes offerings registered 
on Form S-8 [17 CFR 239.16b].
---------------------------------------------------------------------------

    The Rule as adopted also excludes communications regarding business 
combination transactions from being able to rely on the exclusion, as 
those communications are regulated separately.\160\ The Rule also is 
not available for communications regarding offerings made by a 
registered investment company or a business development company.
---------------------------------------------------------------------------

    \160\ See the Regulation M-A Release, note 95. The Rule excludes 
any business combination transaction, including an exchange offer.
---------------------------------------------------------------------------

ii. Comments on 30-day Bright-Line Exclusion
    Commenters expressed strong support for the Rule and suggested 
certain expansions and clarifications.\161\ Some commenters wanted the 
Rule to provide an exemption from the definition of offer for all 
purposes under the Securities Act.\162\ We do not believe that it is 
appropriate to exclude from the definition of offer for all purposes 
any communications occurring more than 30 days from the date of filing 
the registration statement. The Rule contains no content restriction, 
other than a prohibition against referencing a securities offering that 
is or will be the subject of a registration statement. The intent of 
the Rule is to provide certainty that an issuer will not be considered 
to be ``gun jumping'' by engaging in communications more than 30 days 
before it files its registration statement, not to provide certainty 
that it will not be liable for material disclosure deficiencies in its 
communications.\163\
---------------------------------------------------------------------------

    \161\ See, e.g., letters from ABA; Davis Polk; Fried Frank; IBA; 
ICI; NYCBA; NYSBA; and Reuters.
    \162\ See, e.g., letters from ABA; Alston; Cleary; and NYSBA.
    \163\ Commenters also asked that we clarify further that 
information released during the 30 days before the registration 
statement filing in reliance on another exemption would not affect 
the ability of the issuer to rely on the 30-day safe harbor. See, 
e.g., letters from ABA; Alston; Cleary; Fried Frank; and TBMA. We 
have clarified that the Rule is a non-exclusive safe harbor and 
issuers can rely on other available exemptions, exclusions, or safe 
harbors from the gun-jumping provisions for the communications. 
Conversely, reliance on other safe harbors, exemptions, and 
exclusions during the 30-day period does not preclude reliance on 
the 30-day safe harbor.
---------------------------------------------------------------------------

    Commenters also suggested that we provide more guidance as to what 
actions will constitute ``reasonable steps within the issuer's 
control,'' particularly with respect to information posted on web sites 
prior to 30 days before the filing of the registration statement.\164\ 
The ``reasonable steps'' condition is already contained in Rule 165 for 
business combination transactions. We do not believe that it is 
appropriate to provide bright lines as to when an issuer will be 
considered to have taken reasonable steps within its control to prevent 
further dissemination of the communication.\165\ As to the treatment

[[Page 44741]]

of information posted on an issuer's web site, we do not expect that an 
issuer will necessarily remove the information from the Web site and, 
provided that the information is appropriately dated, otherwise 
identified as historical material, and not referred to as part of the 
offering activities, we will not object to an issuer maintaining the 
information on the Web site.
---------------------------------------------------------------------------

    \164\ See, e.g., letters from ABA; Alston; Cleary; and Fried 
Frank.
    \165\ The Rule as adopted limits the exclusion to issuers. While 
we do not expect an issuer to be able to control the republication 
or accessing of previously published press releases, we expect 
issuers and persons acting on their behalf to be able to control 
their own involvement in any subsequent redistribution or 
publication and, therefore, believe that it is an appropriate 
condition to the ability to rely on the exclusion. For example, if 
an issuer or its representative gives an interview to the press 
prior to the 30-day period, it will not be able to rely on the 
exclusion if the interview is published during the 30-day period. We 
have addressed the same issues in the context of free writing 
prospectuses discussed below.
---------------------------------------------------------------------------

    Commenters also suggested that registered investment companies and 
business development companies should be permitted to rely on Rule 
163A.\166\ We are not adopting this suggestion because we believe that 
it would be more appropriate to consider changes to our requirements as 
they apply to registered investment companies and business development 
companies in the context of a broader reconsideration of the separate 
framework applicable to such issuers.
---------------------------------------------------------------------------

    \166\ See letters from ABA; Allied; and Fried Frank.
---------------------------------------------------------------------------

b. Permitted Pre-Filing Offers for Well-Known Seasoned Issuers
i. Overview
    The rules we are adopting today, when taken together, provide 
exemptions generally from the applicability of the gun-jumping 
provisions for eligible well-known seasoned issuers. The safe harbors 
for regularly released factual business and forward-looking information 
and the exemption from the prohibition on offers for purposes of 
Securities Act Section 5(c) for communications more than 30 days prior 
to filing of a registration statement are available to well-known 
seasoned issuers. In addition, as discussed below, the broadened 
exemption for routine offering-related communications and the 
availability of an exemption for eligible issuers from the gun-jumping 
provisions for free writing prospectuses, in both cases after filing of 
a registration statement, also are available to well-known seasoned 
issuers. However, because the gun-jumping provisions prohibit all 
offers--written or oral--before the filing of a registration statement, 
we believe well-known seasoned issuers could be unnecessarily 
constrained in their capital formation activities.\167\
---------------------------------------------------------------------------

    \167\ See Securities Act Section 5(c).
---------------------------------------------------------------------------

ii. Exemption for Pre-Filing Offers
    To address communications made in the 30 days prior to filing a 
registration statement that are not otherwise excluded from the gun-
jumping provisions and to complete the set of rules permitting all 
communications by well-known seasoned issuers under the gun-jumping 
provisions, we are adopting essentially as proposed an exemption from 
the prohibition on offers before the filing of a registration statement 
for offers made by or on behalf of eligible well-known seasoned 
issuers.\168\ The exemption permits these issuers to engage in 
unrestricted oral and written offers before a registration statement is 
filed without violating the gun-jumping provisions. These 
communications, while exempt from the gun-jumping provisions, are still 
considered offers and subject to liability standards applicable to such 
offers.\169\ The exemption is available only for communications made 
``by or on behalf of'' the issuer.\170\ Moreover, any communication for 
which disclosure is required under Securities Act Section 17(b) will be 
deemed to be a communication that is an offer for purposes of the Rule 
and, if written, the communication will be a free writing prospectus of 
the issuer.\171\ As with the other exemptions, exclusions, and safe 
harbor rules we are adopting today, we have made clear that the 
exemption is non-exclusive.
---------------------------------------------------------------------------

    \168\ See Rule 163. The exemption is not available to 
communications involving registered business combination 
transactions or communications in offerings by registered investment 
companies or business development companies.
    \169\ Any written offer will be a prospectus under Securities 
Act Section 2(a)(10) relating to a public offering of the securities 
to be covered by the registration statement to be filed. All oral 
communications that are offers and all prospectuses will be subject 
to liability under Securities Act Section 12(a)(2). The 
communications also will be subject to other provisions addressing 
deficient disclosure, including Securities Act Section 17(a), 
Exchange Act Section 10(b), and Exchange Act Rule 10b-5.
    Communications made in reliance on the Rule also will not be 
considered to be in connection with a registered securities offering 
for purposes of the exclusion from Regulation FD. See Rule 
100(b)(2)(iv) of Regulation FD.
    The Rule is different from Securities Act Rule 254. Securities 
Act Rule 254 permits solicitations of interest in Regulation A 
offerings provided the conditions of the rule, including pre-use 
submission of the materials to the Commission, are satisfied, and 
does not treat the materials as prospectuses. Rule 163 does not 
require pre-filing of the communications and written offers will be 
prospectuses.
    \170\ In addition, as with the other exemptions and safe harbors 
that are available only to the issuer, the definition of by or on 
behalf of the issuer explicitly excludes offering participants who 
are underwriters or dealers.
    \171\ See Rule 163(d). Securities Act Section 17(b) [15 U.S.C. 
77q(b)] generally requires persons who make statements describing an 
issuer's securities to disclose the receipt (and the amount) of 
consideration given, directly or indirectly, by an issuer, 
underwriter, or dealer in exchange for making the statements.
---------------------------------------------------------------------------

    We also have modified the Rule to eliminate the preliminary note 
regarding the unavailability of the exemption if it is part of a scheme 
to avoid or evade the requirements of the gun-jumping provisions. We 
have not included this preliminary note in the adopted Rule because we 
believe that the Rule provides an exemption for the communication from 
the gun-jumping provisions only for well-known seasoned issuers and 
because the disclosure liability and anti-fraud provisions of the 
federal securities laws continue to apply.
    In view of the automatic shelf registration process we describe 
below, we expect that well-known seasoned issuers usually will have a 
registration statement on file that it can use for any of its 
registered offerings. Consequently, it generally will be unusual for 
these issuers to make offers prior to the filing of a registration 
statement;\172\ however, we have provided this exemption from the 
prohibition on pre-filing offers to liberalize communications for these 
issuers to the appropriate extent. A written offer made by or on behalf 
of a well-known seasoned issuer under the exemption will, however, meet 
our definition of ``free writing prospectus'' and will need to include 
a legend and be filed promptly by the issuer when and if the issuer 
files its registration statement.\173\ We also have provided in the 
Rule as adopted that filing is not required if the communication has 
previously been filed with or furnished to us (for example pursuant to 
Regulation FD on Form 8-K). The Rule as adopted also provides that 
filing is not required if filing would not be required under Rule 433 
regarding free

[[Page 44742]]

writing prospectuses, discussed below, if the communication was a free 
writing prospectus used after filing of the registration statement. 
Finally, the filing conditions of Rule 163 will be satisfied if the 
filing conditions of Rule 433 (other than timing of filing) are 
satisfied. As a result, for example, the accommodations provided in 
Rule 433 regarding media publications that are free writing 
prospectuses also will apply under Rule 163.\174\
---------------------------------------------------------------------------

    \172\ See the discussion in Section V.B.2 below under 
``Automatic Shelf Registration for Well-Known Seasoned Issuers,'' 
with regard to the availability of an ``automatic shelf'' 
registration process for these issuers.
    \173\ The legend is similar to the one we are providing as a 
condition for free writing prospectuses used after a registration 
statement is filed. We have made minor modifications to the legend, 
including eliminating issuer-specific language and references to 
risk factors. We also have provided that the legend may include an 
e-mail address and web site where the prospectus can be requested or 
is available. See the discussion in Section III.D.3 below under 
``Legend Condition'' with regard to the conditions for use of a 
``free writing prospectus.'' Under Rule 163 and Rule 433, all issuer 
free writing prospectuses must be filed unless exempt from the 
filing condition. Under Rule 163 as adopted, free writing 
prospectuses must be filed only if the issuer files a registration 
statement or amendment to the registration statement covering the 
securities offered by the free writing prospectus.
    \174\ For example, the issuer could satisfy its filing condition 
under Rule 163 for a media publication for which an issuer could 
file an interview transcript under Rule 433 by similarly filing such 
a transcript, as described below.
---------------------------------------------------------------------------

    Any written communication used in reliance on this exemption will 
be subject to the same provisions applicable to free writing 
prospectuses used after a registration statement is filed with regard 
to the ability to ``cure'' a failure to meet the legend or filing 
condition in reliance on our rules governing free writing prospectuses 
discussed below.\175\
---------------------------------------------------------------------------

    \175\ See discussion in Section III.D.3 below under ``Cure for 
Unintentional or Immaterial Failure to Include a Legend'' and 
``Unintentional Failures to File'' regarding Rules 164 and 433 with 
respect to the cure provisions.
---------------------------------------------------------------------------

iii. Comments on Exemption for Pre-Filing Offers
    Commenters broadly supported the proposed exemption for pre-filing 
offers by well-known seasoned issuers.\176\ One commenter thought the 
exemptions should be expanded to cover all seasoned issuers, not just 
well-known seasoned issuers.\177\ Some commenters suggested that the 
filing condition for free writing prospectuses apply only when and if 
the registration statement is filed.\178\ In addition, commenters 
wanted clarification that the availability of the exemption does not 
depend on the issuer filing the free writing prospectus within a 
particular time frame.\179\ Finally, commenters requested clarification 
that media publications, as with other free writing prospectuses, do 
not need to be filed until the registration statement is filed.\180\ 
One commenter also suggested that Regulation FD should not apply to 
offering-related information communicated in reliance on the 
exemption.\181\
---------------------------------------------------------------------------

    \176\ See, e.g., letters from ABA, Cleary; NYSBA, S&C: SIA; and 
TBMA.
    \177\ See letter from ABA.
    \178\ See, e.g., letters from Fried Frank and NYSBA.
    \179\ See, e.g., letters from ABA and Davis Polk.
    \180\ See, e.g., letters from Davis Polk and NYSBA.
    \181\ See letter from ABA.
---------------------------------------------------------------------------

    We believe it is appropriate at this time to limit the exemption 
for pre-filing offers to well-known seasoned issuers only and not 
expand the benefits to all seasoned issuers. The level of following of 
well-known seasoned issuers by market participants lessens our concerns 
that these issuers, in general, will use the exemption to evade the 
registration requirements of the Securities Act. Accordingly, we are 
limiting this exemption to well-known seasoned issuers.
    We have not made any revisions to the provisions of Rule 163 
regarding the applicability of Regulation FD to offering-related 
information. Well-known seasoned issuers thus must comply with the 
provisions of Regulation FD with regard to communications made pursuant 
to Rule 163 to which Regulation FD would apply.\182\
---------------------------------------------------------------------------

    \182\ We note the recent cases regarding private investment in 
public equity (PIPE) offerings that have involved trading on the 
basis of inside information, including the existence of a private 
offering. See Hilary L. Shane, Lit. Rel. 19227 (May 18, 2005); SEC 
v. Hilary L. Shane, Civ. Action No. 05 CIVIL 4772 (S.D.N.Y.). See 
also Guillaume Pollet, Lit. Rel. 19199 (Apr. 21, 2005); SEC v. 
Guillaume Pollet, Civ. Action No. 05-CV-1937 (SLT/RLM) (E.D.N.Y.).
---------------------------------------------------------------------------

    In response to commenters' suggestions, we have clarified the 
filing condition to apply only when and if a registration statement or 
amendment covering the offered securities is filed. Accordingly, if no 
such registration statement or amendment is filed, a free writing 
prospectus used pursuant to Rule 163 does not have to be filed. 
Finally, media publications that are permissible free writing 
prospectuses pursuant to Rule 433 will be treated the same as other 
communications under Rule 163, and will therefore only be subject to 
filing if a registration statement is filed.
3. Relaxation of Restrictions on Written Offering-Related 
Communications
    The rules we are adopting today will expand the amount and types of 
permitted written offering-related communications that may be made by 
offering participants under the gun-jumping provisions after a 
registration statement is filed.\183\ The two main elements of these 
rules are expansion of information that Securities Act Rule 134 permits 
to be communicated and the permitted use of free writing prospectuses 
in connection with a registered offering.
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    \183\ As noted previously, Securities Act Section 5(b)(1) limits 
the means by which written offers may be made following the filing 
of a registration statement. Section 5(b)(1) does not include a 
limitation on oral offers after the filing of a registration 
statement.
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a. Rule 134
    Rule 134 provides a safe harbor from the gun-jumping provisions for 
limited public notices about an offering made after an issuer files its 
registration statement.\184\ The Rule was intended originally to 
provide an ``identifying statement'' that could be used to locate 
persons that might be interested in receiving a prospectus. All 
issuers, including well-known seasoned issuers, are precluded from 
relying on Rule 134 until the issuer files a registration statement 
that includes a statutory prospectus.\185\
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    \184\ The safe harbor operates by excluding such notices from 
the definition of prospectus under Securities Act Section 2(a)(10). 
See Rule 134 and Adoption of Rules 134 and 135, Release No. 33-3568 
(Aug. 29, 1955) [20 FR 6523]. Rule 134 does not apply to 
communications relating to a registered investment company or a 
business development company. See Rule 134(e) [17 CFR 230.134(e)].
    \185\ Rule 134 is not available until a preliminary prospectus, 
or in the case of shelf registration, a base prospectus, has been 
filed. This does not mean, however, that a final prospectus meeting 
the requirements of Securities Act Section 10(a), including a price, 
is required as a condition to Rule 134. Further, the prospectus 
required for reliance on Rule 134(d) is a statutory prospectus that 
satisfies the requirements of Securities Act Section 10, including a 
price range where required (other than a free writing prospectus), 
and it need not be a prospectus that satisfies Section 10(a).
    If a well-known seasoned issuer makes a written communication of 
information of the type covered by Rule 134 prior to filing its 
registration statement, and that communication constitutes an offer, 
the communication will be a free writing prospectus and the issuer 
will need to look to the Rule 163 exemption of pre-filing offers 
from the gun-jumping provisions.
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i. Expansion of Permitted Information
    We are modifying and expanding the information permitted under Rule 
134 to include information that issuers, underwriters, and investors 
will find helpful and to permit the types of written communications 
during an offering that we do not consider raise the risk of offering 
abuses. We are adopting a limited expansion of the information 
permitted in the notice about the issuer and the registered offering. 
The amendments to Rule 134 will:
     Permit increased information about an issuer and its 
business, including where to contact the issuer;
     Permit more information about the terms of the securities 
being offered; \186\
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    \186\ For example, for fixed income securities, the changes will 
allow greater information about final interest rates and yield 
information, including yield information on fixed income securities 
with comparable maturities and credit ratings. We believe that yield 
disclosure also covers disclosure of the anticipated spread over a 
benchmark. We also have revised the Rule to allow issuers to 
disclose whether securities are convertible, exercisable, or 
exchangeable, and the ranking of the securities. The revised Rule 
also allows disclosure of the permissibility or status of the 
investment under the Employee Retirement Income Security Act of 1974 
[29 U.S.C. 1001 et seq.] (``ERISA'').
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     Expand the scope of permissible factual information about 
the offering

[[Page 44743]]

itself, including underwriter information, more details about the 
mechanics of and procedures for transactions in connection with the 
offering process, the anticipated schedule of the offering, and a 
description of marketing events; \187\
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    \187\ The information on marketing events, such as road shows, 
can include greater detail on the date, time, location, and 
procedures for attending or otherwise accessing the events.
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     Allow more factual information about procedures for 
account opening and submitting indications of interest and conditional 
offers to buy the offered securities; \188\
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    \188\ For example, a broker or dealer can inform investors of 
the procedural aspects of an auction or a directed share program. 
The changes will not include written notices of allocations of 
securities, including those delivered electronically. These notices 
will be a type of written confirmation of sale and, thus, 
prospectuses. The rules we are adopting regarding prospectus 
delivery reforms, as discussed later, will apply to these notices.
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     Allow more factual information regarding procedures for 
directed share plans and other participation in offerings by officers, 
directors, and employees;
     Permit the correction of inaccuracies in permissible 
information previously disclosed pursuant to the Rule;
     Expand the disclosure permitted regarding credit ratings 
to include the security rating that is reasonably expected to be 
assigned.
    While we have expanded the amount of information regarding the 
terms of an offering that may be included in a Rule 134 notice, the 
expansion does not permit use of a Rule 134 notice to provide a 
detailed description of securities being offered. There is increased 
ability under our rules to provide such a detailed description, such as 
a term sheet, as a free writing prospectus, as discussed below.
    Commenters suggested a number of additional items of information 
that they believed should be included in the Rule 134 safe harbor.\189\ 
This additional information generally focused on more extensive 
information about the terms of the securities being offered. As we have 
noted, Rule 134 is not intended as a substitute for a detailed 
description of the securities, such as a term sheet, or information 
included in a prospectus. We have expanded the information categories 
from those in the proposal to include items that provide more 
procedural information about the offering or the securities.\190\
ii. Section 10 Prospectus Requirement
    We have modified the changes to Rule 134 from the proposals in one 
significant regard. We had proposed that Rule 134 explicitly condition 
the availability of the Rule on the issuer filing a statutory 
prospectus meeting the requirements of Securities Act Section 10 which, 
in the case of an initial public offering, would include a bona fide 
estimate of the initial offering price range and the maximum amount of 
securities to be offered. While commenters recognized that the 
registration statement had to be filed, a number of commenters were 
concerned that including an explicit requirement of a bona fide price 
range and maximum amount of securities to be offered would change 
current practice and would not permit a number of communications, 
including press releases announcing the filing of the registration 
statement and naming underwriters, or even lead managers, and other 
notices that would be appropriate before the commencement of marketing 
efforts.\191\ These commenters noted that, in many cases, the bona fide 
price range is not included in registration statements for initial 
public offerings until a later point in time that is closer to the 
commencement of marketing activities for the offering.\192\
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    \189\ See, e.g., letters from ABA; ABA-ABS; Alston; ASF; 
Citigroup; Cleary; CMSA; Fried Frank; Merrill Lynch; Morgan Stanley; 
NYCBA; S&C SIA; and TBMA.
    \190\ Rule 134 and the other communications safe harbors are 
non-exclusive; therefore, if a communication falls outside of the 
safe harbor it still may, depending on the facts and circumstances, 
not be deemed an ``offer.''
    \191\ See, e.g., letters from ABA; Citigroup; Cleary; Davis 
Polk; Fried Frank; Merrill Lynch; Morgan Stanley; NYCBA; NYSBA; and 
SIA.
    \192\ See, e.g., letters from ABA and SIA.
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    We are modifying the Rule to provide that much of the information 
permitted under the Rule may be disclosed under the Rule before the 
inclusion of a bona fide price range in the registration statement. 
This modification does not mean, however, that the prospectus in an 
initial public offering satisfies Section 10 without the bona fide 
price range. Rather, the purpose of the modification is to permit 
notices to contain information that is not dependent on the price range 
or amount of securities being offered prior to inclusion of that 
information. In addition, information related to the pricing and rating 
of the security can be provided only if a price range is included where 
required.
    The amended Rule also provides that the Rule is available for 
certain other information only if it also is disclosed at that time in 
the filed registration statement. For example, notices including 
information about the use of proceeds of the offering can be provided 
only after information about the use of proceeds is included in the 
filed registration statement.\193\ Rule 134(d) continues to require 
that a price range be included where required. We are not modifying the 
provisions of Rule 134(d). The procedures that market participants have 
developed with the staff of the Division of Corporation Finance to 
facilitate offerings of securities using Internet facilities are not 
affected by the amendments to Rule 134 that we are adopting today.
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    \193\ The Rule also provides that identities of selling security 
holders and the type of underwriting can be provided if the 
information has been included in the registration statement.
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iii. Changes to Required Information
    We are modifying the information that must be included in a Rule 
134 notice, as proposed. First, we are eliminating the reference in the 
legend to state securities laws, as we believe that other provisions of 
the Rule already address any state securities law requirements, as 
applicable.\194\ Second, we are eliminating the requirement to specify 
whether the financing is a new financing or refunding, as we believe 
that such information is no longer necessary because it will be 
provided where appropriate by the issuer's disclosure of the use of the 
proceeds of the offering.
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    \194\ See paragraphs (a)(13) and (a)(16) of the amendments to 
Rule 134.
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    One commenter suggested that the Rule 134 requirement that issuers 
alert investors where they can obtain a copy of the statutory 
prospectus should include a means for receipt of a prospectus by 
electronic delivery.\195\ Several commenters also suggested that we 
allow issuers to satisfy the requirement that certain Rule 134 notices 
be accompanied or preceded by a statutory prospectus through the 
inclusion of a hyperlink in the Rule 134 notice to the statutory 
prospectus.\196\ While we are not expanding ``access equals delivery'' 
to Rule 134, we are amending Rule 134(c)(1) to allow persons providing 
notices relying on Rule 134 to include a uniform resource locator 
(``URL'') address to the statutory prospectus that alerts investors 
where they can obtain a statutory prospectus.\197\ For purposes of Rule 
134,

[[Page 44744]]

including a URL address to the statutory prospectus that is not an 
active hyperlink in an electronic communication does not mean that the 
prospectus has been delivered. However, an active hyperlink to a 
statutory prospectus in an electronic Rule 134 notice will satisfy the 
requirement that the prospectus accompany or precede that notice.\198\
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    \195\ See letter from NYCBA.
    \196\ See, e.g., letters from ABA; Alston; Cleary; and S&C.
    \197\ Rule 134 requires in some cases that the notice must be 
accompanied or preceded by a written prospectus meeting the 
requirements of Section 10 of the Securities Act, which may be 
satisfied in an electronic notice by including an active hyperlink 
to such a prospectus. The notice itself cannot, however, include 
information beyond that permitted by the Rule, and, as such, the 
notice cannot include a hyperlink or URL for an address containing 
information beyond that permitted by Rule 134. See the 2000 
Electronics Release, note 96, at II.B.2.
    \198\ See example (19) under Section II.D. of Use of Electronic 
Media for Delivery Purposes, Release No. 33-7233 (Oct. 6, 1995) [60 
FR 53458] (the ``1995 Electronics Release''), which states that a 
URL address can be included in an electronic Rule 134 notice.
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b. Permissible Use of Free Writing Prospectuses
i. Overview
    After the filing of a registration statement, the gun-jumping 
provisions permit issuers and other offering participants to make 
written offers only in the form of a statutory prospectus. After 
effectiveness of a registration statement, written offers other than a 
statutory prospectus may be made only if a final prospectus meeting the 
requirements of Securities Act Section 10(a) is sent or given prior to 
or at the same time as the written offer.\199\ We believe that written 
communications during the offering process are unnecessarily 
restricted, even with the substantial relaxations in restrictions on 
communications resulting from the rules we discuss above. The rules we 
are adopting permit written offers, including electronic 
communications, outside the statutory prospectus beyond those currently 
permitted by the Securities Act, if certain conditions are met. We are 
defining such a written offer outside of the statutory prospectus as a 
``free writing prospectus.''\200\
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    \199\ See Securities Act Section 2(a)(10).
    \200\ We are adding this definition to Securities Act Rule 405.
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    Under the rules we are adopting today, a free writing prospectus 
that satisfies specified conditions can be used by a well-known 
seasoned issuer at any time.\201\ Further, a free writing prospectus 
that satisfies the specified conditions can be used by any other 
eligible issuer or offering participant after a registration statement 
has been filed.\202\ In general, the rules we are adopting will allow 
offering participants to use free writing prospectuses in conjunction 
with most registered primary and secondary offerings, although we do 
not treat all issuers and offerings the same.\203\
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    \201\ As we discuss above, a free writing prospectus can be used 
by a well-known seasoned issuer prior to filing the registration 
statement pursuant to Rule 163.
    \202\ The rules provide that such a free writing prospectus is a 
permitted prospectus for purposes of Securities Act Section 10(b) 
[15 U.S.C.77j(b)] and, as such, can be used without violating 
Securities Act Section 5(b)(1). A free writing prospectus used other 
than in accordance with our new rules will continue to be a 
prospectus.
    \203\ The rules do not extend to business combination 
transactions, for which we have already adopted rules. See 
Securities Act Rule 162 [17 CFR 230.162], Rule 165, Rule 166, and 
Rule 425 [17 CFR 230.425]. Rule 162 relates to submission of tenders 
in registered exchange offers. Communications relating to business 
combinations are covered by Rule 165 and Rule 166. Rule 425 relates 
to the filing of certain prospectuses and communications in 
connection with business combination transactions. See also the 
Regulation M-A Release note 95; and Cross-Border Tender and Exchange 
Offers, Business Combinations and Rights Offerings, Release No. 33-
7759 (Oct. 22, 1999) [64 FR 61382] (exemptive rules for cross-border 
tender and exchange offers, business combinations, and rights 
offerings relating to the securities of foreign issuers). Where 
appropriate, we have included provisions that are intended to ensure 
consistency among the rules and, with respect to filing conditions, 
permit a single filing to satisfy the conditions under both 
regulatory schemes. See Rule 425 and Rule 433.
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    The issuer and any other offering participant in an eligible 
issuer's registered securities offering satisfying the conditions of 
our rules can use a free writing prospectus after a registration 
statement is filed to communicate information about a registered 
offering of securities.\204\ This will permit affiliates, underwriters, 
dealers, and others acting on behalf of the parties to the transaction 
to use a free writing prospectus without violating the gun-jumping 
provisions. The conditions to the use of a free writing prospectus will 
depend on the nature of the issuer and the offering. A free writing 
prospectus can take any form and is not required to meet the 
informational requirements otherwise applicable to prospectuses.
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    \204\ Prior to filing a registration statement, only a well-
known seasoned issuer will be able to use a free writing prospectus. 
This use of a free writing prospectus by a well-known seasoned 
issuer is permitted by Rule 163.
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ii. Definition of Free Writing Prospectus
(A) Scope of Definition
    We are adopting the proposed definition of ``free writing 
prospectus.'' A free writing prospectus is, except as otherwise 
provided specifically or otherwise required by the context, a written 
communication that constitutes an offer to sell or a solicitation of an 
offer to buy securities that are or will be the subject of a 
registration statement and is not:
     A prospectus satisfying the requirements of Securities Act 
Section 10(a);
     A prospectus satisfying our rules permitting the use of 
preliminary or summary prospectuses or prospectuses subject to 
completion;
     A communication made in reliance on the special rules for 
asset-backed issuers permitting the use of ABS informational and 
computational materials; \205\ or
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    \205\ See Rules 167 and 426 [17 CFR 230.167 and 17 CFR 230.426]. 
Asset-backed issuers also may use free writing prospectuses as 
discussed below. We have excluded free writing prospectuses used in 
reliance on Rule 164 and Rule 433 (including the filing 
requirements) from the filing requirements for ABS informational and 
computational materials. See the amendments to Rule 426. The content 
of ABS free writing prospectuses may include, but is not limited to, 
the same information as material used pursuant to Rule 167 and Rule 
426.
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     A prospectus because a final prospectus meeting the 
requirements of Section 10(a) was sent or given with or prior to the 
written communication.\206\

    \206\ See clause (a) of Securities Act Section 2(a)(10). After 
effectiveness of a registration statement, any written offer that is 
accompanied or preceded by a final prospectus that meets the 
requirements of Securities Act Section 10(a) (such as sales 
literature used after effectiveness) will continue to be permitted 
without having to satisfy the requirements of any safe harbor or 
other rule permitting its use or Rule 433. Such a written offer is 
excluded from the definition of ``prospectus'' under the Securities 
Act by reason of clause (a) of Securities Act Section 2(a)(10) if a 
final prospectus meeting the Section 10(a) information requirements 
is sent or given before or at the same time as the written offer. A 
base prospectus included in a shelf registration statement that 
omits information is not a final prospectus meeting the requirements 
of Section 10(a).
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Further, the definition makes clear that, although a free writing 
prospectus will not be filed as part of a registration statement, it 
will still be considered to relate to a registered public offering of 
securities that is or will be the subject of a registration statement, 
regardless of the method of its use or distribution.
    A written communication will be a free writing prospectus only 
where it constitutes an offer by an offering participant of a security 
under the Securities Act. Whether a particular communication 
constitutes such an offer will continue to be determined based on the 
particular facts and circumstances.\207\ While the definition of 
``offer'' is broad, not all communications relating to an offering are 
offers or offers by an offering participant. As a non-exclusive 
illustration, the gun-jumping provisions have been administered in a 
manner that excludes from categorization as an offer a media 
publication or television or radio broadcast that is based solely

[[Page 44745]]

on information that is filed with us or available on an unrestricted 
basis or on other information the dissemination of which did not 
represent an offer by an issuer or other offering participant, where 
there is no other involvement or participation by an offering 
participant. On that basis, for example, a newspaper article about an 
initial public offering that is based on the filed registration 
statement, on a press release that is filed with or furnished to us, on 
a filed free writing prospectus, or on filed issuer information where 
the issuer and other offering participants have refused to comment and 
not otherwise been involved, would not be categorized as an offer under 
the gun-jumping provisions.
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    \207\ In addition, communications that are not considered offers 
or prospectuses for purposes of the gun-jumping provisions, such as 
Rule 134 notices, Rule 135 communications, regularly released 
factual business information and forward-looking information falling 
within the new safe harbors, and research reports falling within the 
safe harbors provided by our rules, will not be free writing 
prospectuses.
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(B) Comments on Definition
    Commenters supported the concept of free writing prospectuses.\208\ 
Commenters suggested that we exclude offshore communications and rating 
agency reports from the scope of the definition.\209\ We are not 
including any specific provision in the rules regarding offshore 
communications and, as such, the treatment of offshore communications 
under the free writing prospectus rules will be no different than the 
treatment of any offshore communication prior to the Rules we adopt 
today.\210\ We also have not revised the Rule in response to 
commenters' request for clarification of the treatment of rating agency 
reports. Our treatment of NRSROs is currently the subject of rulemaking 
and other consideration.\211\
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    \208\ See, e.g., letters from Cleary; NYSBA; and SIA.
    \209\ See, e.g., letters from ABA; ABA-ABS; ASF; Fried Frank; 
NYSBA; S&C SIA; and TBMA. But see letter from State Street Global 
Advisors (``SSGA'').
    \210\ Whether an offshore communication is considered an offer 
in the United States subject to the federal securities laws will 
depend on when and how the communication is made and the 
availability of other exemptions, such as those for offshore press 
conferences. See Rule 135e [17 CFR 230.135e] and note 140 above. See 
also Rule 902(c)(3)(vii) [17 CFR 230.902(c)(3)(vii)].
    \211\ In addition, as we have said previously, whether 
information prepared and distributed by third parties that are not 
offering participants is attributable to an issuer or other offering 
participant depends upon whether the issuer or other offering 
participant has involved itself in the preparation of the 
information or explicitly or implicitly endorsed or approved the 
information. The courts and we have referred to the first line of 
inquiry as the entanglement theory and the second as the adoption 
theory. See the 2000 Electronics Release, note 96, at fn. 48 and 
accompanying text. We think these theories are equally applicable 
with respect to issuer or offering participant involvement regarding 
rating agency reports. For example, if an issuer or underwriter 
distributes the rating agency report in connection with an offering 
of the securities, it is appropriate to conclude that such party has 
adopted that report and should be liable for its contents. Liability 
under the entanglement theory depends upon the level of pre-
publication involvement in the preparation of the information. See 
the Asset-Backed Securities Adopting Release, note 82, at part 
III.C.3.
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iii. Permitted Use of a Free Writing Prospectus After the Filing of a 
Registration Statement Under Rule 433
(A) Overview
    We are adopting Rule 164 and Rule 433 substantially as proposed. 
Rule 164 will permit the use of a free writing prospectus where an 
eligible issuer has filed a registration statement, the other 
requirements of Rule 164 are met, and the conditions of Rule 433 are 
satisfied.\212\ The Rules permitting the use of free writing 
prospectuses are not available for any communication that, while in 
technical compliance with the Rule, is part of a plan or scheme to 
evade the requirements of Securities Act Section 5.\213\
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    \212\ The discussion in this section relates to the use of free 
writing prospectuses after the filing of a registration statement. 
For a discussion of the use of free writing prospectuses by well-
known seasoned issuers prior to filing a registration statement, see 
the discussion in Section III.D.2 above under ``Permitted Pre-Filing 
Offers for Well-Known Seasoned Issuers.''
    \213\ As with certain of the safe harbors and other exemptions 
we are adopting today, we have included language in the Preliminary 
Note to Rule 164 making clear that the exemption in that Rule is 
non-exclusive.
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(B) Issuer Eligibility
    For any offering participant to use free writing prospectuses, 
other than free writing prospectuses that consist only of descriptions 
of the securities in the offering or of the offering, the issuer may 
not be an ineligible issuer.\214\ We have modified the consequences of 
ineligibility in the context of use of free writing prospectuses to 
permit ineligible issuers, other than blank check companies, shell 
companies, and penny stock issuers, to use free writing prospectuses 
that are limited to descriptions of the terms of the securities being 
offered and the offering because we believe that the permitted use of 
such free writing prospectuses can provide advantages to investors that 
justify the risks of use of such materials by some classes of 
ineligible issuers. Such use would be subject to all of the other 
requirements of the new rules.
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    \214\ These descriptions cannot be used in any case if the 
issuer is or it or any of its predecessors in the last three years 
was a blank check company, a shell company (other than a business 
combination related shell company), or a penny stock issuer.
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    We have revised the definition of ineligible issuer from the 
proposals in response to comments. As adopted, ineligible issuers are, 
as of the relevant date of determination: \215\
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    \215\ We have adopted as proposed a waiver provision that will 
allow us to grant or deny a request to waive an issuer's 
ineligibility if we find good cause to provide the waiver. We are 
adopting rules today delegating authority to the Division of 
Corporation Finance to grant or deny waivers from any of the 
ineligibility provisions. See revisions to Rule 30-1 of the Rules of 
Organization and Program Management Governing Delegations of 
Authority to the Director of the Division of Corporation Finance [17 
CFR 200.30-1].
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     Reporting issuers who are not current in their Exchange 
Act reports and other materials required to be filed during the prior 
12 months (or such shorter period that the issuer was required to file 
such reports and materials), other than reports on Form 8-K required 
solely pursuant to an item specified in General Instruction I.A.3(b) of 
Form S-3; \216\
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    \216\ The exception for reports solely for specified items of 
Form 8-K from the requirement that issuers be current effectively 
applies only for purposes of the ineligible issuer definition in the 
context of the use of free writing prospectuses. In the context of 
the determination of status as a well-known seasoned issuer, the 
requirement that the issuer be current at the determination date 
applies separately (without the Form 8-K exceptions) by virtue of 
the requirement that the issuer be eligible for Form S-3. (The Form 
8-K exceptions in the Form S-3 requirements apply in determining 
whether an issuer is timely for purposes of Form S-3 eligibility, 
but not in determining whether it is current.)
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     In the case of asset-backed issuers, the depositor, or any 
issuing entities previously established, directly or indirectly by the 
depositor who are not current in their Exchange Act reports and other 
materials required to be filed during the prior 12 months (or such 
shorter period that the issuer was required to file such reports and 
materials), other than reports on Form 8-K required solely pursuant to 
an item specified in General Instruction I.A.4 of Form S-3; \217\
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    \217\ The requirements for Form S-3 eligibility for asset-backed 
issuers include not only this condition, but also the condition that 
filings be timely, and extend the requirements to reports of 
affiliated depositors regarding the same asset class. The timeliness 
condition and extension to affiliated depositors do not apply here.
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     Issuers who are or during the prior three years were or 
any of their predecessors were:
    [cir] Blank check companies;
    [cir] Shell companies (other than business combination related 
shell companies);
    [cir] Issuers for an offering of penny stock;
     Issuers who are limited partnerships offering and selling 
their securities other than through a firm commitment underwriting; 
\218\
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    \218\ These issuers are subject to our interpretations in 
Limited Partnership Reorganizations and Public Offerings of Limited 
Partnership Interests, Release No. 33-6900 (June 17, 1991) [56 FR 
28979].

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[[Page 44746]]

     Issuers who have filed for bankruptcy or insolvency during 
the past three years; \219\
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    \219\ Ineligibility based on an involuntary bankruptcy filing 
arises on the earlier of 90 days after the date of filing of an 
involuntary petition (if the case was not earlier dismissed) or the 
conversion of the case to a voluntary proceeding under federal 
bankruptcy or state insolvency laws. As a result, issuers will not 
immediately be considered ineligible because an involuntary 
bankruptcy petition has been filed. In addition, ineligibility tied 
to bankruptcy will no longer apply after an issuer files an annual 
report with audited financial statements after emergence from 
bankruptcy.
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     Issuers who have been or are the subject of refusal or 
stop orders under the Securities Act during the past three years, or 
are the subject of a pending proceeding under Securities Act Section 8 
\220\ or Section 8A; \221\ or
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    \220\ 15 U.S.C. 77h.
    \221\ 15 U.S.C. 77h-1.
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     Issuers who, or whose subsidiaries at the time they were 
subsidiaries of the issuer, have been convicted of any felony or 
misdemeanor described in certain provisions of the Exchange Act, have 
been found to have violated the anti-fraud provisions of the federal 
securities laws, or have been made the subject of a judicial or 
administrative decree or order (including a settled claim or order) 
prohibiting certain conduct or activities regarding the anti-fraud 
provisions of the federal securities laws \222\ during the past three 
years. The definition as adopted provides that ineligibility of an 
issuer based on a settlement will be prospective only and thus arise 
only for settlements entered into after the effective date of the new 
rules.\223\
    The categories of ineligible issuers include issuers that at the 
time of the eligibility determination are not current (with specified 
Form 8-K exceptions) for 12 months in their Exchange Act reporting 
obligations, issuers that may raise greater potential for abuse, and 
issuers that have violated the anti-fraud provisions of the federal 
securities laws. Certain of these issuers have been viewed historically 
as unsuited for short-form registration or ineligible for disclosure-
related relief. For instance, we have repeatedly stated our belief that 
blank check companies, shell companies, and penny stock issuers may 
give rise to disclosure abuses.\224\ In addition, Congress determined 
not to extend the safe harbors for forward-looking statements to 
issuers of blank check and penny stock securities, as well as issuers 
previously convicted of certain felonies and misdemeanors and issuers 
subject to a decree or order involving a violation of the anti-fraud 
provisions of the federal securities laws.\225\
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    \222\ The covered decrees or orders (including settlements) are 
prohibitions on future violations of the anti-fraud provisions of 
the federal securities laws, orders requiring issuers to cease and 
desist from violating the anti-fraud provisions of the federal 
securities laws, and determinations of violations of the anti-fraud 
provisions of the federal securities laws. The settlements include 
settlements in which the issuer or its subsidiary neither admits nor 
denies that it violated the anti-fraud provisions of the federal 
securities laws.
    \223\ See amendments to Securities Act Rule 405.
    \224\ See, e.g., Penny Stock Definition for Purposes of Blank 
Check Rule, Release No. 33-7024 (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); Delayed 
Pricing for Certain Registrants, Release No. 33-7393 (Feb. 20, 1997) 
[62 FR 9276] (blank check and penny stock issuers would be 
ineligible to use rule providing for delayed pricing because of 
``prior substantial abuses''); and the Shell Companies Release, note 
109.
    \225\ See Securities Act Section 27A and Exchange Act Section 
21E.
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    We are adopting as proposed the exclusion of registered investment 
companies and business development companies from eligibility for use 
of Rules 164 and 433 because they are already subject to separate rules 
permitting use of a Section 10(b) prospectus.\226\ Securities Act Rule 
482 permits investment companies to advertise investment performance 
data and other information, and Securities Act Rule 498 permits open-
end management investment companies to use a profile. We also are 
adopting as proposed the exclusion of offerings that are business 
combination transactions subject to Regulation M-A. We also are 
excluding all offerings registered on Form S-8, except for those by 
well-known seasoned issuers.
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    \226\ Two commenters suggested that business development 
companies should be permitted to rely on the rules permitting the 
use of a free writing prospectus. See letters from Allied and Fried 
Frank. A third commenter suggested that Securities Act Rule 482 
should be conformed to Rule 433 for registered investment companies 
and business development companies. See letter from ABA.
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    We have revised the Rules from the proposal to change the time of 
determination of status as an ineligible issuer. We have concluded that 
eligibility, in most cases, should not be determined at the time of 
reliance on our new Rules for each free writing prospectus. We have 
adopted an approach to eligibility determination that generally looks 
to the commencement of an offering and will not result in a change of 
status during an offering. As adopted, eligibility determinations will 
be made:
     If the offering is registered pursuant to Rule 415, our 
shelf registration rule, the earliest time after the filing of the 
registration statement covering the offering at which the issuer, or in 
the case of an underwritten offering the issuer or another offering 
participant, makes a bona fide offer, including without limitation 
through the use of a free writing prospectus, in the offering; or
     Otherwise at the time of filing of a registration 
statement covering the offering.
    This timing of determination as to eligibility to use a free 
writing prospectus (with the enumerated exceptions from the 
prohibition) applies to all issuers, including well-known seasoned 
issuers. The timing of determination of whether an issuer is a well-
known seasoned issuer, described above, is different and is made on an 
approximately annual basis.
(1) Comments on Ineligible Issuer Definition
    Commenters expressed a number of concerns about the ineligibility 
conditions, including those relating to prior securities law violations 
and settlements,\227\ going concern opinions in audit reports covering 
financial statements,\228\ and certain involuntary bankruptcy 
petitions.\229\ Commenters also requested clarification of the time 
frame for which the issuer must be current in its reports for purposes 
of the definition.\230\ Commenters did not believe that issuers should 
be ineligible based on disclosure of material weaknesses in internal 
controls over financial reporting.\231\ Commenters also stated that 
offering participants should be able to rely on the various exemptions 
based on a reasonable belief that the issuer was not an ineligible 
issuer.\232\
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    \227\ See, e.g., letters from ABA; Alston; the Business 
Roundtable (``BRT''); Citigroup; Credit Suisse First Boston, LLC 
(``CSFB''); Davis Polk; Merrill Lynch; Morgan Stanley; NYSBA; Paul, 
Weiss, Rifkind, Wharton & Garrison LLP (``Paul Weiss''); S&C and 
SCSGP.
    \228\ See, e.g., letters from ABA; AICPA; Davis Polk; Deloitte; 
E & Y; and KPMG.
    \229\ See, e.g., letters from Davis Polk and TBMA.
    \230\ See, e.g., letters from ABA-ABS; ASF; CMSA; Davis Polk; 
and TBMA.
    \231\ See, e.g., letters from ABA; AICPA; E & Y; and KPMG.
    \232\ See, e.g., letters from ABA-ABS and ASF.
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    With regard to the ineligibility based on securities law violations 
or settlements of alleged violations, commenters believed that the 
disqualifying violations were too broad and should be limited to 
violations of the anti-fraud provisions, not any provision of the 
federal securities laws.\233\ Moreover, commenters stated

[[Page 44747]]

that the disqualification based on settled allegations of violations of 
the securities laws should be prospective only, because the settling 
parties would not have known, at the time of the negotiated settlement, 
also to negotiate a waiver of the ineligible issuer 
disqualifications.\234\ Commenters did not believe that the settlement 
of an alleged violation should be a disqualification.\235\ Other 
commenters did not believe that a securities law violation or 
settlement by a subsidiary should affect the eligibility of an issuer 
to use the various exemptions and safe harbors that we proposed.\236\
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    \233\ See, e.g., letters from ABA; Alston; BRT; Citigroup; 
Richard Hall; Merrill Lynch; Morgan Stanley; the NYSBA; Paul Weiss; 
SCSGP; and SIA.
    \234\ See, e.g., letters from ABA; Alston; BRT; Citigroup; 
Cleary; CSFB; Davis Polk; Intel Corporation (``Intel''); Morgan 
Stanley; NYSBA; SCSGP; S&C SIA; and TBMA.
    \235\ See, e.g., letters from Richard Hall; Paul Weiss; and 
TBMA.
    \236\ See, e.g., letters from Alston; Morgan Stanley; NYSBA; 
Paul Weiss; S&C and SIA. Some commenters were concerned that 
acquired subsidiaries that had securities law violations prior to 
the acquisition would cause the acquiring issuer to be ineligible. 
See, e.g., letters from Alston; Intel; NYSBA; S&C and SCSGP.
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    Commenters addressing ineligibility based on bankruptcy were 
concerned that an involuntary bankruptcy disqualification could 
disadvantage issuers in their relationships with their creditors.\237\ 
They were concerned that a creditor could cause an issuer to be an 
ineligible issuer by filing an involuntary bankruptcy petition against 
the issuer. These commenters suggested that the involuntary bankruptcy 
petition be a disqualification only after the lapse of a period of time 
or conversion of the petition to a voluntary petition, enabling issuers 
to attempt to resolve the issues with their creditors.
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    \237\ See, e.g., letters from Davis Polk and TBMA.
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    We have revised the definition of ``ineligible issuer'' to address 
many of commenters' concerns. Under the definition we are adopting, an 
issuer must be current, but not necessarily timely, in its required 
filings under the Exchange Act for the past twelve months or such 
shorter period that the issuer is subject to the Exchange Act reporting 
requirements. We have limited the ineligibility condition for 
securities law violations to those involving the anti-fraud provisions 
and have eliminated the separate provision regarding settlements 
because they are subsumed within the ineligibility provision based on a 
settled judicial or administrative decree or order. In addition, we 
have provided that ineligibility based on actions of a subsidiary must 
have arisen at the time that the entity was a subsidiary of the issuer. 
We also have eliminated the ineligibility condition based on a going 
concern opinion covering the issuer's most recent audited financial 
statements. In addition to the revisions to the specific ineligibility 
provisions, we also have revised Rule 164 and Rule 433 to provide that 
persons relying on those Rules, other than issuers, must have a 
reasonable belief that an issuer is not ineligible.\238\ We also have 
provided that ineligibility based on settlements will apply only to 
judicial or administrative decrees or orders entered into after the 
effective date of the new rules.
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    \238\ In addition, we believe that the new check box on the Form 
10-K and Form 20-F for issuers to indicate whether they are well-
known seasoned issuers should facilitate an offering participant's 
ability to develop such a reasonable belief with respect to an 
issuer's status as a well-known seasoned issuer.
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(C) Conditions to Permitted Use of a Free Writing Prospectus
    Rule 164 as adopted provides that, after the filing of a 
registration statement, a free writing prospectus that meets the 
requirements of Rule 164 and satisfies the conditions of Rule 433 will 
be a permitted prospectus under Section 10(b) for purposes of 
Securities Act Section 5(b)(1). The Rule 433 conditions on the use of 
free writing prospectuses relate to:
     The delivery or availability of the statutory prospectus 
at the time the free writing prospectus is used;
     The information contained in the free writing prospectus;
     The legend that is to be included in the free writing 
prospectus;
     Filing of the free writing prospectus; and
     Record retention for the free writing prospectus.
(1) Prospectus Delivery or Availability
    The ability of any person participating in the offer and sale of 
the securities to use free writing prospectuses under Rules 164 and 433 
generally is conditioned on the filing of a registration statement that 
includes a prospectus satisfying the requirements of Securities Act 
Section 10.\239\ Further, in specified cases, Rule 433 conditions the 
use of a free writing prospectus on prior or concurrent delivery of the 
issuer's most recently filed statutory prospectus.
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    \239\ Base prospectuses, preliminary prospectuses, summary 
prospectuses, and prospectuses subject to completion that are 
permitted under our rules are not prospectuses that satisfy the 
requirements of Securities Act Section 10(a), but they are statutory 
prospectuses that satisfy the requirements of Securities Act Section 
10. Rule 433 makes clear that the prospectus condition may be 
satisfied by any Section 10 prospectus, other than a summary 
prospectus permitted by Securities Act Rule 431 [17 CFR 230.431] or 
a free writing prospectus.
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(a) Prospectus Delivery Conditions for Non-Reporting Issuers and 
Unseasoned Issuers
    In an offering of securities of an eligible non-reporting issuer, 
including an initial public offering, or securities of an eligible 
unseasoned issuer, the use by an offering participant of free writing 
prospectuses is conditioned on:
     Filing of the registration statement for the offering; and
     The free writing prospectus being preceded or accompanied 
by the most recent statutory prospectus that satisfies the requirements 
of Section 10 if: \240\
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    \240\ For purposes of the prospectus delivery condition, Rule 
433 provides that a prospectus will be deemed to accompany a free 
writing prospectus that is an electronic communication if the free 
writing prospectus contains an active hyperlink to the statutory 
prospectus. In initial public offerings, a preliminary prospectus 
that does not contain a price range does not satisfy our rules or, 
therefore, the requirements of Section 10.
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    [cir] The free writing prospectus is prepared by or on behalf of or 
used or referred to by an issuer or prepared by or on behalf of or used 
or referred to by other offering participants;
    [cir] Consideration has been or will be given by the issuer or an 
offering participant for the dissemination (in any format) \241\ of any 
free writing prospectus (including any published article, publication, 
or advertisement); or
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    \241\ ``In any format'' is meant to encompass all means of 
dissemination of the materials, including graphic, television or 
radio broadcast, or written.
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    [cir] Securities Act Section 17(b) \242\ requires disclosure that 
consideration has been or will be given by the issuer or an offering 
participant for any activity described therein in connection with the 
free writing prospectus.
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    \242\ The rules we are adopting provide that written materials 
for which Securities Act Section 17(b) requires disclosure will be 
treated as free writing prospectuses of the issuer or other offering 
participant on whose behalf the payment has been or will be made or 
consideration has been or will be given.
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    In these cases, issuers and offering participants must assure that 
the most recent statutory prospectus is actually provided to anyone who 
might receive a free writing prospectus. Accordingly, the use of 
broadly disseminated free writing prospectuses in registered offerings 
by these types of issuers and offering participants in these offerings 
may not be feasible unless they are in electronic form and contain a 
hyperlink to the statutory prospectus. We believe that this is an 
appropriate result, as conditioning the use of the free writing 
prospectus on its being preceded or accompanied by the statutory

[[Page 44748]]

prospectus will assure that an investor has a balanced disclosure 
document of an issuer with no or limited reporting history against 
which to evaluate the free writing prospectus and to place the 
statements made in context. The condition that the statutory prospectus 
precede or accompany the free writing prospectus will not require that 
it be provided through the same means, so long as it is provided at the 
required time. Referring to its availability will not satisfy this 
condition.
    In the following situations, for example, the most recent statutory 
prospectus must precede or accompany the free writing prospectus or the 
communication cannot be made in reliance on Rules 164 and 433: \243\
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    \243\ See the discussion below regarding the treatment of media 
publications. See Section III.D.3 below under ``Media Publications 
and Broadcasts.''
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     A direct written communication by an issuer or offering 
participant;
     A written communication or a television or radio broadcast 
prepared by or on behalf of or used or referred to by an issuer or an 
offering participant;
     The dissemination, in any format including publication or 
broadcast, of any free writing prospectus (including any published 
article, publication, or advertisement) for which
    [cir] Consideration is or will be given by the issuer or an 
offering participant; or
    [cir] Securities Act Section 17(b) requires disclosure of a payment 
made or consideration given by an issuer or other offering participant; 
or
     A paid published or broadcast advertisement by an issuer 
or offering participant.
    Once the required statutory prospectus is provided to an investor, 
additional free writing prospectuses can be provided to that investor 
without having to provide an additional statutory prospectus, unless 
there is a material change in the most recent statutory prospectus from 
the provided prospectus.\244\ For example, once an investor has been 
sent a preliminary prospectus, absent a material change, the Rule 
permits subsequent e-mail communications to that investor by an 
offering participant that constitute free writing prospectuses without 
the user having to hyperlink to or otherwise redeliver a statutory 
prospectus with each communication. After effectiveness and 
availability of a final prospectus meeting the requirements of 
Securities Act Section 10(a), no earlier statutory prospectus may be 
provided, and such final prospectus, as revised or supplemented, must 
precede or accompany any free writing prospectus provided after such 
availability, whether or not an earlier statutory prospectus has been 
previously provided to the recipient.\245\
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    \244\ If there are material changes in a preliminary prospectus, 
or preliminary prospectus supplement, the issuer and offering 
participants generally will recirculate the revised preliminary 
prospectus or supplement to potential purchasers.
    \245\ If a final prospectus is given or sent prior to or with a 
written offer, under the exception in clause (a) of Securities Act 
Section 2(a)(10), the written offer is not a prospectus and 
therefore will not be a free writing prospectus and Rules 164 and 
433 will not apply.
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(b) Prospectus Availability Condition for Seasoned Issuers and Well-
Known Seasoned Issuers
    In offerings of securities of eligible seasoned issuers (including 
asset-backed issuers eligible to use Form S-3) and eligible well-known 
seasoned issuers, we are adopting as proposed the provision that these 
issuers and other offering participants in their offerings can use a 
free writing prospectus after the filing of a registration statement 
containing a statutory prospectus.\246\ For shelf offerings, this 
statutory prospectus can be a base prospectus.\247\ For offerings of 
securities of eligible seasoned issuers (including eligible well-known 
seasoned issuers), the Rule does not condition use of the free writing 
prospectus on actual delivery of the most recent statutory prospectus. 
Instead, the user of the free writing prospectus must notify the 
recipient, through a required legend, of the filing of the registration 
statement and the URL for our web site where the recipient can access 
or hyperlink to the preliminary or base prospectus. The Rule as adopted 
permits the use of a generic rather than an issuer-specific legend. The 
legend must contain a toll-free telephone number, and may contain an e-
mail address, through which the statutory prospectus may be 
requested.\248\
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    \246\ Under Rule 433 as adopted, the following offerings are 
included in this category:
    (a) Offerings of securities registered on Form S-3 pursuant to 
General Instruction I.B.1, I.B.2, I.B.5, I.C., or I.D. thereof;
    (b) Offerings of securities registered on Form F-3 pursuant to 
General Instruction I.A.5, I.B.1, I.B.2, or I.C. thereof;
    (c) Any other offering not excluded from reliance on Rule 164 
and Rule 433 of a well-known seasoned issuer; and
    (d) Any other offering not excluded from reliance on Rule 164 
and Rule 433 of an issuer eligible to use Form S-3 or Form F-3 for 
primary offerings pursuant to General Instruction I.B.1 of such 
forms.
    \247\ See Rule 430B, described in Section V.B.1 below, which is 
intended, among other things, to locate within one rule the 
information requirements for a base prospectus in a shelf 
registration statement.
    \248\ In the event that a well-known seasoned issuer does not 
have a registration statement on file, Rule 163 provides that an 
eligible well-known seasoned issuer's written offers are exempt from 
Section 5(c). While it will be exempt from the requirements of 
Section 5(c), a written offer made under the exemption in Rule 163 
will fall within our definition of ``free writing prospectus.'' Rule 
163 conditions the Section 5(c) exemption for that free writing 
prospectus on the satisfaction of the conditions in Rule 163 
including filing and legend conditions. As discussed above, the 
filing conditions of Rule 163 apply only if a registration statement 
is filed and otherwise are largely determined by those set forth 
under Rule 433 if the communication was a free writing prospectus 
used after filing a registration statement.
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(c) Comments on Prospectus Delivery or Availability Conditions
    Some commenters believed that the requirement that a statutory 
prospectus precede or accompany a free writing prospectus in offerings 
of securities of non-reporting or unseasoned issuers should be able to 
be accomplished by the availability of the prospectus on our Electronic 
Data Gathering, Analysis, and Retrieval system (``EDGAR''),\249\ while 
others thought it should be limited only to non-reporting companies 
engaging in their initial public offerings \250\ or that there should 
be cure provisions for failure to provide timely a statutory 
prospectus.\251\ We do not believe that it is appropriate at this time 
to have access or filing of a registration statement on EDGAR satisfy 
this delivery obligation for statutory prospectuses in all cases. In 
addition, as we note above, we believe that investors should have the 
statutory prospectus for unseasoned issuers when they evaluate free 
writing prospectuses involving offerings of securities of such issuers.
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    \249\ See, e.g., letters from ABA; Alston; and Cleary.
    \250\ See, e.g., letters from NYSBA and S&C.
    \251\ See, e.g., letters from ABA; Cleary; Merrill Lynch; S&C 
and SIA.
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(2) Information in a Free Writing Prospectus
(a) Information Conditions
    We are adopting substantially as proposed the provisions that will 
permit a free writing prospectus meeting the conditions of Rule 433 to 
be a Section 10(b) prospectus without having line-item disclosure 
requirements or otherwise requiring that the free writing prospectus 
contain any particular information, other than the legend. The Rule 
permits information in a free writing prospectus to go beyond 
information the substance of which is contained in the prospectus 
included in the registration statement. However, the information in the 
free writing prospectus must not conflict with the information in the 
registration statement, including Exchange Act reports incorporated by 
reference into the registration statement. We believe that exempting 
free writing prospectuses meeting the conditions of

[[Page 44749]]

Rule 433 from limitations on any particular content should not diminish 
investor protection. In that regard, we believe that the liability 
provisions applicable to free writing prospectuses, particularly 
Securities Act Section 12(a)(2) and the anti-fraud provisions of the 
federal securities laws, provide protection against material 
misstatements in and material omissions from information contained in 
such free writing prospectus.
    Although the proposal stated that the information in the free 
writing prospectus did not have to be in the registration statement, 
some commenters requested further clarification of the proposed 
condition that the free writing prospectus cannot contain information 
that is ``inconsistent'' with the information in the prospectus filed 
as part of the registration statement.\252\ In revising the provision 
to preclude information that ``conflicts'' with that in the 
registration statement, we have clarified that information in the free 
writing prospectus may be different from or additional or supplemental 
to that in the registration statement, so long as it does not 
``conflict'' with the latter.
---------------------------------------------------------------------------

    \252\ See, e.g., letters from ABA; Merrill Lynch; and S&C.
---------------------------------------------------------------------------

    Commenters requested clarification as to how information in the 
free writing prospectus would be treated in relation to other 
information that was filed with us or was otherwise publicly 
available.\253\ Commenters believed that liability for free writing 
prospectuses should not be considered in isolation but should take into 
account other information that is conveyed for purposes of the total 
mix of information available.\254\ Free writing prospectuses may 
incorporate or refer investors to other information, so that investors 
will be advised to consider the information presented in the free 
writing prospectus in context. We note that the legend that must be 
included in a free writing prospectus will direct investors to the 
filed prospectus contained in the registration statement. As we discuss 
below, a free writing prospectus cannot include language that deems an 
investor to have read or have knowledge of or rely on the content of 
other documents incorporated in or referred to in the free writing 
prospectus. Whether such other information is conveyed to the investor 
will be determined based on the facts and circumstances.\255\
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    \253\ See, e.g., letters from ABA; Citigroup; Cleary; CSFB; 
Davis Polk; Deloitte; Goldman, SachS&Co. (``Goldman Sachs''); ICI; 
Morgan Stanley; and SIA.
    \254\ Id.
    \255\ See, e.g., Starr v. Georgeson Shareholder, Inc., 2005 U.S. 
App. LEXIS 11250 (2d Cir. 2005).
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    Treating a free writing prospectus satisfying the conditions of 
Rule 433 as a Section 10(b) prospectus provides for additional 
continuing Commission oversight and enforcement authority over the 
contents and use of the free writing prospectus. As we discussed in the 
Proposing Release, we will retain the ability to halt the use of any 
materially false or misleading free writing prospectus in accordance 
with Section 10(b). Under the amendments to Securities Act Rule 418 we 
are adopting today, our staff will be able to request any free writing 
prospectus that has been used in connection with a securities offering.
(b) Amendment to Rule 408
    Finally, we are amending Securities Act Rule 408 as proposed to 
make clear that not including information that is included in a free 
writing prospectus in a prospectus filed as part of a registration 
statement will not, solely by virtue of inclusion of the information in 
a free writing prospectus, be considered an omission of material 
information required to be included in the registration statement.
(c) Legend Condition
(i) Discussion
    We are not adopting any content requirement for free writing 
prospectuses other than to condition the use of a free writing 
prospectus on inclusion of a legend indicating where a prospectus is 
available for the offering to which the communication relates and 
recommending that potential investors read the prospectus (including 
Exchange Act documents incorporated by reference).\256\ In addition, 
the legend also advises investors that they can obtain the registration 
statement including the prospectus and any incorporated Exchange Act 
documents for free through the Commission's web site at www.sec.gov, 
and that they may request the prospectus from the issuer, any 
underwriter or any dealer by calling a toll-free number.\257\ The 
legend also indicates that the free writing prospectus relates to a 
registered public offering. As suggested by commenters, we are adopting 
a generic, rather than issuer-specific legend condition.\258\ We 
believe this modification should assist issuers and offering 
participants in including a legend in a free writing prospectus without 
much added cost.\259\
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    \256\ See Rule 433(c). We have eliminated any issuer-specific 
information as well as the reference to risk factors.
    \257\ Rules 163 and 433 permit offering participants to include 
an e-mail address at which the documents can be requested, a 
statement that the documents are available on the issuer's web site, 
and the Internet address and particular location where the documents 
can be found.
    \258\ See, e.g., letters from Citigroup; Cleary; CSFB; Morgan 
Stanley; S&C and SIA.
    \259\ For example, a single toll-free telephone number could be 
used to request a copy of the prospectus.
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(ii) Cure for Unintentional or Immaterial Failure To Include a Legend
    Rule 164 permits a user to cure an unintentional or immaterial 
failure to include the specified legend in any free writing prospectus, 
as long as a good faith and reasonable effort is made to comply with 
the condition and the free writing prospectus is amended to include the 
specified legend as soon as practicable after discovery of the omitted 
or incorrect legend.\260\ In addition, if a free writing prospectus has 
been transmitted to potential investors without the specified legend, 
the free writing prospectus must be retransmitted, with the appropriate 
legend by substantially the same means as and directed to substantially 
the same investors to whom it was originally transmitted.\261\
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    \260\ See Rule 164(c).
    \261\ Rule 163 contains similar cure provisions. Some commenters 
were concerned that the cure provision would require the redelivery 
of the free writing prospectus with the correct legend to all 
potential purchasers. See letters from ABA and Fried Frank. While 
the proposal did not require that the free writing prospectus be 
delivered to all potential purchasers, we have revised the language 
to clarify that the free writing prospectus with the specified 
legend must be retransmitted by substantially the same means as and 
directed to substantially the same prospective purchasers to whom it 
was originally transmitted. For example, if a free writing 
prospectus without a legend was sent by e-mail to a distribution 
list, it would have to be retransmitted with the specified legend by 
e-mail to the same distribution list.
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    The legend condition is intended to identify more clearly materials 
as free writing prospectuses used in relation to a registered offering. 
We believe that this legend will put investors on notice and assist 
them in evaluating the content of the free writing prospectus.
(iii) Impermissible Legends or Disclaimers
    As we discussed in the Proposing Release, we understand that 
issuers or other users of written communications may sometimes include 
legends or disclaimers in offering materials that may be inappropriate. 
In particular, disclaimers of responsibility or liability that are 
impermissible in a statutory prospectus or registration statement also 
are impermissible in free writing prospectuses. Examples of 
impermissible legends or disclaimers, which are not exclusive, that 
will cause the materials not to be permissible free writing 
prospectuses or not to be

[[Page 44750]]

effective as to any purchaser for liability purposes include:
     Disclaimers regarding accuracy or completeness or reliance 
by investors;
     Statements requiring investors to read or acknowledge that 
they have read or understand the registration statement or any 
disclaimers or legends;
     Language indicating that the communication is neither a 
prospectus nor an offer to sell or a solicitation or an offer to buy; 
and
     For information that must be filed with us, statements 
that the information is confidential.\262\
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    \262\ Language indicating that the material is not a prospectus 
or offer would make the material not a permitted prospectus allowed 
pursuant to Rule 164 and thus preclude reliance on Rules 164 and 
433. See also the Asset-Backed Securities Adopting Release., note, 
at III.C.1.d.
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(3) Filing Conditions
(a) General Conditions
(i) Scope of General Conditions
    We are adopting substantially as proposed the provisions 
conditioning use of a free writing prospectus on the filing of that 
prospectus or information contained in that prospectus,\263\ unless 
exempt from filing, in the following circumstances: \264\
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    \263\ See Rule 433(d). Under Rule 433, Rule 134 notices and Rule 
135 notices are not considered free writing prospectuses and, 
therefore, are not subject to the conditions to use in the Rule. 
This differs from Securities Act Rule 425, which is applicable to 
business combination transactions and covers all communications, 
including Rule 135 notices.
    \264\ Under Rule 433, electronic road shows that are written 
communications are not subject to the filing condition in certain 
circumstances. See Section III.D.3 below under ``Electronic Road 
Shows.''
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     Where a free writing prospectus is prepared by or on 
behalf of, or used or referred to by, the issuer, known as an ``issuer 
free writing prospectus,'' the issuer shall file that free-writing 
prospectus;
     Where a free writing prospectus prepared by or on behalf 
of or used by an offering participant other than the issuer contains 
material information about the issuer or its securities that has been 
provided by or on behalf of an issuer, known as ``issuer information,'' 
that is not already included or incorporated in the prospectus or a 
filed free writing prospectus, the issuer shall file the issuer 
information; \265\
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    \265\ This condition only provides that the issuer information 
contained in the offering participant's free writing prospectus be 
filed, not necessarily the free writing prospectus itself. In 
addition, this condition does not apply where a free writing 
prospectus prepared by or on behalf of an offering participant, 
other than the issuer, contains information prepared on the basis of 
or derived from issuer information but not issuer information.
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     Where a free writing prospectus used or referred to by an 
offering participant other than the issuer is distributed by or on 
behalf of such offering participant in a manner reasonably designed to 
lead to its broad unrestricted dissemination, the offering participant 
shall file the free writing prospectus; and
     Where a free writing prospectus or portion thereof 
prepared by or on behalf of the issuer or other offering participant 
comprises a description of the final terms of the issuer's securities 
in the offering or of the offering, the issuer must file such free 
writing prospectus or portion thereof after such terms have been 
established for all classes of the offering.\266\
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    \266\ The description of the final terms of the issuer's 
securities and of the offering will either be contained in an issuer 
free writing prospectus or, if contained in another party's free 
writing prospectus, will be issuer information.
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    In most cases, there is no condition that underwriters and dealers 
file the free writing prospectuses that they prepare, use, or refer to. 
This includes information prepared by underwriters and others on the 
basis of or derived from, but not containing, issuer information. Such 
information can be, but is not limited to, information that is 
proprietary to the preparer.
    We are adopting as proposed the exception to the general principle 
that underwriter free writing prospectuses do not need to be filed 
where a free writing prospectus is used or referred to by and 
distributed by or on behalf of an offering participant, other than the 
issuer, in a manner that is reasonably designed to lead to its broad 
unrestricted dissemination. Accordingly, such use of a free writing 
prospectus is conditioned on such person filing the free writing 
prospectus on or before the date of first use. For example, the filing 
condition applies where:
     An underwriter includes a free writing prospectus on an 
unrestricted web site or hyperlinks from an unrestricted web site to 
information that would be a free writing prospectus; \267\ or
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    \267\ Conversely, a web site with access restricted to customers 
or a subset of customers will not require filing, nor will an e-mail 
by an underwriter to its customers, regardless of the number of 
customers.
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     An underwriter sends out a press release regarding the 
issuer or the offering that is a free writing prospectus.
    Offering participants include selling security holders. A selling 
security holder who is unaffiliated with the issuer and who uses a free 
writing prospectus is treated for purposes of Rule 164 and Rule 433 as 
any other offering participant who may be an underwriter of the 
issuer's securities. If the selling security holder is an affiliate of 
the issuer and the selling security holder prepares, uses, or refers to 
a free writing prospectus, it should consider, in addition to 
underwriter status, whether it is acting by or on behalf of the issuer. 
Further, the issuer and such affiliated selling security holder should 
evaluate whether the selling security holder has access to material 
information about the issuer and whether it is including such material 
issuer information in that free writing prospectus.\268\
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    \268\ While an unaffiliated selling security holder could, 
depending on the facts and circumstances, be acting on behalf of an 
issuer or have access to material information about the issuer, 
those situations would be more likely to arise with affiliates.
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(ii) Conditions Specific to Final Terms of the Securities or Offering
    We also have adopted with modifications the provision that a 
description of the final terms of the securities in the offering or of 
the offering contained in a free writing prospectus must be filed by 
the issuer, regardless of whether it was prepared by or on behalf of 
the issuer or other offering participant prepared or used it. As 
modified, the provision applies to final terms of the securities in the 
offering and of the offering, whether or not they are the only matters 
included in the free writing prospectus. Terms are required to be filed 
only if they reflect the final terms of the securities or of the 
offering. The issuer has to file the description of the terms contained 
in the free writing prospectus within two days after the later of the 
date such terms became final for all classes of the offering or the 
date of first use.\269\ We believe this filing condition is appropriate 
for the final terms of a security or offering contained in a free 
writing prospectus. Preliminary term sheets and other descriptive 
material containing only the terms of the securities or the offering 
that do not reflect final terms of securities or transactions are not 
subject to filing. All such written offering materials, whether or not 
filed, are, however, free writing prospectuses. As we note above, we 
have revised the Rule as adopted to permit most issuers, whether or not 
ineligible issuers, to use free writing prospectuses that consist only 
of descriptions of the terms of the issuer's

[[Page 44751]]

securities in the offering or of the offering.\270\
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    \269\ This is essentially the same timing for filing for final 
term sheets as we adopted for asset-backed securities. The filing 
condition under this provision of Rule 433 will not be satisfied by 
the timely filing of a prospectus supplement under Rule 424.
    \270\ The issuers who are not permitted to use these free 
writing prospectuses are issuers who are, or during the prior three 
years were or any of their predecessors were, blank check companies, 
shell companies (other than business combination related shell 
companies), and penny stock issuers. Issuers registering business 
combination transactions also may not use these free writing 
prospectuses. Registered investment companies and business 
development companies may not use these descriptions as free writing 
prospectuses.
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(iii) Asset-Backed Issuers
    Asset-backed issuers and other parties to asset-backed transactions 
specified in Rule 167(c) potentially have two sets of rules on which 
they may rely in using written offering materials. Under the special 
rules for asset-backed securities we adopted in December 2004, if the 
offering is registered on Form S-3, these persons may use ABS 
informational and computation materials as defined in Item 1101 of 
Regulation AB as permitted by Rule 167 and Rule 426. Rule 426 in 
particular includes filing conditions for the use of such materials 
using a Form 8-K. The filed materials become part of the registration 
statement for the offering of asset-backed securities in question.
    These persons may also use free writing prospectuses as permitted 
by Rules 164 and 433 that we are adopting today. Use of free writing 
prospectuses is not limited to offerings registered on Form S-3. Free 
writing prospectuses are prospectuses subject to the provisions of 
Section 12(a)(2) of the Securities Act but are not filed as part of or 
included in the registration statement. The contents of free writing 
prospectuses are not limited to ABS informational and computational 
materials. Rule 433 requires filing by issuers of free writing 
prospectuses prepared by or on behalf of or used or referred to by, 
issuers or, depositors, sponsors, servicers, or affiliated depositors, 
whether or not the issuer, but not by underwriters or dealers, unless 
they contain issuer information or are distributed in a manner 
reasonably designed to lead to its broad unrestricted dissemination. 
Issuers also must file issuer information contained in other free 
writing prospectuses.\271\
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    \271\ In the case of asset-backed issuers certain information 
comprehended within the definition of ABS informational and 
computational material is analogous to the terms of securities and 
is therefore issuer information. For example, we would expect that 
the following categories of such material, which are derived from 
the definition of ABS informational and computational materials, are 
generally issuer information:
    (1) Factual information regarding the asset-backed securities 
being offered and the structure and basic parameters of the 
securities, such as the number of classes, seniority, payment 
priorities, terms of payment, the tax, ERISA or other legal 
conclusions of counsel, and descriptive information relating to each 
class (e.g., principal amount, coupon, minimum denomination, price 
or anticipated price, yield, weighted average life, credit 
enhancements, anticipated ratings, and other similar information 
relating to the proposed structure of the offering);
    (2) Factual information regarding the pool assets underlying the 
asset-backed securities, including origination, acquisition and pool 
selection criteria, information regarding any prefunding or 
revolving period applicable to the offering, information regarding 
significant obligors, data regarding the contractual and related 
characteristics of the underlying pool assets (e.g., weighted 
average coupon, weighted average maturity, delinquency and loss 
information and geographic distribution) and other factual 
information concerning the parameters of the asset pool appropriate 
to the nature of the underlying assets, such as the type of assets 
comprising the pool and the programs under which the loans were 
originated;
    (3) Identification of key parties to the transaction, such as 
servicers, trustees, depositors, sponsors, originators and providers 
of credit enhancement or other support, including information about 
any such party;
    (4) Static pool data, as referenced in Item 1105 of Regulation 
AB [17 CFR 229.1105], such as for the sponsor's and/or servicer's 
portfolio, prior transactions or the asset pool itself; and
    (5) To the extent that the information is provided by the 
issuer, depositor, affiliated depositor, or sponsor, statistical 
information displaying for a particular class of asset-backed 
securities the yield, average life, expected maturity, interest rate 
sensitivity, cash flow characteristics, total rate of return, option 
adjusted spread or other financial or statistical information 
relating to the class or classes under specified prepayment, 
interest rate, loss or other hypothetical scenarios. (Where such 
information is prepared by an underwriter or dealer, it is not 
issuer information, even when derived from issuer information.)
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    Under Rule 426, filing is required for ABS informational and 
computational materials provided to prospective investors after final 
terms of all classes of securities in the offering have been 
established. Filing also is required of such materials relating to a 
class of securities, whether or not final terms of all classes had been 
established, as to which a prospective investor had indicated an 
interest. Filing is required by the later of the due date for filing 
the final prospectus with us under Rule 424(b) or two days after the 
date of first use.
    Under Rule 433, the issuer must file a free writing prospectus or 
portion thereof comprising a description of final terms of securities 
in the offering or of the offering within two days after the later of 
the date final terms have been established for all classes of the 
offering or the date of first use. Filing is not required of 
descriptions of securities or of the offering that do not reflect final 
terms, even if a prospective investor had indicated an interest.
    Under Rule 164, ineligible issuers may not use free writing 
prospectuses, except that most categories of ineligible issuers may use 
free writing prospectuses comprising only descriptions of terms of 
securities and offerings. Rule 164 provides that for offerings of 
asset-backed securities, ineligible issuers may use free writing 
prospectuses limited to certain categories of ABS informational and 
computational materials.\272\ There is no such ineligible issuer 
restriction on the use of ABS informational and computational materials 
under Rules 167 and 426.
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    \272\ In asset-backed offerings by ineligible issuers, free 
writing prospectuses used by ineligible issuers are limited to the 
following information:
    (1) Factual information regarding the asset-backed securities 
being offered and the structure and basic parameters of the 
securities, such as the number of classes, seniority, payment 
priorities, terms of payment, the tax, ERISA or other legal 
conclusions of counsel, and descriptive information relating to each 
class (e.g., principal amount, coupon, minimum denomination, 
anticipated price, yield, weighted average life, credit 
enhancements, anticipated ratings, and other similar information 
relating to the proposed structure of the offering);
    (2) Factual information regarding the pool assets underlying the 
asset-backed securities, including origination, acquisition and pool 
selection criteria, information regarding any prefunding or 
revolving period applicable to the offering, information regarding 
significant obligors, data regarding the contractual and related 
characteristics of the underlying pool assets (e.g., weighted 
average coupon, weighted average maturity, delinquency and loss 
information and geographic distribution) and other factual 
information concerning the parameters of the asset pool appropriate 
to the nature of the underlying assets, such as the type of assets 
comprising the pool and the programs under which the loans were 
originated;
    (3) Identification of key parties to the transaction, such as 
servicers, trustees, depositors, sponsors, originators and providers 
of credit enhancement or other support, including a brief 
description of each such party's roles, responsibilities, background 
and experience;
    (4) Static pool data;
    (5) The names of underwriters participating in the offering of 
the securities, and their additional roles, if any, within the 
underwriting syndicate;
    (6) The anticipated schedule for the offering (including the 
approximate date upon which the proposed sale to the public will 
begin) and a description of marketing events (including the dates, 
times, locations, and procedures for attending or otherwise 
accessing them); and
    (7) A description of the procedures by which the underwriters 
will conduct the offering and the procedures for transactions in 
connection with the offering with an underwriter or participating 
dealer (including procedures regarding account-opening and 
submitting indications of interest and conditional offers to buy).
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    To coordinate the operation of the two available approaches to use 
of written offering communications, Rule 433 as adopted today provides 
that a free writing prospectus or portion thereof required to be filed 
under Rule 433 containing only ABS informational and computational 
materials, as defined in Item 1101(a) of Regulation AB, may be filed 
under Rule 433 but within the time frame required for satisfaction of 
the conditions of Rule 426, and that such filing will satisfy the 
conditions of Rule 433.

[[Page 44752]]

    Rule 433 as adopted today also provides that where a free writing 
prospectus is used in reliance on Rules 164 and 433 and the conditions 
of those Rules (including the special filing election for free writing 
prospectuses or portions thereof comprising ABS informational and 
computational materials) are satisfied, the conditions of Rules 167 and 
426 do not need to be satisfied. It similarly provides that where ABS 
informational and computational materials are used in reliance on Rules 
167 and 426 and the conditions of those Rules are satisfied, the 
conditions of Rules 164 and 433 do not need to be satisfied.
    Special considerations apply with respect to providing static pool 
information in offerings of asset-backed securities. Rule 312 of 
Regulation S-T \273\ provides that static pool information provided on 
an Internet web site can be included in the prospectus included in the 
registration statement if certain conditions are satisfied, including 
the inclusion of the specific web site address in the prospectus.
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    \273\ 17 CFR 232.312.
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    Static pool information also can be provided on an Internet web 
site as part of ABS informational and computational materials if 
certain conditions are satisfied, including provision of the specific 
web site address in the materials. Those materials are filed on Form 8-
K and become part of the registration statement pursuant to Rule 167.
    In addition, static pool information provided on an Internet web 
site can be included in a free writing prospectus. The web site address 
can be referred to in a written communication, and in the case of an 
electronic communication an active hyperlink can be provided. In either 
case the static pool information will be part of the free writing 
prospectus. Where filing is required under Rule 433, the Rule provides 
that filing of the free writing prospectus containing the address or 
hyperlink satisfies the filing requirement. Where static pool 
information provided in a free writing prospectus is separately 
included in the prospectus included in the registration statement, the 
filing in the prospectus included in the registration statement is 
accomplished pursuant to Rule 312 of Regulation S-T.
(iv) Comments on Filing Condition
    Some commenters did not believe there should be any filing 
requirements for free writing prospectuses.\274\ Other commenters did 
not believe that filing should be a condition to the use of a free 
writing prospectus because the failure to comply with the filing 
requirements would give rise to a Section 5 violation with related 
rescission rights.\275\ Some commenters requested further clarification 
of the cure provisions, including what constitutes ``unintentional,'' a 
``good faith and reasonable effort'' to comply with the filing 
conditions, and a ``discovery'' of a failure to file a free writing 
prospectus.\276\ We have retained the filing condition and cure 
provisions as noted. We have not provided further elaboration of the 
terms in the cure provisions which also are contained in the rules 
affecting business combination transactions and asset-backed securities 
offerings.\277\
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    \274\ See, e.g., letters from ABA; Alston; and NYSBA.
    \275\ See, e.g., letters from ABA and S&C.
    \276\ See, e.g., letters from ABA; Citigroup; Goldman Sachs; 
Merrill Lynch; S&C and SIA.
    \277\ See Rules 165(e) and 167(e).
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    With regard to filing descriptions of the final terms of the 
securities in the offering or of the offerings, some commenters 
expressed concern that issuers and offering participants would not know 
when the terms were final to be able to file the final term sheet in a 
timely manner.\278\ We believe that because a description of the final 
terms of the securities or the offering does not have to be filed until 
after the deal terms are final for all classes, there will not be a 
situation where there is uncertainty when a description of the final 
terms is a final term sheet. In addition, some commenters thought that 
only issuer prepared term sheets should have to be filed.\279\ Because 
the final terms represent the description of the issuer's securities 
and of the offering, we have retained the condition that the issuer 
must file the final terms, regardless of who has prepared it.
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    \278\ See, e.g., letters from ABA-ABS; ASF; the Bond Market 
Association's comment letter on asset-backed securities (``BMA-
ABS''); and CMSA.
    \279\ See, e.g., letters from Cleary and Davis Polk.
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    Commenters also requested clarification of the interplay between 
new Rule 433 and the rules applicable in business combination 
transactions where there is a capital formation transaction occurring 
at the same time as a business combination transaction, whether or not 
related.\280\ Rule 165, which is applicable to communications in 
connection with business combination transactions, is not available for 
a communication whose primary purpose or effect relates to a capital 
formation transaction. The rules we are adopting today applicable to 
registered capital formation transactions generally will apply to 
registered capital formation transactions even if they have some 
connection to or are proximate in time to a business combination 
transaction. As a result, if an issuer undertakes a registered capital 
formation transaction that is related to, or takes place at around the 
same time as, a business combination transaction, then the issuer can, 
if the conditions to the applicable rules are satisfied, rely on the 
rules we adopt today that apply to the registered capital formation 
transaction and Rules 165 and 166 for the business combination 
transaction. This is true whether the two transactions are connected 
(for example, the purpose of the capital formation transaction is to 
finance a contemporaneous business combination transaction) or 
independent of each other. If a communication relates to both a capital 
formation and business combination transaction, then the communication 
may be subject to both Rules 425 and 433.\281\ We have revised the 
filing condition of Rule 433 to provide that the filing condition of 
the Rule will be satisfied if a filing is made pursuant to Rule 425 and 
the Rule 425 filing includes the Rule 433 legend and indicates on the 
cover page the registration statement number for the capital formation 
transaction and that it also is being filed pursuant to Rule 433.
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    \280\ See, e.g., letters from ABA and Alston.
    \281\ In 2001, the staff of the Division of Corporation Finance 
provided guidance as to how to analyze communications made in 
connection with contemporaneous capital raising and business 
combination transactions in order to determine whether reliance on 
the provisions of Regulation M-A was appropriate. See Question C.1 
(Scope of Rule 165) of Section I (Regulation M-A) from the Third 
Supplement, dated July 2001, of the Division of Corporation 
Finance's Manual of Publicly Available Telephone Interpretations. 
http://www.sec.gov/interps/telephone /phonesupplement3.htm. Such 
guidance may continue to be helpful to this analysis. Of course, the 
issuer or other offering participant can determine to comply with 
both Rule 425 and Rule 433.
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    Some commenters addressed issues regarding asset-backed securities 
offerings. Some commenters questioned the interplay between the free 
writing prospectus rules and rules affecting communications in asset-
backed offerings, particularly as it affected the use of informational 
and computational materials and final term sheets.\282\ These 
commenters were concerned about filing deadlines and the treatment of 
certain disclosures, such as static pool data disclosed on a website, 
under the

[[Page 44753]]

definition of free writing prospectus.\283\ As noted above, we are 
revising Rule 433 and have provided additional guidance as appropriate 
to address these issues.
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    \282\ See, e.g., letters from ABA-ABS; ASF; BMA-ABS; CMSA; and 
FMR.
    \283\ See letter from ABA-ABS.
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(b) Immaterial or Unintentional Failures To File
(i) Scope of Cure Provision
    We are adopting as proposed the ability to cure any unintentional 
or immaterial failure to file free writing materials.\284\ Rule 164 
provides that the material must be filed as soon as practicable after 
discovery of the failure to file.
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    \284\ Such a ``cure'' provision is included in Regulation M-A. 
See Securities Act Rule 165(e). See also the Campos Article, note 
155, at Sec.  1:30.
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    Rule 164 provides an issuer and any other person relying on the 
Rule the ability to cure any immaterial or unintentional failure to 
file or delay in filing the free writing prospectus, without losing the 
ability to rely on the Rule. This cure provision is available if a good 
faith and reasonable effort is made to comply with the filing condition 
and the free writing prospectus is filed as soon as practicable after 
the discovery of the failure to file. As in the business combination 
rules, we are including the cure provision to avoid potential chilling 
of communications due to uncertainty over filing status.
(ii) Comments on Cure Provision
    Some commenters requested further clarification of the cure 
provisions, including what constitutes ``unintentional,'' a ``good 
faith and reasonable effort'' to comply with the filing conditions, and 
a ``discovery'' of a failure to file a free writing prospectus.\285\ 
The filing cure provisions are the same as those contained in the 
asset-backed rules we adopted in 2004 and in the business combination 
rules, which have operated without further elaboration on these issues 
since we adopted the rules in 1999.\286\ As we discuss above under Rule 
163, we are not including any further clarification of what constitutes 
the elements of the cure provisions.\287\
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    \285\ See, e.g., letters from ABA; Citigroup; Goldman Sachs; 
Merrill Lynch; S&C and SIA.
    \286\ See also Regulation D.
    \287\ See discussion in Section III.D.2 above under ``Permitted 
Pre-Filing Offers for Well-Known Seasoned issuers.''
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(4) Record Retention Condition
(a) Discussion
    We are adopting, with some modifications, the proposed record 
retention condition in Rule 433. As adopted, Rule 433 conditions the 
use of a free writing prospectus on issuers and offering participants 
retaining for three years any free writing prospectuses they have used 
from the date of the initial bona fide offering of the securities in 
question that have not been filed with us. This record retention 
condition applies to all offering participants.\288\ The three-year 
retention period is consistent with retention periods for brokers and 
dealers to retain securities sale confirmations.\289\
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    \288\ For example, the record retention policy applies to free 
writing prospectuses prepared by underwriters and not containing 
issuer information and descriptions of the terms of securities or of 
the offering not reflecting final terms not required to be filed. To 
the extent the record retention requirements of Exchange Act Rule 
17a-4 [17 CFR 240.17a-4] apply to free writing prospectuses required 
to be retained by broker-dealers under Rule 433, such free writing 
prospectuses are required to be retained in accordance with such 
requirements.
    \289\ See Exchange Act Rule 17a-3(a)(8) [17 CFR 240.17a-
3(a)(8)].
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    We believe this record retention condition is appropriate for 
several reasons. First, it will give us the ability to review free 
writing prospectuses used in reliance on Rules 164 and 433 under our 
authority in Securities Act Section 10(b) and the amendments to Rule 
418, among other rules. Second, offering participants and purchasers 
will benefit from the availability of the free writing prospectuses.
(b) Immaterial or Unintentional Failure To Retain a Free Writing 
Prospectus
    Some commenters were concerned that the lack of a cure provision 
for failure to retain free writing prospectuses could cause retroactive 
violations of Securities Act Section 5 for three years.\290\ In 
response to these concerns, we have included a provision in Rule 164 
that provides that solely for purposes of that Rule, but not any other 
record retention obligation of any issuer or other offering 
participant, an immaterial or unintentional failure to retain a free 
writing prospectus will not result in a violation of Securities Act 
Section 5(b)(1) or the loss of the ability to rely on the exemption so 
long as a good faith and reasonable effort was made to comply with the 
record retention condition. Whether or not there has been a good faith 
and reasonable effort to comply with the record retention condition 
will be a facts and circumstances determination. We have included this 
provision because we believe that there can be circumstances in which a 
free writing prospectus is inadvertently not retained even after a good 
faith and reasonable effort. We also have modified the record retention 
condition so that it does not apply in cases where the free writing 
prospectus is filed with us.
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    \290\ See, e.g., letters from ABA; Cleary; and TBMA.
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(D) Road Shows
(1) Definition of Electronic Road Show
    Issuers and underwriters frequently conduct presentations known as 
``road shows'' to market their offerings to the public. These road 
shows are a primary means by which issuers are involved directly and 
actively in a selling effort to investors. Historically, these 
presentations were conducted in person and limited to institutional 
investors. Today, due to advances in electronic media, road shows also 
are being conducted or re-transmitted over the Internet or other 
electronic media and in some cases to broader audiences.
    We indicated in the Proposing Release that we intended to clarify 
the treatment of all electronic communications, including electronic 
road shows, as graphic communications under the Securities Act. Under 
the proposed rules, all electronic road shows would have been written 
offers and prospectuses, but also would have been permitted subject to 
conditions, as free writing prospectuses.
    As discussed above, we have revised the definition of graphic 
communication from the proposal to exclude a communication that, at the 
time of the communication, originates live, in real-time to a live 
audience and does not originate in recorded form or otherwise as a 
graphic communication, although it may be transmitted through graphic 
means. This revision applies in the context of road shows. Under the 
definition, a live, in real-time road show to a live audience that is 
transmitted graphically will not be a graphic communication, and 
therefore not a written communication, or a free writing prospectus. It 
will still, however, be an offer subject to Securities Act Section 
12(a)(2) and the other liability provisions of the federal securities 
laws.\291\ Thus, as we discuss below, information that is presented as 
part of the live, in real-time road show to a live audience will not be 
a free writing prospectus. As discussed below, we have added a note to 
the effect that where a communication (such as slides or other visual 
aids) is provided or

[[Page 44754]]

transmitted simultaneously as part of a live road show that is not a 
written communication, including a live, in real-time graphically 
transmitted road show, and that communication is provided or 
transmitted in a manner designed to make it available only as part of 
the road show and not separately, that communication is deemed part of 
the road show. Such a communication is thus deemed also not to be a 
written communication.\292\
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    \291\ In addition, while we have revised the definition of 
graphic communication to exclude certain presentations that 
originate live, in real-time to a live audience, we have retained in 
the definition of written communications the statutory concept of 
radio or television broadcasts, regardless of the transmission 
means. Thus, a communication that is a television or radio 
broadcast, whether or not live, would still be a written 
communication.
    \292\ In-person road shows will continue to be considered oral 
communications. As we note, we have excluded road shows that 
originate and are presented live, in real-time to a live audience 
from the definition of graphic communication. The exclusion for 
presentations to a live audience that originate live, in real-time 
also covers overflow rooms at live, in-person road shows. The rules 
we are adopting today do not affect the treatment of written 
communications or road shows regarding business combination 
transactions to which Rule 425 and Regulation M-A apply.
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    Road shows that do not originate live, in real-time to a live 
audience and are graphically transmitted are electronic road shows that 
will be considered written communications and, therefore, free writing 
prospectuses. Under our new Rules, they are, of course, permitted if 
the conditions of our new Rules for free writing prospectuses are 
satisfied. As we noted in the Proposing Release, issuer involvement or 
participation in an electronic road show that is a written 
communication will make it an issuer free writing prospectus.\293\
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    \293\ We recognize that road shows may be used in marketing the 
issuer's securities in certain private placement transactions, as 
well. Our rules do not address these offerings, although the 
treatment of electronic communications in the definitions of graphic 
communication and written communication apply to private placement 
transactions. For example, in an offering made in reliance on 
Securities Act Rule 505 or Rule 506 of Regulation D [17 CFR 230.505 
and 17 CFR 230.506], an electronic road show or other communication 
that is a written communication would implicate the provisions of 
Securities Act Rule 502 [17 CFR 230.502] regarding information that 
must be provided to non-accredited investors and restrictions on 
general solicitation and general advertising.
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(2) Treatment of Electronic Road Shows
    Electronic road shows have to date proceeded in reliance on a 
series of no-action letters granted by the staff of the Division of 
Corporation Finance.\294\ The rules we are adopting today permit the 
use of electronic road shows without many of the conditions in the 
electronic road show no-action letters.\295\ As we discussed in the 
Proposing Release, the electronic road show no-action letters for 
registered public offerings are withdrawn as of the effective date of 
Rule 433.\296\
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    \294\ See Division of Corporation Finance no-action letters to 
Private Financial Network (Mar. 12, 1997); Net Roadshow, Inc. (July 
30, 1997); Bloomberg L.P. (Oct. 22, 1997); Thompson Financial 
Services, Inc. (Sep. 4, 1998); Activate.net Corporation (June 3, 
1999); Charles Schwab & Co., Inc. (Nov. 15, 1999); and Charles 
Schwab & Co., Inc. (Feb. 9, 2000).
    \295\ For example, under the rules we are adopting today for 
road shows that are free writing prospectuses, the road show 
audience does not have to be limited in any way, and the road show 
does not have to be the re-transmission of a live presentation in 
front of an audience and the electronic road show may be edited. In 
addition, those distributing the road show do not have to limit 
viewers to seeing it either within a 24-hour period or twice. They 
also can allow viewers to copy, print or download the road show. 
Multiple versions of the electronic road show are permitted. Each 
will be a separate free writing prospectus.
    \296\ See discussion of Staff no-action letters in note 182 of 
the Proposing Release.
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    For road shows that are free writing prospectuses, the filing 
conditions of Rule 433 do not apply, with one exception. In the case of 
an issuer that is not required to file reports under Exchange Act 
Section 13 or Section 15(d) at the time of filing the registration 
statement and is registering an offering of common equity or 
convertible equity securities, the filing condition applies to a road 
show that is a free writing prospectus unless the issuer makes at least 
one version of a bona fide electronic road show \297\ for the offering 
in question readily available without restriction electronically to any 
potential investor. If there is more than one version of a road show 
that is a written communication, the unrestrictedly available bona fide 
electronic road show must be available no later than the other 
versions.
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    \297\ We are adding a definition of ``road show'' and adopting 
substantially as proposed the definition of ``bona fide electronic 
road show.'' For purposes of Rule 433, a ``road show'' is an offer 
(other than a statutory prospectus or a portion of a statutory 
prospectus filed as part of a registration statement) that contains 
a presentation regarding an offering by one or more members of the 
issuer's management and includes discussion of one or more of the 
issuer, such management, and the securities being offered. In the 
case of asset-backed offerings, road shows can include presentations 
by management involved in the securitization or servicing by the 
depositor, sponsor, or servicers. For purposes of Rule 433, a ``bona 
fide electronic road show'' is a road show that is a written 
communication transmitted by graphic means that contains a 
presentation by one or more officers of an issuer or other persons 
in an issuer's management and, if the issuer is using or conducting 
more than one road show that is a written communication, includes 
discussion of the same general areas of information regarding the 
issuer, such management, and the securities being offered as such 
other issuer road show or road shows for the same offering that are 
written communications. To be bona fide, the version need not 
address all of the same subjects or provide the same information as 
the other versions of an electronic road show. It also need not 
provide an opportunity for questions and answers or other 
interaction, even if other versions of the electronic road show do 
provide such opportunities.
    A few commenters asked for further guidance on which categories 
of information could be properly excluded from the bona fide 
version. See, e.g., letters from Fried Frank and TBMA. One commenter 
thought that the bona fide electronic road show should be identical 
to the other electronic road shows that were being presented. See 
letter from Harrisdirect. We have not further revised the definition 
of bona fide electronic road show in response to these comments as 
we believe that the definition that we are adopting provides the 
flexibility to offering participants to use different versions of 
road shows depending on the particular facts and circumstances of 
their offering. As we indicated in the Proposing Release and note 
above, the bona fide version must only cover the same general areas 
regarding the issuer, its management, and the securities being 
offered and need not address all the same subjects or provide the 
same information as other versions.
---------------------------------------------------------------------------

    We also have modified the filing conditions from the proposal to 
eliminate the specific obligation to file any material issuer 
information provided at an electronic road show. The filing condition 
for electronic road shows is as described above. We have added a note 
that a where a communication that is provided or transmitted 
simultaneously with a live road show that is not a written 
communication and that communication is provided or transmitted in a 
manner designed to make it available only as part of the road show and 
not separately, that communication is deemed to be part of the road 
show.\298\ Therefore, as discussed above, if the road show is not a 
written communication, such a communication, such as slides or visual 
aids, even if it would otherwise be a graphic or other written 
communication is deemed to be part of the road show and thus not to be 
written. This provision also would cover, for example, a communication 
of visual aids provided in a separate feed from a live, in real-time 
road show to a live audience transmitted by graphic means, where the 
separate communication is provided or transmitted in a manner such that 
the separate communication can only be seen as part of the road show. 
If the road show is written and not required to be filed, such a 
simultaneous communication is also not required to be filed. This 
provision also would cover visual aids transmitted in a manner designed 
to make them available simultaneously only as part of an electronic 
road show. If the electronic road show is not subject to filing, 
neither are the visual aids. Otherwise, graphic or other written 
communications provided separately, for example by graphic means in a 
separate file designed to be available to be copied or downloaded 
separately, will be treated as a written communication and, if an 
offer, will be a free writing prospectus.
---------------------------------------------------------------------------

    \298\ See the Note to Rule 433(d)(8).
---------------------------------------------------------------------------

    Whether or not road shows are written communications, all road 
shows

[[Page 44755]]

that are offers are subject to Securities Act Section 12(a)(2) 
liability. In addition, all road shows that are offers that are written 
communications are free writing prospectuses, whether or not required 
to be filed.
(3) Comments on Electronic Road Shows
    Commenters generally supported permitting electronic road 
shows.\299\ While commenters supported the filing exclusion for 
electronic road shows, a significant number of commenters were 
concerned about the proposed rules conditions affecting electronic road 
shows.\300\ Most of the comments related to the treatment of live, 
real-time road shows transmitted electronically as graphic 
communications.\301\ These commenters believed that all live, real-time 
road shows, including those that are transmitted graphically to 
``overflow rooms,'' should be treated as oral communications.\302\ The 
commenters also argued that all materials provided or made available at 
these live graphically transmitted road shows, including slides and 
other materials used but not retained by participants should be treated 
as oral communications and should not be required to be filed with us 
under Rule 433.\303\ Many commenters were concerned that putting 
greater restrictions on these road shows would eliminate the ability of 
out of town investors to participate in these road shows and view 
PowerPoint[supreg] and similar presentations which would, therefore, 
reduce the amount of information that these investors receive.\304\
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    \299\ See, e.g., letters from ABA; Alston; NetRoadshow; and 
Thomson Financial (``Thomson'').
    \300\ See, e.g., letters from ABA; Alston; E. Price Ambler; 
Kenneth Arnot; Lisa Baudot; Barry C. Bruneer; Harold Candland; Matt 
Crouse; Rick Dowdle; Robert Evans; Goldman Sachs; Marvin D. Lutz; 
Merrill Lynch; NetRoadShow; F. Thomas O'Halloran; Paul J. Rasplicka; 
Eric Ribner; Jeffrey A. Schaffer; Alison Shatz; SIA; Bob Smith; 
Steve Smart; Chris D. Wallace; WR Hambrecht + Co. (``WR 
Hambrecht''); and Kevin Yorke.
    \301\ See, e.g., letters from ABA; Alston; Bloomberg L.P. 
(``Bloomberg''); Goldman Sachs; Merrill Lynch; NetRoadShow; Jeffrey 
A. Schaffer; SIA; and Thomson.
    \302\ See, e.g., letters from Alston; Morgan Stanley; S&C and 
SIA.
    \303\ See, e.g., letters from ABA; Alston; Lisa Baudot; 
Citigroup; Cleary; Morgan Stanley; S&C SIA, David Thickens; Douglas 
Workman; and WR Hambrecht.
    \304\ See, e.g., letters from ABA; Alston; E. Price Ambler; 
Kenneth Arnot; Lisa Baudot; Barry C. Bruneer; Harold Candland; Matt 
Crouse; Rick Dowdle; Robert Evans; Goldman Sachs; Marvin D. Lutz; 
Merrill Lynch; NetRoadShow; F. Thomas O'Halloran; Paul J. Rasplicka; 
Eric Ribner; Jeffrey A. Schaffer; Alison Shatz; SIA; Bob Smith; 
Steve Smart; Chris D. Wallace; WR Hambrecht; and Kevin Yorke.
---------------------------------------------------------------------------

    We have addressed many of these comments and concerns through our 
modification of the definition of graphic communications, which as 
adopted excludes communications originating live, in real time to a 
live audience, even if transmitted by graphic means. The materials 
presented as part of these road shows, such as slides or 
PowerPoint[supreg] presentations will similarly not be graphic 
communications unless they are separately transmitted as graphic 
communications. As a result, live communications, such as live road 
shows transmitted electronically (whether to an overflow room or 
another city) are not graphic communications and thus not free writing 
prospectuses. They will be treated as oral communications and will be 
subject to liability under Securities Act Section 12(a)(2) and the 
anti-fraud provisions.
    We also have revised the filing conditions applicable to electronic 
road shows in response to certain suggestions of commenters. Commenters 
generally supported the definition of ``bona fide electronic road 
show,'' \305\ although two commenters suggested limiting the 
requirement for a bona fide electronic road show only to initial public 
offerings \306\ and another suggested limiting it to equity but not 
debt offerings.\307\
---------------------------------------------------------------------------

    \305\ See, e.g., letters from ABA; Davis Polk; and WR Hambrecht.
    \306\ See, e.g., letters from Alston and NetRoadshow.
    \307\ See letter from Bloomberg.
---------------------------------------------------------------------------

    Within the category of road shows that are graphic under our rules 
as adopted, we have retained the concept of bona fide electronic road 
show only for initial public offerings of common equity or convertible 
equity securities. We have excluded the concept for all other 
registered securities offerings. We believe that it is appropriate to 
limit the filing condition to require a bona fide electronic road show 
to initial public offerings of common equity or convertible equity 
securities, due to the greater potential for involvement and interest 
of the retail investor in these types of offerings and securities of 
the issuer. We believe this change addresses commenters' concerns that 
an unrestricted bona fide electronic road show should not be required 
in what are essentially registered institutional offerings. Finally, we 
believe the note added to Rule 433(d)(8) as adopted will clarify the 
characterization and treatment of materials provided or transmitted as 
part of or simultaneously with road shows, oral or written.
    Some commenters also did not support requiring the filing of any 
issuer information used at any road show,\308\ while two commenters 
thought that all electronic road shows should be filed and available to 
anyone.\309\
---------------------------------------------------------------------------

    \308\ See, e.g., letters from ABA; Alston; Lisa Baudot; 
Citigroup; Cleary; Morgan Stanley; S&C SIA; David Thickens; and WR 
Hambrecht.
    \309\ See, e.g., letter from Harrisdirect and Renaissance 
Capital. In addition, many commenters thought that more information 
should be made available to retail investors, particularly in 
connection with initial public offerings. See, e.g., letters from 
Trevor Boswell; Lyle Fell, Sr.; Eileen Fuls; Corey Gorman; Ronald 
Ricketts, Jr.; and Justin Swearingen.
---------------------------------------------------------------------------

    We believe that our treatment of road shows, including electronic 
road shows, strikes the appropriate balance between the need to market 
an issuer's securities to institutional investors and the desires of 
retail and other investors to have access to issuer information, such 
as management presentations, that are normally available only at road 
shows that often have not been open to retail investors generally. We 
also believe that the Rule as adopted addresses some of the concerns 
that important information about an issuer or an offering can be 
communicated at electronic (as well as live) road shows, rather than in 
the statutory prospectus. In this regard, as we noted in the Proposing 
Release, the Report and Recommendations of the NASD/NYSE IPO Advisory 
Committee recommended that issuers be required to make a version of 
their IPO road show available electronically to unrestricted 
audiences.\310\ While we are not requiring that road shows be made 
available to unrestricted audiences, issuers and underwriters are free 
to make road shows available to all investors and we believe that our 
new rules will encourage issuers to do so where retail interest 
justifies such unrestricted availability.
---------------------------------------------------------------------------

    \310\ Report and Recommendations of a Committee Convened by the 
New York Stock Exchange, Inc. and NASD at the Request of the U.S. 
Securities and Exchange Commission, available at www.nasdr.com/pdf-text/iporeport.pdf (May 29, 2003). Consistent with the Committee's 
suggestion, different versions of electronic road shows for initial 
public offerings of common equity or convertible equity securities 
are permitted for different audiences under the filing exemption, so 
long as at least one version of a bona fide electronic road show, 
where applicable, is available to all potential investors.
---------------------------------------------------------------------------

(E) Treatment of Communications on Web Sites and Other Electronics 
Issues
(1) General
    The communications rules we are adopting will enable issuers and 
market participants to take significantly greater advantage of the 
Internet and other electronic media to communicate and deliver 
information to investors. We have addressed previously the 
circumstances under which an issuer

[[Page 44756]]

retains responsibility for information included on its web site; \311\ 
however, the rules we are adopting today expand possibilities in this 
regard due to the ability to communicate outside the statutory 
prospectus, including posting information on web sites that will be 
free writing prospectuses.
---------------------------------------------------------------------------

    \311\ In our 2000 Electronics Release, we noted that the federal 
securities laws apply equally to information contained on an 
issuer's web site as they do to other communications made by or 
attributed to the issuer. Web site content differs from traditional 
methods of distribution, however, in several important aspects. 
First, information that is placed on a web site can be continuously 
accessed as long as the information remains posted. Second, issuers 
are able to hyperlink to other documents, information, and web 
sites, thereby allowing instant access to such documents, 
information, and web sites. See 2000 Electronics Release, note 96, 
at II.B.
---------------------------------------------------------------------------

    We are adopting Rule 433(e) as proposed to make clear that an offer 
of an issuer's securities that is contained on an issuer's web site or 
that is contained on a third party web site hyperlinked from the 
issuer's web site is considered a written offer of such securities made 
by the issuer and, unless otherwise exempt, will be a free writing 
prospectus of the issuer. Accordingly, the requirements of Rule 433 
will apply to these free writing prospectuses.\312\
---------------------------------------------------------------------------

    \312\ In this regard, if an issuer or other offering participant 
includes a hyperlink within a written communication offering the 
issuer's securities, such as an electronic free writing prospectus, 
to another web site or to other information, the hyperlinked 
information will be considered part of that written communication. 
For example, while a research report published or distributed by a 
broker or dealer around the time of an offering may not be 
considered an offer by the broker or dealer under Rule 139, an 
issuer hyperlinking to that research report will not be able to rely 
on Rule 139. The research report could, therefore, be a free writing 
prospectus of the issuer. See the 2000 Electronics Release, note 96, 
at II.B.2.
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(2) Historical Information on an Issuer Web Site
    As we discussed in the Proposing Release, we recognize the 
importance of an issuer's web site as a means to communicate with the 
public, not just with potential investors in an offering, about its 
business. In this regard, commenters on our 2000 Electronics Release 
expressed concerns regarding the possibility that historical issuer 
information on an issuer's web site that is accessed at a later time 
would be considered ``republished'' at that later date, with attendant 
securities law liability.\313\
---------------------------------------------------------------------------

    \313\ See, e.g., comment letters in File No. S7-11-00 from the 
American Corporate Counsel Association (``ACCA''); The Council of 
Infrastructure Financing Authorities; and the Florida Division of 
Bond Finance.
---------------------------------------------------------------------------

    We believe that the availability of historical issuer information 
provides investors with more readily accessible information about the 
issuer. We also believe that issuers in registration should be able to 
maintain historical information on their web site in a manner by which 
that information will remain accessible to the public but will not be 
considered to be reissued or republished for purposes of the Securities 
Act.
    Historical information that is not an offer under the Securities 
Act, either because its use and content are such that it does not fall 
within the Securities Act definition of that term or, for example, 
because it falls within a safe harbor (such as those we are adopting 
today), will not become an offer if accessed at a later time, unless it 
is updated or used or referred to (by hyperlink or otherwise) in 
connection with the offering.\314\ We believe it is appropriate, 
however, to provide additional certainty regarding the treatment of 
historical information on web sites as ``offers'' under the Securities 
Act. Accordingly, Rule 433, as adopted, includes an exception to its 
general standard. This exception, contained in Rule 433(e)(2), provides 
that historical information will not be considered a current offer of 
the issuer's securities and, therefore, will not be a free writing 
prospectus, if that historical information is:
---------------------------------------------------------------------------

    \314\ See discussion in Section III.D.1 above under ``Permitted 
Continuation of Ongoing Communications During an Offering'' 
regarding Rules 168 and 169.
---------------------------------------------------------------------------

     Separately identified as such; and
     Located in a separate section of the issuer's web site 
containing historical information.
    The use of that historical information will become a current offer 
if it is:
     Incorporated by reference into or otherwise included in a 
prospectus of the issuer for the offering; or
     Otherwise used or referred to in connection with the 
offering.
    While Rule 433(e)(2) addresses particular situations in which 
information retained on a web site will not be considered a free 
writing prospectus, other information located on or hyperlinked to a 
web site might similarly not be considered a current offer of the 
issuer's securities and, therefore, not a free writing prospectus, 
where it can be demonstrated that the information was published 
previously.\315\ For example, certain information that, while not 
contained in a separate section of an issuer's web site, is dated or 
otherwise identified as historical information and is not referred to 
in connection with the offering activities may not be a current offer, 
depending on the particular facts and circumstances.
---------------------------------------------------------------------------

    \315\ See also the 2000 Electronics Release regarding retention 
of information on a web site during an offering. The 2000 
Electronics Release contains a list of information that we believed 
could be retained on a web site without the information being 
considered an offer and we again concur that such information will 
not raise a concern. See the 2000 Electronics Release, note 96, at 
part II.B.2. Although such information may not be considered an 
offer and therefore not subject to liability under Section 12(a)(2), 
it may still be subject to the anti-fraud provisions of the federal 
securities laws.
---------------------------------------------------------------------------

(3) Comments on Treatment of Communications on Web Sites and Other 
Electronics Issues
    Commenters supported the provisions of proposed Rule 433 clarifying 
the treatment of information contained on or hyperlinked to web sites 
of issuers and offering participants.\316\ Some commenters requested 
that the Commission provide greater explanation of what might 
constitute ``historical'' information, including whether and how 
information is archived.\317\ Commenters also desired further 
clarification of the treatment under the free writing prospectus rules 
of information on an issuer's web site hyperlinked from a third party's 
web site.\318\
---------------------------------------------------------------------------

    \316\ See, e.g., letters from ABA; Davis Polk; and S&C.
    \317\ See, e.g., letters from Davis Polk; Merrill Lynch; and 
S&C.
    \318\ See, e.g., letters from ABA and S&C.
---------------------------------------------------------------------------

    Rule 433(e)(2) addresses particular situations in which information 
on an issuer's web site will not be considered a current offer or a 
free writing prospectus. Whether or not other information is historical 
information of the issuer will depend on the facts and circumstances. 
Further, we have not provided additional detail regarding the nature of 
``archiving'' information because we believe that the provision in Rule 
433(e)(2) regarding separately located, identified historical 
information provides issuers with the necessary flexibility in 
operating their web sites within the federal securities laws. Finally, 
information that is an offer and is contained on the web site of an 
offering participant or contained on the web site of another person 
hyperlinked from the web site of an offering participant could be a 
free writing prospectus of that offering participant.
(F) Media Publications or Broadcasts
(1) Overview
    As we discussed in the Proposing Release, we believe it is 
important to identify the circumstances under which information 
released or disseminated to the media by an issuer or offering

[[Page 44757]]

participant in connection with a registered offering will be considered 
the use of a free writing prospectus under the new rules. We recognize 
that the financial news media are a valuable source of information 
about issuers to the public at large. Issuers and offering participants 
use the media to disseminate important information about themselves, 
such as through the use of press releases and interviews. The media 
plays an integral role, therefore, in providing information about 
issuers to the market.
    We want to encourage the role of the media as an important 
communicator of information and some media publications regarding an 
offering are not categorized as offers, under the gun-jumping 
provisions, by issuers or other offering participants. However, we do 
not want issuers and offering participants to avoid responsibility for 
their offering or marketing efforts by using the media. We, therefore, 
believe that it is appropriate to address in our new rules offers that 
take place using the media as a communication vehicle. Under the rules 
we are adopting today, where an issuer or any offering participant 
provides information about the issuer or the offering that constitutes 
an offer, whether orally or in writing, to a member of the media and 
where the media publication of that information is an offer by the 
issuer or other offering participant, we will consider the publication 
to be a free writing prospectus of the issuer or offering participant 
in question.
(2) Application of Rule 164 and Rule 433 to Media Publications
    As we proposed, under the rules we are adopting today, the 
treatment of a media publication that constitutes an offer and 
therefore a free writing prospectus of the issuer or other offering 
participant will depend on whether the issuer or other offering 
participant prepares the publication or television or radio broadcast 
or pays for or provides other consideration for the publication or 
broadcast, or whether unaffiliated media prepares and publishes or 
broadcasts the communication for no consideration or payment from an 
issuer or offering participant.
(a) Prospectus Delivery or Availability
(i) Where Media Publications Are Prepared or Consideration Paid by 
Issuer or Offering Participant
    If an issuer or offering participant prepares, pays for, or gives 
consideration for the preparation, publication or dissemination of or 
uses or refers to a published article, television or radio broadcast, 
or advertisement, the issuer or other offering participant will have to 
satisfy the conditions to the use of any other free writing prospectus 
of that offering participant at the time of the publication or 
broadcast. For example, in the case of a non-reporting issuer or 
reporting unseasoned issuer a statutory prospectus will have to precede 
or accompany the communication. As a consequence of this requirement, 
in offerings by non-reporting and unseasoned issuers, issuers and 
offering participants will not be able to prepare or pay for published 
or broadcast written advertisements, ``infomercials,'' or broadcast 
spots or similar written communications about the issuer, its 
securities, or the offering that includes information beyond that 
permitted by Rule 134. Well-known seasoned and other seasoned issuers 
and offering participants will have to comply with the other applicable 
conditions for the free writing prospectus. For seasoned issuers that 
are not well-known seasoned issuers and offering participants, a 
registration statement including a statutory prospectus (which can be a 
base prospectus) will have to be on file with us. These conditions may 
also include filing with us not later than the date of first use.
(ii) Unaffiliated Media Publications
    Where, however, the free writing prospectus is prepared and 
published or broadcast by persons in the media business that are 
unaffiliated with the issuer and another offering participant,\319\ and 
the preparation, publication, or broadcast is not paid for by the 
issuer or other offering participant, our rules include certain 
accommodations. In these cases, an issuer or offering participant would 
not have to have a statutory prospectus precede or accompany the media 
communication, although a filed registration statement including a 
statutory prospectus would be necessary, except in the case of a well-
known seasoned issuer.\320\ Therefore, an interview or other media 
publication or television or radio broadcast where an issuer or 
offering participant participates (but does not prepare or pay for the 
event or article) could be a free writing prospectus, but because of 
the media intervention, we conclude that its use should not be 
conditioned on prior or simultaneous delivery of the statutory 
prospectus. For example, an underwriter or issuer will be permitted to 
invite the press to a live road show or an electronic road show, but, 
in most cases, we will consider an article including information 
obtained at that road show to be a free writing prospectus of the 
issuer or underwriter and subject to the rules regarding free writing 
prospectuses.\321\ As another example, if a chief executive officer of 
a non-reporting issuer gives an interview to a financial news magazine 
without payment to the magazine for the article, the publication of the 
article after the filing of the registration statement will be a free 
writing prospectus of the issuer that will be subject to the filing 
conditions by the issuer after publication. In that case, there will be 
no requirement that a statutory prospectus precede or accompany the 
article at the time of the publication.
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    \319\ We have revised the provision from the proposals to 
address concerns of issuers that are media companies. See the 
discussion below under ``Issuers in the Media Business.''
    \320\ We believe that in a situation where a written 
communication is not prepared or paid for by an offering participant 
but rather by independent media, it still may be an offer and thus a 
free writing prospectus. There is less need in this situation, 
however, to have a statutory prospectus precede or accompany the 
free writing prospectus if a registration statement containing a 
statutory prospectus is on file with us and available. A media 
publication that is a free writing prospectus of a well-known 
seasoned issuer may also be published or broadcast prior to filing 
of the registration statement, as described above. In such a case, 
where another exemption is not available, the filing conditions 
would have to be satisfied by the issuer promptly after filing a 
registration statement covering the offering if one is filed.
    \321\ Assuming that the road show in question is an offer, an 
article published based on information obtained from a road show 
with a limited audience could be a free writing prospectus depending 
on its content. An article published based solely on information 
provided at a readily accessible electronic road show open to an 
unrestricted audience may not be an offer as discussed above where 
there is no other involvement by an issuer or offering participant.
---------------------------------------------------------------------------

(b) Filing
    We are adopting the filing condition applicable to free writing 
prospectuses that are media publications or television or radio 
broadcasts with some modifications from the proposals in response to 
comments. Rule 433(f) provides that the filing condition of Rule 433(d) 
will be satisfied where a free writing prospectus including information 
about the issuer, its securities, or the offering provided, authorized, 
or approved by or on behalf of the issuer or an offering participant, 
that is prepared and published or disseminated by persons in the media 
business who are not affiliated with or paid by the issuer or an 
offering participant (with certain exceptions for issuers in the media 
business), is filed by the issuer or offering participant involved 
within four business days after

[[Page 44758]]

the issuer or offering participant becomes aware of its publication or 
first broadcast.\322\ Persons in the media have no filing or other 
responsibilities under these provisions.\323\
---------------------------------------------------------------------------

    \322\ In media publications eligible for this accommodation, the 
inclusion of the necessary legend in the fling of the media 
publication will satisfy the legend condition of Rule 433(c)(2) with 
regard to that media publication. See Rule 433(f)(1)(ii). Further, 
the free writing prospectus will have to be filed only once, 
regardless of the number of publications in which the information is 
included. In addition, the publication will only have to be filed 
if, as discussed above, it is an offer.
    \323\ As we note above, press releases that are offers sent out 
by issuers are free writing prospectuses of the issuer at the time 
of the issuer distribution.
---------------------------------------------------------------------------

    We have made certain modifications to the filing conditions from 
the proposals. First, Rule 433 permits issuers and offering 
participants to satisfy the filing condition by filing:
     The media publication;
     All of the information provided to the media in lieu of 
the publication; or
     A transcript of the interview or similar materials that 
the issuer or other offering participant provided to the media, 
provided that all the information provided is filed.
    We also have provided that an issuer or other offering participant 
does not have to file the media publication if the substance of the 
written communication has been previously filed with us. Finally, the 
issuer or offering participant may file, together with or after the 
media publication is filed, information that the issuer reasonably 
believes is necessary or appropriate to correct information included in 
the media publication.\324\ We believe that these additional provisions 
will give issuers and offering participants the ability to file the 
publications on a timely basis, to file the underlying materials in 
lieu of the publication, and to file correcting materials after 
publication, television or radio broadcast, or other dissemination, if 
there is concern about the accuracy of the publication.\325\
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    \324\ Language that, while arguably in the notice of a 
correction, is in fact an impermissible disclaimer (such as a 
disclaimer regarding liability or reliance) or waiver is not 
permitted.
    \325\ The provisions of Rule 433 apply only to free writing 
prospectuses, which by definition must involve a written offer. 
Whether or not the media publication is an offer and therefore a 
free writing prospectus of the issuer or the other offering 
participant providing the information will depend as today on the 
facts and circumstances. In addition, because the exception for free 
writing prospectuses is non-exclusive and does not preclude reliance 
on other exclusions or exemptions from the gun-jumping provisions, 
compliance with the conditions of Rule 433 for the use of a free 
writing prospectus, including filing, does not preclude reliance on 
the argument that the communication is not an offer.
---------------------------------------------------------------------------

(c) Issuers in the Media Business
    In response to comments about the impact the condition that the 
media entity is unaffiliated with the issuer has on issuers that are in 
the media business,\326\ we have provided a limited exclusion that 
would permit issuers that are in the media business to be able to rely 
on the unaffiliated media condition if the media issuer or its 
affiliated media business:
---------------------------------------------------------------------------

    \326\ See, e.g., letters from Davis Polk and NYSBA.
---------------------------------------------------------------------------

     Is the publisher of a bona fide newspaper, magazine, or 
business or financial publication of general and regular circulation or 
bona fide broadcaster of news including business and financial news; 
\327\
---------------------------------------------------------------------------

    \327\ This accommodation is based on the media entity being a 
bona fide media entity. We are using essentially the same definition 
as included in Regulation Analyst Certification [17 CFR 242.500-
242.505] (``Regulation AC'') and the Investment Advisers Act of 1940 
[15 U.S.C. 80b-1 et seq.], except that we have not limited the 
publications to financial or business publications. See Rule 505(a) 
of Regulation AC (17 CFR 242.505(a)) and Section 202(a)(11) of the 
Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)(11)) In 
addition, we have conditioned the accommodation on adequate policies 
and procedures being in place that require the media company's 
content decisions to be independent of the issuer's offering 
activities.
---------------------------------------------------------------------------

     Has established policies and procedures for the 
independence of the content of the publication or broadcast from the 
offering activities of the issuer; and
     Publishes or broadcasts the communication in the ordinary 
course.
(3) Responses to Comments on Treatment of Media Publications
    Among the issues commenters raised, many focused on the treatment 
of media reports under the proposed rules regarding free writing 
prospectuses.\328\ They expressed concern as to whether the issuer or 
offering participants were obligated to monitor media releases and 
provide correcting information.\329\ These commenters were concerned 
about the ability to satisfy the conditions of the exemption if the 
media reports or publicity about the issuer or its securities occurred 
prior to the filing of a statutory prospectus. Commenters also 
suggested that the filing condition be limited to the specific 
publication that was granted an interview or, if statements from that 
interview were carried by different media outlets, the issuer or 
offering participant should be able to file a representative 
statement.\330\ Additionally, some commenters suggested that if the 
media publication was based on a press release or other specifically 
authorized communication, then only the press release or other 
authorized communication should satisfy the filing condition.\331\ One 
commenter suggested that media publications based on publicly 
disseminated information should be excluded from the definition of free 
writing prospectuses.\332\ Commenters also suggested that the filing 
occur after a senior officer has actual knowledge of the publication 
and that the filing deadline be extended to three business days.\333\
---------------------------------------------------------------------------

    \328\ See, e.g., letters from ABA; Alston; Cleary; Fried Frank; 
and NYSBA.
    \329\ See, e.g., letters from ABA; Cleary; Fried Frank; NYSBA; 
and Reuters.
    \330\ See, e.g., letters from ABA; NYSBA; and Reuters.
    \331\ See, e.g., letters from Alston and NYSBA.
    \332\ See letter from Davis Polk.
    \333\ See, e.g., letters from ABA and Reuters.
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    We believe that the modifications we have made to the filing 
conditions and other provisions of Rule 433 should address most of the 
commenters' concerns regarding unaffiliated media publications. We 
would observe first that, as discussed above, not every media 
publication about an offering is an offer or a free writing prospectus 
of the issuer or other offering participant. In particular, we have 
administered the gun-jumping provisions so that where there is no other 
involvement of an issuer or other offering participant, media 
publications based on information filed with us or available on an 
unrestricted basis are not offers of the issuer or other offering 
participant. This should substantially eliminate the need to monitor 
media publications unless offering participants are directly 
communicating offering information or otherwise involved with the media 
in connection with the offering. Further, the Rule only applies to 
written offers prepared, published, or disseminated by the media where 
an issuer or offering participant provides, authorizes, or approves the 
information. In addition, we have made the following modifications:
     Extended the filing due date to four business days after 
the issuer or other offering participant becomes aware of the 
publication or first broadcast;
     Permitted the filing of information reasonably believed 
necessary or appropriate to correct information included in the 
communication;
     In lieu of filing the article, permitted the filing of the 
transcript of the entire interview or other materials that formed the 
basis for the article; and
     Provided that where the substance of the information 
provided by or on behalf of the issuer or other offering participants 
contained in the

[[Page 44759]]

publication is already filed with us no filing is required.

We also have made accommodations so that issuers in the bona fide media 
business will be able to rely on these provisions.
    As in the case of the safe harbors for factual business 
information, some commenters also requested that we revise the 
definition of ``by or on behalf of'' an offering participant to include 
only those communications that were made by specific authorized persons 
and to provide that the issuer or other offering participant is not 
liable for unauthorized communications.\334\ For the reasons noted 
above, we are not modifying the definition of ``by or on behalf of'' to 
limit it to specified persons.
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    \334\ See, e.g., letters from ABA and Alston.
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(G) Liability Issues Affecting Free Writing Prospectuses
(1) General
    Even when filed, a free writing prospectus will not be part of a 
registration statement subject to liability under Securities Act 
Section 11, unless the issuer elects to file it as a part of the 
registration statement. Regardless of whether a free writing prospectus 
is filed, any seller offering or selling securities by means of the 
free writing prospectus will be subject to disclosure liability under 
Securities Act Section 12(a)(2). A free writing prospectus also can, of 
course, be the basis for liability under the anti-fraud provisions of 
the federal securities laws.
(2) Filed Free Writing Prospectus Not Part of Registration Statement
    A free writing prospectus used after a registration statement is 
filed complying with Rule 433 will be governed by the provisions of 
Securities Act Section 10(b), which provides that a prospectus 
permitted under that section is filed as part of the registration 
statement, but is not subject to Section 11 liability. We are adopting 
as proposed the modification to the Section 10(b) filing requirement to 
provide that a free writing prospectus filed pursuant to Rule 433 must 
identify the registration statement to which it relates, but Rule 433 
provides that it will not have to be filed as part of the registration 
statement. We believe that the modified filing condition will enhance 
investor protection because it should facilitate filing of the free 
writing prospectus on a timely basis and more readily identify the 
filed information as a free writing prospectus.\335\
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    \335\ A free writing prospectus filed pursuant to Rule 433 will 
be filed as a separate filing similar to the way in which Rule 425 
filings are made. A free writing prospectus will not have to be 
filed under Exchange Act Form 8-K. Issuers, of course, may file a 
free writing prospectus on Form 8-K if they wish to have the 
information incorporated by reference into the registration 
statement. The free writing prospectus also can be filed as part of 
the registration statement or, where permitted, included in an 
Exchange Act report incorporated by reference into the registration 
statement. In such case, the free writing prospectus would be 
subject to Securities Act Section 11 liability. Once a communication 
or other document is made part of or incorporated by reference into 
a registration statement, Section 11 applies to it as part of the 
registration statement, whether or not it is an offer.
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(3) Cross-Liability Issues
    As we discussed in the Proposing Release, we provided that the 
filing condition applied only to an issuer free writing prospectus and 
issuer information or to information in a free writing prospectus 
broadly disseminated, to address the concerns that commenters on our 
1998 proposals had about cross liability under Securities Act Section 
12(a)(2) for free writing materials of other offering 
participants.\336\ As we discuss above, we are adopting the filing 
condition substantially as proposed so that it does not extend to a 
free writing prospectus prepared by an underwriter, even one including 
information prepared on the basis of or derived from issuer information 
that does not include issuer information, unless the free writing 
prospectus falls into the ``broad dissemination'' category. Free 
writing prospectuses sent directly to customers of an offering 
participant, without regard to number, are not broadly disseminated for 
purposes of the Rule.
---------------------------------------------------------------------------

    \336\ See, e.g., comment letters in File No. S7-30-98 from ABA; 
Ford Motor Credit Company; ICI; Merrill Lynch; and S&C.
---------------------------------------------------------------------------

    Although we attempted in the proposals to address the cross-
liability concerns by restricting the filing obligations only to 
limited situations, commenters on our proposals continued to express 
concern about cross liability for another participant's free writing 
prospectus, whether or not the participant used that free writing 
prospectus. Commenters requested clarification that use of a free 
writing prospectus by one offering participant will not subject other 
offering participants who do not use the free writing prospectus to 
liability under Securities Act Section 12(a)(2).\337\ Some commenters 
recommended that the party should be considered to have offered and 
sold ``by means of'' a free writing prospectus, and liability for the 
free writing prospectus should arise, only if a party has used, 
prepared, or referred to the free writing prospectus.\338\
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    \337\ See, e.g., letters from ABA; Citigroup; Cleary; CSFB; 
Davis Polk; Deloitte; Goldman Sachs; ICI; Morgan Stanley; SIA; and 
TBMA.
    \338\ See, e.g., letters from ABA and Goldman Sachs.
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    In response to commenters' continuing concerns about cross 
liability for free writing prospectuses used by an issuer and other 
offering participants, we have included a new provision in Rule 159A 
that will clarify when an offering participant, other than the issuer, 
is considered to offer and sell securities ``by means of'' a free 
writing prospectus. Under the new provisions of Rule 159A, an offering 
participant other than the issuer will not be considered to offer or 
sell securities to a person ``by means of'' a free writing prospectus 
unless:
     The offering participant used or referred to the free 
writing prospectus in offering or selling the securities to that 
person;
     The offering participant offered or sold the securities to 
that person and participated in planning for the use of that free 
writing prospectus by other offering participants and such free writing 
prospectus was used or referred to in offering or selling securities to 
that person by one or more of such other offering participants; \339\ 
or
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    \339\ We do not intend that the typical inter-syndicate 
arrangement providing for sales out of the syndicate ``pot'' falls 
within this provision, unless the arrangement contemplates use of 
free writing prospectuses in a manner described in the provision.
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     Under the conditions for use of the free writing 
prospectus in Rule 433, the offering participant is required to file 
the free writing prospectus with us pursuant to Rule 433.\340\
---------------------------------------------------------------------------

    \340\ The Rule does not address when an issuer offers or sells 
``by means of'' a free writing prospectus. The Rule does address 
when an issuer is considered to be a seller for purposes of 
Securities Act Section 12(a)(2). See discussion in Section IV.B 
below under ``Issuer as Seller.''
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    The Rule, as revised, also provides that a person will not be 
considered to offer or sell securities by means of a free writing 
prospectus solely because another person has used or referred to the 
free writing prospectus or filed the free writing prospectus with us. 
As a result of these provisions, we believe that offering participants 
will be able to determine when they will be considered to have offered 
or sold securities by means of any particular free writing prospectus.
c. Interaction of New Communications Rules With Regulation FD
i. Amendments to Regulation FD
    As a consequence of our new rules to liberalize communications 
during the offering process and encourage continuing ongoing regular

[[Page 44760]]

communications by reporting issuers, we are revisiting the exclusions 
from Regulation FD for communications made during a registered offering 
of securities.\341\ The communications regime that we are adopting 
today contemplates that, in connection with an offering, certain 
material non-public issuer information can be made public through the 
prospectus filed as part of a registration statement or the issuer's 
filing of free writing prospectuses. Oral communications of an issuer 
made in connection with a registered offering after the registration 
statement is filed will continue not to be subject to any filing or 
public disclosure requirement. As we stated in the Proposing Release, 
we continue to believe that subjecting oral communications that occur 
in connection with a registered offering in a capital formation 
transaction to a public disclosure requirement could adversely affect 
the capital formation process.
---------------------------------------------------------------------------

    \341\ See 17 CFR 243.100(b)(2).
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    We are amending Regulation FD substantially as proposed to specify 
the circumstances, both in terms of the type of offering and the means 
of communication, in which issuer communications will be excluded from 
the operation of that Regulation in connection with a registered 
securities offering.
    First, as amended, Regulation FD will not apply to disclosures made 
in the following communications in connection with a registered 
securities offering that is of the type excluded from the Regulation:
     A registration statement filed under the Securities Act, 
including a prospectus contained therein;
     A free writing prospectus used after filing of the 
registration statement for the offering or a communication falling 
within the exception to the definition of prospectus contained in 
clause (a) of Securities Act Section 2(a)(10);
     Any other Section 10(b) prospectus;
     A notice permitted by Securities Act Rule 135;
     A communication permitted by Securities Act Rule 134; or
     An oral communication made in connection with the 
registered securities offering after filing of the registration 
statement for the offering under the Securities Act.
    Second, prior to our actions today, Regulation FD applied to 
offerings of the types described in Rule 415(a)(1)(i) through 
(vi).\342\ Rule 415(a)(1)(i) provides for offering by selling security 
holders. We are amending Regulation FD to clarify that, as to offerings 
of the type described in Rule 415(a)(1)(i) where the registered 
offering also includes a registered offering, whether or not 
underwritten, for capital formation purposes for the account of the 
issuer, Regulation FD does not apply, unless the issuer's offering is 
included for the purpose of evading Regulation FD.\343\ The amendments 
do not otherwise change the types of registered offerings that are 
excluded from, or subject to, the operation of the Regulation.
---------------------------------------------------------------------------

    \342\ The types of offerings under these provisions of Rule 415 
are delayed or continuous offerings that are (1) securities to be 
offered or sold solely by or on behalf of selling security holders 
other than the issuer or its subsidiaries; (2) securities offered 
pursuant to dividend or interest reinvestment plans or an employee 
benefit plan of the issuer; (3) securities to be issued upon the 
exercise of outstanding options, warrants, or rights; (4) securities 
to be issued upon conversion of other outstanding securities; (5) 
securities pledged as collateral; and (6) securities registered on 
Form F-6.
    \343\ This provision will cover the situation, for example, 
where a de minimis issuer participation is included in what is 
otherwise entirely a selling security holder offering for the 
purpose of excluding communications in the offering from the 
application of Regulation FD.
---------------------------------------------------------------------------

    In view of our new rules to expand permissible communications, we 
believe it is appropriate to clarify that the communications excluded 
from the operation of Regulation FD are, in fact, those communications 
that are directly related to a registered securities offering. 
Communications not contained in our enumerated list of exceptions from 
Regulation FD--for example, the publication of regularly released 
factual business information or regularly released forward-looking 
information or pre-filing communications--are subject to Regulation FD.
ii. Comments on Amendments to Regulation FD
    Most commenters on the proposed changes to Regulation FD supported 
the inclusion of the specific enumeration of communications in 
connection with offerings that are not subject to the provisions of 
Regulation FD.\344\ Commenters expressed concern that the proposed 
changes limited the Regulation FD exclusion only to registered 
offerings involving capital formation transactions.\345\ Some 
commenters believed that the Regulation FD exclusion should cover all 
secondary offerings (those on behalf of selling security holders), 
regardless of whether conducted as part of an issuer capital raising 
transaction.\346\
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    \344\ See, e.g., letters from Cleary; Fried Frank; and NYCBA.
    \345\ See, e.g., letters from ABA; Merrill Lynch; and TBMA.
    \346\ See, e.g., letters from ABA and NYCBA.
---------------------------------------------------------------------------

    We have clarified the modifications to Regulation FD from the 
proposals. We have not changed the types of offerings in which 
disclosures are subject to Regulation FD. The only change we are making 
from the current language is to provide that disclosures made in 
connection with registered offerings by selling security holders of the 
type described in Rule 415(a)(1)(i) are excluded from the application 
of Regulation FD if the offering also includes a registered primary 
offering that is a capital formation transaction for the account of the 
issuer.
    The change to Regulation FD does not, as some commenters may have 
misinterpreted, mandate that all registered securities offerings be for 
capital formation purposes as a condition of exclusion from the 
operation of Regulation FD. The exclusions prior to and after the 
change have the general effect of excluding capital formation 
transactions, but there was, and after the change will be, no separate 
``capital formation'' requirement for the exclusions. Rather, the 
change will provide that secondary offerings will be excluded from 
Regulation FD if the offering also includes a registered capital 
formation transaction for the account of the issuer.
4. Use of Research Reports
a. Current Regulatory Treatment of Research Reports
    The veracity and reliability of research reports, particularly 
those issued by full service broker-dealers, have received significant 
attention in recent years. The Sarbanes-Oxley Act,\347\ Regulation 
AC,\348\ the self-regulatory organization rules we approved,\349\ and 
the global research analyst settlement \350\ have addressed many of the 
abuses identified with analyst research and have required structural 
reforms and increased

[[Page 44761]]

disclosures.\351\ As a direct result of these initiatives and actions, 
we expect that analyst research reports used by market participants 
will better disclose conflicts of interest relating to research of 
which investors should be aware.
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    \347\ See Section 501 of the Sarbanes-Oxley Act [15 U.S.C. 78o-
6(a)(2)].
    \348\ Regulation AC requires, among other things, that brokers, 
dealers and certain persons associated with a broker or dealer 
include in research reports certifications by the research analyst 
that the views expressed in the report accurately reflect his or her 
personal views, and disclose whether or not the analyst received 
compensation or other payments in connection with his or her 
specific recommendation or views. See Regulation AC, note 327.
    \349\ See Order Approving Proposed Rule Changes Relating to 
Research Analyst Conflicts of Interest, Release No. 34-45908 (May 
10, 2002) [67 FR 34968]; Order Approving Proposed Rule Changes 
Relating to Research Analyst Conflicts of Interest, Release No. 34-
48252 (Aug. 4, 2003)[68 FR 34968].
    \350\ See Lit. Rel. No. 18438 (Oct. 31, 2003); Press Release 
2004-120 (Aug. 26, 2004).
    \351\ The settlement, which involved twelve brokerage firms and 
two individuals, requires the settling firms to, among other things, 
adopt changes designed to ensure that there is a structural 
separation between the firm's analysts and investment bankers. The 
firms are required to include enhanced disclosures, including 
disclosure of potential conflicts of interests in research reports 
and public disclosure of their analysts' quarterly performance. The 
firms also are required to pay for independent research for a five-
year period and to make this research available to the firm's 
customers.
    The National Association of Securities Dealers and the New York 
Stock Exchange adopted rules, among other things, requiring 
separating analyst compensation from investment banking influence, 
prohibiting analysts from issuing research reports around the 
expiration of a lock-up agreement (sometimes called ``booster shot'' 
research reports), imposing quiet periods around the issuance of 
research reports for offering participants, prohibiting analysts 
from participating in ``pitches'' or other communications for the 
purpose of soliciting investment banking business, restricting 
prepublication review of research reports by non-research personnel, 
prohibiting retaliation by investment banking against analysts whose 
reports or public appearances may adversely affect an investment 
banking relationship, requiring disclosure of any compensation 
received from an issuer as well as client relationship with an 
issuer, and imposing additional registration, qualification, and 
continuing education requirements on research analysts.
---------------------------------------------------------------------------

    The value of research reports in continuing to provide the market 
and investors with information about reporting issuers cannot be 
disputed. Research analysts study publicly traded issuers and provide 
information about the securities of those issuers, often through the 
issuance of research reports.
    We believe it is appropriate to limit the restrictions on research 
under the gun-jumping provisions of the Securities Act to those we 
believe are appropriate to avoid offering abuses. Given the ongoing 
flow of information into the market, particularly with respect to 
reporting issuers and the enhancements to the environment for research 
imposed by recent statutory, regulatory, and enforcement developments, 
we believe it is appropriate to make measured revisions to the research 
rules that are consistent with investor protection but that will permit 
dissemination of research around the time of an offering under a 
broader range of circumstances.
b. Amendments to Exemptions for Research
    Rules 137, 138, and 139 under the Securities Act describe 
circumstances in which a broker or dealer may publish research 
constituting an offer around the time of a registered offering without 
violating the Section 5 prohibitions on pre-filing offers and 
impermissible prospectuses. We are adopting measured amendments that 
will make incremental modifications to these rules.\352\ As adopted, 
the rules will, for the first time, contain a definition of research 
report. The rules also expand the circumstances in which offering 
participants and persons who are not offering participants will have 
safe harbor exemptions for dissemination of research reports during a 
registered offering.\353\
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    \352\ The safe harbor provisions of Securities Act Rules 137, 
138, and 139 will continue to be available only to brokers and 
dealers. Issuers cannot use the safe harbor provisions for research 
reports prepared or distributed by brokers or dealers in reliance on 
the rules to directly or indirectly communicate with potential 
investors about the issuer's offering. For example, a hyperlink on 
an issuer's web site during its registered offering to a research 
report could raise concerns in this regard. Issuers using research 
reports in this manner could be deemed to have adopted the contents 
of such reports and, under our rules, the reports could be 
considered free writing prospectuses.
    \353\ The amendments to the rules will continue to permit the 
distribution of independent research within the safe harbor 
provisions. Our research rules permit the distribution of 
independent research provided the distribution satisfies the 
conditions of the rules. For brokers and dealers subject to the 
global research analyst settlement, their ability to continue to 
distribute independent research during a registered securities 
offering depends on concluding that the independent research 
distribution by the broker or dealer satisfies the conditions of the 
research rule at the time of the distribution or is otherwise not an 
offer. If a broker or dealer is not able to rely on any of the 
research safe harbors for their own research, they similarly cannot 
rely on the safe harbor to distribute independent research. For 
example, independent research that is prepared by an entity not 
participating in an offering but paid for by a broker or dealer 
participating in an offering will be distributed by an offering 
participant and thus will not satisfy the requirements of Securities 
Act Rule 137 and cannot be used in reliance on the safe harbor. Such 
research may continue to be distributed by the entity not 
participating in the offering that prepared it without involvement 
by an offering participant. A research report constituting an offer 
and not falling within a safe harbor will be considered a free 
writing prospectus. Our research rules also do not supersede the 
requirements of any applicable rule of a self-regulatory 
organization regarding the timing of the distribution of research 
reports. See, e.g., NYSE Rule 472(f)(1) through (4) and NASD Rule 
2711(f)(1) through (4).
---------------------------------------------------------------------------

    The amendments we are adopting today are designed to ensure that 
appropriate investor protections are maintained. In that regard, we 
have maintained our current approach with respect to liability for 
research, which includes general anti-fraud liability, used in reliance 
on these rules.\354\
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    \354\ Research reports published or distributed in reliance on 
Rules 138 and 139 are not offers for purposes of Securities Act 
Section 2(a)(10) and Section 5(c). Brokers or dealers publishing or 
distributing research in reliance on Rule 137 are not considered 
underwriters of the securities under Securities Act Section 
2(a)(11). Of course, the anti-fraud provisions of the federal 
securities laws continue to apply to such communications. See 
Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 
10b-5 thereunder.
---------------------------------------------------------------------------

i. Definition of Research Report
    Based on comments, we believe it is important to have a significant 
measure of consistency between Regulation AC and the research safe 
harbors contained in Rules 137, 138, and 139. We do not believe, 
however, that absolute consistency is appropriate in recognition of the 
differences in the purposes of the rules. Accordingly, we are adopting 
a definition of research report that builds on the definition of 
``research report'' in Regulation AC, while preserving the purposes of 
Rules 137, 138, and 139.
(A) Definition
    As adopted, ``research report'' is defined as a written 
communication, as defined in Securities Act Rule 405, that includes 
information, opinions, or recommendations with respect to securities of 
an issuer or an analysis of a security or an issuer, whether or not it 
provides information reasonably sufficient upon which to base an 
investment decision.\355\ This definition is intended to encompass all 
types of research reports, whether issuer-specific or industry research 
separately identifying the issuer.
---------------------------------------------------------------------------

    \355\ The definition of ``research report'' is included in each 
of Rules 137, 138, and 139.
---------------------------------------------------------------------------

    Unlike the proposals, the definition does not require that the 
research report contain sufficient information on which to base an 
investment decision. As with the current research rules, the definition 
is limited to research, including information, opinions, or 
recommendations, contained in written communications.\356\
---------------------------------------------------------------------------

    \356\ The twelve brokerage firms that were part of the global 
research analyst settlement agreed to disclose, on trade 
confirmations and on account statements, as well as on the firms' 
web sites, their research ratings, along with the research ratings 
of the independent research providers who cover the security. We do 
not believe that the continued publication of these ratings on trade 
confirmations and on account statements, as required under the 
global research analyst settlement, would raise concerns about 
whether the ratings were offers in that they would be provided in 
the ordinary course, and as to confirmations, after the sale of the 
securities. The continued inclusion of either the firm's own ratings 
or those of the independent research provider on the firms' web 
sites during an offering could be an offer of the issuer's 
securities unless the safe harbors in Rules 137, 138, or 139 are 
available to the firm at that time.
---------------------------------------------------------------------------

    Under the definition of ``research report'' we are adopting today, 
there could be some differences in the types of communications that 
will constitute a research report under the research safe harbors as 
compared to Regulation AC. In light of the different purposes of the 
rules, we believe the distinctions are appropriate and will not raise 
investor

[[Page 44762]]

protection concerns. For example, for purposes of Rule 139, it is 
possible that particular documents, such as industry reports, will be 
research reports under our new definition, even if they fall outside of 
the definition of ``research report'' under Regulation AC.
    The definition of research report we are adopting today retains the 
condition that the research be in a written communication. A 
publication element has been a condition of the research safe harbors 
since the rules were first contemplated and adopted. From the earliest 
Commission statements in the 1960's, the Commission did not want to 
discourage the ongoing publication of research reports by market 
professionals, provided they were provided within the scope of the 
restrictions of Securities Act Section 5.\357\ The research safe 
harbors have always been aimed at written reports due to the Section 5 
restrictions on written offers.
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    \357\ As the Commission stated in 1983, * * * research reports 
containing information, opinions or recommendations with respect to 
a proposed offering, under certain circumstances, may be considered 
offers to sell under Section 5(c), particularly when a broker-dealer 
is a participant in the distribution. In addition, research reports 
disseminated by participating broker-dealers in the waiting or post-
effective periods which do not meet Section 10 prospectus 
requirements or are not accompanied by a Section 10 prospectus may 
violate Section 5(b)(1).
    Research Reports, Release No. 33-6492 (Oct. 5, 1983)[48 FR 
46801]. See Publication of Information and Delivery of Prospectus by 
Broker Dealers Prior to or After the Filing of a Registration 
Statement Under the Securities Act of 1933, Release No. 33-5010 
(Oct. 7, 1969) [34 FR 18130]; Adoption of Rules Relating to 
Publication of Information and Delivery of Prospectus by Broker-
Dealers Prior to or After the Filing of a Registration Statement 
under the Securities Act of 1933, Release No. 33-5101 (Nov. 19, 
1970) [35 FR 18457]; Research Reports, Release No. 33-6550 (Sept. 
19, 1984) [49 FR 36719]; Amendments to Clarify Safe Harbors for 
Broker-Dealer Research Reports, Release No. 33-7120 (Dec. 13, 1994) 
[59 FR 31038]; and Adoption of Amendments to Clarify Safe Harbors 
for Broker-Dealer Research Reports, Release No. 33-7132 (Feb. 1, 
1995) [60 FR 6965]. See also the Wheat Report, note 21.
---------------------------------------------------------------------------

    The research safe harbors are not intended to protect oral 
communications that might be offers from the liability provisions of 
Securities Act Section 12(a)(2).\358\ Similarly, in our new definition, 
we are not expanding the scope of the research safe harbors to cover 
oral communications because we believe that the appropriate liability 
provisions should continue to apply to such oral communications. 
Whether oral communications relate to general research or are in 
connection with an offering may also involve distinctions that are too 
fine to be appropriate for the research exemptions. Whether a 
particular oral communication about an issuer or its securities by an 
offering participant is an offer will thus continue to depend on the 
facts and circumstances.
---------------------------------------------------------------------------

    \358\ In this regard, we note that the title of each safe harbor 
refers to ``certain publications.'' After a registration statement 
is filed, oral communications regarding a registered securities 
offering are not constrained by the gun-jumping provisions of the 
Securities Act.
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(B) Comments on Definition of Research Report
    While commenters supported the proposed amendments to the research 
safe harbors,\359\ they were concerned that the proposed definition of 
research report would narrow the types of research that would be 
eligible for the safe harbors.\360\ In particular, commenters requested 
that the research report definition not be the same as in Regulation AC 
requiring that the research report contain information sufficient upon 
which to make an investment decision.\361\ Rather, the commenters 
requested that, as today, the research safe harbors be available for 
information, opinions, and recommendations about an issuer or its 
securities.\362\ Some commenters also requested that the definition of 
research permit the use of oral, rather than just written, research in 
reliance on the safe harbors.\363\
---------------------------------------------------------------------------

    \359\ See, e.g., letters from ABA; Davis Polk; Fried Frank; 
NYSBA; Richard Hall; and S&C.
    \360\ See, e.g., letters from ABA; Citigroup; Cleary; Davis 
Polk; Merrill Lynch; NYSBA; Prudential Equity Group, LLC (``PEG''); 
S&C and SIA.
    \361\ See, e.g., letters from ABA; NYSBA; S&C and SIA.
    \362\ See, e.g., letters from ABA; Cleary; Merrill Lynch; PEG; 
and SIA.
    \363\ See, e.g., letters from ABA; S&C and SIA.
---------------------------------------------------------------------------

    As we discuss above, we have revised the proposed definition of 
research report for purposes of Rules 137, 138, and 139 to make clear 
that it continues to apply to information, opinions, or recommendations 
contained in written communications. We agree with commenters that for 
purposes of Rules 137, 138, and 139 a research report does not have to 
contain information sufficient to make an investment decision for the 
research safe harbors to be available and have revised the definition 
accordingly. We have not, however, expanded the scope of the research 
safe harbors to encompass oral communications.
ii. Rule 137
    Rule 137 provides that a broker or dealer that is not an offering 
participant in a registered offering but publishes or distributes 
research reports with respect to an issuer's securities will not be 
considered to be engaged in a distribution of the issuer's securities 
and would therefore not be an underwriter in the offering. We are 
expanding the exemption, as proposed, to apply to securities of any 
issuer, including non-reporting issuers, with exceptions for blank 
check companies, shell companies, and penny stock issuers. Rule 137 
will continue to be available only to brokers and dealers who:
     Are not participating in the registered offering of the 
issuer's securities;
     Have not received compensation from the issuer, its 
affiliates, or participants in the securities distribution, among 
others, in connection with the research report; and
     Publish or distribute the research report in the regular 
course of business.
    Commenters supported the proposed changes to Rule 137 but requested 
that the rule make clear that the prohibition on consideration from the 
issuer would apply only to consideration paid in connection with the 
publication or distribution of the research report.\364\ Other 
commenters suggested that the safe harbor be expanded to permit dealers 
to rely on the safe harbor for the publication and distribution of 
research reports after the effectiveness of the registration 
statement.\365\
---------------------------------------------------------------------------

    \364\ See, e.g., letters from Fried Frank; PEG; and S&C.
    \365\ See, e.g., letters from ABA; Merrill Lynch; and PEG.
---------------------------------------------------------------------------

    We are adopting as proposed, and as is in current Rule 137, the 
provision prohibiting compensation in connection with the publication 
or distribution of the research report. In response to commenters' 
concerns regarding compensation, however, we have clarified the 
compensation language in Rule 137 to provide that the prohibition on 
compensation applies to compensation for the particular research 
report. While the safe harbor covers research reports provided after 
effectiveness of the registration statement, it continues to be an 
exemption from the definition of underwriter.
iii. Rule 138
    Rule 138 permits a broker or dealer participating in a distribution 
of an issuer's common stock and similar securities to publish or 
distribute research that is confined to that issuer's fixed income 
securities, and vice versa, if it publishes or distributes that 
research in the regular course of its business. We believe it is 
appropriate to permit research on a broader group of reporting issuers 
under Rule 138 in

[[Page 44763]]

view of the regulatory reforms and the role of independent research. 
Further, we believe the current limitation on the type of issuers under 
this Rule is no longer necessary to protect investors.
(A) Amendments to Rule 138
    We are amending Rule 138 substantially as proposed to expand the 
categories of eligible issuers. As adopted, the Rule generally will 
cover research reports on all reporting issuers that are current in 
their periodic Exchange Act reports on Forms 10-K, 10-KSB, 10-Q, 10-
QSB, and 20-F at the time of reliance on the exemptions, rather than 
only issuers who are Form S-3 or Form F-3 eligible, as is currently the 
case. In addition, in response to commenters' suggestions, we are 
expanding the Rule as it applies to foreign private issuers to allow 
broker-dealers publishing or distributing research reports on non-
reporting foreign private issuers that either have had equity 
securities traded on a designated offshore market or have a $700 
million worldwide public float to rely on the Rule.\366\ Like the 
amendments regarding Rules 137 and 139 that we are adopting today, the 
Rule excludes research reports on issuers that have historically posed 
certain risks of abuse, including blank check companies, shell 
companies, and penny stock issuers.
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    \366\ Prior to today's amendments, Rule 138 required that a 
foreign private issuer's securities be traded on a designated 
offshore securities market for at least twelve months. We are 
amending the Rule to specify that this requirement relates to the 
issuer's equity securities. Current Rule 138 covers issuers that are 
Form S-2 or Form F-2 eligible as well. Because we are eliminating 
these Forms, as discussed below, we have revised Rule 138 to 
eliminate the reference to those forms.
---------------------------------------------------------------------------

    We also are adopting as proposed the condition to the Rule 138 
exemption that the broker or dealer must have previously published or 
distributed research reports on the types of securities that are the 
subject of the reports in the regular course of its business.\367\ As 
we stated in the Proposing Release, we believe that it is appropriate 
to include this condition because it is important that the broker or 
dealer have a history of publishing or distributing a particular type 
of research. This condition does not mean, however, that the broker or 
dealer must have a history of publishing research reports about the 
particular issuer or its securities. If a broker or dealer begins 
publishing research about a different type of security around the time 
of a public offering of an issuer's security and does not have a 
history of publishing research on those types of securities, we are 
concerned that such publication or distribution might be a way to 
provide information about the publicly offered securities in order to 
circumvent the provisions of Section 5 and the permissible free writing 
rules we are adopting today.
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    \367\ Prior to today's amendments, Rule 138 required that the 
broker or dealer publish or distribute research in the regular 
course of business, but did not contain a condition that the broker 
or dealer have published or distributed research reports on the same 
types of securities.
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(B) Comments on Rule 138 Amendments
    Commenters generally supported the expansion of the safe harbor to 
a broader class of issuers.\368\ Some commenters suggested that the 
safe harbor also be available to research reports on voluntary filers 
and Schedule B issuers and that it apply to all private offerings.\369\ 
A number of commenters requested a further change to the existing 
provisions of Rule 138 to eliminate the foreign private issuer 
eligibility condition regarding trading on a designated offshore 
securities market.\370\ Finally, some commenters requested 
clarification of the condition that the broker or dealer be publishing 
reports on the same types of securities to be able to rely on the safe 
harbor, while others recommended eliminating this condition.\371\
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    \368\ See, e.g., letters from ABA and S&C.
    \369\ See, e.g., letters from ABA; Cleary; IBA; Merrill Lynch; 
NYSBA; and SIA.
    \370\ See, e.g., letters from ABA; Citigroup; Goldman Sachs; and 
SIA.
    \371\ See, e.g., letters from ABA; NYSBA; and SIA.
---------------------------------------------------------------------------

    We have adopted the amendments to Rule 138 substantially as 
proposed. We do not believe it is appropriate at this time to further 
expand the categories of eligible issuers under the Rule, other than 
for certain non-reporting foreign private issuers that have a 
significant worldwide public float. We have clarified that the broker 
dealer does not have to be publishing or distributing research reports 
about a particular issuer or its securities to rely on the Rule, only 
that the research reports cover the same types of securities. We have 
not expanded the scope of the research safe harbor to cover all private 
offerings.
iv. Rule 139
    Rule 139 permits a broker or dealer participating in a distribution 
of securities by a seasoned issuer or by certain non-reporting foreign 
private issuers 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 for industry reports covering smaller 
seasoned issuers, if the broker or dealer complies with restrictions on 
the nature of the publication and the opinion or recommendation 
expressed in that publication.
(A) Issuer-Specific Reports
(1) Amendments Regarding Issuer-Specific Reports
    We are adopting the amendments to Rule 139 to allow reports about a 
specific issuer that, at the time of reliance on the Rule, is current 
in its Exchange Act periodic reports and:
     At the later of the time of filing its most recent 
registration statement on Form S-3 or Form F-3 or the time of filing of 
its most recent amendment to such registration statement for purposes 
of complying with Securities Act Section 10(a)(3), is eligible to 
register a primary offering of securities on Forms S-3 or F-3, based on 
the $75 million minimum public float eligibility provision of those 
forms; or
     At the time of reliance on the Rule, the issuer's 
registration statement covers an offering of the issuer's securities in 
reliance on General Instruction I.B.2 of Form S-3 or Form F-3.
    As with Rule 138, we are allowing reports on a broader category of 
non-reporting foreign private issuers also to be covered by the 
Rule.\372\ Research reports on penny stock issuers, blank check 
companies, and shell companies are excluded from Rule 139.
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    \372\ As in the changes to Rule 138, we are providing that a 
non-reporting foreign private issuer must either have its equity 
securities be traded on a designated offshore securities market for 
at least twelve months or have a $700 million worldwide public 
float.
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    In the amendments we are adopting today, we are retaining the 
requirement that the broker or dealer publish or distribute the 
research report in the regular course of its business. We are not 
retaining the requirement of publication with reasonable regularity. As 
we stated in the Proposing Release, we do not believe that the 
reasonable regularity requirement has added any particular degree of 
investor protection and has raised concerns as to when the condition is 
satisfied. We are, however, requiring that the broker or dealer must, 
at the time of reliance on the Rule, have distributed or published at 
least one research report about the issuer or its securities, or have 
distributed or published at least one such report following 
discontinuing coverage. This requirement, we believe, retains the most 
important element of the ``reasonable regularity'' requirement, namely 
that the report initiating (or re-

[[Page 44764]]

initiating) coverage of an issuer not benefit from an exemption under 
Rule 139.
    As we noted previously, we are not requiring any minimum time 
period for the broker or dealer to have distributed or published 
research reports, only that the particular broker or dealer have 
initiated or re-initiated coverage. In addition, the amendment as 
adopted does not require that the previously published or distributed 
research report cover the same securities that are the subject of the 
registered offering.
(2) Comments on Issuer-Specific Reports
    Commenters supported extending the safe harbor to a broader class 
of issuers and recommended further extension to all reporting issuers, 
investment companies, and business development companies.\373\ We have 
not extended the safe harbor to a broader class of issuers than we 
proposed, other than for certain non-reporting foreign private issuers 
with a significant public float. Commenters also requested 
clarification that the proposed changes would only require the 
publication or distribution of one prior research report in order to be 
able to rely on the safe harbor.\374\ As noted above, we have clarified 
the Rule in this regard to require only that coverage be initiated or 
re-initiated.
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    \373\ See, e.g., letters from ABA; Citigroup; Goldman Sachs; 
Morgan Stanley; NYSBA; S&C and SIA.
    \374\ See, e.g., letters from ABA; Citigroup; Cleary; CSFB; 
Merrill Lynch; Morgan Stanley; S&C and SIA.
---------------------------------------------------------------------------

(B) Industry-Related Reports
(1) Amendments Regarding Industry-Related Reports
    As adopted, industry reports under Rule 139 can cover issuers 
required to file reports pursuant to Exchange Act Section 13 or Section 
15(d) and issuers satisfying the conditions regarding non-reporting 
foreign private issuers. The safe harbor for industry reports is not 
available if the issuer is or during the last three years was or any of 
its predecessors was a blank check company, shell company (other than 
business combination related shell company), or penny stock issuer. As 
adopted, the amendments extend the safe harbor for industry reports to 
registered offerings of any reporting issuer.
    Today's amendments remove the prohibition on a broker or dealer 
making a more favorable recommendation than the one it made in the last 
publication. As in the proposals, we are not requiring that the 
research report include any prior recommendations regarding the issuer 
or its securities. We are adopting as proposed the requirement that the 
research reports contain similar types of information about the issuer 
or its securities as contained in prior reports.
    We believe that the recently adopted safeguards regarding analyst 
recommendations make it appropriate to remove the ``no more favorable'' 
recommendation conditions in current Rule 139. We believe the Rules, as 
amended, are consistent with our recent actions affecting research 
analysts and research reports and will result in enhanced opportunity 
to provide information to investors regarding issuers and their 
securities.
    In the instruction regarding projections, we are requiring that 
projections be provided for substantially all the issuers listed in the 
comprehensive list of securities contained in the report.
(2) Comments on Industry-Related Reports
    Commenters supported the safe harbor for industry-related reports 
for all reporting issuers and suggested expanding the safe harbor 
further to include all issuers, whether or not reporting, including 
voluntary filers.\375\ Commenters also supported the elimination of the 
previous publication condition in the safe harbor.\376\ Some commenters 
thought that the disqualification for research reports on blank check, 
shell companies, and penny stock issuers should remain at two years, 
not three, and that Rules 137 and 138 should have only a two-year 
disqualification.\377\
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    \375\ See, e.g., letters from ABA; NYSBA; S&C and SIA.
    \376\ See, e.g., letters from ABA and S&C.
    \377\ See, e.g., letters from ABA and S&C.
---------------------------------------------------------------------------

    We have not expanded the coverage of the safe harbor to all issuers 
or to include voluntary filers. In addition, we have provided that the 
disqualification for blank check companies, shell companies (other than 
business combination related shell companies), and penny stock issuers 
is for three, rather than two, years to be consistent with all of the 
Rules we are adopting today that have similar disqualification 
provisions.
v. Rule 139a
    In the Asset-Backed Securities Adopting Release, we noted that we 
were considering amendments to Rules 137, 138 and 139 in connection 
with these reform proposals and:

    To the extent these existing safe harbors are modified, we also 
will consider similar modifications to the ABS safe harbor. We also 
encourage ABS market participants to comment specifically on the 
proposals in that release regarding any appropriate changes to the 
existing safe harbors or the ABS safe harbor.\378\
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    \378\ See Asset-Backed Securities Adopting Release, note at 
III.C.2.b.

    In light of the modifications we are making to Rule 139 today to 
eliminate the requirement that in an industry report a recommendation 
regarding the registrant or its securities can only be included if a 
recommendation as favorable or more favorable had appeared in the last 
publication of the broker-dealer, we are eliminating paragraph (c) of 
Rule 139a, which contains a comparable provision for recommendations in 
reports on asset-backed securities.
    Commenters suggested the elimination of paragraph (c) and also 
suggested that the ``reasonable regularity'' requirement in Rule 139a 
be eliminated. While we have eliminated the latter requirement in Rule 
139, we have added a requirement that the research report not represent 
the initiation or reinitiation of research coverage. In Rule 139a the 
``reasonable regularity'' requirement extends to reports on multiple 
issuers and transactions. We have therefore decided to retain the 
``reasonable regularity'' requirement in Rule 139a.
vi. Research Report Amendments in Connection With Regulation S and Rule 
144A Offerings
    We are concerned that the restrictions in Regulation S on directed 
selling efforts and offshore transactions \379\ and in Rule 144A on 
offers to non-qualified institutional buyers (``QIBs'') and general 
solicitation \380\ have resulted in brokers and dealers unnecessarily

[[Page 44765]]

withholding regularly published research.\381\ Accordingly, we are 
adopting as proposed amendments providing that research reports meeting 
the conditions of Rule 138 and Rule 139 will not be considered offers 
or general solicitation or general advertising in connection with 
offerings relying on Rule 144A.\382\ The amendments also provide that 
these research reports will not constitute directed selling efforts or 
be inconsistent with the offshore transaction requirements of 
Regulation S.\383\
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    \379\ Securities Act Regulation S [17 CFR 230.901 through 
230.905] provides a safe harbor from the registration requirements 
of the Securities Act for offshore offers and sales of securities. 
When a broker or dealer participates in a Regulation S offering, 
questions arise regarding whether research activities would conflict 
with the prohibition against directed selling efforts or the 
offshore transaction condition. The concern stems from the fact that 
the distribution or publication of research 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.
    \380\ Securities Act Rule 144A provides a safe harbor from the 
registration requirements of the Securities Act for resales of 
restricted securities to QIBs. 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 a Rule 144A transaction, questions 
arise regarding whether it may be viewed as making offers to persons 
that receive the research, including those who are not QIBs.
    \381\ In the 1998 proposals, we expressed the interpretive view 
that brokers and dealers may publish and distribute research reports 
as described in current Rule 138 and 139 without such reports being 
deemed to constitute ``directed selling efforts.'' The amendments we 
are adopting today codify that interpretation.
    \382\ See amendments to Rule 138 and Rule 139.
    \383\ See amendments to Regulation S.
---------------------------------------------------------------------------

    We do not believe that the publication of research in reliance on 
Rules 138 and 139 will jeopardize the interests of investors in 
transactions relying on Rule 144A or Regulation S. On the other hand, 
limiting the ability to rely on these exemptions when research on the 
issuers may otherwise be available could, we believe, negatively impact 
information available to investors. Commenters supported the proposals 
to exempt research reports meeting the conditions of the safe harbor 
from the restrictions in Regulation S and Rule 144A.\384\
---------------------------------------------------------------------------

    \384\ See, e.g., letters from ABA and Merrill Lynch.
---------------------------------------------------------------------------

vii. Research and Proxy Solicitations
    We are adopting with one modification from the proposal a 
codification of a Commission staff position \385\ that the publication 
or distribution of research under the conditions set forth in Rules 138 
and 139 is permitted in connection with a transaction that is subject 
to the proxy rules under the Exchange Act.\386\ The new Rule provides 
that distribution of research in accordance with Rule 138 or Rule 139 
is a solicitation to which Rules 14a-3 through 14a-15 (other than Rule 
14a-9) of the proxy rules \387\ does not apply. Commenters supported 
the proposal to codify the staff position and one requested that the 
exemption not be restricted to use only in connection with transactions 
registered under the Securities Act.\388\ We are adopting Rule 14a-
2(b)(5) without the requirement that the exemption be limited to 
transactions registered under the Securities Act.
---------------------------------------------------------------------------

    \385\ See Division of Corporation Finance no-action letter to 
Merrill, Lynch, Pierce, Fenner & Smith, Inc. (Oct. 24, 1997).
    \386\ See Exchange Act Rule 14a-2(b)(5) [17 CFR 240.14a-
2(b)(5)].
    \387\ 17 CFR 240.14a-3 through 240.14a-15.
    \388\ See, e.g., letters from ABA and Merrill Lynch.
---------------------------------------------------------------------------

IV. Liability Issues

A. Information Conveyed by the Time of Sale for Purposes of Section 
12(a)(2) and Section 17(a)(2) Liability

1. Interpretation and Rule
    Under the Securities Act, purchasers of an issuer's securities in a 
registered offering have private rights of action for materially 
deficient disclosure in registration statements under Section 11 and in 
prospectuses and oral communications under Section 12(a)(2). Section 11 
liability exists for untrue statements of material facts or omissions 
of material facts required to be included in a registration statement 
or necessary to make the statements in the registration statement not 
misleading at the time the registration statement became effective. 
Under Section 12(a)(2), sellers have liability to purchasers for offers 
or sales by means of a prospectus or oral communication that includes 
an untrue statement of material fact or omits to state a material fact 
that makes the statements made, based on the circumstances under which 
they were made, not misleading.\389\ Securities Act Section 17(a) is a 
general anti-fraud provision which provides, among other things, that 
it shall be unlawful for any person in the offer and sale of a security 
to obtain money or property by means of any untrue statement of a 
material fact or any omission 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.\390\
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    \389\ Whether any particular statement or omission is material 
will depend on the particular facts and circumstances. Information 
is material if ``there is a substantial likelihood that a reasonable 
shareholder would consider it important'' in making an investment 
decision. TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449 
(1976); see also Basic v. Levinson, 485 U.S. 224, 231 (1988). To 
fulfill the materiality requirement, there must be a substantial 
likelihood that a fact ``would have been viewed by the reasonable 
investor as having significantly altered the `total mix' of 
information made available.'' Id.
    Courts have analyzed materiality under Exchange Act Section 
10(b) and Exchange Act Rule 10b-5, and Securities Act Sections 11 
and 12(a)(2) in a similar fashion. See, e.g., In re Donald J. Trump 
Casino Sec. Litig., 7 F.3d 357, 368 n.10 (3d Cir. 1993) (noting that 
while there are substantial differences in the elements that a 
plaintiff must establish under these provisions, they all have a 
materiality requirement and this element is analyzed the same under 
all of the provisions).
    \390\ See Securities Act Section 17(a)(2).
---------------------------------------------------------------------------

    The term ``sale'' under the Securities Act includes any contract of 
sale.\391\ As we discussed in the Proposing Release, we believe that we 
should address the discrepancies in time between the time of the 
contract of sale for securities (when an investor becomes committed to 
purchase the securities) on the one hand, and the later time of 
availability of a prospectus (and perhaps other information) on the 
other hand. The Securities Act registration regime permits final 
prospectuses to become available after an investor becomes committed to 
purchase a security.\392\ This availability, therefore, does not 
necessarily address the receipt by an investor of information at the 
time of its contractual commitment.
---------------------------------------------------------------------------

    \391\ See Securities Act Section 2(a)(3). Courts have held 
consistently that the date of a sale is the date of contractual 
commitment, not the date that a confirmation is sent or received or 
payment is made. See, e.g., Radiation Dynamics, Inc. v. Goldmuntz, 
464 F.2d 876, 891 (2d Cir. 1972) (holding that a purchase occurs at 
``the time when the parties to the transaction are committed to one 
another''); In re Alliance Pharmaceutical Corp. Secs. Lit., 279 F. 
Supp. 2d 171, 186-187 (S.D.N.Y. 2003) (following the holding in 
Radiation Dynamics with respect to the timing of a contract of 
sale); Pahmer v. Greenberg, 926 F. Supp. 287, (citing Finkel v. 
Stratton Corp., 962 F.2d 169, 173 (2d Cir. 1992) (``[A] sale occurs 
for Section 12[(a)](2) purposes when the parties obligate themselves 
to perform what they have agreed to perform even if the formal 
performance of their agreement is to be after a lapse of time'')); 
Adams v. Cavanaugh Communities Corp., 847 F. Supp. 1390, 1402 (N.D. 
Ill. 1994) (noting that the Seventh Circuit has followed the 
Radiation Dynamics decision). Also, as indicated in note , below, 
the Uniform Commercial Code no longer requires that a securities 
contract be in writing.
    \392\ For example, in a shelf offering our rules permit an 
issuer to file a final prospectus supplement not later than the 
second business day after a takedown from the shelf registration 
statement.
---------------------------------------------------------------------------

    We provided an interpretation of Section 12(a)(2) and Section 
17(a)(2) in our Proposing Release and we are reaffirming that 
interpretation. Securities Act Section 12(a)(2) and Section 17(a)(2) do 
not require that oral statements or the prospectus or other 
communications contain all information called for under our line-item 
disclosure rules or otherwise contain all material information.\393\ 
Rather, under these provisions, the determination of liability is based 
on whether the communication includes a material misstatement or fails 
to include material information that is necessary to make the 
communication, under the circumstances in which it is made, not 
misleading. Under our interpretation, the time at which an investor has 
taken the action the investor must take to become committed to purchase 
the securities, and has therefore entered into a contract of sale,

[[Page 44766]]

is one appropriate time \394\ to apply the liability standards of 
Section 12(a)(2) and Section 17(a)(2).\395\
---------------------------------------------------------------------------

    \393\ Registration statements or final prospectuses or 
prospectus supplements would, as today, require inclusion of 
information necessary to satisfy our line-item requirements and 
other applicable requirements.
    \394\ Under our interpretation, the time of contract of sale can 
be the time the purchaser either enters into the contract (including 
by virtue of acceptance by the seller of an offer to purchase) or 
completes the sale. The time of the contract of sale under our 
interpretation follows the statutory definition of sale in 
Securities Act Section 2(a)(3). Under Section 2(a)(3), sale includes 
``every contract of sale.''
    Our interpretation is not intended to affect any rights 
currently existing at any other time. Section 12(a)(2) applies to 
oral communications and prospectuses (including final prospectuses) 
at other times. Section 17(a)(2) similarly applies to statements at 
other times. In addition, both Securities Act Section 12(a)(2) and 
Section 17(a) assess liability for ``offers'' as well as for sales.
    The 1954 amendments to the Securities Act permitting the use of 
a preliminary prospectus recognized that the final prospectus would 
not always be available to investors at the time they made their 
investment decisions. See 1954 Amendments to the Securities Act of 
1933, Pub. L. No. 83-577 68 Stat. 683 (1954). Following the 1954 
amendments, the Commission adopted a number of rules that would 
ensure that preliminary prospectuses were sent to investors in 
initial public offerings at least 48 hours before the confirmation 
of the sale of the securities could be sent. Our interpretation and 
rule do not affect this requirement. See Securities Act Rule 460 [17 
CFR 230.460], and Exchange Act Rule 15c2-8 [17 CFR 240.15c2-8].
    \395\ Article 8 of the Uniform Commercial Code was amended in 
1994 to eliminate the requirement that a contract for the purchase 
of a security be reflected in a writing. See UCC, 1994 official text 
with comments, Article 8-113 (West 1994). The official comment to 
the rule states that the requirement that a contract be in writing 
is unsuited to the realities of the securities business. Thus, under 
state law oral contracts for sales of securities are permitted.
---------------------------------------------------------------------------

    We interpret Section 12(a)(2) and Section 17(a)(2) as meaning that, 
for purposes of assessing whether at the time of sale (including a 
contract of sale) a prospectus or oral communication or statement 
includes or represents a material misstatement or omits to state a 
material fact necessary in order to make the prospectus, oral 
communication, or statement, in light of the circumstances under which 
it was made, not misleading, information conveyed to the investor only 
after the time of sale (including a contract of sale) should not be 
taken into account.\396\ For purposes of Section 12(a)(2) and Section 
17(a)(2), whether or not information has been conveyed to an investor 
at or prior to the time of the contract of sale currently is a facts 
and circumstances determination, and our actions today do not affect 
that determination. Such information could include information in the 
issuer's registration statement and prospectuses for the offering in 
question, the issuer's Exchange Act reports incorporated by reference 
therein or information otherwise disseminated by means reasonably 
designed to convey such information to investors. Such information also 
could include information directly communicated to investors 
(including, under the rules we are adopting today, through the use of 
free writing prospectuses).\397\
---------------------------------------------------------------------------

    \396\ As we discuss above, the basis for liability under Section 
12(a)(2) for statements in a prospectus (including a free writing 
prospectus) or oral communication, and the basis for liability under 
Section 17(a)(2) for the statements to which the section applies, 
are that the statements cannot contain any misstatement of a 
material fact or omit to state a material fact necessary to make the 
statements made, in light of the circumstances under which they were 
made, not misleading.
    \397\ Direct communications can take various forms, including 
orally or through the use of electronic or other free writing 
prospectuses, under the new communications regime. See also Starr v. 
Georgeson Shareholder, Inc., 2005 U.S. App. LEXIS 11250 (2d Cir. 
2005).
---------------------------------------------------------------------------

    As noted above, liability under Section 12(a)(2) attaches to an 
oral communication or prospectus by means of which an offer or sale is 
made that contains a material misstatement or omits to state a material 
fact necessary to make the statements, in light of the circumstances in 
which they were made, not misleading. Liability under Section 17(a)(2) 
attaches to an untrue statement of a material fact or an omission to 
state a material fact necessary to make the statements made, in light 
of the circumstances in which they were made, not misleading, by means 
of which money or property is obtained.
    Under our interpretation, the liability determination under Section 
12(a)(2) or Section 17(a)(2) as to an oral communication, prospectus, 
or statement, as the case may be, does not take into account 
information conveyed to a purchaser only after the time of sale 
(including the contract of sale), including information contained in 
any final prospectus, prospectus supplement, or Exchange Act filing 
that is filed or delivered subsequent to the time of sale (including 
the contract of sale) where the information is not otherwise conveyed 
at or prior to that time.\398\
---------------------------------------------------------------------------

    \398\ As we elaborate on later, this interpretation would not, 
of course, affect the ability of the seller and the purchaser to 
consider subsequently provided facts or disclosure and, among other 
actions, by agreement terminate their sale contract and by agreement 
enter into a new contract of sale with respect to the offered 
securities. In such case, for purposes of our interpretation and 
rule, the time of the contract of sale to that purchaser will be the 
time of the new contract of sale.
---------------------------------------------------------------------------

    In furtherance of our interpretation discussed above, we also are 
adopting as proposed an interpretive rule, Rule 159, under Section 
12(a)(2) and Section 17(a)(2). We intend that the effect of our 
interpretive rule will be the same as our interpretation. Our new Rule 
provides the following:
     For purposes of Section 12(a)(2) and Section 17(a)(2) 
only, and without affecting any other rights under those sections, for 
purposes of determining at the time of sale (including the time of the 
contract of sale), whether a prospectus, oral statement, or a 
statement,\399\ includes an untrue statement of material fact or omits 
to state a material fact necessary in order to make the statements, in 
light of the circumstances under which they were made, not 
misleading,\400\ any information conveyed to the purchaser only after 
that time of sale will not be taken into account; and
---------------------------------------------------------------------------

    \399\ These include a prospectus or oral statement in the case 
of Section 12(a)(2), or a statement to which Section 17(a)(2) is 
applicable.
    \400\ Or, in the case of Section 17(a)(2), any omission 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.
---------------------------------------------------------------------------

     For purposes of Section 12(a)(2) only, a purchaser's 
``knowing of such untruth or omission'' in respect of a sale (including 
a contract of sale) means knowing at the time of such sale.

We find that our interpretation and interpretive rule are in 
furtherance of the objectives of Section 12(a)(2) and Section 17(a) and 
are necessary for the protection of the rights of investors intended to 
be provided by those sections.
    We do not believe that our interpretation or interpretive rule 
should result in ``speed bumps'' or otherwise slow down the offering 
process. Particularly in light of the new rules we are adopting today 
regarding communications, issuers and underwriters should have 
sufficient flexibility to convey information in a manner that does not 
slow the offering process. At the same time, in our view, the 
interpretation that liability under Section 12(a)(2) and Section 
17(a)(2) should be determined based on information conveyed at the time 
of sale (including a contract of sale) is unassailable.
2. Comments and Guidance Regarding Our Interpretation and Rule 159
    With regard to our interpretation of Securities Act Section 
12(a)(2) and Securities Act Section 17(a)(2) and proposed Rule 159, 
commenters raised concerns in the following areas:
     The Section 12(a)(2) and Section 17(a)(2) analysis of the 
information conveyed; \401\
---------------------------------------------------------------------------

    \401\ See, e.g., letters from ABA-ABS; BMA-ABS; Cleary; and 
CSFB.
---------------------------------------------------------------------------

     The manner in which the time of ``sale'' is determined; 
\402\ and
---------------------------------------------------------------------------

    \402\ See, e.g., letters from ABA; ABA-ABS; Alston; ASF; BMA-
ABS; Citigroup; Cleary; CMSA; CSFB; Deloitte; Fried Frank; Merrill 
Lynch; Morgan Stanley; NYSBA; and SIA.

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[[Page 44767]]

     The manner in which a purchaser and seller may terminate 
an old contract and enter into a new contract of sale based on new 
information.\403\
---------------------------------------------------------------------------

    \403\ See, e.g., letters from ABA; ABA-ABS; CSFB; Morgan 
Stanley; and NYSBA.
---------------------------------------------------------------------------

a. The Section 12(a)(2) and Section 17(a)(2) Analysis of the 
Information Conveyed
    Securities Act Section 12(a)(2) and Section 17(a)(2) do not require 
that oral statements or the prospectus or other communication contain 
all information called for under our line-item disclosure rules or 
otherwise contain all material information. Rather, under these 
provisions, the determination of liability is based on whether the 
communication includes a material misstatement or fails to include 
material information that is necessary to make the communication not 
misleading in light of the circumstances in which the communication is 
made. In that regard, where in our discussion of our interpretation in 
the Proposing Release we referred to ``materially accurate and complete 
information,'' we were referring to the standards contained in 
Securities Act Section 12(a)(2) and Section 17(a)(2)--a communication 
that contains no material misstatements, and no material omissions that 
would cause the communication to be misleading in light of the 
circumstances in which it is made. Accordingly, liability for omissions 
under Section 12(a)(2) and Section 17(a)(2) is not based on the mere 
omission of required prospectus information or other material 
information, but on the omission of material information as a result of 
which the information conveyed is misleading, under the circumstances 
in which the communication in question is made. As a result, for 
example, a statement prior to the time of a contract of sale that a 
transaction is ``the same as the XYZ transaction'' or ``just like the 
XYZ transaction'' with specified modifications can, if there are no 
material omissions that would make that statement misleading under the 
circumstances in which it is made, meet the standards of Section 
12(a)(2) and Section 17(a)(2). As another example, in an area cited by 
a number of commenters,\404\ in the asset-backed securities market 
there are a number of forward-sale transactions where contracts of sale 
are entered into based on ``portfolio profiles'' or similar 
communications specifying important characteristics of asset pools 
within given ranges or market standards. Where the characteristics 
enumerated in the portfolio profiles do not exclude material elements 
of the pool's characteristics the omission of which would make the 
profiles misleading and where the final pools fall within the ranges or 
market standards disclosed in the portfolio profiles, this kind of 
disclosure prior to the time of a contract of sale can, depending on 
the facts and circumstances and even if all disclosure required in a 
statutory prospectus by our line-item requirements is not included, 
meet the standards of Section 12(a)(2) and Section 17(a)(2).
---------------------------------------------------------------------------

    \404\ See, e.g., letters from ABA-ABS; ASF; BMA-ABS; CMSA; the 
Mortgage Bankers Association of America (``MBA'').
---------------------------------------------------------------------------

b. Determination of Time of Sale
    Some commenters argued that the parties to the transaction should 
be able to determine by contract, by reference to state law, when the 
contract of sale is entered into, without regard to any provision of 
the federal securities laws,\405\ including the anti-waiver provisions 
of Securities Act Section 14.\406\ Other commenters argued that the 
iterative nature of their particular type of offerings meant that the 
parties could not identify the precise point when the purchaser became 
bound to acquire the securities.\407\
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    \405\ See, e.g., letters from Cleary; CSFB; Fried Frank; Morgan 
Stanley; and SIA.
    \406\ 17 U.S.C. 77n.
    \407\ See, e.g., letters from ABA-ABS; ASF; BMA-ABS; and CMSA. 
These comments were most prevalent in the asset-backed securities 
area. In this regard, the commenters stated that asset-backed 
securities offerings involved conditional contracts where investors 
agreed to purchase securities before they had all the prospectus 
information. These commenters stated that purchasers were given the 
opportunity to reassess their purchase decisions if new or changed 
information was provided. Investors who commented, on the other 
hand, did not believe that material changes or additional material 
disclosures made after their binding purchase decisions were 
adequately communicated to them, if at all, and they believed it was 
clear when they had entered into a contract of sale. See, e.g., 
letters from FMR and SSGA.
---------------------------------------------------------------------------

    As we discuss above, we believe that one appropriate time to assess 
whether a purchaser has a claim under Section 12(a)(2), or whether 
there has been a violation of Section 17(a)(2), is the time of the 
contract of sale of the securities. State law contract principles are 
significant with regard to contract formation, and we are not aware of 
any current significant conflicts between state contract law and 
federal law regarding the elements of formation of a contract. Of 
course, a contract of sale under the federal securities laws can occur 
before there is an unconditional bilateral contract under state law, 
for example when a purchaser has taken all actions necessary to be 
bound but a seller's obligations remain conditional under state 
law.\408\ If such conflicts were to arise in the future, we would have 
to consider at that time the appropriate actions to take, if any, to 
preserve the important federal interests in the determination of the 
time of a contract of sale. Importantly, beyond the elements of 
formation of a contract, federal law governs any waiver of a right or 
claim arising under the federal securities laws.\409\ Thus, contracts 
for sales of securities may not contain provisions that operate to 
waive a purchaser's substantive rights under the federal securities 
laws. For example, conditional contracts that bind the purchaser at an 
earlier date but provide that no contract of sale occurs until the 
final prospectus is provided would not be consistent with the 
definition of sale under the Securities Act nor the anti-waiver 
provisions of Securities Act Section 14.\410\
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    \408\ See notes 391 and 394 above.
    \409\ AES Corp. v. Dow Chemical Co., 325 F.3d 174, 179 (3d Cir. 
2003) cert. denied, 540 U.S. 1068 (2003); Petro-Ventures, Inc. v. 
Vrable, 967 F.2d 1337 (9th Cir. 1992).
    \410\ Any such contractual provision or any other contractual 
provision that operates as a waiver of substantive rights under the 
federal securities laws would be void, even if such provision was 
enforceable as a matter of state contract law.
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c. Termination of an Old Contract and Creation or Reformation of a New 
Contract
    We recognize that there may be circumstances where a seller wishes 
to convey information to a purchaser after the time of a contract of 
sale that had not been conveyed before that time. In the Proposing 
Release, we made clear our view that sellers could convey additional or 
changed information after the time of the contract of sale, terminate 
the old contract by agreement with the purchaser, and enter into a new 
contract of sale based on the new information. Any rights to damages 
with respect to material defects in information in respect of the 
original contract of sale would cease to exist as a result of the 
termination and formation of a new contract. Commenters expressed 
uncertainty regarding how this renegotiation and new contract would be 
effected.\411\
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    \411\ While commenters also requested elaboration on when and 
how information would be considered conveyed, as we made clear in 
the Proposing Release, we believe this remains a facts and 
circumstances determination. See, e.g., letters from ABA; Alston; 
Citigroup; Cleary; and S&C.
---------------------------------------------------------------------------

    In light of commenters' concerns, we are providing guidance on the 
circumstances under which purchasers and sellers can reassess their 
purchase commitment based on new or changed information and enter into 
a new

[[Page 44768]]

contract of sale, consistent with the purchaser's rights, including 
under Section 12(a)(2), under the original contract and the anti-waiver 
provisions of the federal securities laws. Commenters expressed 
uncertainty regarding the termination of a contract of sale and the 
creation of a new contract and the ability, consistent with the federal 
securities laws, including the anti-waiver provisions, to agree 
contractually on a procedure to terminate and reform a contract of sale 
and thus provide a new time of sale at the time of the reformation of 
the contract.\412\ In our view, any such procedure must be the 
substantive equivalent of the termination by mutual agreement of the 
prior contract of sale and the entering into a new contract of sale. 
Any such procedure would, as pointed out above, result in a right to 
damages under the old contract ceasing to exist. It follows from this 
position that any such procedure would conflict with federal law 
unless:
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    \412\ See, e.g., letters from CSFB and Morgan Stanley.
---------------------------------------------------------------------------

     The investor is provided adequate disclosure of the 
contractual arrangement;
     The investor is provided with adequate disclosure of its 
rights under the existing contract at the time termination is sought;
     The investor is provided with adequate disclosure of the 
new information that the seller seeks to convey; and
     The investor is provided with a meaningful ability to 
elect to terminate or not terminate the prior contract and to elect to 
enter into or not enter into the new contract.
    Whether the investor is given such adequate disclosure and 
meaningful ability will depend on the particular facts and 
circumstances. An evaluation of the facts and circumstances would 
include but not be limited to the following:
     The manner and prominence of the disclosure of the 
contractual arrangements and the investor's rights under the old 
contract. Insufficient disclosure as to the provisions would not 
necessarily put the purchaser on notice of the arrangement and of its 
rights, and thus may be viewed as an unacceptable anticipatory waiver 
of the purchaser's substantive rights.
     The process by which the new or changed material 
information will be conveyed to the purchaser. As noted above, whether 
information is conveyed is a facts and circumstances determination. 
However, in our view, in the context of providing new information 
following a contract of sale, factors to consider in determining 
whether the new information has been conveyed could include whether it 
is identified as new or changed or is otherwise sufficiently prominent.
     The method by which the purchaser is required to make or 
communicate its decisions. For the contractual provision to be 
consistent with the anti-waiver provisions of the federal securities 
laws, the purchaser must knowingly terminate the prior contract if it 
chooses to do so. Similarly, the investor must knowingly enter into the 
new contract if it chooses to do so. While we are not saying that the 
method chosen necessarily requires an affirmative communication rather 
than acquiescence by silence after the lapse of a specified period of 
time, the concept of reaffirmation is one that earlier Commissions and 
Congress have struggled with since the 1940s.\413\ The method chosen 
should give the purchaser a meaningful ability to make its contractual 
decisions in light of the new or changed material information.
---------------------------------------------------------------------------

    \413\ See, e.g., Nathan D. Lobell, Revision of the Securities 
Act, 48 Colum. L.Rev. 313, 332 (1948); Clark Byse and Raymond J. 
Bradley, Proposals to Amend the Registration and Prospectus 
Requirements of the Securities Act of 1933, 96 U.Pa. L.Rev. 609, 
635-36 (1947-1948).
---------------------------------------------------------------------------

    In addition to our general observations, we note the following:
     Any contractual provision to the effect that the seller is 
deemed to have communicated information to the purchaser would be a 
violation of the anti-waiver provisions of the federal securities 
laws.\414\
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    \414\ Moreover, a contractual provision that provides that a 
purchaser is deemed to have read or have constructive or actual 
knowledge of information or documents, generally, would act as a 
waiver of substantive rights under the federal securities laws and 
thus would be inconsistent with the anti-waiver provisions of the 
federal securities laws. For example, a contractual provision 
stating that a purchaser who has access to information is charged 
with knowledge of that information for purposes of Section 12(a)(2) 
would be impermissible. These are merely examples of language that 
would be inconsistent with the anti-waiver provisions of the federal 
securities laws and are not all-inclusive.
---------------------------------------------------------------------------

     A non-conditional contract that moves the time of sale 
forward to a different time would effectively act as a waiver of 
substantive rights under the federal securities laws and is a violation 
of the anti-waiver provisions of the federal securities laws.\415\
---------------------------------------------------------------------------

    \415\ Thus, a waiver might also be deemed to occur where an 
underwriter e-mails the purchaser saying that the issuer filed a 
prospectus supplement and provides a specified period of time in 
which the purchaser may contact the underwriter, after which the 
purchaser will be deemed to have purchased the securities as of the 
end of the period, which would be a new date of sale.
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3. Rule 412 and Rule 430B
    Under Securities Act Rule 412, information contained in a 
prospectus supplement or Exchange Act filing incorporated by reference 
into a registration statement may modify or supersede other previously 
disclosed information that was contained in a document incorporated or 
deemed to be incorporated by reference in that registration statement. 
We are revising Rule 412 essentially as proposed to make it consistent 
with the other rules we are adopting today. The revisions provide that 
information contained in a document that is deemed part of and included 
in or incorporated by reference into a registration statement or 
prospectus that is contained in the registration statement would modify 
or supersede the information contained in the registration statement or 
prospectus that is part of or contained in the registration statement 
itself.\416\ Thus, the provisions of Rule 412 regarding modified or 
superseded information will operate regardless of whether the new 
information is contained in an Exchange Act report, prospectus 
supplement, or prospectus that is part of or included in a registration 
statement.
---------------------------------------------------------------------------

    \416\ See discussion in Section V.B.1 below under ``Date of 
Inclusion of Prospectus Supplements in Registration Statements and 
New Effective Dates of Registration Statements.''
---------------------------------------------------------------------------

    Under Rule 430B, which we are adopting today (and in the 
corresponding undertakings of issuers), we have provided that 
subsequently provided information deemed part of and included in or 
incorporated by reference into a registration statement or prospectus 
that is part of the registration statement would not modify or 
supersede any information conveyed to an investor at an earlier time of 
sale (including the time of the contract of sale) for purposes of 
determining the information conveyed to an investor at or prior to that 
time.\417\
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    \417\ We originally proposed to include this provision in Rule 
412 but have determined, in response to comments, to include it 
instead in Rule 430B. See, e.g., letter from William J. Williams, 
Jr. It also is included in undertakings of issuers provided in 
accordance with Item 512 of Regulation S-K and Regulation S-B [17 
CFR 229.512 and 17 CFR 228.512].
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4. Relationship of Section 12(a)(2) and Section 17(a)(2) Interpretation 
and Rule 159 to Section 11 Liability
    Information contained in a prospectus or prospectus supplement that 
is part of a registration statement that is filed after the time of the 
contract of sale will be part of and included in a registration 
statement for purposes of liability under Section 11 at the time of 
effectiveness, which may be at or before the time of

[[Page 44769]]

the contract of sale. The date and time that the information is part of 
the registration statement and the time of effectiveness relate to an 
investor's rights under Section 11, but do not affect any rights 
assessed at the time of sale that the investor may have under Section 
12(a)(2) or that we might enforce under Section 17(a). Thus, 
information that is deemed to be part of the registration statement as 
of the time of the contract of sale for shelf takedowns or as of 
effectiveness under Securities Act Rule 430A, will not, under our 
interpretation or Rule 159, be taken into account under Section 
12(a)(2) or Section 17(a)(2), unless the information is conveyed to an 
investor at or prior to the time of sale (including the contract of 
sale). Similarly, an investor's rights under Section 11 will not be 
affected by information conveyed to an investor at or prior to the time 
of the contract of sale that is not included in or incorporated by 
reference into the registration statement at the time of the 
effectiveness of the registration statement for the securities sold to 
the investor.\418\ The class of investors that may have a claim under 
Section 11 and Section 12(a)(2) may thus be different.
---------------------------------------------------------------------------

    \418\ See discussion regarding Rule 430B in Section V.B.1 below 
under ``Rule 430B.'' See also Rule 158.
---------------------------------------------------------------------------

    A free writing prospectus that is not part of a registration 
statement will not be subject to Section 11 liability, although it will 
be subject to Section 12(a)(2) and Section 17(a)(2) liability.\419\ 
Information contained in a free writing prospectus not otherwise 
included in or incorporated by reference into the registration 
statement will not be part of the registration statement for purposes 
of Section 11.
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    \419\ A free writing prospectus, while considered to relate to a 
registered securities offering, is not included in and does not 
become part of the registration statement unless the issuer files it 
as part of the registration statement or includes it in a filing 
that is incorporated by reference into the registration statement. 
Thus, the responsibility and liability of offering participants for 
a particular free writing prospectus that is not incorporated or 
included in the registration statement can arise only under Section 
12(a)(2) and Section 17(a)(2) and the other anti-fraud provisions. 
This is true regardless of whether the free writing prospectus 
contains information from the registration statement (including 
information that has been included with the consent of an expert).
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B. Issuer as Seller

    We believe there currently is unwarranted uncertainty as to issuer 
liability under Section 12(a)(2) for issuer information in registered 
offerings using certain types of underwriting arrangements.\420\ As a 
result, there is a possibility that issuers may not be held liable 
under Section 12(a)(2) to purchasers in the initial distribution of the 
securities for information contained in the issuer's prospectus 
included in its registration statement. This also could be the case for 
other communications that are offers by or on behalf of an issuer, 
including issuer free writing prospectuses. When an issuer registers 
securities to be sold in a primary offering, the registration covers 
the offer and sale of its securities to the public. The issuer is 
selling its securities to the public, although the form of underwriting 
of such offering, such as a firm commitment underwriting, may involve 
the sale first by the issuer to the underwriter and then the sale by 
the underwriter to the public.\421\ We believe that an issuer offering 
or selling its securities in a registered offering pursuant to a 
registration statement containing a prospectus that it has prepared and 
filed, or by means of other communications that are offers made by or 
on behalf of or used or referred to by the issuer can be viewed as 
soliciting purchases of the issuer's registered securities.\422\ 
Therefore, we are adopting a rule providing that under Section 12(a)(2) 
an issuer in a primary offering of securities, regardless of the form 
of the underwriting arrangement, will be a seller and will be 
considered to offer or sell the securities to a purchaser in the 
initial distribution of the securities as to any of the following 
communications:
---------------------------------------------------------------------------

    \420\ See, e.g., Capri v. Murphy, 856 F.2d 473, 478 (2d Cir. 
1988); Lone Star Ladies Investment Club v. Schlotzsky's, Inc, 238 
F.3d 363, 370 (5th Cir. 2001); Rosenzweig v. Azurix Corp., 332 F.3d 
854 (5th Cir. 2003).
    \421\ The two transactions are parts of the same distribution of 
the securities to the public.
    \422\ See Pinter v. Dahl, 486 U.S. 622 (1988).
---------------------------------------------------------------------------

     Any preliminary prospectus or prospectus of the issuer 
relating to the offering required to be filed pursuant to Securities 
Act Rule 424 or Rule 497;
     Any free writing prospectus relating to the offering 
prepared by or on behalf of or used or referred to by the issuer and, 
in the case of an issuer that is an open-end management investment 
company, any profile relating to the offering provided pursuant to 
Securities Act Rule 498;
     The portion of any other free writing prospectus (or, in 
the case of an issuer that is a registered investment company or 
business development company, any advertisement pursuant to Securities 
Act Rule 482) relating to the offering containing material information 
about the issuer or its securities provided by or on behalf of the 
issuer; and
     Any other communication that is an offer in the offering 
made by the issuer to such purchaser.\423\
---------------------------------------------------------------------------

    \423\ We are not addressing the status of the issuer as a seller 
in a registered offering of transactions by selling security holders 
only.
---------------------------------------------------------------------------

    This definition of the issuer as a seller is not intended to affect 
whether any other person offers or sells a security by means of the 
same prospectus or oral communication for purposes of Section 12(a)(2). 
A communication by an underwriter or dealer participating in an 
offering would also not be on behalf of the issuer solely by virtue of 
that participation. As today, there are circumstances where the 
involvement of an issuer could be sufficiently extensive (for example 
under adoption and entanglement theories) that a communication of 
another person, including an offering participant, could be by an 
issuer.
    A number of commenters were concerned that as proposed the rule was 
unnecessarily broad and would encompass purchasers of the issuer's 
securities in the aftermarket, after the initial distribution of 
securities in the offering was completed.\424\ These commenters were 
also concerned that the proposed rule would encompass oral 
communications made by underwriters.\425\ As with certain of our other 
proposals, some commenters wanted to limit liability only to those 
situations in which the communication was made by designated 
persons.\426\
---------------------------------------------------------------------------

    \424\ See, e.g., letters from ABA; Alston; CMSA; Davis Polk; and 
NYSBA.
    \425\ See, e.g., letters from ABA and CMSA.
    \426\ See, e.g., letters from Alston and CMSA.
---------------------------------------------------------------------------

    While we have adopted the issuer as seller provisions substantially 
as proposed, we have included language that clarifies that it is aimed 
only at liability to purchasers in the initial distribution of the 
securities who were offered or sold the securities by means of the 
particular communication.\427\ Thus, the Rule, as adopted, would not 
cover purchasers of the issuer's securities in the aftermarket. We have 
also provided, as noted above, that an underwriter or dealer 
participating in an offering is not acting on behalf of the issuer 
solely by virtue of that participation.
---------------------------------------------------------------------------

    \427\ We also have revised the final provision to provide that 
it covers communications by the issuer, not communications by or on 
behalf of the issuer.
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C. Due Diligence Interpretation

    We requested comment in the Proposing Release as to whether we 
should re-evaluate the factors discussed in Securities Act Rule 176 
\428\ regarding

[[Page 44770]]

what constitutes a reasonable investigation and reasonable grounds 
under Securities Act Section 11(c), and requested an explanation of the 
changes that should be made and how each of those changes would work in 
the context of each type of registered securities offering. In 
response, commenters urged us to reintroduce the 1998 proposal to amend 
Rule 176 so that it also applies to the reasonable care standard under 
Section 12(a)(2).\429\ Additionally, commenters asked us to reaffirm 
the statement from the 1998 proposals that ``Section 11 requires a more 
diligent investigation than Section 12(a)(2),'' so as to avoid any 
implication that our view of the matter has changed.\430\ We have 
determined not to propose modifications to Rule 176 at this time. We 
believe, however, as we have stated previously, that the standard of 
care under Section 12(a)(2) is less demanding than that prescribed by 
Section 11 or, put another way, that Section 11 requires a more 
diligent investigation than Section 12(a)(2).\431\ Moreover, we believe 
that any practices or factors that would be considered favorably under 
Section 11, including pursuant to Rule 176, also would be considered as 
favorably under the reasonable care standard of Section 12(a)(2).\432\
---------------------------------------------------------------------------

    \428\ 17 CFR 230.176.
    \429\ See, e.g., letters from Morgan Stanley; SIA; and TBMA.
    \430\ See, e.g., letters from ABA; SIA; and S&C.
    \431\ See the 1998 proposals, note , at Section IX.D. In a brief 
filed in Sanders v. John Nuveen & Co., 619 F.2d 1222 (7th Cir. 
1980), the Commission stated that the standard of care under Section 
12(a)(2) (formerly Section 12(2)) is less demanding than that 
prescribed by Section 11:
    [I]t would be inconsistent with the statutory scheme to apply 
precisely the same standards to the scope of an underwriter's duty 
under Section 12[(a)](2) as the case law appropriately has applied 
to underwriters under Section 11. Because of the vital role played 
by an underwriter in the distribution of securities, and because the 
registration process is integral and important to the statutory 
scheme, we are of the view that a higher standard of care should be 
imposed on those actors who are critical to its proper operations. 
Since Congress has determined that registration is not necessary in 
certain defined situations, we believe that it would undermine the 
Congressional intent--that issuers and other persons should be 
relieved of registration--if the same degree of investigation were 
to be required to avoid potential liability whether or not a 
registration statement is required.
    Brief for SEC in Nos. 74-2047 and 75-1260 (CA7), Sanders v. John 
Nuveen & Co., 554 F.2d 790 (7th Cir., 1977), p. 69, as quoted by 
Powell, J., dissenting to the denial of certiorari in John Nuveen & 
Co. v. Sanders, 450 U.S. 1005 (U.S., 1981).

    \432\ See the 1998 proposals, note 30, at Section IX.
---------------------------------------------------------------------------

V. Securities Act Registration Rules and Amendments

A. Overview

    As discussed above and in the Proposing Release, enhanced 
requirements for reporting under the Exchange Act for public issuers 
have been intended to improve the quality and currency of disclosure 
under the Exchange Act. Together with technological advances, these 
developments provide the basis for the rules we are adopting today to 
modernize many procedural aspects of securities offerings registered 
under the Securities Act.
    Our new rules cover the registration procedures for seasoned and 
unseasoned issuers, and seek to streamline the registration process for 
most types of reporting issuers. These rules include:
     A more flexible automatic registration process for well-
known seasoned issuers;
     Modifications that clarify and expand how and when 
information can be included in registration statements;
     A clarification of the Securities Act liability treatment 
of information provided in a prospectus supplement and Exchange Act 
reports incorporated by reference;
     Modification of the timing of effectiveness of shelf 
registration statements applicable to issuers in certain cases; and
     Rules relating to non-shelf offerings of securities.

B. Procedural Rules

1. Procedural Changes Regarding Shelf Offerings
a. Overview
    We are adopting changes to the operation of the shelf registration 
system under the Securities Act. These new provisions involve:
     Clarifying and codifying the information to be included in 
and omitted from base prospectuses in shelf registration statements;
     Codifying the manner of inclusion of information in the 
final prospectus;
     Providing for the treatment of prospectus supplements; and
     Liberalizing certain of the requirements under Securities 
Act Rule 415, including:
     Eliminating the two-year limitation for registered 
securities for a delayed offering;
    [cir] Eliminating the ``at-the-market'' offering restrictions for 
issuers registering primary equity offerings on Form S-3 or Form F-3;
    [cir] Eliminating the prohibition against immediate takedowns off 
delayed shelf registration statements; and
    [cir] Making conforming changes to Rule 424 regarding the filing of 
prospectus supplements.
    Commenters strongly supported the proposed procedural changes to 
the Securities Act registration process.\433\ A number of commenters on 
these proposed changes, while supporting the automatic shelf 
registration proposals for well-known seasoned issuers, believed that 
all seasoned issuers should be able to use certain of the elements of 
automatic shelf registration such as identification of selling security 
holders in prospectus supplements, omission of most information from 
base prospectuses, and addition of new securities and new registrants 
by automatically effective post-effective amendments.\434\ As discussed 
in greater detail below, we are adopting the procedural changes with 
some modifications.
---------------------------------------------------------------------------

    \433\ See, e.g., letters from ABA; Alston; Citigroup; Cleary; 
Davis Polk; Fried Frank; IBA; NYCBA; NYSBA; S&C SIA; and TBMA.
    \434\ See, e.g., letters from ABA; Alston; Citigroup; Cleary; 
Davis Polk; NYCBA; NYSBA; S&C SIA; and TBMA.
---------------------------------------------------------------------------

b. Information in a Prospectus
i. Mechanics
(A) Rule 430B
    Rule 415 provides for continuous or delayed offerings and is, 
therefore, the foundation for shelf registration. Primary offerings on 
a delayed basis may be registered by certain seasoned issuers only. A 
number of other delayed or continuous offerings may be undertaken or 
registered by any issuer, including offerings on a continuous basis of 
securities issued on exercise of outstanding options or warrants or 
conversion of other securities, offerings on a continuous basis under 
dividend reinvestment plans, offerings on a continuous basis under 
employee benefit plans, and offerings solely on behalf of selling 
security holders. Rule 415 also permits registration by any issuer of a 
continuous offering that will commence promptly and may continue for 
more than 30 days from the date of initial effectiveness.\435\
---------------------------------------------------------------------------

    \435\ See Securities Act Rule 415(a)(1)(ix) [17 CFR 
230.415(a)(1)(ix)].
---------------------------------------------------------------------------

    Many of the types of offerings contemplated by Rule 415 can be 
accomplished using a prospectus that is complete at the time of 
effectiveness of the related registration statement and therefore may 
not require a supplement because there may be no additional information 
to include in the prospectus.\436\ There are a number of

[[Page 44771]]

offerings contemplated by Rule 415, however, such as a delayed 
offering, in which the prospectus included in the related registration 
statement at the time of effectiveness, usually referred to as a ``base 
prospectus,'' must be supplemented to reflect the final terms of the 
security and offering for each particular offering of securities. In 
addition, in continuous or delayed offerings employing shelf 
registration under Rule 415, there may be circumstances where a 
prospectus will be supplemented other than at the time of a takedown.
---------------------------------------------------------------------------

    \436\ The terms of the securities being offered and the plan of 
distribution are often complete at the time of effectiveness and not 
subject to change. Where the offering is not registered on Form S-3 
or Form F-3, updating information in the registration statement 
regarding the issuer cannot be included in future periodic reports 
filed under the Exchange Act and incorporated by reference, and 
therefore must be included in the prospectus contained in the 
registration statement by a post-effective amendment. In that case, 
the new form of prospectus included in the amended registration 
statement is then complete at the new effective date and therefore 
also does not require a supplement.
---------------------------------------------------------------------------

    Rule 424 provides the framework for the filing of each type of 
prospectus and prospectus supplement. There currently is no rule, 
however, that specifies the relationship between the base prospectus 
and prospectus supplements and the information that may be omitted from 
or included in one or the other. We are adopting with some 
clarifications from the proposals a new rule, Rule 430B, which we 
intend to achieve that purpose by codifying existing practice in most 
respects and liberalizing the framework for the registration process in 
certain areas.\437\ We also are adopting Rule 430C which addresses the 
treatment of prospectuses and prospectus supplements for all registered 
offerings not covered by Rule 430B and for prospectuses not covered by 
Rule 430A.
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    \437\ We also are making conforming changes to Rule 424.
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    Rule 430B is a shelf offering corollary to existing Rule 430A, in 
that it describes the type of information that primary shelf eligible 
and automatic shelf issuers may omit from a base prospectus in a Rule 
415 offering and include instead in a prospectus supplement, Exchange 
Act report incorporated by reference, or a post-effective 
amendment.\438\
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    \438\ Issuers cannot rely on Rule 430B for offerings made in 
reliance on other provisions of Rule 415(a). For example, issuers 
that are not primary shelf eligible, but that are eligible to 
register securities for resale on behalf of selling security holders 
in reliance on General Instruction I.B.3 of Form S-3 or register the 
issuance of securities on exercise or conversion of outstanding 
securities pursuant to General Instruction I.B.4 of Form S-3, would 
not be eligible to rely on this Rule, but would instead be subject 
to Rule 430C.
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    Rule 430B covers the following types of offerings:
     Offerings by well-known seasoned issuers registered on 
automatic shelf registration statements;
     Immediate, delayed, and continuous primary offerings by 
primary shelf eligible issuers pursuant to Rule 415(a)(1)(x), including 
asset-backed issuers eligible to register their offerings on Form S-3;
     Secondary offerings by certain primary shelf eligible 
issuers, including for the purpose of adding information regarding the 
identities of and amounts of securities to be sold by selling security 
holders; and
     Offerings of mortgage-backed securities permitted by Rule 
415(a)(1)(vii) that generally are registered on Form S-11.\439\
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    \439\ 17 CFR 239.18.

    Rule 430C covers all registered offerings that are not covered by 
Rule 430B and prospectuses that are not covered by Rule 430A.\440\
    Rule 430B generally is consistent with current requirements and 
practice for shelf registration statements for delayed offerings on 
Forms S-3 and F-3.\441\ Under Rule 430B, a base prospectus in a shelf 
registration statement must comply with the applicable form 
requirements but can, as has been the case before today's new rules, 
continue to omit information that is unknown or not reasonably 
available to the registrant pursuant to Rule 409.\442\
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    \440\ As we discuss below, Rule 430C provides that all 
prospectuses and prospectus supplements filed pursuant to Rule 424 
and Rule 497(b), (c), (d), and (e) (other than for offerings relying 
on Rule 430B or prospectuses covered by Rule 430A) are deemed part 
of and included in the related registration statement as of the date 
of first use. Rule 430C applies to prospectuses filed in offerings 
made in reliance on Rule 430A to the extent the prospectus or 
prospectus supplement is not covered by Rule 430A.
    \441\ Rule 430B liberalizes current requirements in certain 
respects, and significantly liberalizes requirements for automatic 
shelf registration statements, as discussed in Section V.B.2 below 
under ``Automatic Shelf Registration for Well-Known Seasoned 
Issuers.''
    \442\ See Rule 430B and Rule 409 [17 CFR 230.409]. The base 
prospectus still must include, for other than automatic shelf 
registration statements, general descriptions of the types of 
securities and possible plans of distribution.
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    Rule 430B provides that a base prospectus that omits information as 
provided in the Rule will be a permitted prospectus.\443\ Thus, after a 
registration statement is filed, offering participants can use a base 
prospectus that omits information in accordance with the Rule. In 
addition, issuers can communicate using Rule 134 notices, and issuers 
and other offering participants can use free writing prospectuses under 
Rules 164 and 433. Commenters supported proposed Rule 430B because of 
the level of certainty it would provide for delayed offerings off of 
shelf registration statements.\444\
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    \443\ The Rule codifies that such a prospectus will satisfy the 
requirements of Securities Act Section 10 for purposes of Securities 
Act Section 5(b)(1).
    For asset-backed securities offerings made in reliance on 
General Instruction I.B.5 of Form S-3, because those issuers do not 
have to satisfy a reporting history requirement, asset-backed 
securities offerings often must present most of their disclosure in 
the base prospectus and prospectus supplements rather than 
incorporate such information by reference into the registration 
statement. Thus, for purposes of Section 10, a prospectus for an 
asset-backed securities offering must include the format of deal-
specific information in the base prospectus or the base prospectus 
and a prospectus supplement. See Asset-Backed Securities Adopting 
Release, note , at Section III.A.3.b. and General Instruction V. to 
Form S-3.
    \444\ See, e.g., letters from Alston; NYCBA; and NYSBA.
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(B) Means for Providing Information
    A base prospectus that omits statutorily required information is 
not a Securities Act Section 10(a) final prospectus, and today's rules 
do not change that fact. To satisfy the requirements of Securities Act 
Section 10(a), as is the case with shelf registration statements today, 
an issuer must include the information omitted from the base prospectus 
in:
     A prospectus supplement;
     A post-effective amendment; or
     Where permitted as described below, through its Exchange 
Act filings that are incorporated by reference into the registration 
statement and prospectus that is part of the registration statement and 
identified in a prospectus supplement.

Information included in a base prospectus or in an Exchange Act 
periodic report incorporated into a prospectus is included in the 
registration statement. Rule 430B makes clear that prospectus 
supplements and information in them also will be deemed to be part of 
and included in the registration statement.\445\
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    \445\ In the 1998 proposals, we expressed our belief that 
prospectus supplements and the information contained in them are 
subject to liability under Section 11. The rules we adopt today 
codify that position. See 1998 proposals, note 30, at Section V.C.1.
---------------------------------------------------------------------------

    The rules we are adopting today provide primary shelf eligible 
issuers and well-known seasoned issuers with automatic shelf 
registration statements the ability to add to a prospectus, by means 
other than a post-effective amendment to the registration statement, 
more additional or omitted information than is currently the case.\446\ 
We are adopting amendments to Forms S-3 and F-3 to permit all 
information required in the prospectus about the issuer and its 
securities to be incorporated by reference from Exchange Act 
reports.\447\ Such

[[Page 44772]]

information also can be contained in the prospectus or a prospectus 
supplement.\448\ For example, material changes in the plan of 
distribution, which currently are required to be included in post-
effective amendments, can be amended under our new rules by 
incorporated Exchange Act reports or prospectus supplements.\449\ Rule 
430B also requires that a prospectus supplement be prepared and filed 
pursuant to Rule 424 if omitted information about an offering, such as 
the terms of the offering, the securities, the plan of distribution, or 
the selling security holders, is included in an Exchange Act report 
incorporated by reference. The prospectus supplement filed pursuant to 
Rule 424 must disclose the Exchange Act report or reports containing 
such information. This disclosure will assist investors and the markets 
in locating this offering-related information and will also be 
consistent with the treatment of other prospectus supplements filed for 
these purposes.
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    \446\ Issuers still have the flexibility to file post-effective 
amendments to include the information.
    \447\ The amendments to Forms S-3 and F-3 explicitly permit 
information otherwise required in the prospectus directly pursuant 
to Item 3 through Item 11 of Form S-3 and Item 3 through Item 5 of 
Form F-3 to be included in this manner.
    \448\ The changes to Form S-3 and Form F-3 are intended to allow 
the disclosure requirements to be satisfied through incorporation by 
reference, or through a filed prospectus or prospectus supplement, 
not to change the timing of when the information must be included.
    \449\ As noted above, under today's rules, prospectus 
supplements and the information contained in them are deemed to be 
part of and included in the registration statement.
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(C) Identification of Selling Security Holders Following Effectiveness
(1) Scope of Provision
    As we discussed in the Proposing Release, transfers of restricted 
securities can occur after a private placement is completed so that the 
identities of the holders of those restricted securities at the time of 
filing the resale registration statement may not be known to the 
issuer.\450\ Filing post-effective amendments to add new or previously 
unidentified security holders can impose delays. To alleviate the 
timing concern arising from an issuer's inability to identify selling 
security holders prior to effectiveness, we are including provisions to 
allow issuers eligible to use Form S-3 or Form F-3 for primary 
offerings in reliance on General Instruction I.B.1 to those Forms \451\ 
to identify selling security holders and the amounts of securities to 
be registered on behalf of each of them after effectiveness.
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    \450\ Currently, the staff in the Division of Corporation 
Finance requires all issuers registering securities for the benefit 
of selling security holders to include the names of selling security 
holders in the registration statement either prior to effectiveness 
or through a post-effective amendment to the registration statement, 
with limited exceptions for the identities of security holders 
owning a de minimis amount of the issuers securities (less than 1%) 
or receiving the securities as a result of a donative transfer.
    \451\ General Instruction I.B.1 to Form S-3 and Form F-3 permits 
reporting issuers that are current and timely in their periodic and 
current reporting obligations under the Exchange Act and that have 
$75 million in non-affiliate voting and non-voting common equity 
market capitalization to register securities offerings for cash on 
Form S-3 and Form F-3 for the benefit of the issuer or selling 
security holders. Blank check companies, shell companies, and penny 
stock issuers are not eligible to rely on this provision.
---------------------------------------------------------------------------

    Rule 430B and amendments to Form S-3 and Form F-3, as adopted, 
permit eligible seasoned issuers to add the identities of the selling 
security holders and all information about them, as required by Item 
507 of Regulation S-K,\452\ to the registration statement covering the 
resale of their securities after effectiveness by:
---------------------------------------------------------------------------

    \452\ 17 CFR 229.507.
---------------------------------------------------------------------------

     An amendment to that registration statement;
     A prospectus supplement; or

     An Exchange Act report incorporated by reference into the 
registration statement (subject to filing a prospectus supplement 
identifying such report).\453\
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    \453\ As we are amending Rule 424 today, prospectus supplements 
may be filed in connection with selling security holders offerings, 
to add selling security holders omitted pursuant to Rule 430B and to 
provide supplemental or additional information. The filing of a 
prospectus supplement to include the identity of omitted selling 
security holders pursuant to Rule 424(b)(7) will be deemed to be a 
new effective date of the registration statement for Section 11 
liability purposes of the issuer and underwriter. Under the 
Securities Act, selling security holders may be underwriters in 
connection with the distribution of the securities being registered 
for resale on their behalf.
---------------------------------------------------------------------------

    We have revised this provision from the proposal to clarify that 
this ability to identify selling security holders after effectiveness 
will be available only if:
     The registration statement is an automatic shelf 
registration statement; \454\ or
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    \454\ See Section V.B.2 below under ``Automatic Shelf 
Registration for Well-Known Seasoned Issuers.''
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     All of the following are satisfied:
    [cir] The resale registration statement identifies the initial 
offering transaction or transactions pursuant to which the securities, 
or securities convertible into such securities, were sold; \455\
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    \455\ The Rule requires disclosure of the initial offering 
transaction pursuant to which the sales were made, not any 
subsequent resale transactions.
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    [cir] The initial offering of the securities, or the securities 
convertible into such securities, is completed; and
    [cir] The securities, or the securities convertible into such 
securities, that are the subject of the registration statement are 
issued and outstanding prior to initial filing of the resale 
registration statement.
    An issuer registering the resale of securities sold in a private 
offering may not rely on this provision to identify after effectiveness 
selling security holders who will acquire the securities directly from 
the issuer if the securities are not yet issued in the private 
offering, even where the investors are contractually bound to acquire 
the securities.\456\ The issuer can still register the resale of the 
not-yet-issued securities, but it must identify the selling security 
holders in the registration statement at the time of filing and prior 
to effectiveness because the issuer will know the identities of the 
selling security holders who will acquire the securities from it.
---------------------------------------------------------------------------

    \456\ These types of offerings include PIPE transactions 
discussed in note 182 above.
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    We believe that it is important for issuers to be able to satisfy 
their contractual registration obligations to selling security holders 
in registering their resales, while also assuring that offerings are 
properly registered and the selling security holders and the securities 
to be sold by them are identified in the registration statement. The 
purpose of this provision of Rule 430B is to provide a more convenient 
method to identify selling security holders in registration statements, 
and not to change the existing responsibilities and liabilities of 
issuers and these selling security holders under the federal securities 
laws.
(2) Comments on Identification of Selling Security Holders
    Commenters expressed support for the proposals to allow seasoned 
issuers the ability to identify selling shareholders after 
effectiveness.\457\ As with many of the other proposals, some believed 
that this flexibility also should be extended to unseasoned 
issuers.\458\ In addition, one commenter suggested that we eliminate 
the proposed requirement that the issuer identify any known selling 
security holders prior to effectiveness, because some selling security 
holders known to the issuer may not have consented to the inclusion of 
their names in the prospectus.\459\
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    \457\ See, e.g., letters from Alston; ABA; and Davis Polk.
    \458\ See, e.g., letters from ABA; NYCBA; NYSBA; and TBMA.
    \459\ See letter from Fried Frank.
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    In response to commenters' suggestions, we have clarified that the 
initial transaction that the issuer must disclose in the resale 
registration statement must be the initial offering transaction in 
which the securities were

[[Page 44773]]

initially sold, not a resale transaction in which any particular 
selling security holder may have acquired the securities. The goal of 
the disclosure is to clearly link the securities being registered for 
resale to a completed initial offering. Moreover, we have revised the 
instructions to Form S-3 and Form F-3 to eliminate any requirement to 
name any selling security holders prior to effectiveness if the 
conditions of Rule 430B are satisfied.
    Commenters also suggested that we should allow all issuers to be 
able to identify selling security holders after effectiveness.\460\ We 
have determined not to extend this flexibility to all issuers. We 
believe that issuers that are not eligible to file a primary offering 
on Form S-3 or Form F-3 are more prone, in general, to engage in 
transactions some of which have raised disclosure and registration 
issues.\461\ As a result, we believe it is important to have complete 
selling security holder information and be able to review that 
information in registration statements to assure compliance with 
Section 5 and our disclosure rules in connection with these offerings.
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    \460\ See, e.g., letters from ABA; NYCBA; NYSBA; and TBMA.
    \461\ See note 182 above.
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ii. Information Deemed Part of Registration Statement
    We are adopting provisions in Rule 430B that will make clear that 
information contained in a prospectus supplement required to be filed 
under Rule 424, whether in connection with a takedown or otherwise, 
will be deemed part of and included in the registration statement 
containing the base prospectus to which the prospectus supplement 
relates. We also are adopting new Rule 430C that has similar provisions 
regarding the treatment of prospectus supplements, which applies to 
offerings not covered by Rule 430B and prospectuses not covered by Rule 
430A. As a result of Rule 430B and Rule 430C, prospectus supplements 
required to be filed under Rule 424 or Rule 497(b), (c), (d), or (e) 
will, in all cases, be deemed to be part of and included in 
registration statements for purposes of Securities Act Section 11.
iii. Date of Inclusion of Prospectus Supplements in Registration 
Statements and New Effective Dates of Registration Statements
(A) Scope of Provisions
    Rule 430B and Rule 430C, as adopted, deem information contained in 
prospectus supplements to be part of and included in the registration 
statement as follows:
     For a prospectus supplement required to be filed other 
than in connection with a takedown of securities, all information 
contained in that prospectus supplement will be deemed part of and 
included in the registration statement as of the date the prospectus 
supplement is first used; \462\ and
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    \462\ We already have made clear that the date of first use for 
purposes of Securities Act Rule 424 is not the date that the 
prospectus supplement is given to a purchaser in connection with a 
sale. Rather, it refers to the date that the prospectus is available 
to the managing underwriter, syndicate member, or any prospective 
purchaser. See Elimination of Certain Pricing Amendments and 
Revision of Prospectus Filing Procedures, Release No. 33-6714 (May 
27, 1987) [52 FR 21252].
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     Under Rule 430B only, for a prospectus supplement required 
to be filed in connection with a takedown of securities pursuant to 
Rule 424(b)(2), (b)(5), or (b)(7), all information in that prospectus 
supplement will be deemed part of and included in the registration 
statement as of the earlier of the date it is first used or the date 
and time of the first contract of sale of securities in the offering to 
which the prospectus supplement relates.\463\
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    \463\ These new provisions determine when a prospectus 
supplement is deemed part of the registration statement for 
Securities Act Section 11 purposes. They do not affect the 
determination of when information is conveyed to a purchaser for 
Section 12(a)(2) liability purposes.
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    We have chosen the triggering dates for prospectus supplements to 
be deemed part of and included in registration statements for a number 
of reasons. First, under Rule 430B and Rule 430C, for a prospectus 
supplement filed other than in connection with a takedown, we have 
chosen the date of first use as the appropriate date for it to be 
deemed part of and included in the registration statement because that 
is the date on which the prospectus supplement updates the information 
in the registration statement.\464\ Second, under Rule 430B, a 
prospectus supplement filed in connection with a takedown pursuant to 
Rule 424 will be deemed part of and included in the registration 
statement as of the earlier of when it is first used or the date and 
time of the first contract of sale of the securities to which the 
prospectus supplement relates. This timing, combined with the new 
effective date provisions discussed below, provides the appropriate 
timing for assessing liability under Section 11 for issuers and 
underwriters.
---------------------------------------------------------------------------

    \464\ See amendments to Securities Act Rule 412(a) [17 CFR 
230.412(a)].
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(B) New Effective Date for Section 11 Purposes
    Rule 430B also establishes a new effective date for a shelf 
registration statement for Section 11 liability purposes only for the 
issuer and for a person that is at the time an underwriter.\465\ That 
new effective date will be the date a prospectus supplement filed in 
connection with the takedown or takedowns is deemed part of the 
relevant registration statement.\466\ For purposes of liability under 
Section 11 of the issuer and any underwriter at the time only, the new 
effective date will be as to the part of the registration statement 
relating to the securities to which such prospectus relates. The part 
of the registration statement will consist of all information included 
in the registration statement and any prospectus relating to the 
offering of the securities as of the new effective date and all 
information included in reports and materials incorporated by reference 
into the registration statement and prospectus as of such date relating 
to the offering, and in each case, not modified or superseded pursuant 
to Rule 412. The part of the registration statement will include 
information relating to the offering in a prospectus already included 
in the registration statement. This includes, for example, a form of 
prospectus containing information relating to the offering and 
previously filed pursuant to Rule 424(b)(3) other than in connection 
with the takedown in question, where the information has not been 
modified or superseded. These provisions also will reconcile the 
effective date for shelf offerings for issuers and underwriters with a 
comparable date for non-shelf offerings. We believe the Rule also will 
eliminate the unwarranted, disparate treatment of underwriters and 
issuers under Section 11.\467\
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    \465\ We also are amending Rule 158 to include conforming 
changes to the effective date for purposes of the last paragraph of 
Securities Act Section 11(a).
    Under Rule 430C, the filing of prospectus supplements will not 
trigger new effective dates of the registration statement.
    \466\ The new effective date will not, however, be considered 
the filing of a new registration statement for purposes of Form 
eligibility. See Securities Act Rule 401.
    \467\ Currently, there can be a mismatch between issuers and 
underwriters in the time that liability is assessed. For example, in 
an offering off a shelf registration statement, an issuer could have 
its liability assessed as of the date of the registration 
statement's initial effectiveness (or post-effective amendment) or 
the most recent updating required under Securities Act Section 
10(a)(3), while the liability of an underwriter would be assessed at 
the later time when it became an underwriter. In such a case, 
underwriters in takedowns occurring after the date of initial 
effectiveness (or post-effective amendment) or the Section 10(a)(3) 
update would be subject to liability under Section 11 for an 
issuer's Exchange Act reports incorporated by reference into the 
prospectus included in the registration statement after that date 
while issuers would not. Rule 430B results in most cases in the date 
of effectiveness of a registration statement for an issuer and 
underwriter in a particular offering being close in time.

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[[Page 44774]]

    At the same time, we believe that for other persons, including 
directors, signing officers, and experts, the filing of a form of 
prospectus should not result in a later Section 11 liability date than 
that which applied prior to our new rules.\468\ Therefore, under Rule 
430B, except for an effective date resulting from the filing of a form 
of prospectus for purposes of updating the registration statement 
pursuant to Section 10(a)(3) or reflecting fundamental changes in the 
information in the registration statement pursuant to the issuer's 
undertakings, the prospectus filing will not create a new effective 
date for directors or signing officers of the issuer. Any person 
signing any report or document incorporated by reference in the 
prospectus that is part of the registration statement or the 
registration statement, other than a document filed for the purposes of 
updating the prospectus pursuant to Section 10(a)(3) or reflecting a 
fundamental change, is deemed not to be a person who signed the 
registration statement as a result. The new effective date also does 
not apply to a person that becomes an underwriter after that effective 
date; in that case Securities Act Section 11(d) provides that the date 
the person became an underwriter is its effective date.\469\
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    \468\ Prior to today's amendments, Rule 158(c) provided that, 
for purposes of the last paragraph of Section 11(a), a new effective 
date is deemed to be the latest to occur of (1) the effective date 
of the registration statement, (2) any post-effective amendment next 
preceding a particular sale of registered securities by the issuer 
filed to update the registration statement pursuant to Section 
10(a)(3) or to reflect in the prospectus fundamental changes in the 
information in the registration statement or add any material 
information about or reflect any material changes in the plan of 
distribution; or (3) the date of filing of the last report of the 
issuer incorporated by reference into the prospectus and relied on 
in lieu of filing a post-effective amendment to effect a Section 
10(a)(3) update to the registration statement or to reflect a 
fundamental change in the information in the registration statement, 
next preceding a particular sale by the issuer of registered 
securities.
    \469\ Securities Act Section 11(d) provides in part, ``If any 
person becomes an underwriter with respect to the security after the 
part of the registration statement with respect to which his 
liability is asserted has become effective, then * * * such part of 
the registration statement shall be considered as having become 
effective with respect to such person as of the time when he became 
an underwriter.''
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    We also are not changing the effective date for auditors who 
provided consent in an existing registration statement for their report 
on previously issued financial statements or previous reports on 
management's assessment of internal control over financial reporting, 
unless a prospectus supplement (and any Exchange Act report 
incorporated by reference into the prospectus and registration 
statement) or post-effective amendment contains new audited financial 
statements or other information as to which the auditor is an expert 
and for which a new consent is required.\470\ As to any other expert, 
the filing of the prospectus supplement also will not trigger a new 
effective date, and thus will not require the filing of a consent, 
unless the prospectus supplement (including incorporated Exchange Act 
reports) includes a new report or opinion of an expert whose consent is 
required pursuant to Section 7 and who will have liability pursuant to 
Section 11. For example, a prospectus supplement filed in connection 
with one or more takedowns of securities that did not include other 
disclosure (including through incorporated Exchange Act reports) for 
which the consent of an expert is required pursuant to Securities Act 
Section 7 and Securities Act Rule 436 will not require consents to be 
filed.
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    \470\ New audited financial statements or other information as 
to which the accountant is an expert and for which a new consent is 
required under Securities Act Section 7 [15 U.S.C. 77g] or 
Securities Act Rule 436 [17 CFR 230.436] includes any financial 
statements filed pursuant to Article 3 of Regulation S-X [17 CFR 
210.3-01 et seq.] after the date of the last consent by the 
accountant, including those that are restated. Examples of such 
audited financial statements and financial information are (1) a 
restatement of the issuer's or a guarantor's financial statements, 
(2) financial statements required under Rule 3-05 of Regulation S-X 
[17 CFR 210.3-05], and (3) financial statements that are required 
under Rule 3-14 of Regulation S-X [17 CFR 210.3-14]. In addition, a 
new consent is required when the accountant's report on management's 
assessment of the registrant's internal control over financial 
reporting is changed.
    In the event a new consent is required, that consent may be 
filed by a post-effective amendment to the registration statement or 
by filing an Exchange Act report, such as an annual report on Form 
10-K or a report on Form 8-K or Form 6-K, which is incorporated by 
reference into the registration statement. Under Rule 430B, a report 
pursuant to Rule 10-01(d) of Regulation S-X [17 CFR 210.10-01] on 
unaudited interim financial information by an accountant which has 
conducted a review of such interim financial information would not 
require the consent of such accountant under Rule 436. Such a report 
is not considered part of a registration statement prepared or 
certified by an accountant or a report prepared or certified by an 
accountant within the meaning of Securities Act Sections 7 and 11.
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    Including information contained in prospectus supplements in 
registration statements and triggering new effective dates for the 
issuer and underwriter will provide and preserve important investor 
protections under the Securities Act. We believe that these 
modifications are appropriate to ensure issuer liability for 
information included in the registration statement at the time of the 
prospectus supplement filing.
(C) Comments on Prospectus Supplements and New Effective Dates
    A number of commenters addressed the provisions providing for new 
effective dates of registration statements at the time of filing of 
prospectus supplements for takedowns off shelf registration 
statements.\471\ Commenters supporting these proposals agreed that, as 
to shelf registration statement takedowns, the liability of issuers 
under Section 11 should be brought into line with the liability of 
underwriters.\472\ A number of commenters were concerned with the 
liability of auditors, other experts, and outside directors that would 
arise under Section 11 as of the new effective date of the registration 
statement.\473\ While some commenters believed that the Rule should 
provide that a new auditor's consent is not required in connection with 
the takedown and new effective dates, others believed that unless the 
Rule was clear that the takedown would not be a new effective date for 
auditors and other experts, we should require that consents of these 
experts be provided at the new effective date.\474\
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    \471\ See, e.g., letters from ABA; AICPA; Alston, BDO Seidman; 
Deloitte; E & Y; KPMG; PwC; and SIA.
    \472\ See, e.g., letters from ABA and SIA.
    \473\ See, e.g., letters from ABA; AICPA; Alston, BDO Seidman; 
Deloitte; E & Y; KPMG; and PwC.
    \474\ One commenter expressed concern that requiring an auditor 
to give a consent before a shelf takedown would impose undue delays 
on the offering process. See letter from ABA. The commenter noted 
that, although auditor ``bring-down'' procedures are customary in 
connection with a comfort letter, these procedures currently do not 
delay pricing.
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    We have revised Rule 430B in response to commenters' concerns about 
new effective dates as we discuss above. We believe that these changes 
should provide clarity for auditors, among others, that a new effective 
date for them is not created and that new consents and corresponding 
procedures are not required as a result of Rule 430B.
iv. Amendments to Rule 415
(A) Elimination of Limitation on Amount of Securities Registered
(1) Revised Provisions
    Prior to today's amendments, Rule 415(a)(2) limited the amount of 
securities that could be registered where the registration statement 
pertained to offerings pursuant to Rule 415(a)(1)(viii), (ix), and (x). 
Rule 415(a)(2) limited the amount of securities that could be 
registered in

[[Page 44775]]

these offerings to an amount which, at the time the registration 
statement became effective, was reasonably expected to be offered and 
sold within two years from the initial effective date of a registration 
statement.
    For offerings under Rule 415(a)(1)(x) and continuous offerings 
under Rule 415(a)(1)(ix) in each case that are registered on Form S-3 
or Form F-3, we are eliminating the provision in Securities Act Rule 
415(a)(2) that limits the amount of securities registered. The two-year 
limitation was designed to ensure that the issuer had a bona fide 
intention to offer and sell securities in the proximate future.\475\ We 
are eliminating this requirement for these offerings because we do not 
believe that it provides any significant investor protection.\476\
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    \475\ See Securities Act Section 6(a) [15 U.S.C. 77f(a)] and 
Proposed Revision of Regulation S-K and Guides for the Preparation 
and Filing of Registration Statements and Reports, Release No. 33-
6276 at Part III.E (Dec. 23, 1980) [46 FR 78].
    \476\ We are retaining the limitation for business combination 
transactions registered under Rule 415(a)(viii) and continuous 
offerings under Rule 415(a)(ix) that are not registered on Form S-3 
or Form F-3.
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    However, under the amendments to Rule 415 we are adopting today, 
that shelf registration statement can only be used for three years 
(subject to a limited extension) after the initial effective date of 
the registration statement.\477\ Under the revised rule, new shelf 
registration statements must be filed every three years, with unsold 
securities and fees paid thereon allowed to be included on the new 
registration statement, where the shelf registration statement relates 
to:
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    \477\ The rules adopted today do not limit the amount that can 
be registered and provide for unused amounts to be carried forward.
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     Offerings registered on an automatic shelf registration 
statement; or
     Offerings of securities described in Rule 415(a)(vii), 
(ix), or (x).\478\
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    \478\ In the Proposing Release we sought comment on whether Rule 
415(a)(1)(vii), which permits shelf offerings of mortgage related 
securities, should be eliminated. We have decided to retain Rule 
415(a)(1)(vii), but have also determined that the requirement of a 
new shelf registration statement every three years should apply to 
offerings of these securities.
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    Automatic shelf registration statements are immediately effective, 
as discussed below. In other cases, as long as the new shelf 
registration statement is filed within three years of the original 
effective date of the old registration statement the issuer may 
continue to offer and sell securities from the old registration 
statement for up to six months thereafter until the new registration 
statement is declared effective.\479\ Prior to effectiveness of the new 
registration statement (including at the time of filing for an 
automatic shelf registration statement), the issuer can amend the later 
registration statement to include any securities (and fees attributable 
to such securities) remaining unsold on the older registration 
statement. We believe that allowing issuers to continue to offer and 
sell securities off the old registration statement for an additional 
six months after filing the new registration statement pending 
effectiveness of the new registration statement, and then including any 
securities remaining unsold on the new registration statement, will 
preserve the ability of these issuers to continue to use their shelf 
registration statements to access the capital markets. The additional 
six-month time period will not impact adversely our decision to have 
new shelf registration statements filed every three years. In addition, 
continuous offerings begun prior to the end of the three years can 
continue on the old registration statement until the effective date of 
the new registration statement if they are permitted to be made under 
the new registration statement.
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    \479\ The six-month extension does not apply to automatic shelf 
registration statements, since they will go effective immediately 
upon filing. See discussion in Section V.B.2 below under ``Automatic 
Shelf Registration for Well-Known Seasoned Issuers.''
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    We believe that, especially with our liberalization of procedures 
for shelf registration, particularly automatic shelf registration as 
described below, the precise contents of shelf registration statements 
may become difficult to identify over time, and that markets will 
benefit from a periodic updating and consolidation requirement.\480\ 
The new registration statement will include the disclosures then 
required under the applicable form and our rules.
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    \480\ See, for example, our revisions to Securities Act Rule 412 
to permit information in registration statements and prospectuses to 
be modified or superseded by subsequently filed Exchange Act reports 
and prospectus supplements and our amendments to Forms S-3 and F-3 
to permit most information to be included in the prospectus through 
incorporation by reference.
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(2) Comments on Elimination of Limitation on Amount of Securities 
Registered
    Commenters supported most of the proposed changes to Rule 415.\481\ 
Some commenters were concerned that the requirement to file a new shelf 
registration statement every three years could result in a blackout 
period between the end of the three years and effectiveness of the new 
registration statement, during which issuers could not continue to sell 
securities off their old registration statements.\482\ As noted above, 
we are maintaining the three-year requirement, but we are allowing the 
issuer to continue to offer and sell securities off its old 
registration statement until the earlier of the effectiveness of the 
new registration statement or six months after the timely filing of the 
new registration statement. We believe that this provision will 
eliminate any inappropriate blackout periods.
---------------------------------------------------------------------------

    \481\ See, e.g., letters from Brinson Patrick; NYCBA; and NYSBA.
    \482\ See, e.g., letters from ABA; Alston; BRT; NYCBA; S&C and 
SIA. One commenter suggested a five-year, rather than a three-year, 
time period to file a new automatic registration statement. See 
letter from NYCBA.
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(B) Immediate Takedowns From a Shelf Registration Statement Filed Under 
Rule 415(a)(1)(x)
    We are amending Securities Act Rule 415(a)(1)(x), as proposed, to 
allow primary offerings on Form S-3 or Form F-3 to occur immediately 
after effectiveness of a shelf registration statement.\483\ With 
respect to immediate offerings from an effective registration 
statement, our current rules permit omission of information from the 
prospectus at the time of effectiveness only in reliance on Securities 
Act Rule 430A.\484\ The changes we are adopting today affecting the 
treatment of prospectus supplements provides sufficient protection to 
investors to allow, in an immediate offering, omission of information 
under Rule 415 and Rule 430B.\485\ Commenters on this provision 
expressed support for allowing immediate takedowns off of shelf 
registration statements in reliance on Rule 415.\486\
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    \483\ See amendments to Securities Act Rule 415(a)(1)(x).
    \484\ See Prospectus Delivery; Securities Transactions 
Settlement, Release No. 33-7168 (May 11, 1995) [60 FR 26604] at 
Section II.A.5.
    \485\ Rule 430A continues to be available for immediate 
takedowns where the information omitted from a form of prospectus 
contained in the registration statement at the time of effectiveness 
omits only Rule 430A information. We are amending Rule 430A to 
enable the rule to be relied on by issuers using automatic shelf 
registration statements that go effective immediately.
    \486\ See, e.g., letters from NYCBA and NYSBA.
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(C) Eliminating ``At-the-Market'' Offering Restrictions for Seasoned 
Issuers
    The restrictions on primary ``at-the-market'' offerings of equity 
securities currently set forth in Rule 415(a)(4) were adopted initially 
to address concerns about the integrity of trading markets.\487\ As 
discussed in the

[[Page 44776]]

Proposing Release, we are eliminating these restrictions for primary 
shelf eligible issuers because they are not necessary to provide 
protection to markets or investors. The market today has greater 
information about seasoned issuers than it did at the adoption of the 
``at-the-market'' limitations, due to enhanced Exchange Act reporting. 
Further, trading markets for these issuers' securities have grown 
significantly since that time. Requiring the involvement of 
underwriters and limiting the amount of securities that can be sold 
imposes artificial limitations on this avenue for these issuers to 
access capital. Under our revised Rule, an issuer that is registering a 
primary equity shelf offering pursuant to Rule 415(a)(1)(x) can 
register an ``at-the-market'' offering of equity securities without 
identifying an underwriter in its registration statement \488\ and 
without a limitation on the amount of the offering. Issuers who are not 
eligible to register primary equity offerings using Rule 415(a)(1)(x) 
will still not be eligible to register ``at-the-market'' equity 
securities offerings. Commenters generally supported the removal of the 
restrictions on ``at-the-market'' offerings.\489\
---------------------------------------------------------------------------

    \487\ 17 CFR 230.415(a)(4). See Integrated Disclosure Release, 
note 23, at Section IV.B.2.d.
    \488\ Underwriters may, as in the case of other information, be 
included in the relevant prospectus supplement.
    \489\ See, e.g., letters from Brinson Patrick; NYCBA; and NYSBA.
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v. Rule 424 Amendments
    In conjunction with our other procedural rules, we are adopting 
certain companion modifications to Securities Act Rule 424. We are 
adding a separate new paragraph (b)(8) to Rule 424 for forms of final 
prospectuses not filed within the required timeframe under Rule 424. As 
we discuss below, this provision of Rule 424 will allow us to identify 
more readily final prospectuses not filed timely.\490\ As noted above, 
we also are adding a separate new paragraph (b)(7) under Rule 424 for 
filing of prospectuses identifying selling security holders.
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    \490\ A prospectus filed under new paragraph (b)(8) will still 
be characterized as ``required to be filed'' under the paragraph 
originally applicable to it. For example, a form of prospectus 
required to be filed under paragraph (b)(2) but filed under 
paragraph (b)(8) will still trigger a new effective date as provided 
in Rule 430B.
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    Commenters supported the amendments to Rule 424.\491\ Some 
commenters suggested additional revisions to Rule 424, including 
deleting references to paper copies \492\ and defining the phrase 
``date it is first used.\493\ We are adopting the changes to Rule 424 
essentially as proposed.\494\
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    \491\ See, e.g., letters from Alston and NYSBA.
    \492\ See, e.g., letters from Cleary and Davis Polk.
    \493\ See, e.g., letter from NYSBA.
    \494\ We have included in Rule 430B a provision regarding 
identification in prospectuses or prospectus supplements of Exchange 
Act reports filed to include certain omitted information in 
prospectuses and registration statements.
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vi. Elimination of Rule 434
    In the Proposing Release, we requested comment as to whether we 
should eliminate Rule 434 in its entirety.\495\ The commenters who 
responded to this request believed that the Rule is superfluous and 
should be eliminated.\496\ Because we believe that Rule 434 has been 
used only very rarely, and because our new rules regarding free writing 
prospectuses permit the use of written descriptions of the terms of the 
issuer's securities or of the offering, such as term sheets, under more 
flexible circumstances, we are eliminating Rule 434.\497\
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    \495\ Rule 434 has permitted the use of term sheets in 
connection with certain offerings.
    \496\ See letters from Cleary and Davis Polk.
    \497\ We have made conforming changes to the rules that 
reference Rule 434.
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vii. Issuer Undertakings
    We are adopting conforming revisions to the issuer undertakings 
that are required in connection with a shelf registration statement. 
These revisions reflect the issuer's agreement regarding the inclusion 
of information contained in prospectus supplements in registration 
statements and new effective dates of the registration statement on 
filing of a prospectus supplement.
(A) Treatment of Information in Prospectus Supplements
    Item 512(a) of Regulation S-K currently requires an issuer that has 
registered securities pursuant to Rule 415 to undertake to file a post-
effective amendment to the registration statement to:
     Include in the registration statement any prospectus 
required by Securities Act Section 10(a)(3);
     Reflect in a prospectus included in the registration 
statement any facts or events arising after the effective date of the 
registration statement (or the most recent post-effective amendment 
thereto) which, individually or in the aggregate, represent a 
fundamental change in the information set forth in the registration 
statement; and
     Include in a prospectus included in the registration 
statement any material information with respect to the plan of 
distribution not previously disclosed in the registration statement or 
any material change in such information in the registration 
statement.\498\
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    \498\ In addition, Item 512(a)(4) contains a provision under 
which foreign private issuers are required include an undertaking 
regarding the updating of the financial and other information in a 
shelf prospectus in accordance with the age of financial statements 
provisions under Item 8.A of Form 20-F. We are not modifying this 
requirement. Foreign private issuers will continue to be subject to 
this updating requirement, by a post-effective amendment or by 
incorporation by reference, as currently provided for under Item 
512(a)(4).
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    Currently, shelf issuers can satisfy the first two of these 
obligations by filing Exchange Act periodic reports that are 
incorporated by reference into the registration statement. We are 
amending the Item 512(a) undertaking as proposed to clarify that, in 
shelf registration statements filed on Forms S-3 and F-3, all the 
disclosures required by this undertaking also may be contained in any 
filed prospectus supplement deemed part of and included in a 
registration statement or any Exchange Act report, instead of only in 
periodic reports, that an issuer files that is incorporated by 
reference into the registration statement.\499\ As discussed below, we 
also are adopting as proposed the undertaking to allow automatic shelf 
issuers to include in this manner all other information that has been 
omitted from the base prospectus, subject in the case of a takedown of 
securities to the filing of a prospectus supplement. In the event that 
satisfaction of any element of the undertaking requires the filing by 
any of the permitted methods of a consent of an expert, that consent 
may be filed by post-effective amendment to Part II of the registration 
statement or by filing of an Exchange Act report, such as an annual 
report on Form 10-K or a report on Form 8-K or Form 6-K, that is 
incorporated by reference into the registration statement.\500\
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    \499\ This amendment will permit an issuer to use an 
incorporated Form 8-K (or incorporated Form 6-K) to satisfy this 
undertaking.
    \500\ See Securities Act Rule 436.
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(B) Prospectus Supplements Deemed Part of a Registration Statement and 
New Effective Dates
    To reflect the issuer's understanding of and agreement to the 
changes described above regarding inclusion of prospectus supplements 
in registration statements and new effective dates, we are including a 
new undertaking in which the issuer will agree that, consistent with 
Rules 430B and 430C, information in prospectus supplements is deemed 
part of and included in registration statements and that, consistent 
with Rule 430B, new effective dates as to the issuer and underwriter 
will occur in respect of

[[Page 44777]]

prospectuses related to certain shelf takedowns.\501\ The new 
undertaking will assure that the issuer agrees that it has liability 
for information that is included in or deemed part of the registration 
statement, that the liability of the issuer will be assessed as of the 
date such a prospectus supplement is deemed part of and included in the 
registration statement.\502\
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    \501\ See Rules 430B and 430C.
    \502\ With regard to the liability of directors, persons signing 
registration statements, and experts, see the discussion in Section 
V.B.1. above under ``Date of Inclusion of Prospectus Supplements in 
Registration Statements and New Effective Dates of Registration 
Statements.''
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    Because closed-end management investment companies use Securities 
Act Rule 415 to make shelf offerings under certain circumstances and 
provide an undertaking similar to that required by Item 512(a) of 
Regulation S-K in their registration statements on Form N-2, we are 
including a new undertaking in Form N-2 similar to that which we are 
including in Item 512(a) of Regulation S-K.\503\ We also are amending 
Rule 415 to clarify that investment companies filing on Form N-2 that 
use the Rule must provide the undertaking required by Form N-2, rather 
than the undertaking required in Item 512(a) of Regulation S-K.\504\
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    \503\ Item 34.4.d and e of Form N-2. Form N-2 is the 
registration form used by closed-end management investment companies 
to register under the Investment Company Act of 1940 and to offer 
their securities under the Securities Act.
    \504\ See Rule 415(a)(3).
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c. Changes to Form S-3 and Form F-3
    In addition to adopting changes that will allow additional Form S-3 
or Form F-3 disclosures to be included through prospectus supplements 
and Exchange Act reports, we are amending Form S-3 and Form F-3, as 
proposed, to expand the categories of majority-owned subsidiaries that 
will be eligible to register their non-convertible securities, other 
than common equity, or guarantees under General Instruction I.C. of 
Form S-3 or General Instruction I.A.5 of Form F-3. The permitted 
circumstances are the same as those provided for majority-owned 
subsidiaries to be well-known seasoned issuers.\505\ We believe that 
this expansion is appropriate in that it recognizes the various types 
of subsidiary guarantees that may be employed in registered offerings 
of such non-convertible securities, other than common equity, of 
related entities. Whether information regarding the subsidiary will 
have to be included in the registration statement will depend, as 
today, on whether the subsidiary meets the conditions of Rule 3-10 of 
Regulation S-X and Exchange Act Rule 12h-5.
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    \505\ See discussion in Section II.A. above under ``Well-Known 
Seasoned Issuers.''
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2. Automatic Shelf Registration for Well-Known Seasoned Issuers
a. Overview
i. Rule Changes
    In addition to the updating of the shelf registration process 
described above, we are adopting rules to establish a significantly 
more flexible version of shelf registration for offerings by well-known 
seasoned issuers. This version of shelf registration, which we refer to 
as ``automatic shelf registration,'' involves filings on Form S-3 or 
Form F-3. The automatic shelf registration rules are in addition to the 
communications exemptions we are adopting today and will allow eligible 
well-known seasoned issuers substantially greater latitude in 
registering and marketing securities. The automatic shelf registration 
process will continue to enable the issuer, as with other shelf 
registrants, to take down securities off a shelf registration statement 
from time to time.\506\ Automatic shelf registration is not mandatory; 
a well-known seasoned issuer may continue to file any other 
registration statement it is eligible to use or engage in any exempt 
offering or offerings of exempt securities available to it.\507\
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    \506\ As with other delayed shelf registration statements, the 
issuer will be considered to be in registration or offering its 
securities only when it offers securities in a takedown off its 
registration statement. See, e.g., the 2000 Electronics Release, 
note , at note 10.
    \507\ Those other registration statements will not go effective 
immediately.
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    For well-known seasoned issuers, we believe that the modifications 
we are adopting will facilitate immediate market access and promote 
efficient capital formation, without at the same time diminishing 
investor protection. Most significantly, the new rules will provide the 
flexibility to take advantage of market windows, to structure 
securities on a real-time basis to accommodate issuer needs or investor 
demand, and to determine or change the plan of distribution of 
securities as issuers elect in response to changing market conditions. 
We hope that providing these automatic shelf issuers more flexibility 
for their registered offerings, coupled with the liberalized 
communications rules we are adopting, will encourage these issuers to 
raise their necessary capital through the registration process.\508\
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    \508\ The flexibility permitted under the automatic shelf 
registration process will benefit issuers and investors by 
facilitating different types of offerings that issuers currently may 
elect to conduct on an unregistered basis. For example, this process 
will facilitate the registration under the Securities Act of rights 
offerings conducted by eligible foreign private issuers. At present, 
foreign private issuers frequently do not extend rights offerings to 
their U.S. security holders because the current registration process 
under the Securities Act does not accommodate the timing mechanics 
of rights offerings, which are typically announced and launched in a 
very short period of time. The ability of eligible foreign private 
issuers to use the automatic shelf registration process and to have 
a Securities Act registration statement become automatically 
effective so that sales in a rights offering can take place 
immediately after filing should encourage eligible foreign private 
issuers to extend rights offerings to U.S. security holders.
---------------------------------------------------------------------------

    Under our automatic shelf registration process, eligible well-known 
seasoned issuers may register unspecified amounts of different 
specified types of securities on immediately effective Form S-3 or Form 
F-3 registration statements. Unlike other issuers registering primary 
offerings on Form S-3 or Form F-3, the automatic shelf registration 
process allows eligible issuers to add additional classes of securities 
and to add eligible majority-owned subsidiaries as additional 
registrants after an automatic shelf registration statement is 
effective. They also can freely accommodate both primary and secondary 
offerings using automatic shelf registration. Thus, these issuers have 
significant latitude in determining the types and amounts of their 
securities or those of their eligible subsidiaries that can be offered 
without any potential time delay or other obstacles imposed by the 
registration process.
    Issuers using an automatic shelf registration statement will be 
permitted, but not required, to pay filing fees at any time in advance 
of a takedown or on a ``pay-as-you-go'' basis at the time of each 
takedown off the shelf registration statement in an amount calculated 
for that takedown.
    The rules as adopted also permit more information to be excluded 
from the base prospectus in an automatic shelf registration statement 
than from a regular shelf registration statement. The omitted 
information can then be included at or before the time of filing a 
prospectus supplement. The automatic shelf registration process, 
together with the loosening of the restrictions on communications, 
permits well-known seasoned issuers with maximum flexibility to use 
free writing prospectuses to structure transactions.
ii. Comments on Automatic Shelf Registration
    Commenters strongly supported the concept of automatic shelf 
registration

[[Page 44778]]

for well-known seasoned issuers.\509\ Commenters also believed that 
automatic shelf registration should be optional and, in addition, 
should allow issuers to control the timing of effectiveness of their 
registration statements, if they did not want immediate 
effectiveness.\510\ A number of commenters on the procedural changes, 
while supporting the automatic shelf registration proposals for well-
known seasoned issuers, believed that all seasoned issuers should be 
able to use certain of the elements of automatic shelf registration 
such as identification of selling security holders in prospectus 
supplements, omission of most information from base prospectuses, and 
addition of new securities and new registrants by automatically 
effective post-effective amendments.\511\
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    \509\ See, e.g., letters from ABA; Alston; BMA; Citigroup; 
Cleary; Davis Polk; Fried Frank; NYCBA; NYSBA; S&C and SIA.
    \510\ See, e.g., letters from ABA and Cleary.
    \511\ See, e.g., letters from ABA; Citigroup; Cleary; NYSBA; 
SIA; S&C and TBMA.
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    The rules we are adopting today continue to provide the greatest 
flexibility to well-known seasoned issuers. We have not expanded the 
automatic shelf provisions to other issuers.\512\ As we discussed in 
the Proposing Release, we believe that limiting the benefits of 
automatic shelf registration to well-known seasoned issuers is 
appropriate, at this point, as these issuers have an established 
Exchange Act record and a significant following in the market. As we 
discuss above, we are directing the staff of the Division of 
Corporation Finance and OEA to undertake a study in three years after 
the full implementation of the rules as to the operation of the 
definition of well-known seasoned issuers.\513\
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    \512\ As a result of the amendments to Rule 415 and the 
provisions of Rule 430B, seasoned issuers will have more flexibility 
in a number of respects, including in providing information in 
registration statements, including selling security holder 
information, conducting ``at-the-market'' offerings, and conducting 
immediate takedowns off of shelf registration statements.
    \513\ See Section II.A.4 above under ``Comments Regarding the 
Definition of Well-Known Seasoned Issuer.''
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    We are not mandating that automatic shelf registration be used by 
any issuer meeting the conditions for being a well-known seasoned 
issuer and we are not modifying the immediate effectiveness provisions 
to permit a well-known seasoned issuer to defer effectiveness. Rather, 
well-known seasoned issuers may continue to file a registration 
statement on any form for which it is eligible if they either do not 
wish to file an automatic shelf registration statement or otherwise 
desire to delay the effective date of their registration statements.
b. Automatic Shelf Registration Mechanics
i. Eligibility
    The automatic shelf registration procedure can be used in 
connection with registration statements on Form S-3 or Form F-3 for all 
primary and secondary offerings of securities of well-known seasoned 
issuers.\514\ In general, securities of majority-owned subsidiaries of 
a well-known seasoned issuer parent can be included on the automatic 
shelf registration statement of the parent if the subsidiary satisfies 
the conditions for being considered a well-known seasoned issuer 
described above.\515\ Under automatic shelf registration, as adopted, a 
registration statement can be amended by post-effective amendment to 
add an eligible subsidiary as an issuer.\516\
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    \514\ As today, business combination transactions, including 
exchange offers cannot be registered on Form S-3 or Form F-3. 
Automatic shelf registration is not available for Form S-4 or Form 
F-4.
    \515\ See discussion in Section II.A above under ``Well-Known 
Seasoned Issuers.''
    \516\ See discussion below at note 520.
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    Under the rules we are adopting today, an issuer can file an 
automatic shelf registration statement if it meets the eligibility 
criteria for well-known seasoned issuer on the initial filing date. 
Thereafter, the issuer also must determine its eligibility at the time 
of each amendment to its shelf registration statement for purposes of 
providing its update under Securities Act Section 10(a)(3) (or on the 
due date thereof). If an issuer is no longer eligible to use an 
automatic shelf registration statement at the time of its determination 
of eligibility, it will have to either post-effectively amend its 
registration statement onto the form it is then eligible to use or file 
a new registration statement on such a form. For example, a well-known 
seasoned issuer that is initially eligible for automatic shelf 
registration, that is not eligible at the time of its annual report 
filing, but that retains its eligibility to file a shelf registration 
statement under Rule 415 on Form S-3, can file a post-effective 
amendment or a new registration statement on Form S-3 that designates 
an amount of securities to be registered and otherwise complies with 
requirements for seasoned issuers that are not well-known seasoned 
issuers.
ii. Information in a Registration Statement
(A) Information That May Be Omitted From the Base Prospectus
    Our rules as adopted will allow well-known seasoned issuers using 
automatic shelf registration statements to omit more information from 
the base prospectus in an automatic shelf registration statement than 
is the case currently or than is the case in a regular shelf offering 
registration statement under new Rule 430B. A base prospectus included 
in an automatic shelf registration statement can, as today, omit 
information pursuant to Securities Act Rule 409 that is unknown and not 
reasonably available and, as adopted, can omit the following additional 
information:
     Whether the offering is a primary or secondary offering;
     The description of the securities to be offered other than 
an identification of the name or class of the securities;
     The names of any selling security holders; and
     The disclosure regarding any plan of distribution.
    Omitting this additional information from the base prospectus will 
not affect the information that an investor will be provided in 
connection with a particular sale.\517\
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    \517\ In shelf registration statements currently, base 
prospectuses generally do not contain certain information about 
particular securities offering takedowns. That information is 
communicated orally or through a preliminary prospectus and then 
reflected in a final prospectus filed pursuant to Rule 424. Under 
our new rules, it also will be permitted to communicate such 
information in free writing prospectuses. The automatic shelf 
expands the categories of information that may be omitted from the 
base prospectus. The right to omit information from a base 
prospectus does not affect the fact that under our interpretation 
and Rule 159 regarding Securities Act Sections 12(a)(2) and 
17(a)(2), whether there are material misstatements or material 
omissions that make a communication misleading, in the circumstances 
in which it is made, is assessed on the basis of information 
conveyed at the time of sale, as discussed above.
---------------------------------------------------------------------------

(B) Mechanics for Including Information
    We believe that our new rules to broaden the means by which issuers 
may include information in an automatic shelf registration statement 
will benefit both issuers and investors. These new rules provide 
issuers with automatic shelf registration statements the ability to add 
omitted information to a prospectus by means of:
     A post-effective amendment to the registration statement;
     Incorporation by reference from Exchange Act reports; or
     A prospectus or a prospectus supplement that would be 
deemed to be

[[Page 44779]]

part of and included in the registration statement.\518\
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    \518\ The amendments permit any information required in the 
prospectus pursuant to Item 3 through Item 11 of Form S-3 and Item 3 
through Item 5 of Form F-3 to be included in this manner by any one 
of these methods or a combination thereof. Rule 430B requires that 
the issuer file a prospectus supplement if the Exchange Act reports 
include the offering-related information.

    Examples of the types of information that can be added in this 
manner for automatic shelf registration statements include:
     The public offering price;
     Any updating information regarding the issuer (whether or 
not a fundamental change);
     Detailed description of securities including information 
not contained or incorporated by reference in the base prospectus;
     The identity of underwriters and selling security holders; 
and
     The plan of distribution of the securities.
    The principal exceptions to this complete flexibility will be that 
an issuer adding new types of securities \519\ or new eligible issuers, 
including guarantors, and the securities they may issue to a 
registration statement must do so by post-effective amendment, which 
will be effective immediately upon filing.\520\ New issuers and 
requisite officers and directors are required to be signatories to the 
post-effective amendment.\521\
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    \519\ See discussion in Section V.B.2 below under ``Registration 
of Securities to be Offered.''
    \520\ Adding the issuer by post-effective amendment, including 
necessary signatures and information and filings necessary for 
qualification under the Trust Indenture Act of 1939 [15 U.S.C. 
77aaa-bbbb] where applicable, ensures that the entity will be 
considered an issuer for purposes of Securities Act Section 11 for 
the securities covered by the registration statement. Information 
about the newly added subsidiary is required in the amended 
registration statement, either in a prospectus that is part of the 
registration statement or through incorporation by reference, unless 
the subsidiary is exempt from reporting pursuant to Exchange Act 
Rule 12h-5. The post-effective amendment also must include necessary 
opinions and consents. All disclosure items with regard to that new 
issuer can be incorporated by reference from the new issuer's 
Exchange Act filings, or be included in a prospectus supplement or a 
post-effective amendment.
    \521\ See Securities Act Section 6 [15 U.S.C. 77f], and the 
discussion in Section V.B.2 below under ``Registration of Securities 
to be Offered.''
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(C) Registration of Securities To Be Offered
    An eligible well-known seasoned issuer may register on an automatic 
shelf registration statement an unspecified amount of securities to be 
offered, without indicating whether the securities are being sold in 
primary offerings or secondary offerings on behalf of selling security 
holders. Issuers that are well-known seasoned issuers based only on 
their registered non-convertible security issuances can register on 
automatic shelf registration statements only non-convertible 
securities, other than common equity, unless they also are primarily 
eligible to use Form S-3 or Form F-3 for a primary offering because 
they have a public float of $75 million or more.\522\ The calculation 
of registration fee table in the initial registration statement will 
not need to include a dollar amount or a specific number of securities, 
unless a fee based on an amount of securities is paid at the time of 
filing, but that table must at least list each class of security 
registered and indicate if the filing fee will be paid on a pay-as-you-
go basis. The issuer can specify the number or dollar amount of 
securities in a prospectus supplement at the time it pays a fee in 
advance of or for each offering.\523\
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    \522\ See the discussion in Section II.A.3 above under ``Well-
Known Seasoned Issuers Securities Offerings.''
    \523\ See amendments to Securities Act Rules 413, 456(b), and 
457(r) [17 CFR 230.413; 230.456(b), and 230.457(r)]. See also, Form 
S-3--General Instruction II.E and Instructions to the Calculation of 
Registration Fee Table.
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    The base prospectus in the initial registration statement must 
identify in general terms the names or classes of securities 
registered.\524\ In addition, we are expanding the unallocated shelf 
procedure to allow automatic shelf issuers to register classes of 
securities without allocating the mix of securities registered between 
the issuer, its eligible subsidiaries, or selling security 
holders.\525\ Allowing registration without separately allocating the 
registered classes of securities will provide, we believe, greater 
flexibility to well-known seasoned issuers in conducting registered 
securities offerings.
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    \524\ One commenter suggested that the rule should not require 
issuers using automatic shelf registration statements to include a 
description of securities in the base prospectus. See letter from 
NYCBA. The proposal did not contemplate a detailed description and 
we are clarifying that only the identification of the names or 
classes of securities such as ``debt,'' ``common stock,''preferred 
stock,'' etc., is required.
    \525\ See General Instruction II.E. of Form S-3 and General 
Instruction II.F. of Form F-3. Currently, an issuer offering 
securities on Form S-3 or Form F-3 is not required to specify the 
amount of each class of securities that it will offer, but it is 
required to separately register and designate the amount and classes 
of securities that may be offered and sold by eligible subsidiaries 
and selling security holders. Under our current rules, offerings for 
selling security holders are not considered delayed offerings under 
Rule 415(a)(1)(x) and thus must be separately registered or 
designated prior to effectiveness of the registration statement. 
Except under our new rules for well-known seasoned issuers, issuers 
cannot offer and sell securities of selling security holders using 
an unallocated shelf registration statement.
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    We are adopting revisions to remove the current restriction that 
would prevent well-known seasoned issuers from adding classes of 
securities to an automatic shelf registration statement after 
effectiveness.\526\ Under the amended rules, a well-known seasoned 
issuer can add new classes of securities or securities of an eligible 
subsidiary to an automatic shelf registration statement at any time 
before the sale of those securities. In order to add new classes of 
securities, an issuer must file a post-effective amendment, which will 
be immediately effective, to register an unspecified amount of 
securities of the new class of security.\527\ This requirement will 
cause the registration statement to include each new class of 
securities to be offered. An issuer can provide the disclosure about 
the new class of securities of the issuer in:
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    \526\ See amendments to Securities Act Rule 413 [17 CFR 
230.413].
    \527\ If an issuer using automatic shelf registration determines 
after effectiveness to add a class of debt securities or guarantees 
of securities to its registration statement, in addition to filing a 
post-effective amendment to the registration statement to register 
the class of debt securities or guarantees, it also needs to qualify 
all appropriate indentures under the Trust Indenture Act of 1939. 
The Division of Corporation Finance has long taken the position that 
the indenture covering the securities to be sold pursuant to a 
registration statement must be qualified when that registration 
statement becomes effective and not at the time of any post-
effective amendment to that registration statement. See Division of 
Corporation Finance letter to Donald P. Spencer (available September 
24, 1982). This position is consistent with the existing 
registration process and Securities Act Rule 413, which provides 
that an issuer must register an offering of additional securities 
through the use of a separate registration statement. In the 
automatic shelf registration process we are adopting today, however, 
an issuer is permitted to add securities to a shelf registration 
statement by means of a post-effective amendment. As such, unlike in 
the current registration statement process, under our new rules the 
effectiveness of an automatic shelf registration post-effective 
amendment that adds securities to a shelf registration statement 
will be the time ``when registration becomes effective as to such 
securit(ies),'' as that term is used in Trust Indenture Act Section 
309(a)(1). Accordingly, under the automatic shelf procedure, the 
Trust Indenture Act qualification requirement will be satisfied in 
the following manner: (1) for debt securities or guarantees included 
in the registration statement at original effectiveness, the trust 
indenture will be required to be included in the registration 
statement at the time that registration statement becomes effective; 
and (2) for debt securities or guarantees added to the registration 
statement through a post-effective amendment, the trust indenture 
will be required to be included in the registration statement at the 
time that post-effective amendment becomes effective.
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     A post-effective amendment to the registration statement;
     A prospectus supplement deemed part of and included in the 
registration statement; or

[[Page 44780]]

     An Exchange Act report that is incorporated by reference 
into the registration statement.\528\
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    \528\ This disclosure becomes part of the registration statement 
regardless of the method chosen to provide it.
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(D) Pay-as-You-Go Registration Fees
(1) Pay-as-You-Go Fee Rules
    We are adopting rules to permit, but not require, issuers using 
automatic shelf registration statements to pay filing fees at the time 
of a securities offering--commonly known as ``pay-as-you-go''--or prior 
to that time. Under the new rules, for issuers electing to use the pay-
as-you-go arrangement, the issuer will not have to pay any filing fee 
at the time of filing the initial registration statement.\529\ We have 
eliminated the requirement in the proposal to pay a nominal ($100) 
initial filing fee. The triggering event for a required fee payment is 
a takedown off a shelf registration statement. For each takedown, the 
issuer can file a prospectus supplement for the takedown that includes 
a calculation of registration fee table or can file a post-effective 
amendment including the same information. The rules provide that the 
issuer must pay the appropriate fee calculated in accordance with 
Securities Act Rule 457 within the time required to file the prospectus 
supplement pursuant to Rule 424, but provide an ability to cure a 
failure to pay the fee. The cure is available if the issuer made a good 
faith effort to pay the fee timely and then pays the fee within four 
business days of the original fee due date. The rules we are adopting 
today also require that the issuer file the prospectus supplement, 
including the fee table reflecting payment of the fee on the cover 
page, pursuant to Rule 424. In addition, at any time before one or more 
takedowns in the future (for example, in the case of a medium-term note 
program), the issuer can pay a filing fee in advance and file such a 
prospectus supplement with a fee table reflecting payment of the fee on 
the cover.\530\
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    \529\ Because an issuer can pay any filing fee, in whole or in 
part, in advance of a takedown, the rules as adopted provide 
flexibility in the timing of the fee payment. Issuers using pay-as-
you-go can still deposit monies in an account for payment of filing 
fees when due. As today, the fee rules applicable to the use of such 
account will apply. We are referring to this account as the 
``lockbox account.'' The amount of the fee will be calculated based 
on the fee schedule in effect when the money is withdrawn from the 
lockbox account. We are providing this flexibility for issuers, such 
as those with medium term note programs, to determine the fee 
payment approach most appropriate for them.
    \530\ As we note above, issuers can use the lockbox account for 
the monies to be used to pay the fees.
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(2) Comments on Pay-as-You-Go Fees
    Commenters supported a pay-as-you-go filing fee approach.\531\ Some 
commenters were concerned about the effect of an inadvertent failure to 
pay the filing fee in a timely manner.\532\ Commenters also believed 
that issuers should continue to be able to pay filing fees in advance 
of an offering.\533\ Some commenters requested guidance on the time at 
which automatic shelf issuers using the pay-as-you-go system should 
calculate the amount of the filing fee.\534\
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    \531\ See, e.g., letters from ABA; Cleary; S&C and TBMA.
    \532\ See, e.g., letters from Cleary and TBMA.
    \533\ See, e.g., letters from NYSBA; S&C and SIA.
    \534\ See, e.g., letters from Cleary and TBMA.
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    We have adopted the pay-as-you-go filing fee provisions 
substantially as proposed, but with certain modifications to address 
commenters' concerns. In response to commenters' concerns, we have 
provided a cure provision that will allow an issuer to pay a filing fee 
after its original payment due date if it made a good faith effort to 
pay timely and then paid the fee within four business days of the 
original fee due date. We also have clarified that automatic shelf 
issuers may use any of the methods available to pay their filing fees, 
including paying the filing fees in advance, or paying the filing fees 
on a pay-as-you-go basis. We have eliminated the initial fee 
requirement. As a result of this clarification and the cure provisions, 
we believe that we have addressed commenters' concerns in this area. 
With regard to the time when the amount of the filing fee is 
calculated, as today, the amount of the filing fee is calculated based 
on the fee schedule in effect at the time of payment (upon filing in 
advance, or at the time of a takedown) in accordance with the 
provisions of Rule 457. Thus, the fee amount may be different depending 
on the time of payment.\535\
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    \535\ Fees paid through the use of the lockbox account will be 
calculated at the time the money is withdrawn from the lockbox 
account to make the payment, not at the time the money is deposited 
into the lockbox account.
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(E) Registration under Securities Act Sections 5 and 6
    As we discussed in the Proposing Release, under our new rules for 
automatic shelf registration, compliance with Securities Act Sections 5 
and 6 is tied to the timing of the necessary filings and the content of 
the automatic shelf registration statement (including, as we have 
described, amendments, incorporated documents, and prospectus 
supplements). Securities Act Section 5 requires registration of each 
securities offering unless an exemption is available. Securities Act 
Section 6 governs how securities may be registered, including the 
filing of registration statements and the payment of filing fees. Any 
securities offered and sold off an effective automatic shelf 
registration statement will satisfy the requirements of Securities Act 
Section 5(c) if the registration statement, as amended if applicable, 
includes that class of securities and is filed prior to sale and will 
satisfy the requirements of Securities Act Section 5(a) if such 
registration statement, as amended if applicable, includes that class 
of securities and is effective prior to sale. The securities sold in 
the takedown will be registered for purposes of Securities Act Section 
6 if:
     The class of securities is included in the registration 
statement, which is signed as required; and
     The appropriate fee is paid as provided in our rules.
(F) Immediate Effectiveness
    Under the automatic shelf registration statement rules we are 
adopting today, all automatic shelf registration statements and post-
effective amendments thereto will become effective immediately upon 
filing.\536\ In addition, we are adopting the proposed amendments to 
Securities Act Rule 401(g) to provide that an automatic shelf 
registration statement will be deemed to be filed on the proper form 
unless we notify the issuer after filing of our objection to the use of 
such form.\537\ Therefore, until an issuer is notified by us, it can 
conduct offerings with certainty that it has registered the securities 
on the proper form. After we notify an issuer of our objection, the 
issuer cannot proceed with subsequent offerings (those offerings not in 
progress), unless it amends the registration statement to the proper 
form, or otherwise resolves the issue with us. If we notify an issuer 
that it is ineligible to use an automatic shelf registration statement, 
securities sold prior to our notification will not have been sold in 
violation of Section 5. For ongoing offerings, the issuer, once 
notified by us, will promptly have to file a post-effective amendment 
or a new registration statement to reflect that it is

[[Page 44781]]

not an automatic shelf registration statement. Pending effectiveness of 
the post-effective amendment or a new registration statement, the 
ongoing offering could continue if such offering is permitted by the 
post-effective amendment or new registration statement.
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    \536\ See Rule 462(e) and (f).
    \537\ We are delegating our authority to object and to notify 
the issuer to the Division of Corporation Finance.
    One commenter supported the change to Rule 401 that provides 
that automatic shelf registration statements will be deemed to be 
filed on the proper form unless we notify the issuer of our 
objection. See letter from Alston. Of course this provision does not 
affect the issuer's responsibility to assess its eligibility as a 
well-known seasoned issuer on the relevant determination date.
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    Immediate effectiveness of automatic shelf registration statements 
will not raise, we believe, significant investor protection concerns. 
As with shelf registration statements today, most, if not all, 
information about the issuer is included in shelf registration 
statements through incorporation by reference of Exchange Act reports. 
Such shelf registration statements permit issuers to sell securities 
off the shelf registration statement without previous staff review of 
each offering.\538\ We expect issuers to evaluate disclosure or 
accounting issues in Exchange Act filings before filing registration 
statements, including automatic shelf registration statements, and at 
the time of filing incorporated Exchange Act reports. Because we 
believe it is important that issuers address unresolved staff comments 
as part of its evaluation of these issues, we are adopting, as we 
discuss below, substantially as proposed the requirement for 
accelerated filers and well-known seasoned issuers to disclose written 
staff comments received 180 days before an issuer's fiscal year end 
that the issuer believes are material and that have remained unresolved 
at the time of filing of the Form 10-K or Form 20-F.\539\
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    \538\ The staff of the Division of Corporation Finance will 
continue to review, upon request, prospectus supplements involving 
novel and unique securities offerings that are submitted to them 
prior to the offering.
    \539\ See amendments to Form 10-K and Form 20-F. We recently 
began publicly releasing, not less than 45 days after the staff has 
completed a filing review, staff comment letters and response 
letters relating to disclosure filings made after August 1, 2004 
that are selected for review. See SEC Press Release 2005-72 (May 9, 
2005). See discussion in Section VII.B below under ``Disclosure of 
Unresolved Staff Comments.''
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(G) Duration
    An automatic shelf registration statement will become effective 
immediately and will cover an unspecified amount of securities. The 
open-ended nature of such registration statements could result in a 
large number of post-effective amendments. We are, therefore, adopting 
as proposed a requirement for issuers to file new automatic shelf 
registration statements every three years that will, in effect, restate 
their then-current registration statement and amend it, as they deem 
appropriate. As adopted, issuers will be prohibited from issuing 
securities off an automatic shelf registration statement that is more 
than three years old. Our rules provide, however, that, so long as 
eligibility for automatic shelf registration is maintained, the new 
registration statement will be effective immediately and will carry 
forward to the new registration statement, at the issuer's election, 
either any unused fees paid or unsold securities registered and fees 
paid attributable to such registered securities under the old 
registration statement. As a result, an issuer's securities offerings 
under the registration statement can be uninterrupted.\540\
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    \540\ We are adopting a similar requirement for non-automatic 
shelf issuers but are providing an additional six-month timeframe 
for such issuers to have their non-automatic shelf registration 
statements declared effective. See discussion in Section V.B.1. 
above under ``Elimination of Limitation on Amount of Securities 
Registered.''
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3. Unseasoned Issuers and Non-Reporting Issuers
a. Overview
    We are adopting as proposed procedural changes that will affect 
reporting issuers that are not seasoned issuers. These include:
     Expanding the circumstances under which issuers may 
incorporate information from their Exchange Act reports into their 
Securities Act registration statements; \541\ and
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    \541\ See amendments to Form S-1 and Form F-1.
---------------------------------------------------------------------------

     Eliminating Form S-2 and Form F-2.
    The provisions of Rule 430C also apply to prospectuses and 
prospectus supplements used in offerings by non-reporting issuers and 
unseasoned reporting issuers.\542\
---------------------------------------------------------------------------

    \542\ See discussion in Section V.B.1 above under ``Information 
Deemed Part of Registration Statement.''
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b. Amendments to Form S-1 and Form F-1--Expanded Use of Incorporation 
by Reference
i. Eligibility
    As we stated in the Proposing Release, as part of our initiatives 
to integrate further the Exchange Act and the Securities Act, we are 
adopting as proposed amendments to Form S-1 and Form F-1 to permit a 
reporting issuer that has filed at least one annual report and that is 
current in its reporting obligation under the Exchange Act to 
incorporate by reference into its Form S-1 or Form F-1 information from 
its previously filed Exchange Act reports and documents. Successor 
registrants can incorporate by reference if their predecessors were 
eligible.\543\ In a change from the proposals, only the following 
issuers will not be able to incorporate by reference into a Form S-1 or 
Form F-1:
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    \543\ This is the same as has been the case for Form S-2 and 
Form F-2. The succession will either have to be primarily for the 
purpose of changing the state or jurisdiction of incorporation of 
the issuer or because all of the predecessor issuers were eligible 
at the time of the succession and the issuer continues to be 
eligible.
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     Reporting issuers who are not current in their Exchange 
Act reports; \544\
     Issuers who are, or were or any of whose predecessors were 
during the past three years:
    [cir] Blank check issuers;
    [cir] Shell companies (other than business combination related 
shell companies); or
     Issuers for offerings of penny stock.
---------------------------------------------------------------------------

    \544\ To be current in its reporting obligations under the 
Exchange Act, at the time of filing the registration statement, the 
issuer must have filed all materials required to be filed pursuant 
to Exchange Act Sections 13, 14, or 15(d) during the preceding 12 
calendar months (or for such shorter period that the issuer was 
required to file such materials).
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    In addition, as proposed, to enhance the availability to investors 
of incorporated information, the ability to incorporate by reference is 
conditioned on the issuer making its incorporated Exchange Act reports 
and other materials readily accessible on a web site maintained by or 
for the issuer. By conditioning the ability to incorporate by reference 
on the ready accessibility of an issuer's incorporated Exchange Act 
reports and other materials on its web site, we are providing investors 
the ability to obtain the information from those reports and materials 
at the same time that they would have been able to obtain the 
information if it was set forth directly in the registration statement. 
Issuers may satisfy this condition by including hyperlinks directly to 
the reports or other materials filed on EDGAR or on another third-party 
web site where the reports or other materials are made available in the 
appropriate time frame and access to the reports or other materials is 
free of charge to the user.\545\
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    \545\ This manner of access is similar to that provided for 
disclosure of web site access to an accelerated filer's Exchange Act 
reports. See Acceleration of Periodic Report Filing Dates and 
Disclosure Concerning Web site Access to Reports, Release No. 33-
8128 (Sept. 5, 2002) [67 FR 58480] at part II.D.3.
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ii. Procedural Requirements
    Under the amendments we are adopting today, the prospectus in the 
registration statement at effectiveness must identify all previously 
filed Exchange Act reports and materials, such as proxy and information 
statements, that are incorporated by reference. There will be no 
permitted

[[Page 44782]]

incorporation by reference of Exchange Act reports and materials filed 
after the registration statement is effective--known as ``forward 
incorporation by reference.'' Under the amended Forms, an issuer 
eligible to incorporate by reference its Exchange Act reports and other 
materials into its Securities Act registration statement must include 
the following in the prospectus that is part of the registration 
statement:
     A list of the incorporated reports and materials;
     A statement that it will provide copies of any 
incorporated reports or materials on request;
     An indication that the reports and materials are available 
from us through our EDGAR system or our public reference room;
     Identification of the issuer's web site address where such 
incorporated reports and other materials can be accessed; and
     Required disclosures regarding material changes in or 
updates to the information that is incorporated by reference from an 
Exchange Act report or other material required to be filed.
iii. Comments on Form S-1 and Form F-1 Amendments
    Commenters on this aspect of the proposals strongly supported the 
changes to allow issuers to incorporate by reference historical filings 
into Forms S-1 and F-1.\546\ Some commenters suggested that Form S-1 
and Form F-1 should allow forward incorporation by reference as well 
for filings made after effectiveness of a registration statement.\547\ 
Some commenters did not believe that issuers should, as a condition to 
incorporating by reference into their Forms S-1 or F-1, be required to 
make their Exchange Act reports and other materials readily accessible 
on their web sites.\548\
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    \546\ See, e.g., letters from Alston; BDO Seidman; Cleary; Davis 
Polk; and E & Y.
    \547\ See, e.g., letters from ABA; Alston; Cleary; Davis Polk, 
and NYCBA.
    \548\ See, e.g., letters from ABA; E & Y; and NYSBA.
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    As we discuss above, we have adopted the proposals substantially as 
proposed. We have narrowed the categories of ineligible issuers that 
can use incorporation by reference because the amended provisions still 
permit only incorporation of previously filed reports. Because the 
purpose of the proposal was not to extend short-form registration to 
all reporting issuers, but to further integrate disclosures under the 
Securities Act and Exchange Act without impacting investor protection, 
we have not adopted the suggestion that Form S-1 and Form F-1 permit 
``forward incorporation by reference'' of Exchange Act reports that are 
filed in the future. As adopted, we also are retaining the condition 
that the reports and other materials that are incorporated by reference 
must be readily available and accessible on a web site maintained by or 
for the issuer and containing issuer information.
c. Elimination of Form S-2 and Form F-2
    As we discussed in the Proposing Release, the purposes underlying 
the disclosure and delivery requirements of Form S-2 and Form F-2 are 
to minimize duplicative reporting, while still requiring that the 
incorporated information be delivered with the prospectus. It appears 
that the premises underlying Form S-2 and Form F-2 have become outdated 
in view of the introduction of EDGAR, other technological developments, 
and the rapid dissemination of information in the market. Also, these 
forms have not been widely used, particularly for the purposes they 
were intended.\549\ Expanding the types of issuers that may incorporate 
by reference through our amendments to Form S-1 and Form F-1, without 
requiring delivery of the incorporated documents (except on request), 
makes Form S-2 and Form F-2 superfluous. Several commenters supported 
the elimination of Form S-2 and Form F-2.\550\ We are, therefore, 
rescinding Form S-2 and Form F-2.\551\
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    \549\ According to data obtained from our internal Filing 
Activity Tracking System, from 2001 to 2004, a total of 10 Forms F-2 
were filed by 9 different issuers and a total of 253 Forms S-2 were 
filed by 153 different issuers.
    \550\ See, e.g., letters from ABA; Alston; BDO Seidman; E & Y; 
NYCBA; and NYSBA.
    \551\ We also are amending Forms S-4 and F-4 to delete the 
references to Forms S-2 and F-2.
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VI. Prospectus Delivery Reforms

A. Current Prospectus Delivery Requirements

    The Securities Act requires delivery of a prospectus meeting the 
requirements of Securities Act Section 10(a), known as a ``final 
prospectus,'' to each investor in a registered offering.\552\ After the 
effective date of a registration statement, a written communication 
that offers a security for sale or confirms the sale of a security may 
be provided if a final prospectus is sent or given previously or at the 
same time. Otherwise, such a communication is a prospectus and may not 
be provided unless it meets the requirements of Securities Act Section 
10(a).\553\ A written confirmation is not designed to meet these 
requirements. Therefore, a final prospectus must accompany or precede a 
written confirmation. In addition, Securities Act Section 5(b)(2) makes 
it unlawful to deliver a security ``unless accompanied or preceded'' by 
a final prospectus.
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    \552\ Congress intended that the prospectus provide investors 
with ``the means of understanding the intricacies of the transaction 
* * *.'' H.R. Rep. No. 85, 73rd Cong., 1st Sess. 8 (1933).
    \553\ The term ``prospectus,'' as defined in Securities Act 
Section 2(a)(10), includes any written communication that ``offers a 
security for sale or confirms the sale of any security; except that 
* * * a communication provided after the effective date of the 
registration statement * * * shall not be deemed a prospectus if it 
is proved that prior to or at the same time with such communication 
a written prospectus meeting the requirements of subsection (a) of 
section 10'' is sent or given.
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    Under these requirements, in the current system, if no preliminary 
prospectus or written selling materials are distributed, the final 
prospectus is the only prospectus received by investors. However, an 
investor's purchase commitment and the resulting contract of sale of 
securities to the investor in the offering generally occur before the 
final prospectus is required to be delivered under the Securities Act. 
Moreover, for sales occurring in the aftermarket, as a result of our 
rules, investors in securities of reporting issuers generally are not 
delivered a final prospectus.\554\ Accordingly, the greatest utility of 
a final prospectus may be as a document that informs and memorializes 
the information for the aftermarket. Actual delivery to purchasers is 
not necessary to satisfy this purpose.\555\
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    \554\ For non-reporting issuers who are listed, as of the 
offering date, on a national securities exchange or automated 
quotation system, we require that prospectuses be delivered for 25 
days after the offering date. See Securities Act Rule 174(d) [17 CFR 
230.174(d)].
    \555\ Professor Louis Loss has noted that ``[a] prospectus that 
comes with the security does not tell the investor whether or not he 
or she should buy; it tells the investor whether he has acquired a 
security or a lawsuit.'' L. Loss & J. Seligman, Securities 
Regulation, Sec.  2-b-3 (3d ed. 2001). See also Cohen, Truth in 
Securities Revisited, 79 Harv. L. Rev.1340, note 20, at 1386 
(criticizing the requirement that a final prospectus be delivered 
after an investment decision is made and noting that information 
essential to a transaction should, to the extent practicable, be 
required to be provided in time for use in an investment decision). 
The final prospectus also can be a basis for liability claims under 
Securities Act Section 12(a)(2).
    Our interpretation set forth above and in the Proposing Release 
and Rule 159 as adopted also provide that liability under Section 
12(a)(2) is assessed based on the information conveyed at the time 
of the contract of sale.
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    We have previously adopted a number of other rules to address 
prospectus delivery in primary offerings and secondary market 
transactions. Securities Act Rule 153 addresses delivery of final 
prospectuses in transactions between brokers taking

[[Page 44783]]

place over a national securities exchange. Securities Act Rule 434 was 
intended to ease the burden of prospectus delivery within the T+3 
settlement cycle by permitting delivery of a final prospectus to be 
made in multiple documents at different intervals in the offering 
process.\556\
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    \556\ As part of our actions today, we are eliminating Rule 434 
because it has been used extremely infrequently and we believe that 
with the new rules it is no longer necessary.
---------------------------------------------------------------------------

    Many of our recent rulemakings to improve the content and timing of 
a reporting issuer's Exchange Act filings, together with the 
communications and procedural changes we are adopting today, are aimed 
at providing more information to investors at the time they commit to 
purchase a security. As we discussed in the Proposing Release, the 
increase in the flow of current information about a reporting issuer 
and the ability of offering participants to use free writing 
prospectuses in connection with offerings will give offering 
participants a greater ability to provide information to investors 
about the securities at that time. Further, rapid technological 
advances in the area of information delivery have resulted in greater 
access to information. For example, prospectuses and other filings now 
are available through EDGAR and other electronic sources, including the 
Internet, immediately upon filing.\557\
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    \557\ Paper copies also remain available through our Public 
Reference Room, 100 F Street, N.E., Washington, DC 20549.
---------------------------------------------------------------------------

B. Prospectus Delivery Revisions

    We are adopting revisions to the prospectus delivery requirements. 
Our new and amended rules are intended to facilitate effective access 
to information, while taking into account advancements in technology 
and the practicalities of the offering process. These changes are 
intended to alleviate timing difficulties that may arise under the 
current securities clearance and settlement system, and also to 
facilitate the successful delivery of, and payment for, securities in a 
registered offering.
    As we discussed in the Proposing Release, given that the final 
prospectus delivery obligations generally affect investors only after 
they have made their purchase commitments and that investors and the 
market have access to the final prospectus upon its filing, we believe 
that delivery obligation should be able to be satisfied through a means 
other than physical delivery. Because the contract of sale has already 
occurred, we also believe that delivery of a written confirmation and 
the delivery of the final prospectus need not be linked.
    Many commenters and market participants have encouraged us to adopt 
an ``access equals delivery'' model for final prospectus delivery.\558\ 
Under such an ``access equals delivery'' model, investors are presumed 
to have access to the Internet, and issuers and intermediaries can 
satisfy their delivery requirements if the filings or documents are 
posted on a web site. The access concept is premised on the information 
or filings being readily available.
---------------------------------------------------------------------------

    \558\ Commenters on prospectus delivery aspects of the 2000 
Electronics Release indicated support for some sort of ``access 
equals delivery'' model. See comment letters in File No. S7-11-00 
from ACCA; NYCBA; SIA; and TBMA.
---------------------------------------------------------------------------

    At this time, we believe that Internet usage has increased 
sufficiently to allow us to adopt a final prospectus delivery model for 
issuers and their intermediaries that relies on timely access to filed 
information and documents.\559\ Issuers, brokers, and dealers can 
satisfy their final prospectus delivery obligations if a final 
prospectus is or will be on file with us within the time required by 
the new rules, including the cure period.
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    \559\ Internet usage in the United States has grown considerably 
since 2000 when we published our most recent interpretive guidance 
on the use of electronic media in securities offerings, including 
with regard to prospectus delivery by electronic means. For example, 
recent data indicates that 75% of Americans have access to the 
Internet in their homes, and that those numbers are increasing 
steadily among all age groups. See, Three out of Four Americans Have 
Access to the Internet, Nielsen//NetRatings, March 18, 2004; Robyn 
Greenspan, Senior Surfing Surges, ClickZNetwork, Nov. 20, 2003 
(citing statistics from Neilsen/NetRatings and Jupiter Research). In 
addition, there is evidence suggesting that the ``digital divide'' 
is diminishing. See, for example, Kristen Fountain, Antennas Sprout, 
and a Bronx Neighborhood Goes Online, The N.Y. Times, June 10, 2004 
at G8; and Steve Lohr, Libraries Wired, and Reborn, The N.Y. Times, 
Apr. 22, 2004 at G1.
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    As adopted, the new and amended rules will:
     Eliminate the existing link between delivery of the final 
prospectus and the delivery of a written confirmation of sale;
     Provide that the obligation to have a final prospectus 
precede or accompany a security for sale can be satisfied by filing the 
final prospectus with us within the relevant timeframe provided by Rule 
424(b);
     Permit written notices of allocations; and
     Permit the prospectus delivery obligations in dealer 
transactions during any prospectus delivery period and in broker or 
dealer transactions on exchanges, facilities of exchanges, and 
alternative trading systems to be satisfied if the final prospectus has 
been or will be filed with us.
1. Access Equals Delivery
a. Rule 172
(i) Scope of Rule
    We are adopting new Rule 172 with some refinements from the 
proposals to implement our access equals delivery model.\560\ Under 
Rule 172(b), as adopted, a final prospectus will be deemed to precede 
or accompany a security for sale for purposes of Securities Act Section 
5(b)(2) as long as the final prospectus meeting the requirements of 
Securities Act Section 10(a) is filed or the issuer will make a good 
faith and reasonable effort to file it with us as part of the 
registration statement within the required Rule 424 prospectus filing 
timeframe.\561\
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    \560\ This prospectus delivery model is in addition to Rules 153 
and 174, as we are amending those rules. See discussion in Section 
VI.B.3 below under ``Transactions Taking Place on an Exchange or 
Through a Registered Trading Facility--Rule 153'' and in Section 
VI.B.4 below under ``Aftermarket Prospectus Delivery--Rule 174.''
    \561\ A final prospectus only filed as provided in Rule 172 will 
not be considered to be sent or given prior to or with a written 
offer within the meaning of clause (a) of Securities Act Section 
2(a)(10).
---------------------------------------------------------------------------

    Our ``access equals delivery'' model will continue to satisfy the 
principal statutory purposes of final prospectus delivery while 
recognizing the need to modernize the obligations in view of 
technological and market structure developments.\562\
---------------------------------------------------------------------------

    \562\ We are not amending Exchange Act Rule 15c2-8(d), which 
requires broker-dealers to take reasonable steps to comply promptly 
with written requests for copies of the final prospectus.
---------------------------------------------------------------------------

(ii) Comments on Rule 172
    Most commenters supported the proposals that would deem the final 
prospectus delivery requirements satisfied through the filing of the 
final prospectus with the Commission.\563\ Some commenters believed 
that the ``access equals delivery'' concept should extend to delivery 
obligations for preliminary prospectuses in initial public offerings as 
well as those applicable to proxy statements and other documents.\564\ 
One commenter was concerned that an access equals delivery method for 
providing information would not provide older persons with the 
information they needed for their investment decisions.\565\
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    \563\ See, e.g., letters from ABA; Alston; ASF; BRT; Cleary; 
Davis Polk; Fried Frank; Goldman Sachs; ICI; Intel; Lindsay Kassof; 
Merrill Lynch; NYCBA; NYSBA; PEG; S&C SCSGP; SIA; and TBMA.
    \564\ See, e.g., letters from BRT and Cleary.
    \565\ See letter from the American Association of Retired 
Persons (``AARP'').
---------------------------------------------------------------------------

    A number of commenters were concerned about the condition to the 
proposed rule that the final prospectus

[[Page 44784]]

would have to be on file with the Commission within the time frame 
required under Securities Act Rule 424.\566\ The commenters were 
concerned about retroactive violations of Section 5 if underwriters or 
dealers sent written confirmations and then the issuer failed to file 
the final prospectus within the required time frame. These commenters 
recommended including a cure provision in the Rule. Other commenters 
recommended eliminating this condition entirely and instead relying on 
Commission enforcement actions as the penalty for issuers failing to 
timely file final prospectuses.\567\
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    \566\ See, e.g., letters from Citigroup; Cleary; CSFB; Fried 
Frank; Goldman Sachs; Merrill Lynch; Morgan Stanley; NYSBA; and PEG.
    \567\ See, e.g., letters from ABA and SIA. Some commenters 
requested that we provide an interpretation of the applicability of 
the Electronic Signature in Global and National Commerce Act (``E-
Sign'') to the Securities Act prospectus delivery requirements. See, 
e.g., letters from ABA and S&C.
---------------------------------------------------------------------------

    As we note above, we have adopted Rule 172 to continue to cover 
only delivery of final prospectuses. We do not currently believe that 
extension of access equals delivery is appropriate for preliminary 
prospectus delivery obligations in initial offerings because we believe 
that it is important for potential investors to be sent the preliminary 
prospectus.
    We have, however, revised the Rule in response to commenters' 
concerns about the filing condition. As adopted, we have provided that 
the filing condition is satisfied if the issuer makes a good faith and 
reasonable effort to file the prospectus within the timeframe required 
by Rule 424. We have included a cure provision that allows the issuer 
an ability to cure an unintentional failure to file if it has made such 
a good faith and reasonable effort to comply with the filing condition 
and files the prospectus as soon as practicable after discovery of the 
failure to file. We believe that these revisions to the Rule will 
address commenters' concerns regarding retroactive violations of 
Section 5 due to an issuer's failure to timely file the final 
prospectus.\568\ We also have provided new paragraph (b)(8) of Rule 424 
under which the issuer will file a form of prospectus that is not 
timely filed. We also have provided that the filing condition does not 
apply to transactions by dealers requiring delivery of a final 
prospectus pursuant to Securities Act Section 4(3).
---------------------------------------------------------------------------

    \568\ We believe that the filing condition remains a central 
component of the access equals delivery construct.
---------------------------------------------------------------------------

b. Exceptions to the Rule
    We have excluded certain types of offerings from the Rule as 
adopted because either they do not raise the same issues as in 
corporate capital formation transactions or they are already subject to 
rules unique to their offerings. For example, in offerings made 
pursuant to Form S-8, the final prospectus is never filed with us and 
thus, these offerings do not raise the same types of issues as other 
capital formation transactions. Business combination transactions and 
exchange offers also differ from other types of 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, will be delivered regardless of the 
Securities Act's requirements. Moreover, it is important to retain 
consistency among the various rules and regulations applicable to these 
business combination transactions and exchange offers.\569\
---------------------------------------------------------------------------

    \569\ Securities Act Rule 162 provides, however, a final 
prospectus delivery exemption in certain registered exchange offers 
subject to Exchange Act Rules 13e-4(e) [17 CFR 240.13e-4(e)] or 14d-
4(b) [17 CFR 240.14d-4(b)].
---------------------------------------------------------------------------

    Finally, registered investment companies and business development 
companies will not be able to rely on the Rule. These entities are 
subject to a separate framework governing communications with 
investors, and we believe that it would be more appropriate to consider 
any changes to our prospectus delivery requirements as they apply to 
registered investment companies and business development companies in 
the context of a broader reconsideration of this framework.\570\
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    \570\ Although some commenters wanted us to expand the 
categories of issuers to whom Rule 172 would apply, we are not doing 
so at this time. See, e.g., letters from ABA; Allied; and Cleary.
---------------------------------------------------------------------------

c. Notification
(i) Rule 173
    In addition to providing access to information, prospectus delivery 
can serve the function of informing investors that they purchased 
securities in a registered transaction. This notification will provide 
investors the ability to trace their purchases for purposes of 
asserting their rights under the liability provisions of the federal 
securities laws. To preserve this investor protection function, we are 
adopting Rule 173 substantially as proposed. Rule 173 addresses each 
transaction involving:
     A sale by an issuer or an underwriter to a purchaser; and
     A sale in which the final prospectus delivery requirements 
apply.
    Rule 173 provides that, in these transactions, each underwriter or 
dealer participating in a registered offering (or, if the sale was 
effected by the issuer and not by or through an underwriter or dealer, 
then the issuer) must provide to each purchaser from it, not later than 
two business days after the completion of the sale, a copy of the final 
prospectus or, in lieu of the final prospectus, a notice providing that 
the sale was made pursuant to a registration statement or in a 
transactions in which a final prospectus would have been required to 
have been delivered in the absence of Rule 172.
    The Rule also provides that an investor can request a final 
prospectus. Under the Rule, a requested final prospectus does not have 
to be provided before settlement.\571\
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    \571\ The final prospectus also can be comprised of a set of 
documents which, taken together, satisfy the information 
requirements of Securities Act Section 10(a). See discussion in 
Section V.B.1 above under ``Information Deemed Part of Registration 
Statement.''
---------------------------------------------------------------------------

    Rule 173, as adopted, provides that compliance with Rule 173 is not 
a condition to reliance on Rule 172 to satisfy final prospectus 
delivery. Accordingly non-compliance with Rule 173 will not result in a 
violation of Securities Act Section 5. Rule 173 is, however, an 
important component of the prospectus delivery modifications we are 
adopting today.
    As adopted, the same offerings excluded pursuant to Rule 172, as 
discussed above, also are excluded from this notification 
provision.\572\ We also have revised Rule 173 to exclude transactions 
solely between brokers or dealers in reliance on Rule 153.
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    \572\ In addition, as a result of the operation of Rule 172 and 
Rule 173, if a current final prospectus is filed with us, final 
prospectuses will no longer be required to be delivered in 
connection with market-making transactions by dealers affiliated 
with issuers.
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(ii) Comments on Rule 173
    Commenters suggested certain clarifications to proposed Rule 173 
including providing a cure provision for failure to provide the 
required notification,\573\ eliminating required compliance with Rule 
173 for aftermarket sales covered by Rule 174,\574\ and providing that 
compliance with Rule 153 would be deemed compliance with Rule 173.\575\ 
One commenter also requested that we confirm that the Rule 173 
notification may be included in Rule 10b-10 confirmations.\576\
---------------------------------------------------------------------------

    \573\ See, e.g., letter from TBMA.
    \574\ See, e.g., letter from Goldman Sachs.
    \575\ See, e.g., letter from Brinson Patrick.
    \576\ 17 CFR 240.10b-10. See, e.g, letter from CSFB.

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[[Page 44785]]

    We have adopted Rule 173 substantially as proposed. We have made 
clear that Rule 173 does not apply to transactions between dealers or 
brokers in reliance on Rule 153, but it continues to apply to the 
transaction between the broker or dealer and the underlying purchaser 
on whose behalf or for whose account the transaction is effected. We 
believe that it is important that purchasers in registered offerings 
are notified that they have acquired their securities in the registered 
transaction and so we also have not taken commenters' suggestions to 
eliminate compliance with the Rule for aftermarket sales. The Rule 173 
notification can be sent separately or can be included in a Rule 10b-10 
confirmation.
2. Written Confirmations and Notices of Allocations
    We are adopting Rule 172(a), substantially as proposed, to provide 
an exemption from Securities Act Section 5(b)(1) that allows written 
confirmations and notices of allocation to be sent after effectiveness 
of a registration statement without being accompanied or preceded by a 
final prospectus.\577\ The exemption is conditioned on the registration 
statement being effective and the final prospectus meeting the 
requirements of Securities Act Section 10(a) being filed with us.\578\ 
The exemption permits:
---------------------------------------------------------------------------

    \577\ See Rule 172.
    \578\ The exemption is in Rule 172 and is subject to the same 
prospectus filing and cure condition, as we have modified it, as 
described above.
---------------------------------------------------------------------------

     Written confirmations containing information limited to 
that called for in Exchange Act Rule 10b-10 and other information 
customarily included in confirmations, including any notice provided 
pursuant to Rule 173; and
     Written communications from an offering participant to a 
customer or from an underwriter to dealers in the selling group 
notifying them of the transaction and their allocations of securities 
in a registered offering.
    Under the exemption, for example, broker-dealers could send e-mail 
notices after effectiveness to inform investors in a public offering of 
their allocations. Under the Rule as adopted, the notices of 
allocations may include the name of the securities, the CUSIP number, 
the amount allocated to the customer, the price of the securities, and 
the date or expected date of settlement and incidental information. 
Similar information is permitted in notices to participating dealers. 
The exemption is not available for the same offerings excluded from the 
prospectus delivery provision of the Rule discussed above.
    One commenter suggested that the notice of allocation be permitted 
to included CUSIP numbers and also suggested that, especially for 
asset-backed securities, the notice of allocation should be expanded to 
permit communication of demand for securities and ``price talk'' or a 
communication of information regarding expected or actual allocation of 
classes of securities in order to facilitate an investment 
decision.\579\ We have included specific reference permitting inclusion 
of a CUSIP number. However, we believe that the other information 
identified in this comment, if communicated in writing, should be the 
subject of a free writing prospectus. It is not an appropriate subject 
for a notice of allocation. The notice of allocation is intended to be 
a notice of actual allocation of securities to the investor or 
participating dealer to which the notice is provided.
---------------------------------------------------------------------------

    \579\ See letter from BMA-ABS.
---------------------------------------------------------------------------

3. Transactions Taking Place on an Exchange or Through a Registered 
Trading Facility--Rule 153
    Securities Act Rule 153 addresses delivery of final prospectuses in 
transactions taking place between brokers over a national securities 
exchange; it does not currently apply to transactions on an automated 
quotation system, such as the Nasdaq Stock Market. Rule 153 provides 
that where members of the exchange are on both sides of the transaction 
and the transaction is effected on that exchange, the Section 5 
obligation to deliver a final prospectus before or with a security 
between the brokers will be satisfied if the issuer or underwriter 
delivers copies of the final prospectus to the exchange.\580\ Rule 153 
has limited utility today because it may be relied on only for 
transactions between brokers on an exchange. The difficulty in 
prospectus delivery that Rule 153 was designed to address--the 
difficulty or inability to identify the ultimate buyer--has expanded 
since 1936 with the rise in transactions effected on markets other than 
national securities exchanges, such as the Nasdaq Stock Market and 
alternative trading systems, the growth of the book-entry system, and 
street name holdings.\581\ In addition, the paper-based system upon 
which Rule 153 is premised is outmoded and unnecessary due to 
electronic filings of final prospectuses on EDGAR and the technological 
resources of market members. There currently is no significance to the 
paper copies of prospectuses delivered to national securities 
exchanges.
---------------------------------------------------------------------------

    \580\ Securities Act Rule 153 defines the phrase ``preceded by a 
prospectus'' as used in Securities Act Section 5(b)(2).
    \581\ In connection with a proposed rulemaking in 1976, we 
solicited comment on extending the procedures available under 
Securities Act Rule 153 to transactions effected on the automated 
quotation system of a national securities association registered 
under Exchange Act Section 15A [15 U.S.C. 78oA], at least initially 
for Form S-8 transactions. See Effective Date of Amendments to 
Registration Statement and Possible Expansion of Definitional Rule, 
Release No. 33-5768 (Nov. 22, 1976) [41 FR 52701]. Two years later, 
these plans were deferred for further consideration due to lack of 
public interest and input at the time. See Effective Date of 
Amendments to Registration Statement and Expansion of Definition 
Rule, Release No. 33-5978 (Sep. 18, 1978) [43 FR 43725]. Many 
trading markets allow market participants to preserve their 
anonymity, thus making it difficult or impossible to identify the 
ultimate buyer. The growth in the book-entry system and the fact 
that most securities are held in street name exacerbates the 
problem.
---------------------------------------------------------------------------

    As we stated in the Proposing Release, we believe it is important, 
therefore, to amend Rule 153. Under the amendments we are adopting 
today, brokers or dealers effecting transactions on a registered 
exchange, through a trading facility of a registered national 
securities association, or through a registered alternative trading 
system will be deemed to satisfy their prospectus delivery obligations 
under Securities Act Section 5(b)(2) with regard to transactions in 
securities if:
     The issuer has filed or will file the final prospectus 
with us;
     Securities of the same class as the securities that are 
the subject of the transaction are trading on that exchange or through 
that trading facility or alternative trading system;
     The registration statement relating to the offering is 
effective and not the subject of a stop order issued under Securities 
Act Section 8; and
     Neither the issuer nor any underwriter or participating 
dealer is the subject of a pending proceeding under Securities Act 
Section 8A in connection with the offering.
    These changes will eliminate the difficulties for prospectus 
delivery among brokers and dealers in registered resales and other 
sales into existing trading markets where securities of the same class 
already are trading. We are not requiring as part of the Rule that 
physical copies of the prospectus be sent to the exchange or a market 
maker. Further, the exchange and the market maker no longer will need 
to keep track of any prospectuses.\582\ As with the existing rule, the 
amended Rule does not affect delivery obligations to

[[Page 44786]]

purchasers other than brokers or dealers.
---------------------------------------------------------------------------

    \582\ Because we are adopting the proposed changes to Rule 153, 
on the effective date of the amendment our interpretation in 
Question 11 in the 1995 Electronics Release will no longer be 
effective.
---------------------------------------------------------------------------

    We have revised our proposed amendments to Rule 153 in one respect. 
For purposes of Rule 153 as amended, the filing of the final 
prospectus, regardless of whether it occurs before or after reliance on 
the Rule, will satisfy the conditions of the Rule.\583\
---------------------------------------------------------------------------

    \583\ We have revised the amendments to Rule 153 to address the 
suggestions of some commenters in this regard. See, e.g., letters 
from Cleary and Fried Frank.
---------------------------------------------------------------------------

4. Aftermarket Prospectus Delivery--Rule 174
    Unless our rules provide otherwise, all dealers are required to 
deliver a final prospectus for a specified period after a registration 
statement becomes effective to persons who buy the securities in the 
aftermarket.\584\ Securities Act Rule 174 exempts from this aftermarket 
dealer prospectus delivery obligation any transaction relating to 
securities of a reporting issuer. These exemptions in Rule 174 do not 
apply to underwriters or dealers with regard to any unsold allotment. 
Otherwise, if the transaction relates to securities of a non-reporting 
issuer 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 after effectiveness. For 
offerings of securities of non-reporting issuers that will not be so 
listed or quoted and offerings by blank check companies, Rule 174 sets 
an aftermarket prospectus delivery period of 90 days after 
effectiveness or after the funds are released from the escrow or trust 
account, as the case may be. 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 period expires. 
The underlying purpose of aftermarket prospectus delivery is to assure 
wide dissemination of information about the issuer in the market. For 
reporting issuers, the Rule assumes that the information is already 
disseminated and eliminates the prospectus delivery requirement for 
these issuers.
---------------------------------------------------------------------------

    \584\ See Securities Act Section 4(3).
---------------------------------------------------------------------------

    We believe that, where information regarding all issuers is largely 
disseminated other than through physical delivery, including through 
EDGAR, physical delivery of a final prospectus in the aftermarket is of 
limited utility and necessity. We are, therefore, amending Rule 174 as 
proposed to provide that during the aftermarket period, dealers can 
rely on proposed Rule 172 to satisfy any aftermarket delivery 
obligations (other than for blank check companies).
    Some commenters recommended that we eliminate the conditions to 
``access equals delivery'' contained in Rule 172 for brokers or dealers 
involved in only aftermarket distributions.\585\ Commenters also 
recommended elimination of all aftermarket prospectus delivery 
requirements for all transactions, with some suggesting that the 
obligation should be eliminated where the securities are listed on an 
exchange or quoted on the Nasdaq Stock Market.\586\ While we are not 
eliminating the prospectus delivery obligations that currently arise 
under Securities Act Section 4(3) and Rule 174, we are providing for 
reliance on Rule 172 to satisfy those delivery obligations (other than 
for blank check companies).\587\ Rule 173 applies in part where 
Securities Act Section 4(3) requires prospectus delivery and where 
there is no exemption from delivery under Rule 174.
---------------------------------------------------------------------------

    \585\ See, e.g., letters from ABA; Cleary; and Davis Polk.
    \586\ See, e.g., letters from ABA; Goldman Sachs; Morgan 
Stanley; and SIA.
    \587\ We also have eliminated the filing condition as a 
condition to satisfaction of that delivery requirement.
---------------------------------------------------------------------------

VII. Additional Exchange Act Disclosure Provisions

A. Risk Factor Disclosure

1. Scope of Requirement
    As we stated in the Proposing Release, many Securities Act 
registration statements require disclosure of the risks associated with 
an investment in an issuer's securities. Items 503(c) of Regulation S-K 
and Regulation S-B \588\ describe that required disclosure as a 
``discussion of the most significant factors that make the offering 
speculative or risky.'' The risk factor section is intended to provide 
investors with a clear and concise summary of the material risks to an 
investment in the issuer's securities.
---------------------------------------------------------------------------

    \588\ 17 CFR 229.503(c) and 17 CFR 228.503(c).
---------------------------------------------------------------------------

    We are adopting substantially as proposed a new item requiring risk 
factor disclosure in annual reports on Forms 10-K and Exchange Act 
registration statements on Form 10.\589\ We are not extending this 
requirement to Forms 10-KSB or Form 10-SB. The new item applies the 
standard for risk factor disclosure in Securities Act registration 
statements to Exchange Act registration statements and annual 
reports.\590\ As such, risk factor disclosure under the Exchange Act 
will be the same type of disclosure as required in a Securities Act 
registration statement by Item 503, other than information about a 
particular securities offering.\591\ We are not requiring asset-backed 
issuers to include risk factor disclosure in their annual reports on 
Form 10-K. We agree with commenters who noted that disclosure 
requirements in a Form 10-K for asset-backed issuers varies 
considerably under Regulation AB from corporate issuers.\592\ These 
requirements, along with the fundamental structure of most asset-backed 
securities offerings involving stand-alone trusts, make this 
requirement inappropriate for asset-backed issuers.
---------------------------------------------------------------------------

    \589\ See amendments to Form 10-K and Form 10. Form 20-F (the 
form used for annual reports and Exchange Act registrations for 
foreign private issuers) already requires risk factor disclosure. 
See Item 3.D. of Form 20-F. The 1998 proposals also proposed risk 
factor disclosure in annual reports. The Advisory Committee Report 
contained similar recommendations. See the Advisory Committee 
Report, note 25, at Section II.B.4.
    \590\ See Item 503(c) of Regulation S-K. We recognize that a 
risk factor discussion in a Form 10-K may not be necessary or 
appropriate in all cases, depending on the issuer.
    \591\ We have revised the item from the proposal to eliminate 
the added language which caused concern that a different standard 
for risk disclosure would apply to annual reports on Form 10-K and 
registration statements on Form 10 from that required for Securities 
Act registration statements. We believe that the added language was 
redundant of the existing language of Item 503 and, therefore, 
unnecessary.
    \592\ See, e.g., letters from ABA-ABS; ASF; BMA-ABS; and CMSA.
---------------------------------------------------------------------------

    We also are adopting as proposed the requirement that the risk 
factor disclosure in Forms 10 and 10-K be written in accordance with 
the same ``plain English'' standards as apply to risk factor disclosure 
in Securities Act registration statements.\593\ The amendments as 
adopted also provide for quarterly updates to reflect material changes 
from risk factors as previously disclosed in Exchange Act reports. The 
amendments do not otherwise require, and we discourage, unnecessary 
restatement or repetition of risk factors in quarterly reports.
---------------------------------------------------------------------------

    \593\ Securities Act Rule 421 [17 CFR 230.421] requires issuers 
to write and design their risk factor disclosure in registration 
statements using plain English principles. See also Updated Staff 
Legal Bulletin No. 7 (June 7, 1999), question no. 3. The plain 
English rules applicable to Securities Act registration statements 
already apply to risk factor disclosure in Exchange Act reports 
incorporated by reference into Securities Act registration 
statements.
---------------------------------------------------------------------------

    As we stated in the Proposing Release, the requirement to include 
risk factor disclosure in Forms 10 and 10-K will, we believe, further 
enhance the contents of Exchange Act reports and their value in 
informing investors and the markets.\594\ Further, requiring risk 
factor

[[Page 44787]]

disclosure in Exchange Act registration statements and annual reports 
will enhance the ability of reporting issuers to incorporate risk 
factor disclosure from these Exchange Act reports into Securities Act 
registration statements to satisfy the risk factor disclosure 
requirements.\595\ Because one of our goals is to further integrate 
disclosures under the Securities Act and the Exchange Act, we believe 
it is important to establish consistent disclosure standards for risk 
factor disclosure.
---------------------------------------------------------------------------

    \594\ We note that many issuers have included risk factor 
disclosure in their Exchange Act reports for a number of years. See 
comment letter in File No. S7-30-98 from BRT. Issuers may already 
include risk factor disclosure in their Exchange Act reports for 
varying reasons, including to take advantage of the safe harbor for 
forward-looking statements in Securities Act Section 27A and the 
``bespeaks caution'' defense developed through case law. See, e.g., 
In re Donald Trump Sec. Litig., 7 F.3d at 371 (3d Cir. 1993); P. 
Stolz Family P'ship L.P. v. Daum, 355 F.3d 92, 97 (2d Cir., 2004); 
and In re Sprint Corp. Sec. Litig., 232 F. Supp. 2d 1193 (D. Kan. 
Sept. 30, 2002).
    \595\ We note that incorporation by reference of risk factors in 
Exchange Act reports may not fully satisfy the Securities Act 
disclosure obligations. For example, additional offering-related 
risks may need to be included in Securities Act registration 
statements.
---------------------------------------------------------------------------

    We are adopting the proposed requirements for updated risk factor 
disclosure in quarterly reports because we believe that issuers who are 
required to file quarterly reports already need to undertake a review 
of changes in their operations, financial results, financial condition, 
and other circumstances in order to prepare the other portions of the 
quarterly report, including the financial statements and MD&A.\596\ 
Therefore, we believe that issuers should be able, on a quarterly 
basis, to update risk factors to reflect material changes from 
previously disclosed risk factors.
---------------------------------------------------------------------------

    \596\ Moreover, issuers will already have in place disclosure 
controls and procedures and internal controls over financial 
reporting that should alert them to new or changing material risks 
affecting the issuer.
---------------------------------------------------------------------------

2. Comments on Risk Factor Disclosure Requirement
    While some commenters supported the proposal generally, others 
suggested modifications to the risk factor requirement.\597\ For 
example, several commenters suggested we should require risk factors 
only ``where appropriate.'' \598\ Other commenters did not believe a 
separate risk factor section was necessary because reporting companies 
already included risk disclosures in various sections of their annual 
reports.\599\ Commenters also noted that the proposed language was more 
extensive than Item 503(c).\600\ A number of commenters thought we 
should extend the requirement for risk factor disclosure to small 
business issuers.\601\ Further, at least one commenter was concerned 
about the proposal to require updated risk factor disclosures in 
quarterly reports.\602\
---------------------------------------------------------------------------

    \597\ See, e.g., letters from ABA; AICPA; Alston; BDO Seidman; 
BRT; Deloitte; E & Y; KPMG; NYCBA; and PwC.
    \598\ See, e.g., letters from ABA; Davis Polk; NYSBA; and S&C. 
The proposed disclosure requirement omitted the qualifier that risk 
factors should only be disclosed ``where appropriate.'' In addition, 
commenters believed that risk factors are not appropriate for 
issuers of asset-backed securities. See, e.g., letters from ASF; 
BMA-ABS; and CMSA.
    \599\ See, e.g., letters from BRT; Intel; and SCSGP.
    \600\ As proposed, the risk factor disclosure would have 
required a discussion of 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. See, e.g., letters from ABA; Alston; and S&C.
    \601\ See, e.g., letters from ABA; AICPA; Alston; BDO Seidman; 
KPMG; NYSBA; and PwC.
    \602\ See letter from Fried Frank.
---------------------------------------------------------------------------

    We have made modifications to the language in the proposals as we 
considered appropriate. While we are providing risk factor disclosure 
to be included ``where appropriate,'' and have eliminated duplicative 
language, we continue to believe that a risk factor section in Exchange 
Act annual reports and registration statements will, where appropriate, 
be beneficial to investors.

B. Disclosure of Unresolved Staff Comments

    As we stated in the Proposing Release, because enhanced Exchange 
Act reporting provides a principal element of support for, and is at 
the core of, the rules we are adopting today, it is important that 
issuers timely resolve any staff comments on their Exchange Act 
reports. It is possible, however, that the procedural changes we are 
adopting today may eliminate some of the incentives issuers have to 
respond to and resolve comments on their Exchange Act reports in a 
timely manner. In particular, with immediate effectiveness, well-known 
seasoned issuers will not be subject to the possibility that 
effectiveness of a Securities Act registration statement could be 
delayed while comments are being resolved. In addition, all shelf 
eligible issuers will have to file new registration statements only 
every three years. Staff in the Division of Corporation Finance has 
begun to review more Exchange Act reports and will continue to do so in 
keeping with the requirements of the Sarbanes-Oxley Act \603\ as well 
as our view of the importance of an issuer's Exchange Act reports. 
Under these circumstances, and with the greater flexibility given in 
the rules we are adopting today to communications outside the statutory 
prospectus and offering procedures, we think it is appropriate for 
accelerated filers and well-known seasoned issuers to disclose 
outstanding staff comments that remain unresolved for a substantial 
period of time.
---------------------------------------------------------------------------

    \603\ See Section 408 of the Sarbanes-Oxley Act.
---------------------------------------------------------------------------

1. Disclosure Requirement
    We are adopting substantially as proposed the requirement that all 
entities defined as accelerated filers and well-known seasoned issuers 
disclose, in their annual reports on Form 10-K or Form 20-F, written 
comments our staff made in connection with a review of Exchange Act 
reports that:
     The issuer believes are material;
     Were issued more than 180 days before the end of the 
fiscal year covered by the annual report; \604\ and
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    \604\ The 180-day time period begins from the date of the first 
comment letter that specifically raises the issue, which may be 
later than the date of the initial comment letter on the filing.
---------------------------------------------------------------------------

     Remain unresolved as of the date of the filing of the Form 
10-K or Form 20-F.\605\
---------------------------------------------------------------------------

    \605\ The requirement to disclose outstanding comments applies 
to both domestic and foreign registrants. The term ``accelerated 
filer,'' which is defined in Exchange Act Rule 12b-2 [17 CFR 
240.12b-2], does not distinguish between domestic and foreign 
issuers. Accelerated filers who file reports on Form 20-F are not 
subject to accelerated deadlines because that Form, unlike Form 10-
K, does not include accelerated deadlines for filing. Nevertheless, 
any registrant that meets the definition of accelerated filer is 
subject to the disclosure requirement for outstanding comments.
---------------------------------------------------------------------------

    The disclosure must be sufficient to disclose the substance of the 
comments. Staff comments that have been resolved, including those that 
the staff and issuer have agreed will be addressed in future Exchange 
Act reports, do not need to be disclosed. Issuers can provide other 
information, including their position regarding any such unresolved 
comments.
2. Comments on Disclosure of Outstanding Comments
    Many commenters did not support the proposed disclosure of 
outstanding comments.\606\ These commenters believed that issuers 
already have sufficient incentives to comply with staff comments and 
that the disclosure may not provide meaningful information to 
investors.\607\ Some commenters suggested that well-known seasoned 
issuers should be able to choose to either comply with the disclosure 
requirement or abstain from conducting an offering until the

[[Page 44788]]

comments have been resolved.\608\ One commenter was concerned about 
potential liability that might arise from the disclosure of the 
unresolved comments.\609\
---------------------------------------------------------------------------

    \606\ See, e.g., letters from AICPA; Alston; BDO Seidman; BRT; 
Cleary; CSFB; Deloitte; E & Y; KPMG; Intel; Merrill Lynch; Morgan 
Stanley; SCSGP; and TBMA.
    \607\ See, e.g., letters from AICPA; BDO Seidman; and E & Y.
    \608\ See, e.g., letters from ABA; Alston; CSFB; and NYSBA.
    \609\ See letter from TBMA.
---------------------------------------------------------------------------

    For the reasons noted above, we believe that disclosure of 
outstanding comments is an important component of the rules that we are 
adopting today. Because the disclosure requirement applies only to 
comments issued more than 180 days before the issuer's fiscal year end 
that remain unresolved at the filing date, we believe that, in most 
circumstances, this will provide issuers with more than enough time to 
address and resolve issues. Moreover, we are not modifying the language 
from the proposal to allow issuers the choice to either disclose or 
refrain from offering securities in registered offerings because we 
believe the disclosures are important to the entire market.

C. Disclosure of Status as Voluntary Filer Under the Exchange Act

    As we noted in the Proposing Release, our filing system does not 
prohibit issuers that are not required to file Exchange Act reports us 
from filing those reports voluntarily. In most cases, voluntary filers 
are issuers who have, at some point, completed a registered offering 
under the Securities Act and have continued to file Exchange Act 
reports even after their reporting obligation under Exchange Act 
Section 15(d) has been suspended.\610\
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    \610\ Exchange Act Section 15(d) suspends automatically its 
application to any issuer that would be subject to the filing 
requirements of that section where, if other conditions are met, on 
the first day of the issuer's fiscal year, it has fewer than 300 
holders of record of the class of securities that created the 
Section 15(d) obligation.
---------------------------------------------------------------------------

    We are adopting the proposal to include a box on the cover page of 
Forms 10-K, 10-KSB, and 20-F for an issuer to check if it is filing 
reports voluntarily. However, the box is for disclosure purposes only 
and an issuer's filing obligation will be unaffected by an incorrectly 
checked box.
    We believe that it is important that investors and other market 
participants are aware that an issuer that is a voluntary filer is not 
required to continue to file Exchange Act reports and may cease to file 
its Exchange Act reports at any time and for any reason without notice. 
In addition, our communications and procedural rules we are adopting 
today do not treat voluntary filers as reporting issuers or seasoned 
issuers. As we indicated above, voluntary filers desiring treatment as 
reporting issuers should register a class of their securities under the 
Exchange Act.\611\ Identification of voluntary filers will enable 
market participants and us to identify voluntary filers.
---------------------------------------------------------------------------

    \611\ See Exchange Act Section 12(g) [15 U.S.C. 78l(g)].
---------------------------------------------------------------------------

    Commenters on voluntary filers generally thought that voluntary 
filers should be treated as seasoned issuers because many of them have 
contractual obligations to file reports.\612\ Some commenters were 
concerned that it would be difficult for certain foreign private 
issuers to assess their voluntary filer status because of issues 
relating to calculating the number of U.S. holders of record.\613\
---------------------------------------------------------------------------

    \612\ See, e.g., letters from ABA and Alston.
    \613\ See, e.g., letters from ABA and Alston.
---------------------------------------------------------------------------

    We are adopting as proposed the requirement for voluntary filers to 
disclose their status on the cover of Form 10-K, Form 10-KSB, and Form 
20-F. To date, we have permitted voluntary filers to submit their 
reports to us through EDGAR. We believe it is important to be able to 
assess whether issuers are subject to our reporting and other 
requirements arising from their reporting status. We do not believe 
that calculation of the number of U.S. holders is a significant 
obstacle to unregistered foreign private issuers' determination of 
their voluntary filer status.

VIII. Paperwork Reduction Act

A. Background

    The rules contain ``collection of information'' requirements within 
the meaning of the Paperwork Reduction Act of 1995 (PRA).\614\ We 
published a notice requesting comment on the collection of information 
requirements in the Proposing Release, and we submitted these 
requirements to the Office of Management and Budget (OMB) for review in 
accordance with the PRA.\615\
---------------------------------------------------------------------------

    \614\ 44 U.S.C. 3501 et seq.
    \615\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
---------------------------------------------------------------------------

    We did not receive any comments on the PRA analysis contained in 
the Proposing Release. As discussed above, we have made several changes 
to the proposed rules in response to comments on the proposals. These 
changes are designed to avoid potential unintended consequences and 
reduce possible additional costs or burdens pointed out by commenters. 
After evaluating the comments and our responsive revisions to address 
them, we are not changing the initial PRA estimates described in the 
Proposing Release and submitted to OMB, other than to reflect the 
decreased number of free writing prospectuses that will be filed as a 
result of the changes to the treatment of electronic road shows, as 
discussed below.
    The titles for all the collections of information affected by these 
rules are: \616\
---------------------------------------------------------------------------

    \616\ The paperwork burden from Regulations S-K, S-B, and C are 
imposed through the forms that are subject to the requirements in 
those Regulations and reflected in the analysis of those forms. To 
avoid a Paperwork Reduction Act inventory reflecting duplicative 
burdens, for administrative convenience we estimate the burdens 
imposed by Regulations S-K, S-B, and C to be a total of one hour.
---------------------------------------------------------------------------

    (1) ``Form 10'' (OMB Control No. 3235-0064);
    (2) ``Form 20-F'' (OMB Control No. 3235-0288);
    (3) ``Form 10-K'' (OMB Control No. 3235-0063);
    (4) ``Form 10-Q'' (OMB Control No. 3235-0070);
    (5) ``Regulation S-K'' (OMB Control No. 3235-0071);
    (6) ``Regulation S-B'' (OMB Control No. 3235-0417);
    (7) ``Regulation C'' (OMB Control No. 3235-0074);
    (8) ``Form S-1'' (OMB Control No. 3235-0065);
    (9) ``Form F-1'' (OMB Control No. 3235-0258);
    (10) ``Form S-2'' (OMB Control Number 3235-0072);
    (11) ``Form F-2'' (OMB Control Number 3235-0257);
    (12) ``Form S-3'' (OMB Control Number 3235-0073);
    (13) ``Form F-3'' (OMB Control Number 3235-0256);
    (14) ``Form S-4'' (OMB Control Number 3235-0324);
    (15) ``Form F-4'' (OMB Control Number 3235-0325);
    (16) ``Form N-2'' (OMB Control Number 3235-0026);
    (17) ``Rule 173'' (OMB Control Number 3235-0618);
    (18) ``Rule 163'' (OMB Control Number 3235-0619); and
    (19) ``Rule 433'' (OMB Control Number 3235-0617).
    We adopted all of the existing regulations and forms pursuant to 
the Securities Act of 1933, the Securities Exchange Act of 1934, and 
the Investment Company Act of 1940. They set forth the disclosure 
requirements for annual and quarterly reports, registration statements, 
and prospectuses that are prepared by issuers to ensure that investors 
have the information they need to make informed investment decisions in 
registered offerings and in secondary market transactions. We also are 
adopting new Securities Act Rules 163, 173, and 433

[[Page 44789]]

and eliminating Securities Act Rule 434 and Forms S-2 and F-2.
    The amendments to existing forms and regulations and new rules will 
modify and advance the Commission's regulatory system for offerings 
under the Securities Act, enhance communications between public issuers 
and investors, and promote investor protection. The rules involve three 
main areas:
     Communications related to registered securities offerings;
     Procedural restrictions in the offering and capital 
formation processes; and
     Delivery of information to investors.
    The hours and costs associated with preparing disclosure, filing 
forms, and retaining records constitute reporting and cost burdens 
imposed by the collections of information. The estimates of reporting 
and cost burdens provided in this PRA analysis address the time, 
effort, and financial resources necessary to provide the collections of 
information and are not intended to represent the full economic cost of 
complying with the rules. 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 control number.
    The information collection requirements related to registration 
statements and periodic reports will be mandatory. For registration 
statements and periodic reports, there will be no mandatory retention 
period for the information disclosed, and the information gathered will 
be made publicly available. The information collection requirements 
related to the communications and prospectus delivery rules will apply 
only to issuers and other offering participants choosing to rely on 
them. There will be a mandatory record retention period with respect to 
the communications and prospectus delivery provisions. Moreover, free 
writing prospectuses that are prepared by or on behalf of or used or 
referred to by an issuer, and free writing prospectuses that are 
broadly disseminated by another offering participant, will have to be 
filed and will be publicly available on the EDGAR filing system, 
whereas other free writing prospectuses prepared by or on behalf of or 
used or referred to by offering participants, other than the issuer, 
will not have to be filed.

B. Summary of Information Collections

    The rules will add the following disclosure requirements to 
Exchange Act periodic reports and registration statements:
     Risk factor disclosure;
     Disclosure by accelerated filers and well-known seasoned 
issuers, in their annual reports on Forms 10-K or 20-F, of any written 
staff comments regarding their Exchange Act reports issued more than 
180 days before the end of the fiscal year covered by the annual report 
that the issuer believes to be material and that remain unresolved as 
of the date of the filing of the annual report; and
     ``Check boxes'' that will appear on the cover page of the 
report or registration statement to indicate whether the registrant is 
filing Exchange Act reports on a voluntary basis and whether the 
registration is a well-known seasoned issuer.\617\
---------------------------------------------------------------------------

    \617\ We believe that the burden associated with checking a box 
on the cover page of an Exchange Act report or registration 
statement is so minimal that we are unable to quantify the burden.
---------------------------------------------------------------------------

    The rules will impose the following new disclosure requirements and 
filing or notification conditions in connection with registered 
offerings under the Securities Act:
     A brief notice to purchasers in a registered offering 
providing that the sale was made pursuant to a registration statement; 
\618\
---------------------------------------------------------------------------

    \618\ Under Securities Act Rule 173, this notification will be 
imposed, which may be satisfied through inclusion of the 
notification on a confirmation of sale already required to be 
provided in sales involving broker dealers, while Securities Act 
Rule 172 will eliminate the more burdensome requirement of delivery 
of a final prospectus.
---------------------------------------------------------------------------

     A brief legend in ``free writing prospectuses'' \619\ that 
refers investors to the statutory prospectus;
---------------------------------------------------------------------------

    \619\ ``Free writing prospectuses'' are written communications 
(other than statutory prospectuses) that constitute offers to sell 
or solicitations of offers to buy securities.
---------------------------------------------------------------------------

     ``Check boxes'' on registration statement cover pages 
indicating whether the registration statement is being used for 
``automatic shelf registration'' or post-effective registration of 
additional securities or classes of securities; \620\
---------------------------------------------------------------------------

    \620\ In this regard, see note regarding the burden associated 
with checking a box on the cover page.
---------------------------------------------------------------------------

     Additional disclosure in the undertakings required to be 
included in a registration statement for securities to be offered 
pursuant to Rule 415; \621\
---------------------------------------------------------------------------

    \621\ We also are requiring similar undertaking language in Form 
N-2, the registration statement form for closed-end management 
investment companies.
---------------------------------------------------------------------------

     A filing condition in connection with the use of certain 
free writing prospectuses; \622\ and
---------------------------------------------------------------------------

    \622\ See the discussion in Section III above under 
``Permissible Use of Free Writing Prospectuses'' under ``Filing 
Conditions.''
---------------------------------------------------------------------------

     Making a version of an electronic road show that is a 
written communication used in initial public offerings of common equity 
or convertible equity securities by non-reporting issuers broadly 
disseminated on an unrestricted basis.
    The rules will decrease existing disclosure requirements by:
     Reducing the need to repeat previously disclosed 
information by permitting any reporting issuer that has filed at least 
one annual report and that is current in its reporting obligation to 
incorporate information by reference into its registration statement on 
Forms S-1 or F-1; and
     Reducing the number of registration statements filed 
because the automatic shelf registration rules likely will eliminate 
the need to file multiple registration statements.

C. Summary of Comment Letters on the PRA Analysis

    We received no comments in response to our request for comment on 
the PRA analysis in the Proposing Release. We have made several changes 
and clarifications in response to comments on the proposals that are 
designed to avoid or reduce possible additional costs or burdens 
pointed out by commenters. For example, we are not requiring that an 
electronic road show be filed for most offerings, except if an 
electronic road show that is a written communication is used in an 
initial public offering of common equity or convertible equity 
securities by a non-reporting issuer. In that case, the electronic road 
show does not have to be filed if a bona fide electronic road show is 
made readily available electronically on an unrestricted basis In 
addition, we have revised the definition of graphic communication so 
that live, in real-time presentations to a live audience will not be 
considered written communications and therefore not free writing 
prospectuses. As a result of these modifications, we believe that fewer 
free writing prospectuses, including those that are electronic road 
shows, will be filed or otherwise made available electronically on an 
unrestricted basis, and we have therefore revised the estimates for the 
total burden imposed by Rule 433.

D. Paperwork Reduction Act Burden Estimates

    For purposes of the PRA, we estimated the total annual incremental 
reduction in the paperwork burden for registrants to comply with the 
collection of information requirements to be approximately 40,393 hours 
of in-house issuer personnel time and the reduction in cost to be 
approximately $70,797,000 for the services of outside

[[Page 44790]]

professionals.\623\ The changes in the PRA burden estimates for Rule 
433 (OMB Control No. 3235-0617) have the effect of reducing the 
estimated paperwork burden for registrants by approximately 356 hours 
of in-house personnel time, for a new estimate of approximately 40,749 
hours, and a reduction in cost of approximately $320,800, for a new 
estimate of approximately $71,117,800 for the services of outside 
professionals. For broker-dealers, we estimated the annual incremental 
paperwork burden to comply with the collection of information 
requirements to be approximately 3,874,133 hours of in-house issuer 
personnel time, and we are not changing this estimate.\624\ Those 
estimates include the time and the cost of preparing and reviewing 
disclosure, filing documents or otherwise publicizing information, and 
retaining records.
---------------------------------------------------------------------------

    \623\ For administrative convenience, the presentation of the 
totals related to the paperwork burden hours have been rounded to 
the nearest whole number and the cost totals have been rounded to 
the nearest thousand.
    \624\ We assume that brokers and dealers will not use outside 
professionals to comply with the new collection of information 
requirements.
---------------------------------------------------------------------------

    As we noted in the Proposing Release, the estimates represent the 
average burden for all issuers, both large and small. We expect that 
the burdens and costs could be greater for larger issuers and lower for 
smaller issuers. For Exchange Act periodic reports, we estimated that 
75% of the burden of preparation is carried by the issuer internally 
and that 25% of the burden is carried by outside professionals retained 
by the issuer at an average cost of $300 per hour.\625\ For Securities 
Act registration statements, Exchange Act registration statements, all 
filings by foreign private issuers, and the free writing prospectus 
rules, we estimated that 25% of the burden of preparation is carried by 
the issuer internally and that 75% of the burden is carried by outside 
professionals retained by the issuer at an average cost of $300 per 
hour. The portion of the burden carried by outside professionals is 
reflected as a cost, while the portion of the burden carried by the 
issuer internally is reflected in hours.
---------------------------------------------------------------------------

    \625\ In connection with other recent rulemakings, we have had 
discussions with several private law firms to estimate an hourly 
rate of $300 as the average cost of outside professionals that 
assist issuers in preparing disclosures and conducting registered 
offerings.
---------------------------------------------------------------------------

1. Exchange Act Periodic Reports and Registration Statements
    For purposes of the PRA, we estimated the annual incremental 
paperwork burden for all issuers to prepare the disclosure required in 
Exchange Act periodic reports and registration statements under the 
rules to be approximately 43,245 hours of issuer personnel time and the 
cost to be approximately $4,477,000 for the services of outside 
professionals, as we explained more fully in the Proposing Release. 
Those estimates include the time and the cost of preparing and 
reviewing the required new disclosure. The estimates reflect our belief 
that, because the current disclosure requirements for Exchange Act 
reports (such as Management's Discussion and Analysis of Financial 
Condition and Results of Operations) \626\ already require issuers to 
obtain information necessary to evaluate their material risks, and 
because disclosure by accelerated filers describing unresolved written 
staff comments on previous filings that the issuer believes to be 
material will be simply a summary of comments provided to the issuer by 
the staff of the Commission, the disclosure that issuers would have to 
make in their Exchange Act periodic reports and registration statements 
should not impose significant new burdens.
---------------------------------------------------------------------------

    \626\ Item 303 of Regulation S-K [17 CFR 229.303].
---------------------------------------------------------------------------

2. Communications and Prospectus Delivery
    For purposes of the PRA, we estimate that the annual paperwork 
burden for issuers that choose to comply with the communications rules 
will be approximately 1,176 hours of issuer personnel time and a cost 
of approximately $1,058,288 for the services of outside professionals. 
These estimates reflect the burden hours and costs associated with the 
disclosure, filing, and record retention conditions. As noted above, we 
are revising the annual burden for the information collection 
requirements of Rule 433 as a result of the changes to the treatment of 
electronic road shows and we have decreased the annual paperwork burden 
accordingly. For the prospectus delivery rules, we estimated that the 
annual burden would be 3,874,133 hours total for all respondents to 
comply with Rule 173.
3. Securities Act Registration Statements
    For purposes of the PRA, we estimated that the rules affecting the 
collection of information requirements related to Securities Act 
registration statements would reduce incrementally the annual paperwork 
burden by approximately 85,170 hours of issuer personnel time and by a 
cost of approximately $76,653,000 for the services of outside 
professionals, as we explained more fully in the Proposing Release. 
That estimate reflected changes to the number of filings that could 
result from the rules as well as the decrease in disclosure preparation 
time resulting from the expansion of incorporation by reference.

IX. Cost Benefit Analysis

A. Background

    We are revising the registration, communications, and offering 
processes under the Securities Act. The rules involve three main areas:
     Communications related to registered securities offerings;
     Registration and other procedures in the offering and 
capital formation processes; and
     Delivery of information to investors.
    The overall goal of the reforms is to make the registration system 
more workable for issuers and underwriters and more effective for 
investors in today's capital markets. We believe that the gun-jumping 
provisions of the Securities Act impose substantial and increasingly 
unworkable restrictions on useful communications that would be 
beneficial to investors and markets and consistent with investor 
protection. Today's rules reflect our view that revisions to the 
Securities Act registration and offering processes are appropriate in 
light of significant developments in the offering and capital formation 
processes and can provide enhanced protection of investors under the 
statute. This view is based on our belief that today's rules will:
     Facilitate greater availability of information to 
investors and the market with regard to all issuers;
     Eliminate barriers to open communications that have been 
made increasingly outmoded by technological advances;
     Reflect the increased importance of electronic 
dissemination of information, including the use of the Internet;
     Make the capital formation process more efficient; and
     Define more clearly both the information and the 
timeliness of the availability of information against which a seller's 
statements are evaluated for liability purposes.

B. Summary of Rules

    The amount of flexibility granted to issuers under the revisions to 
the registration, communications, and offering processes is contingent 
on the characteristics of the issuer. We believe that the most far-
reaching revisions of the communications rules and registration 
processes should be

[[Page 44791]]

considered for issuers that have a reporting history under the Exchange 
Act and are presumptively the most widely followed in the marketplace. 
We believe that these issuers have an Exchange Act record, a broad 
following of their Exchange Act filings, and the contemplated attention 
directed to their Exchange Act reports by analysts and institutional 
investors, and the staff of the Division of Corporation Finance that 
will produce the greatest likelihood of Exchange Act reports that not 
only are reliable but also are broadly scrutinized by investors and the 
markets.
    For purposes of the rules we are adopting today, we categorize 
issuers into tiers, consisting of non-reporting issuers, unseasoned 
issuers, seasoned issuers, and well-known seasoned issuers. The first 
three tiers of issuers are identified by pre-existing criteria under 
the existing federal securities laws. A non-reporting issuer is an 
issuer that is not required to file reports pursuant to Sections 13 or 
15(d) of the Exchange Act.\627\ An unseasoned issuer is an issuer that 
is required to file reports pursuant to Sections 13 or 15(d) of the 
Exchange Act, but does not satisfy the requirements of Form S-3 or Form 
F-3 for a primary offering of its securities. A seasoned issuer is an 
issuer that uses Form S-3 or Form F-3 to register primary offerings of 
securities. Our longstanding experience with these categories of 
issuers provides us with a basis for determining the amount of 
flexibility provided by the rules we are adopting today.
---------------------------------------------------------------------------

    \627\ Under the rules, an issuer that is filing Exchange Act 
reports voluntarily, but is not required to do so, will be a non-
reporting issuer for purposes of the communications and procedural 
rules.
---------------------------------------------------------------------------

    The characteristics of the last tier of issuer, called well-known 
seasoned issuers in the rules, will be easily measurable and readily 
available so that issuers and market participants can determine 
eligibility easily. In response to comments, we are modifying the 
definition of well-known seasoned issuer to provide that the 
eligibility determination will be made as of the later of the time of 
filing of the issuer's most recent registration statement on Form S-3 
or Form F-3 for a primary offering, the time of filing its most recent 
amendment for purposes of complying with Section 10(a)(3) of the 
Securities Act, or an amendment to a shelf registration within 16 
months. If the well-known seasoned issuer has not filed an automatic 
shelf registration statement, the eligibility is determined at the time 
of filing the issuer's most recent annual report on Form 10-K or Form 
20-F (or if such report has not been filed by its due date, such due 
date). In addition, we will require issuers to check a box on the cover 
of their Form 10-K or Form 20-F if they are a well-known seasoned 
issuer so that market participants may reasonably rely on the issuer's 
determination. For issuers with publicly traded equity, we believe that 
market capitalization provides a sufficient proxy for determining 
whether or not an issuer is well followed. For issuers of fixed income 
securities, we believe that the amount of fixed income securities sold 
in registered offerings for cash in the past three years provides a 
sufficient proxy.\628\
---------------------------------------------------------------------------

    \628\ For further discussion of the characteristics of well-
known seasoned issuers, see Section II above.
---------------------------------------------------------------------------

    Under the rules, a well-known seasoned issuer will have the 
greatest flexibility. The largest issuers are followed by sophisticated 
institutional and retail investors, members of the financial press, and 
numerous sell-side and buy-side analysts that actively seek new 
information on a continual basis. Unlike smaller or less mature 
issuers, large, seasoned public issuers tend to have a more regular 
dialogue with investors and market participants through the press and 
other media. The communications of these well-known seasoned issuers 
are subject to scrutiny by investors, the financial press, analysts, 
and others who evaluate disclosure when it is made.
1. Communications
    We are adopting communications rules that recognize the value of 
ongoing communications as well as the importance of avoiding 
unnecessary restrictions on offers during a registered offering. The 
rules are designed to improve investors' access to information, to 
promote communications between offering participants and investors, and 
to maintain adequate investor protection. The rules will operate in the 
following manner:
     There will be two separate safe harbors from the gun-
jumping provisions for ongoing communications at any time:
    [cir] A safe harbor for a reporting issuer's continued publication 
or dissemination at any time of regularly released factual business and 
forward-looking information; and
    [cir] A safe harbor for a non-reporting issuer's continued 
publication or dissemination at any time of factual business 
information that is regularly released to persons other than investors 
or potential investors.
     There will be two separate exclusions from the gun-jumping 
provisions for communications not encompassed in the rules above that 
occur prior to the filing of a registration statement:
    [cir] An exclusion from the definition of offer for purposes of 
Securities Act Section 5(c) for all issuers for all communications made 
by or on behalf of issuers 30 days prior to filing a registration 
statement; and
    [cir] An exemption from the prohibition on offers for purposes of 
Securities Act Section 5(c) before the filing of a registration 
statement for offers made by or on behalf of eligible well-known 
seasoned issuers.
     Certain written offering related communications, such as 
communications about the schedule for an offering or communications 
about account-opening procedures, will be permitted in connection with 
an offering and will be excluded from the definition of ``prospectus.''
     Issuers and other offering participants will be permitted 
to use free writing prospectuses after the filing of the registration 
statement, subject to enumerated conditions (including, in specified 
cases, filing with the Commission).
     The safe harbors for research reports will be expanded.
2. Securities Act Registration Rules
    As part of the rules to modernize the regulatory regime for 
registered securities offerings, we are streamlining the registration 
process for most types of reporting issuers. The rules recognize the 
role that technology and improved Exchange Act reporting procedures 
have in informing the marketplace. The rules address the registration 
procedures for seasoned and unseasoned issuers. These rules include:
     Modifications that clarify and expand how and when 
information can be included in registration statements;
     A clarification of the Securities Act liability treatment 
of information provided in a prospectus supplement and Exchange Act 
reports incorporated by reference;
     A more flexible automatic registration process for well-
known seasoned issuers, including immediate effectiveness and pay-as-
you-go registration fee payment; and
     Rules related to non-shelf offerings of securities.
3. Prospectus Delivery
    We are adopting an ``access equals delivery'' prospectus delivery 
model, where final prospectus delivery obligations for purposes of 
Securities

[[Page 44792]]

Act Section 5(b)(2) will be satisfied if the issuer filed the final 
prospectus with the Commission within the required time frame. The 
rules will:
     Eliminate the existing link between delivery of the final 
prospectus and the delivery of a written confirmation of sale;
     Provide that the obligation to have a final prospectus 
precede or accompany a security can be satisfied by filing a final 
prospectus with us within the relevant timeframe provided by Rule 
424(b);
     Permit written notices of allocations; and
     Permit the prospectus delivery obligations in dealer 
transactions during any prospectus delivery period and broker or dealer 
transactions in registered resales of securities that are trading to be 
satisfied if the final prospectus has been or will be filed with us.
4. Exchange Act Reports
    A public issuer's Exchange Act record often provides the most 
detailed source of information to the market and to potential 
purchasers regarding the issuer, its business, its financial condition, 
and its prospects. We are adopting, substantially as proposed, several 
reforms to Exchange Act reporting requirements related to the reforms 
to the Securities Act offering process. As a result of the rules, we 
will:
     Extend risk factor disclosure requirements to annual 
reports on Exchange Act Form 10-K and registration statements on 
Exchange Act Form 10;
     Require updates for previously disclosed risk factors in 
quarterly reports on Exchange Act Form 10-Q;
     Require accelerated filers and well-known seasoned issuers 
to disclose in their annual reports on Exchange Act Forms 10-K and 20-F 
any written staff comments on Exchange Act reports issued more than 180 
days before the end of the fiscal year covered by the report that the 
issuer believes to be material and that remain unresolved as of the 
filing date of the report;
     Include a box on the cover page of the Exchange Act Forms 
10-K and 20-F for an issuer to check if it is a well-known seasoned 
issuer; and
     Include a box on the cover page of Exchange Act Forms 10-
K, 10-KSB, and 20-F for an issuer to check if it is filing reports 
voluntarily.

C. Comments on the Proposals

    Commenters supported the proposals, with many commenters noting 
that the proposals struck the appropriate balance between improving the 
capital formation process and modernizing offering communications, 
while preserving investor protection and avoiding unnecessary 
impediments to the capital formation process. We did not receive any 
comments on the cost-benefit analysis, other than asking generally 
about cost savings by underwriters and broker-dealers. Some commenters 
noted potential costs that certain of the proposals might impose. We 
considered these comments carefully and believe that we have made 
responsive changes in order to minimize these potential costs.
    For example, a number of commenters were concerned about the final 
prospectus filing condition in Rule 172, due to the potential liability 
if written confirmations were sent and the issuer failed to file the 
final prospectus within the required time frame. We have included a 
cure provision allowing an issuer that has made a good faith and 
reasonable effort to file within the required time frame to file the 
final prospectus as soon as practicable after discovery of the failure 
to file. Commenters also expressed concern about the distinctions 
between oral and written communications and the effects on offering 
participants to provide information. We have revised the definition of 
graphic and written communications to make clearer when a communication 
is written and when it is oral.

D. Benefits

    As discussed, the overall goal of the reforms is to make the 
registration system more workable for issuers and underwriters and more 
effective for investors in today's capital markets. We believe that the 
reforms will achieve this goal and consequently result in significant 
benefits in a number of areas, including by increasing the flow of 
information available to investors during a registered offering while 
maintaining investor protection against misleading or inaccurate 
disclosures. We also anticipate that the rules will improve access to 
the public capital markets and possibly lower the cost of capital by, 
among other things, modifying, and in some cases clarifying, the 
federal securities laws related to communications, liability, shelf 
registration, and the use of electronic media during a registered 
offering. Finally, we believe that the rules will provide cost-saving 
options to issuers and underwriters.
1. Increased Information Flow
    The primary benefit that the rules seek to achieve is an increased 
flow of information to investors during a registered offering. While 
much of the Commission's recent rulemaking is intended to encourage 
reporting issuers to provide materially accurate and complete 
information to the market on a more current basis, the Securities Act's 
constraints on communications during an offering cause issuers to be 
concerned about the treatment of their ongoing communications and 
whether their customary disclosures will be considered an impermissible 
offer of securities. As a result of the multiplicity of means of 
communication, restricting written offers to a statutory prospectus 
inhibits desirable methods of timely communication of information. The 
rules regarding communications, registration, and liability will 
operate to increase the amount of valuable information that could be 
provided to investors before they make investment decisions. We believe 
that more information will be provided on a more timely basis because 
the rules will eliminate regulatory barriers to the dissemination of 
that information, and the markets may provide incentives for issuers, 
underwriters, and broker dealers to produce additional information.
    Increased information flow will promote efficient capital markets 
because the market may be able to value securities more accurately. 
Under the rules, underwriters can communicate with potential investors 
during an offering to better gauge investor interest, thus facilitating 
greater discourse among investors and underwriters.
    Another benefit of increasing the information flow is that 
investors may become better informed in making portfolio allocation 
decisions in accordance with their particular risk-return profiles. 
Moreover, the ability of offering participants to use free writing 
prospectuses in connection with offerings will impart a greater ability 
to provide information to investors about securities before they make 
investment decisions. For example, issuers and underwriters will be 
able to provide proprietary analytical material that is specifically 
tailored to address the particular asset allocation considerations of 
different investors. Today's markets include a growing number of 
increasingly complex securities where written communications, such as 
detailed term sheets, will enhance significantly the offering process 
for the benefit of investors. In addition, we are adopting rules to 
permit research to be distributed about more issuers that are making 
registered offerings. Having access to these reports may facilitate

[[Page 44793]]

additional security analysis among investors.
    By reducing the restrictions on the contents of written 
communications, we anticipate that investors will demand more 
information and issuers, underwriters, and other offering participants 
will be more willing to provide it. Significant technological advances 
have increased both the market's demand for more timely corporate 
disclosure and the ability of issuers to capture, process, and 
disseminate information. The rules will enable issuers and market 
participants to take greater advantage of the Internet and other 
electronic media to communicate and deliver information to investors. 
As discussed in greater detail below, reducing regulatory and liability 
uncertainty with respect to the treatment of written communications may 
make issuers more comfortable in supplying information without worrying 
about violating the gun-jumping provisions. Accordingly, investor 
demand for information can be satisfied through relatively inexpensive 
mass dissemination of the information through electronic means.
    Finally, the rules we are adopting today that provide that an 
electronic road show presentation must either be filed or a bona fide 
version must be made readily available to an unrestricted audience for 
initial public offerings of a non-reporting issuer's common equity or 
convertible equity securities provide for the availability of 
information in these offerings to all investors. We believe these 
changes will encourage more road shows and other information in these 
offerings to be provided to more investors.
2. Investor Protection
    Another benefit of the rules is that they will maintain investor 
protection against misleading or inaccurate disclosures. Investor 
protection is of paramount importance in maintaining fair, orderly, and 
efficient capital markets. The rules regarding liability and disclosure 
in Exchange Act periodic reports, as well as the filing conditions and 
record retention conditions for unfiled free writing prospectuses, will 
maintain and enhance investor protection in connection with registered 
securities offerings.
    A central premise underlying the liability rules is that 
communications to investors at the time of sale (including the time of 
the contract of sale) should not include material misstatements or fail 
to include material information that is necessary to make the 
communication not misleading in light of the circumstances in which the 
communication is made. We believe that the rules will provide issuers 
and underwriters with greater flexibility to communicate information in 
a manner that does not slow the offering process unduly. At the same 
time, investors should be in a better position to have accurate 
information at the time of the sale of the securities to them 
(including the time of the contract of sale). These measures should 
encourage the disclosure of accurate information about 
transactions.\629\
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    \629\ Recent research has examined the effect of securities laws 
on stock market development in 49 countries and found strong 
evidence that laws facilitating private enforcement through 
disclosure and liability rules are positively correlated with more 
developed stock markets. See, La Porta, Lopez de Silanes, and 
Shleifer, ``What Works in Securities Laws?'' Forthcoming in Journal 
of Finance.
---------------------------------------------------------------------------

    The free writing prospectus rules will promote investor protection 
by requiring issuers to file issuer prepared or used free writing 
prospectuses and issuer information in free writing prospectuses. We 
believe that conditioning the use of written issuer provided or used 
information on filing will improve investor protection. On the one 
hand, the filing requirement is designed to assure that written issuer 
provided or used information is publicly available. On the other hand, 
requiring underwriters to file their proprietary analysis may cause 
them competitive harm. Additionally, the free writing prospectus will 
be a Section 10(b) prospectus under the Securities Act and, as such, 
will be subject to liability under Section 12(a)(2) as well as the 
anti-fraud provisions of the federal securities laws. As a Section 
10(b) prospectus, there will be continuing Commission oversight and 
enforcement authority over the contents and use of the free writing 
prospectus, including the ability to halt the use of any materially 
false or misleading free writing prospectus in accordance with Section 
10(b).
    The rules allowing automatic shelf registration statements to 
become effective immediately will allow the Commission to shift its 
resources more toward the review of issuers' Exchange Act reports. 
Because we believe that an issuer's Exchange Act record often provides 
the most detailed source of information to the market and to potential 
purchasers regarding the issuer, its business, its financial condition, 
and its prospects, we believe that investors will benefit from the 
staff's ability to review Exchange Act reports more frequently.
    The inclusion of additional disclosures in Exchange Act periodic 
reports also will promote investor protection. We believe that the 
disclosure by issuers meeting the definition of accelerated filers and 
well-known seasoned issuers of unresolved written staff comments that 
the issuer believes to be material will benefit investors because they 
will be able to ascertain the nature of the staff comments and take 
them into account in their investment decisions. We believe that the 
disclosure of risk factors in plain English will help investors in 
assessing the risks that an issuer currently faces or may face in the 
future. Many issuers currently provide this risk factor disclosure in 
their Exchange Act reports voluntarily. However, for other issuers, 
investors have access to this information only if the issuer has 
recently conducted a registered offering under the Securities Act, in 
which case the issuer will be subject to risk factor disclosure 
requirements in its Securities Act registration statement. The rules 
also require disclosure of voluntary filer status. We believe it is 
important that the staff and the market understand when issuers are 
filing Exchange Act reports voluntarily, since such issuers may cease 
filing these reports at any time.
3. Facilitating Capital Formation
    We anticipate that the rules will facilitate capital formation, and 
possibly lower the cost of capital, by improving access to the public 
capital markets. The rules are designed to eliminate unnecessary 
regulatory impediments to capital formation and provide more 
flexibility to issuers to conduct registered securities offerings. The 
amount of flexibility accorded by the rules will depend on the 
characteristics of the issuer. The rules provide the most flexibility 
under the communications rules and the automatic shelf registration 
system to eligible well-known seasoned issuers. Other issuers also will 
benefit, albeit to a lesser degree, from the other revisions to the 
communications and registration process.
    The rules may lower the cost of capital because they will provide 
significant flexibility to issuers and underwriters in marketing their 
securities. The communications rules will allow well-known seasoned 
issuers to communicate at any time regarding an offering and will allow 
other issuers more freedom in communicating after a registration 
statement is filed. For well-known seasoned issuers, automatic shelf 
registration will facilitate immediate market access and promote 
efficient capital formation, without diminishing investor protection. 
The automatic shelf registration process will allow eligible

[[Page 44794]]

issuers to add additional classes of securities and eligible majority-
owned subsidiaries as additional registrants after an automatic shelf 
registration statement is effective. The ``pay-as-you-go'' system will 
allow well-known seasoned issuers to pay at the time of each takedown 
off the shelf registration statement or in advance. The automatic shelf 
registration rules will provide these issuers with significant latitude 
in determining the types and amounts of their securities or those of 
their eligible subsidiaries that could be offered without any potential 
time delay or other obstacles imposed by the registration process. The 
rules will provide the flexibility to take advantage of market windows, 
to structure securities on a real-time basis to accommodate issuer 
needs or investor demand, and to determine or change the plan of 
distribution of securities as issuers elect in response to changing 
market conditions.
    The other rules to the shelf registration procedures and expansion 
of incorporation by reference also will provide flexibility to issuers 
to enable them to access the capital markets at a lower cost. For 
example, removing the current restrictions on at-the-market offerings 
of equity securities will allow issuers eligible to use Form S-3 or 
Form F-3 for primary equity offerings to offer securities directly to 
the marketplace, without using the underwriting or syndication process. 
Under the rules to expand Form S-3 eligibility to cover additional 
majority-owned subsidiaries, issuers will have greater flexibility to 
structure offerings of guaranteed securities without losing the 
benefits of shelf registration. In addition, the rules to expand 
incorporation by reference to Form S-1 and Form F-1 will enable 
eligible issuers to use their Exchange Act filings to satisfy their 
disclosure requirements without having to incur costs to replicate 
information in the prospectus.
    Providing flexibility for registered offerings may encourage 
issuers to raise capital through the registration process instead of 
through private placements. Typically, registered securities enjoy more 
liquid markets than unregistered securities. Therefore, registered 
securities are less likely to be subject to a liquidity discount. In 
addition, registered securities offerings provide a potentially larger 
investor base than that available to those who participate in private 
placements. Accordingly, issuers may incur lower transaction costs when 
raising capital because they will have access to a much deeper market 
for their securities and may have to expend fewer resources to locate 
investors.
    The prospectus delivery rules are designed to facilitate effective 
access to information, while taking into account advancements in 
technology and the practicalities of the offering process. These 
changes are intended to alleviate timing difficulties that may arise 
under the current securities clearance and settlement system, and also 
to facilitate the successful delivery of, and payment for, securities 
in a registered offering. Given that the final prospectus delivery 
obligations generally affect investors only after they have made their 
investment decisions and that investors and the market have access to 
the final prospectus upon its filing, we believe that the obligation 
can be satisfied through a means other than physical delivery. Because 
the contract of sale will have already occurred by the time the final 
prospectus is filed, we also believe that delivery of a confirmation 
and the delivery of the final prospectus need not be linked. Receiving 
confirmations earlier in the settlement process will enable investors 
to review the confirmation and verify trade data closer to the time of 
the investment decision.
4. Reduced Regulatory Uncertainty
    The rules modify the federal securities laws related to 
communications, liability, shelf registration, and the use of 
electronic media during a registered offering. The rules, by enhancing 
issuers' certainty about the regulatory treatment of and liability 
provisions attached to the communication of information to the 
marketplace, could encourage issuers to increase the dissemination of 
readily available information useful to investors, such as management's 
plans and objectives for future operations. The 30-day bright-line 
exclusion and the exemption from the prohibition on offers prior to 
filing for well-known seasoned issuers will provide these issuers with 
the ability to communicate information prior to filing a registration 
statement without risk of violating the gun-jumping provisions.
    The safe harbors for regularly released factual business 
information and forward-looking information will allow issuers to 
continue ordinary communications without fear of violating the gun-
jumping provisions. At the same time, these communications could 
benefit all investors because there will be more current information 
and analysis available upon which to make investment decisions. We also 
are clarifying the treatment of information located on or hyperlinked 
to an issuer's website around the time of a registered offering, to 
allow for the continued availability of historical information that may 
be useful to investors.
    The rules affecting the shelf registration procedures will codify 
in a single location permissible omissions from shelf registration 
statements and the permissible methods to include the omitted 
information. This will promote efficiency by providing certainty about 
the content of base prospectuses in shelf registration statements and 
the methods by which required information may be included, thereby 
reducing divergent practices and eliminating possible inadvertent 
mistakes. In addition, we believe the rules will address the disparate 
treatment of underwriters from a liability standpoint by establishing a 
new effective date for liability purposes for issuers and persons who 
are underwriters at that time in connection with takedowns off shelf 
registration statements, as reflected in prospectus supplements filed 
for such takedowns. On the other hand, the new rules regarding 
prospectus supplement filings will not trigger a new effective date for 
officers or directors of the issuer or for experts, including 
accountants.
5. Lower Costs
    The prospectus delivery rules and the rules related to the 
registered securities offering process will provide cost-saving options 
to issuers, underwriters, and dealers. We believe that allowing 
reporting issuers to incorporate by reference their previously filed 
Exchange Act reports and other materials into a Form S-1 or Form F-1 
provides them a more cost-effective way to raise capital without the 
cost of duplicating the information contained in their filed reports 
and other materials. The rules affecting final prospectus delivery 
should also result in lower costs to issuers because of reduced 
printing costs for a smaller number of final prospectuses.
    For purposes of the PRA analysis, we have estimated that the rules 
to the registered securities offering processes will reduce the total 
current annual compliance costs by approximately $87,664,000.\630\ In 
addition, we believe that issuers and underwriters will benefit from 
not having to print and deliver final prospectuses. We estimate that 
the cost savings per prospectus will be approximately $0.75 per 
prospectus. For purposes of the PRA, we have estimated 232.45 million 
instances in which broker dealers will be able to rely on the ``access 
equals delivery''

[[Page 44795]]

provisions. Investors may request the final prospectus, and we estimate 
that they will do so 25% of the time. Therefore, we estimate the total 
annual cost savings will be approximately $130,753,000.
---------------------------------------------------------------------------

    \630\ For purposes of monetizing the cost of issuer personnel 
time, we estimate the average hourly cost of issuer personnel time 
to be $125.
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E. Costs

    While the overall goal of the reforms is to make the registration 
system more workable for issuers and underwriters and more effective 
for investors in today's capital markets, we do believe that there will 
be costs to the rules. These include costs for compliance with the 
rules, potential behavioral changes resulting from the liability rules, 
and certain other costs.
1. Compliance Costs
    One potential cost of the rules is that issuers may incur increased 
filing costs associated with issuer free writing prospectuses or making 
a version of an electronic road show publicly available.\631\ These 
costs should be mitigated somewhat by the fact that free writing 
prospectuses are not required to be filed as part of the registration 
statement and therefore will not have to be conformed to meet all the 
requirements for an amendment to the registration statement. In 
addition, because oral communications are not written and, therefore, 
not free writing prospectuses, the rules should not result in 
significant incremental costs from existing regulations. We also are 
conditioning the use of free writing prospectuses on the inclusion of a 
legend that notifies investors that they can receive a copy of the 
prospectus by calling a toll-free number. Accordingly, there may be 
some costs for issuers and offering participants associated with 
establishing a toll-free number for investors, although the toll-free 
number does not have to be issuer specific.
---------------------------------------------------------------------------

    \631\ For example, for purposes of the PRA analysis, we estimate 
that the aggregate total annual paperwork burden for issuers arising 
from the preparation, review, and filing of free writing 
prospectuses or making a version of an electronic road show 
available under the new communications rules will be approximately 
$301,993.
---------------------------------------------------------------------------

    Another potential compliance cost is the additional expenditures 
that issuers and offering participants may incur in storing and 
archiving information to satisfy the record retention conditions.\632\ 
Parties will need to implement appropriate mechanisms to ensure that 
they retain for three years adequate records of any free writing 
prospectuses used and not filed. We have revised the proposed record 
retention condition so that it encompasses only free writing 
prospectuses that have not been filed on EDGAR, so this should ease the 
burden for issuers and offering participants.
---------------------------------------------------------------------------

    \632\ For example, as we discussed in the Proposing Release, for 
purposes of the PRA analysis, we estimated that the aggregate total 
annual paperwork burden of complying with the record retention 
conditions for free writing prospectuses used in reliance on Rule 
433 will be approximately $948,900.
---------------------------------------------------------------------------

    The disclosures may increase the cost to issuers of preparing their 
Exchange Act reports. We do not expect the costs to accelerated filers 
and well-known seasoned issuers of including disclosure of certain 
unresolved staff comments to be significant because the information 
will be readily available to the issuer.\633\
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    \633\ For example, as we discussed in the Proposing Release, for 
purposes of the PRA analysis, we estimated that the aggregate total 
annual paperwork burden of preparing, reviewing and filing the 
disclosure of unresolved comments in Exchange Act reports will be 
approximately $138,713.
---------------------------------------------------------------------------

    Including risk factor disclosure may impact issuers who do not 
already include this disclosure in their Exchange Act reports for other 
reasons.\634\ Because issuers already are required to prepare financial 
statements and other information about their business, financial 
condition, and prospects in their annual and quarterly reports, some of 
which will include these risk factors, we believe that issuers will 
have already analyzed the issues that might be addressed in the risk 
factor disclosure. In addition, issuers may already include risk factor 
disclosure in their Exchange Act reports for varying reasons, including 
to take advantage of the safe harbor for forward-looking statements in 
Securities Act Section 27A of the Securities Act \635\ and the 
``bespeaks caution'' defense developed through case law. We recognize, 
however, that issuers will incur costs in preparing, reviewing, filing, 
printing, and disseminating this information. In particular, in 
addition to involving in-house preparers, in-house legal and accounting 
staff, and senior management, issuers may consult with outside legal 
counsel in preparing this disclosure. We believe, however, that the 
potential compliance costs for the risk factor disclosure should be 
considered in light of the fact that requiring risk factor disclosure 
in Exchange Act registration statements and annual reports will enhance 
the ability of reporting issuers to incorporate risk factor disclosure 
from Exchange Act reports into Securities Act registration statements 
to satisfy the risk factor disclosure requirements.
---------------------------------------------------------------------------

    \634\ For example, as we discussed in the Proposing Release, for 
purposes of the PRA analysis, we estimated that the aggregate total 
annual paperwork burden of preparing, reviewing and filing the 
disclosure of risk factors in Exchange Act reports will be 
approximately $9,743,417.
    \635\ 17 U.S.C. 77z-2.
---------------------------------------------------------------------------

    Parties also may incur additional costs due to the requirement to 
notify investors that they have purchased in a registered offering. In 
addition, these same parties will incur costs to establish procedures 
for receiving and complying with requests for final prospectuses. We 
believe that providing the notice to investors will not impose a 
significant incremental cost because the notice can consist of a pre-
printed message that is automatically delivered with or as part of the 
confirmation required by Exchange Act Rule 10b-10. Accordingly, we 
estimate that the cost for complying with Rule 173 will be 
approximately $0.05 per notice. We estimate the annual cost of 
providing the notifications will be approximately $11,622,500.\636\ The 
cost savings resulting from the elimination of the requirement to 
supply a final prospectus to each investor will offset the costs 
incurred, however.
---------------------------------------------------------------------------

    \636\ ($0.05 per notice) multiplied by (232.45 million 
confirmations) = $11,622,500.
---------------------------------------------------------------------------

2. Potential for Increased Liability
    The rules to deem prospectus supplements to be part of and included 
in effective registration statements, and to modify, for liability 
purposes for the issuer and underwriters only, the effective date of 
shelf registration statements to link them to individual offerings or 
takedowns off the shelf registration statement may cause issuers to 
evaluate more carefully the information contained in prospectuses and 
the information conveyed to investors. We have sought to minimize the 
potential costs by limiting the rule so that it affects the issuer and 
underwriters only, and therefore have not changed the effective date 
for liability purposes for officers, directors, and experts, other than 
when new expertized information is included in the prospectus.
    In response to commenters' concerns about cross-liability for free 
writing prospectuses, the rules provide greater clarity for when an 
offering participant would be liable for a free writing prospectus.
    With respect to the risk factor disclosure, a potential cost might 
be that issuers may be concerned about increased liability for a 
material misstatement or omission in their disclosure. In view of 
existing liability for information in registration statements and 
Exchange Act reports, as well as existing safe-harbors for forward-
looking information, in drafting the current rules, however, we were

[[Page 44796]]

sensitive to potential additional costs that the disclosure requirement 
might impose. For example, for liability purposes, we are not treating 
risk factor disclosure any differently than other disclosures in 
Exchange Act reports that may be incorporated by reference into 
Securities Act registration statements. We also note that the safe 
harbor for forward-looking statements contained in Securities Act 
Section 27A and Exchange Act Section 21E may apply to this disclosure 
for eligible issuers. In addition, the risk factor disclosure is based 
on an evaluation of the material risks facing an issuer. Issuers 
currently disclose significant information about themselves in their 
Exchange Act reports, including in management's discussion and analysis 
of financial condition and results of operations and, as a result, 
already analyze their business and operations. Moreover, we note that 
issuers already are subject to disclosure requirements regarding this 
information in Securities Act registration statements.
3. Other Potential Costs
    We are allowing registration statements by well-known seasoned 
issuers to become effective automatically, rather than being subject to 
review by the staff of the Division of Corporation Finance. As a 
result, registrants may not have the same incentive to remedy deficient 
disclosure in Exchange Act reports or in the registration statement 
itself than they would if their registration statements were subject to 
pre-effective staff review. We have sought to minimize this possibility 
by requiring accelerated filers and well-known seasoned issuers to 
disclose, on an annual basis, written staff comments on their periodic 
report disclosures, that were issued more than 180 days prior to the 
fiscal year end covered by the report, that the issuer believes to be 
material, and that remain unresolved at the time of the filing of the 
annual report.
    The rules also may impose certain costs on underwriters. For 
example, removing the restrictions on at-the-market equity offerings by 
unseasoned issuers on Form S-3 or Form F-3 may affect underwriters 
adversely because issuers may decide not to hire an underwriter to 
conduct an at-the-market equity offering.
    The rules permit reporting issuers with the ability to incorporate 
by reference historical filings into Form S-1 or Form F-1, provided 
that the issuer post its Exchange Act reports on a web site maintained 
by or for the issuer and containing issuer information. Issuers wishing 
to take advantage of this ability to incorporate by reference will have 
to make these reports readily available on a web site maintained by or 
for the issuer in addition to availability on EDGAR. Because most 
companies today maintain web sites for their businesses and other 
entities maintain web sites for companies, we do not believe that this 
cost will be significant.
    We also recognize that relaxing restrictions on communications may 
impose a burden on investors. For example, today, for some offerings, 
such as those on Form S-1, much of the relevant information regarding 
an offering is required to be contained in one document comprising the 
registration statement. Under the rules, some offerings will require an 
investor to assemble and assimilate information from various free 
writing prospectuses, Exchange Act reports, and the Securities Act 
registration statement in order to get the relevant information 
regarding an offering. Investors will have to compile the information 
integrated into the registration statement or delivered by means 
outside of the prospectus. We note, however, that Securities Act Forms 
S-3 and F-3 have long permitted incorporation by reference from the 
issuer's Exchange Act reports and investors have not complained they 
are unduly burdened when investing in offerings registered on these 
Forms.

X. Consideration of Burden on Competition and Promotion of Efficiency, 
Competition and Capital Formation

    Exchange Act Section 23(a)(2) \637\ requires us, when adopting 
rules under the Exchange Act, to consider the impact that any new rule 
would have on competition. In addition, Section 23(a)(2) prohibits us 
from adopting any rule that would impose a burden on competition not 
necessary or appropriate in furtherance of the purposes of the Exchange 
Act. Furthermore, Securities Act Section 2(b),\638\ Exchange Act 
Section 3(f),\639\ and Investment Company Act Section 2(c) \640\ 
require us, when engaging in rulemaking where we are required to 
consider or determine whether an action is necessary or appropriate in 
the public interest, to consider, in addition to the protection of 
investors, whether the action will promote efficiency, competition, and 
capital formation.
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    \637\ 15 U.S.C. 78w(a)(2).
    \638\ 15 U.S.C. 77b(b).
    \639\ 15 U.S.C. 78c(f).
    \640\ 15 U.S.C. 80a-2(c).
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    The rules are intended to modify and advance the Commission's 
regulatory system for offerings under the Securities Act, enhance 
communications between public issuers and investors, and promote 
investor protection. We anticipate these rules will improve investors' 
ability to make informed investment decisions and, therefore, lead to 
increased efficiency and competitiveness of the U.S. capital markets. 
We anticipate that this increased market efficiency and investor 
confidence also may encourage more efficient capital formation. 
Specifically, we believe that the rules will:
     Facilitate greater availability of information to 
investors and the market with regard to all issuers;
     Eliminate barriers to open communications that have been 
made increasingly outmoded by technological advances;
     Reflect the increased importance of electronic 
dissemination of information, including the use of the Internet;
     Make the capital formation process more efficient; and
     Define more clearly both the information and the 
timeliness of the availability of information against which a seller's 
statements are evaluated for liability purposes.
    To the extent that some of these reforms will be available to well-
known seasoned issuers, smaller issuers may not be able to use all of 
the reforms. In addition, it is possible that investors will favor 
issuers that are able to take advantage of the reforms. We believe, 
however, that these potential unequal effects are justified in order to 
ensure that investors have appropriate access to required information 
about all issuers.
    We requested comment on whether the rules would promote efficiency, 
competition, and capital formation or have an impact or burden on 
competition. We received no comments on this subject directly, but some 
comments touched on these issues. Commenters expressed strong support 
for the proposals to streamline the registration process by providing 
well-known seasoned issuers the ability to use automatic shelf 
registration statements.\641\ They generally believed that the 
streamlined registration process will aid issuers in capital formation 
by providing them with quick access to the capital markets. In 
addition, one commenter believed the proposals have the potential to 
draw more offerings from 144A and other unregistered markets into 
public market, improve efficiency of U.S. public market, and possibly 
enhance global competitiveness of U.S. public capital markets.\642\
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    \641\ See note 509, above.
    \642\ See letter from SIA.

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[[Page 44797]]

    Two commenters believed that the proposed rules, which created an 
exception to the conditions to the free writing prospectus rules for 
publications by unaffiliated media would create a competitive 
disadvantage for issuers who are in the media business.\643\ We have 
addressed these concerns by providing an exclusion for media companies 
and their affiliates if certain conditions are met, including that the 
company or its affiliate is a bona fide media publisher or 
broadcaster.\644\
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    \643\ See letters from Davis Polk and NYSBA.
    \644\ See the discussion in Section III.D.3 above under 
``Issuers in the Media Business.''
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XI. Final Regulatory Flexibility Act Analysis

    This Final Regulatory Flexibility Act Analysis has been prepared in 
accordance with 5 U.S.C. 603. It relates to revisions to the rules and 
forms under the Securities Act and the Exchange Act that will (1) alter 
shelf registration procedures; (2) allow more communications between 
offering participants than currently permitted; and (3) enable offering 
participants to satisfy their prospectus delivery obligations through 
means other than actual physical delivery. These rules are intended to 
modify and advance the Commission's regulatory system for offerings 
under the Securities Act, enhance communications between public issuers 
and investors, and promote investor protection.

A. Reasons for and Objectives of the Rules and Amendments

    On November 3, 2004, we issued proposed rule and form changes under 
the Securities Act and the Exchange Act that would modernize the 
securities offering and communication processes while maintaining 
protection of investors under the Securities Act.\645\ We are revising 
the registration, communications, and offering processes under the 
Securities Act that we believe, while limited in scope, properly 
address the areas that are in need of modernization. The rules involve 
three main areas:
---------------------------------------------------------------------------

    \645\ Securities Offering Reform, Release No. 33-8501 (Nov. 3, 
2004)[69 FR 67392] (``Proposing Release'').
---------------------------------------------------------------------------

     Communications related to registered securities offerings;
     Procedural restrictions in the offering and capital 
formation processes; and
     Delivery of information to investors.
    The overall objective of the reforms is to make the registration 
system more workable for issuers and underwriters and more effective 
for investors in today's capital markets. The rules reflect our view 
that revisions to the Securities Act registration and offering 
processes are not only appropriate in light of significant developments 
in the offering and capital formation processes, but also are necessary 
for the proper protection of investors under the statute. This view is 
based on our belief that today's rules will:
     Facilitate greater availability of information to 
investors and the market with regard to all issuers;
     Eliminate barriers to open communications that have been 
made increasingly outmoded by technological advances;
     Reflect the increased importance of electronic 
dissemination of information, including the use of the Internet;
     Make the capital formation process more efficient; and
     Define more clearly both the information and the 
timeliness of the availability of information against which a seller's 
statements are evaluated for liability purposes.

B. Significant Issues Raised by Public Comment

    The Initial Regulatory Flexibility Analysis, or IRFA, appeared in 
the Proposing Release.\646\ We requested comment on any aspect of the 
IRFA, including the number of small entities that would be affected by 
the rules, the nature of the impact, how to quantify the number of 
small entities that would be affected and how to quantify the impact of 
the proposals. We received no comment letters responding to that 
request.
---------------------------------------------------------------------------

    \646\ See the Proposing Release at Section VII.
---------------------------------------------------------------------------

C. Small Entities Subject to the Rules

    The rules will affect issuers that are small entities. Securities 
Act Rule 157 \647\ and Exchange Act Rule 0-10(a) \648\ define an 
issuer, other than an investment company, to be a ``small business'' or 
``small organization'' for purposes of the Regulatory Flexibility Act 
if it had total assets of $5 million or less on the last day of its 
most recent fiscal year.\649\ We estimate that there were approximately 
2,500 public issuers, other than investment companies, that may be 
considered small entities as of the end of fiscal year 2004.\650\
---------------------------------------------------------------------------

    \647\ 17 CFR 230.157.
    \648\ 17 CFR 240.0-10(a).
    \649\ An investment company is a small entity if it, together 
with other investment companies in the same group of related 
investment companies, has net assets of $50 million or less as of 
the end of its most recent fiscal year. 17 CFR 270.0-10.
    \650\ We estimate that there are approximately 233 investment 
companies that may be considered small entities. We believe the 
impact on these investment companies will be minimal because they 
generally are not covered by the new rules.
---------------------------------------------------------------------------

    In addition to small issuers, small broker-dealers may be affected 
by the rules. Paragraph (c)(1) of Rule 0-10 \651\ states that the term 
``small business'' or ``small organization,'' when referring to a 
broker-dealer, means a broker or dealer that had total capital (net 
worth plus subordinated liabilities) of less than $500,000 on the date 
in the prior fiscal year as of which its audited financial statements 
were prepared pursuant to Sec.  240.17a-5(d); and is not affiliated 
with any person (other than a natural person) that is not a small 
business or small organization. As of 2003, we estimated that there 
were approximately 900 broker-dealers that qualified as small entities 
as defined above. To the extent a small broker-dealer participates in a 
securities offering or prepares research reports, it may be affected by 
the rules. Generally, we believe larger broker-dealers engage in these 
activities. We requested comment on whether and how these rules will 
affect small broker-dealers and did not receive any responses.
---------------------------------------------------------------------------

    \651\ 17 CFR 240.0-10(c)(1).
---------------------------------------------------------------------------

    For purposes of the rules, we categorize issuers into tiers, 
consisting of non-reporting issuers, unseasoned issuers, seasoned 
issuers, and well-known seasoned issuers. The first three tiers of 
issuers are identified by pre-existing criteria under the existing 
federal securities laws. A non-reporting issuer is an issuer that is 
not required to file reports pursuant to Sections 13 or 15(d) of the 
Exchange Act.\652\ An unseasoned issuer is an issuer that is required 
to file reports pursuant to Sections 13 or 15(d) of the Exchange Act, 
but does not satisfy the requirements of Form S-3 or Form F-3 for a 
primary offering of its securities. A seasoned issuer is an issuer that 
uses Form S-3 or Form F-3 to register offerings of securities.
---------------------------------------------------------------------------

    \652\ Under the rules, an issuer that is voluntarily filing 
Exchange Act reports, but is not required to do so, will be an 
unseasoned issuer for purposes of the communications and procedural 
rules and rule rules.
---------------------------------------------------------------------------

    Under the rules, a well-known seasoned issuer will have the 
greatest flexibility. The largest issuers are followed by sophisticated 
institutional and retail investors, members of the financial press, and 
numerous sell-side and buy-side analysts that actively seek new 
information on a continual basis. Unlike smaller or less mature 
issuers, large, seasoned public issuers tend to have a more regular 
dialogue with investors and market participants through the press and 
other media. The

[[Page 44798]]

communications of these well-known seasoned issuers are subject to 
scrutiny by investors, the financial press, analysts, and others who 
evaluate disclosure when it is made.
    To the extent that some of these reforms are designed for well-
known seasoned issuers, smaller issuers may not benefit from all of the 
reforms to the registration process. We believe, however, that these 
potential unequal effects are justified in order to ensure that 
investors have access to required information about all issuers. 
Therefore, allowing smaller entities to take advantage of all of the 
reforms to the registration process may not address issues of investor 
protection. The reforms are not available to offerings by a blank check 
company, offerings by a shell company, and offerings of penny stock by 
an issuer. These offerings are more likely to be made by issuers that 
are small issuers. We have excluded these offerings from the reforms 
because they pose the greatest risk of abuse of the reforms.
    To the extent the rules are not available to smaller issuers, the 
establishment of any differing compliance or reporting requirements or 
timetables or any exemptions for small business issuers may not be in 
keeping with the objectives of the rules. We believe that the rules are 
a cost-effective initial approach to address specific concerns related 
to small entities.

D. Reporting, Recordkeeping, and Other Compliance Requirements

    The rules are expected to impact all issuers raising capital and 
selling security holder transactions that are registered under the 
Securities Act, as well as all issuers that file annual reports on 
Exchange Act Form 10-K or Form 20-F.
    For smaller issuers, we are not imposing any new restrictions on 
communications. In fact, small issuers will be able to take advantage 
of the new bright-line rule permitting communications more than 30 days 
before filing a registration statement and the clarification that they 
can continue to make factual business communications and, if they are 
reporting companies, communications of forward-looking information. 
Small issuers, like larger issuers, will have to file any free writing 
prospectus they use. We requested comment on whether issuers that file 
on Form 10-KSB, who tend to be smaller issuers, should be required to 
disclose risk factors in their annual reports, and have decided not to 
extend this requirement to these issuers. Unlike larger companies that 
are ``accelerated filers,'' smaller issuers will not be required to 
disclose outstanding staff comments in their annual reports.
    The rules also will affect broker-dealers participating in a 
registered offering, as they will no longer be required to deliver a 
final prospectus, but will be able to send a notice of allocation and 
notice of prospectus availability. They also will be permitted to 
prepare and use free writing prospectuses. If a free writing is not 
required to be filed publicly, the broker-dealer will have to retain 
copies of the free writing prospectus for three years. (Such retention 
requirements may already exist in most cases). Finally, the broker-
dealer will be permitted to issue research reports with respect to a 
broader class of issuers and securities than currently permitted.

E. Agency Action To Minimize Effect on Small Entities

    The Regulatory Flexibility Act directs us to consider significant 
alternatives that would accomplish the stated objectives, while 
minimizing any significant adverse impact on small entities. In 
connection with the rules, we considered the following alternatives:
    1. Establishing different compliance or reporting requirements that 
take into account the resources available to small entities;
    2. Clarifying, consolidating, or simplifying compliance and 
reporting obligations for small entities;
    3. Using performance standards rather than design standards; and
    4. Including smaller entities in some of the reforms.
    We have considered a variety of reforms to achieve our regulatory 
objectives and, where possible, have taken steps to minimize the 
effects of the rules and amendments on small entities. For example, we 
are not requiring small business issuers to include disclosure of risk 
factors or unresolved staff comments in their Exchange Act periodic 
reports. We are liberalizing generally the restrictions regarding 
communications around the time of a Securities Act registered offering 
of securities. As discussed above, the flexibility will be greatest for 
larger, more seasoned issuers; however, the rules will provide greater 
flexibility for all issuers, including small entities. As we implement 
these changes, we will consider the available information to determine 
whether greater flexibility is warranted, consistent with investor 
protections. In this regard, we have established an Advisory Committee 
on Smaller Public Companies to examine these and other related issues.

XII. Statutory Authority--Text of the Rules and Amendments

    We are adopting the new rules and amendments pursuant to Sections 
7, 10, 19, 27A and 28 of the Securities Act, as amended, Sections 3, 
10, 12, 13, 15, 17, 21E, 23 and 36 of the Securities Exchange Act, as 
amended, and Sections 8, 24(a), 30, and 38 of the Investment Company 
Act of 1940, as amended.

List of Subjects

17 CFR Part 200

    Administrative practice and procedure, Authority delegations 
(Government agencies), Organization and functions (Government 
agencies).

17 CFR Part 228

    Reporting and recordkeeping requirements, Securities, Small 
businesses.

17 CFR Parts 229, 230, 239, 240, 243, and 249

    Reporting and recordkeeping requirements, Securities.

17 CFR Part 274

    Investment companies, Reporting and recordkeeping requirements, 
Securities.


0
For the reasons set out in the preamble, title 17, chapter II of the 
Code of Federal Regulations is amended as follows:

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

Subpart A--Organization and Program Management

0
1. The authority citation for Part 200, subpart A, continues to read, 
in part, as follows:

    Authority: 15 U.S.C. 77s, 77o, 77sss, 78d, 78d-1, 78d-2, 78w, 
78ll(d), 78mm, 79t, 80a-37, 80b-11, and 7202, unless otherwise 
noted.
* * * * *

0
2. Amend Sec.  200.30-1 to add paragraphs (a)(9) and (a)(10) to read as 
follows:


Sec.  200.30-1  Delegation of authority to Director of Division of 
Corporation Finance.

* * * * *
    (a) * * *
    (9) To determine whether to object, pursuant to Rule 401(g)(1) 
(Sec.  230.401(g)(1) of this chapter), and to notify issuers, pursuant 
to Rule 401(g)(2) (Sec.  230.401(g)(2) of this chapter), of an 
objection to the use of an automatic shelf registration as defined in 
Rule 405 (Sec.  230.405 of this chapter) or any post-effective 
amendment thereto that becomes effective immediately

[[Page 44799]]

pursuant to Rule 462 (Sec.  230.462 of this chapter).
    (10) To authorize the granting or denial of applications, upon a 
showing of good cause, that it is not necessary under the circumstances 
that the issuer be considered an ineligible issuer as defined in Rule 
405.
* * * * *

PART 228--INTEGRATED DISCLOSURE SYSTEM FOR SMALL BUSINESS ISSUERS

0
3. The authority citation for part 228 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2, 
77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77jjj, 77nnn, 
77sss, 78l, 78m, 78n, 78o, 78u-5, 78w, 78ll, 78mm, 80a-8, 80a-29, 
80a-30, 80a-37, 80b-11, and 7201 et seq.; and 18 U.S.C. 1350.
* * * * *

0
4. Amend Sec.  228.512 as follows:
0
a. Revise the Note after paragraph (a)(1)(iii);
0
b. Add paragraph (a)(4); and
0
c. Add paragraph (g).
    The additions read as follows:


Sec.  228.512 (Item 512)  Undertakings.

* * * * *
    (a) * * *

    Notes to paragraph (a)(1): 
    1. Small business issuers do not need to give the statements in 
paragraphs (a)(1)(i) and (a)(1)(ii) of this Item if the registration 
statement is on Form S-8 (Sec.  239.16b of this chapter), and the 
information required in a post-effective amendment is incorporated 
by reference from periodic reports filed by the small business 
issuer under the Exchange Act; and
    2. Small business issuers do not need to give the statements in 
paragraphs (a)(1)(i), (a)(1)(ii), and (a)(1)(iii) of this Item if 
the registration statement is on Form S-3 (Sec.  239.13 of this 
chapter) and the information required in a post-effective amendment 
is incorporated by reference from periodic reports filed by the 
small business issuer under the Exchange Act, or is contained in a 
form of prospectus filed pursuant to Rule 424(b) (Sec.  230.424(b) 
of this chapter) that is deemed part of and included in the 
registration statement.

* * * * *
    (4) For determining liability of the undersigned small business 
issuer under the Securities Act to any purchaser in the initial 
distribution of the securities, the undersigned small business issuer 
undertakes that in a primary offering of securities of the undersigned 
small business issuer pursuant to this registration statement, 
regardless of the underwriting method used to sell the securities to 
the purchaser, if the securities are offered or sold to such purchaser 
by means of any of the following communications, the undersigned small 
business issuer will be a seller to the purchaser and will be 
considered to offer or sell such securities to such purchaser:
    (i) Any preliminary prospectus or prospectus of the undersigned 
small business issuer relating to the offering required to be filed 
pursuant to Rule 424 (Sec.  230.424 of this chapter);
    (ii) Any free writing prospectus relating to the offering prepared 
by or on behalf of the undersigned small business issuer or used or 
referred to by the undersigned small business issuer;
    (iii) The portion of any other free writing prospectus relating to 
the offering containing material information about the undersigned 
small business issuer or its securities provided by or on behalf of the 
undersigned small business issuer; and
    (iv) Any other communication that is an offer in the offering made 
by the undersigned small business issuer to the purchaser.
* * * * *
    (g) That, for the purpose of determining liability under the 
Securities Act to any purchaser:
    (1) If the small business issuer is relying on Rule 430B (Sec.  
230.430B of this chapter):
    (i) Each prospectus filed by the undersigned small business issuer 
pursuant to Rule 424(b)(3) (Sec.  230.424(b)(3) of this chapter) shall 
be deemed to be part of the registration statement as of the date the 
filed prospectus was deemed part of and included in the registration 
statement; and
    (ii) Each prospectus required to be filed pursuant to Rule 
424(b)(2), (b)(5), or (b)(7) (Sec.  230.424(b)(2), (b)(5), or (b)(7) of 
this chapter) as part of a registration statement in reliance on Rule 
430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), 
or (x) (Sec.  230.415(a)(1)(i), (vii), or (x) of this chapter) for the 
purpose of providing the information required by section 10(a) of the 
Securities Act shall be deemed to be part of and included in the 
registration statement as of the earlier of the date such form of 
prospectus is first used after effectiveness or the date of the first 
contract of sale of securities in the offering described in the 
prospectus. As provided in Rule 430B, for liability purposes of the 
issuer and any person that is at that date an underwriter, such date 
shall be deemed to be a new effective date of the registration 
statement relating to the securities in the registration statement to 
which that prospectus relates, and the offering of such securities at 
that time shall be deemed to be the initial bona fide offering thereof. 
Provided, however, that no statement made in a registration statement 
or prospectus that is part of the registration statement or made in a 
document incorporated or deemed incorporated by reference into the 
registration statement or prospectus that is part of the registration 
statement will, as to a purchaser with a time of contract of sale prior 
to such effective date, supersede or modify any statement that was made 
in the registration statement or prospectus that was part of the 
registration statement or made in any such document immediately prior 
to such effective date; or
    (2) If the small business issuer is subject to Rule 430C (Sec.  
230.430C of this chapter), include the following:

    Each prospectus filed pursuant to Rule 424(b)(Sec.  230.424(b) 
of this chapter) as part of a registration statement relating to an 
offering, other than registration statements relying on Rule 430B or 
other than prospectuses filed in reliance on Rule 430A (Sec.  
230.430A of this chapter), shall be deemed to be part of and 
included in the registration statement as of the date it is first 
used after effectiveness. Provided, however, that no statement made 
in a registration statement or prospectus that is part of the 
registration statement or made in a document incorporated or deemed 
incorporated by reference into the registration statement or 
prospectus that is part of the registration statement will, as to a 
purchaser with a time of contract of sale prior to such first use, 
supersede or modify any statement that was made in the registration 
statement or prospectus that was part of the registration statement 
or made in any such document immediately prior to such date of first 
use.

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

0
5. 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, 
77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 
77nnn, 77sss, 78c, 78i, 78j, 78l, 78m, 78n, 78o, 78u-5, 78w, 78ll, 
78mm, 79e, 79j, 79n, 79t, 80a-8, 80a-9, 80a-20, 80a-29, 80a-30, 80a-
31(c), 80a-37, 80a-38(a), 80a-39, 80b-11, and 7201 et seq.; and 18 
U.S.C. 1350, unless otherwise noted.
* * * * *

0
6. Amend Sec.  229.512 as follows:
0
a. Revise the first proviso immediately following paragraph 
(a)(1)(iii);
0
b. Redesignate the second proviso immediately following paragraph 
(a)(1)(iii) as paragraph (a)(1)(iii)(C);
0
c. Add paragraph (a)(5); and

[[Page 44800]]

0
d. Add paragraph (a)(6).
    The revision and additions read as follows:


Sec.  229.512  (Item 512) Undertakings.

    (a) * * *
    (1) * * *
    (iii) * * *
    Provided, however, That:
    (A) Paragraphs (a)(1)(i) and (a)(1)(ii) of this section do not 
apply if the registration statement is on Form S-8 (Sec.  239.16b of 
this chapter), and the information required to be included in a post-
effective amendment by those paragraphs is contained in reports filed 
with or furnished to the Commission by the registrant pursuant to 
section 13 or section 15(d) of the Securities Exchange Act of 1934 (15 
U.S.C. 78m or 78o(d)) that are incorporated by reference in the 
registration statement; and
    (B) Paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this 
section do not apply if the registration statement is on Form S-3 
(Sec.  239.13 of this chapter) or Form F-3 (Sec.  239.33 of this 
chapter) and the information required to be included in a post-
effective amendment by those paragraphs is contained in reports filed 
with or furnished to the Commission by the registrant pursuant to 
section 13 or section 15(d) of the Securities Exchange Act of 1934 that 
are incorporated by reference in the registration statement, or is 
contained in a form of prospectus filed pursuant to Rule 424(b) (Sec.  
230.424(b) of this chapter) that is part of the registration statement.
* * * * *
    (5) That, for the purpose of determining liability under the 
Securities Act of 1933 to any purchaser:
    (i) If the registrant is relying on Rule 430B (Sec.  230.430B of 
this chapter):
    (A) Each prospectus filed by the registrant pursuant to Rule 
424(b)(3) (Sec.  230.424(b)(3) of this chapter) shall be deemed to be 
part of the registration statement as of the date the filed prospectus 
was deemed part of and included in the registration statement; and
    (B) Each prospectus required to be filed pursuant to Rule 
424(b)(2), (b)(5), or (b)(7) (Sec.  230.424(b)(2), (b)(5), or (b)(7) of 
this chapter) as part of a registration statement in reliance on Rule 
430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), 
or (x) (Sec.  230.415(a)(1)(i), (vii), or (x) of this chapter) for the 
purpose of providing the information required by section 10(a) of the 
Securities Act of 1933 shall be deemed to be part of and included in 
the registration statement as of the earlier of the date such form of 
prospectus is first used after effectiveness or the date of the first 
contract of sale of securities in the offering described in the 
prospectus. As provided in Rule 430B, for liability purposes of the 
issuer and any person that is at that date an underwriter, such date 
shall be deemed to be a new effective date of the registration 
statement relating to the securities in the registration statement to 
which that prospectus relates, and the offering of such securities at 
that time shall be deemed to be the initial bona fide offering thereof. 
Provided, however, that no statement made in a registration statement 
or prospectus that is part of the registration statement or made in a 
document incorporated or deemed incorporated by reference into the 
registration statement or prospectus that is part of the registration 
statement will, as to a purchaser with a time of contract of sale prior 
to such effective date, supersede or modify any statement that was made 
in the registration statement or prospectus that was part of the 
registration statement or made in any such document immediately prior 
to such effective date; or
    (ii) If the registrant is subject to Rule 430C (Sec.  230.430C of 
this chapter), each prospectus filed pursuant to Rule 424(b) as part of 
a registration statement relating to an offering, other than 
registration statements relying on Rule 430B or other than prospectuses 
filed in reliance on Rule 430A (Sec.  230.430A of this chapter), shall 
be deemed to be part of and included in the registration statement as 
of the date it is first used after effectiveness. Provided, however, 
that no statement made in a registration statement or prospectus that 
is part of the registration statement or made in a document 
incorporated or deemed incorporated by reference into the registration 
statement or prospectus that is part of the registration statement 
will, as to a purchaser with a time of contract of sale prior to such 
first use, supersede or modify any statement that was made in the 
registration statement or prospectus that was part of the registration 
statement or made in any such document immediately prior to such date 
of first use.
    (6) That, for the purpose of determining liability of the 
registrant under the Securities Act of 1933 to any purchaser in the 
initial distribution of the securities:
    The undersigned registrant undertakes that in a primary offering of 
securities of the undersigned registrant pursuant to this registration 
statement, regardless of the underwriting method used to sell the 
securities to the purchaser, if the securities are offered or sold to 
such purchaser by means of any of the following communications, the 
undersigned registrant will be a seller to the purchaser and will be 
considered to offer or sell such securities to such purchaser:
    (i) Any preliminary prospectus or prospectus of the undersigned 
registrant relating to the offering required to be filed pursuant to 
Rule 424 (Sec.  230.424 of this chapter);
    (ii) Any free writing prospectus relating to the offering prepared 
by or on behalf of the undersigned registrant or used or referred to by 
the undersigned registrant;
    (iii) The portion of any other free writing prospectus relating to 
the offering containing material information about the undersigned 
registrant or its securities provided by or on behalf of the 
undersigned registrant; and
    (iv) Any other communication that is an offer in the offering made 
by the undersigned registrant to the purchaser.
* * * * *

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

0
7. The authority citation for part 230 continues to read in part as 
follows:

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

0
8. Revise Sec.  230.134 to read as follows:


Sec.  230.134  Communications not deemed a prospectus.

    Except as provided in paragraphs (e) and (g) of this section, the 
terms ``prospectus'' as defined in section 2(a)(10) of the Act or 
``free writing prospectus'' as defined in Rule 405 (Sec.  230.405) 
shall not include a communication limited to the statements required or 
permitted by this section, provided that the communication is published 
or transmitted to any person only after a registration statement 
relating to the offering that includes a prospectus satisfying the 
requirements of section 10 of the Act (except as otherwise permitted in 
paragraph (a) of this section) has been filed.
    (a) Such communication may include any one or more of the following 
items of information, which need not follow the numerical sequence of 
this paragraph, provided that, except as to paragraphs (a)(4), (a)(5), 
(a)(6), and (a)(17) of this section, the prospectus included in the 
filed registration statement does not have to include a price range 
otherwise required by rule:
    (1) Factual information about the legal identity and business 
location of the

[[Page 44801]]

issuer limited to the following: the name of the issuer of the 
security, the address, phone number, and e-mail address of the issuer's 
principal offices and contact for investors, the issuer's country of 
organization, and the geographic areas in which it conducts business;
    (2) The title of the security or securities and the amount or 
amounts being offered, which title may include a designation as to 
whether the securities are convertible, exercisable, or exchangeable, 
and as to the ranking of the securities;
    (3) A brief indication of the general type of business of the 
issuer, limited to the following:
    (i) In the case of a manufacturing company, the general type of 
manufacturing, the principal products or classes of products 
manufactured, and the segments in which the company conducts business;
    (ii) In the case of a public utility company, the general type of 
services rendered, a brief indication of the area served, and the 
segments in which the company conducts business;
    (iii) In the case of an asset-backed issuer, the identity of key 
parties, such as sponsor, depositor, issuing entity, servicer or 
servicers, and trustee, the asset class of the transaction, and the 
identity of any credit enhancement or other support; and
    (iv) In the case of any other type of company, a corresponding 
statement;
    (4) The price of the security, or if the price is not known, the 
method of its determination or the bona fide estimate of the price 
range as specified by the issuer or the managing underwriter or 
underwriters;
    (5) In the case of a fixed income security, the final maturity and 
interest rate provisions or, if the final maturity or interest rate 
provisions are not known, the probable final maturity or interest rate 
provisions, as specified by the issuer or the managing underwriter or 
underwriters;
    (6) In the case of a fixed income security with a fixed (non-
contingent) interest rate provision, the yield or, if the yield is not 
known, the probable yield range, as specified by the issuer or the 
managing underwriter or underwriters and the yield of fixed income 
securities with comparable maturity and security rating as referred to 
in paragraph (a)(17) of this section;
    (7) A brief description of the intended use of proceeds of the 
offering, if then disclosed in the prospectus that is part of the filed 
registration statement;
    (8) The name, address, phone number, and e-mail address of the 
sender of the communication and the fact that it is participating, or 
expects to participate, in the distribution of the security;
    (9) The type of underwriting, if then included in the disclosure in 
the prospectus that is part of the filed registration statement;
    (10) The names of underwriters participating in the offering of the 
securities, and their additional roles, if any, within the underwriting 
syndicate;
    (11) The anticipated schedule for the offering (including the 
approximate date upon which the proposed sale to the public will begin) 
and a description of marketing events (including the dates, times, 
locations, and procedures for attending or otherwise accessing them);
    (12) A description of the procedures by which the underwriters will 
conduct the offering and the procedures for transactions in connection 
with the offering with the issuer or an underwriter or participating 
dealer (including procedures regarding account-opening and submitting 
indications of interest and conditional offers to buy), and procedures 
regarding directed share plans and other participation in offerings by 
officers, directors, and employees of the issuer;
    (13) Whether, in the opinion of counsel, the security is a legal 
investment for savings banks, fiduciaries, insurance companies, or 
similar investors under the laws of any State or Territory or the 
District of Columbia, and the permissibility or status of the 
investment under the Employee Retirement Income Security Act of 1974 
[29 U.S.C. 1001 et seq.];
    (14) Whether, in the opinion of counsel, the security is exempt 
from specified taxes, or the extent to which the issuer has agreed to 
pay any tax with respect to the security or measured by the income 
therefrom;
    (15) Whether the security is being offered through rights issued to 
security holders, and, if so, the class of securities the holders of 
which will be entitled to subscribe, the subscription ratio, the actual 
or proposed record date, the date upon which the rights were issued or 
are expected to be issued, the actual or anticipated date upon which 
they will expire, and the approximate subscription price, or any of the 
foregoing;
    (16) Any statement or legend required by any state law or 
administrative authority;
    (17) With respect to the securities being offered:
    (i) Any security rating assigned, or reasonably expected to be 
assigned, by a nationally recognized statistical rating organization as 
defined in Rule 15c3-1(c)(2)(vi)(F) of the Securities Exchange Act of 
1934 (Sec.  240.15c3-1(c)(2)(vi)(F) of this chapter) and the name or 
names of the nationally recognized statistical rating organization(s) 
that assigned or is or are reasonably expected to assign the rating(s); 
and
    (ii) If registered on Form F-9 (Sec.  239.39 of this chapter), any 
security rating assigned, or reasonably expected to be assigned, by any 
other rating organization specified in the Instruction to paragraph 
A.(2) of General Instruction I of Form F-9;
    (18) The names of selling security holders, if then disclosed in 
the prospectus that is part of the filed registration statement;
    (19) The names of securities exchanges or other securities markets 
where any class of the issuer's securities are, or will be, listed;
    (20) The ticker symbols, or proposed ticker symbols, of the 
issuer's securities;
    (21) The CUSIP number as defined in Rule 17Ad-19(a)(5) of the 
Securities Exchange Act of 1934 (Sec.  240.17Ad-19(a)(5) of this 
chapter) assigned to the securities being offered; and
    (22) Information disclosed in order to correct inaccuracies 
previously contained in a communication permissibly made pursuant to 
this section.
    (b) Except as provided in paragraph (c) of this section, every 
communication used pursuant to this section shall contain the 
following:
    (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; and

    (2) The name and address of a person or persons from whom a written 
prospectus for the offering meeting the requirements of section 10 of 
the Act (other than a free writing prospectus as defined in Rule 405) 
including as to the identified paragraphs above a price range where 
required by rule, may be obtained.
    (c) Any of the statements or information specified in paragraph (b) 
of this section may, but need not, be contained in a communication 
which:
    (1) Does no more than state from whom and include the uniform 
resource locator (URL) where a written prospectus meeting the 
requirements of section 10 of the Act (other than a free writing 
prospectus as defined in Rule 405) may be obtained, identify the 
security, state the price thereof and state by whom orders will be 
executed; or

[[Page 44802]]

    (2) Is accompanied or preceded by a prospectus or a summary 
prospectus, other than a free writing prospectus as defined in Rule 
405, which meets the requirements of section 10 of the Act, including a 
price range where required by rule, at the date of such preliminary 
communication.
    (d) A communication sent or delivered to any person pursuant to 
this section which is accompanied or preceded by a prospectus which 
meets the requirements of section 10 of the Act (other than a free 
writing prospectus as defined in Rule 405), including a price range 
where required by rule, at the date of such communication, may solicit 
from the recipient of the communication an offer to buy the security or 
request the recipient to indicate whether he or she might be interested 
in the security, if the communication contains substantially the 
following statement:

    No offer to buy the securities can be accepted and no part of 
the purchase price can be received until the registration statement 
has become effective, and any such offer may be withdrawn or 
revoked, without obligation or commitment of any kind, at any time 
prior to notice of its acceptance given after the effective date.


Provided, that such statement need not be included in such a 
communication to a dealer.
    (e) A section 10 prospectus included in any communication pursuant 
to this section shall remain a prospectus for all purposes under the 
Act.
    (f) The provision in paragraphs (c)(2) and (d) of this section that 
a prospectus that meets the requirements of section 10 of the Act 
precede or accompany a communication will be satisfied if such 
communication is an electronic communication containing an active 
hyperlink to such prospectus.
    (g) This section does not apply to a communication relating to an 
investment company registered under the Investment Company Act of 1940 
(15 U.S.C. 80a-1 et seq.) or a business development company as defined 
in section 2(a)(48) of the Investment Company Act of 1940 (15 U.S.C. 
80a-2(a)(48))

0
9. Revise Sec.  230.137 to read as follows:


Sec.  230.137  Publications or distributions of research reports by 
brokers or dealers that are not participating in an issuer's registered 
distribution of securities.

    Under the following conditions, the terms ``offers,'' 
``participates,'' or ``participation'' in section 2(a)(11) of the Act 
shall not be deemed to apply to the publication or distribution of 
research reports with respect to the securities of an issuer which is 
the subject of an offering pursuant to a registration statement that 
the issuer proposes to file, or has filed, or that is effective:
    (a) The broker or dealer (and any affiliate) that has distributed 
the report and, if different, the person (and any affiliate) that has 
published the report have not participated, are not participating, and 
do not propose to participate in the distribution of the securities 
that are or will be the subject of the registered offering.
    (b) In connection with the publication or distribution of the 
research report, the broker or dealer (and any affiliate) that has 
distributed the report and, if different, the person (and any 
affiliate) that has published the report are not receiving and have not 
received consideration directly or indirectly from, and are not acting 
under any direct or indirect arrangement or understanding with:
    (1) The issuer of the securities;
    (2) A selling security holder;
    (3) Any participant in the distribution of the securities that are 
or will be the subject of the registration statement; or
    (4) Any other person interested in the securities that are or will 
be the subject of the registration statement.

    Instruction to Sec.  230.137(b). This paragraph (b) does not 
preclude payment of:
    1. The regular price being paid by the broker or dealer for 
independent research, so long as the conditions of this paragraph 
(b) are satisfied; or
    2. The regular subscription or purchase price for the research 
report.

    (c) The broker or dealer publishes or distributes the research 
report in the regular course of its business.
    (d) The issuer is not and during the past three years neither the 
issuer nor any of its predecessors was:
    (1) A blank check company as defined in Rule 419(a)(2) (Sec.  
230.419(a)(2));
    (2) A shell company, other than a business combination related 
shell company, each as defined in Rule 405 (Sec.  230.405); or
    (3) An issuer for an offering of penny stock as defined in Rule 
3a51-1 of the Securities Exchange Act of 1934 (Sec.  240.3a51-1 of this 
chapter).
    (e) Definition of research report. For purposes of this section, 
research report means a written communication, as defined in Rule 405, 
that includes information, opinions, or recommendations with respect to 
securities of an issuer or an analysis of a security or an issuer, 
whether or not it provides information reasonably sufficient upon which 
to base an investment decision.

0
10. Revise Sec.  230.138 to read as follows:


Sec.  230.138  Publications or distributions of research reports by 
brokers or dealers about securities other than those they are 
distributing.

    (a) Registered offerings. Under the following conditions, a 
broker's or dealer's publication or distribution of research reports 
about securities of an issuer shall be deemed for purposes of sections 
2(a)(10) and 5(c) of the Act not to constitute an offer for sale or 
offer to sell a security which is the subject of an offering pursuant 
to a registration statement that the issuer proposes to file, or has 
filed, or that is effective, even if the broker or dealer is 
participating or will participate in the registered offering of the 
issuer's securities:
    (1)(i) The research report relates solely to the issuer's common 
stock, or debt securities or preferred stock convertible into its 
common stock, and the offering involves solely the issuer's non-
convertible debt securities or non-convertible, non-participating 
preferred stock; or
    (ii) The research report relates solely to the issuer's non-
convertible debt securities or non-convertible, non-participating 
preferred stock, and the offering involves solely the issuer's common 
stock, or debt securities or preferred stock convertible into its 
common stock.

    Instruction to paragraph (a)(1): If the issuer has filed a shelf 
registration statement under Rule 415(a)(1)(x) (Sec.  
230.415(a)(1)(x)) or pursuant to General Instruction I.D. of Form S-
3 or General Instruction I.C. of Form F-3 (Sec.  239.13 or Sec.  
239.33 of this chapter) with respect to multiple classes of 
securities, the conditions of paragraph (a)(1) of this section must 
be satisfied for the offering in which the broker or dealer is 
participating or will participate.

    (2) The issuer as of the date of reliance on this section:
    (i) Is required to file reports, and has filed all periodic reports 
required during the preceding 12 months (or such shorter time that the 
issuer was required to file such reports) on Forms 10-K (Sec.  249.310 
of this chapter), 10-KSB (Sec.  249.310b of this chapter), 10-Q (Sec.  
249.308a of this chapter), 10-QSB (Sec.  249.308b of this chapter), and 
20-F (Sec.  249.220f of this chapter) pursuant to section 13 or section 
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); 
or
    (ii) Is a foreign private issuer that:
    (A) Meets all of the registrant requirements of Form F-3 other than 
the reporting history provisions of General Instructions I.A.1. and 
I.A.2(a) of Form F-3;
    (B) Either:

[[Page 44803]]

    (1) Satisfies the public float threshold in General Instruction 
I.B.1. of Form F-3; or
    (2) Is issuing non-convertible investment grade securities meeting 
the provisions of General Instruction I.B.2. of Form F-3; and
    (C) Either:
    (1) Has its equity securities trading on a designated offshore 
securities market as defined in Rule 902(b) (Sec.  230.902(b)) and has 
had them so traded for at least 12 months; or
    (2) Has a worldwide market value of its outstanding common equity 
held by non-affiliates of $700 million or more.
    (3) The broker or dealer publishes or distributes research reports 
on the types of securities in question in the regular course of its 
business; and
    (4) The issuer is not, and during the past three years neither the 
issuer nor any of its predecessors was:
    (i) A blank check company as defined in Rule 419(a)(2) (Sec.  
230.419(a)(2));
    (ii) A shell company, other than a business combination related 
shell company, each as defined in Rule 405 (Sec.  230.405); or
    (iii) An issuer for an offering of penny stock as defined in Rule 
3a51-1 of the Securities Exchange Act of 1934 (Sec.  240.3a51-1 of this 
chapter).
    (b) Rule 144A offerings. If the conditions in paragraph (a) of this 
section are satisfied, a broker's or dealer's publication or 
distribution of a research report shall not be considered an offer for 
sale or an offer to sell a security or general solicitation or general 
advertising, in connection with an offering relying on Rule 144A (Sec.  
230.144A).
    (c) Regulation S offerings. If the conditions in paragraph (a) of 
this section are satisfied, a broker's or dealer's publication or 
distribution of a research report shall not:
    (1) Constitute directed selling efforts as defined in Rule 902(c) 
(Sec.  230.902(c)) for offerings under Regulation S (Sec.  230.901 
through Sec.  230.905); or
    (2) Be inconsistent with the offshore transaction requirement in 
Rule 902(h) (Sec.  230.902(h)) for offerings under Regulation S.
    (d) Definition of research report. For purposes of this section, 
research report means a written communication, as defined in Rule 405, 
that includes information, opinions, or recommendations with respect to 
securities of an issuer or an analysis of a security or an issuer, 
whether or not it provides information reasonably sufficient upon which 
to base an investment decision.

0
11. Revise Sec.  230.139 to read as follows:


Sec.  230.139  Publications or distributions of research reports by 
brokers or dealers distributing securities.

    (a) Registered offerings. Under the conditions of paragraph (a)(1) 
or (a)(2) of this section, a broker's or dealer's publication or 
distribution of a research report about an issuer or any of its 
securities shall be deemed for purposes of sections 2(a)(10) and 5(c) 
of the Act not to constitute an offer for sale or offer to sell a 
security that is the subject of an offering pursuant to a registration 
statement that the issuer proposes to file, or has filed, or that is 
effective, even if the broker or dealer is participating or will 
participate in the registered offering of the issuer's securities:
    (1) Issuer-specific research reports.
    (i) The issuer either:
    (A)(1) At the later of the time of filing its most recent Form S-3 
(Sec.  239.13 of this chapter) or Form F-3 (Sec.  239.33 of this 
chapter) or the time of its most recent amendment to such registration 
statement for purposes of complying with section 10(a)(3) of the Act, 
meets the registrant requirements of such Form S-3 or Form F-3 and 
either at such date meets the minimum float provisions of General 
Instruction I.B.1 of such Forms or, at the date of reliance on this 
section, is offering securities meeting the requirements for the 
offering of investment grade securities pursuant to General Instruction 
I.B.2 of Form S-3 or Form F-3; and
    (2) As of the date of reliance on this section, has filed all 
periodic reports required during the preceding 12 months on Forms 10-K 
(Sec.  249.310 of this chapter), 10-KSB (Sec.  249.310b of this 
chapter), 10-Q (Sec.  249.308a of this chapter), 10-QSB (Sec.  249.308b 
of this chapter), and 20-F (Sec.  249.220f of this chapter) pursuant to 
section 13 or section 15(d) of the Securities Exchange Act of 1934 (15 
U.S.C. 78m or 78o(d)); or
    (B) Is a foreign private issuer that as of the date of reliance on 
this section:
    (1) Meets all of the registrant requirements of Form F-3 other than 
the reporting history provisions of General Instructions I.A.1. and 
I.A.2(a) of Form F-3;
    (2) Either:
    (i) Satisfies the public float threshold in General Instruction 
I.B.1. of Form F-3; or
    (ii) Is issuing non-convertible investment grade securities meeting 
the provisions of General Instruction I.B.2. of Form F-3; and
    (3) Either:
    (i) Has its equity securities trading on a designated offshore 
securities market as defined in Rule 902(b) (Sec.  230.902(b)) and has 
had them so traded for at least 12 months; or
    (ii) Has a worldwide market value of its outstanding common equity 
held by non-affiliates of $700 million or more;
    (ii) The issuer is not and during the past three years neither the 
issuer nor any of its predecessors was:
    (A) A blank check company as defined in Rule 419(a)(2) (Sec.  
230.419(a)(2));
    (B) A shell company, other than a business combination related 
shell company, each as defined in Rule 405 (Sec.  230.405); or
    (C) An issuer for an offering of penny stock as defined in Rule 
3a51-1 of the Securities Exchange Act of 1934 (Sec.  240.3a51-1 of this 
chapter); and
    (iii) The broker or dealer publishes or distributes research 
reports in the regular course of its business and such publication or 
distribution does not represent the initiation of publication of 
research reports about such issuer or its securities or reinitiation of 
such publication following discontinuation of publication of such 
research reports.
    (2) Industry reports.
    (i) The issuer is required to file reports pursuant to section 13 
or section 15(d) of the Securities Exchange Act of 1934 or satisfies 
the conditions in paragraph (a)(1)(i)(B) of this section;
    (ii) The condition in paragraph (a)(1)(ii) of this section is 
satisfied;
    (iii) The research report includes similar information 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 the broker or dealer;
    (iv) The analysis regarding the issuer or its securities is given 
no materially greater space or prominence in the publication than that 
given to other securities or issuers; and
    (v) The broker or dealer publishes or distributes research reports 
in the regular course of its business and, at the time of the 
publication or distribution of the research report, is including 
similar information about the issuer or its securities in similar 
reports.
    (b) Rule 144A offerings. If the conditions in paragraph (a)(1) or 
(a)(2) of this section are satisfied, a broker's or dealer's 
publication or distribution of a research report shall not be 
considered an offer for sale or an offer to sell a security or general 
solicitation or general advertising, in connection with an offering 
relying on Rule 144A (Sec.  230.144A).
    (c) Regulation S offerings. If the conditions in paragraph (a)(1) 
or (a)(2) of this section are satisfied, a broker's or

[[Page 44804]]

dealer's publication or distribution of a research report shall not:
    (1) Constitute directed selling efforts as defined in Rule 902(c) 
(Sec.  230.902(c)) for offerings under Regulation S (Sec. Sec.  230.901 
through 230.905); or
    (2) Be inconsistent with the offshore transaction requirement in 
Rule 902(h) (Sec.  230.902(h)) for offerings under Regulation S.
    (d) Definition of research report. For purposes of this section, 
research report means a written communication, as defined in Rule 405, 
that includes information, opinions, or recommendations with respect to 
securities of an issuer or an analysis of a security or an issuer, 
whether or not it provides information reasonably sufficient upon which 
to base an investment decision.

    Instruction to Sec.  230.139.
    Projections. A projection constitutes an analysis or information 
falling within the definition of research report. When a broker or 
dealer publishes or distributes projections of an issuer's sales or 
earnings in reliance on paragraph (a)(2) of this section, it must:
    1. Have previously published or distributed projections on a 
regular basis in order to satisfy the ``regular course of its 
business'' condition;
    2. At the time of publishing or disseminating a research report, 
be publishing or distributing projections with respect to that 
issuer; and
    3. For purposes of paragraph (a)(2)(iii) of this section, 
include projections covering the same or similar periods with 
respect to either a substantial number of issuers in the issuer's 
industry or sub-industry or substantially all issuers represented in 
the comprehensive list of securities contained in the research 
report.


Sec.  230.139a  [Amended]

0
12. Amend Sec.  230.139a as follows:
0
a. Remove paragraph (c); and
0
b. Redesignate paragraphs (d) and (e) as paragraphs (c) and (d).

0
13. Revise Sec.  230.153 to read as follows:


Sec.  230.153  Definition of ``preceded by a prospectus'' as used in 
section 5(b)(2) of the Act, in relation to certain transactions.

    (a) Definition of preceded by a prospectus. The term preceded by a 
prospectus as used in section 5(b)(2) of the Act, regarding any 
requirement of a broker or dealer to deliver a prospectus to a broker 
or dealer as a result of a transaction effected between such parties on 
or through a national securities exchange or facility thereof, trading 
facility of a national securities association, or an alternative 
trading system, shall mean the satisfaction of the conditions in 
paragraph (b) of this section.
    (b) Conditions. Any requirement of a broker or dealer to deliver a 
prospectus for transactions covered by paragraph (a) of this section 
will be satisfied if:
    (1) Securities of the same class as the securities that are the 
subject of the transaction are trading on that national securities 
exchange or facility thereof, trading facility of a national securities 
association, or alternative trading system;
    (2) The registration statement relating to the offering is 
effective and is not the subject of any pending proceeding or 
examination under section 8(d) or 8(e) of the Act;
    (3) Neither the issuer, nor any underwriter or participating dealer 
is the subject of a pending proceeding under section 8A of the Act in 
connection with the offering; and
    (4) The issuer has filed or will file with the Commission a 
prospectus that satisfies the requirements of section 10(a) of the Act.
    (c) Definitions.
    (1) The term national securities exchange, as used in this section, 
shall mean a securities exchange registered as a national securities 
exchange under section 6 of the Securities Exchange Act of 1934 (15 
U.S.C. 78f).
    (2) The term trading facility, as used in this section, shall mean 
a trading facility sponsored and governed by the rules of a registered 
securities association or a national securities exchange.
    (3) The term alternative trading system, as used in this section, 
shall mean an alternative trading system as defined in Rule 300(a) of 
Regulation ATS under the Securities Exchange Act of 1934 (Sec.  
242.300(a) of this chapter) registered with the Commission pursuant to 
Rule 301 of Regulation ATS under the Securities Exchange Act of 1934 
(Sec.  242.301(a) of this chapter).

0
14. Amend Sec.  230.158 to revise paragraph (c) to read as follows:


Sec.  230.158  Definitions of certain terms in the last paragraph of 
section 11(a).

* * * * *
    (c) For purposes of the last paragraph of section 11(a) of the Act 
only, the effective date of the registration statement is deemed to be 
the date of the latest to occur of:
    (1) The effective date of the registration statement;
    (2) The effective date of the last post-effective amendment to the 
registration statement next preceding a particular sale of the issuer's 
registered securities to the public filed for the purposes of:
    (i) Including any prospectus required by section 10(a)(3) of the 
Act; or
    (ii) Reflecting in the prospectus any facts or events arising after 
the effective date of the registration statement (or the most recent 
post-effective amendment thereof) which, individually or in the 
aggregate, represent a fundamental change in the information set forth 
in the registration statement;
    (3) The date of filing of the last report of the issuer 
incorporated by reference into the prospectus that is part of the 
registration statement or the date that a form of prospectus filed 
pursuant to Rule 424(b) or Rule 497(b), (c), (d), or (e) (Sec.  
230.424(b) or Sec.  230.497(b), (c), (d), or (e)) is deemed part of and 
included in the registration statement, and relied upon in either case 
in lieu of filing a post-effective amendment for purposes of paragraphs 
(c)(2)(i) and (ii) of this section next preceding a particular sale of 
the issuer's registered securities to the public; or
    (4) As to the issuer and any underwriter at that time only, the 
most recent effective date of the registration statement for purposes 
of liability under section 11 of the Act of the issuer and any such 
underwriter only at the time of or next preceding a particular sale of 
the issuer's registered securities to the public determined pursuant to 
Rule 430B (Sec.  230.430B).
* * * * *
0
15. Add Sec.  230.159 to read as follows:


Sec.  230.159  Information available to purchaser at time of contract 
of sale.

    (a) For purposes of section 12(a)(2) of the Act only, and without 
affecting any other rights a purchaser may have, for purposes of 
determining whether a prospectus or oral statement included an untrue 
statement of a material fact or omitted to state a material fact 
necessary in order to make the statements, in the light of the 
circumstances under which they were made, not misleading at the time of 
sale (including, without limitation, a contract of sale), any 
information conveyed to the purchaser only after such time of sale 
(including such contract of sale) will not be taken into account.
    (b) For purposes of section 17(a)(2) of the Act only, and without 
affecting any other rights the Commission may have to enforce that 
section, for purposes of determining whether a statement includes or 
represents any untrue statement of a material fact or any omission 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 at the time of sale (including, without limitation, a 
contract of sale), any information conveyed to the purchaser only after 
such time of sale (including such contract of sale) will not be taken 
into account.
    (c) For purposes of section 12(a)(2) of the Act only, knowing of 
such untruth

[[Page 44805]]

or omission in respect of a sale (including, without limitation, a 
contract of sale), means knowing at the time of such sale (including 
such contract of sale).
    16. Add Sec.  230.159A to read as follows:


Sec.  230.159A  Certain definitions for purposes of section 12(a)(2) of 
the Act.

    (a) Definition of seller for purposes of section 12(a)(2) of the 
Act. For purposes of section 12(a)(2) of the Act only, in a primary 
offering of securities of the issuer, regardless of the underwriting 
method used to sell the issuer's securities, seller shall include the 
issuer of the securities sold to a person as part of the initial 
distribution of such securities, and the issuer shall be considered to 
offer or sell the securities to such person, if the securities are 
offered or sold to such person by means of any of the following 
communications:
    (1) Any preliminary prospectus or prospectus of the issuer relating 
to the offering required to be filed pursuant to Rule 424 (Sec.  
230.424) or Rule 497 (Sec.  230.497);
    (2) Any free writing prospectus as defined in Rule 405 (Sec.  
230.405) relating to the offering prepared by or on behalf of the 
issuer or used or referred to by the issuer and, in the case of an 
issuer that is an open-end management company registered under the 
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), any profile 
relating to the offering provided pursuant to Rule 498 (Sec.  230.498);
    (3) The portion of any other free writing prospectus (or, in the 
case of an issuer that is an investment company registered under the 
Investment Company Act of 1940 or a business development company as 
defined in section 2(a)(48) of the Investment Company Act of 1940 (15 
U.S.C. 80a-2(a)(48)), any advertisement pursuant to Rule 482 (Sec.  
230.482)) relating to the offering containing material information 
about the issuer or its securities provided by or on behalf of the 
issuer; and
    (4) Any other communication that is an offer in the offering made 
by the issuer to such person.


    Notes to paragraph (a) of Rule 159A. 
    1. For purposes of paragraph (a) of this section, information is 
provided or a communication is made by or on behalf of an issuer if 
an issuer or an agent or representative of the issuer authorizes or 
approves the information or communication before its provision or 
use. An offering participant other than the issuer shall not be an 
agent or representative of the issuer solely by virtue of its acting 
as an offering participant.
    2. Paragraph (a) of this section shall not affect in any respect 
the determination of whether any person other than an issuer is a 
``seller'' for purposes of section 12(a)(2) of the Act.


    (b) Definition of by means of for purposes of section 12(a)(2) of 
the Act.
    (1) For purposes of section 12(a)(2) of the Act only, an offering 
participant other than the issuer shall not be considered to offer or 
sell securities that are the subject of a registration statement by 
means of a free writing prospectus as to a purchaser unless one or more 
of the following circumstances shall exist:
    (i) The offering participant used or referred to the free writing 
prospectus in offering or selling the securities to the purchaser;
    (ii) The offering participant offered or sold securities to the 
purchaser and participated in planning for the use of the free writing 
prospectus by one or more other offering participants and such free 
writing prospectus was used or referred to in offering or selling 
securities to the purchaser by one or more of such other offering 
participants; or
    (iii) The offering participant was required to file the free 
writing prospectus pursuant to the conditions to use in Rule 433 (Sec.  
230.433).
    (2) For purposes of section 12(a)(2) of the Act only, a person will 
not be considered to offer or sell securities by means of a free 
writing prospectus solely because another person has used or referred 
to the free writing prospectus or filed the free writing prospectus 
with the Commission pursuant to Rule 433.

0
17. Add Sec.  230.163 to read as follows:


Sec.  230.163  Exemption from section 5(c) of the Act for certain 
communications by or on behalf of well-known seasoned issuers.

    Preliminary Note to Sec.  230.163. Attempted compliance with 
this section does not act as an exclusive election and the issuer 
also may claim the availability of any other applicable exemption or 
exclusion. Reliance on this section does not affect the availability 
of any other exemption or exclusion from the requirements of section 
5 of the Act.


    (a) In an offering by or on behalf of a well-known seasoned issuer, 
as defined in Rule 405 (Sec.  230.405), that will be or is at the time 
intended to be registered under the Act, an offer by or on behalf of 
such issuer is exempt from the prohibitions in section 5(c) of the Act 
on offers to sell, offers for sale, or offers to buy its securities 
before a registration statement has been filed, provided that:
    (1) Any written communication that is an offer made in reliance on 
this exemption will be a free writing prospectus as defined in Rule 405 
and a prospectus under section 2(a)(10) of the Act relating to a public 
offering of securities to be covered by the registration statement to 
be filed; and
    (2) The exemption from section 5(c) of the Act provided in this 
section for such written communication that is an offer shall be 
conditioned on satisfying the conditions in paragraph (b) of this 
section.
    (b) Conditions. (1) Legend. (i) Every written communication that is 
an offer made in reliance on this exemption shall contain substantially 
the following legend:

    The issuer may file a registration statement (including a 
prospectus) with the SEC for the offering to which this 
communication relates. Before you invest, you should read the 
prospectus in that registration statement and other documents the 
issuer has filed with the SEC for more complete information about 
the issuer and this offering. You may get these documents for free 
by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, 
the company will arrange to send you the prospectus after filing if 
you request it by calling toll-free 1-8[xx-xxx-xxxx].

    (ii) The legend also may provide an e-mail address at which the 
documents can be requested and may indicate that the documents also are 
available by accessing the issuer's Web site, and provide the Internet 
address and the particular location of the documents on the Web site.
    (iii) An immaterial or unintentional failure to include the 
specified legend in a free writing prospectus required by this section 
will not result in a violation of section 5(c) of the Act or the loss 
of the ability to rely on this section so long as:
    (A) A good faith and reasonable effort was made to comply with the 
specified legend condition;
    (B) The free writing prospectus is amended to include the specified 
legend as soon as practicable after discovery of the omitted or 
incorrect legend; and
    (C) If the free writing prospectus has been transmitted without the 
specified legend, the free writing prospectus is retransmitted with the 
legend by substantially the same means as, and directed to 
substantially the same prospective purchasers to whom, the free writing 
prospectus was originally transmitted.
    (2) Filing condition. (i) Subject to paragraph (b)(2)(ii) of this 
section, every written communication that is an offer made in reliance 
on this exemption shall be filed by the issuer with the Commission 
promptly upon the filing of the registration statement, if one is 
filed, or an amendment, if one is filed, covering the securities that 
have been offered in reliance on this exemption.
    (ii) The condition that an issuer shall file a free writing 
prospectus with the

[[Page 44806]]

Commission under this section shall not apply in respect of any 
communication that has previously been filed with, or furnished to, the 
Commission or that the issuer would not be required to file with the 
Commission pursuant to the conditions of Rule 433 (Sec.  230.433) if 
the communication was a free writing prospectus used after the filing 
of the registration statement. The condition that the issuer shall file 
a free writing prospectus with the Commission under this section shall 
be satisfied if the issuer satisfies the filing conditions (other than 
timing of filing which is provided in this section) that would apply 
under Rule 433 if the communication was a free writing prospectus used 
after the filing of the registration statement.
    (iii) An immaterial or unintentional failure to file or delay in 
filing a free writing prospectus to the extent provided in this section 
will not result in a violation of section 5(c) of the Act or the loss 
of the ability to rely on this section so long as:
    (A) A good faith and reasonable effort was made to comply with the 
filing condition; and
    (B) The free writing prospectus is filed as soon as practicable 
after discovery of the failure to file.
    (3) Ineligible offerings. The exemption in paragraph (a) of this 
section shall not be available to:
    (i) Communications relating to business combination transactions 
that are subject to Rule 165 (Sec.  230.165) or Rule 166 (Sec.  
230.166);
    (ii) Communications by an issuer that is an investment company 
registered under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et 
seq.); or
    (iii) Communications by an issuer that is a business development 
company as defined in section 2(a)(48) of the Investment Company Act of 
1940 (15 U.S.C. 80a-2(a)(48)).
    (c) For purposes of this section, a communication is made by or on 
behalf of an issuer if the issuer or an agent or representative of the 
issuer, other than an offering participant who is an underwriter or 
dealer, authorizes or approves the communication before it is made.
    (d) For purposes of this section, a communication for which 
disclosure would be required under section 17(b) of the Act as a result 
of consideration given or to be given, directly or indirectly, by or on 
behalf of an issuer is deemed to be an offer by the issuer and, if a 
written communication, is deemed to be a free writing prospectus of the 
issuer.
    (e) A communication exempt from section 5(c) of the Act pursuant to 
this section will not be considered to be in connection with a 
securities offering registered under the Securities Act for purposes of 
Rule 100(b)(2)(iv) of Regulation FD under the Securities Exchange Act 
of 1934 (Sec.  243.100(b)(2)(iv) of this chapter).

0
18. Add Sec.  230.163A to read as follows:


Sec.  230.163A  Exemption from section 5(c) of the Act for certain 
communications made by or on behalf of issuers more than 30 days before 
a registration statement is filed.

    Preliminary Note to Sec.  230.163A. Attempted compliance with 
this section does not act as an exclusive election and the issuer 
also may claim the availability of any other applicable exemption or 
exclusion. Reliance on this section does not affect the availability 
of any other exemption or exclusion from the requirements of section 
5 of the Act.


    (a) Except as excluded pursuant to paragraph (b) of this section, 
in all registered offerings by issuers, any communication made by or on 
behalf of an issuer more than 30 days before the date of the filing of 
the registration statement that does not reference a securities 
offering that is or will be the subject of a registration statement 
shall not constitute an offer to sell, offer for sale, 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 takes 
reasonable steps within its control to prevent further distribution or 
publication of such communication during the 30 days immediately 
preceding the date of filing the registration statement.
    (b) The exemption in paragraph (a) of this section shall not be 
available with respect to the following communications:
    (1) Communications relating to business combination transactions 
that are subject to Rule 165 (Sec.  230.165) or Rule 166 (Sec.  
230.166);
    (2) Communications made in connection with offerings registered on 
Form S-8 (Sec.  239.16b of this chapter), other than by well-known 
seasoned issuers;
    (3) Communications in offerings of securities of an issuer that is, 
or during the past three years was (or any of whose predecessors during 
the last three years was):
    (i) A blank check company as defined in Rule 419(a)(2) (Sec.  
230.419(a)(2));
    (ii) A shell company, other than a business combination related 
shell company, each as defined in Rule 405 (Sec.  230.405); or
    (iii) An issuer for an offering of penny stock as defined in Rule 
3a51-1 of the Securities Exchange Act of 1934 (Sec.  240.3a51-1 of this 
chapter); or
    (4) Communications made by an issuer that is:
    (i) An investment company registered under the Investment Company 
Act of 1940 (15 U.S.C. 80a-1 et seq.); or
    (ii) A business development company as defined in section 2(a)(48) 
of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(48)).
    (c) For purposes of this section, a communication is made by or on 
behalf of an issuer if the issuer or an agent or representative of the 
issuer, other than an offering participant who is an underwriter or 
dealer, authorizes or approves the communication before it is made.
    (d) A communication exempt from section 5(c) of the Act pursuant to 
this section will not be considered to be in connection with a 
securities offering registered under the Securities Act for purposes of 
Rule 100(b)(2)(iv) of Regulation FD under the Securities Exchange Act 
of 1934 (Sec.  243.100(b)(2)(iv) of this chapter).

0
19. Add Sec.  230.164 to read as follows:


Sec.  230.164  Post-filing free writing prospectuses in connection with 
certain registered offerings.

    Preliminary Notes to Sec.  230.164. 
    1. This section is not available for any communication that, 
although in technical compliance with this section, is part of a 
plan or scheme to evade the requirements of section 5 of the Act.
    2. Attempted compliance with this section does not act as an 
exclusive election and the person relying on this section also may 
claim the availability of any other applicable exemption or 
exclusion. Reliance on this section does not affect the availability 
of any other exemption or exclusion from the requirements of section 
5 of the Act.


    (a) In connection with a registered offering of an issuer meeting 
the requirements of this section, a free writing prospectus, as defined 
in Rule 405 (Sec.  230.405), of the issuer or any other offering 
participant, including any underwriter or dealer, after the filing of 
the registration statement will be a section 10(b) prospectus for 
purposes of section 5(b)(1) of the Act provided that the conditions set 
forth in Rule 433 (Sec.  230.433) are satisfied.
    (b) An immaterial or unintentional failure to file or delay in 
filing a free writing prospectus as necessary to satisfy the filing 
conditions contained in Rule 433 will not result in a violation of 
section 5(b)(1) of the Act or the loss of the ability to rely on this 
section so long as:
    (1) A good faith and reasonable effort was made to comply with the 
filing condition; and

[[Page 44807]]

    (2) The free writing prospectus is filed as soon as practicable 
after discovery of the failure to file.
    (c) An immaterial or unintentional failure to include the specified 
legend in a free writing prospectus as necessary to satisfy the legend 
condition contained in Rule 433 will not result in a violation of 
section 5(b)(1) of the Act or the loss of the ability to rely on this 
section so long as:
    (1) A good faith and reasonable effort was made to comply with the 
legend condition;
    (2) The free writing prospectus is amended to include the specified 
legend as soon as practicable after discovery of the omitted or 
incorrect legend; and
    (3) If the free writing prospectus has been transmitted without the 
specified legend, the free writing prospectus must be retransmitted 
with the legend by substantially the same means as, and directed to 
substantially the same prospective purchasers to whom, the free writing 
prospectus was originally transmitted.
    (d) Solely for purposes of this section, an immaterial or 
unintentional failure to retain a free writing prospectus as necessary 
to satisfy the record retention condition contained in Rule 433 will 
not result in a violation of section 5(b)(1) of the Act or the loss of 
the ability to rely on this section so long as a good faith and 
reasonable effort was made to comply with the record retention 
condition. Nothing in this paragraph will affect, however, any other 
record retention provisions applicable to the issuer or any offering 
participant.
    (e) Ineligible issuers. (1) This section and Rule 433 are available 
only if at the eligibility determination date for the offering in 
question, determined pursuant to paragraph (h) of this section, the 
issuer is not an ineligible issuer as defined in Rule 405 (or in the 
case of any offering participant, other than the issuer, the 
participant has a reasonable belief that the issuer is not an 
ineligible issuer);
    (2) Notwithstanding paragraph (e)(1) of this section, this section 
and Rule 433 are available to an ineligible issuer with respect to a 
free writing prospectus that contains only descriptions of the terms of 
the securities in the offering or the offering (or in the case of an 
offering of asset-backed securities, contains only information 
specified in paragraphs (a)(1), (2), (3), (4), (6), (7), and (8) of the 
definition of ABS informational and computational materials in Item 
1101 of Regulation AB (Sec.  229.1101 of this chapter), unless the 
issuer is or during the last three years the issuer or any of its 
predecessors was:
    (i) A blank check company as defined in Rule 419(a)(2) (Sec.  
230.419(a)(2));
    (ii) A shell company, other than a business combination related 
shell company, as defined in Rule 405; or
    (iii) An issuer for an offering of penny stock as defined in Rule 
3a51-1 of the Securities Exchange Act of 1934 (Sec.  240.3a51-1 of this 
chapter).
    (f) Excluded issuers. This section and Rule 433 are not available 
if the issuer is an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1 et seq.) or a business development 
company as defined in section 2(a)(48) of the Investment Company Act of 
1940 (15 U.S.C. 80a-2(a)(48)).
    (g) Excluded offerings. This section and Rule 433 are not available 
if the issuer is registering a business combination transaction as 
defined in Rule 165(f)(1) (Sec.  230.165(f)(1)) or the issuer, other 
than a well-known seasoned issuer, is registering an offering on Form 
S-8 (Sec.  239.16b of this chapter).
    (h) For purposes of this section and Rule 433, the determination 
date as to whether an issuer is an ineligible issuer in respect of an 
offering shall be:
    (1) Except as provided in paragraph (h)(2) of this section, the 
time of filing of the registration statement covering the offering; or
    (2) If the offering is being registered pursuant to Rule 415 (Sec.  
230.415), the earliest time after the filing of the registration 
statement covering the offering at which the issuer, or in the case of 
an underwritten offering the issuer or another offering participant, 
makes a bona fide offer, including without limitation through the use 
of a free writing prospectus, in the offering.

0
20. Add Sec.  230.168 to read as follows:


Sec.  230.168  Exemption from sections 2(a)(10) and 5(c) of the Act for 
certain communications of regularly released factual business 
information and forward-looking information

    Preliminary Notes to Sec.  230.168. 
    1. This section is not available for any communication that, 
although in technical compliance with this section, is part of a 
plan or scheme to evade the requirements of section 5 of the Act.
    2. This section provides a non-exclusive safe harbor for factual 
business information and forward-looking information released or 
disseminated as provided in this section. Attempted compliance with 
this section does not act as an exclusive election and the issuer 
also may claim the availability of any other applicable exemption or 
exclusion. Reliance on this section does not affect the availability 
of any other exemption or exclusion from the definition of 
prospectus in section 2(a)(10) or the requirements of section 5 of 
the Act.
    3. The availability of this section for a release or 
dissemination of a communication that contains or incorporates 
factual business information or forward-looking information will not 
be affected by another release or dissemination of a communication 
that contains all or a portion of the same factual business 
information or forward-looking information that does not satisfy the 
conditions of this section.


    (a) For purposes of sections 2(a)(10) and 5(c) of the Act, the 
regular release or dissemination by or on behalf of an issuer (and, in 
the case of an asset-backed issuer, the other persons specified in 
paragraph (a)(3) of this section) of communications containing factual 
business information or forward-looking information shall be deemed not 
to constitute an offer to sell or offer for sale of a security which is 
the subject of an offering pursuant to a registration statement that 
the issuer proposes to file, or has filed, or that is effective, if the 
conditions of this section are satisfied by any of the following:
    (1) An issuer that is required to file reports pursuant to section 
13 or section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 
78m or 78o(d));
    (2) A foreign private issuer that:
    (i) Meets all of the registrant requirements of Form F-3 (Sec.  
239.33 of this chapter) other than the reporting history provisions of 
General Instructions I.A.1. and I.A.2.(a) of Form F-3;
    (ii) Either:
    (A) Satisfies the public float threshold in General Instruction 
I.B.1. of Form F-3; or
    (B) Is issuing non-convertible investment grade securities meeting 
the provisions of General Instruction I.B.2. of Form F-3; and
    (iii) Either:
    (A) Has its equity securities trading on a designated offshore 
securities market as defined in Rule 902(b) (Sec.  230.902(b)) and has 
had them so traded for at least 12 months; or
    (B) Has a worldwide market value of its outstanding common equity 
held by non-affiliates of $700 million or more; or
    (3) An asset-backed issuer or a depositor, sponsor, or servicer (as 
such terms are defined in Item 1101 of Regulation AB (Sec.  229.1101 of 
this chapter)) or an affiliated depositor, whether or not such other 
person is the issuer.
    (b) Definitions.
    (1) Factual business information means some or all of the following 
information that is released or disseminated under the conditions in 
paragraph (d) of this section, including, without limitation, such 
factual

[[Page 44808]]

business information contained in reports or other materials filed 
with, furnished to, or submitted to the Commission pursuant to the 
Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.):
    (i) Factual information about the issuer, its business or financial 
developments, or other aspects of its business;
    (ii) Advertisements of, or other information about, the issuer's 
products or services; and
    (iii) Dividend notices.
    (2) Forward-looking information means some or all of the following 
information that is released or disseminated under the conditions in 
paragraph (d) of this section, including, without limitation, such 
forward-looking information contained in reports or other materials 
filed with, furnished to, or submitted to the Commission pursuant to 
the Securities Exchange Act of 1934:
    (i) Projections of the issuer's revenues, income (loss), earnings 
(loss) per share, capital expenditures, dividends, capital structure, 
or other financial items;
    (ii) 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;
    (iii) Statements about the issuer's future economic performance, 
including statements of the type contemplated by the management's 
discussion and analysis of financial condition and results of operation 
described in Item 303 of Regulations S-B and S-K (Sec.  228.303 and 
Sec.  229.303 of this chapter) or the operating and financial review 
and prospects described in Item 5 of Form 20-F (Sec.  249.220f of this 
chapter); and
    (iv) Assumptions underlying or relating to any of the information 
described in paragraphs (b)(2)(i), (b)(2)(ii) and (b)(2)(iii) of this 
section.
    (3) For purposes of this section, the release or dissemination of a 
communication is by or on behalf of the issuer if the issuer or an 
agent or representative of the issuer, other than an offering 
participant who is an underwriter or dealer, authorizes or approves 
such release or dissemination before it is made.
    (4) For purposes of this section, in the case of communications of 
a person specified in paragraph (a)(3) of this section other than the 
asset-backed issuer, the release or dissemination of a communication is 
by or on behalf of such other person if such other person or its agent 
or representative, other than an underwriter or dealer, authorizes or 
approves such release or dissemination before it is made.
    (c) Exclusion. A communication containing information about the 
registered offering or released or disseminated as part of the offering 
activities in the registered offering is excluded from the exemption of 
this section.
    (d) Conditions to exemption. The following conditions must be 
satisfied:
    (1) The issuer (or in the case of an asset-backed issuer, the 
issuer and the other persons specified in paragraph (a)(3) of this 
section, taken together) has previously released or disseminated 
information of the type described in this section in the ordinary 
course of its business;
    (2) The timing, manner, and form in which the information is 
released or disseminated is consistent in material respects with 
similar past releases or disseminations; and
    (3) The issuer is not an investment company registered under the 
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) or a business 
development company as defined in section 2(a)(48) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-2(a)(48)).

0
21. Add Sec.  230.169 to read as follows:


Sec.  230.169  Exemption from sections 2(a)(10) and 5(c) of the Act for 
certain communications of regularly released factual business 
information.

    Preliminary Notes to Sec.  230.169. 
    1. This section is not available for any communication that, 
although in technical compliance with this section, is part of a 
plan or scheme to evade the requirements of section 5 of the Act.
    2. This section provides a non-exclusive safe harbor for factual 
business information released or disseminated as provided in this 
section. Attempted compliance with this section does not act as an 
exclusive election and the issuer also may claim the availability of 
any other applicable exemption or exclusion. Reliance on this 
section does not affect the availability of any other exemption or 
exclusion from the definition of prospectus in section 2(a)(10) or 
the requirements of section 5 of the Act.
    3. The availability of this section for a release or 
dissemination of a communication that contains or incorporates 
factual business information will not be affected by another release 
or dissemination of a communication that contains all or a portion 
of the same factual business information that does not satisfy the 
conditions of this section.


    (a) For purposes of sections 2(a)(10) and 5(c) of the Act, the 
regular release or dissemination by or on behalf of an issuer of 
communications containing factual business information shall be deemed 
not to constitute an offer to sell or offer for sale of a security by 
an issuer which is the subject of an offering pursuant to a 
registration statement that the issuer proposes to file, or has filed, 
or that is effective, if the conditions of this section are satisfied.
    (b) Definitions.
    (1) Factual business information means some or all of the following 
information that is released or disseminated under the conditions in 
paragraph (d) of this section:
    (i) Factual information about the issuer, its business or financial 
developments, or other aspects of its business; and
    (ii) Advertisements of, or other information about, the issuer's 
products or services.
    (2) For purposes of this section, the release or dissemination of a 
communication is by or on behalf of the issuer if the issuer or an 
agent or representative of the issuer, other than an offering 
participant who is an underwriter or dealer, authorizes or approves 
such release or dissemination before it is made.
    (c) Exclusions. A communication containing information about the 
registered offering or released or disseminated as part of the offering 
activities in the registered offering is excluded from the exemption of 
this section.
    (d) Conditions to exemption. The following conditions must be 
satisfied:
    (1) The issuer has previously released or disseminated information 
of the type described in this section in the ordinary course of its 
business;
    (2) The timing, manner, and form in which the information is 
released or disseminated is consistent in material respects with 
similar past releases or disseminations;
    (3) The information is released or disseminated for intended use by 
persons, such as customers and suppliers, other than in their 
capacities as investors or potential investors in the issuer's 
securities, by the issuer's employees or agents who historically have 
provided such information; and
    (4) The issuer is not an investment company registered under the 
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) or a business 
development company as defined in section 2(a)(48) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-2(a)(48)).

0
22. Add Sec.  230.172 to read as follows:


Sec.  230.172  Delivery of prospectuses.

    (a) Sending confirmations and notices of allocations. After the 
effective date of a registration statement, the following are exempt 
from the provisions of section 5(b)(1) of the Act if the

[[Page 44809]]

conditions set forth in paragraph (c) of this section are satisfied:
    (1) Written confirmations of sales of securities in an offering 
pursuant to a registration statement that contain information limited 
to that called for in Rule 10b-10 under the Securities Exchange Act of 
1934 (Sec.  240.10b-10 of this chapter) and other information 
customarily included in written confirmations of sales of securities, 
which may include notices provided pursuant to Rule 173 (Sec.  
230.173); and
    (2) Notices of allocation of securities sold or to be sold in an 
offering pursuant to the registration statement that may include 
information identifying the securities (including the CUSIP number) and 
otherwise may include only information regarding pricing, allocation 
and settlement, and information incidental thereto.
    (b) Transfer of the security. Any obligation under section 5(b)(2) 
of the Act to have a prospectus that satisfies the requirements of 
section 10(a) of the Act precede or accompany the carrying or delivery 
of a security in a registered offering is satisfied if the conditions 
in paragraph (c) of this section are met.
    (c) Conditions. (1) The registration statement relating to the 
offering is effective and is not the subject of any pending proceeding 
or examination under section 8(d) or 8(e) of the Act;
    (2) Neither the issuer, nor an underwriter or participating dealer 
is the subject of a pending proceeding under section 8A of the Act in 
connection with the offering; and
    (3) The issuer has filed with the Commission a prospectus with 
respect to the offering that satisfies the requirements of section 
10(a) of the Act or the issuer will make a good faith and reasonable 
effort to file such a prospectus within the time required under Rule 
424 (Sec.  230.424) and, in the event that the issuer fails to file 
timely such a prospectus, the issuer files the prospectus as soon as 
practicable thereafter.
    (4) The condition in paragraph (c)(3) of this section shall not 
apply to transactions by dealers requiring delivery of a final 
prospectus pursuant to section 4(3) of the Act.
    (d) Exclusions. This section shall not apply to any:
    (1) Offering of any investment company registered under the 
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.);
    (2) Offering of any business development company as defined in 
section 2(a)(48) of the Investment Company Act of 1940 (15 U.S.C. 80a-
2(a)(48));
    (3) A business combination transaction as defined in Rule 165(f)(1) 
(Sec.  230.165(f)(1); or
    (4) Offering registered on Form S-8 (Sec.  239.16b of this 
chapter).

0
23. Add Sec.  230.173 to read as follows:


Sec.  230.173  Notice of registration.

    (a) In a transaction that represents a sale by the issuer or an 
underwriter, or a sale where there is not an exclusion or exemption 
from the requirement to deliver a final prospectus meeting the 
requirements of section 10(a) of the Act pursuant to section 4(3) of 
the Act or Rule 174 (Sec.  230.174), each underwriter or dealer selling 
in such transaction shall provide to each purchaser from it, not later 
than two business days following the completion of such sale, a copy of 
the final prospectus or, in lieu of such prospectus, a notice to the 
effect that the sale was made pursuant to a registration statement or 
in a transaction in which a final prospectus would have been required 
to have been delivered in the absence of Rule 172 (Sec.  230.172).
    (b) If the sale was by the issuer and was not effected by or 
through an underwriter or dealer, the responsibility to send a 
prospectus, or in lieu of such prospectus, such notice as set forth in 
paragraph (a) of this section, shall be the issuer's.
    (c) Compliance with the requirements of this section is not a 
condition to reliance on Rule 172.
    (d) A purchaser may request from the person responsible for sending 
a notice a copy of the final prospectus if one has not been sent.
    (e) After the effective date of the registration statement with 
respect to an offering, notices as set forth in paragraph (a) of this 
section, are exempt from the provisions of section 5(b)(1) of the Act.
    (f) Exclusions. This section shall not apply to any:
    (1) Transaction solely between brokers or dealers in reliance on 
Rule 153 (Sec.  230.153);
    (2) Offering of any investment company registered under the 
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.);
    (3) Offering of any business development company as defined in 
section 2(a)(48) of the Investment Company Act of 1940 (15 U.S.C. 80a-
2(a)(48));
    (4) A business combination transaction as defined in Rule 165(f)(1) 
(Sec.  230.165(f)(1)); or
    (5) Offering registered on Form S-8 (Sec.  239.16b of this 
chapter).

0
24. Amend Sec.  230.174 by removing the authority citations following 
the section and adding paragraph (h) to read as follows:


Sec.  230.174  Delivery of prospectus by dealers; exemptions under 
section 4(3) of the Act.

* * * * *
    (h) Any obligation pursuant to Section 4(3) of the Act and this 
section to deliver a prospectus, other than pursuant to paragraph (g) 
of this section, may be satisfied by compliance with the provisions of 
Rule 172 (Sec.  230.172).

0
25. Amend Sec.  230.401 by removing the authority citations following 
the section and revising paragraph (g) to read as follows:


Sec.  230.401  Requirements as to proper form.

* * * * *
    (g)(1) Subject to paragraph (g)(2) of this section, except for 
registration statements and post-effective amendments that become 
effective immediately pursuant to Rule 462 and Rule 464 (Sec.  230.462 
and Sec.  230.464), a registration statement or any amendment thereto 
is deemed filed on the proper registration form unless the Commission 
objects to the registration form before the effective date.
    (2) An automatic shelf registration statement as defined in Rule 
405 (Sec.  230.405) and any post-effective amendment thereto are deemed 
filed on the proper registration form unless and until the Commission 
notifies the issuer of its objection to the use of such form. Following 
any such notification, the issuer must amend its automatic shelf 
registration statement onto the registration form it is then eligible 
to use, provided, however, that any continuous offering of securities 
pursuant to Rule 415 (Sec.  230.415) that the issuer has commenced 
pursuant to the registration statement before the Commission has 
notified the issuer of its objection to the use of such form may 
continue until the effective date of a new registration statement or 
post-effective amendment to the registration statement that the issuer 
has filed on the proper registration form, if the issuer files promptly 
after notification the new registration statement or post-effective 
amendment and if the offering is permitted to be made under the new 
registration statement or post-effective amendment.

0
26. Amend Sec.  230.405 as follows:
0
a. Add new definitions of ``automatic shelf registration statement,'' 
``free writing prospectus,'' ``ineligible issuer,'' ``well-known 
seasoned issuer,'' and ``written communication,'' in alphabetical 
order; and
0
b. Revise the definition of ``graphic communication.''
    The additions and revision read as follows:

[[Page 44810]]

Sec.  230.405  Definition of terms.

* * * * *
    Automatic shelf registration statement. The term automatic shelf 
registration statement means a registration statement filed on Form S-3 
or Form F-3 (Sec.  239.13 or Sec.  239.33 of this chapter) by a well-
known seasoned issuer pursuant to General Instruction I.D. or I.C. of 
such forms, respectively.
* * * * *
    Free writing prospectus. Except as otherwise specifically provided 
or the context otherwise requires, a free writing prospectus is any 
written communication as defined in this section that constitutes an 
offer to sell or a solicitation of an offer to buy the securities 
relating to a registered offering that is used after the registration 
statement in respect of the offering is filed (or, in the case of a 
well-known seasoned issuer, whether or not such registration statement 
is filed) and is made by means other than:
    (1) A prospectus satisfying the requirements of section 10(a) of 
the Act, Rule 430 (Sec.  230.430), Rule 430A (Sec.  230.430A), Rule 
430B (Sec.  230.430B), Rule 430C (Sec.  230.430C), or Rule 431 (Sec.  
230.431);
    (2) A written communication used in reliance on Rule 167 and Rule 
426 (Sec.  230.167 and Sec.  230.426); or
    (3) A written communication that constitutes an offer to sell or 
solicitation of an offer to buy such securities that falls within the 
exception from the definition of prospectus in clause (a) of section 
2(a)(10) of the Act.
    Graphic communication. The term graphic communication, which 
appears in the definition of ``write, written'' in section 2(a)(9) of 
the Act and in the definition of written communication in this section, 
shall include all forms of electronic media, including, but not limited 
to, audiotapes, videotapes, facsimiles, CD-ROM, electronic mail, 
Internet Web sites, substantially similar messages widely distributed 
(rather than individually distributed) on telephone answering or voice 
mail systems, computers, computer networks and other forms of computer 
data compilation. Graphic communication shall not include a 
communication that, at the time of the communication, originates live, 
in real-time to a live audience and does not originate in recorded form 
or otherwise as a graphic communication, although it is transmitted 
through graphic means.
    Ineligible issuer. (1) An ineligible issuer is an issuer with 
respect to which any of the following is true as of the relevant date 
of determination:
    (i) Any issuer that is required to file reports pursuant to section 
13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 
78o(d)) that has not filed all reports and other materials required to 
be filed during the preceding 12 months (or for such shorter period 
that the issuer was required to file such reports pursuant to sections 
13 or 15(d) of the Securities Exchange Act of 1934), other than reports 
on Form 8-K (Sec.  249.308 of this chapter) required solely pursuant to 
an item specified in General Instruction I.A.3(b) of Form S-3 (Sec.  
239.13 of this chapter) (or in the case of an asset-backed issuer, to 
the extent the depositor or any issuing entity previously established, 
directly or indirectly, by the depositor (as such terms are defined in 
Item 1101 of Regulation AB (Sec.  229.1101 of this chapter) are or were 
at any time during the preceding 12 calendar months required to file 
reports pursuant to section 13 or 15(d) of the Securities Exchange Act 
of 1934 with respect to a class of asset-backed securities involving 
the same asset class, such depositor and each such issuing entity must 
have filed all reports and other material required to be filed for such 
period (or such shorter period that each such entity was required to 
file such reports), other than reports on Form 8-K required solely 
pursuant to an item specified in General Instruction I.A.4 of Form S-
3);
    (ii) The issuer is, or during the past three years the issuer or 
any of its predecessors was:
    (A) A blank check company as defined in Rule 419(a)(2) (Sec.  
230.419(a)(2));
    (B) A shell company, other than a business combination related 
shell company, each as defined in this section;
    (C) An issuer in an offering of penny stock as defined in Rule 
3a51-1 of the Securities Exchange Act of 1934 (Sec.  240.3a51-1 of this 
chapter);
    (iii) The issuer is a limited partnership that is offering and 
selling its securities other than through a firm commitment 
underwriting;
    (iv) Within the past three years, a petition under the federal 
bankruptcy laws or any state insolvency law was filed by or against the 
issuer, or a court appointed a receiver, fiscal agent or similar 
officer with respect to the business or property of the issuer subject 
to the following:
    (A) In the case of an involuntary bankruptcy in which a petition 
was filed against the issuer, ineligibility will occur upon the earlier 
to occur of:
    (1) 90 days following the date of the filing of the involuntary 
petition (if the case has not been earlier dismissed); or
    (2) The conversion of the case to a voluntary proceeding under 
federal bankruptcy or state insolvency laws; and
    (B) Ineligibility will terminate under this paragraph (1)(iv) if an 
issuer has filed an annual report with audited financial statements 
subsequent to its emergence from that bankruptcy, insolvency, or 
receivership process;
    (v) Within the past three years, the issuer or any entity that at 
the time was a subsidiary of the issuer was convicted of any felony or 
misdemeanor described in paragraphs (i) through (iv) of section 
15(b)(4)(B) of the Securities Exchange Act of 1934 (15 U.S.C. 
78o(b)(4)(B)(i) through (iv));
    (vi) Within the past three years (but in the case of a decree or 
order agreed to in a settlement, not before December 1, 2005), the 
issuer or any entity that at the time was a subsidiary of the issuer 
was made the subject of any judicial or administrative decree or order 
arising out of a governmental action that:
    (A) Prohibits certain conduct or activities regarding, including 
future violations of, the anti-fraud provisions of the federal 
securities laws;
    (B) Requires that the person cease and desist from violating the 
anti-fraud provisions of the federal securities laws; or
    (C) Determines that the person violated the anti-fraud provisions 
of the federal securities laws;
    (vii) The issuer has filed a registration statement that is the 
subject of any pending proceeding or examination under section 8 of the 
Act or has been the subject of any refusal order or stop order under 
section 8 of the Act within the past three years; or
    (viii) The issuer is the subject of any pending proceeding under 
section 8A of the Act in connection with an offering.
    (2) An issuer shall not be an ineligible issuer if the Commission 
determines, upon a showing of good cause, that it is not necessary 
under the circumstances that the issuer be considered an ineligible 
issuer. Any such determination shall be without prejudice to any other 
action by the Commission in any other proceeding or matter with respect 
to the issuer or any other person.
    (3) The date of determination of whether an issuer is an ineligible 
issuer is as follows:
    (i) For purposes of determining whether an issuer is a well-known 
seasoned issuer, at the date specified for purposes of such 
determination in paragraph (2) of the definition of well-known seasoned 
issuer in this section; and

[[Page 44811]]

    (ii) For purposes of determining whether an issuer or offering 
participant may use free writing prospectuses in respect of an offering 
in accordance with the provisions of Rules 164 and 433 (Sec.  230.164 
and Sec.  230.433), at the date in respect of the offering specified in 
paragraph (h) of Rule 164.
* * * * *
    Well-known seasoned issuer. A well-known seasoned issuer is an 
issuer that, as of the most recent determination date determined 
pursuant to paragraph (2) of this definition:
    (1)(i) Meets all the registrant requirements of General Instruction 
I.A. of Form S-3 or Form F-3 (Sec.  239.13 or Sec.  239.33 of this 
chapter) and either:
    (A) As of a date within 60 days of the determination date, has a 
worldwide market value of its outstanding voting and non-voting common 
equity held by non-affiliates of $700 million or more; or
    (B)(1) As of a date within 60 days of the determination date, has 
issued in the last three years at least $1 billion aggregate principal 
amount of non-convertible securities, other than common equity, in 
primary offerings for cash, not exchange, registered under the Act; and
    (2) Will register only non-convertible securities, other than 
common equity, and full and unconditional guarantees permitted pursuant 
to paragraph (1)(ii) of this definition unless, at the determination 
date, the issuer also is eligible to register a primary offering of its 
securities relying on General Instruction I.B.1. of Form S-3 or Form F-
3.
    (3) Provided that as to a parent issuer only, for purposes of 
calculating the aggregate principal amount of outstanding non-
convertible securities under paragraph (1)(i)(B)(2) of this definition, 
the parent issuer may include the aggregate principal amount of non-
convertible securities, other than common equity, of its majority-owned 
subsidiaries issued in registered primary offerings for cash, not 
exchange, that it has fully and unconditionally guaranteed, within the 
meaning of Rule 3-10 of Regulation S-X (Sec.  210.3-10 of this chapter) 
in the last three years; or
    (ii) Is a majority-owned subsidiary of a parent that is a well-
known seasoned issuer pursuant to paragraph (1)(i) of this definition 
and, as to the subsidiaries' securities that are being or may be 
offered on that parent's registration statement:
    (A) The parent has provided a full and unconditional guarantee, as 
defined in Rule 3-10 of Regulation S-X, of the payment obligations on 
the subsidiary's securities and the securities are non-convertible 
securities, other than common equity;
    (B) The securities are guarantees of:
    (1) Non-convertible securities, other than common equity, of its 
parent being registered; or
    (2) Non-convertible securities, other than common equity, of 
another majority-owned subsidiary being registered where there is a 
full and unconditional guarantee, as defined in Rule 3-10 of Regulation 
S-X, of such non-convertible securities by the parent; or
    (C) The securities of the majority-owned subsidiary meet the 
conditions of General Instruction I.B.2 of Form S-3 or Form F-3.
    (iii) Is not an ineligible issuer as defined in this section.
    (iv) Is not an asset-backed issuer as defined in Item 1101 of 
Regulation AB (Sec.  229.1101(b) of this chapter).
    (v) Is not an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1 et seq.) or a business development 
company as defined in section 2(a)(48) of the Investment Company Act of 
1940 (15 U.S.C. 80a-2(a)(48)).
    (2) For purposes of this definition, the determination date as to 
whether an issuer is a well-known seasoned issuer shall be the latest 
of:
    (i) The time of filing of its most recent shelf registration 
statement; or
    (ii) The time of its most recent amendment (by post-effective 
amendment, incorporated report filed pursuant to section 13 or 15(d) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d) of this 
chapter), or form of prospectus) to a shelf registration statement for 
purposes of complying with section 10(a)(3) of the Act (or if such 
amendment has not been made within the time period required by section 
10(a)(3) of the Act, the date on which such amendment is required); or
    (iii) In the event that the issuer has not filed a shelf 
registration statement or amended a shelf registration statement for 
purposes of complying with section 10(a)(3) of the Act for sixteen 
months, the time of filing of the issuer's most recent annual report on 
Form 10-K (Sec.  249.310 of this chapter) or Form 20-F (Sec.  249.220f 
of this chapter) (or if such report has not been filed by its due date, 
such due date).
* * * * *
    Written communication. Except as otherwise specifically provided or 
the context otherwise requires, a written communication is any 
communication that is written, printed, a radio or television 
broadcast, or a graphic communication as defined in this section.


    Note: Note to definition of ``written communication.''
    A communication that is a radio or television broadcast is a 
written communication regardless of the means of transmission of the 
broadcast.


0
27. Amend Sec.  230.408 as follows:
0
a. Designate the current text as paragraph (a); and
0
b. Add paragraph (b).
    The addition reads as follows:


Sec.  230.408  Additional information.

* * * * *
    (b) Notwithstanding paragraph (a) of this section, unless otherwise 
required to be included in the registration statement, the failure to 
include in a registration statement information included in a free 
writing prospectus will not, solely by virtue of inclusion of the 
information in a free writing prospectus (as defined in Rule 405 (Sec.  
230.405)), be considered an omission of material information required 
to be included in the registration statement.

0
28. Amend Sec.  230.412 as follows:
0
a. Remove the authority citation following the section; and
0
b. Revise paragraph (a).
    The revision reads as follows:


Sec.  230.412  Modified or superseded documents.

    (a) Any statement contained in a document incorporated or deemed to 
be incorporated by reference or deemed to be part of a registration 
statement or the prospectus that is part of the registration statement 
shall be deemed to be modified or superseded for purposes of the 
registration statement or the prospectus that is part of the 
registration statement to the extent that a statement contained in the 
prospectus that is part of the registration statement or in any other 
subsequently filed document which also is or is deemed to be 
incorporated by reference or deemed to be part of the registration 
statement or prospectus that is part of the registration statement 
modifies or replaces such statement. Any statement contained in a 
document that is deemed to be incorporated by reference or deemed to be 
part of a registration statement or the prospectus that is part of the 
registration statement after the most recent effective date or after 
the date of the most recent prospectus that is part of the registration 
statement may modify or replace existing statements contained in the 
registration statement or the prospectus that is part of the 
registration statement.
* * * * *

0
29. Revise Sec.  230.413 to read as follows:

[[Page 44812]]

Sec.  230.413  Registration of additional securities and additional 
classes of securities.

    (a) Except as provided in section 24(f) of the Investment Company 
Act of 1940 (15 U.S.C. 80a-24(f)) and in paragraph (b) of this section, 
where a registration statement is already in effect, the registration 
of additional securities shall only be effected through a separate 
registration statement relating to the additional securities.
    (b) Notwithstanding paragraph (a) of this section, the following 
additional securities or additional classes of securities may be added 
to an automatic shelf registration statement already in effect by 
filing a post-effective amendment to that automatic shelf registration 
statement:
    (1) Securities of a class different than those registered on the 
effective automatic shelf registration statement identified as provided 
in Rule 430B(a) (Sec.  230.430B(a)); or
    (2) Securities of a majority-owned subsidiary that are permitted to 
be included in an automatic shelf registration statement, provided that 
the subsidiary and the securities are identified as provided in Rule 
430B and the subsidiary satisfies the signature requirements of an 
issuer in the post-effective amendment.
0
30. Amend Sec.  230.415 as follows:
0
a. Remove the authority citations following the section;
0
b. Revise paragraph (a)(1)(x);
0
c. Revise paragraph (a)(2);
0
d. Revise paragraph (a)(3);
0
e. Revise paragraph (a)(4) including the undesignated paragraph;
0
f. Add paragraph (a)(5); and
0
g. Add paragraph (a)(6).
    The revisions and addition read as follows:


Sec.  230.415  Delayed or continuous offering and sale of securities.

    (a) * * *
    (1) * * *
    (x) Securities registered (or qualified to be registered) on Form 
S-3 or Form F-3 (Sec.  239.13 or Sec.  239.33 of this chapter) which 
are to be offered and sold on an immediate, continuous or delayed basis 
by or on behalf of the registrant, a majority-owned subsidiary of the 
registrant or a person of which the registrant is a majority-owned 
subsidiary; or
* * * * *
    (2) Securities in paragraph (a)(1)(viii) of this section and 
securities in paragraph (a)(1)(ix) of this section that are not 
registered on Form S-3 or Form F-3 (Sec.  239.13 or Sec.  239.33 of 
this chapter) may only be registered in an amount which, at the time 
the registration statement becomes effective, is reasonably expected to 
be offered and sold within two years from the initial effective date of 
the registration.
    (3) The registrant furnishes the undertakings required by Item 
512(a) of Regulation S-K (Sec.  229.512(a) of this chapter) or Item 
512(a) or Item 512(g) of Regulation S-B (Sec.  228.512(a) or (g) of 
this chapter), except that a registrant that is an investment company 
filing on Form N-2 (Sec. Sec.  239.14 and 274.11a-1 of this chapter) 
must furnish the undertakings required by Item 34.4 of Form N-2.
    (4) In the case of a registration statement pertaining to an at the 
market offering of equity securities by or on behalf of the registrant, 
the offering must come within paragraph (a)(1)(x) of this section. As 
used in this paragraph, the term ``at the market offering'' means an 
offering of equity securities into an existing trading market for 
outstanding shares of the same class at other than a fixed price.
    (5) Securities registered on an automatic shelf registration 
statement and securities described in paragraphs (a)(1)(vii), (ix), and 
(x) of this section may be offered and sold only if not more than three 
years have elapsed since the initial effective date of the registration 
statement under which they are being offered and sold, provided, 
however, that if a new registration statement has been filed pursuant 
to paragraph (a)(6) of this section:
    (i) If the new registration statement is an automatic shelf 
registration statement, it shall be immediately effective pursuant to 
Rule 462(e) (Sec.  230.462(e)); or
    (ii) If the new registration statement is not an automatic shelf 
registration statement:
    (A) Securities covered by the prior registration statement may 
continue to be offered and sold until the earlier of the effective date 
of the new registration statement or 180 days after the third 
anniversary of the initial effective date of the prior registration 
statement; and
    (B) A continuous offering of securities covered by the prior 
registration statement that commenced within three years of the initial 
effective date may continue until the effective date of the new 
registration statement if such offering is permitted under the new 
registration statement.
    (6) Prior to the end of the three-year period described in 
paragraph (a)(5) of this section, an issuer may file a new registration 
statement covering securities described in such paragraph (a)(5) of 
this section, which may, if permitted, be an automatic shelf 
registration statement. The new registration statement and prospectus 
included therein must include all the information that would be 
required at that time in a prospectus relating to all offering(s) that 
it covers. Prior to the effective date of the new registration 
statement (including at the time of filing in the case of an automatic 
shelf registration statement), the issuer may include on such new 
registration statement any unsold securities covered by the earlier 
registration statement by identifying on the bottom of the facing page 
of the new registration statement or latest amendment thereto the 
amount of such unsold securities being included and any filing fee paid 
in connection with such unsold securities, which will continue to be 
applied to such unsold securities. The offering of securities on the 
earlier registration statement will be deemed terminated as of the date 
of effectiveness of the new registration statement.
* * * * *
0
31. Amend Sec.  230.418 as follows:
0
a. Revise the introductory text of paragraph (a)(3);
0
b. Remove the word ``and'' at the end of paragraph (a)(6);
0
c. Remove the period at the end of the paragraph (a)(7) and in its 
place add ``; and'';
0
d. Add paragraph (a)(8); and
0
e. Revise the introductory text of paragraph (b).
    The addition and revisions read as follows:


Sec.  230.418  Supplemental information.

    (a) * * *
    (3) Except in the case of a registrant eligible to use Form S-3 
(Sec.  239.13 of this chapter), any engineering, management or similar 
reports or memoranda relating to broad aspects of the business, 
operations or products of the registrant, which have been prepared 
within the past twelve months for or by the registrant and any 
affiliate of the registrant or any principal underwriter, as defined in 
Rule 405 (Sec.  230.405), of the securities being registered except 
for:
* * * * *
    (8) Any free writing prospectuses used in connection with the 
offering.
    (b) Supplemental information described in paragraph (a) of this 
section shall not be required to be filed with or deemed part of and 
included in the registration statement, unless otherwise required. The 
information shall be returned to the registrant upon request, provided 
that:
* * * * *

0
32. Amend Sec.  230.424 as follows:
0
a. Revise the introductory text of paragraph (b);

[[Page 44813]]

0
b. Revise paragraph (b)(2);
0
c. Revise paragraph (b)(7);
0
d. Add paragraph (b)(8) before the Instruction 1;
0
e. Remove Instruction 2;
0
f. Revise the heading to ``Instruction 1'' to read ``Instruction;'' and
0
g. Add paragraph (g).
    The additions and revisions read as follows:


Sec.  230.424  Filing of prospectuses, number of copies.

* * * * *
    (b) Ten copies of each form of prospectus purporting to comply with 
section 10 of the Act, except for documents constituting a prospectus 
pursuant to Rule 428(a) (Sec.  230.428(a)) or free writing prospectuses 
pursuant to Rule 164 and Rule 433 (Sec.  230.164 and Sec.  230.433), 
shall be filed with the Commission in the form in which it is used 
after the effectiveness of the registration statement and identified as 
required by paragraph (e) of this section; provided, however, that only 
a form of prospectus that contains substantive changes from or 
additions to a previously filed prospectus is required to be filed; 
Provided, further, that this paragraph (b) shall not apply in respect 
of a form of prospectus contained in a registration statement and 
relating solely to securities offered at competitive bidding, which 
prospectus is intended for use prior to the opening of bids. Ten copies 
of the form of prospectus shall be filed or transmitted for filing as 
follows:
* * * * *
    (2) A form of prospectus that is used in connection with a primary 
offering of securities pursuant to Rule 415(a)(1)(x) (Sec.  
230.415(a)(1)(x)) or a primary offering of securities registered for 
issuance on a delayed basis pursuant to Rule 415(a)(1)(vii) or (viii) 
(Sec.  230.415(a)(1)(vii) or (viii)) and that, in the case of Rule 
415(a)(1)(viii) discloses the public offering price, description of 
securities or similar matters, and in the case of Rule 415(a)(1)(vii) 
and (x) discloses information previously omitted from the prospectus 
filed as part of an effective registration statement in reliance on 
Rule 430B (Sec.  230.430B), shall be filed with the Commission no later 
than the second business day following the earlier of the date of the 
determination of the offering price or the date it is first used after 
effectiveness in connection with a public offering or sales, or 
transmitted by a means reasonably calculated to result in filing with 
the Commission by that date.
* * * * *
    (7) A form of prospectus that identifies selling security holders 
and the amounts to be sold by them that was previously omitted from the 
registration statement and the prospectus in reliance upon Rule 430B 
(Sec.  230.430B) shall be filed with the Commission no later than the 
second business day following the earlier of the date of sale or the 
date of first use or transmitted by a means reasonably calculated to 
result in filing with the Commission by that date.
    (8) A form of prospectus otherwise required to be filed pursuant to 
paragraph (b) of this section that is not filed within the time frames 
specified in paragraph (b) of this section must be filed pursuant to 
this paragraph as soon as practicable after the discovery of such 
failure to file.


    Note to paragraph (b)(8) of Rule 424. A form of prospectus 
required to be filed pursuant to another paragraph of Rule 424(b) 
that is filed under Rule 424(b)(8) shall nonetheless be ``required 
to be filed'' under such other paragraph.

* * * * *
    (g) A form of prospectus filed pursuant to this section that 
operates to reflect the payment of filing fees for an offering or 
offerings pursuant to Rule 456(b) (Sec.  230.456(b)) must include on 
its cover page the calculation of registration fee table reflecting the 
payment of such filing fees for the securities that are the subject of 
the payment.
0
33. Amend Sec.  230.426 by adding paragraph (c)(8) to read as follows:


Sec.  230.426  Filing of certain prospectuses under Sec.  230.167 in 
connection with certain offerings of asset-backed securities.

* * * * *
    (c) * * *
    (8) Any free writing prospectus used in reliance on Rule 164 and 
Rule 433 (Sec.  230.164 and Sec.  230.433).
* * * * *

0
34. Amend Sec.  230.430A to add paragraph (f) immediately preceding the 
note to read as follows:


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

* * * * *
    (f) This section may apply to registration statements that are 
immediately effective pursuant to Rule 462(e) and (f) (Sec.  230.462(e) 
and (f)).

0
35. Add Sec.  230.430B to read as follows:


Sec.  230.430B  Prospectus in a registration statement after effective 
date.

    (a) A form of prospectus filed as part of a registration statement 
for offerings pursuant to Rule 415(a)(1)(vii) or (a)(1)(x) (Sec.  
230.415(a)(1)(vii) or (a)(1)(x)) may omit from the information required 
by the form to be in the prospectus information that is unknown or not 
reasonably available to the issuer pursuant to Rule 409 (Sec.  
230.409). In addition, a form of prospectus filed as part of an 
automatic shelf registration statement for offerings pursuant to Rule 
415(a) (Sec.  230.415(a)), other than Rule 415(a)(1)(vii) or (viii), 
also may omit information as to whether the offering is a primary 
offering or an offering on behalf of persons other than the issuer, or 
a combination thereof, the plan of distribution for the securities, a 
description of the securities registered other than an identification 
of the name or class of such securities, and the identification of 
other issuers. Each such form of prospectus shall be deemed to have 
been filed as part of the registration statement for the purpose of 
section 7 of the Act.
    (b) A form of prospectus filed as part of a registration statement 
for offerings pursuant to Rule 415(a)(1)(i) by an issuer eligible to 
use Form S-3 or Form F-3 (Sec.  239.13 or Sec.  239.33 of this chapter) 
for primary offerings pursuant to General Instruction I.B.1 of such 
forms, may omit the information specified in paragraph (a) of this 
section, and may also omit the identities of selling security holders 
and amounts of securities to be registered on their behalf if:
    (1) The registration statement is an automatic shelf registration 
statement as defined in Rule 405 (Sec.  230.405); or
    (2) All of the following conditions are satisfied:
    (i) The initial offering transaction of the securities (or 
securities convertible into such securities) the resale of which are 
being registered on behalf of each of the selling security holders, was 
completed;
    (ii) The securities (or securities convertible into such 
securities) were issued and outstanding prior to the original date of 
filing the registration statement covering the resale of the 
securities;
    (iii) The registration statement refers to any unnamed selling 
security holders in a generic manner by identifying the initial 
offering transaction in which the securities were sold; and
    (iv) The issuer is not and during the past three years neither the 
issuer nor any of its predecessors was:
    (A) A blank check company as defined in Rule 419(a)(2) (Sec.  
230.419(a)(2));
    (B) A shell company, other than a business combination related 
shell company, each as defined in Rule 405; or
    (C) An issuer in an offering of penny stock as defined in Rule 
3a51-1 of the

[[Page 44814]]

Securities Exchange Act of 1934 (Sec.  240.3a51-1 of this chapter).
    (c) A form of prospectus that is part of a registration statement 
that omits information in reliance upon paragraph (a) or (b) of this 
section meets the requirements of section 10 of the Act for the purpose 
of section 5(b)(1) thereof. This provision shall not limit the 
information required to be contained in a form of prospectus in order 
to meet the requirements of section 10(a) of the Act for the purposes 
of section 5(b)(2) thereof or exception (a) of section 2(a)(10) 
thereof.
    (d) Information omitted from a form of prospectus that is part of 
an effective registration statement in reliance on paragraph (a) or (b) 
of this section may be included subsequently in the prospectus that is 
part of a registration statement by:
    (1) A post-effective amendment to the registration statement;
    (2) A prospectus filed pursuant to Rule 424(b) (Sec.  230.424(b)); 
or
    (3) If the applicable form permits, including the information in 
the issuer's periodic or current reports filed pursuant to section 13 
or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 
78o(d)) that are incorporated or deemed incorporated by reference into 
the prospectus that is part of the registration statement in accordance 
with applicable requirements, subject to the provisions of paragraph 
(h) of this section.
    (e) Information omitted from a form of prospectus that is part of 
an effective registration statement in reliance on paragraph (a) or (b) 
of this section and contained in a form of prospectus required to be 
filed with the Commission pursuant to Rule 424(b), other than as 
provided in paragraph (f) of this section, shall be deemed part of and 
included in the registration statement as of the date such form of 
filed prospectus is first used after effectiveness.
    (f)(1) Information omitted from a form of prospectus that is part 
of an effective registration statement in reliance on paragraph (a) or 
(b) of this section and is contained in a form of prospectus required 
to be filed with the Commission pursuant to Rule 424(b)(2), (b)(5), or 
(b)(7), shall be deemed to be part of and included in the registration 
statement on the earlier of the date such subsequent form of prospectus 
is first used or the date and time of the first contract of sale of 
securities in the offering to which such subsequent form of prospectus 
relates.
    (2) The date on which a form of prospectus is deemed to be part of 
and included in the registration statement pursuant to paragraph (f)(1) 
of this section shall be deemed, for purposes of liability under 
section 11 of the Act of the issuer and any underwriter at the time 
only, to be a new effective date of the part of such registration 
statement relating to the securities to which such form of prospectus 
relates, such part of the registration statement consisting of all 
information included in the registration statement and any prospectus 
relating to the offering of such securities (including information 
relating to the offering in a prospectus already included in the 
registration statement) as of such date and all information relating to 
the offering included in reports and materials incorporated by 
reference into such registration statement and prospectus as of such 
date, and in each case not modified or superseded pursuant to Rule 412 
(Sec.  230.412). The offering of such securities at that time shall be 
deemed to be the initial bona fide offering thereof.
    (3) If a registration statement is amended to include or is deemed 
to include, through incorporation by reference or otherwise, except as 
otherwise provided in Rule 436 (Sec.  230.436), a report or opinion of 
any person made on such person's authority as an expert whose consent 
would be required under section 7 of the Act because of being named as 
having prepared or certified part of the registration statement, then 
for purposes of this section and for liability purposes under section 
11 of the Act, the part of the registration statement for which 
liability against such person is asserted shall be considered as having 
become effective with respect to such person as of the time the report 
or opinion is deemed to be part of the registration statement and a 
consent required pursuant to section 7 of the Act has been provided as 
contemplated by section 11 of the Act.
    (4) Except for an effective date resulting from the filing of a 
form of prospectus filed for purposes of including information required 
by section 10(a)(3) of the Act or pursuant to Item 512(a)(1)(ii) of 
Regulation S-K or Regulation S-B (Sec.  229.512(a)(1)(ii) or Sec.  
228.512(a)(1)(ii) of this chapter), the date a form of prospectus is 
deemed part of and included in the registration statement pursuant to 
this paragraph shall not be an effective date established pursuant to 
paragraph (f)(2) of this section as to:
    (i) Any director (or person acting in such capacity) of the issuer;
    (ii) Any person signing any report or document incorporated by 
reference into the registration statement, except for such a report or 
document incorporated by reference for purposes of including 
information required by section 10(a)(3) of the Act or pursuant to Item 
512(a)(1)(ii) of Regulation S-K or Regulation S-B (such person except 
for such reports being deemed not to be a person who signed the 
registration statement within the meaning of section 11(a) of the Act).
    (5) The date a form of prospectus is deemed part of and included in 
the registration statement pursuant to paragraph (f)(2) of this section 
shall not be an effective date established pursuant to paragraph (f)(2) 
of this section as to:
    (i) Any accountant with respect to financial statements or other 
financial information contained in the registration statement as of a 
prior effective date and for which the accountant previously provided a 
consent to be named as required by section 7 of the Act, unless the 
form of prospectus contains new audited financial statements or other 
financial information as to which the accountant is an expert and for 
which a new consent is required pursuant to section 7 of the Act or 
Rule 436; and
    (ii) Any other person whose report or opinion as an expert or 
counsel has, with their consent, previously been included in the 
registration statement as of a prior effective date, unless the form of 
prospectus contains a new report or opinion for which a new consent is 
required pursuant to section 7 of the Act or Rule 436.
    (g) Notwithstanding paragraph (e) or (f) of this section or 
paragraph (a) of Rule 412, no statement made in a registration 
statement or prospectus that is part of the registration statement or 
made in a document incorporated or deemed incorporated by reference 
into the registration statement or prospectus that is part of the 
registration statement after the effective date of such registration 
statement or portion thereof in respect of an offering determined 
pursuant to this section will, as to a purchaser with a time of 
contract of sale prior to such effective date, supersede or modify any 
statement that was made in the registration statement or prospectus 
that was part of the registration statement or made in any such 
document immediately prior to such effective date.
    (h) Where a form of prospectus filed pursuant to Rule 424(b) 
relating to an offering does not include disclosure of omitted 
information regarding the terms of the offering, the securities, or the 
plan of distribution, or selling security holders for the securities 
that are the subject of the form of prospectus, because such omitted 
information has

[[Page 44815]]

been included in periodic or current reports filed pursuant to section 
13 or 15(d) of the Securities Exchange Act of 1934 incorporated or 
deemed incorporated by reference into the prospectus, the issuer shall 
file a form of prospectus identifying the periodic or current reports 
that are incorporated or deemed incorporated by reference into the 
prospectus that is part of the registration statement that contain such 
omitted information. Such form of prospectus shall be required to be 
filed, depending on the nature of the incorporated information, 
pursuant to Rule 424(b)(2), (b)(5), or (b)(7).
    (i) Issuers relying on this section shall furnish the undertakings 
required by Item 512(a) of Regulation S-K or Item 512(a) or (g) of 
Regulation S-B.

    Note to Rule 430B: The provisions of paragraph (b) of Rule 401 
(Sec.  230.401(b)) shall apply to any prospectus filed for purposes 
of including information required by section 10(a)(3) of the Act.


0
36. Add Sec.  230.430C to read as follows:


Sec.  230.430C  Prospectus in a registration statement pertaining to an 
offering other than pursuant to Rule 430A or Rule 430B after the 
effective date.

    (a) In offerings made other than in reliance on Rule 430B (Sec.  
230.430B) and other than for prospectuses filed in reliance on Rule 
430A (Sec.  230.430A), information contained in a form of prospectus 
required to be filed with the Commission pursuant to Rule 424(b) (Sec.  
230.424(b)) or Rule 497(b), (c), (d), or (e) (Sec.  230.497(b), (c), 
(d) or (e)), shall be deemed to be part of and included in the 
registration statement on the date it is first used after 
effectiveness.
    (b) Notwithstanding paragraph (a) of this section or paragraph (a) 
of Rule 412 (Sec.  230.412), no statement made in a registration 
statement or prospectus that is part of the registration statement or 
made in a document incorporated or deemed incorporated by reference 
into the registration statement or prospectus that is part of the 
registration statement will, as to a purchaser with a time of contract 
of sale prior to such first use, supersede or modify any statement that 
was made in the registration statement or prospectus that was part of 
the registration statement or made in any such document immediately 
prior to such date of first use.
    (c) Nothing in this section shall affect the information required 
to be included in an issuer's registration statement and prospectus.
    (d) Issuers subject to paragraph (a) of this section shall furnish 
the undertakings required by Item 512(a) of Regulation S-K (Sec.  
229.512(a) of this chapter), Item 512(a) and (g) of Regulation S-B 
(Sec.  229.512(a) and (g) of this chapter), or Item 34.4 of Form N-2 
(Sec. Sec.  239.14 and 274.11a-1 of this chapter), as applicable.

0
37. Add Sec.  230.433 to read as follows:


Sec.  230.433  Conditions to permissible post-filing free writing 
prospectuses.

    (a) Scope of section. This section applies to any free writing 
prospectus with respect to securities of any issuer (except as set 
forth in Rule 164 (Sec.  230.164)) that are the subject of a 
registration statement that has been filed under the Act. Such a free 
writing prospectus that satisfies the conditions of this section may 
include information the substance of which is not included in the 
registration statement. Such a free writing prospectus that satisfies 
the conditions of this section will be a prospectus permitted under 
section 10(b) of the Act for purposes of sections 2(a)(10), 5(b)(1), 
and 5(b)(2) of the Act and will, for purposes of considering it a 
prospectus, be deemed to be public, without regard to its method of use 
or distribution, because it is related to the public offering of 
securities that are the subject of a filed registration statement.
    (b) Permitted use of free writing prospectus. Subject to the 
conditions of this paragraph (b) and satisfaction of the conditions set 
forth in paragraphs (c) through (g) of this section, a free writing 
prospectus may be used under this section and Rule 164 in connection 
with a registered offering of securities:
    (1) Eligibility and prospectus conditions for seasoned issuers and 
well-known seasoned issuers. Subject to the provisions of Rule 164(e), 
(f), and (g), the issuer or any other offering participant may use a 
free writing prospectus in the following offerings after a registration 
statement relating to the offering has been filed that includes a 
prospectus that, other than by reason of this section or Rule 431, 
satisfies the requirements of section 10 of the Act:
    (i) Offerings of securities registered on Form S-3 (Sec.  239.33 of 
this chapter) pursuant to General Instruction I.B.1, I.B.2, I.B.5, 
I.C., or I.D. thereof;
    (ii) Offerings of securities registered on Form F-3 (Sec.  239.13 
of this chapter) pursuant to General Instruction I.A.5, I.B.1, I.B.2, 
or I.C. thereof;
    (iii) Any other offering not excluded from reliance on this section 
and Rule 164 of securities of a well-known seasoned issuer; and
    (iv) Any other offering not excluded from reliance on this section 
and Rule 164 of securities of an issuer eligible to use Form S-3 or 
Form F-3 for primary offerings pursuant to General Instruction I.B.1 of 
such Forms.
    (2) Eligibility and prospectus conditions for non-reporting and 
unseasoned issuers. If the issuer does not fall within the provisions 
of paragraph (b)(1) of this section, then, subject to the provisions of 
Rule 164(e), (f), and (g), any person participating in the offer or 
sale of the securities may use a free writing prospectus as follows:
    (i) If the free writing prospectus is or was prepared by or on 
behalf of or used or referred to by an issuer or any other offering 
participant, if consideration has been or will be given by the issuer 
or other offering participant for the dissemination (in any format) of 
any free writing prospectus (including any published article, 
publication, or advertisement), or if section 17(b) of the Act requires 
disclosure that consideration has been or will be given by the issuer 
or other offering participant for any activity described therein in 
connection with the free writing prospectus, then a registration 
statement relating to the offering must have been filed that includes a 
prospectus that, other than by reason of this section or Rule 431, 
satisfies the requirements of section 10 of the Act, including a price 
range where required by rule, and the free writing prospectus shall be 
accompanied or preceded by the most recent such prospectus; provided, 
however, that use of the free writing prospectus is not conditioned on 
providing the most recent such prospectus if a prior such prospectus 
has been provided and there is no material change from the prior 
prospectus reflected in the most recent prospectus; provided further, 
that after effectiveness and availability of a final prospectus meeting 
the requirements of section 10(a) of the Act, no such earlier 
prospectus may be provided in satisfaction of this condition, and such 
final prospectus must precede or accompany any free writing prospectus 
provided after such availability, whether or not an earlier prospectus 
had been previously provided.


    Notes to paragraph (b)(2)(i) of Rule 433. 
    1. The condition that a free writing prospectus shall be 
accompanied or preceded by the most recent prospectus satisfying the 
requirements of section 10 of the Act would be satisfied if a free 
writing prospectus that is an electronic communication contained an 
active hyperlink to such most recent prospectus; and
    2. A communication for which disclosure would be required under 
section 17(b) of the Act as a result of consideration given or to be 
given, directly or indirectly, by or on behalf of an issuer or other 
offering participant is an offer by the issuer or such other 
offering participant as the case may be and is, if written, a free 
writing prospectus of the issuer or other offering participant.



[[Page 44816]]


    (ii) Where paragraph (b)(2)(i) of this section does not apply, a 
registration statement relating to the offering has been filed that 
includes a prospectus that, other than by reason of this section or 
Rule 431 satisfies the requirements of section 10 of the Act, including 
a price range where required by rule.
    (3) Successors. A successor issuer will be considered to satisfy 
the applicable provisions of this paragraph (b) if:
    (i) Its predecessor and it, taken together, satisfy the conditions, 
provided that the succession was primarily for the purpose of changing 
the state or other jurisdiction of incorporation of the predecessor or 
forming a holding company and the assets and liabilities of the 
successor at the time of succession were substantially the same as 
those of the predecessor; or
    (ii) All predecessors met the conditions at the time of succession 
and the issuer has continued to do so since the succession.
    (c) Information in a free writing prospectus. (1) A free writing 
prospectus used in reliance on this section may include information the 
substance of which is not included in the registration statement but 
such information shall not conflict with:
    (i) Information contained in the filed registration statement, 
including any prospectus or prospectus supplement that is part of the 
registration statement (including pursuant to Rule 430B or Rule 430C) 
(Sec.  230.430B or Sec.  230.430C) and not superseded or modified; or
    (ii) Information contained in the issuer's periodic and current 
reports filed or furnished to the Commission pursuant to section 13 or 
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) 
that are incorporated by reference into the registration statement and 
not superseded or modified.
    (2)(i) A free writing prospectus used in reliance on this section 
shall contain substantially the following legend:


    The issuer has filed a registration statement (including a 
prospectus) with the SEC for the offering to which this 
communication relates. Before you invest, you should read the 
prospectus in that registration statement and other documents the 
issuer has filed with the SEC for more complete information about 
the issuer and this offering. You may get these documents for free 
by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, 
the issuer, any underwriter or any dealer participating in the 
offering will arrange to send you the prospectus if you request it 
by calling toll-free 1-8[xx-xxx-xxxx].

    (ii) The legend also may provide an e-mail address at which the 
documents can be requested and may indicate that the documents also are 
available by accessing the issuer's Web site and provide the Internet 
address and the particular location of the documents on the Web site.
    (d) Filing conditions. (1) Except as provided in paragraphs (d)(3), 
(d)(4), (d)(5), (d)(6), (d)(7), (d)(8), and (f) of this section, the 
following shall be filed with the Commission under this section by a 
means reasonably calculated to result in filing no later than the date 
of first use. The free writing prospectus filed for purposes of this 
section will not be filed as part of the registration statement:
    (i) The issuer shall file:
    (A) Any issuer free writing prospectus, as defined in paragraph (h) 
of this section;
    (B) Any issuer information that is contained in a free writing 
prospectus prepared by or on behalf of or used by any other offering 
participant (but not information prepared by or on behalf of a person 
other than the issuer on the basis of or derived from that issuer 
information); and
    (C) A description of the final terms of the issuer's securities in 
the offering or of the offering contained in a free writing prospectus 
or portion thereof prepared by or on behalf of the issuer or any 
offering participant, after such terms have been established for all 
classes in the offering; and
    (ii) Any offering participant, other than the issuer, shall file 
any free writing prospectus that is used or referred to by such 
offering participant and distributed by or on behalf of such person in 
a manner reasonably designed to lead to its broad unrestricted 
dissemination.
    (2) Each free writing prospectus or issuer information contained in 
a free writing prospectus filed under this section shall identify in 
the filing 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.
    (3) The condition to file a free writing prospectus under paragraph 
(d)(1) of this section shall not apply if the free writing prospectus 
does not contain substantive changes from or additions to a free 
writing prospectus previously filed with the Commission.
    (4) The condition to file issuer information contained in a free 
writing prospectus of an offering participant other than the issuer 
shall not apply if such information is included (including through 
incorporation by reference) in a prospectus or free writing prospectus 
previously filed that relates to the offering.
    (5) Notwithstanding the provisions of paragraph (d)(1) of this 
section:
    (i) To the extent a free writing prospectus or portion thereof 
otherwise required to be filed contains a description of terms of the 
issuer's securities in the offering or of the offering that does not 
reflect the final terms, such free writing prospectus or portion 
thereof is not required to be filed; and
    (ii) A free writing prospectus or portion thereof that contains 
only a description of the final terms of the issuer's securities in the 
offering or of the offerings shall be filed by the issuer within two 
days of the later of the date such final terms have been established 
for all classes of the offering and the date of first use.
    (6)(i) Notwithstanding the provisions of paragraph (d) of this 
section, in an offering of asset-backed securities, a free writing 
prospectus or portion thereof required to be filed that contains only 
ABS informational and computational materials as defined in Item 
1101(a) of Regulation AB (Sec.  229.1101 of this chapter), may be filed 
under this section within the timeframe permitted by Rule 426(b) (Sec.  
230.426(b)) and such filing will satisfy the filing conditions under 
this section.
    (ii) In the event that a free writing prospectus is used in 
reliance on this section and Rule 164 and the conditions of this 
section and Rule 164 (which may include the conditions of paragraph 
(d)(6)(i) of this section) are satisfied with respect thereto, then the 
use of that free writing prospectus shall not be conditioned on 
satisfaction of the provisions, including without limitation the filing 
conditions, of Rule 167 and Rule 426 (Sec.  230.167 and Sec.  230.426). 
In the event that ABS informational and computational materials are 
used in reliance on Rule 167 and Rule 426 and the conditions of those 
rules are satisfied with respect thereto, then the use of those 
materials shall not be conditioned on the satisfaction of the 
conditions of Rule 164 and this section.
    (iii) If a free writing prospectus used in an offering of asset-
backed securities in reliance on this section and Rule 164 includes the 
specific address of or a hyperlink to an Internet Web site containing 
static pool information and is filed in accordance with this paragraph 
(d), the static pool information relating to the asset-backed 
securities offering at that specific address is included in the free 
writing prospectus, and the filing including such address or hyperlink 
satisfies the filing conditions under this section.
    (7) The condition to file a free writing prospectus or issuer 
information

[[Page 44817]]

pursuant to this paragraph (d) for a free writing prospectus used at 
the same time as a communication in a business combination transaction 
subject to Rule 425 (Sec.  230.425) shall be satisfied if:
    (i) The free writing prospectus or issuer information is filed in 
accordance with the provisions of Rule 425, including the filing 
timeframe of Rule 425;
    (ii) The filed material pursuant to Rule 425 indicates on the cover 
page that it also is being filed pursuant to Rule 433; and
    (iii) The filed material pursuant to Rule 425 contains the 
information specified in paragraph (c)(2) of this section.
    (8) Notwithstanding any other provision of this paragraph (d):
    (i) A road show for an offering that is a written communication is 
a free writing prospectus, provided that, except as provided in 
paragraph (d)(8)(ii) of this section, a written communication that is a 
road show shall not be required to be filed; and
    (ii) In the case of a road show that is a written communication for 
an offering of common equity or convertible equity securities by an 
issuer that is, at the time of the filing of the registration statement 
for the offering, not required to file reports with the Commission 
pursuant to section 13 or section 15(d) of the Securities Exchange Act 
of 1934, such a road show is required to be filed pursuant to this 
section unless the issuer of the securities makes at least one version 
of a bona fide electronic road show available without restriction by 
means of graphic communication to any person, including any potential 
investor in the securities (and if there is more than one version of a 
road show for the offering that is a written communication, the version 
available without restriction is made available no later than the other 
versions).


    Note to paragraph (d)(8): A communication that is provided or 
transmitted simultaneously with a road show and is provided or 
transmitted in a manner designed to make the communication available 
only as part of the road show and not separately is deemed to be 
part of the road show. Therefore, if the road show is not a written 
communication, such a simultaneous communication (even if it would 
otherwise be a graphic communication or other written communication) 
is also deemed not to be written. If the road show is written and 
not required to be filed, such a simultaneous communication is also 
not required to be filed. Otherwise, a written communication that is 
an offer contained in a separate file from a road show, whether or 
not the road show is a written communication, or otherwise 
transmitted separately from a road show, will be a free writing 
prospectus subject to any applicable filing conditions of paragraph 
(d) of this section.

    (e) Treatment of information on, or hyperlinked from, an issuer's 
Web site.
    (1) An offer of an issuer's securities that is contained on an 
issuer's Web site or hyperlinked by the issuer from the issuer's Web 
site to a third party's Web site is a written offer of such securities 
by the issuer and, unless otherwise exempt or excluded from the 
requirements of section 5(b)(1) of the Act, the filing conditions of 
paragraph (d) of this section apply to such offer.
    (2) Notwithstanding paragraph (e)(1) of this section, historical 
issuer information that is identified as such and located in a separate 
section of the issuer's Web site containing historical issuer 
information, that has not been incorporated by reference into or 
otherwise included in a prospectus of the issuer for the offering and 
that has not otherwise been used or referred to in connection with the 
offering, will not be considered a current offer of the issuer's 
securities and therefore will not be a free writing prospectus.
    (f) Free writing prospectuses published or distributed by media. 
Any written offer for which an issuer or any other offering participant 
or any person acting on its behalf provided, authorized, or approved 
information that is prepared and published or disseminated by a person 
unaffiliated with the issuer or any other offering participant that is 
in the business of publishing, radio or television broadcasting or 
otherwise disseminating written communications would be considered at 
the time of publication or dissemination to be a free writing 
prospectus prepared by or on behalf of the issuer or such other 
offering participant for purposes of this section subject to the 
following:
    (1) The conditions of paragraph (b)(2)(i) of this section will not 
apply and the conditions of paragraphs (c)(2) and (d) of this section 
will be deemed to be satisfied if:
    (i) No payment is made or consideration given by or on behalf of 
the issuer or other offering participant for the written communication 
or its dissemination; and
    (ii) The issuer or other offering participant in question files the 
written communication with the Commission, and includes in the filing 
the legend required by paragraph (c)(2) of this section, within four 
business days after the issuer or other offering participant becomes 
aware of the publication, radio or television broadcast, or other 
dissemination of the written communication.
    (2) The filing obligation under paragraph (f)(1)(ii) of this 
section shall be subject to the following:
    (i) The issuer or other offering participant shall not be required 
to file a free writing prospectus if the substance of that free writing 
prospectus has previously been filed with the Commission;
    (ii) Any filing made pursuant to paragraph (f)(1)(ii) of this 
section may include information that the issuer or offering participant 
in question reasonably believes is necessary or appropriate to correct 
information included in the communication; and
    (iii) In lieu of filing the actual written communication as 
published or disseminated as required by paragraph (f)(1)(ii) of this 
section, the issuer or offering participant in question may file a copy 
of the materials provided to the media, including transcripts of 
interviews or similar materials, provided the copy or transcripts 
contain all the information provided to the media.
    (3) For purposes of this paragraph (f) of this section, an issuer 
that is in the business of publishing or radio or television 
broadcasting may rely on this paragraph (f) as to any publication or 
radio or television broadcast that is a free writing prospectus in 
respect of an offering of securities of the issuer if the issuer or an 
affiliate:
    (i) Is the publisher of a bona fide newspaper, magazine, or 
business or financial publication of general and regular circulation or 
bona fide broadcaster of news including business and financial news;
    (ii) Has established policies and procedures for the independence 
of the content of the publications or broadcasts from the offering 
activities of the issuer; and
    (iii) Publishes or broadcasts the communication in the ordinary 
course.
    (g) Record retention. Issuers and offering participants shall 
retain all free writing prospectuses they have used, and that have not 
been filed pursuant to paragraph (d) or (f) of this section, for 3 
years following the initial bona fide offering of the securities in 
question.


    Note to paragraph (g) of Sec.  230.433. To the extent that the 
record retention requirements of Rule 17a-4 of the Securities 
Exchange Act of 1934 (Sec.  240.17a-4 of this chapter) apply to free 
writing prospectuses required to be retained by a broker-dealer 
under this section, such free writing prospectuses are required to 
be retained in accordance with such requirements.


    (h) Definitions. For purposes of this section:
    (1) An issuer free writing prospectus means a free writing 
prospectus

[[Page 44818]]

prepared by or on behalf of the issuer or used or referred to by the 
issuer and, in the case of an asset-backed issuer, prepared by or on 
behalf of a depositor, sponsor, or servicer (as defined in Item 1101 of 
Regulation AB) or affiliated depositor or used or referred to by any 
such person.
    (2) Issuer information means material information about the issuer 
or its securities that has been provided by or on behalf of the issuer.
    (3) A written communication or information is prepared or provided 
by or on behalf of a person if the person or an agent or representative 
of the person authorizes the communication or information or approves 
the communication or information before it is used. An offering 
participant other than the issuer shall not be an agent or 
representative of the issuer solely by virtue of its acting as an 
offering participant.
    (4) A road show means an offer (other than a statutory prospectus 
or a portion of a statutory prospectus filed as part of a registration 
statement) that contains a presentation regarding an offering by one or 
more members of the issuer's management (and in the case of an offering 
of asset-backed securities, management involved in the securitization 
or servicing function of one or more of the depositors, sponsors, or 
servicers (as such terms are defined in Item 1101 of Regulation AB) or 
an affiliated depositor) and includes discussion of one or more of the 
issuer, such management, and the securities being offered; and
    (5) A bona fide electronic road show means a road show that is a 
written communication transmitted by graphic means that contains a 
presentation by one or more officers of an issuer or other persons in 
an issuer's management (and in the case of an offering of asset-backed 
securities, management involved in the securitization or servicing 
function of one or more of the depositors, sponsors, or servicers (as 
such terms are defined in Item 1101 of Regulation AB) or an affiliated 
depositor) and, if more than one road show that is a written 
communication is being used, includes discussion of the same general 
areas of information regarding the issuer, such management, and the 
securities being offered as such other issuer road show or shows for 
the same offering that are written communications.


    Note to Sec.  230.433. This section does not affect the 
operation of the provisions of clause (a) of section 2(a)(10) of the 
Act providing an exception from the definition of ``prospectus.''

Sec.  230.434  [Removed]

0
38. Remove Sec.  230.434.
0
39. Amend Sec.  230.439 by revising paragraph (b) to read as follows:


Sec.  230.439  Consent to use of material incorporated by reference.

* * * * *
    (b) Notwithstanding paragraph (a) of this section, any required 
consent may be incorporated by reference into a registration statement 
filed pursuant to Rule 462(b) (Sec.  230.462(b)) or a post-effective 
amendment filed pursuant to Rule 462(e) (Sec.  230.462(e)) from a 
previously filed registration statement relating to that offering, 
provided that the consent contained in the previously filed 
registration statement expressly provides for such incorporation.

0
40. Amend Sec.  230.456 as follows:
0
a. Revise the section heading;
0
b. Designate the current text as paragraph (a); and
0
c. Add paragraph (b).
    The revisions and additions read as follows:


Sec.  230.456  Date of filing; timing of fee payment.

* * * * *
    (b)(1) Notwithstanding paragraph (a) of this section, a well-known 
seasoned issuer that registers securities offerings on an automatic 
shelf registration statement, or registers additional securities or 
classes of securities thereon pursuant to Rule 413(b) (Sec.  
230.413(b)), may, but is not required to, defer payment of all or any 
part of the registration fee to the Commission required by section 
6(b)(2) of the Act on the following conditions:
    (i) If the issuer elects to defer payment of the registration fee, 
it shall pay the registration fees (pay-as-you-go registration fees) 
calculated in accordance with Rule 457(r) (Sec.  230.457(r)) in advance 
of or in connection with an offering of securities from the 
registration statement within the time required to file the prospectus 
supplement pursuant to Rule 424(b) (Sec.  230.424(b)) for the offering, 
provided, however, that if the issuer fails, after a good faith effort 
to pay the filing fee within the time required by this section, the 
issuer may still be considered to have paid the fee in a timely manner 
if it is paid within four business days of its original due date; and
    (ii) The issuer reflects the amount of the pay-as-you-go 
registration fee paid or to be paid in accordance with paragraph 
(b)(1)(i) of this section by updating the ``Calculation of Registration 
Fee'' table to indicate the class and aggregate offering price of 
securities offered and the amount of registration fee paid or to be 
paid in connection with the offering or offerings either in a post-
effective amendment filed at the time of the fee payment or on the 
cover page of a prospectus filed pursuant to Rule 424(b) (Sec.  
230.424(b)).
    (2) A registration statement filed relying on the pay-as-you-go 
registration fee payment provisions of paragraph (b)(1) of this section 
will be considered filed as to the securities or classes of securities 
identified in the registration statement for purposes of this section 
and section 5 of the Act when it is received by the Commission, if it 
complies with all other requirements of the Act and the rules with 
respect to it.
    (3) The securities sold pursuant to a registration statement will 
be considered registered, for purposes of section 6(a) of the Act, if 
the pay-as-you-go registration fee has been paid and the post-effective 
amendment or prospectus including the amended ``Calculation of 
Registration Fee'' table is filed pursuant to paragraph (b)(1) of this 
section.

0
41. Amend Sec.  230.457 by adding paragraph (r) to read as follows:


Sec.  230.457  Computation of fee.

* * * * *
    (r) Where securities are to be offered pursuant to an automatic 
shelf registration statement, the registration fee is to be calculated 
in accordance with this section. When the issuer elects to defer 
payment of the fees pursuant to Rule 456(b) (Sec.  230.456(b)), the 
``Calculation of Registration Fee'' table in the registration statement 
must indicate that the issuer is relying on Rule 456(b) but does not 
need to include the number of shares or units of securities or the 
maximum aggregate offering price of any securities until the issuer 
updates the ``Calculation of Registration Fee'' table to reflect 
payment of the registration fee, including a pay-as-you-go registration 
fee in accordance with Rule 456(b). The registration fee shall be 
calculated based on the fee payment rate in effect on the date of the 
fee payment.

0
42. Amend Sec.  230.462 by adding paragraphs (e) and (f) to read as 
follows:


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

* * * * *
    (e) An automatic shelf registration statement, including an 
automatic shelf registration statement filed in accordance with Rule 
415(a)(6) (Sec.  230.415(a)(6)), and any post-effective amendment 
thereto, including a post-effective amendment filed to register 
additional classes of securities pursuant to Rule 413(b) (Sec.  
230.413(b)), shall

[[Page 44819]]

become effective upon filing with the Commission.
    (f) A post-effective amendment filed pursuant to paragraph (e) of 
this section for purposes of adding a new issuer and its securities as 
permitted by Rule 413(b) (Sec.  230.413(b)) that satisfies the 
requirements of Form S-3 or Form F-3 (Sec.  239.13 or Sec.  239.33 of 
this chapter), as applicable, including the signatures required by Rule 
402(e) (Sec.  230.402(e)), and contains a prospectus satisfying the 
requirements of Rule 430B (Sec.  230.430B), shall become effective upon 
filing with the Commission.

0
43. Amend Sec.  230.473 by revising paragraph (d) to read as follows:


Sec.  230.473  Delaying amendments.

* * * * *
    (d) No amendments pursuant to paragraph (a) of this section may be 
filed with a registration statement on Form F-7, F-8 or F-80 (Sec.  
239.37, Sec.  239.38 or Sec.  239.41 of this chapter); on Form F-9 or 
F-10 (Sec.  239.39 or Sec.  239.40 of this chapter) relating to an 
offering being made contemporaneously in the United States and the 
issuer's home jurisdiction; on Form S-8 (Sec.  239.16b of this 
chapter); on Form S-3 or F-3 (Sec.  239.13 or Sec.  239.33 of this 
chapter) relating to a dividend or interest reinvestment plan; on Form 
S-3 or Form F-3 relating to an automatic shelf registration statement; 
or on Form S-4 (Sec.  239.25 of this chapter) complying with General 
Instruction G of that Form.


Sec.  230.497  [Amended]

0
44. Amend Sec.  230.497 as follows:
0
a. Remove paragraph (h)(2); and
0
b. Redesignate paragraph (h)(1) as paragraph (h).

0
45. Amend Sec.  230.902 as follows:
0
a. Remove the word ``and'' at the end of paragraph (c)(3)(v)(B);
0
b. Remove the period at the end of paragraph (c)(3)(vi) and add in its 
place a semi-colon;
0
c. Remove the period at the end of paragraph (c)(3)(vii) and add in its 
place ``; and''; and
0
d. Add paragraphs (c)(3)(viii) and (h)(4).
    The amendments and additions read as follows:


Sec.  230.902  Definitions.

* * * * *
    (c) Directed selling efforts. * * *
    (3) * * *
    (viii) Publication or distribution of a research report by a broker 
or dealer in accordance with Rule 138(c) (Sec.  230.138(c)) or Rule 
139(b) (Sec.  230.139(b)).
* * * * *
    (h) Offshore transaction.* * *
    (4) Notwithstanding paragraph (h)(1) of this section, publication 
or distribution of a research report in accordance with Rule 138(c) 
(Sec.  230.138(c)) or Rule 139(b) (Sec.  230.139(b)) by a broker or 
dealer at or around the time of an offering in reliance on Regulation S 
(Sec. Sec.  230.901 through 230.905) will not cause the transaction to 
fail to be an offshore transaction as defined in this section.
* * * * *

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

0
46. The general authority citation for part 239 is revised to read as 
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3, 
77sss, 78c, 78l, 78m, 78n, 78o(d), 78u-5, 78w(a), 78ll(d), 78mm, 
79e, 79f, 79g, 79j, 79l, 79m, 79n, 79q, 79t, 80a-2(a), 80a-3, 80a-8, 
80a-9, 80a-10, 80a-13, 80a-24, 80a-26, 80a-29, 80a-30, and 80a-37, 
unless otherwise noted.
* * * * *


Sec.  239.11  [Amended]

0
47. Remove the authority citation following Sec.  239.11.
0
48. Amend Form S-1 (referenced in Sec.  239.11) as follows:
0
a. Remove the sentence and check box immediately preceding the 
``Calculation of Registration Fee'' table;
0
b. Add General Instruction VII.;
0
c. Add Item 11A to Part I;
0
d. Redesignate Item 12 to Part I as Item 12A; and
0
e. Add new Item 12 to Part I.
    The additions read as follows:

    Note: The text of Form S-1 does not and this amendment will not 
appear in the Code of Federal Regulations

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
    Washington, DC 20549

FORM S-1--REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

GENERAL INSTRUCTIONS

* * * * *

VII. Eligibility To Use Incorporation by Reference

    If a registrant meets the following requirements immediately 
prior to the time of filing a registration statement on this Form, 
it may elect to provide information required by Items 3 through 11 
of this Form in accordance with Item 11A and Item 12 of this Form:
    A. The registrant is subject to the requirement to file reports 
pursuant to Section 13 or Section 15(d) of the Securities Exchange 
Act of 1934 (``Exchange Act'').
    B. The registrant has filed all reports and other materials 
required to be filed by Sections 13(a), 14, or 15(d) of the Exchange 
Act during the preceding 12 months (or for such shorter period that 
the registrant was required to file such reports and materials).
    C. The registrant has filed an annual report required under 
Section 13(a) or Section 15(d) of the Exchange Act for its most 
recently completed fiscal year.
    D. The registrant is not:
    1. And during the past three years neither the registrant nor 
any of its predecessors was:
    (a) A blank check company as defined in Rule 419(a)(2) (Sec.  
230.419)(a)(2);
    (b) A shell company, other than a business combination related 
shell company, each as defined in Rule 405 (Sec.  230.405); or
    (c) A registrant for an offering of penny stock as defined in 
Rule 3a51-1 of the Exchange Act (Sec.  240.3a51-1 of this chapter).
    2. Registering an offering that effectuates a business 
combination transaction as defined in Rule 165(f)(1) (Sec.  
230.165(f)(1) of this chapter).
    E. If a registrant is a successor registrant it shall be deemed 
to have satisfied conditions, A., B., C., and D.2 above if:
    1. Its predecessor and it, taken together, do so, provided that 
the succession was primarily for the purpose of changing the state 
of incorporation of the predecessor or forming a holding company and 
that the assets and liabilities of the successor at the time of 
succession were substantially the same as those of the predecessor; 
or
    2. All predecessors met the conditions at the time of succession 
and the registrant has continued to do so since the succession.
    F. The registrant makes its periodic and current reports filed 
pursuant to Section 13 or Section 15(d) of the Exchange Act that are 
incorporate by reference pursuant to Item 11A or Item 12 of this 
Form readily available and accessible on a Web site maintained by or 
for the registrant and containing information about the registrant.
* * * * *

PART I--INFORMATION REQUIRED IN PROSPECTUS

* * * * *

Item 11A. Material Changes.

    If the registrant elects to incorporate information by reference 
pursuant to General Instruction VII., describe any and all material 
changes in the registrant's affairs which has occurred since the end 
of the latest fiscal year for which audited financial statements 
were included in the latest Form 10-K for Form 10-KSB and which have 
not been described in a Form 10-Q, Form 10-QSB, or Form 8-K filed 
under the Exchange Act.

Item 12. Incorporation of Certain Information by Reference.

    If the registrant elects to incorporate information by reference 
pursuant to General Instruction VII.:
    (a) It must specifically incorporate by reference into the 
prospectus contained in the registration statement the following 
documents by means of a statement to that effect in the prospectus 
listing all such documents:
    (1) The registrant's latest annual report on Form 10-K or Form 
10-KSB filed pursuant to Section 13(a) or Section 15(d) of the 
Exchange Act which contains financial

[[Page 44820]]

statements for the registrant's latest fiscal year for which a Form 
10-K for Form 10-KSB was required to have been filed; and
    (2) All other reports filed pursuant to Section 13(a) or 15(d) 
of the Exchange Act or proxy or information statements filed 
pursuant to Section 14 of the Exchange Act since the end of the 
fiscal year covered by the annual report referred to in paragraph 
(a)(1) above.

    Note to Item 12(a).  Attention is directed to Rule 439 (Sec.  
230.439) regarding consent to use of material incorporated by 
reference.

    (b)(1) The registrant must state:
    (i) That it will provide to each person, including any 
beneficial owner, to whom a prospectus is delivered, a copy of any 
or all of the reports or documents that have been incorporated by 
reference in the prospectus contained in the registration statement 
but not delivered with the prospectus;
    (ii) That it will provide these reports or documents upon 
written or oral request;
    (iii) That it will provide these reports or documents at no cost 
to the requester;
    (iv) The name, address, telephone number, and e-mail address, if 
any, to which the request for these reports or documents must be 
made; and
    (v) The registrant's Web site address, including the uniform 
resource locator (URL) where the incorporated reports and other 
documents may be accessed.

    Note to Item 12(b)(1). If the registrant sends any of the 
information that is incorporated by reference in the prospectus 
contained in the registration statement to security holders, it also 
must send any exhibits that are specifically incorporated by 
reference in that information.

    (2) The registrant must:
    (i) Identify the reports and other information that it files 
with the SEC; and
    (ii) State that the public may read and copy any materials it 
files with the SEC at the SEC's Public Reference Room at 100 F 
Street, NE., Washington, DC 20549. State that the public may obtain 
information on the operation of the Public Reference Room by calling 
the SEC at 1-800-SEC-0330. If the registrant is an electronic filer, 
state that the SEC maintains an Internet site that contains reports, 
proxy and information statements, and other information regarding 
issuers that file electronically with the SEC and state the address 
of that site (http://www.sec.gov).
* * * * *


Sec.  239.12  [Removed and reserved]

0
49. Remove and reserve Sec.  239.12 and remove Form S-2 referenced in 
that section.

0
50. Amend Sec.  239.13 as follows:
0
a. Revise the introductory paragraph;
0
b. Remove the word ``or'' at the end of paragraph (c)(2);
0
c. Revise paragraph (c)(3);
0
d. Add paragraphs (c)(4) and (c)(5);
0
e. Add a note to paragraph (c);
0
f. Redesignate paragraph (d) as paragraph (e); and
0
g. Add new paragraph (d).
    The revision and additions read as follows:


Sec.  239.13  Form S-3, for registration under the Securities Act of 
1933 of securities of certain issuers offered pursuant to certain types 
of transactions.

    This instruction sets forth registrant requirements and transaction 
requirements for the use of Form S-3. Any registrant which meets the 
requirements of paragraph (a) of this section (``Registrant 
Requirements'') may use this Form for the registration of securities 
under the Securities Act of 1933 (``Securities Act'') which are offered 
in any transaction specified in paragraph (b) of this section 
(``Transaction Requirement'') provided that the requirement applicable 
to the specified transaction are met. With respect to majority-owned 
subsidiaries, see paragraph (c) of this section. With respect to well-
known seasoned issuers and majority-owned subsidiaries of well-known 
seasoned issuers, see paragraph (d) of this section.
* * * * *
    (c) * * *
    (3) The parent of the registrant-subsidiary meets the Registrant 
Requirements and the applicable Transaction Requirement, and provides a 
full and unconditional guarantee, as defined in Rule 3-10 of Regulation 
S-X (Sec.  210.3-10 of this chapter), of the payment obligations on the 
securities being registered, and the securities being registered are 
non-convertible securities, other than common equity;
    (4) The parent of the registrant-subsidiary meets the Registrant 
Requirements and the applicable Transaction Requirement, and the 
securities of the registrant-subsidiary being registered are full and 
unconditional guarantees, as defined in Rule 3-10 of Regulation S-X, of 
the payment obligations on the parent's non-convertible securities, 
other than common equity, being registered; or
    (5) The parent of the registrant-subsidiary meets the Registrant 
Requirements and the applicable Transaction Requirement, and the 
securities of the registrant-subsidiary being registered are guarantees 
of the payment obligations on the non-convertible securities, other 
than common equity, being registered by another majority-owned 
subsidiary of the parent, where the parent provides a full and 
unconditional guarantee, as defined in Rule 3-10 of Regulation S-X, of 
such non-convertible securities.

    Note to paragraph (c): With regard to paragraphs (c)(3), (c)(4), 
and (c)(5) of this section, the guarantor is the issuer of a 
separate security consisting of the guarantee, which must be 
concurrently registered, but may be registered on the same 
registration statement as are the guaranteed non-convertible 
securities.


    (d) Automatic shelf offerings by well-known seasoned issuers. Any 
registrant that is a well-known seasoned issuer as defined in Rule 405 
(Sec.  230.405 of this chapter) at the most recent eligibility 
determination date specified in paragraph (2) of that definition may 
use this Form for registration under the Securities Act of securities 
offerings, other than pursuant to Rule 415(a)(1)(vii) or (viii) (Sec.  
230.415(a)(1)(vii) or (viii) of this chapter), as follows:
    (1) The securities to be offered are:
    (i) Any securities to be offered pursuant to Rule 415, Rule 430A, 
or Rule 430B (Sec.  230.415, Sec.  230.430A, or Sec.  230.430B of this 
chapter) by:
    (A) A registrant that is a well-known seasoned issuer by reason of 
paragraph (1)(i)(A) of the definition in Rule 405; or
    (B) A registrant that is a well-known seasoned issuer only by 
reason of paragraph (1)(i)(B) of the definition in Rule 405 if the 
registrant also is eligible to register a primary offering of its 
securities pursuant to paragraph (b)(1) of this section;
    (ii) Non-convertible securities, other than common equity, to be 
offered pursuant to Rule 415, Rule 430A, or Rule 430B by a registrant 
that is a well-known seasoned issuer only by reason of paragraph 
(1)(i)(B) of the definition in Rule 405 and does not fall within 
paragraph (b)(1) of this section;
    (iii) Securities of majority-owned subsidiaries of the parent 
registrant to be offered pursuant to Rule 415, Rule 430A, or Rule 430B 
if the parent registrant is a well-known seasoned issuer and the 
securities of the majority-owned subsidiary being registered meet the 
following requirements:
    (A) Securities of a majority-owned subsidiary that is a well-known 
seasoned issuer at the time it becomes a registrant, other than by 
virtue of paragraph (1)(ii) of the definition of well-known seasoned 
issuer in Rule 405;
    (B) Securities of a majority-owned subsidiary that are non-
convertible securities, other than common equity, and the parent 
registration provides a full and unconditional guarantee, as defined in 
Rule 3-10 of Regulation S-X, of the payment obligations on the non-
convertible securities;
    (C) Securities of a majority-owned subsidiary that are a guarantee 
of:
    (1) Non-convertible securities, other than common equity, of the 
parent registrant being registered;
    (2) Non-convertible securities, other than common equity, of 
another

[[Page 44821]]

majority-owned subsidiary being registered and the parent has provided 
a full and unconditional guarantee, as defined in Rule 3-10 of 
Regulation S-X, of the payment obligations on such non-convertible 
securities; or
    (D) Securities of a majority-owned subsidiary that meet the 
conditions of the Transaction Requirement set forth in paragraph (b)(2) 
of this section (Primary offerings of non-convertible investment grade 
securities).
    (iv) Securities to be offered for the account of any person other 
than the issuer (``selling security holders''), provided that the 
registration statement and the prospectus are not required to 
separately identify the selling security holders or the securities to 
be sold by such persons until the filing of a prospectus, prospectus 
supplement, post-effective amendment to the registration statement, or 
periodic or current report under the Exchange Act that is incorporated 
by reference into the registration statement and prospectus, 
identifying the selling security holders and the amount of securities 
to be sold by each of them and, if included in a periodic or current 
report, a prospectus or prospectus supplement is filed, as required by 
Rule 430B, pursuant to Rule 424(b)(7) (Sec.  230.424(b)(7) of this 
chapter);
    (2) The registrant pays the registration fee pursuant to Rule 
456(b) and Rule 457(r) (Sec.  230.456(b) and Sec.  230.457(r) of this 
chapter) or in accordance with Rule 456(a) (Sec.  230.456(a) of this 
chapter);
    (3) If the registrant is a majority-owned subsidiary, it is 
required to file and has filed reports pursuant to section 13 or 
section 15(d) of the Exchange Act (15 U.S.C. 78m or 78o(d)) and 
satisfies the requirements of this Form with regard to incorporation by 
reference or information about the majority-owned subsidiary is 
included in the registration statement (or a post-effective amendment 
to the registration statement);
    (4) The registrant may register additional securities or classes of 
its or its majority-owned subsidiaries' securities on a post-effective 
amendment pursuant to Rule 413(b) (Sec.  230.413(b) of this chapter); 
and
    (5) An automatic shelf registration statement and post-effective 
amendment will become effective immediately pursuant to Rule 462(e) and 
(f) (Sec.  230.462(e) and (f) of this chapter) upon filing. All filings 
made on or in connection with automatic shelf registration statements 
on this Form become public upon filing with the Commission.
* * * * *
0
51. Amend Form S-3 (referenced in Sec.  239.13) as follows:
0
a. Remove the sentence and check box immediately preceding the 
``Calculation of Registration Fee'' table;
0
b. Add two check boxes to the cover page immediately before 
``Calculation of Registration Fee'' table;
0
c. Revise the Note to the ``Calculation of Registration Fee'' Table;
0
d. Revise the introductory paragraph to General Instruction I;
0
e. Remove the word ``or'' at the end of General Instruction I.C.2.;
0
f. Revise paragraph 3., and add paragraphs 4., and 5. to General 
Instruction I.C.;
0
g. Add a note to General Instruction 1.C.;
0
h. Add paragraph D. to General Instruction I.;
0
i. Revise paragraph D. of General Instruction II.;
0
j. Add paragraphs E., F., and G. to General Instruction II.;
0
k. Revise the heading of General Instruction IV.;
0
l. Designate the current text under General Instruction IV. as 
paragraph A;
0
m. Add a heading to paragraph A to General Instruction IV.;
0
n. Add paragraph B. to General Instruction IV.;
0
o. In Item 12(c)(2)(ii) to Part I revise the phrase ``450 Fifth Street, 
NW.,'' to read ``100 F Street, NE.,''; and
0
p. Add paragraph (d) of Item 12 to Part I.
    The revisions and additions read as follows:


    Note: The text of Form S-3 does not and this amendment will not 
appear in the Code of Federal Regulations.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
    Washington, DC 20549

FORM S-3--REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *
    If this Form is a registration statement pursuant to General 
Instruction I.D. or a post-effective amendment thereto that shall 
become effective upon filing with the Commission pursuant to Rule 
462(e) under the Securities Act, check the following box. [ballot]
    If this Form is a post-effective amendment to a registration 
statement filed pursuant to General Instruction I.D. filed to 
register additional securities or additional classes of securities 
pursuant to Rule 413(b) under the Securities Act, check the 
following box. [ballot]
* * * * *

Notes to the ``Calculation of Registration Fee'' Table (``Fee Table'')

    1. Specific details relating to the fee calculation shall be 
furnished in notes to the Fee Table, including references to 
provisions of Rule 457 (Sec.  230.457 of this chapter) relied upon, 
if the basis of the calculation is not otherwise evident from the 
information presented in the Fee Table.
    2. If the filing fee is calculated pursuant to Rule 457(o) under 
the Securities Act, only the title of the class of securities to be 
registered, the proposed maximum aggregate offering price for that 
class of securities, and the amount of registration fee need to 
appear in the Fee Table. Where two or more classes of securities are 
being registered pursuant to General Instruction II.D., however, the 
Fee Table need only specify the maximum aggregate offering price for 
all classes; the Fee Table need not specify by each class the 
proposed maximum aggregate offering price (see General Instruction 
II.D.).
    3. If the filling fee is calculated pursuant to Rule 457(r) 
under the Securities Act, the Fee Table must state that it registers 
an unspecified amount of securities of each identified class of 
securities and must provide that the issuer is relying on Rule 
456(b) and Rule 457(r). If the Fee Table is amended in a post-
effective amendment to the registration statement or in a prospectus 
filed in accordance with Rule 456(b)(1)(ii) (Sec.  230.456(b)(1)(ii) 
of chapter), the Fee Table must specify the aggregate offering price 
for all classes of securities in the referenced offering or 
offerings and the applicable registration fee.
    4. Any difference between the dollar amount of securities 
registered for such offerings and the dollar amount of securities 
sold may be carried forward on a future registration statement 
pursuant to Rule 457 under the Securities Act.

General Instructions

I. Eligibility Requirements for Use of Form S-3

    This instruction sets forth registrant requirements and 
transaction requirements for the use of Form S-3. Any registrant 
which meets the requirements of I.A. below (``Registrant 
Requirements'') may use this Form for the registration of securities 
under the Securities Act of 1933 (``Securities Act'') which are 
offered in any transaction specified in I.B. below (``Transaction 
Requirement'') provided that the requirement applicable to the 
specified transaction are met. With respect to majority-owned 
subsidiaries, see Instruction I.C. below. With respect to well-known 
seasoned issuers and majority-owned subsidiaries of well-known 
seasoned issuers, see Instruction I.D. below.
* * * * *

C. Majority-Owned Subsidiaries

    If a registrant is a majority-owned subsidiary, security 
offerings may be registered on this Form if:
* * * * *
    3. The parent of the registrant-subsidiary meets the Registrant 
Requirements and the applicable Transaction Requirement, and 
provides a full and unconditional guarantee, as defined in Rule 3-10 
of Regulation S-X (Sec.  210.3-10 of this chapter), of the payment 
obligations on the securities being registered, and the securities 
being registered are non-convertible securities, other than common 
equity;

[[Page 44822]]

    4. The parent of the registrant-subsidiary meets the Registrant 
Requirements and the applicable Transaction Requirement, and the 
securities of the registrant-subsidiary being registered are full 
and unconditional guarantees, as defined in Rule 3-10 of Regulation 
S-X, of the payment obligations on the parent's non-convertible 
securities, other than common equity, being registered; or
    5. The parent of the registrant-subsidiary meets the Registrant 
Requirements and the applicable Transaction Requirement, and the 
securities of the registrant-subsidiary being registered are 
guarantees of the payment obligations on the non-convertible 
securities, other than common equity, being registered by another 
majority-owned subsidiary of the parent where the parent provides a 
full and unconditional guarantee, as defined in Rule 3-10 of 
Regulation S-X, of such non-convertible securities.

    Note to General Instruction I.C.: With regard to paragraphs 
I.C.3, I.C.4, and I.C.5 above, the guarantor is the issuer of a 
separate security consisting of the guarantee, which must be 
concurrently registered, but may be registered on the same 
registration statement as are the non-convertible guaranteed 
securities.

D. Automatic Shelf Offerings by Well-Known Seasoned Issuers

    Any registrant that is a well-known seasoned issuer, as defined 
in Rule 405, at the most recent eligibility determination date 
specified in paragraph (2) of that definition may use this Form for 
registration under the Securities Act of securities offerings, other 
than pursuant to Rule 415(a)(1)(vii) or (viii) (Sec.  
230.415(a)(1)(vii) or (viii) of this chapter), as follows:
    1. The securities to be offered are:
    (a) Any securities to be offered pursuant to Rule 415, Rule 
430A, or Rule 430B (Sec.  230.415, Sec.  230.430A, or Sec.  230.430B 
of this chapter) by:
    (i) A registrant that is a well-known seasoned issuer by reason 
of paragraph (1)(i)(A) of the definition in Rule 405; or
    (ii) A registrant that is a well-known seasoned issuer only by 
reason of paragraph (1)(i)(B) of the definition in Rule 405 if the 
registrant also is eligible to register a primary offering of its 
securities pursuant to Transaction Requirement I.B.I of this Form;
    (b) Non-convertible securities, other than common equity, to be 
offered pursuant to Rule 415, Rule 430A, or Rule 430B by a 
registrant that is a well-known seasoned issuer only by reason of 
paragraph (1)(i)(B) of the definition of Rule 405 and does not fall 
within Transaction Requirement I.B.1 of this Form;
    (c) Securities of majority-owned subsidiaries of the parent 
registrant to be offered pursuant to Rule 415, Rule 430A, or Rule 
430B if the parent registrant is a well-known seasoned issuer and 
the securities of the majority-owned subsidiary being registered 
meet the following requirements:
    (i) Securities of a majority-owned subsidiary that is a well-
known seasoned issuer at the time it becomes a registrant, other 
than by virtue of paragraph (1)(ii) of the definition of well-known 
seasoned issuer in Rule 405;
    (ii) Securities of a majority-owned subsidiary that are non-
convertible securities, other than common equity, and the parent 
registrant provides a full and unconditional guarantee, as defined 
in Rule 3-10 of Regulation S-X, of the payment obligations on the 
non-convertible securities;
    (iii) Securities of a majority-owned subsidiary that are a 
guarantee of:
    (A) Non-convertible securities, other than common equity, of the 
parent registrant being registered;
    (B) Non-convertible securities, other than common equity, of 
another majority-owned subsidiary being registered and the parent 
registrant has provided a full and unconditional guarantee, as 
defined in Rule 3-10 of Regulation S-X, of the payment obligations 
on such non-convertible securities; or
    (iv) Securities of a majority-owned subsidiary that meet the 
conditions of Transaction Requirement I.B.2. of this Form (Primary 
Offerings of Non-Convertible Investment Grade Securities).
    (d) Securities to be offered for the account of any person other 
than the issuer (``selling security holders''), provided that the 
registration statement and the prospectus are not required to 
separately identify the selling security holders or the securities 
to be sold by such persons until the filing of a prospectus, 
prospectus supplement, post-effective amendment to the registration 
statement, or periodic or current report under the Exchange Act that 
is incorporated by reference into the registration statement and 
prospectus, identifying the selling security holders and the amount 
of securities to be sold by each of them and, if included in a 
periodic or current report, a prospectus or prospectus supplement is 
filed, as required by Rule 430B, pursuant to Rule 424(b)(7) (Sec.  
230.424(b)(7) of this chapter).
    2. The registrant pays the registration fee pursuant to Rules 
456(b) and 457(r) or in accordance with Rule 456(a).
    3. If the registrant is a majority-owned subsidiary, it is 
required to file and has filed reports pursuant to Section 13 or 
Section 15(d) of the Exchange Act and satisfies the requirements of 
the Form with regard to incorporation by reference or information 
about the majority-owned subsidiary is included in the registration 
statement (or a post-effective amendment to the registration 
statement).
    4. The registrant may register additional securities or classes 
of its or its majority-owned subsidiaries' securities on a post-
effective amendment pursuant to Rule 413(b) (Sec.  203.413(b) of 
this chapter).
    5. An automatic shelf registration statement and post-effective 
amendment will become effective immediately pursuant to Rule 462(e) 
and (f) (Sec.  230.462(e) and (f) of this chapter) upon filing. All 
filings made on or in connection with automatic shelf registration 
statements on this Form become public upon filing with the 
Commission.

II. Application of General Rules and Regulations

* * * * *

D. Non-Automatic Shelf Registration Statements

    Where two or more classes of securities being registered on this 
Form pursuant to General Instruction I.B.1. or I.B.2. are to be 
offered pursuant to Rule 415(a)(1)(x) (Sec.  230.415(a)(1)(x) of 
this chapter), and where this Form is not an automatic shelf 
registration statement, Rule 457(o) permits the registration fee to 
be calculated on the basis of the maximum offering price of all the 
securities listed in the Fee Table. In this event, while the Fee 
Table would list each of the classes of securities being registered 
and the aggregate proceeds to be raised, the Fee Table need not 
specify by each class information as to the amount to be registered, 
proposed maximum offering price per unit, and proposed maximum 
aggregate offering price.

E. Automatic Shelf Registration Statements

    Where securities are being registered on this Form pursuant to 
General Instruction I.D., Rule 456(b) permits, but does not require, 
the registrant to pay the registration fee on a pay-as-you-go basis 
and Rule 457(r) permits, but does not require, the registration fee 
to be calculated on the basis of the aggregate offering price of the 
securities to be offered in an offering or offerings off the 
registration statement. If a registrant elects to pay all or a 
portion of the registration fee on a deferred basis, the Fee Table 
in the initial filing must identify the classes of securities being 
registered and provide that the registrant elects to rely on Rule 
456(b) and Rule 457(r), but the Fee Table does not need to specify 
any other information. When the registrant amends the Fee Table in 
accordance with Rule 456(b)(1)(ii), the amended Fee Table must 
include either the dollar amount of securities being registered if 
paid in advance of or in connection with an offering or offerings or 
the aggregate offering price for all classes of securities 
referenced in the offerings and the applicable registration fee.

F. Information in Automatic and Non-Automatic Shelf Registration 
Statements

    Where securities are being registered on this Form pursuant to 
General Instruction I.B.1, I.B.2, I.B.5, I.C., or I.D., information 
is only required to be furnished as of the date of initial 
effectiveness of the registration statement to the extent required 
by Rule 430A or Rule 430B. Required information about a specific 
transaction must be included in the prospectus in the registration 
statement by means of a prospectus that is deemed to be part of and 
included in the registration statement pursuant to Rule 430A or Rule 
430B, a post-effective amendment to the registration statement, or a 
periodic or current report under the Exchange Act incorporated by 
reference into the registration statement and the prospectus and 
identified in a prospectus filed, as required by Rule 430B, pursuant 
to Rule 424(b) (Sec.  230.424(b) of this chapter).

G. Selling Security Holder Offerings

    Where a registrant eligible to register primary offerings on 
this Form pursuant to General Instruction I.B.1 registers securities

[[Page 44823]]

offerings on this Form pursuant to General Instruction I.B.1 or 
I.B.3 for the account of persons other than the registrant, if the 
offering of the securities, or securities convertible into such 
securities, that are being registered on behalf of the selling 
security holders was completed and the securities, or securities 
convertible into such securities, were issued and outstanding prior 
to the original date of filing the registration statement covering 
the resale of the securities, the registrant may, as permitted by 
Rule 430B(b), in lieu of identifying selling security holders prior 
to effectiveness of the resale registration statement, refer to 
unnamed selling security holders in a generic manner by identifying 
the initial transaction in which the securities were sold. Following 
effectiveness, the registrant must include in a prospectus filed 
pursuant to Rule 424(b)(7), a post-effective amendment to the 
registration statement, or an Exchange Act report incorporated by 
reference into the prospectus that is part of the registration 
statement (which Exchange Act report is identified in a prospectus 
filed, as required by Rule 430B, pursuant to Rule 424(b)(7)) the 
names of previously unidentified selling security holders and 
amounts of securities that they intend to sell. If this Form is 
being filed pursuant to General Instruction I.D. by a well-known 
seasoned issuer to registerer securities being offered for the 
account of persons other than the issuer, the registration statement 
and the prospectus included in the registration statement do not 
need to designate the securities that will be offered for the 
account of such persons, identify them, or identify the initial 
transaction in which the securities, or securities convertible into 
such securities, were sold until the registrant files a post-
effective amendment to the registration statement, a prospectus 
pursuant to Rule 424(b), or an Exchange Act report (and prospectus 
filed, as required by Rule 430B, pursuant to Rule 434(b)(7)) 
containing information for the offering on behalf of such persons.
* * * * *

IV. Registration of Additional Securities and Additional Classes of 
Securities

A. Registration of Additional Securities Pursuant to Rule 462(b)

* * * * *

B. Registration of Additional Securities or Classes of Securities or 
Additional Registrants After Effectiveness

    A well-known seasoned issuer relying on General Instruction I.D. 
of this Form may register additional securities or classes of 
securities, pursuant to Rule 413(b) by filing a post-effective 
amendment to the effective registration statement. The well-known 
seasoned issuer may add majority-owned subsidiaries as additional 
registrants whose securities are eligible to be sold as part of the 
automatic shelf registration statement by filing a post-effective 
amendment identifying the additional registrants, and the registrant 
and the additional registrants and other persons required to sign 
the registration statement must sign the post-effective amendment. 
The post-effective amendment must consist of the facing page; any 
disclosure required by this Form that is necessary to update the 
registration statement to reflect the additional securities, 
additional classes of securities, or additional registrants; any 
required opinions and consents; and the signature page. Required 
information, consents, or opinions may be included in the prospectus 
and the registration statement through a post-effective amendment or 
may be provided through a document incorporated or deemed 
incorporated by reference into the registration statement and the 
prospectus that is part of the registration statement, or, as to the 
required information only, contained in a prospectus filed pursuant 
to Rule 424(b) that is deemed part of and included in the 
registration statement and prospectus that is part of the 
registration statement.
* * * * *

PART I--INFORMATION REQUIRED IN PROSPECTUS

* * * * *

Item 12. Incorporation of Certain Information by Reference

* * * * *
    (d) Any information required in the prospectus in response to 
Item 3 through Item 11 of this Form may be included in the 
prospectus through documents filed pursuant to Section 13(a), 14, or 
15(d) of the Exchange Act that are incorporated or deemed 
incorporated by reference into the prospectus that is part of the 
registration statement.
* * * * *

0
52. Amend Form S-4 (referenced in Sec.  239.25) as follows:
0
a. Revise paragraphs B.1.b., B.1.c., C.1.b., and C.1.c. to the General 
Instructions;
0
b. In Item 11(c)(2) to Part I revise the phrase ``450 Fifth Street, 
N.W.,'' to read ``100 F Street, N.E.,'';
0
c. Revise the heading and introductory text of Item 12 of Part I;
0
d. Revise the introductory text of Item 13 of Part I;
0
e. In Item 13(d)(2) to Part I revise the phrase ``450 Fifth Street, 
N.W.,'' to read ``100 F Street, N.E.,'';
0
f. Revise the heading and introductory text of Item 14 of Part I;
0
g. Revise the reading and paragraph (a) of Item 16 of Part I;
0
h. Revise the heading and introductory text of Item 17 of Part I;
0
i. Revise paragraph (b) of Item 18 of Part I; and
0
j. Revise paragraph (c) of Item 19 of Part I.
    The revisions read as follows:


    Note: The text of Form S-4 does not and this amendment will not 
appear in the Code of Federal Regulations.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
    Washington, DC 20549

FORM S-4--REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

B. Information With Respect to the Registrant

    1. * * *
    a. * * *
    b. Items 12 and 13 of this Form, if the registrant meets the 
requirements for use of Form S-3 and elects this alternative; or
    c. Item 14 of this Form, if the registrant does not meet the 
requirements for use of Form S-3, or if it otherwise elects to use 
this alternative.
* * * * *

C. Information With Respect to the Company Being Acquired

    1. * * *
    b. Item 16 of this Form, if the Company being acquired meets the 
requirements for use of Form S-3 and this alternative is elected; or
    c. Item 17 of this Form, if the Company being acquired does not 
meet the requirements for use of Form S-3, or if this alternative is 
otherwise elected.
* * * * *

PART I--INFORMATION REQUIRED IN PROSPECTUS

* * * * *

B. Information About the Registrant

* * * * *

Item 12. Information with Respect to S-3 Registrants

    If the registrant meets the requirements for use of Form S-3 and 
elects to comply with this Item, furnish the information required by 
either paragraph (a) or paragraph (b) of this Item. The information 
required by paragraph (b) shall be furnished if the registrant 
satisfies the conditions of paragraph (c) of this Item.
* * * * *

Item 13. Incorporation of Certain Information by Reference

    If the registrant meets the requirements for use of Form S-3 and 
elects to furnish information in accordance with the provisions of 
Item 12 of this Form:
* * * * *

Item 14. Information With Respect to Registrants Other Than S-3 
Registrants

    If the registrant does not meet the requirements for use of Form 
S-3, or otherwise elects to comply with this Item in lieu of Item 10 
or 12, furnish the information required by:
* * * * *

C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED

* * * * *

Item 16. Information With Respect to S-3 Companies

    (a) If the company being acquired meets the requirements for use 
of Form S-3 and elects to comply with this Item, furnish the 
information that would be required by Items 12 and 13 of this Form 
if securities of such company were being registered.
* * * * *

[[Page 44824]]

Item 17. Information With Respect to Companies Other Than S-3 Companies

    If the company being acquired does not meet the requirements for 
use of Form S-3, or compliance with this Item is otherwise elected 
in lieu of Item 15 or 16, furnish the information reuqired by 
paragraph (a) or (b) of this Item, whichever is applicable.
* * * * *

D. VOTING AND MANAGEMENT INFORMATION

Item 18. Information if Proxies, Consents or Authorizations Are To Be 
Solicited

* * * * *
    (b) If the registrant or the company being acquired meets the 
requirements for use of Form S-3, any information required by 
paragraphs (a)(5)(ii) and (7) of this Item with respect to such 
company may be incorporatated by reference from its latest annual 
report on Form 10-K or Form 10-KSB.
* * * * *

Item 19. Information if Proxies, Consents or Authorizations are not to 
be Solicited or in an Exchange Officer

* * * * *
    (c) If the registrant or the company being acquired meets the 
requirements for use of Form S-3, any information required by 
paragraphs (a)(5) and (7) of this Item with respect to such company 
may be incorporated by reference from its latest annual report on 
Form 10-K or Form 10-KSB.
* * * * *

0
53. Amend Form F-1 (referenced in Sec.  239.31) as follows:
0
a. Remove the sentence and check box immediately preceding the 
``Calculation of Registration Fee'' table;
0
b. Add General Instruction VI.;
0
c. Add Item 4A to Part I;
0
d. Redesignate Item 5 as Item 5A to Part I.; and
0
e. Add new Item 5 to Part I.
    The additions read as follows:

    Note: The text of Form F-1 does not and this amendment will not 
appear in the Code of Federal Regulations.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
    Washington, DC 20549

FORM F-1--REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

GENERAL INSTRUCTIONS

* * * * *

VI. Eligibility To Use Incorporation by Reference

    If a registrant meets the following requirements immediately 
prior to the time of filing a registration statement on this Form, 
it may elect to provide information required by Item 3 and Item 4 of 
this Form in accordance with Item 4A and Item 5 of this Form:
    A. The registrant is subject to the requirement to file reports 
pursuant to Section 13 or Section 15(d) of the Securities Exchange 
Act of 1934 (``Exchange Act'');
    B. The registrant has filed all reports and other materials 
required to be filed by Section 13(a) or 15(d) of the Exchange Act 
during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports and materials);
    C. The registrant has filed an annual report required under 
Section 13(a) or 15(d) of the Exchange Act for its most recently 
completed fiscal year;
    D. The registrant is not:
    1. And during the past three years neither the registrant nor 
any of its predecessors was:
    (a) A blank check company as defined in Rule 419(a)(2) (Sec.  
230.419(a)(2) of this chapter);
    (b) A shell company, other than a business combination related 
shell company, each as defined in Rule 405 (Sec.  230.405 of this 
chapter); or
    (c) A registrant for an offering of penny stock as defined in 
Rule 3a51-1 of the Exchange Act (Sec.  240.3a51-1 of this chapter);
    2. Registering an offering that effectuates a business 
combination transaction as defined in Rule 165(f)(1) (Sec.  
230.165(f)(1) of this chapter);
    E. If a registrant is a successor registrant it shall be deemed 
to have satisfied conditions A., B., C., and D.2. above if:
    1. Its predecessor and it, taken together, do so, provided that 
the succession was primarily for the purpose of changing the state 
or other jurisdiction of incorporation of the predecessor or forming 
a holding company and that the assets and liabilities of the 
successor at the time of succession were substantially the same as 
those of the predecessor; or
    2. All predecessors met the conditions at the time of succession 
and the registrant has continued to do so since the succession; and
    F. The registrant makes it reports filed pursuant to Sections 13 
or 15(d) of the Exchange Act that are incorporated by reference 
pursuant to Item 4A of Item 5 of this Form readily available and 
accessible on a Web site maintained by or for the registrant and 
containing information about the registrant.
* * * * *

PART I--INFORMATION REQUIRED PROSPECTUS

* * * * *

Item 4A. Material Changes

    (a) If the registrant elects to incorporate information by 
reference pursuant to General Instruction VI., described any and all 
material changes in the registrant's affairs which have occurred 
since the end of the latest fiscal year for which audited financial 
statements were included in accordance with Item 5 of this Form and 
which have not been described in a report on Form 6-K, Form 10-Q or 
Form 8-K filed under the Exchange Act and incorporated by reference 
pursuant to Item 5 of this Form.
    (b)1. Include in the prospectus contained in the registration 
statement, if not included in the reports filed under the Exchange 
Act which are incorporated by reference into the prospectus 
contained in the registration statement pursuant to Item 5:
    i. Information required by Rule 3-05 and Article 11 of 
Regulation S-X (Sec.  210.3-05 and Sec.  210.11 et seq. of this 
chapter);
    ii. Restated financial statement if there has been a change in 
accounting principles or a correction of an error where such change 
or correction requires material retroactive restatement of financial 
statements;
    iii. Restated financial statements where one or more business 
combinations accounted for by the pooling of interest method of 
accounting have been consummated subsequent to the most recent 
fiscal year and the acquired businesses, considered in the 
aggregate, are significant under Rule 11-01(b) (Sec.  210.11-01(b) 
(Sec.  210.11-01(b) of this chapter); or
    iv. Any financial information required because of a material 
disposition of assets outside the normal course of business.
    2. If the financial statements included in this registration 
statement in accordance with Item 5 are not sufficiently current to 
comply with the requirements of Item 8.A of Form 20-F, financial 
statements necessary to comply with that Item shall be presented;
    i. Directly in the prospectus;
    ii. Through incorporation by reference and delivery of a Form 6-
K identified in the prospectus as containing such financial 
statements; or
    iii. Through incorporation by reference of an amended Form 20-F, 
Form 40-F, or Form 10-K, in which case the prospectus shall disclose 
that the Form 20-F, Form 40-F, or Form 10-K has been so amended.
    Instruction. Financial statements or information required to be 
furnished by this Item shall be reconciled pursuant to either Item 
17 or Item 18 of Form 20-F, whichever is applicable to the primary 
financial statements.

Item 5. Incorporation of Certain Information by Reference

    If the registrant elects to incorporate information by reference 
pursuant to General Instruction VI.:
    (a) It must specifically incorporate by reference into the 
prospectus contained in the registration statement the following 
documents by means of a statement to that effect in the prospectus 
all such documents:
    1. The registrant's latest annual report on Form 20-F, Form 40-F 
or Form 10-K filed under the Exchange Act.
    2. Any report on Form 10-Q or Form 8-K filed since the date of 
filing of the annual report. The registrant may also incorporate by 
reference any Form 6-K meeting the requirements of this Form.

    Note to Item 5(a): Attention is directed to Rule 439 (Sec.  
230.439) regarding consent to use of material incorporated by 
reference.

    (b)1. The registrant must state:
    i. That it will provide to each person, including any beneficial 
owner, to whom a prospectus is delivered, a copy of any or all of 
the reports or documents that have been incorporated by reference in 
the prospectus contained in the registration statement but not 
delivered with prospectus;
    ii. That it will provide these reports or documents upon written 
or oral request;
    iii. That it will provide these reports or documents at no cost 
to the requester;

[[Page 44825]]

    iv. The name, address, telephone number, and e-mail address, if 
any, to which the request for these reports or documents must be 
made; and
    v. The registrant's Web site address, including the uniform 
resource locator (URL) where the incorporated reports and other 
documents may be accessed.

    Note to Item 5.(b)1.  If the registrant sends any of the 
information that is incorporated by reference in the prospectus 
contained in the registration statement to security holders, it also 
must send any exhibits that are specifically incorporated by 
reference in that information.

    2. The registrant must:
    i. Identify the reports and other information that it files with 
the SEC; and
    ii. State that the public may read and copy any materials it 
files with the SEC at the SEC's Public Reference Room at 100 F 
Street, NE, Washington, DC 20549. State that the public may obtain 
information on the operation of the Public Reference Room by calling 
the SEC at 1-800-SEC-0330. If the registrant is an electronic filer, 
state that the SEC maintains an Internet site that contains reports, 
proxy and information statements, and other information regarding 
issuers that file electronically with the SEC and state the address 
of that site (http://www.sec.gov).
* * * * *


Sec.  239.32  [Removed and Reserved]

0
54. Remove and reserve Sec.  239.32 and remove Form F-2 referenced in 
that section.

0
55. Amend Sec.  293.33 as follows:
0
a. Revise the introductory paragraph;
0
b. Remove the word ``or'' at the end of paragraph (a)(5)(ii);
0
c. Revise paragraph (a)(5)(iii) and remove the note following paragraph 
(a)(5)(iii);
0
d. Add paragraphs (a)(5)(iv) and (a)(5)(v);
0
e. Add a note to paragraph (a)(5); and
0
f. Add paragraph (c).
    The revisions and additions read as follows:


Sec.  239.33  Form F-3, for registration under the Securities Act of 
1933 of securities of certain foreign private issuers offered pursuant 
to certain types of transactions

    This instruction set forth registrant requirements and transaction 
requirements for the use of Form F-3. Any foreign private issuer, as 
defined in Rule 405 (Sec.  230.405 of this chapter), which meets the 
requirements of paragraph (a) of this section (the ``Registrant 
Requirements'') may use this Form for the registration of securities 
under the Securities Act of 1933 (the ``Securities Act'') which are 
offered in any transaction specified in paragraph (b) of this section 
(the ``Transaction Requirements''), provided that the requirements 
applicable to the specified transaction are met. With respect to 
majority-owned subsidiaries, see paragraph (a)(5) of this section. With 
respect to well-known seasoned issuers and majority-owned subsidiaries 
of well-known seasoned issuers, see paragraph (c) of this section.
* * * * *
    (a) * * *
    (5) * * *
    (iii) The parent of the registrant-subsidiary meets the Registrant 
Requirements and the applicable Transaction Requirement, and provides a 
full and unconditional guarantee, as defined in Rule 3-10 of Regulation 
S-X (Sec.  210.33-10 of this chapter), of the payment obligation on the 
securities being registered, and the securities being registered are 
non-convertible securities, other than common equity;
    (iv) The parent of the registrant-subsidiary meets the Registrant 
Requirements and the applicable Transaction Requirement, and the 
securities of the registrant-subsidiary being registered are full and 
unconditional guarantees, as defined in Rule 3-10 of Regulation S-X, of 
the payment obligations on the parent's non-convertible securities, 
other than common equity, being registered; or
    (v) The parent of the registrant-subsidiary meets the Registrant 
Requirements and the applicable Transaction Requirement, and the 
securities of the registrant-subsidiary being registered are guarantees 
of the payment obligations on the non-convertible securities, other 
than common equity, being registered by another majority-owned 
subsidiary of the parent, where the parent provides a full and 
unconditional guarantee, as defined in Rule 3-10 of Regulation S-X, of 
such non-convertible securities.


    Note to paragraph (a)(5): In the situations described in 
paragraphs (a)(5)(iii), (a)(5)(iv); and (a)(5)(v) of this section, 
the parent or majority-owned subsidiary guarantor is the issuer of a 
separate security consisting of the guarantee, which must be 
concurrently registered, but may be registered on the same 
registration statement as are the guaranteed non-convertible 
securities. Both the parent and majority-owned subsidiary shall each 
disclose the information required by this Form as if each were the 
only registrant except that if the majority-owned subsidiary will 
not be eligible to file annual reports on Form 20-F or Form 40-F 
(Sec.  249.220f or Sec.  249.240f of this chapter) after the 
effective date of the registration statement, then is shall disclose 
the information specified in Form S-3 (Sec.  239.13). Rule 3-10 of 
Regulation S-X specifies the financial statements required.

* * * * *
    (c) Automatic shelf offerings by well-known seasoned issuers. Any 
registrant that is a well-known seasoned issuer as defined in Rule 405 
(Sec.  230.405 of this chapter) at the most recent eligibility 
determination date specified in paragraph (2) of such definition may 
use this Form for registration under the Securities Act of securities 
offerings, other then pursuant to Rule 415(a)(1)(vii) or (viii) (Sec.  
230.415(a)(1)(vii) or (viii) of this chapter), as follows:
    (1) The securities to be offered are:
    (i) Any securities to be offered pursuant to Rule 415, Rule 430A, 
or Rule 430B (Sec.  230.415, Sec.  230.430A, or Sec.  230.430B of this 
chapter) by:
    (A) A registrant that is a well-known seasoned issuer by reason of 
paragraph (1)(i)(A) of the definition in rule 405; or
    (B) A registrant that is a well-known seasoned issuer only by 
reason of paragraph (1)(i)(B) of the definition in Rule 405 if the 
registrant also is eligible to register a primary offering of its 
securities pursuant to paragraph (b)(1) of this section;
    (ii) Non-convertible securities, other than common equity, to be 
offered pursuant to Rule 415, Rule 430A, or Rule 430B by a registrant 
that is a well-known seasoned issuer only by reason of paragraph 
(1)(i)(B) of the definition in Rule 405 and does not fall within 
paragraph (b)(1) of this section;
    (iii) Securities of majority-owned subsidiaries of the parent 
registrant to be offered pursuant to Rule 415, Rule 430A, or Rule 430B 
if the parent registrant is a well-known seasoned issuer and the 
securities of the majority-owned subsidiary being registered meet the 
following requirements:
    (A) Securities of a majority-owned subsidiary that is a well-known 
seasoned issuer at the time it becomes a registrant, other than by 
virtue of paragraph (1)(ii) of the definition of well-known seasoned 
issuer in Rule 405;
    (B) Securities of a majority-owned subsidiary that are non-
convertible securities, other than common equity, and the parent 
registrant provides a full and unconditional guarantee, as defined in 
Rule 3-10 of Regulation S-X, of the payment obligations on the non-
convertible securities;
    (C) Securities of a majority-owned subsidiary that are a guarantee 
of:
    (1) Non-convertible securities, other than common equity, of the 
parent registrant being registered;
    (2) Non-convertible securities, other than common equity, of 
another majority-owned subsidiary being registered and the parent 
registrant has provided a full and unconditional guarantee, as defined 
in Rule 3-10 of Regulation S-X, of the payment

[[Page 44826]]

obligations on such non-convertible securities; or
    (D) Securities of a majority-owned subsidiary that meet the 
conditions of the Transaction Requirement set forth in paragraph (b)(2) 
of this section (Primary offerings of non-convertible investment grade 
securities).
    (iv) Securities to be offered for the account of any person other 
than the issuer (``selling security holders''), provided that the 
registration statement and the prospectus are not required to 
separately identify the selling security holders or the securities to 
be sold by such persons until the filing of a prospectus, prospectus 
supplement, post-effective amendment to the registration statement, or 
report under the Exchange Act that is incorporated by reference into 
the registration statement and prospectus, identifying the selling 
security holders and the amount of securities to be sold by each of 
them and, if included in a report under the Exchange Act that is 
incorporated by reference, a prospectus or prospectus supplement is 
filed, as required by Rule 430B, pursuant to Rule 424(b)(7) (Sec.  
230.424(b)(7) of this chapter).
    (2) The registrant pays the registration fee pursuant to Rules 
456(b) and 457(r) (Sec.  230.456(b) and Sec.  230.457(r) of this 
chapter) or in accordance with Rule 456(a) (Sec.  230.456(a) of this 
chapter);
    (3) If the registrant is a majority-owned subsidiary, it is 
required to file and has filed reports pursuant to section 13 or 
section 15(d) of the Exchange Act (15 U.S.C. 78m or 78o(d)) and 
satisfies the requirements of this Form with regard to incorporation by 
reference or information about the majority-owned subsidiary is 
included in the registration statement (or a post-effective amendment 
to the registration statement);
    (4) The registrant may register additional securities or classes of 
its or its subsidiaries' securities on a post-effective amendment 
pursuant to Rule 413(b) (Sec.  230.413(b) of this chapter); and
    (5) An automatic shelf registration statement and post-effective 
amendment will become effective immediately pursuant to Rule 462(e) and 
(f) (Sec.  230.462(e) and (f) of this chapter) upon filing. All filings 
made on or in connection with automatic shelf registration statements 
on this Form become public upon filing with the Commission.

0
56. Amend Form F-3 (referenced in Sec.  239.33) as follows:
0
a. Remove the sentence and check box immediately preceding the 
``Calculation of Registration Fee'' table;
0
b. Add two check boxes to the cover page immediately before 
``Calculation of Registration Fee'' table;
0
c. Revise the Note to the ``Calculation of Registration Fee'' table;
0
d. Revise the introductory paragraph to General Instruction I.;
0
e. Remove the word ``or'' at the end of paragraph (ii), revise 
paragraph (iii) and add paragraphs (iv), (v), and (vi) to General 
Instruction I.A.5.;
0
f. Revise the note to General Instruction I.A.5.;
0
g. Add paragraph C. to General Instruction I.;
0
h. Revise paragraph C. of General Instruction II.;
0
i. Revise in paragraph D. to General Instruction II the phrase ``(202) 
942-8900.'' to read ``(202) 551-8900.'' and the phrase ``(202) 942-
2940'' to read ``(202) 551-3610.'';
0
j. Add paragraphs F., G., and H. to General Instruction II.;
0
k. Revise the heading of General Instruction IV. and designate the 
current text under General Instruction IV. as paragraph A.;
0
l. Add a heading to paragraph A. of General Instruction IV.;
0
m. Add paragraph B. to General Instruction IV.;
0
n. In Item 6(e)(2) of Part I revise the phrase ``450 Fifth Street, 
NW.,'' to read ``100 F Street, NE.,''; and
0
o. Add paragraph (f) to Item 6 of Part I.
    The revisions and additions read as follows:


    Note: The text of Form F-3 does not and this amendment will not 
appear in the Code of Federal Regulations.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
    Washington, DC 20549

FORM F-3--REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *
    If this Form is a registration statement pursuant to General 
Instruction I.C. or a post-effective amendment thereto that shall 
become effective upon filing with the Commission pursuant to Rule 
462(e) under the Securities Act, check the following box. [square]
    If this Form is a post-effective amendment to a registration 
statement filed pursuant to General Instruction I.C. filed to 
register additional securities or additional classes of securities 
pursuant to Rule 413(b) under the Securities Act, check the 
following box. [square]
* * * * *

Notes to the ``Calculation of Registration Fee'' Table (``Fee Table'')

    1. Specific details relating to the fee calculation shall be 
furnished in notes to the Fee Table, including reference to 
provisions of Rule 457 (Sec.  230.457 of this chapter) relied upon, 
if the basis of the calculation is not otherwise evident from the 
information presented in the Fee Table.
    2. If the filing fee is calculated pursuant to Rule 457(o) under 
the Securities Act, only the title of the class of securities to be 
registered, the proposed maximum aggregate offering price for that 
class of securities, and the amount of registration fee need to 
appear in the Fee Table. Where two or more classes of securities are 
being registered pursuant to General Instruction II.C., however, the 
Fee Table need only specify the maximum aggregate offering price for 
all classes; the Fee Table need not specify by each class the 
proposed maximum aggregate offering price (see General Instruction 
II.C.).
    3. If the filing fee is calculated pursuant to Rule 457(r) of 
this chapter) under the Securities Act, the Fee Table must state 
that it registers an unspecified amount of securities of each 
identified class of securities and must provide that the issuer is 
relying on Rule 456(b) and Rule 457(r). If the Fee Table is amended 
in a post-effective amendment to the registration statement or in a 
prospectus filed in accordance with Rule 456(b)(1)(ii) (Sec.  
230.456(b)(1)(ii) of this chapter), the Fee Table must specify the 
aggregate offering price for all classes of securities in the 
referenced offering or offerings and the applicable registration 
fee.
    4. Any difference between the dollar amount of securities 
registered for such offerings and the dollar amount of securities 
sold may be carried forward on a future registration statement 
pursuant to Rule 457 under the Securities Act.

GENERAL INSTRUCTIONS

I. Eligibility Requirements for Use of Form F-3

    This instruction sets forth registrant requirements and 
transaction requirements for the use of Form F-3. Any foreign 
private issuer, as defined in Rule 405 (Sec.  230.405 of this 
chapter), which meets the requirements of I.A. below (the 
``Registrant Requirements'') may use this Form for the registration 
of securities under the Securities Act of 1933 (the ``Securities 
Act'') which are offered in any transaction specified in I.B. below 
(the ``Transaction Requirements''), provided that the requirements 
applicable to the specified Transaction are met. With respect to 
majority-owned subsidiaries, see Instruction I.A.5 below. With 
respect to well-known seasoned issuers and majority-owned 
subsidiaries of well-known seasoned issuers, see Instruction I.C. 
below.
* * * * *

A. Registrant Requirements

* * * * *

5. Majority-Owned Subsidiaries

    If a registrant is a majority-owned subsidiary, security 
offerings may be registered on this Form if:
* * * * *
    (iii) The parent of the registrant-subsidiary meets the 
Registrant Requirements and the applicable Transaction Requirement, 
and provides a full and unconditional guarantee, as defined in Rule 
3-10 of Regulation S-X (Sec.  210.3-10 of this chapter), of the 
payment obligations on the securities being registered,

[[Page 44827]]

and the securities being registered are non-convertible securities, 
other than common equity;
    (iv) The parent of the registrant-subsidiary meets the 
Registrant Requirements and the applicable Transaction Requirement, 
and the securities of the registrant-subsidiary being registered are 
full and unconditional guarantees, as defined in Rule 3-10 of 
Regulation S-X, of the payment obligations on the parent's non-
convertible securities, other than common equity, being registered; 
or
    (v) The parent of the registrant-subsidiary meets the Registrant 
Requirements and the applicable Transaction Requirement, and the 
securities of the registrant-subsidiary being registered are 
guarantees of the payment obligations on the non-convertible 
securities, other than common equity, being registered by another 
majority-owned subsidiary of the parent where the parent provides a 
full and unconditional guarantee, as defined in Rule 3-10 of 
Regulation S-X, of such non-convertible securities.

    Note: In the situation described in paragraphs I.A.5(iii), 
I.A.5(iv), and I.A.5(v) above, the parent or majority-owned 
subsidiary guarantor is the issuer of a separate security consisting 
of the guarantee, which must be concurrently registered, but may be 
registered on the same registration statement as are the guaranteed 
non-convertible securities. Both the parent or majority-owned 
subsidiary shall each disclose the information required by this Form 
as if each were the only registrant except that if the majority-
owned subsidiary will not be eligible to file annual reports on Form 
20-F or Form 40-F after the effective date of the registration 
statement, then it shall disclose the information specified in Form 
S-3. Rule 3-10 of Regulation S-X specifies the financial statements 
required.

* * * * *

C. Automatic Shelf Offerings by Well-Known Seasoned Issuers

    Any registrant that is a well-known seasoned issuer, as defined 
in Rule 405, at the most recent eligibility determination date 
specified in paragraph (2) of that definition may use this Form for 
registration under the Securities Act of securities offerings, other 
than pursuant to Rule 415(a)(1)(vii) or (viii)(Sec.  
230.415(a)(1)(vii) or (viii) of this chapter), as follows:
    1. The securities to be offered are:
    (a) Any securities to be offered pursuant to Rule 415, Rule 
430A, or Rule 430B (Sec.  230.415, Sec.  230.430A, or Sec.  230.430B 
of this chapter) by:
    (i) A registrant that is a well-known seasoned issuer by reason 
of paragraph (1)(i)(A) of the definition in Rule 405; or
    (ii) A registrant that is a well-known seasoned issuer only by 
reason of paragraph (1)(i)(B) of the definition in Rule 405 if the 
registrant also is eligible to register a primary offering of its 
securities pursuant to Transaction Requirement I.B.1 of this Form;
    (b) Non-convertible securities, other than common equity, to be 
offered pursuant to Rule 415, Rule 430A, or Rule 430B by a 
registrant that is a well-known seasoned issuer only by reason of 
paragraph (1)(i)(B) of the definition in Rule 405 and does not fall 
within General Instruction I.B.1 of this Form;
    (c) Securities of majority-owned subsidiaries of the parent 
registrant to be offered pursuant to Rule 415, Rule 430A, or Rule 
430B if the parent registrant is a well-known seasoned issuer and 
the securities of the majority-owned subsidiary being registered 
meet the following requirements:
    (i) Securities of a majority-owned subsidiary that is a well-
known seasoned issuer at the time it becomes a registrant, other 
than by virtue of paragraph (1)(ii) of the definition of well-known 
seasoned issuer in Rule 405;
    (ii) Securities of a majority-owned subsidiary that are non-
convertible securities, other than common equity, and the parent 
registrant provides a full and unconditional guarantee, as defined 
in Rule 3-10 of Regulation S-X, of the payment obligations on such 
non-convertible securities;
    (iii) Securities of a majority-owned subsidiary that are a 
guarantee of:
    (A) Non-convertible securities, other than common equity of the 
parent registrant being registered;
    (B) Non-convertible securities, other than common equity, of 
another majority-owned subsidiary being registered and the parent 
has provided a full and unconditional guarantee, as defined in Rule 
3-10 of Regulation S-X, of the payment obligations on such non-
convertible securities; or
    (iv) Securities of a majority-owned subsidiary that meet the 
conditions of Transaction Requirement I.B.2. of this Form (Primary 
Offerings of Non-Convertible Investment Grade Securities).
    (d) Securities to be offered for the account of any person other 
than the issuer (``selling security holders''), provided that the 
registration statement and the prospectus are not required to 
separately identify the selling security holders or the securities 
to be sold by such persons until the filing of a prospectus, 
prospectus supplement, post-effective amendment to the registration 
statement, or report under the Exchange Act that is incorporated by 
reference into the registration statement and prospectus, 
identifying the selling security holders and the amount of 
securities to be sold by each of them, and if included in a report 
under the Exchange Act that is incorporated by reference, a 
prospectus or prospectus supplement is filed, as required by Rule 
430B, pursuant to Rule 424(b)(7)(Sec.  230.424(b)(7) of this 
chapter).
    2. The registrant pays the registration fee pursuant to Rules 
456(b) and 457(r) or in accordance with Rule 456(a).
    3. If the registrant is a majority-owned subsidiary, it is 
required to file and has filed reports pursuant to Section 13 or 
Section 15(d) of the Exchange Act and satisfies the requirements of 
the Form with regard to incorporation by reference or information 
about the majority-owned subsidiary is included in the registration 
statement (or a post-effective amendment to the registration 
statement).
    4. The registrant may register additional securities or classes 
of its or its majority-owned subsidiaries' securities on a post-
effective amendment pursuant to Rule 413(b)(Sec.  203.413(b) of this 
chapter).
    5. An automatic shelf registration statement and post-effective 
amendment will become effective immediately pursuant to Rule 462(e) 
and (f) (Sec.  230.462(e) and (f) of this chapter) upon filing. All 
filings made on or in connection with automatic shelf registration 
statements on this Form become public upon filing with the 
Commission.

II. Application of General Rules and Regulations

* * * * *

C. Non-Automatic Shelf Registration Statements

    Where two or more classes of securities being registered on this 
Form pursuant to General Instruction I.B.1. or I.B.2. are to be 
offered pursuant to Rule 415(a)(1)(x) (Sec.  230.415(a)(1)(x)), and 
where this Form is not an automatic shelf registration statement, 
Rule 457(o) permits the registration fee to be calculated on the 
basis of the maximum offering price of all the securities listed in 
the Fee Table. In this event, while the Fee Table would list each of 
the classes of securities being registered and the aggregate 
proceeds to be raised, the Fee Table need not specify by each class 
information as to the amount to be registered, proposed maximum 
offering price per unit, and proposed maximum aggregate offering 
price.
* * * * *

F. Automatic Shelf Registration Statements

    Where securities are being registered on this Form pursuant to 
General Instruction I.C., Rule 456(b) permits, but does not require, 
the registrant to pay the registration fee on a pay-as-you-go basis 
and Rule 457(r) permits, but does not require, the registration fee 
to be calculated on the basis of the aggregate offering price of the 
securities to be offered in an offering or offerings off the 
registration statement. If a registrant elects to pay all or a 
portion of the registration fee on a deferred basis, the Fee Table 
in the initial filing must identify the classes of securities being 
registered and provide that the registrant elects to rely on Rule 
456(b) and Rule 457(r), but the Fee Table does not need to specify 
any other information. When the registrant amends the Fee Table in 
accordance with Rule 456(b)(1)(ii), the amended Fee Table must 
include either the dollar amount of securities being registered if 
paid in advance of or in connection with an offering or offerings or 
the aggregate offering price for all classes of securities 
referenced in the offerings and the applicable registration fee.

G. Information in Automatic and Non-Automatic Shelf Registration 
Statements

    Where securities are being registered on this Form pursuant to 
General Instruction I.A.5, I.B.1, I.B.2, or I.C., information is 
only required to be furnished as of the date of initial 
effectiveness of the registration statement to the extent required 
by Rule 430A or Rule 430B. Required information about a specific 
transaction must be included in the prospectus in the registration 
statement by means of a prospectus that is deemed to be part of and 
included in the registration statement pursuant to Rule 430A

[[Page 44828]]

or Rule 430B, a post-effective amendment to the registration 
statement, or an Exchange Act report incorporated by reference into 
the registration statement and the prospectus and identified in a 
prospectus filed, as required by Rule 430B, pursuant to Rule 424(b) 
(Sec.  230.424(b) of this chapter).

H. Selling Security Holder Offerings

    Where a registrant eligible to register primary offerings on 
this Form pursuant to General Instruction I.B.1 registers securities 
offerings on this Form pursuant to General Instruction I.B.1 or 
I.B.3 for the account of persons other than the registrant, if the 
offering of the securities, or securities convertible into such 
securities, that are being registered on behalf of the selling 
security holders was completed and the securities, or securities 
convertible into such securities, were issued and outstanding prior 
to the original date of filing the registration statement covering 
the resale of the securities, the registrant may, as permitted by 
Rule 430B(b), in lieu of identifying selling security holders prior 
to effectiveness of the resale registration statement, refer to 
unnamed selling security holders in a generic manner by identifying 
the initial transaction in which the securities were sold. Following 
effectiveness, the registrant must include in a prospectus filed 
pursuant to Rule 424(b)(7), a post-effective amendment to the 
registration statement, or an Exchange Act report incorporated by 
reference into the prospectus that is part of the registration 
statement (which Exchange Act report is identified in a prospectus 
filed, as required by Rule 430B, pursuant to Rule 424(b)(7)), the 
names of previously unidentified selling security holders and 
amounts of securities that they intend to sell. If this Form is 
being filed pursuant to General Instruction I.C. by a well-known 
seasoned insurer to register securities being offered for the 
account of persons other than the issuer, the registration statement 
and the prospectus included in the registration statement do not 
need to designate the securities that will be offered for the 
account of such persons, identify them, or identify the initial 
transaction in which the securities, or securities convertible into 
such securities, were sold until the registrant files a post-
effective amendment to the registration statement, a prospectus 
pursuant to Rule 424(b), or an Exchange Act report (and prospectus 
filed, as required by Rule 430B, pursuant to Rule 424(b)(7)) 
containing information for the offering on behalf of such persons.
* * * * *

IV. Registration of Additional Securities and Additional Classes of 
Securities

A. Registration of Additional Securities Pursuant to Rule 462(b)

* * * * *

B. Registration of Additional Securities or Classes of Securities or 
Additional Registrants After Effectiveness

    A well-known seasoned issuer relying on General Instruction I.C. 
or this Form may register additional securities or classes of 
securities, pursuant to Rule 413(b) by filing a post-effective 
amendment to the effective registration statement. The well-known 
seasoned issuer may add majority-owned subsidiaries as additional 
registrants whose securities are eligible to be sold as part of the 
automatic shelf registration statement by filing a post-effective 
amendment identifying the additional registrants, and the registrant 
and the additional registrants and other persons required to sign 
the registration statement must sign the post-effective amendment. 
The post-effective amendment must consist of the facing page; any 
disclosure required by this Form that is necessary to update the 
registration statement to reflect the additional securities, 
additional classes of securities, or additional registrants; any 
required opinions and consents; and the signature page. Required 
information, consents or opinions may be included in the prospectus 
and the registration statement through a post-effective amendment or 
may be provided through a document incorporated or deemed 
incorporated by reference into the registration statement and the 
prospectus that is part of the registration statement, or, as to the 
required information only, contained in a prospectus filed pursuant 
to Rule 424(b) that is deemed part of and included in the 
registration statement and prospectus that is part of the 
registration statement.
* * * * *

PART I--INFORMATION REQUIRED IN PROSPECTUS

* * * * *

Item 6. Incorporation of Certain Information by Reference

* * * * *
    (f) Any information required in the prospectus in response to 
Item 3 through Item 5 of this Form may be included in the prospectus 
through documents filed pursuant to Sections 13(a), 14, or 15(d) of 
the Exchange Act that are incorporated or deemed incorporated by 
reference into the prospectus that is part of the registration.
* * * * *

0
57. Amend Form F-4 (reference in Sec.  239.34) as follows:
0
a. Revise paragraph B.1.(b), B.1.(c), C.1.(b), and C.1.(c) to the 
General Instructions;
0
b. Revise, in paragraph D.4. to the General Instructions the phrase 
``(202) 942-8900.'' to read ``(202) 551-8900.'' and the phrase ``(202) 
942-2940.'' to read ``(202) 551-3610.'';
0
c. Redesignate the second paragraph (b) of Item 11 in Part I as 
paragraph (c);
0
d. Revise in newly redesignated paragraph (c)(2) of Item 11 in Part I 
the phrase ``450 Fifth Street, N.W.,'' to read ``100 F Street, N.E.,'';
0
e. In Item 12 to Part I, revise the heading and introductory text, the 
introductory text of paragraph (b)(2), and paragraph (b)(3)(vii);
0
f. Revise Instructions 1. and 3. of paragraph (c) of Item 13 in Part I;
0
g. Revise in Item 13(c)(2) in Part I., the phrase ``450 Fifth Street, 
N.W.,'' to read ``100 F Street, N.E.,''
0
h. Revise the heading and introductory text of Item 14 in Part I;
0
i. Revise the heading and text of Item 16 in Part I;
0
j. Revise the heading and introductory text of Item 17 in Part I;
0
k. Revise paragraph (b) of Item 18 in Part I; and
0
l. Revise the heading and paragraph (c) of Item 19 in Part I.
    The revisions read as follows:

    Note: The text of Form F-4 does not and this amendment will not 
appear in the Code of Federal Regulations.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
    Washington, DC 20549

FORM F-4--REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

* * * * *

General Instructions

* * * * *

B. Information With Respect to the Registrant

* * * * *
    1. * * *
    (b) Items 12 and 13 of this Form, if the registrant meets the 
requirements for use of Form F-3 and elects this alternative; or
    (c) Item 14 of this Form, if the registrant does not meet the 
requirements for use of Form F-3, or if it otherwise elects this 
alternative.
* * * * *

C. Information With Respect to the Company Being Acquired

    1. * * *
    (b) Item 16 of this Form, if the company being acquired meets 
the requirements for use of Form F-3 and this alternative is 
elected; or
    (c) Item 17 of this Form, if the company being acquired does not 
meet the requirements for use of Form F-3, or if this alternative is 
otherwise elected.
* * * * *

PART I--INFORMATION REQUIRED IN THE PROSPECTUS

* * * * *

B. INFORMATION ABOUT THE REGISTRANT

* * * * *

Item 12. Information With Respect to F-3 Registrants

    If the registrant meets the requirements for use of Form F-3 or 
Form S-3 and elects to comply with this Item, furnish the 
information required by either paragraph (a) or (b) of this Item. 
However, the registrant shall not provide prospectus information in 
the manner allowed by paragraph (a) of this Item if the financial 
statements incorporated by reference pursuant to Item 13 reflect:
* * * * *
    (b) * * *
    (2) Include financial statements and information as required by 
Item 18 of Form

[[Page 44829]]

20-F, except that financial statements of the registrant may comply 
with Item 17 of Form 20-F if the only securities being registered 
are investment grade securities as defined in the General 
Instructions to Form F-3. In addition, provide:
* * * * *
    (3) * * *
    (vii) Financial statements required by Item 18 of Form 20-F, 
except that financial statements of the registrant may comply with 
Item 17 of Form 20-F if the only securities being registered are 
investment grade securities as defined in the General Instructions 
to Form F-3, and financial information required by Rule 3-05 and 
Article 11 of Regulation S-X with respect to transactions other than 
that pursuant to which the securities being registered are to be 
issued (Schedules required under Regulation S-X shall be filed as 
``Financial Statement Schedules'' pursuant to Item 21 of this Form, 
but need not be provided with respect to the company being acquired 
if information is being furnished pursuant to Item 17(a) of this 
Form); and
* * * * *

Item 13. Incorporation of Certain Information by Reference

* * * * *

Instructions.

    1. All annual reports incorporated by reference pursuant to Item 
13 of this Form shall contain financial statements that comply with 
Item 18 of Form 20-F, except that financial statements of the 
registrants may comply with Item 17 of Form 20-F if the only 
securities being registered are investment grade securities as 
defined in General Instructions to Form F-3. * * *
* * * * *
    3. The registrant may incorporate by reference and deliver with 
the prospectus any Form 6-K, Form 10-Q or Form 8-K containing 
information eligible to be incorporated by reference into Form F-1. 
See Rules 4-01(a)(2) and 10-01 of Regulation S-X and Item 18 of Form 
20-F.
* * * * *

Item 14. Information With Respect to Registrants Other Than F-3 
Registrants

    If the foreign registrant does not meet the requirements for use 
of Form F-3, or otherwise elects to comply with this Item in lieu of 
Items 10 and 11 or Items 12 and 13, furnish the following 
information:
* * * * *

C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED

* * * * *

Item 16. Information With Respect to F-3 Companies

    If the company being acquired meets the requirements for use of 
Form F-3 and compliance with this Item is elected, furnish the 
information that would be required by Items 12 and 13 of this Form 
if securities of such company were being registered.
* * * * *

Item 17. Information With Respect to Foreign Companies Other Than F-3 
Companies

    If the company being acquired does not meet the requirements for 
use of Form F-3, or compliance with this Item is otherwise elected 
in lieu of Item 15 or 16, furnish the information required by 
paragraph (a) or (b) of this Item, whichever is applicable.
* * * * *

D. VOTING AND MANAGEMENT INFORMATION

Item 18. Information if Proxies, Consents or Authorizations Are To Be 
Solicited

* * * * *
    (b) If the registrant or the company being acquired meets the 
requirements for use of Form F-3, any information required by 
paragraphs (a)(5)(ii) and (7) of this Item with respect to such 
company may be incorporated by reference from its latest annual 
report on Form 20-f.

Item 19. Information if Proxies, Consents or Authorizations Are Not To 
Be Solicited or in an Exchange Offer

* * * * *
    (c) If the registrant or the company being acquired meets the 
requirements for use of Form F-3, any information required by 
paragraphs (a)(5)(ii) and (7) of this Item with respect to such 
company may be incorporated by reference from its latest annual 
report on Form 20-F.
* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

0
58. The authority citation for part 240 continues to read inpart as 
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 
78j, 78j-1, 78k, 78k-1, 781, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 
78w, 78x, 7811, 78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-
3, 80b-4, 80b-11, and 7201 et seq.; and 18 U.S.C. 1350, unless 
otherwise noted.
* * * * *

0
59. Amend Sec.  240.14a-2 as follows:
0
a. Remove the authority citation following the section; and
0
b. Add paragraph (b)(5).
    The addition reads as follows:


Sec.  240.14a-2  Solicitations to which Sec.  240.14a-3 to Sec.  
240.14a-15 apply.

* * * * *
    (b) * * *
    (5) Publication or distribution by a broker or a dealer of a 
research report in accordance with Rule 138 (Sec.  230.138 of this 
chapter) or Rule 139 (Sec.  230.139 of this chapter) during a 
transaction in which the broker or dealer or its affiliate participates 
or acts in a an advisory role.

PART 243--REGULATION FD

0
60. The authority citation for part 243 continues to read as follows:

    Authority: 15 U.S.C. 78c, 78i, 78j, 78m, 78o, 78w, 78mm, and 
80a-29, unless otherwise noted.


0
61. Amend Sec.  243.100 by revising paragraph (b)(2)(iv) to read as 
follows:


Sec.  243.100  General rule regarding selective disclosure.

* * * * *
    (b) * * *
    (2) * * *
    (iv) In connection with a securities offering registered under the 
Securities Act, other than an offering of the type described in any of 
Rule 415(a)(1)(i) through (vi) under the Securities Act (Sec.  
230.415(a)(1)(i) through (vi) of this chapter) (except an offering of 
the type described in Rule 415(a)(1)(i) under the Securities Act (Sec.  
230.415(a)(1)(i) of this chapter) also involving a registered offering, 
whether or not underwritten, for capital formation purposes for the 
account of the issuer (unless the issuer's offering is being registered 
for the purpose of evading the requirements of this section)), if the 
disclosure is by any of the following means:
    (A) A registration statement filed under the Securities Act, 
including a prospectus contained therein;
    (B) A free writing prospectus used after filing of the registration 
statement for the offering or a communication falling within the 
exception to the definition of prospectus contained in clause (a) of 
section 2(a)(10) of the Securities Act;
    (C) Any other Section 10(b) prospectus;
    (D) A notice permitted by Rule 135 under the Securities Act (Sec.  
230.135 of this chapter);
    (E) A communication permitted by Rule 134 under the Securities Act 
(Sec.  230.134 of this chapter); or
    (F) An oral communication made in connection with the registered 
securities offering after filing of the registration statement for the 
offering under the Securities Act.

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

0
62. The authority citation for part 249 continues to read in part as 
follows:

    Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; and 18 U.S.C. 
1350, unless otherwise noted.


0
63. Amend Form 10 (referenced in Sec.  249.210) by adding Item 1A. to 
read as follows:



[[Page 44830]]


    Note: The text of Form 10 does not, and this amendment will not, 
appear in the Code of Federal Regulations.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
    Washington, DC 20549

FORM 10

* * * * *

Item 1A. Risk Factors

    Set forth, under the caption, ``Risk Factors,'' where 
appropriate, the risk factors described in Item 503(c) of Regulation 
S-K (Sec.  229.503(c) of this chapter) applicable to the registrant. 
Provide any discussion of risk factors in plain English in 
accordance with Rule 421(d) of the Securities Act of 1933 (Sec.  
230.421(d) of this chapter).
* * * * *

0
64. Amend Form 20-F (referenced in Sec.  249.220f) as follows:
0
a. Add two check boxes to the cover page before the paragraph that 
starts ``Indicate by check mark whether the registrant (1) has filed 
all reports required to be filed by Section 13 or 15(d) of the 
Securities Exchange Act of 1934 during the preceding 12 months * * *'';
0
b. Revise in paragraph (a) of General Instruction D the phrase ``(202) 
942-8900.'' to read ``(202) 551-8900.'' and the phrase ``(202) 942-
2940.'' to read ``(202) 551-3610.'';
0
c. Revise in paragraph (c) to General Instruction D the phrase ``450 
Fifth Street, NW.,'' to read ``100 F Street, NE.,'';
0
d. Revise paragraph (c) to General Instruction E; and
0
e. Add Item 4A. to Part I.
    The revision and additions read as follows:

    Note: The text of Form 20-F does not, and this amendment will 
not, appear in the Code of Federal Regulations.


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
    Washington, DC 20549

FORM 20-F

* * * * *
    Indicate by check mark if the registrant is a well-known 
seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes-------- No--------

    If this report is an annual or transition report, indicate by 
check mark if the registrant is not required to file reports 
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 
1934.

Yes-------- No--------

    Note --Checking the box above will not relieve any registrant 
required to file reports pursuant to Section 13 or 15(d) of the 
Securities Exchange Act of 1934 from their obligations under those 
Sections.

* * * * *

GENERAL INSTRUCTIONS

* * * * *

E. Which Items To Respond to in Registration Statements and Annual 
Reports

* * * * *
    (c) Financial Statement. An Exchange Act registration statement 
or annual report filed on this Form must contain the financial 
statements and related information specified in Item 17 of this 
Form. We encourage you to provide the financial statements and 
related information specified in Item 18 of this Form in lieu of 
Item 17, but the Item 18 statements and information are not 
required. In certain circumstances, Form F-1, F-3, or F-4 for the 
registration of securities under the Securities Act require that you 
provide the financial statements and related information specified 
in Item 18 in your annual report on Form 20-F. Consult those 
Securities Act forms for the specified requirements and consider the 
potential advantages of complying with Item 18 instead of Item 17 of 
this form. Note that Items 17 and 18 may require you to file 
financial statements of other entities in certain circumstances. 
These circumstances are described in Regulations S-X.
    The financial statements must be audited in accordance with U.S. 
generally accepted auditing standards, and the auditor must comply 
with the U.S. standards for auditor independence. If you have any 
questions about these requirements, contact the Office of Chief 
Accountant in the Division of Corporation Finance at (202) 551-3400.
* * * * *

Part I

* * * * *

Item 4. * * *

Item 4A. Unresolved Staff Comments

    If the registrant is an accelerated filer as defined in Rule 
12b-2 of the Exchange Act (Sec.  240.12b-2 of this chapter) or is a 
well-known seasoned issuer as defined in rule 405 of the Securities 
Act (Sec.  230.405 of this chapter) and has received written 
comments from the Commission staff regarding its periodic reports 
under the Exchange Act not less than 180 days before the end of its 
fiscal year to which the annual report relates, and such comments 
remain unresolved, disclose the substance of any such unresolved 
comments that the registrant believes are material. Such disclosure 
may provide other information including the position of the 
registrant with respect to any such comment.
* * * * *

0
65. Amend Form 10-Q (reference in Sec.  249.308a) by adding Item 1A to 
Part II 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.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
    Washington, DC 20549

FORM 10-Q

* * * * *

PART II. OTHER INFORMATION

* * * * *

Item 1. * * *

Item 1A. Risk Factors

    Set forth any material changes from risk factors as previously 
disclosed in the registrant's Form 10-K ( 249.310) in response to 
Item 1A. to Part I of Form 10-K.
* * * * *

0
66. Amend Form 10-K (referenced in Sec.  249.310) as follows:
0
a. In General Instruction J., redesignate paragraphs (1)(b) through 
(1)(m) as paragraph (1)(c) through (1)(n), and add new paragraph (b);
0
b. Add two check boxes to the cover page before the paragraph that 
starts ``Indicate by check mark whether the registrant (1) has filed 
all reports required to be filed by Section 13 or 15(d) of the 
Securities Exchange Act of 1934 during the preceding 12 months * * *''; 
and
0
c. Add Items 1A. and 1.B. to Part I.
    The additions read as follows:


    Note: The text of Form 10-K does not, and this amendment will 
not, appear in the Code of Federal Regulations.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
    Washington, DC 20549

FORM 10-K

* * * * *

GENERAL INSTRUCTIONS

* * * * *

J. Use of this Form by Asset-Backed Issuers.

    (1) Items that May be Omitted. * * *
    (a) * * *
    (b) Item 1A. Risk Factors;
* * * * *
    Indicate by check mark if the registrant is a well-known 
seasoned issuer, as defined in Rule 405 of the Securities Act.

     Yes -------- No --------.

    Indicate by check mark if the registrant is not required to file 
reports pursuant to Section 13 or Section 15(d) of the Act.

     Yes -------- No --------.

    Note: Checking the box above will not relieve any registrant 
required to file reports pursuant to Section 13 or 15(d) of the 
Exchange Act from their obligations under those Sections.

* * * * *

PART I

* * * * *

Item 1. * * *

Item 1A. Risk Factors

    Set forth, under the caption ``Risk Factors,'' where 
appropriate, the risk factors described in Item 503(c) of Regulation 
S-K (Sec.  229.503(c) of this chapter) applicable to the registrant. 
Provide any discussion of risk factors in plain English in 
accordance with Rule 421(d) of the Securities Act of 1933 (Sec.  
230.421(d) of this chapter).

[[Page 44831]]

Item 1B. Unresolved Staff Comments

    If the registrant is an accelerated filer as defined in Rule 
12b-2 of the Exchange Act (Sec.  240.12b-2 of this chapter) or is a 
well-known seasoned issuer as defined in Rule 405 of the Securities 
Act ( 230.405 of this chapter) and has received written comments 
from the Commission staff regarding its periodic or current reports 
under the Act not less than 180 days before the end of its fiscal 
year to which the annual report relates, and such comments remain 
unresolved, disclose the substance of any such unresolved comments 
that the registrant believes are material. Such disclosure may 
provide other information including the position of the registrant 
with respect to any such comment.
* * * * *

0
67. Amend Form 10-KSB (referenced in Sec.  249.310b) by adding a check 
box to the cover page before the paragraph that starts ``Check whether 
the issuer (1) filed all reports required to be filed by Section 13 or 
15(d) of the Exchange Act during the past 12 month * * *'' 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.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
    Washington, DC 20549

FORM 10-KSB

* * * * *
    Check whether the issuer is not required to file reports 
pursuant to Section 13 or 15(d) of the Exchange Act.[ ]

    Note-- Checking the box above will not relieve any registrant 
required to file reports pursuant to Section 13 or 15(d) of the 
Exchange Act from their obligations under those Sections.

* * * * *

PART 274--FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1940

0
68. The authority citation for Part 274 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m, 
78n, 78o(d), 80a-8, 80a-24, 80a-26, and 80a-29, unless otherwise 
noted.

0
69. Amend Form N-2 (referenced in Sec.  239.14 and Sec.  274.11a-1) as 
follows:
0
a. Revise in the third paragraph of the Instructions after the 
Calculation of Registration Fee table the phrase ``450 5th Street, 
NW.,'' to read ``100 F Street, NE.,'';
0
b. Revise in Item 18.15, the phrase ``1-202-942-8090,'' to read ``1-
202-551-8090,'';
0
c. Remove the period at the end of paragraph 4.a(3) to Item 34 and in 
its place add a semi-colon;
0
d. Remove the word ``and'' at the end of paragraph 4.b to Item 34;
0
e. Remove the period at the end of the paragraph 4.c to Item 34 and in 
its place add a semi-colon; and
0
f. Add paragraphs 4.d and 4.e to Item 34.
    The additions read as follows:


    Note: The text of Form N-2 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM N-2

* * * * *

Item 34. Undertakings

* * * * *
    4. * * *
    d. That, for the purpose of determining liability under the 1933 
Act to any purchaser, if the Registrant is subject to Rule 430C [17 
CFR 230.430C]: Each prospectus filed pursuant to Rule 497(b), (c), 
(d) or (e) under the 1933 Act [17 CFR 230.497(b), (c), (d), or (e)] 
as part of a registration statement relating to an offering, other 
than prospectuses filed in reliance on Rule 430A under the 1933 Act 
[17 CFR 230.430A], shall be deemed to be part of and included in the 
registration statement as of the date it is first used after 
effectiveness. Provided however, that no statement made in a 
registration statement or prospectus that is part of the 
registration statement or made in a document incorporated or deemed 
incorporated by reference into the registration statement or 
prospectus that is part of the registration statement will, as to a 
purchaser with a time of contract of sale prior to such first use, 
supersede or modify any statement that was made in the registration 
statement or prospectus that was part of the registration statement 
or made in any such document immediately prior to such date of first 
use.
    e. That for the purpose of determining liability of the 
Registrant under the 1933 Act to any purchaser in the initial 
distribution of securities:
    The undersigned Registrant undertakes that in a primary offering 
of securities of the undersigned Registrant pursuant to this 
registration statement, regardless of the underwriting method used 
to sell the securities to the purchaser, if the securities are 
offered or sold to such purchaser by means of any of the following 
communications, the undersigned Registrant will be a seller to the 
purchaser and will be considered to offer or sell such securities to 
the purchaser:
    (1) Any preliminary prospectus or prospectus of the undersigned 
Registrant relating to the offering required to be filed pursuant to 
Rule 497 under the 1933 Act [17 CFR 230.497];
    (2) The portion of any advertisement pursuant to Rule 482 under 
the 1933 Act [17 CFR 230.482] relating to the offering containing 
material information about the undersigned Registrant or its 
securities provided by or on behalf of the undersigned Registrant; 
and
    (3) Any other communication that is an offer in the offering 
made by the undersigned Registrant to the purchaser.
* * * * *

    Dated: July 19, 2005.

    By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 05-14560 Filed 8-2-05; 8:45 am]
BILLING CODE 8010-01-P