Company Name: ENI Corporation
Public Availability Date: Dec. 03, 1975

[INQUIRY LETTER]

HILL, CHRISTOPHER AND PHILLIPS, P.C.

2000 L STREET, N.W.

WASHINGTON, D.C. 20036

September 03, 1975

William E. Toomey, Esq.

Office of General Counsel

Division of Corporation Finance

Securities and Exchange Commission

500 North Capitol Street

Washington, D. C. 20549

Re: Section 4(2) of the Securities Act and Rule 146 Thereunder

Dear Mr. Toomey:

In accordance with a previous discussion with you, we are writing on behalf of our client, ENI Corporation, to request the concurrence of the staff in our interpretation that the use of certain institutional advertising, under the circumstances set forth below, would not constitute a "form of general solicitation or general advertising" for purposes of Paragraph (c) of Rule 146 under the Securities Act of 1933.

ENI Corporation is registered with the Commission as a broker and dealer in securities under the Securities Exchange Act of 1934, and as an investment adviser under the Investment Advisers Act of 1940. It is headquartered in Seattle, Washington and has various offices in other cities within the United States.

ENI, since its organization in 1971, has specialized in the sale of tax-sheltered investments, particularly oil and gas drilling programs. Throughout its business history ENI has served as a selling group member in the distribution of interests in oil and gas drilling programs registered under the Securities Act of 1933. ENI believes that it is one of the largest distributors of registered oil and gas programs in the United States.

More recently, ENI has sold interests in oil and gas programs in reliance upon the private offering exemption contained in Section 4(2) of the Securities Act. The dollar volume of such offerings has become substantial. Since adoption of Rule 146, ENI has sought to qualify most of these private placements under the provisions of that Rule.

ENI engages in the distribution of publicly offered registered tax-shelter investments on behalf of a variety of different oil company sponsors. It is entirely unaffiliated with these sponsors and participates in a particular public offering only on the basis of its independent evaluation of the program being offered. ENI expects that it will continue to participate in these registered offerings on a regular basis throughout the year. Similarly, ENI also expects to be engaged in private placements in reliance upon the provisions of Rule 146(c) on a regular basis throughout the year.

ENI has in the past engaged in a very limited form of institutional advertising. Such advertising has appeared in The Wall Street Journal, financial pages of other newspapers, and in various financial publications. The purpose of the advertising has been to maintain ENI's identity with the financial community in general and the oil and gas industry in particular, as well as with the class of investors eligible to participate in tax-sheltered investments. The advertisements aid ENI in its relationship with oil and gas operators whose programs ENI has sold or may in the future sell, assist ENI in the recruitment and retention of sales representatives and maintain its familiarity among existing and potential investor clientele. The variety of purposes served by ENI's advertising, therefore, is no different than those served by institutional advertising generally.

ENI proposes to reinstitute its institutional advertising with an advertisement substantially similar to that which it has used in the past. A copy of this proposed advertisement is attached hereto. Although this advertisement does not relate to any particular private placement or to private placements in general, its proposed use may raise the question whether it constitutes a "form of general solicitation or general advertising" within the meaning of Rule 146(c) so as to preclude reliance on that rule in connection with ENI's private placements.

To our knowledge this question has been presented to the staff on only two occasions. In Damson Oil Corporation (Staff reply available July 5, 1974), the staff took the position that a proposed advertisement by an oil company would raise a serious question as to the availability of Rule 146 should the advertisement "contribute to an effort to find proposed offerees of future privately sponsored programs" contemplated by the company. The advertisement in that case, however, was specifically intended to identify individuals as potential offerees for both public and private oil and gas drilling programs to be sponsored by the oil company. It related only to the programs sponsored by that oil company and specifically invited readers "to find out more about. . . . Damson operations" by writing to "Barry M. Damson, President, Damson Oil Company."

In contrast, ENI is a broker-dealer selling the programs of many different, unaffiliated sponsors rather than an oil company which merchandises its own sponsored programs. Thus, the proposed ENI advertisement is far more general in nature than the one involved in Damson. ENI's advertisement relates only to tax-sheltered investments in general; it does not relate to oil and gas programs to be offered by a specific sponsor. Moreover, it does not invite prospective interested offerees to inquire concerning additional information. It is, instead, the prototype of generalized institutional advertising.

To hold that institutional advertising such as here involved would constitute a "form of general solicitation or general advertising" within the meaning of Rule 146(c) would force broker-dealers to eliminate all institutional advertising or to foreclose themselves from use of the provisions of Rule 146. We do not believe that such a far-reaching result was ever intended by the Commission.

This unsatisfactory choice of alternatives is not necessary to the protection of investors because other provisions of Rule 146 effectively insulate general institutional advertising from contributing in any significant way "to the finding of prospective offerees for future private placements." These safeguards include Paragraph (d) of Rule 146 which prohibits any offer of securities pursuant to the rule to any person, unless immediately prior to sale there is reason to believe as well as actual belief that the offeree has adequate financial sophistication or economic risk-bearing capability. The effect of Paragraph (d) is to preclude a broker-dealer from offering a Rule 146 private placement even to existing customers without adequate information concerning the customer's financial sophistication or risk-bearing capability; a fortiori it precludes such an offer in response to an inquiry from an unknown person who may have previously come across the broker-dealer's institutional advertisement.

The staff has recognized that its position in Damson was not intended as a general prohibition against all institutional advertising by broker-dealers. In Borden & Ball (Staff reply avail. Nov. 23, 1974), the staff agreed with the view that Paragraph (c) of Rule 146 was "not intended to preclude broker-dealers from using the media to attract issuers as customers." The staff also stated that it would raise no objection under Rule 146(c) to the form or content of the institutional-type advertisements there submitted to it. Although the avowed purpose of the advertising there involved was "to attract issuers as customers," the staff expressly recognized that "such advertisements may attract individual private investors as well as issuers." It nevertheless concluded that questions as to its effect on the availability of Rule 146(c) must be answered by the facts and circumstances of each such situation.

For the reasons stated herein and under the "particular facts and circumstances" set forth above, it is our opinion that the use of advertisement by ENI of the type attached hereto would not constitute a "form of general solicitation or general advertising" within the meaning of Rule 146 under the Securities Act and would not otherwise result in violations of the registration provisions of the Act. We request that you advise us whether you concur with this opinion.

Sincerely yours,

Richard M. Phillips

Attachment

[STAFF REPLY LETTER]

NOV 3 1975

Richard M. Phillips, Esq.

Hill, Christopher and Phillips, P.C.

2000 L. Street, N.W.

Washington, D. C. 20036

Re: ENI Corporation

Dear Mr. Phillips:

This is with reference to your letter of September 3, 1975 requesting an interpretation of paragraph (c) of Rule 146 under the Securities Act of 1933 (the "Act") as applied to a proposed advertisement which would appear on the financial pages of various newspapers and in other financial publications. We understand the material facts to be as follows.

ENI Corporation ("ENI") is registered with the Commission as a broker and dealer in securities and as an investment adviser under the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940. ENI, organized in 1971 with its main office in Seattle, Washington, specializes in the sale of tax-sheltered investments, particularly oil and gas drilling programs. Throughout its business history, ENI has served as a selling group member in the distribution of interests in such programs registered under the Act. More recently, ENI has sold interests in such programs in reliance upon the private offering exemption contained in Section 4(2) of the Act and, since the adoption of Rule 146 under the Act, ENI has sought to qualify most of these private placements under the provisions of that rule.

ENI engages in the distribution of publicly offered, registered taxshelter investments on behalf of a variety of different oil company sponsors, and participants in a particular public offering only on the basis of its independent evaluation of the program being offered. ENI will continue to participate in these registered offerings on a regular basis, and also expects to be engaged in private placements in reliance upon the provisions of Rule 146 on a regular basis.

In the past, ENI engaged in a limited form of institutional advertising appearing in the financial pages of newspapers and in various financial publications. The purpose of the advertising has been to maintain ENI's identity with the financial community in general and the oil and gas industry in particular, as well as with the class of investors eligible to participate in tax-sheltered investments. It is your opinion that the purposes served by ENI's advertising, therefore, are no different than those served by institutional advertising generally.

ENI proposes to reinstitute its institutional advertising with an advertisement substantially similar to that which it has used in the past. You state that ENI's advertisement relates only to tax-sheltered investments in general; it does not relate to oil and gas programs to be offered by a specific sponsor; and it does not invite prospective interested offerees to request additional information. A copy of the proposed advertisement was included with your letter.

We agree with your view that the use by ENI of the sample advertisement submitted would not constitute a "form of general solicitation or general advertising" within the meaning of paragraph (c) of Rule 146 under the Act. As you recognize, such advertisements may attract individual private investors as well as issuers. The question whether such a response will entail the offer or sale of securities to particular investors in a manner prohibited by Rule 146(c) remains a factual question which will be governed by the special facts and circumstances of each situation.

Sincerely,

William E. Toomey

Assistant Chief Counsel