Company Name: Valicenti Leighton Reid & Pine
Public Availability Date: Apr. 14, 1972

[INQUIRY LETTER]

VALICENTI LEIGHTON REID & PINE

70 PINE STREET

NEW YORK, N.Y. 10005

March 24, 1972

Neal S. McCoy, Esq.

Chief Counsel

Division of Corporation Finance

Securities and Exchange Commission

Washington, D.C.

Re: Interpretation of Paragraph (/f)(3)(B) of Rule 144 under Securities Act of 1933 as Amended

Dear Mr. McCoy:

I have been asked by a client for an opinion concerning the sale of restricted securities by a pledgee of a person not an affiliate of the issuer of the subject securities.

In reading paragraph (e) of Rule 144 and particularly subparagraph (3)(B) thereof, I have difficulty interpreting the clause "or for the account of a purchaser of the pledged securities."

If pursuant to a pledge agreement a pledgee sells the subject securities directly in an unsolicited broker's transaction, must any subsequent sales of the same securities by the purchaser be taken into account in determining the maximum amount of securities which may be subsequently sold by the pledgee and the pledgor? Or does the cause "or for the account of the purchaser of the pledged securities" only apply with respect to securities acquired in a private sale to a purchaser, by a pledgee arrangement? Is it permissible for pledgee to sell shares in a private transaction pursuant to the pledge arrangement, provided the purchaser agrees to be bound by the selling limitations contained in paragraph (e)(3)(B), and, if so, would the purchaser be able to include in his holding period for purposes of Rule 144 the time during which the securities were held by the pledgee and pledgor?

Very truly yours,

James M. Rae

[STAFF REPLY LETTER]

April 14, 1972

James M. Rae, Esq.

Valicenti Leighton Reid & Pine

70 Pine Street

New York, New York 10005

Dear Mr. Rae:

This is in reply to your letter of March 24, 1972 requesting an interpretation of the phrase "or for the account of a purchaser of the pledged securities" contained in Rule 144(e)(3)(B) under the Securities Act of 1933. Specifically, you have inquired whether sales by the purchaser of securities formerly subject to a pledge agreement would have to be aggregated with subsequent sales by the pledger and pledgee for the purpose of determining the maximum amount of securities that could be sold under Rule 144.

In the staff's opinion, Rule 144(e)(3)(B) would not require the aggregating of the purchaser's sales with those of the pledgee and pledger if the purchaser had acquired his securities in a brokerage transaction effected in reliance upon Rule 144. However, if the purchaser had acquired his securities in a private transaction, his sales would be aggregated with those of the pledgee and pledger for a period of two years after the default of the obligation secured by the pledge.

You have also asked whether a pledgee may sell shares in a private transaction pursuant to the pledge arrangement, and whether the purchaser in such circumstances may tack the holding periods of the pledger and pledgee to his own holding period. The staff is of the opinion that pledged securities can be sold in private transactions, and that the purchaser of such securities may tack the holding periods of the pledger and pledgee to his own for the purpose of computing the requisite two-year holding period. It should be understood, however, that the purchaser in such circumstances acquires restricted securities which are subject to the sale limitations set forth in Rule 144(e)(3)(B).

Sincerely,

Peter J. Romeo

Attorney Adviser