Release No. 33-6383

Release No. 34-18524

Release No. 35-22407

Release No. 39-700

Release IC-12264

Release ASR-306

47 Fed. Reg. 11466 - Mar. 16, 1982

Adoption of Integrated Disclosure System

ACTION: Final rules.

Table of Conents

IV. Procedural Provisions

A. Background

The third aspect of the integrated disclosure system consists of Regulation C and Regulation 12B, which contain the procedures to be used in preparing and filing registration statements and reports under the Securities Act and the Exchange Act, respectively. ⁵⁹ As part of the rulemaking proceeding to develop an integrated disclosure system, the Commission proposed revisions to Regulations C and 12B to accomplish three objectives. First, revisions were proposed to centralize all disclosure requirements in Regulation S-K. ⁶⁰ Second, revisions were proposed to establish Regulations C and 12B as the source of procedural requirements in the integrated disclosure system. Prior to this rulemaking proceeding, procedural provisions were found not only in Regulations C and 12B, but also in the Guides and in the instructions to registration forms and reports. Because the provisions in the Guides and the instructions were often duplicative of and in some situations inconsistent with, the provisions of Regulations C and 12B, the Commission proposed amendments to eliminate duplications and to harmonize inconsistencies. ⁶¹ Third, revisions were proposed to modify current rules and to remove obsolete and unnecessary rules as part of a "sunset" review of Regulations C and 12B. ⁶² Related to the sunset review was a solicitation of public comment on the necessity of restructuring Regulation C.

B. Synopsis of Revisions

The comments received in response to the proposed revisions to Regulations C and 12B supported the Commissions objectives, with the vast majority of the comment directed toward a few specific points of interest for each commentator. However, certain commentators recommended either the development of a new procedural regulation encompassing the procedural provisions of Regulations C and 12B, as well as those of the proxy rules, or a total reorganization of Regulation C. The Commission has determined that a new procedural regulation encompassing all procedural provisions, similar to Regulation S-K for disclosure matters and Regulation S-X for accounting matters, is not appropriate because, unlike certain disclosure and accounting matters, the procedural requirements are not as interchangeable. Procedures for filing registration statements are necessarily different from the procedures for filing proxy statements, because of the different functions which such statements fulfill under the statutes. While there is some overlap in the provisions of Regulation C, Regulation 12B and the proxy regulations, the Commission has determined that the better approach is to eliminate unnecessary inconsistencies among the provisions and to continue the current pattern of separate procedural rules to which a registrant and its counsel can turn easily for specific guidance on the procedures to be used in satisfying statutory obligations.

With respect to the organization of Regulation C, in response to comment, the Commission has determined to locate the rules specifically relating to registration statements for competitive bidding ⁶³ and to investment companies and business development companies ⁶⁴ under separate headings within Regulation C.

In general, the discussion of the revisions of the rules in Regulation C and of the corresponding revisions of the rules in Regulation 12B follows the organization of Regulation C. Because of the importance of the shelf registration concepts, this subject will be discussed under a separate heading. This discussion will highlight only the significant changes made in the proposed revisions as set forth in the Regulation C Release. ⁶⁵

1. General Requirements.

Several commentators requested that the Commission delete or otherwise modify the final clause of paragraph (g) of proposed Rule 401 which generally provided that the Commission could notify a registrant that the effectiveness of a registration statement would provide no presumption as to the appropriateness of the registration form used by the registrant. ⁶⁶ They contended that a good faith, but erroneous, determination as to the availability of a registration form should not result in contingent liability for the sale of unregistered securities. Based on these and related comments and the implementation of certification requirements in the signature provisions of the registration forms, the Commission has determined to delete the last clause of Rule 401(g).

The majority of the comments on the Regulation C proposals addressed the definitions in proposed Rule 405 and proposed Rule 12b-2. Certain commentators requested that the Commission retain the current definition of the term "material" or modify the proposed definition. Since the proposed definition is based on the definition as set forth by the Supreme Court in TSC Industries, Inc. v. Northway, ⁶⁷ the Commission has determined to adopt the definition of the term "material" as proposed. Other comments suggested that the definition of the term "executive officer" be revised to limit the scope of the definition by emphasizing policy making functions as the determining factor for classifying a person as an executive officer. The Commission has determined to adopt a uniform definition for the term "executive officer" based substantially on the proposed definition, but revised to emphasize policy making functions. ⁶⁸ It should be noted that policy making functions would include business and legal decisions. Pursuant to other comments, the definition of the term "significant subsidiary" has been conformed to the definition of that term as adopted by the Commission in Regulation S-X. ⁶⁹ A definition of the term "common equity" has been adopted because it is used in several places ⁷⁰ and a definition of the term "business development company" has been added to avoid repetitious references. A definition of the term "managing underwriter" has been added in response to comment received on the Rule governing shelf registration.

Rule 485 relating to confidential treatment of contracts has been recast as Rule 406.

The commentators made various suggestions relating to the rules governing incorporation by reference. Certain language changes have been made to clarify the procedures of incorporation by reference. Other changes made pursuant to comment include, most notably, the incorporation of the substance of Rules 422 and 12b-24, dealing with summaries of documents, into revised Rules 411 and 12b-23 respectively.

The incorporation by reference rules are an important aspect of the operation of the integrated disclosure system. Pursuant to Rule 24 of the Commissions Rules of Practice (17 CFR 201.24), incorporation of information by reference to a document may not be made if the referred to document incorporate by reference a third document; except where incorporation by reference is expressly required. Under the Securities Act in Rule 411, subject to Rule 24, incorporation of information may be made by reference to any document filed with the Commission; except that with respect to a prospectus, information may be incorporated by reference only where the particular registration form so permits or to qualify a required summary or outline of a document. Under the Exchange Act in Rule 12b-23, subject to Rule 24, incorporation of information may be made by reference to any document, provided that such document is filed as an exhibit to the Exchange Act report or statement; except that information or documents required to be filed as exhibits to an Exchange Act report or statement may be incorporated by reference if previously filed with the Commission and no additional filing is required.

Rule 414 has been revised in response to comment to extend the coverage of the rule to certain intrastate reorganizations, where the issuer is changing only its form of organization, such as a trust to a corporation or vice verse. The extension of Rule 414 to such intrastate reorganizations is conditioned on the satisfaction by the successor issuer of the requirements of paragraphs (a) through (d) of Rule 414.

Because proposed Rule 418 has been recast as Rule 412, ⁷¹ proposed Rule 419 (Supplemental information) has been recast and adopted as Rule 418. ⁷² In addition to certain minor revisions, the Commission has determined to delete the paragraph on information concerning the underwriters due diligence investigation with respect to new registrants and issues of securities about which certain risk factors are required to be disclosed. ⁷³

Other minor revisions have been made to the rules comprising the General Requirements.

2. Shelf Registration.

Rule 415 is a temporary rule, effective until December 10, 1982, which governs the registration of securities that are to be offered and sold on a delayed or continuous basis in the future ("shelf registration"). ⁷⁴ The Rule codifies staff practice concerning shelf offerings which have occurred to date, such as securities to be offered in a continuing acquisition program. ⁷⁵ Under certain circumstances, it contemplates shelf registration for primary offerings of equity securities which the registrant intends to sell on a non-fixed price basis over time depending on market conditions. Also, the Rule contemplates an issuers selling the securities registered on the shelf in a succession of different kinds of offerings.

A substantial number of commentators expressed views on the shelf rule proposal ranging from support for the rule, as proposed or with modifications, to concern that the proposal would have worked potential impacts upon the capital raising process. ⁷⁶ Recognizing the importance of the views and concerns of the commentators, the Commission is taking a series of procedural steps to afford the opportunity for continued consideration of shelf registration and is adopting the Rule, with modifications, on a temporary basis.

The procedural steps will include public hearings to explore the impact of a shelf registration rule and to give all interested parties further opportunity to present their views to the Commission. The hearings will be announced officially in a separate release published in the near future and will begin in approximately four months. During the period prior to the commencement of the hearings, interested investors, registrants and members of the securities industry may wish to form groups or task forces to organize and prepare their presentations. Following the hearings, the Commission may publish further rulemaking proposals for notice and comment.

The temporary Rule will be effective until December 10, 1982. During that period, the Commission will monitor the operation and impact of the new Rule. Prior to the temporary Rules expiration, the Commission expects that the further proceedings noted above will have been concluded and a determination will be made whether to adopt Rule 415 as a permanent rule, adopt a modification of Rule 415 or allow the Rule to expire. ⁷⁷

Rule 415 reflects changes from the proposal in two respects: (1) the addition of two further conditions for primary, at the market offerings of equity securities and (2) the clarification of related Item 512(a) of Regulation S-K (undertakings to file post-effective amendments) and Rule 405 (definitions) with respect to managing underwriters. The following discussion is intended to clarify certain issues raised by commentators in response to the proposed Rule and to highlight the changes made in the proposals. Because the Guides Release and the Shelf Release discussed in detail the background and major issues of shelf registration, as well as the essential features of the Rule, this release does not repeat earlier explanatory material.

a. Bona Fide Intention to Offer and Sell.

Rule 415(a)(1)(i) as proposed in the Shelf Release permits registration of any security on a shelf registration statement in an amount that is reasonably expected to be offered and sold within two years of the registration statements effective date. Some commentators argued that this standard is inappropriate and unnecessary. The Commission adheres to its belief that the flexible, yet measurable, standard provided by the two-year benchmark is a proper condition to the general use of shelf registration statements for primary offerings. Paragraphs (a)(1)(ii) through (a)(1)(vii) of the Rule set forth those types of offerings that in the Commissions experience may be permitted without regard to the two-year standard and are adopted as proposed.

b. Accurate and Current Information.

One of the basic concerns which must be met in the context of shelf registration is ensuring that investors are provided accurate and current information where offers or sales are not to be made immediately after the registration statement becomes effective. Rule 415(a)(2) addresses this issue by setting forth when and how updating should be done, i.e., when updating may be done by prospectus supplement pursuant to Rule 424(c) (a "sticker") and when a post-effective amendment to the shelf registration statement is appropriate, by requiring registrants to furnish the undertakings required by Item 512(a) of Regulation S-K to file post-effective amendments in specified circumstances. The Item 512(a) undertakings are adopted substantially as proposed. ⁷⁸ They relate only to periods in which offers or sales are being made, thus making clear that there is no need to maintain an accurate and current, or "evergreen." prospectus when no offers or sales are being made pursuant to the shelf registration. The circumstances under which registrants must undertake to file post-effective amendments are: (1) To include any prospectus required by section 10(a)(3) of the Securities Act; (2) to reflect 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 (3) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement, including (but not limited to) any addition or deletion of a managing underwriter other than as a co-manager.

The provisions relating to updating, particularly respecting "fundamental changes," are intended to reflect current practice in determining the need for a post-effective amendment as opposed to a prospectus sticker. As indicated in the Shelf Release, the Commission believes that the filing of a post-effective amendment is appropriate in certain instances in order to ensure full statutory liability for the information disclosed and to afford the Commissions staff an opportunity to review the disclosure in appropriate cases. However, the Commission also is aware that staff practice concerning the filing of post-effective amendments and stickers, for all registration statements, has been somewhat flexible depending on the nature of the information to be disclosed or modified and the ability to reflect that information in a short sticker to the prospectus. The Commission wishes to preserve within the context of a shelf registration statement.

Most of the commentators who addressed the provisions relating to updating generally supported the proposals. A few commentators, however, requested further guidance as to what constitutes a "fundamental" change and thus makes a post-effective amendment appropriate. While the Commission continues to believe that a detailed listing in Item 512(a) of the situations in which post-effective amendments are appropriate would impair the flexibility of current practice, it does wish to provide some guidance in this area. As the Shelf Release noted, the use of the term "fundamental" is intended to reflect current staff practice under which post-effective amendments are filed when major and substantial changes are made to information contained in the registration statement. ⁷⁹ Material changes that can be stated accurately and succinctly in a short sticker will continue to be permitted. While many variations in matters such as operating results, properties, business, product development, backlog, management and litigation ordinarily would not be fundamental, major changes in the issuers operations, such as significant acquisitions or dispositions, would require the filing of a post-effective amendment. ⁸⁰ Also, any change in the business or operations of the registrant that would necessitate a restatement of the financial statements always would be reflected in a post-effective amendment. ⁸¹ At the same time, pursuant to the undertaking, a registrant using a shelf-registration statement for a series of debt offerings would be able to sticker the prospectus to reflect changes in interest rates, redemption, prices and maturities. Although such information is material to any investor in the securities, it does not represent a fundamental change in the information set forth in the registration statement when all other details remain the same.

With respect to the undertaking to file a post-effective amendment to disclose any material information relating to the plan of distribution, a few commentators urged that it would enhance the flexibility of the shelf rule to allow automatic effectiveness for such post-effective amendments. The Commission does not believe it appropriate to eliminate all possibility of review of such post-effective amendments, but will monitor this area to avoid any undue delays.

Also in connection with the Item 512(a)(1)(iii) undertaking, the Commission noted in the Shelf Release that a sticker supplement to the prospectus could be used to reflect the final terms of the transaction in the circumstance where a registration statement contained a full description of several alternative methods of distribution with the only missing information consisting of numerical details such as price and underwriting spread. The Commission emphasizes, in response to public comment, that in order to permit use of a sticker supplement the registration statement description of such alternative methods of distribution must be complete, omitting only such information as price and spread. ⁸² If the registration statement names several underwriters who may participate in the shelf-registered offering, the selection of any one or more of those underwriters to be the underwriter(s) with respect to a particular portion of the shelf offering may be indicated by sticker supplement to the prospectus.

The use of a single shelf registration statement for widely diverse plans of financing may be inappropriate in cases where a complete description of each plan of distribution to which the filing relates, together with a discussion of the impact on the issuer of such plan alone and in combination with the other contemplated financings, becomes so complex as to reduce substantially the effectiveness of the disclosures. In such cases, more than one registration statement may be necessary.

Undertaking (a)(1)(iii) of Item 512 of Regulation S-K recognizes the materiality to the plan of distribution of a change in managing underwriter. The proposed Rule did not define the term "managing underwriter," but the Shelf Release generally described the characteristics and duties of a managing underwriter. The release specifically requested public comment regarding the need for a definition, either in Rule 415 or in Regulation C. The commentators had no specific suggestions for a definition of managing underwriter, but two commentators urged codification of the term. The Commission agrees that it would be useful to codify a definition of the term "managing underwriter" and has decided to include the term in the definition section of Regulation C, Rule 405. The definition is similar to the description of "managing underwriter" provided in the Shelf Release. As defined, a "managing underwriter" includes an underwriter (or underwriters) who, by contract or otherwise, deals with the issuer; organizes the selling effort; receives some benefit from the underwriting which is not shared by other underwriters; or represents any other underwriters in such matters as maintaining the records of the distribution, arranging the allotments of securities offered or arranging for appropriate stabilization activities, if any. ⁸³

In addition to providing a definition of the term "managing underwriter," the Commission is adding two clarifying instructions to Item 512(a)(1). Instruction (1) states that a post-effective amendment need not be filed to disclose the addition or deletion of a managing underwriter as a co-manager unless there is no longer at least one managing underwriter who was named in the registration statement or the most recent post-effective amendment thereto. ⁸⁴ This instruction clarifies, in response to public comment, when the addition or deletion of a co-manager must be reflected in a post-effective amendment, as opposed to a sticker supplement to the prospectus. With the addition of Instruction (1) to Item 512(a)(1), there is no need for the phrase "other than as a co-manager" at the end of the last clause of Item 512(a)(1)(iii) and it has been deleted, Instruction (2) addresses the situation where there may be more than one managing underwriter and the relationship of one underwriter to another is that of co-manager.

The Rule 415 undertakings provide an exception to the duty to update in the case of a registration statement filed on either Form S-3 or Form S-8 if the information required to be included in a post-effective amendment pursuant to Item 512(a)(1)(i) and (a)(1)(ii) of Regulation S-K is contained in periodic reports filed under the Exchange Act and incorporated by reference in the registration statement. Two commentators suggested that registrants filing on Forms S-1 and S-2 also should be able to incorporate by reference subsequently filed Exchange Act reports. As noted in the discussion of Form S-2, the Commission has determined not to allow incorporation by reference of subsequently filed Exchange Act reports on Form S-1 or S-2 because it does not believe that there is sufficiently widespread marketplace following with respect to registrants using those forms to assure sufficient dissemination of information for purposes of the delayed or continuous offering of securities. Thus, the Commission reemphasizes that registrants filing on Forms S-2 or S-1 must meet the duty to update by filing post-effective amendments pursuant to the undertaking in Item 512(a)(1).

c. Exemptions from Application of Shelf Rule.

The Commission is adopting as proposed the provisions creating exemptions from the application of Rule 415 for offerings by a face amount certificate company or offerings of redeemable securities by an open-end management company or unit investment trust under the Investment Company Act and for any registration statement filed by any foreign government. The exemption relating to investment companies recognizes the specific provisions for continuous registration which are contained in the Investment Company Act. As indicated in the Shelf Release, foreign government registration statements are exempted because the Commission is still gaining experience with shelf registration by such registrants pursuant to a staff interpretive letter which set forth procedures to be followed by foreign governmental issuers in using a shelf registration that differed somewhat from the proposed Rule. ⁸⁵ Until such time as the Commission determines whether to codify the interpretive release or otherwise to address foreign government shelf registration, foreign governmental issuers may continue to use the procedures set forth in the staff interpretive letter.

d. At the Market Offerings.

(1) Conditions.

Rule 415 permits shelf registration of "at the market offerings" of equity securities directly by or on behalf of the registrant. Because such offerings raise concerns for the public and for the marketplace, the Shelf Release proposed the imposition of two conditions. First, the Commission proposed that those securities must be sold through an underwriter or underwriters, acting as principal(s) or agent(s) for the registrant, and that such underwriter(s) must be named in the prospectus which is part of the registration statement. Second, the Commission proposed to define an "at the market offering" as an offering of securities into an existing trading market for outstanding shares of the same class of securities at other than a fixed price on or through the facilities of a national securities exchange or to a market maker otherwise than on an exchange.

A number of commentators agreed with the Commission that it should impose conditions upon the availability of shelf registration for an at the market offering. The Commission has determined to adopt the conditions proposed and to adopt two further conditions: (1) That the registrant must meet the registrant requirements and applicable transaction requirements of Form S-3 and (2) that the amount of securities registered must not exceed ten percent of the registrants non-affiliate float. The Commission is conditioning primary equity offerings at the market on Form S-3 availability and is limiting such offerings to ten percent of a registrants float in view of the experimental nature of the temporary rule. ⁸⁶

The Commission is adopting the requirement for a named underwriter because it believes that the direct involvement of an underwriter can provide a desirable discipline upon such offerings of equity securities into an existing trading market ⁸⁷ and that the presence of an underwriter helps to ensure that accurate and current disclosure is made to investors in the prospectus and that the prospectus delivery requirements of the Securities Act are met. A few commentators opposed this requirement or expressed concerns about related issues of liability and anti-manipulative rule application. The Commission is confident that the liability concerns will be allayed as both registrants and underwriters gain experience with the shelf rule. In addition, the Commission does not believe that the anti-manipulative rules will impose any unduly burdensome prohibitions upon underwriters named in the prospectus. ⁸⁸ In this regard, it should be noted that the Commissions monitoring of the shelf rule will include attention to this requirement to determine, among other things, whether it would be appropriate to adopt a provision, as advocated by some commentators, which would require issuers to obtain the underwriters consent to being named.

(2) Treatment of Statutory Underwriter.

Rule 415 permits a direct distribution of securities by a registrant into an existing trading market over an extended period of time and thus raises the issue of underwriter status ⁸⁹ in a novel situation. The Shelf Release set forth the Commissions views as to the status of various market professionals as statutory underwriters in an at the market offering of equity securities by a registrant under the proposed Rule. The views expressed received comment from only four commentators, three of whom generally agreed with the Commissions stated positions. The Commission has determined to reaffirm without change the positions regarding treatment as a statutory underwriter which were published in the Shelf Release. ⁹⁰

(3) Application of Anti-Manipulative Rules.

At the market offerings of securities pursuant to Rule 415 also raise a number of questions concerning the maintenance of orderly market processes, the prevention of market manipulation, and the application of the anti-manipulative rules, ⁹¹ specifically the application of Rule 10b-6 (17 CFR 240.10b-6) under the Exchange Act, to these offerings. The Shelf Release contained an extensive discussion of the various Rule 10b-6 issues raised by at the market offerings, set forth a number of staff positions with respect to these issues, and specifically solicited comment on a number of issues. ⁹²

A substantial number of commentators addressed the Rule 10b-6 issues discussed in the Shelf Release and offered helpful suggestions as to how the Rule could be interpreted or modified to avoid unduly interfering with at the market offerings permitted by Rule 415 while still affording the market sufficient protection from manipulation. In addition, a number of commentators suggested that Rule 10b-6 should be modified generally, not only for purposes of shelf registrations. The Commission has considered these comments and has incorporated its determinations with respect thereto into a separate release proposing amendments to Rule 10b-6 ⁹³ published concurrently with this release. The Rule 10b-6 Release resolves the issues raised in the Rule 415 context as well as analogous issues raised more generally. Attention is directed to that release for the text of the proposed amendments and a complete discussion thereof. In addition, the Rule 10b-6 Release indicates the staffs intention, so long as the issuer qualifies to use new Form S-2 or S-3 to follow the interpretive position codified in the proposed amendments on an administrative basis pending adoption of the amendments in order to facilitate the implementation of Rule 415. ⁹⁴

3. Form and Contents of Prospectus.

The revisions to the rules comprising this section of Regulation C have been adopted substantially as proposed. In addition to the rules which were deleted because their substance was transferred to Regulation S-K, the Commission has determined to rescind Rules 430, 431, 432, 434 ⁹⁵ and 434c as unnecessary or obsolete. In light of such rescissions, current Rules 433, 434a and 434b have been recast as Rules 430, 431 and 432. Pursuant to comment and its own experience, the Commission has determined to revise proposed Rule 434a (renumbered as Rule 431), concerning summary prospectus eligibility and use, to permit non-United States issuers to use the Rule on the same basis as they are permitted to use Form S-3.

4. Written Consents.

The proposed revisions to the rules, including paragraph (g) of the Rule 436, comprising this section of Regulation C have been adopted as proposed. Since the substance of Rule 435 has been transferred to Regulation S-K, the Commission has rescinded Rule 435.

5. Competitive Bids.

This is a new section of Regulation C with contains the provisions that apply specifically to registration statements for securities to be offered at competitive bid. The previous heading of this section was "Exhibits," but that heading has been withdrawn, because the substance of the rules concerning exhibits has been transferred to Regulation S-K (Rules 445 and 446) and to Rule 411 (Rule 447). It is believed that a separate section for competitive bidding registration statements will make it easier for registrants and their counsel to comply with the requirements for such registration statements.

6. Filings, Fees, Effective Date.

The proposed revisions to the rules comprising this section of Regulation C have been adopted substantially as proposed. Two technical changes have been made to Rule 457 to clarify the operation of that Rule. First, Rule 457 (e)(2) has been amended to include registrants with a negative book value but not in bankruptcy or receivership within the filing fee requirements of that paragraph. Second, Rule 457(k) has been revised to include all issuers of standardized options within the filing fee requirements of that paragraph.

Certain commentators objected to the treatment of insurance against liabilities arising under the Securities Act for investment companies and business development companies in proposed Rule 461(c). The Commission has determined to revise the Rule 461(c) on adoption to make clear that such insurance will not be considered a bar to acceleration of a registration statement if the cost of the insurance is borne by the insured officer or director of the registrant.

7. Amendments, Withdrawals.

The proposed revisions to the rules comprising this section of Regulation C have been adopted substantially as revised. With respect to Rules 477 and 479, the Commission requested specific comment on the necessity of retaining the marking procedure for withdrawn or abandoned registration statements in light of the Commissions current system for retaining official documents on microfiche. ⁹⁶ The commentators opined that a marking procedure provides that an order declaring a registration statement to be either withdrawn or abandoned will be placed under the same file number as the registration statement to which such order relates.

8. Investment Companies, Business Development Companies.

This grouping of rules is a new section within Regulation C. It has been developed to bring together all of the special rules for investment companies and business development companies. The Commission emphasizes that this grouping does not mean that only these rules and not others in Regulation C apply to such companies. All rules within Regulation C are applicable to registration statements filed by investment companies and a note has been added to the Regulation to that effect. The proposed rules and the proposed revisions to existing rules have been adopted substantially as proposed.

9. Registration by Foreign Governments.

The Commission did not propose revisions to the rules comprising this section of Regulation C nor did the commentators suggest any revisions. Hence, there have been no changes to these rules.

⁶⁰ The following disclosure items previously found in Regulation C have been moved to Regulation S-K; the description of securities in Rule 406; the undertakings in Rules 415 and 428; the table of contents requirement in Rule 421; the legend provisions in Rules 425, 425a, 426 and 433; and certain exhibit provisions in Rules 435, 445 and 446.

⁶¹ Corresponding revisions in the registration forms and reports were proposed in the S-1-2-3 Release, the Securities Act Coordinating Release and the Exchange Act Coordinating Release.

⁶² No overall review has been undertaken for some time. See the Regulation C Release, 46 FR at 41972, for a discussion of the background and the development of Regulations C and 12B.

⁶³ Current Rules 415, 428 and 471(b) have been recast as Rules 445, 446 and 447, respectively, under the heading "Competitive Bids."

⁶⁴ One aspect of a reorganization of Regulation C that was the subject of comment was the rules proposed for registration statements under the Securities Act for investment companies and business development companies. Since the forms for the registration of securities by such companies do not reference Regulation S-K, the provisions of Regulation C which were proposed to be transferred to Regulation S-K were set forth in four special rules, denominated by the letter "y", which were to apply only to investment companies and business development companies. Comment was requested on whether these rules and other rules which apply only to such companies should be located in a special section of Regulation C. Proposed Rule 406y, proposed Rule 425y, Rule 434d, proposed Rule 445y, proposed Rule 461y and Rule 465 have been recast as Rules 480 through 485, respectively, under the heading "Investment Companies; Business Development Companies." Rule 400 has been revised and a note has been added to Regulation C following such heading to make clear that these rules are applicable to such companies in addition to all of the remaining rules of Regulation C.

⁶⁵ See the Regulation C Release for a complete discussion of all of the proposed revisions to Regulations C and 12B.

⁶⁶ See the Regulation C Release, 46 FR at 41976, for a discussion of the operation of proposed Rule 401 and the purpose of the last clause of proposed Rule 401(g).

⁶⁷ 426 U.S. 438 (1976). See the Regulation C Release, 46 FR at 41977-8, for discussion of the Northway standard.

⁶⁸ The same definition is adopted for the Exchange Act in Rule 3b-7. As a result, definitions of the term "executive officer" previously found in Rule 13e-3, Rule 13e-4, Schedule 13D 17 CFR 240.13d-101, Rule 14a-3, Rule 14c-3 17 CFR 240.14c-3 and Rule 14d-1 17 CFR 240.14d-1 under the Exchange Act; and Instruction 1(b) to Item 4(a) of Regulation S-K have been deleted.

⁶⁹ See Release No. 33-6359.

⁷⁰ This definition is derived from the definition of the term "common equity" in Instruction 5 to proposed Item 201 of Regulation S-K. See the Regulation S-K Release, 46 FR at 41946.

⁷¹ See discussion of liability issues in Part V, infra.

⁷² A supplemental information rule has been added to Regulation 12B: Rule 12b-4.

⁷³ The deletion of this paragraph does not affect the Commissions view that, "a thorough and intensive underwriters investigation is especially important in an initial public offering by companies in the development stage or those dealing with "high technology products or processes. Release No. 33-5275 (July 27, 1972) 37 FR 16011 at 16013.

⁷⁴ The Rule was first proposed in the Guides Release as proposed Rule 462A. It was reproposed, again as proposed Rule 462A, in conjunction with the Commissions proposed integration program in the "Shelf Release." These two proposing releases contain extensive discussion of the background and issues relating to shelf registration.

⁷⁵ It should be noted that Rule 415 replaces former Guide 4 and various no-action and interpretive letters issued by the staff concerning particular offerings to be made on a delayed or continuous basis. Accordingly, registrants should no longer rely on previous staff positions and letters and comply with Rule 415.

⁷⁶ In addition to the 55 comment letters on the shelf rule proposal (File No. S7-896) received during the official comment period ending October 30, 1981 or shortly thereafter, the Commission received 44 comment letters in the seven weeks preceding its consideration of the shelf rule on February 24, 1982. These 44 letters are not included in the comment highlights prepared by the Division of Corporation Finance (See Note 12, supra), but were accepted and included in the public record and are available for public inspection and copying at the Commissions Public Reference Room (File No. S7-896). See 17 CFR 202.6(b).

⁷⁷ The Commission contemplates that, when it takes subsequent action either to adopt Rule 415 on a permanent basis (in the same or revised form) or to withdraw the Rule, registrants with then-effective shelf registration statements pursuant to Rule 415 will be subject immediately to the subsequent action. See Rule 401(f).

⁷⁸ The Commission is adopting as proposed the requirement in Item 512(a)(2) of Regulation S-K that registrants undertake that each post-effective amendment "shall be deemed to be a new registration statement relating to the securities offered therein and the offering of such securities at that time shall be deemed to be initial bona fide offering thereof," which results in a new statute of limitations period under Section 13 of the Securities Act. As indicated in the Guides Release and again in the Shelf Release, this undertaking reflects the Commissions view of the law in this area as well as the longstanding staff practice of requiring the inclusion of such an undertaking in many shelf registration statements.

⁷⁹ The proposal also reflects the fact that numerous small changes to information in the registration statement can become cumulatively fundamental. Cf. In re Franchard Corporation, 42 S.E.C. 163, 184-85 (1964).

⁸⁰ Similarly, a change in the registrants capital structure caused by sales of securities under the shelf registration statement could, if sufficiently large, be such a fundamental change.

⁸¹ See also the undertakings required by the staff in connection with a shelf registration for a continuing acquisition program. Letter re Beatrice Foods Co., (1973) Fed. Sec. L. Rep. (CCH) 79,351 (available January 17, 1973). These undertakings are subsumed within the undertaking to file post-effective amendments to reflect fundamental changes.

⁸² If the plan of distribution description discloses that an offering may be distributed by an underwriting syndicate, the identity of or changes in the identity of the members of the underwriting syndicate may be indicated by sticker. If the registration statement is on Form S-3, which incorporates by reference Exchange Act reports filed subsequent to effectiveness of the registration statement, underwriting agreements or other required exhibits may be filed with a report on Form 8-K.

⁸³ See the Shelf Release, 46 FR at 42008.

⁸⁴ The remaining named managing underwriter need not be the "books-running manager."

⁸⁵ See Release No. 33-6240 (September 17, 1980) 45 FR 61609. In particular, the staff imposed certain additional prospectus delivery requirements upon the registrant and limited the availability of the shelf registration to securities which the registrant proposed to sell in one year.

⁸⁶ It should be noted that Rule 415 is not intended to allow registrants not eligible to use Form S-3 to circumvent the Form S-3 condition on at the market offerings by registering shelf offerings at a fixed price and then using frequent prospectus stickers to change price.

⁸⁷ Cf. In re Hazel Bishop Inc., 40 S.E.C. 718, 729-32 (1961).

⁸⁸ Under Rule 415(a)(3), a registration statement providing for an at the market offering of equity securities registered therein could be declared effective without a named underwriter or underwriters if such an at the market offering would not begin immediately following the effective date of the registration statement. Offerings of securities under the registration statement could then be made without underwriter involvement, provided that such offerings were not made at the market.

⁸⁹ Section 2(11) of the Securities Act defines an underwriter as "any person who has purchased from an issuer with a view to, or offers or sells for an issuer in connection with, the distribution of any security, or participates or has a direct or indirect participation in any such underwriting, or participates or has a participation in the direct or indirect underwriting of any such undertaking."

⁹⁰ 46 FR at 42011.

⁹¹ The existing regulatory framework includes rules adopted both by the Commission and by the self regulatory organizations.

⁹² The issues discussed included: (1) Whether and how to define the term "distribution" for purposes of a shelf offering; (2) when a distribution should be deemed to commence with respect to a shelf registration; (3) what kinds of conditions such as "cooling off" periods should be imposed on registrants engaged in no selling efforts with respect to the shelf-registered securities; (4) whether purchases by affiliates should be treated differently from purchases by registrants; (5) what kinds of conditions should be imposed on purchases by broker-dealers with continuing agreements with the registrant to participate in the shelf offering during periods in which all sales and selling efforts have been suspended; (6) whether to clarify the applicability of Rule 10b-6 to market professionals who purchase securities in connection with a primary shelf offering; (7) whether special problems need to be addressed with respect to registrants and broker-dealers acting on behalf of registrants where there is a combination of conventional fixed price offerings and shelf offerings; (8) whether the staff position with respect to the distribution of research reports should be expanded for purposes of broker-dealers with continuing agreements with the registrant; and (9) whether a staff interpretive position regarding debt securities Letter re American Telephone and Telegraph Company (February 26, 1975) should be expanded.

⁹³ Release No. 34-18528 (March 3, 1982) (the "Rule 10b-6 Release").

⁹⁴ With respect to research reports distributed by broker-dealers with continuing agreements with the registrant, the staff generally has taken the position that reports complying with Rule 139 under the Securities Act (17 CFR 230.139) do not constitute prohibited inducements to purchase under Rule 10b-6. Under Rule 139, the distribution or publication by a dealer of certain types of information, opinions or recommendations concerning an issuer are deemed not to constitute an offer for sale or offer to sell securities of that issuer, for purposes of sections 2(10) and 5(c) of the Securities Act, even if the dealer is participating in an underwritten offering of the issuers securities. The interim no action position announced in the Rule 10b-6 Release with respect to Rule 415 shelf registrations would operate to allow those persons subject to Rule 10b-6 to distribute research reports beyond those complying with Rule 139 up until three business days prior to the commencement of sales. A similar position will be taken with respect to research reports for purposes of sections 2(1) and 5(c) of the Securities Act and Rule 139 thereunder. It also should be noted that Rule 139 will be the subject of the "sunset" review of the "100" rules under the Securities Act (17 CFR 230.100 to 230.175).

⁹⁵ Summary prospectuses prepared by independent organizations and filed by a registrant as part of its registration statement shall comply with the requirements of revised Rule 431.

⁹⁶ See the Regulation C Release, 46 FR at 41984.