Release No. 33-6763

Release No. 34-25546

April 4, 1988

Prospectus Delivery for Aftermarket Transactions

ACTION: Final Rules.

SUMMARY: The Securities and Exchange Commission ("Commission") has adopted an amendment to Rule 174 governing a dealers obligation to deliver prospectuses after a registered offering during the 40 or 90 day period specified in Section 4(3) of the Securities Act of 1933. This amendment reduces the aftermarket prospectus delivery period with respect to offerings by issuers that were not reporting companies before filing their registration statements to 25 calendar days after the offering of securities that are either listed on a national securities exchange or authorized for inclusion in an electronic inter-dealer quotation system of a registered securities association (e.g., NASDAQ, the quotation system sponsored and governed by the National Association of Securities Dealers, Inc.). In addition, the Commission has adopted a corresponding amendment to Rule 15c2-8 under the Securities Exchange Act of 1934.

EFFECTIVE DATE: These amendments are effective for public offerings commencing after date of publication of this release in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Prior to the effective date, Larisa E. Dobriansky (202) 272-2589, Office of Disclosure Policy, Division of Corporation Finance, Securities and Exchange Commission, 450 Fifth St., N.W., Washington, D.C. 20549. After the effective date, contact Anne Krauskopf, (202) 272-2573, Office of the Chief Counsel, Division of Corporation Finance.

SUPPLEMENTARY INFORMATION: The Commission today announced the adoption of revisions to Rule 174 ¹ under the Securities Act of 1933 ("Securities Act") ² and a corresponding amendment to Rule 15c2-8 ³ under the Securities Exchange Act of 1934 ("Exchange Act"). ⁴

The Commission reminds all securities professionals that the prospectus delivery requirement of Section 4(3), ⁵ as modified by Rule 174, applies to all dealers effecting transactions in the registered securities, whether or not they participate in the distribution of the securities, and that failure to comply with those requirements, as amended today, may result in appropriate Commission enforcement action.

Table of Contents

I. Discussion

A. Alternative Proposals to Reduce Prospectus Delivery Period

In December, 1986, the Commission proposed alternative amendments to Rule 174 ⁶ to reduce or, in some cases, eliminate the 40 or 90 day prospectus delivery period specified in Section 4(3) of the Securities Act ("prospectus delivery period"). During the applicable period, ⁷ dealers ⁸ must deliver a Section 10(a) ⁹ prospectus (final prospectus) in connection with most secondary market transactions ¹⁰ in securities that are the subject of a registration statement filed under the Securities Act. The aftermarket prospectus delivery requirement applies to all dealers effecting transactions in the registered securities, whether or not they participate in the distribution of the securities. That requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

The prospectus delivery period and associated "quiet period" ¹¹ run from the later of the effective date of the registration statement or the first date on which the securities were bona fide offered to the public. Rule 174 provides, with respect to either the 40 or 90 day period, that a prospectus need not be delivered for aftermarket transactions in the securities of an issuer that was a reporting company under the Exchange Act prior to filing the Securities Act registration statement covering such securities.

Two approaches to amending Rule 174 were proposed. Both would have provided relief, under certain circumstances, for transactions in the securities of issuers not subject to the reporting requirements of Section 13 or 15(d) ¹² of the Exchange Act immediately prior to filing their registration statements ("non-reporting companies"). In this regard, comment was solicited on whether developments that have occurred in the trading markets justify a reduction in the prospectus delivery period for offerings by non-reporting companies ("initial public offerings") of securities meeting the conditions of either proposal. In particular, comment was requested on whether current trading requirements, market processes, and issuer standards assure the availability and timely dissemination of material information and minimize the potential for market manipulation and other hot issue abuses. The Commission asked commentators to furnish empirical data supporting their views.

Proposal I would have reduced the prospectus delivery period to 25 days following a public offering for transactions in listed equity ¹³ or NASDAQ ¹⁴ securities for which real-time transaction reporting ¹⁵ is required by an effective transaction reporting plan ¹⁶ ("transaction-reported securities"). Exchange Act Rule 11Aa2-1 designates for trading in the National Market System ("NMS") any transaction-reported security. ¹⁷

In addition to reducing the prospectus delivery period for transaction-reported securities, Proposal I would have eliminated the prospectus delivery requirement for aftermarket transactions in transaction-reported common stock sold in a firm commitment underwriting if the registrant satisfied criteria relating to the companys size, public float and operating history. Those transactions would have been afforded the same relief currently provided under Rule 174 to transactions in securities of reporting companies.

The alternative rule proposed for comment, Proposal II, was based on the recommendations contained in a rulemaking petition filed by the Securities Industry Association ("SIA"). ¹⁸ It would have reduced the prospectus delivery period to 25 days for dealers trading in securities listed on a national securities exchange or authorized for inclusion in the NASDAQ system, whether or not subject to transaction reporting.

B. Comments on Proposed Amendments

Of the seven commentators on the rule proposals, six endorsed the Commissions objective of further reducing the regulatory burdens imposed upon dealers under Section 4(3) of the Securities Act without compromising investor protection. ¹⁹ However, none of the commentators supported the elimination of the delivery period under Proposal I. Doubts were expressed about whether, immediately after completion of an initial public offering, information concerning the issuer will have been disseminated as broadly as information relating to comparable companies having a reporting history under the Exchange Act.

Of the commentators favoring a reduction in the prospectus delivery period, four commentators specifically addressed the appropriate time period, ²⁰ but only one commentator provided empirical data to support its position. ²¹ Those commentators believed that 25 calendar days should provide adequate time for the establishment of an orderly trading market for securities covered by either Proposal I or II.

Five of the commentators supporting changes to Rule 174 preferred the approach of Proposal II. They believed that it would be sufficient to rely upon listing standards, filing and disclosure requirements, and available market information about exchange-traded or NASDAQ securities to curb the potential for abuse associated with hot issues. Four of those commentators stated their belief that the distinctions between NASDAQ/NMS and NASDAQ-only securities do not justify limiting relief to NASDAQ/NMS securities. Only one commentator supported transaction reporting as a condition for relief under Rule 174. In that commentators view, the qualification criteria for transaction reporting minimize the risk of abuse.

C. Analysis of Trading Volume and Price Data by the Directorate of Economic and Policy Analysis

The Commissions Directorate of Economic and Policy Analysis ("DEPA") ²² analyzed aftermarket trading behavior of transaction-reported common stocks and non-NMS/NASDAQ common stocks issued in initial public offerings between March 1985 and February 1986 ("DEPA Analysis"). ²³ The analysis focused on daily volume and relative price changes occurring with respect to aftermarket transactions in 96 such securities during the first 90 and 150 trading days, respectively, following registration effectiveness. The total sample consisted of 33 transaction-reported stocks and 63 non-NMS/NASDAQ stocks.

The volume data indicated that abnormal volume subsided well before 90 calendar days for both transaction-reported and non-NMS/NASDAQ securities. ²⁴ The volume and price data did not support the zero-day exemption contained in Proposal I. The data indicated that abnormal volume and price behavior subsided no more quickly for those securities that would have qualified for the zero-day exemption than for the other securities in the total sample. ²⁵

II. Amendment of Rule 174

The Commission has determined to reduce the prospectus delivery period based on Proposal II. The amendment to Rule 174 is intended to reduce unnecessary regulatory burdens and compliance costs imposed upon dealers in the aftermarket by Section 4(3), consistent with investor protection.

The revised rule preserves an aftermarket prospectus delivery period and associated "quiet period" ²⁶ to ensure that investors obtain full and fair disclosure concerning non-reporting issuers. Because of the importance of the aftermarket prospectus delivery period and the "quiet period" to investor protection, the Commission intends to institute appropriate action for failure to comply with the requirements of Section 4(3) as modified by Rule 174 as amended.

The amendment to Rule 174 ²⁷ reduces the 40 or 90 day prospectus delivery period after a registered offering of securities by a non-reporting company, if, as of the "offering date," the securities are either listed on a national securities exchange or authorized for inclusion in an electronic inter-dealer quotation system sponsored and governed by the rules of a registered securities association. ²⁸ For purposes of this provision, the term "offering date" refers to the later of the effective date of the registration statement or the first date on which the security was bona fide offered to the public. Under the Rule as revised, a dealers prospectus delivery obligation with respect to the offerings described above will cease 25 calendar days after the offering date.

Under Proposal II, the prospectus delivery period would have run solely from the date of effectiveness. As adopted, Rule 174(d) establishes a trigger date that conforms to the provisions of Section 4(3)(B) of the Securities Act. The statutory trigger date has been retained because the need for prospectus delivery does not arise until the bona fide commencement of a public offering, which may be later than the date on which a registration statement becomes effective. ²⁹

In response to the Commissions question in the Proposing Release, commentators stated their belief that a reduced prospectus delivery period of 25 calendar days should provide a reasonable time for the secondary market to assimilate available information and to stabilize. ³⁰ The DEPA analysis indicated that abnormal trading volume for the transaction-reported and NASDAQ-only securities tested was 80% dissipated by the 16th trading day (23rd calendar day). ³¹

The delivery period is expressed in terms of calendar rather than trading days in order to simplify compliance and to make the calculation under Item 502(e) of Regulation S-K ³² easier. Under Item 502(e), the registrant is required to insert into the prospectus legend the expiration date of the Section 4(3) delivery period. That legend indicates that all dealers, whether or not participating in the distribution of securities that are the subject of a Securities Act registration statement, may be required to deliver a prospectus for the applicable delivery period. As is currently the case, the registrant, through its managing underwriter, will be in a position to know when the offering will commence and therefore able to calculate the correct date for the prospectus legend.

The Rule 174 amendment covers registered offerings of all exchange-listed and NASDAQ securities by previously non-reporting companies. It does not apply to offerings of over-the-counter securities for which transaction quotations are solely listed by the National Quotation Bureau in the "pink sheets." ³³

The existence of regulatory requirements applicable to exchange-listed and NASDAQ securities and market processes provide adequate investor protection to permit relaxation of the prospectus delivery requirements. Listing standards, filing and disclosure requirements, and market information requirements assure the availability and timely dissemination of material information.

In admitting securities for trading, the exchanges and the National Association of Securities Dealers ("NASD") impose qualification criteria on issuers. ³⁴ These criteria specify minimum standards for an issuers financial characteristics, public distribution of a security and market activity of a security. ³⁵ They also require issuers to comply with continuing filing and disclosure obligations. ³⁶ These requirements are intended to assure that information about qualifying issuers is available to the marketplace and is updated on a timely basis. ³⁷

To qualify for the 25-day prospectus delivery period, the applicable Exchange or NASDAQ standards must be satisfied as of the offering date under new Rule 174(d). For the shortened delivery period to apply where an issuer undertakes a unit offering, or more than one class of securities is covered by a prospectus, each security comprising a unit or offered by means of the prospectus must be so qualified.

Trade and quotation reporting requirements applicable to exchange-listed and NASDAQ securities help investors, self-regulatory organizations, and the Commission to monitor and surveil aftermarket transactions. Securities that have been designated for trading in the National Market System are subject to both continuous firm quotation ³⁸ and real-time last sale reporting requirements. ³⁹ NASDAQ-only securities and regional exchange-listed securities that are not transaction-reported also are subject to continuous firm quotation requirements. ⁴⁰

Consistent with Proposal II, Rule 174, as amended, retains the Section 4(3) delivery periods for secondary market transactions in the securities of non-reporting companies where the securities (or any of the securities comprising a unit) are neither exchange-listed nor NASDAQ securities. The amendment to Rule 174 also preserves the prospectus delivery requirement for a dealer acting as an underwriter or effecting transactions in an unsold allotment or subscription of securities. ⁴¹ Finally, this amendment does not alter a dealers prospectus delivery obligations under Exchange Act Rule 15c2-8. ⁴²

In the Proposing Release, the Commission requested comment on whether to exclude from relief under the proposed Rule 174 amendment "blank check" offerings by companies with minimal operating assets. These offerings involve "shell" companies going public by means of registration statements that do not specify business or investment plans at the time of effectiveness. Instead of creating an exclusion from the amendment to Rule 174 for such "blank check" offerings, the Commission has determined to rely upon the issuer financial and trading criteria for exchange listing or NASDAQ authorization to screen out offerings that are most susceptible to abuse.

III. Cost-Benefit Analysis

To evaluate fully the benefits and costs associated with the proposed amendment to Rule 174, the Commission requested commentators to provide views and data as to the costs and benefits associated with the amendment to reduce the 40 or 90 day aftermarket prospectus delivery periods specified in Section 4(3) of the Securities Act. In this regard, the Commission noted that the amendment would reduce unnecessary costs and regulatory burdens imposed by Section 4(3) and Rule 174 thereunder. The commentators on the rule proposals did not quantify the costs of the Section 4(3) prospectus delivery requirements nor the cost savings under the respective proposals. Commentators that addressed the issue of benefits pointed out that the relief provided by Proposal II would apply to a broader class of securities offerings.

IV. Final Regulatory Flexibility Analysis

This final regulatory flexibility analysis concerns amendments to Securities Act Rule 174 and Exchange Act Rule 15c2-8, and has been prepared in accordance with 5 U.S.C. 604. A summary of the Initial Regulatory Flexibility Analysis was included in the Proposing Release.

Reasons For and Objectives of Amendments

The objective of the amendment to Rule 174 is to reduce the aftermarket prospectus delivery periods specified in Section 4(3) of the Securities Act where current trading requirements, issuer standards and market processes assure the availability and timely dissemination of material information and minimize the potential for abuse. By relaxing the aftermarket prospectus delivery obligation through a reduction of the time period, this amendment reduces unnecessary costs imposed by the prospectus delivery requirements of Section 4(3) and Rule 174 thereunder. The change achieves these purposes while preserving adequate disclosure of information to investors and investor protection under the federal securities laws.

The technical amendment to Rule 15c2-8 reflects the fact that the prospectus delivery requirements under that rule are not affected by the Rule 174 amendment.

Public Comment

No commentators responded to the Commissions request for comments on the Initial Regulatory Flexibility Analysis.

Significant Alternatives

Pursuant to Section 604 of the Regulatory Flexibility Act, the following types of alternatives were considered:

(1) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; and

(2) the clarification, consolidation or simplification of compliance and reporting requirements under the rules for such small entities.

The scope of the relief provided under Rule 174, as amended herein, is based on investor protection concerns. Hot issue abuses and investor protection concerns arise with respect to the securities offerings of small entities as well as those of larger companies. The relief provided herein reduces unnecessary regulatory burdens and compliance costs imposed by Section 4(3) to the extent consistent with investor protection.

(3) The use of performance rather than design standards. With respect to Rule 174, as amended herein, performance standards are not consistent with this agencys statutory mandate to provide adequate disclosure to investors.

(4) An exemption from coverage of the rules, or any part thereof, for small entities. Rule 174, as amended herein, provides relief from the prospectus delivery requirements of Section 4(3) to the extent consistent with investor protection. Extending an exemption to or providing different prospectus delivery requirements for small entities for transactions subject to the Securities Act would not be warranted in light of the Commissions statutory mandate.

As more fully discussed in the text of the release, the Commission evaluated the alternative rule proposals and determined to provide relief under Rule 174 based on Proposal II for transactions in exchange-listed and NASDAQ securities.

V. Statutory Basis

Rule 174 is being amended by the Commission pursuant to Sections 4 and 19 of the Securities Act. Rule 15c2-8 is being amended pursuant to Sections 2, 15(c) and 23(a) of the Exchange Act. Because these rule changes are intended to relieve existing regulatory restrictions within the meaning of Section 553(d)(1) of the Administrative Procedure Act (5 U.S.C. 553(d)(1)), the Commission has determined to make them effective immediately upon publication in the Federal Register.

List of Subjects in 17 CFR Parts 230 and 240

Reporting and recordkeeping requirements, Securities.

VI. Text of Amendments

In accordance with the foregoing, Title 17, Chapter II of the Code of Federal Regulations is to be amended as follows:

PART 230-General Rules And Regulations, Securities Act of 1933

1. The authority citation for Part 230 continues to read, in part, as follows: (Citations before * * * indicate general rulemaking authority).

Authority: Section 19, 48 Stat. 85, as amended: 15 U.S.C. 77s * * * §230.174 also issued under Section 4, 48 Stat. 77; 15 U.S.C. 77d.

2. §230.174 is amended by redesignating paragraphs (d) and (e) as (e) and (f) respectively and adding new paragraph (d) to Section 230.174 to read as follows:

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

* * * * *

(d) If (1) the registration statement relates to the security of an issuer that is not subject, immediately prior to the time of filing the registration statement, to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, and (2) as of the offering date, the security is listed on a registered national securities exchange or authorized for inclusion in an electronic inter-dealer quotation system sponsored and governed by the rules of a registered securities association, no prospectus need be delivered after the expiration of twenty-five calendar days after the offering date. For purposes of this provision, the term "offering date" refers to the later of the effective date of the registration statement or the first date on which the security was bona fide offered to the public.

* * * * *

Part 240-General Rules and Regulations, Securities Exchange Act of 1934

1. The authority citation for Part 240 continues to read, in part, as follows: (Citations before * * * indicate general rulemaking authority).

Authority: Section 23, 48 Stat. 901, as amended: 15 U.S.C. 78w * * * §240.15c2-8 also issued under Sections 2, 52 Stat. 1075, 15 U.S.C. 78b; 15, 48 Stat. 895, as amended, 15 U.S.C. 78o.

2. The third sentence of paragraph (d) of §240.15c2-8 is amended to read as follows:

§240.15c2-8 Delivery of Prospectus.

* * * * *

(d) * * * (The 40-day and 90-day periods referred to above shall be deemed to apply for purposes of this rule irrespective of the provisions of paragraphs (b) and (d) of Rule 174 under the Securities Act of 1933).

* * * * *

By the Commission.

Jonathan G. Katz

Secretary

¹ 17 CFR 230.174.

² 15 U.S.C. 77a-77aa (1982).

³ 17 CFR 240.15c2-8.

⁴ 15 U.S.C. 78a-78kk (1982).

⁵ 15 U.S.C. 77d(3).

⁶ Release No. 33-6682 (December 18, 1986) 51 FR 46874 ("Proposing Release").

⁷ If securities of the issuer have not been sold previously pursuant to an earlier effective registration statement, the applicable period specified in Section 4(3)(B) 15 U.S.C. 77d(3)(B) is 90 days; otherwise, the designated period is 40 days. In both cases, the Securities Act authorizes the Commission to specify a shorter period.

⁸ Under Section 2(12) of the Securities Act 15 U.S.C. 77b(12), and as used throughout this Release, the term "dealer" includes a "broker."

⁹ 15 U.S.C. 77j(a).

¹⁰ Section 4(4) of the Securities Act (15 U.S.C. 77d(4)) exempts transactions executed by brokers on exchanges or in the over-the-counter markets pursuant to unsolicited customers orders.

¹¹ Sections 5(b)(1) 15 U.S.C. 77e(b)(1) and 2(10) 15 U.S.C. 77b(10) of the Securities Act, taken together, require that, during the prospectus delivery period, a prospectus meeting the requirements of Section 10(a) of the Act accompany or precede any communication that would be deemed to be a prospectus and does not itself meet the Section 10(a) requirements. As a result of such restrictions, the prospectus delivery period frequently is referred to as a "quiet period."

¹² 15 U.S.C. 78m, 78o(d).

¹³ The term "listed equity security" means any equity security which is listed on a national securities exchange.

¹⁴ The term "NASDAQ security" means any equity security for which quotation information is disseminated in the National Association of Securities Dealers Automated Quotations ("NASDAQ") system.

¹⁵ Real-time transaction reporting is the disseminating, within 90 seconds of a transaction, of the price and volume data associated with the transaction.

¹⁶ Rule 11Aa3-1 under the Exchange Act ("transaction reporting rule") 17 CFR 240.11Aa3-1 defines an "effective transaction reporting plan" as a plan for collecting, processing and disseminating transaction reports with respect to transactions in reported securities that has been approved by the Commission.

¹⁷ Rule 11Aa2-1 17 CFR 240.11Aa2-1 ("NMS securities rule"). See Release No. 34-24635 (June 23, 1987) 52 FR 24149.

¹⁸ The SIA is a trade association representing over 500 securities firms in the United States and Canada, which collectively account for approximately 90% of the securities business transacted in North America. The SIA petition was submitted on April 1, 1985 pursuant to Rule 4(a) of the Commissions Rules of Practice 17 CFR 201.4(a). This petition is available for public inspection and copying in the Commissions Public Reference Room (see File No. S7-31-86).

¹⁹ The comment letters are available for public inspection and copying at the Commissions Public Reference Room (see File No. S7-31-86).

²⁰ The SIA addressed this issue in its rulemaking petition.

²¹ That commentator presented aftermarket price and volume data for the first 10, 25, 40 and 90 days of trading in securities that were issued in various initial public offerings it underwrote. The data indicated that the heaviest trading volume generally occurred within the first 10 trading days and, after 25 trading days, the average volume leveled off substantially. The commentator supplying the data favored the adoption of Proposal II.

²² DEPA was merged with the Office of the Chief Economist in January, 1988, to create the Office of Economic Analysis.

²³ DEPAs analysis is available for public inspection and copying at the Commissions Public Reference Room (see File No. S7-31-86).

²⁴ The analysis notes that, while choosing the point when the level of trading volume becomes normal is judgmental, abnormal trading volume for both groups of stocks was 80% dissipated by the 16th day of trading (23rd calendar day) and virtually non-existent by about the 38th trading day (56th calendar day). DEPA Analysis at 6.

²⁵ DEPA Analysis at 6, 14.

²⁶See n. 11, supra.

²⁷See new paragraph (d) of Rule 174. Subsequent paragraphs of Rule 174 have been redesignated.

²⁸ Currently, NASDAQ is the only such quotation system.

²⁹ For example, this could occur where a registrant relies upon Securities Act Rule 430A 17 CFR 230.430A or Rule 415 17 CFR 230.415.

³⁰See n. 21, supra.

³¹See n. 24, supra.

³² 17 CFR 229.502(e).

³³ The NASD has submitted to the Commission a rule filing that would establish a Non-NASDAQ Reporting System: an electronic price and volume reporting system for non-NASDAQ securities. See SR-NASD-87-55. Approval by the Commission of the rule filing would not cause "pink sheet" securities to be subject to the reduced prospectus delivery period now set out in Rule 174.

³⁴See, e.g., New York Stock Exchange ("NYSE") Listed Company Manual, reprinted in NYSE Guide (CCH) 2501 at 4225-26; American Stock Exchange ("Amex") Guide (CCH) 10,001-10,005; Philadelphia Stock Exchange Guide (CCH) 2803 at 2301, Rule 803(a); Pacific Stock Exchange Guide (CCH) 3025 at 3053-54, Rule I Section 3(b); Midwest Stock Exchange Guide (CCH) 1897, Article XXVIII, Rule 7; Boston Stock Exchange Guide (CCH) 2260, Chapter XXVII, Section 1; NASD Manual (CCH) 1754 at 1571, Schedule D to the By-Laws, Part VI, Sections 2(a) and (b).

³⁵ For example, these standards may specify: 1) that there be a minimum number of shares of the issuers security in the hands of a minimum number of public shareholders; 2) that the issuer meet minimum asset, capital and surplus, or income requirements; 3) that the issuer have a certain operating history; 4) that the public float have a certain market value. See standards for listing and quotation cited in n. 34, supra. For initial inclusion in NASDAQ, a security must have two registered and active market makers, and each market maker must be willing to buy and sell the security for its own account on a continuous basis and must enter and maintain firm two-sided quotations in the NASDAQ system. NASD Manual (CCH) 1754 at 1565, 1571, Schedule D to the By-Laws, Part II, Section 1(c)(1) and Part VI, Sections 2(a) and (b).

³⁶See n. 34 supra E.g., NYSE Guide 2507; Amex Guide 10,030; NASD Manual 1754; Philadelphia Stock Exchange Guide 2805; Midwest Stock Exchange Guide 1898; Boston Stock Exchange Guide 2267.

³⁷ Issuers seeking to have their securities listed on an exchange or reported under the NASDs Transaction Reporting Plan must register their securities immediately under Section 12(b) or 12(g) of the Exchange Act 15 U.S.C. 781(b), (g). A NASDAQ-only issuer need not register its securities under Section 12(g) of the Exchange Act until 120 days after the last day of the issuers fiscal year during which the registration statement became effective. NASD Manual (CCH) 1754 at 1565, Schedule D to the By-Laws, Part II, Sections 1(b)(1) and (2). However, upon effectiveness of the registration statement, the registrant will be subject to the reporting requirements of Exchange Act Section 15(d).

³⁸ Exchange Act Rule 11Ac1-1 17 CFR 240.11Ac1-1 ("the firm quotation rule").

³⁹See n. 15, supra.

⁴⁰ The firm quotation rule; NASD Manual, (CCH) 1754 at 1561, Schedule D to the By-Laws, Part VI, Sections 2(a) and (b).

⁴¹See current Rule 174(e) 17 CFR 230.174(e), redesignated as Rule 174(f).

⁴² The Commission is adopting a technical amendment to Rule 15c2-8(d) 17 CFR 240.15c2-8(d) to reflect the fact that the obligation to deliver prospectuses under that rule is unaffected by this amendment to Rule 174.