Release No. 33-6932

Release No. 34-30577

Release No. IC-18651

April 13, 1992

ACTION: Final Rules

Blank Check Offerings

SUMMARY: To implement provisions of the Securities Enforcement Remedies and Penny Stock Reform Act of 1990 (Penny Stock Reform Act), the Commission today is adopting rules relating to registration statements filed by blank check companies offering penny stock. The rules include requirements to deposit in a special account securities issued and funds received in the offering, prohibit trading in deposited securities, disclose information regarding acquisitions by the blank check company, provide purchasers with the right to obtain a refund of deposited funds upon receipt of the information, and return deposited funds to investors if an acquisition meeting specified criteria has not been consummated within 18 months after the initial offering date.

EFFECTIVE DATE: The rules will apply to registration statements filed by blank check companies on or after [insert date of publication of this release in the Federal Register], as well as registration statements pending on that date.

FOR FURTHER INFORMATION CONTACT: Richard P. Konrath, Office of Disclosure Policy, Division of Corporation Finance, Securities and Exchange Commission, 450 Fifth St., N.W., Washington, D.C. 20549, (202) 272-2589.

SUPPLEMENTARY INFORMATION: The Commission today is adopting new Rule 419 under the Securities Act of 1933 (Securities Act), ¹ new Rule 15g-8 under the Securities Exchange Act of 1934 (Exchange Act), ² and an amendment to Securities Act Rule 174. ³

Table of Contents

I. EXECUTIVE SUMMARY AND BACKGROUND

In adopting the Penny Stock Reform Act, ⁴ Congress recognized that fraud undermines investor confidence and thereby inhibits capital formation. ⁵ Finding blank check offerings to be a common vehicle for fraud and manipulation in the penny stock market, Congress expressly directed the Commission to adopt rules governing registration statements filed by blank check companies offering penny stock. ⁶ The statute states that the special rules may include additional disclosure requirements, limitations on the use of proceeds and the distribution of securities by the issuer until the required disclosure has been made, and a right of rescission to shareholders who invested in the offering.

Pursuant to that mandate, the Commission published for comment proposed Rule 419 under the Securities Act, new Rule 15g-8 under the Exchange Act, and an amendment to Securities Act Rule 174. ⁷ Those proposals prescribed registration procedures for offerings by blank check companies designed to assure adequate disclosure and restrict the potential for market manipulation. ⁸

The Commission today is adopting Rule 419 substantially as proposed, with changes discussed below. ⁹ The rule requires funds received and securities issued in an offering of penny stock by a blank check company to be placed in an escrow or trust account (Rule 419 Account) until consummation of an acquisition(s) in which the fair value of the business(es) or the net assets that constitute a business (net assets) acquired represents at least 80 percent of the maximum offering proceeds, including amounts received or to be received upon exercise or conversion of securities offered but excluding underwriter compensation payable to non-affiliates. The conditions include the filing of a post-effective amendment upon execution of an agreement for the acquisition of a business or assets meeting the above criteria. Upon receipt of the prospectus describing the acquisition(s), purchasers will have the opportunity to have their deposited funds (less certain withdrawals) returned. Funds will not be released from the Rule 419 Account to the registrant until the acquisition(s) meeting the specified criteria is consummated. If such an acquisition does not occur within 18 months after the effective date of the initial registration statement, funds must be returned to purchasers.

The Commission also is adopting, as proposed, new Exchange Act Rule 15g-8 and an amendment to Securities Act Rule 174. Rule 15g-8 prevents trading of securities held in the Rule 419 Account. Securities Act Rule 174 has been amended to provide that the statutory prospectus delivery period would not terminate until 90 days following the release of the blank check companys securities from the Rule 419 Account.

The principal changes from the proposed rules are as follows. First, as adopted, funds to pay certain expenses to underwriters or dealers unaffiliated with the registrant need not be deposited in the Rule 419 Account, regardless of whether the offering is on a firm commitment or contingent basis. ¹⁰ Second, the registrant may use up to 10 percent of the offering proceeds after payment of unaffiliated underwriter and dealer compensation, regardless of whether the offering is on a firm commitment or contingent basis. ¹¹ Third, execution of an agreement for the acquisition(s) of a business(es) or assets meeting specified criteria, rather than consummation of the acquisition(s), will trigger the requirement to file a post-effective amendment under Rule 419(e). However, the release of funds from the Rule 419 Account to the registrant will not be permitted until the acquisition(s) is consummated. Fourth, the criteria that the acquisition(s) must meet have been modified to provide that the fair value of the business(es) or net assets to be acquired must represent 80 percent of the maximum offering proceeds, including funds received or to be received upon exercise or conversion of securities offered. Finally, the rule has been reorganized for clarity.

II. DISCUSSION OF THE RULES

A. Scope of Rule 419

Rule 419 applies to every registration statement filed under the Securities Act relating to an offering by a blank check company. ¹² The term blank check company, restructured from the proposal, ¹³ means a development stage company ¹⁴ that either has no specific business plan or purpose, or has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies; and is issuing penny stock as defined in Exchange Act Rule 3a51-1. ¹⁵ Rule 419 does not apply to offerings by small businesses other than blank check companies, such as investments in limited partnerships or other direct participation programs (sometimes called blind pools) where a detailed plan of business is developed, but specific investment properties are unidentified (e.g., a real estate limited partnership formed to invest in apartment buildings that have not yet been selected). ¹⁶ Likewise, start-up companies with specific business plans are not subject to Rule 419, even if operations have not commenced at the time of the offering.

In the Proposing Release, comment was solicited as to whether the definition of blank check company should include companies that do not have a specific percentage of offering proceeds committed to a specific business plan or purpose or an identified acquisition. While the Commission has determined not to adopt a specific percentage test at this time, it will scrutinize registered offerings for attempts to create the appearance that the registrant is not a development stage company or has a specific business plan, in an effort to avoid the application of Rule 419.

B. Rule 419 Account

1. Deposit of Funds into an Escrow or Trust Account

Rule 419 requires the proceeds received pursuant to a blank check offering to be deposited into (i) an escrow account maintained by an insured depository institution ¹⁷ or (ii) a separate bank account established by a broker or dealer acting as trustee for persons having beneficial interests in the account. ¹⁸ If funds and securities are deposited into an escrow account maintained by an insured depository institution, that institutions deposit account records must specify that funds are held for the named purchasers of the securities in accordance with specified regulations of the Federal Deposit Insurance Corporation. ¹⁹ If funds are deposited in a separate bank account by a broker or dealer acting as a trustee, the books and records of the broker or dealer must indicate the name, address, and interest of each person for whom the account is held. ²⁰

As proposed, Rule 419 would have required all proceeds received in a contingent offering (i.e., offering on an all-or-none or part-or-none basis) to remain in the Rule 419 Account until termination of that account. By contrast, in a firm commitment offering under the proposed rule, underwriting commissions, underwriting expenses, and dealer allowances of entities unaffiliated with the registrant were excluded from amounts required to be deposited, and up to ten percent of the proceeds to be deposited could be used by the registrant. In response to commenter concerns regarding this disparate treatment, Rule 419, as adopted, permits excluding underwriting commissions, underwriting expenses, and dealer allowances of entities unaffiliated with the registrant from amounts required to be deposited, regardless of whether the offering is on a firm commitment or contingent basis. ²¹ Moreover, ten percent of the net proceeds, after payment of underwriter and dealer compensation, may be released to the registrant as the proceeds are deposited in both contingent and firm commitment offerings. ²²

Unlike Rule 419, Exchange Act Rule 15c2-4 ²³ does not permit the payment of underwriting commissions, underwriting expenses, and dealer allowances from proceeds required to be deposited, and prohibits the disbursal of deposited funds to the registrant in a contingent offering until the specified contingency is satisfied. With respect to a blank check offering subject to both Rule 419 and Rule 15c2-4, the requirements of Rule 15c2-4 are applicable only until the conditions of the offering governed by that Rule are met (e.g., reaching the minimum in a part-or-none offering). Upon satisfaction of those conditions, Rule 419 continues to govern the use of offering proceeds. ²⁴ This interplay between Rule 15c2-4 and Rule 419 is required to be disclosed in the initial registration statement filed by the blank check company. ²⁵

For example, a registrant makes a blank check offering on a best efforts, part-or-none basis, through an unaffiliated underwriter, the terms of which provide that the minimum offering is $500,000, which must be received on or before October 1, 1992, and the maximum offering is $1 million. If $500,000 is raised by the specified date, securities can continue to be sold until the stated maximum of $1 million is raised. Until the earlier of the satisfaction of the contingency or October 1, 1992, Rules 419, 15c2-4 and 10b-9 apply and no offering proceeds may be released from deposit. If on October 1, 1992, $500,000 has not been raised, proceeds must be returned promptly to investors pursuant to Rules 15c2-4 and 10b-9.

If on October 1, 1992, at least $500,000 has been raised and the other obligations under Rules 15c2-4 and 10b-9 have been satisfied, such obligations cease but funds would continue to be held pursuant to Rule 419. A $50,000 underwriter commission (assuming a 10 percent commission to non-affiliates) may be paid on October 2, 1992. Ten percent of the remaining proceeds of $450,000, or $45,000, may be paid to the registrant, leaving $405,000 of offering proceeds, as well as the securities issued, in the Rule 419 Account. As further offering proceeds are received, for example, $1,000 on October 2, 1992, underwriters may be paid commissions ($100) and the registrant may receive 10 percent of the remainder ($90), leaving $810 of proceeds to be deposited in the Rule 419 Account. Thus, $405,810 of the offering proceeds is held in the Rule 419 Account.

Contemplating the use of escrowed funds and bank borrowings, on December 1, 1992, the registrant files a post-effective amendment reflecting the execution of an acquisition agreement accounting for $850,000, which represents in excess of 80 percent of the maximum offering proceeds of $900,000. ²⁶ Once the post-effective amendment is effective, the registrant must distribute the prospectus to investors. Assume that investors request refunds of $20,000 so that proceeds now in the Rule 419 Account total $385,810. The registrant would not be required pursuant to Rule 10b-9 to refund offering proceeds for failure to maintain the stated $500,000 minimum offering amount. A broker would not be deemed to be in violation of Rule 15c2-4 for having received commissions after October 1, since the minimum offering terms were met as initially specified.

Funds deposited in a Rule 419 Account and interest or dividends thereon must be held for the sole benefit of the purchasers ²⁷ in one of the following accounts: (1) an obligation that constitutes a deposit as that term is defined in Section 3(1) of the Federal Deposit Insurance Act; ²⁸ (2) securities of any open-end investment company registered under the Investment Company Act of 1940 that holds itself out as a money market fund ²⁹; or (3) securities that are direct obligations of, or obligations guaranteed as to principal or interest by, the United States. ³⁰ Commenters expressed concern regarding the potential fluctuation in value of government securities and the ability to liquidate those securities within time periods specified in Rule 419. Although the Rule continues to permit investments in government securities, registrants are cautioned that such an investment would be inappropriate unless the instrument could be readily sold or otherwise disposed of for cash within the constraints of Rule 419 without any dissipation of offering proceeds invested. ³¹

The proposing release solicited comment regarding the registration of the Rule 419 Account as an investment company under the Investment Company Act. Although a Rule 419 Account may be an investment company under the Investment Company Act of 1940, ³² in light of the purposes served by the regulatory requirement to establish such an account, the limited nature of the investments, and the limited duration of the account, such an account will neither be required to register as an investment company nor regulated as an investment company as long as it meets the requirements of Rule 419.

2. Deposit of Securities into an Escrow or Trust Account

Requirements regarding the deposit of securities into the Rule 419 Account are adopted as proposed. Accordingly, all securities sold in an offering by a blank check company, as well as securities issued in connection with the offering to underwriters, promoters or others as compensation or otherwise, must be placed in the Rule 419 Account and subject to the following conditions. ³³ The securities must be issued in the name of the purchaser, remain in that form, and held for the sole benefit of purchasers, who will have the voting rights, if any, provided by applicable state law. ³⁴ In addition, deposited securities may not be transferred or disposed of, except by will or the laws of descent and distribution, pursuant to a qualified domestic relations order as defined, or to permit the exercise or conversion of derivative securities held in the escrow or trust account. ³⁵

Frequently, securities sold by blank check companies are issued in units consisting of common stock and warrants or convertible securities relating to the common stock (e.g., a unit consisting of one share of common stock and two common stock warrants or other derivative securities relating to the common stock). While permitting the exercise or conversion of securities held in a Rule 419 Account, Rule 419 requires the deposit of securities received upon exercise or conversion, as well as any cash or other consideration paid in connection with exercise or conversion. ³⁶

3. Prohibition on Trading in Deposited Securities

Exchange Act Rule 15g-8 is adopted as proposed. Following the initial sale of the blank check companys securities, new Exchange Act Rule 15g-8 prohibits any sale of deposited securities or interests in these securities until the securities are released from the Rule 419 Account. Therefore, contracts of sale to be satisfied by delivery of the deposited security, such as contracts for sale on a when, as, and if-issued basis, and sale of derivative securities settled by delivery of the security, such as a physically-settled option on the security, are prohibited by Rule 15g-8 while the securities are in the Rule 419 Account. In addition, Rule 15g-8 prohibits the sale of other interests based on the deposited security, whether or not physical delivery is required.

C. Release of Funds and Securities from the Rule 419 Account

To effect release of funds and securities from the Rule 419 Account, the following conditions must be met. First, the registrant must execute an agreement for the acquisition(s) of a business(es) or assets for which the fair value of the business(es) or net assets to be acquired represents at least 80 percent of the maximum offering proceeds, including funds received or to be received upon exercise or conversion of securities offered, but excluding underwriting commissions, underwriting expenses and dealer allowances payable to nonaffiliates. ³⁷ Second, upon execution of that agreement, the registrant must file a post-effective amendment with the Commission providing the disclosure required by Rule 419(e). ³⁸ Third, no later than five business days after the effective date of that post-effective amendment, the registrant must send each purchaser a copy of the prospectus contained in the post-effective amendment and any amendment or supplement thereto. ³⁹ Fourth, the registrant must give each purchaser no fewer than 20 business days and no more than 45 business days from the effective date of the post-effective amendment to notify the registrant that he or she elects to remain an investor. ⁴⁰ If purchaser notification is not received by the registrant within the prescribed time, the purchasers deposit must be refunded. Fifth, the registrant must consummate the acquisition(s) meeting the criteria set forth above. ⁴¹ Funds may not be released until the consummation of the acquisition and the receipt by the escrow agent or trustee of a signed representation from the registrant that the above conditions have been met. ⁴²

There are two circumstances under which funds will be returned to the purchaser and securities returned to the registrant. First, as noted above, if upon receipt of the prospectus purchasers do not confirm an intent to invest within the prescribed time, their funds must be returned to them. ⁴³ Second, if the conditions noted above are not met within 18 months after the effective date of the registrants initial registration statement, deposited funds must be returned to purchasers. ⁴⁴

The following requirements have been changed from the proposals. Execution of an agreement for the acquisition(s) of a business(es) or assets meeting specified criteria, rather than consummation of the acquisition as proposed, will trigger filing of the post-effective amendment required in Rule 419(e). Difficulties noted by commenters in consummating an acquisition without knowledge of the amount of confirmed investments prompted this change. However, the acquisition(s) must be consummated before funds may be released from the Rule 419 Account to the registrant. The criteria for the acquisition(s), as adopted, are that the fair value of the business(es) or net assets to be acquired must represent at least 80 percent of the maximum offering proceeds, including funds received or to be received upon exercise or conversion of securities offered, but excluding underwriter and dealer compensation payable to non-affiliates. ⁴⁵

In the Proposing Release, the Commission inquired as to the conditions which would be most appropriate for the release of funds and securities from a Rule 419 Account. Following a review of the public comments and its experience with blank check offerings, the Commission has determined that the protection of investors is best served through a test that is measured against the maximum proceeds sought to be acquired in the offering. Thus under the Rule as adopted, funds in a Rule 419 Account may be disbursed to the registrant only when an amount equivalent to at least 80 percent of the maximum offering proceeds sought, including those obtainable, currently or in the future, through the exercise or conversion of any security offered, has been applied to an acquisition(s) of a business or assets that constitute the business or a line of business of the registrant. ⁴⁶

Further, with respect to stock acquisitions, the proposing release provided that the resulting entity must have net tangible assets equal to the greater of 80 percent of proceeds or $100,000. Since there is not a sufficient basis to distinguish a cash acquisition and a stock acquisition in a blank check offering, the Rule adopted today provides for one acquisition standard applicable to both. The net tangible asset standard proposed is, accordingly, unnecessary. An acquisition for either cash or securities will be able to meet the standard if the fair value ⁴⁷ of the business(es) or net assets to be acquired represents at least 80 percent of the maximum offering proceeds.

In certain contingent offerings, Rule 419 provisions relating to the release of funds and Exchange Act Rule 10b-9 obligations will apply. Rule 10b-9 prohibits as a manipulative or deceptive device or contrivance under Section 10(b) of the Exchange Act ⁴⁸ any representation that a security is being offered on an all or none or part or none basis, unless prompt refunds are made to purchasers if the represented number of securities is not sold at the specified price within the specified time and the total amount due the seller is not received by the seller by the specified date.

Just as with Rule 15c2-4, for blank check offerings subject to both Rule 419 and Rule 10b-9, the requirements of Rule 10b-9 apply until the conditions of the offering governed by that Rule are met (e.g., reaching the minimum in a part-or-none offering). Upon satisfaction of Rule 10b-9, the provisions of Rule 419 will continue to govern. ⁴⁹ Proposed Rule 419(b)(2)(i)(B) would have required a refund of proceeds if as a result of purchaser refund the terms of the offering governed by Rule 10b-9 were no longer met, but that requirement has not been adopted. The initial registration statement filed by the blank check company making a contingent offering subject to Rule 10b-9 must disclose that the provisions of that Rule apply only until the conditions subject to that Rule are met, but after satisfaction of such conditions an investor is not guaranteed a return of proceeds even if, as a result of investor refund requests under Rule 419, the Rule 10b-9 conditions would no longer be met. ⁵⁰ The risks to the investor resulting from the issuer receiving less than the minimum specified proceeds as a result of later refunds under Rule 419 must be clearly disclosed.

D. Disclosure Obligations under Rule 419

Disclosure obligations under Rule 419 are adopted substantially as proposed.

1. Disclosure in Initial Prospectus

The initial prospectus for a Rule 419 offering must describe the obligation of the registrant to deposit funds and securities in the Rule 419 Account, the restrictions on trading in securities held in the Account, and the conditions for release of deposited funds and securities. ⁵¹ The effect of these requirements on purchasers and the registrants right to receive funds also must be described. ⁵² In addition, a copy of the executed escrow or trust agreement must be filed as an exhibit to the initial registration statement and contain provisions specified in Rule 419. ⁵³

2. Disclosure in Post-Effective Amendment Describing an Acquisition Agreement

A post-effective amendment filed pursuant to Rule 419(e) describing an acquisition agreement must contain the following information. First, all information specified by the applicable registration statement form and Industry Guides would be included. ⁵⁴ That information would include financial statements of the issuer and company to be acquired, as well as pro forma financial information reflecting the acquisition, as specified by the form and applicable rules and regulations. Second, the gross amount of offering proceeds received pursuant to the offering would be required to be disclosed, specifying the amounts paid for underwriter commissions, underwriting expenses and dealer allowances, amounts disbursed to the registrant, and amounts remaining in the escrow or trust account. ⁵⁵ Third, the registrant would be required to detail the use of funds received, if any, under the terms of the escrow or trust agreement. ⁵⁶ This disclosure would delineate amounts paid to officers, directors, promoters and others and the reasons for such payments, e.g., compensation, reimbursement of expenses, purchase of assets from such individuals, etc. Finally, the post-effective amendment prospectus, like the initial prospectus, must describe the terms of the offering, including the conditions imposed on the offering by Rule 419. ⁵⁷ If funds and securities are released from the Rule 419 Account, this prospectus would be supplemented by sticker to indicate the amount of funds and securities released and the date of release. ⁵⁸

3. Financial Statements

Rule 419(f), adopted substantially as proposed, requires the blank check company to furnish security holders with audited financial statements for the first full fiscal year of operations following the date an acquisition is consummated pursuant to the Rule, ⁵⁹ accompanied by a managements discussion and analysis of such information, ⁶⁰ no later than 90 days after the end of the fiscal year. ⁶¹ That information also would be filed with the Commission under cover of Form 8-K. ⁶² Pursuant to this provision, investors in the blank check company would have the financial statements and related information for at least a full accounting period following commencement of operations of the company. If at the end of its first full fiscal year of operations the blank check company was filing reports pursuant to Section 13(a) or 15(d) of the Exchange Act, ⁶³ this requirement would not be applicable, since it would duplicate those reporting requirements.

E. Amendment to Rule 174

The amendment to Rule 174 is adopted as proposed. Rule 174 under the Securities Act prescribes prospectus delivery requirements with respect to transactions subject to Section 4(3) of the Securities Act. ⁶⁴ Under Section 4(3), transactions by dealers are exempt from the prospectus delivery and other requirements of Section 5 of the Securities Act unless those transactions are within 40 days of the date securities were first offered to the public, or 90 days if the securities have not been sold previously pursuant to an earlier effective registration statement. New paragraph (g) of Rule 174 provides that with respect to offerings subject to Rule 419, the prospectus delivery period would not terminate until 90 days after the release of funds and securities from the Rule 419 Account.

III. COST-BENEFIT ANALYSIS

No specific empirical data was submitted in response to the Commissions invitation to provide information on the costs and benefits of the proposed rules. A review of the information provided by blank check issuers in their registration statements reveals that their cost of initial registration are typically the lowest of any issuers. The purpose for the legislative directive to develop these rules was to counteract many abusive practices which were found in markets for blank check securities. While additional costs to registrants and broker-dealers may result from the new rules, such costs are expected to be outweighed by the increased protection of investors in blank check offerings.

IV. AVAILABILITY OF FINAL REGULATORY FLEXIBILITY ANALYSIS

The Commission has prepared a Final Regulatory Flexibility Analysis, pursuant to the requirements of the Regulatory Flexibility Act, ⁶⁵ regarding the new rules. The Final Regulatory Flexibility Analysis indicates that the rules could impose some additional costs on small broker-dealers and small issuers. The rules are designed to minimize these costs to the greatest extent possible consistent with the provisions of the Penny Stock Reform Act. A copy of the Final Regulatory Flexibility Analysis may be obtained from Richard P. Konrath, Attorney-Advisor, Office of Disclosure Policy, Division of Corporation Finance, Securities and Exchange Commission, 450 Fifth Street, N.W., Mail Stop 3-12, Washington, D.C. 20549, (202) 272-2589.

V. EFFECTIVE DATE

The rules relating to blank check offerings are effective upon publication in the Federal Register. The Commission finds that there is good cause to dispense with the 30 day delay between publication and effectiveness normally required by the Administrative Procedure Act. ⁶⁶ Focusing on demonstrated abuses in connection with blank check offerings that cause harm to investors, Congress in the Penny Stock Reform Act directed the Commission to enact a special regulatory scheme that goes beyond disclosure to provide substantive protections to investors. Congressional concern was focused on the recent history of blank check offerings as an area rife with fraud and manipulation, particularly in view of the lack of information at the commencement of a blank check offering about the manner in which proceeds will be used, and the potential for dissipation of those proceeds. These abuses were found to be inadequately addressed by the current regulatory scheme, and in need of immediate attention in order to prevent investors from further harm. These abuses and the protections that would be imposed by the new rules have been publicized in the Proposing Release and elsewhere.

None of the Commissions current provisions provide for the escrowing of proceeds and securities, the restriction on trading in escrowed securities or the right of investors to obtain the return of invested funds upon receipt of complete information about an acquisition. Congress believed that such protections were needed for the protection of investors in blank check offerings. Delay in the effectiveness of these rules very likely could frustrate the legislative intent behind the provisions by permitting anticipatory filings in order to avoid compliance. Similarly, a substantial number of registration statements by blank check issuers are currently on file with the Commission. Very few provide restrictions on the use of proceeds or other protections similar to those required by the new rules, which are needed in order to prevent the abuse that was the subject of Congressional concern. The Commission finds that it is in the interest of investors that these rules apply to both pending as well as future filings by blank check issuers.

VI. STATUTORY BASIS

New Rule 419 and the amendment to Rule 174 are being adopted by the Commission pursuant to Sections 3, ⁶⁷ 4, ⁶⁸ 5, ⁶⁹ 7, ⁷⁰ and 19 ⁷¹ of the Securities Act. New Rule 15g-8 is being proposed pursuant to Sections 3, ⁷² 9, ⁷³ 10, ⁷⁴ 15, ⁷⁵ and 23 ⁷⁶ of the Exchange Act.

List of Subjects in 17 CFR Parts 230 and 240

Advertising, brokers, confidential business information, fraud, investment companies, reporting and recordkeeping requirements, and securities.

VII. TEXT OF NEW RULES

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

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

1.The authority citation for Part 230 is revised to read as follows:

Authority: 15 U.S.C. 77b, 77c, 77d, 77e, 77f, 77g, 77h, 77j, 77s, 77sss, 78o, 78l, 78m 78n, 78o, 78w, 79t, and 80a-37, as amended, unless otherwise noted.

2.By amending §230.174 by adding paragraph (g) to read as follows:

230.174 Delivery of Prospectus By Dealers; Exemptions under Section 4(3) of the Act.

* * * * *

(g)If the registration statement relates to an offering of securities of a blank check company, as defined in Rule 419 under the Act [17 CFR 230.419], the statutory period for prospectus delivery specified in Section 4(3) of the Act shall not terminate until 90 days after the date funds and securities are released from the escrow or trust account pursuant to Rule 419 under the Act.

3.By adding §230.419 to read as follows:

§230.419 Offerings by Blank Check Companies.

(a)Scope of the Rule and Definitions.

(1)The provisions of this section shall apply to every registration statement filed under the Act relating to an offering by a blank check company.

(2)For purposes of this Section, the term blank check company shall mean a company that:

(i)is a development stage company that has no specific business plan or purpose or has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies, or other entity or person; and

(ii)is issuing penny stock, as defined in Rule 3a51-1 [17 CFR 240.3a51-1] under the Securities Exchange Act of 1934 (Exchange Act).

(3)For purposes of this section, the term purchaser shall mean any person acquiring securities directly or indirectly in the offering, for cash or otherwise, including promoters or others receiving securities as compensation in connection with the offering.

(b) Deposit of Securities and Proceeds in Escrow or Trust Account.

(1) General.

(i)Except as otherwise provided in this section or prohibited by other applicable law, all securities issued in connection with an offering by a blank check company and the gross proceeds from the offering shall be deposited promptly into:

(A)an escrow account maintained by an insured depository institution, as that term is defined in Section 3(c)(2) of the Federal Deposit Insurance Act [12 U.S.C. 1813(c)(2) (1991)]; or

(B)a separate bank account established by a broker or dealer registered under the Exchange Act maintaining net capital equal to or exceeding $25,000 (as calculated pursuant to Exchange Act Rule 15c3-1 [17 CFR 240.15c3-1]), in which the broker or dealer acts as trustee for persons having the beneficial interests in the account.

(ii)If funds and securities are deposited into an escrow account maintained by an insured depository institution, the deposit account records of the insured depository institution must provide that funds in the escrow account are held for the benefit of the purchasers named and identified in accordance with section 330.1 of the regulations of the Federal Deposit Insurance Corporation [12 CFR 330.1], and the records of the escrow agent, maintained in good faith and in the regular course of business, must show the name and interest of each party to the account. If funds and securities are deposited in a separate bank account established by a broker or dealer acting as a trustee, the books and records of the broker-dealer must indicate the name, address, and interest of each person for whom the account is held.

(2) Deposit and Investment of Proceeds.

(i)All offering proceeds, after deduction of cash paid for underwriting commissions, underwriting expenses and dealer allowances, and amounts permitted to be released to the registrant pursuant to (b)(2)(vi) of this section, shall be deposited promptly into the escrow or trust account; provided, however, that no deduction may be made for underwriting commissions, underwriting expenses or dealer allowances payable to an affiliate of the registrant.

(ii)Deposited proceeds shall be in the form of checks, drafts, or money orders payable to the order of the escrow agent or trustee.

(iii)Deposited proceeds and interest or dividends thereon, if any, shall be held for the sole benefit of the purchasers of the securities.

(iv)Deposited proceeds shall be invested in one of the following:

(A)an obligation that constitutes a deposit, as that term is defined in section 3(l) of the Federal Deposit Insurance Act [12 U.S.C. 1813(l) (1991)];

(B)securities of any open-end investment company registered under the Investment Company Act of 1940 [15 U.S.C. 80a-1 et. seq.] that holds itself out as a money market fund meeting the conditions of paragraphs (c)(2), (c)(3), and (c)(4) of Rule 2a-7 [17 CFR 270.2a-7] under the Investment Company Act; or

(C)securities that are direct obligations of, or obligations guaranteed as to principal or interest by, the United States.

Note to Rule 419(b)(2)(iv):Issuers are cautioned that investments in government securities are inappropriate unless such securities can be readily sold or otherwise disposed of for cash at the time required without any dissipation of offering proceeds invested.

(v)Interest or dividends earned on the funds, if any, shall be held in the escrow or trust account until the funds are released in accordance with the provisions of this section. If funds held in the escrow or trust account are released to a purchaser of the securities, the purchasers shall receive interest or dividends earned, if any, on such funds up to the date of release. If funds held in the escrow or trust account are released to the registrant, interest or dividends earned on such funds up to the date of release may be released to the registrant.

(vi)The registrant may receive up to 10 percent of the proceeds remaining after payment of underwriting commissions, underwriting expenses and dealer allowances permitted by paragraph (b)(2)(i) of this section, exclusive of interest or dividends, as those proceeds are deposited into the escrow or trust account.

(3) Deposit of Securities.

(i)All securities issued in connection with the offering, whether or not for cash consideration, and any other securities issued with respect to such securities, including securities issued with respect to stock splits, stock dividends, or similar rights, shall be deposited directly into the escrow or trust account promptly upon issuance. The identity of the purchaser of the securities shall be included on the stock certificates or other documents evidencing such securities. See also 17 CFR 240.15g-8 regarding restrictions on sales of, or offers to sell, securities deposited in the escrow or trust account.

 escrow or trust account.

(ii)Securities held in the escrow or trust account are to remain as issued and deposited and shall be held for the sole benefit of the purchasers, who shall have voting rights, if any, with respect to securities held in their names, as provided by applicable state law. No transfer or other disposition of securities held in the escrow or trust account or any interest related to such securities shall be permitted other than by will or the laws of descent and distribution, or pursuant to a qualified domestic relations order as defined by the Internal Revenue Code of 1986 as amended [26 U.S.C. 1 et seq.], Title 1 of the Employee Retirement Income Security Act [29 U.S.C. 1001 et seq.], or the rules thereunder.

(iii)Warrants, convertible securities or other derivative securities relating to securities held in the escrow or trust account may be exercised or converted in accordance with their terms; provided, however, that securities received upon exercise or conversion, together with any cash or other consideration paid in connection with the exercise or conversion, are promptly deposited into the escrow or trust account.

(4)Escrow or Trust Agreement. A copy of the executed escrow or trust agreement shall be filed as an exhibit to the registration statement and shall contain the provisions of paragraphs (b)(2), (b)(3), and (e)(3) of this section.

(5)Request for Supplemental Information. Upon request by the Commission or the staff, the registrant shall furnish as supplemental information the names and addresses of persons for whom securities are held in the escrow or trust account.

Note to Rule 419(b):With respect to a blank check offering subject to both Rule 419 and Exchange Act Rule 15c2-4 [17 CFR 240.15c2-4], the requirements of Rule 15c2-4 are applicable only until the conditions of the offering governed by that Rule are met (e.g., reaching the minimum in a part-or-none offering). When those conditions are satisfied, Rule 419 continues to govern the use of offering proceeds.

(c) Disclosure of Offering Terms.

The initial registration statement shall disclose the specific terms of the offering, including, but not limited to:

(1)the terms and provisions of the escrow or trust agreement and the effect thereof upon the registrants right to receive funds and the effect of the escrow or trust agreement upon the purchasers funds and securities required to be deposited into the escrow or trust account, including, if applicable, any material risk of non-insurance of purchasers funds resulting from deposits in excess of the insured amounts; and

(2)the obligation of the registrant to provide, and the right of the purchaser to receive, information regarding an acquisition, including the requirement that pursuant to this section, purchasers confirm in writing their investment in the registrants securities as specified in paragraph (e) of this section.

(d) Probable Acquisition Post-Effective Amendment Requirement.

If, during any period in which offers or sales are being made, a significant acquisition becomes probable, the registrant shall file promptly a post-effective amendment disclosing the information specified by the applicable registration statement form and Industry Guides, including financial statements of the registrant and the company to be acquired as well as pro forma financial information required by the form and applicable rules and regulations. Where warrants, rights or other derivative securities issued in the initial offering are exercisable, there is a continuous offering of the underlying security.

(e) Release of Deposited and Funds Securities.

(1)Post-Effective Amendment for Acquisition Agreement. Upon execution of an agreement(s) for the acquisition(s) of a business(es) or assets that will constitute the business (or a line of business) of the registrant and for which the fair value of the business(es) or net assets to be acquired represents at least 80 percent of the maximum offering proceeds, including proceeds received or to be received upon the exercise or conversion of any securities offered, but excluding amounts payable to non-affiliates for underwriting commissions, underwriting expenses, and dealer allowances, the registrant shall file a post-effective amendment that:

(i)discloses the information specified by the applicable registration statement form and Industry Guides, including financial statements of the registrant and the company acquired or to be acquired and pro forma financial information required by the form and applicable rules and regulations;

(ii)discloses the results of the initial offering, including but not limited to:

(A)the gross offering proceeds received to date, specifying the amounts paid for underwriter commissions, underwriting expenses and dealer allowances, amounts disbursed to the registrant, and amounts remaining in the escrow or trust account; and

(B)the specific amount, use and application of funds disbursed to the registrant to date, including, but not limited to, the amounts paid to officers, directors, promoters, controlling shareholders or affiliates, either directly or indirectly, specifying the amounts and purposes of such payments; and

(iii)discloses the terms of the offering as described pursuant to paragraph (e)(2) of this section.

(2)Terms of the Offering.The terms of the offering must provide, and the registrant must satisfy, the following conditions:

(i)within five business days after the effective date of the post-effective amendment(s), the registrant shall send by first class mail or other equally prompt means, to each purchaser of securities held in escrow or trust, a copy of the prospectus contained in the post-effective amendment and any amendment or supplement thereto;

(ii)each purchaser shall have no fewer than 20 business days and no more than 45 business days from the effective date of the post-effective amendment to notify the registrant in writing that the purchaser elects to remain an investor. If the registrant has not received such written notification by the 45th business day following the effective date of the post-effective amendment, funds and interest or dividends, if any, held in the escrow or trust account shall be sent by first class mail or other equally prompt means to the purchaser within five business days;

(iii)the acquisition(s) meeting the criteria set forth in paragraph (e)(1) of this section will be consummated if a sufficient number of purchasers confirm their investments; and

(iv)if a consummated acquisition(s) meeting the requirements of this section has not occurred by a date 18 months after the effective date of the initial registration statement, funds held in the escrow or trust account shall be returned by first class mail or equally prompt means to the purchaser within five business days following that date.

(3)Conditions for Release of Deposited Securities and Funds. Funds held in the escrow or trust account may be released to the registrant and securities may be delivered to the purchaser or other registered holder identified on the deposited securities only at the same time as or after:

(i)the escrow agent or trustee has received a signed representation from the registrant, together with other evidence acceptable to the escrow agent or trustee, that the requirements of paragraphs (e)(1) and (e)(2) of this section have been met; and

(ii)consummation of an acquisition(s) meeting the requirements of paragraph (e)(2)(iii) of this section.

(4)Prospectus Supplement.If funds and securities are released from the escrow or trust account to the registrant pursuant to this paragraph, the prospectus shall be supplemented to indicate the amount of funds and securities released and the date of release.

Notes to Rule 419(e)

Note 1.With respect to a blank check offering subject to both Rule 419 and Exchange Act Rule 10b-9 [17 CFR 240.10b-9], the requirements of Rule 10b-9 are applicable only until the conditions of the offering governed by that Rule are met (e.g., reaching the minimum in a part-or-none offering). When those conditions are satisfied, Rule 419 continues to govern the use of offering proceeds.

Note 2.If the business(es) or assets are acquired for cash, the fair value shall be presumed to be equal to the cash paid. If all or part of the consideration paid consists of securities or other non-cash consideration, the fair value shall be determined by an accepted standard, such as bona fide sales of the assets or similar assets made within a reasonable time, forecasts of expected cash flows, independent appraisals, etc. Such valuation must be reasonable at the time made.

(f) Financial Statements.

The registrant shall:

(1)Furnish to security holders audited financial statements for the first full fiscal year of operations following consummation of an acquisition pursuant to paragraph (e) of this section, together with the information required by Item 303(a) of Regulation S-K [17 CFR 229.303(a)], no later than 90 days after the end of such fiscal year; and

(2)File the financial statements and additional information with the Commission under cover of Form 8-K [17 CFR 249.308]; provided, however, that such financial statements and related information need not be filed separately if the registrant is filing reports pursuant to Section 13(a) or 15(d) of the Exchange Act.

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

4.The authority citation for Part 240 continues to read as follows:

Authority: 15 U.S.C. 77c, 77d, 77s, 77ttt, 78c, 78d, 78i, 78j, 78l, 78m, 78n, 78o, 78p, 78s, 78w, 78x, 79q, 79t, 80a-29, 80a-37, unless otherwise noted.

5.By adding §240.15g-8 to read as follows:

§240.15g-8 Sales of Escrowed Securities of Blank Check Companies.

As a means reasonably designed to prevent fraudulent, deceptive, or manipulative acts or practices, it shall be unlawful for any person to sell or offer to sell any security that is deposited and held in an escrow or trust account pursuant to Rule 419 under the Securities Act of 1933 [17 CFR 230.419], or any interest in or related to such security, other than pursuant to a qualified domestic relations order as defined by the Internal Revenue Code of 1986, as amended [26 U.S.C. 1 et seq.], or Title I of the Employee Retirement Income Security Act [29 U.S.C. 1001 et seq.], or the rules thereunder.

By the Commission.

Jonathan G. Katz
Secretary

Secretary

¹ 15 U.S.C. 77a et seq. (1988).

² 15 U.S.C. 78a et seq. (1988).

³ 17 CFR 230.174.

⁴ S.647, Pub. L. 101-429.

⁵ See H.R. Rep. No. 101-617; 101 Cong., 2d. Sess. at 23 (1990).

⁶ See H.R. Rep. No. 101-617; 101 Cong., 2d Sess. 10-11, 15 (1990). Of the 179 registration statement filings received and reviewed by the Commissions regional offices in calendar year 1991, approximately 36 percent involved blank check offerings (48 percent by dollar amount of the offering).

⁷ Release No. 33-6891 (April 17, 1991) [56 FR 19201] (Proposing Release).

⁸ Twelve letters of comment were received in response to the proposals. The comment letters and a staff summary of the letters may be inspected and copied at the Commissions Public Reference Room (File No. S7-10-91).

⁹ The Penny Stock Reform Act also mandated adoption of rules regarding secondary market trading in penny stocks. Pursuant to that mandate, the Commission is adopting today, inter alia, a definition of the term penny stock, which is referred to in Rule 419, as discussed in II.A, infra. See Release No. 34-30571 (April 10, 1992).

¹⁰ Note, however, the discussion of Exchange Act Rule 15c2-4 [17 CFR 240.15c2-4] in II.B.1, infra.

¹¹ Id.

¹² Rule 419(a)(1). Offerings pursuant to Regulation A [17 CFR 230.251 et seq. (1991)] and Regulation D [17 CFR 230.501 et seq. (1991)] under the Securities Act are not subject to Rule 419. But see Securities Act Release No. 6924 [57 FR 9768] (March 23, 1992), a proposing to exclude blank check offerings from Regulation A.

¹³ Rule 419(a)(2) corresponds to the definition of blank check company in Section 7(b)(3) of the Securities Act [15 U.S.C. 77g(b)(3)].

¹⁴ A development stage company is defined in Rule 1-02(h) of Regulation S-X [17 CFR 210.a-02(h)] as a company that is devoting substantially all of its efforts to establishing a new business in which planned principal operations have not commenced, or have commenced but there has been no significant revenue therefrom.

¹⁵ 17 CFR 240.3a51-1, adopted in Release No. 34-30571 (April 10, 1992); see n. 9, supra.

¹⁶ The Commission has recently issued an interpretive release designed to enhance the quality of information provided to investors in connection with limited partnership transactions. See Release No. 33-6900 [56 FR 28979] (June 17, 1991).

¹⁷ Rule 419(b)(1)(i)(A). Section 3(c)(2) of the Federal Deposit Insurance Act [12 U.S.C. 1813(c)(2) (1991)] defines insured depository institution to mean any bank or savings and loan association with deposits insured by the Federal Deposit Insurance Corporation. See also 12 U.S.C. 1813(1) (1991); and 12 U.S.C. 1821 (1991), as well as FDIC 88-47, 1988 FDIC Interp. Ltr. Lexis 47 (July 15, 1988) as to federal deposit insurance governing such accounts. If there is a material risk of non-insurance of purchasers funds resulting from deposits in excess of the insured amounts, appropriate disclosure should be included in the prospectus. See Rule 419(c)(1).

¹⁸ Rule 419(b)(1)(i)(B). A broker-dealer acting as trustee under Rule 419 must have net capital equal to or greater than $25,000. See Rule 15c3-1 under the Exchange Act [17 CFR 240.15c3-1].

¹⁹ Rule 419(b)(1)(ii). Under Section 330.1 of the regulations of the Federal Deposit Insurance Corporation (FDIC) [12 CFR 330.1], the deposit account records of the insured bank are conclusive as to the existence of insurance coverage for a deposit. The relationship under which funds are deposited (e.g., trustee, agent custodian or executor) must be clearly established by the deposit agreement and clearly indicated in the deposit account records to permit a claim for deposit insurance. The details of the relationship and interests of other parties in the account must be ascertainable either from the records of the bank or records of the depositor.

²⁰ Rule 419(b)(1)(ii).

²¹ Rule 419(b)(2)(i).

²² Rule 419(b)(2)(vi). For example, if a registrant making a $5 million blank check offering receives $100,000, amounts needed to pay the portion allocated to underwriter compensation (e.g., $10,000) and ten percent of the remainder ($9,000) may be paid to the underwriter and the issuer, respectively. The remaining $81,000 would be invested in the Rule 419 Account.

²³ Under Rule 15c2-4, in a best efforts distribution of securities conducted on an all or none basis, or on any other basis in which payment will not be made to the issuer until some further event or contingency occurs, a broker-dealer participant is obligated either to segregate funds received in a separate bank account, as agent or trustee, or to deposit promptly such funds with a bank pursuant to a written escrow agreement, pending the occurrence of the contingency. Under Rule 15c3-1(b) [17 CFR 240.15c3-1(b)], broker-dealers that do not carry customer accounts or that are affiliated with the issuer must deposit offering funds in an escrow account established at a bank.

²⁴ An explanatory note has been added to Rule 419(b).

²⁵ Rule 419(c). See also the discussion of Rule 10b-9 [17 CFR 240.10b-9] in II.C, infra.

²⁶ Although the maximum was $1 million, for purposes of the 80 percent calculation, Rule 419(e)(1) permits the exclusion of underwriter and dealer compensation payable to non-affiliates, which would amount to $100,000 in this example.

²⁷ Rule 419(b)(2)(iii). Rule 419(a)(3) defines purchaser as any person acquiring securities in the offering, for cash or otherwise, including promoters or others receiving securities as compensation in connection with the offering.

²⁸ 12 U.S.C. 1813(1)(1991).

²⁹ Money market funds are open-end management investment companies registered under the Investment Company Act of 1940 (Investment Company Act) [15 U.S.C. 80a-1 et seq.] that invest in short-term debt instruments. There are currently 710 money market funds with over $538 billion in assets. See IBC/Donoghues Money Fund Report (Feb. 8, 1991). Most money market funds maintain a stable price of $1.00 per share. The stable $1.00 per share price has encouraged investors to view money market funds as an alternative to bank deposit and checking accounts, even though money market funds lack federal deposit insurance. See Investment Company Act Release No. 18005 (February 20, 1991) [56 FR 8113], at n. 2 and 3.

³⁰ Rule 419(b)(2)(iv).

³¹ A cautionary note has been set forth in the Rule. The staff of the Division of Market Regulation has articulated this approach with respect to investments in government securities in the context of Exchange Act Rule 15c2-4. See NASD Notice to Members 84-7 (January 30, 1984).

³² See Prudential Insurance Co. v. S.E.C., 326 F.2d 383 (3d Cir. 1964), cert. denied, 377 U.S. 953 (1964) (a fund need not be a recognizable business entity in order to be an issuer for purposes of the Investment Company Act).

³³ Rule 419(b)(3)(i). Securities issued for consideration other than cash (e.g., as a dividend) also must be deposited, as well as securities issued in respect of already deposited securities (e.g., securities issued as a result of a stock split or dividend or upon exercise or conversion).

³⁴ Rule 419(b)(3)(ii). Upon request by the Commission or the staff, the registrant would be required to furnish as supplemental information the names and addresses of purchasers of securities in the Rule 419 Account. Rule 419(b)(5).

³⁵ Rule 419(b)(3)(ii) and (iii).

³⁶ Rule 419(b)(3)(iii).

³⁷ Rule 419(e)(1). The acquisition must constitute the business or a line of business of the registrant. Two or more acquisitions that together meet the criteria specified in Rule 419(e) will be treated in the same manner as a single such acquisition.

³⁸ Id. If at any time during the offering a significant acquisition between the registrant and another company is probable, a post-effective amendment to the registration statement would be required pursuant to Rule 419(d), adopted as proposed (proposed Rule 419(c)). See also Item 512(a)(1)(ii) of Regulation S-K [17 CFR 229.512(a)(1)(ii)]; and Securities Act Release No. 6383 (March 16, 1992) [47 FR 11380], text accompanying n.80, 47 FR at 11396.

³⁹ Rule 419(e)(2)(i).

⁴⁰ Rule 419(e)(2)(ii).

⁴¹ Rule 419(e)(2)(iii).

⁴² Rule 419(e)(3)(i).

⁴³ Rule 419(e)(2)(ii).

⁴⁴ Rule 419(e)(2)(iv).

⁴⁵ As proposed, the criteria would have been that the posteffective amendment be filed upon consummation of an acquisition that would account for at least 80 percent of the deposited proceeds or, where securities were issued in the acquisition, the resulting entity would have net tangible assets equivalent to the greater of 80 percent of the deposited proceeds or $100,000.

⁴⁶ Rule 419(e)(1).

⁴⁷ A note has been added to the Rule providing that in a cash acquisition, fair value is presumed to be equal to the cash paid. When non-cash consideration, such as securities, is used, fair value is to be determined by an accepted standard, such as bona fide sales, forecasts of expected cash flows, independent appraisals, etc. The valuation must be reasonable at the time made.

⁴⁸ 15 U.S.C. 78j(b).

⁴⁹ An explanatory note has been added to Rule 419(e). See the example of the interaction of Rules 419, 15c2-4 and 10b-9 in II.B.1, supra.

⁵⁰ Rule 419(c). Of course, the registrant may choose to provide that funds be returned to investors if a minimum is not met because of Rule 419 refunds.

⁵¹ Rule 419(c).

⁵² If purchasers receive interest or dividends on deposited funds, the prospectus must set forth the tax effect on the purchaser, including the possibility of having to pay taxes on such income and being required to file an amended tax return to receive a tax refund if ultimately the interest or dividend income is released to the blank check company.

⁵³ Rule 419(b)(4). Those provisions include Rule 419(b)(2) (deposit and investment of proceeds), Rule 419(b)(3) (deposit of securities), and Rule 419(e)(3) (conditions for the release of deposited securities and funds).

⁵⁴ Rule 419(e)(1)(i). This information also would be included in a post-effective amendment filed pursuant to Rule 419(d) reflecting a probable significant acquisition.

⁵⁵ Rule 419(e)(1)(ii).

⁵⁶ Id. In addition, Form SR under the Securities Act [17 CFR 239.61] requires first-time registrants to file with the Commission at specified intervals reports describing its use of offering proceeds. See Securities Act Rule 463 [17 CFR 230.463].

⁵⁷ Rule 419(e)(1)(iii).

⁵⁸ Rule 419(e)(4).

⁵⁹ The registrant, as currently required, would be subject to Section 15(d) of the Exchange Act for at least the first fiscal year following the effective date of the initial registration statement.

⁶⁰ Item 303(a) of Regulation S-K [17 CFR 229.303(a)].

⁶¹ Rule 419(f). Proposed Rule 419(d)(6) required financial statements for the first full fiscal year of operations following the effective date of the post-effective amendment; a specific reference to the date of a consummated acquisition was not contained because under the proposals, unlike the adopted rules, consummation was a condition to filing the post-effective amendment.

⁶² 17 CFR 249.308, Item 7.

⁶³ 15 U.S.C. 78m(a) (1988); 15 U.S.C. 78o(d) (1988).

⁶⁴ 15 U.S.C. 77d(3) (1988).

⁶⁵ 5 U.S.C. 603 (1988).

⁶⁶ 5 U.S.C. 553(d)(3).

⁶⁷ 15 U.S.C. 77c (1988).

⁶⁸ 15 U.S.C. 77d (1988).

⁶⁹ 15 U.S.C. 77e (1988).

⁷⁰ 15 U.S.C. 77g (1988).

⁷¹ 15 U.S.C. 77s (1988).

⁷² 15 U.S.C. 78c (1988).

⁷³ 15 U.S.C. 78i (1988).

⁷⁴ 15 U.S.C. 78j (1988).

⁷⁵ 15 U.S.C. 78o (1988).

⁷⁶ 15 U.S.C. 78w (1988).