Release No 34-6905

October 3, 1962. 

Adoption of Rule X-10B-9 Under the Securities Exchange Act of 1934.

On July 30, 1962, in Securities Exchange Act Release No. 6864, the Securities and Exchange Commission published its proposal to adopt Rule 10b-9 under the Securities Exchange Act of 1934 to make it unlawful to represent that a security is offered or sold on an "all-or-none" basis unless specified conditions are met.  The Commission has considered the comments and suggestions received and has adopted the rule in the form stated below, effective November 5, 1962.

As adopted, Rule 10b-9 makes it a "manipulative or deceptive device or contrivance", as used in Section 10(b) of the Act, for any person, in connection with the offer or sale of a security, to make any representation to the effect that the security is being offered or sold on an "all-or-none" basis unless the security is par of an offering being made on the condition that all or a specified amount of the purchase price will be promptly refunded to the purchaser if all of the securities being offered are not sold at a specified price within a specified time and the total amount due to the seller is not received by him by a specified date.  The rule would also prohibit a representation to the effect that the security is being offered or sold on any other basis under which all or part of the amount paid will he refunded to the purchaser if all or part of the securities are not sold, unless the security is part of an offering being made on the condition that all or a specified part of the amount paid will be promptly refunded if a specified number of units are not sold at a specified price within a specified time and the total amount due to the seller is not received by him by a specified date.

The rule would not be applicable where there is a firm commitment underwriting for the purchase of all the securities being offered.  The problem which the rule is intended to meet, i.e. misleading representations concerning the conditions under which purchasers will obtain refunds, does not arise in the conventional firm commitment underwriting, where the underwriter has a definition obligation to take down and pay the seller for the securities.

Statutory Basis

The Commission acting pursuant to the provisions of the Securities Exchange Act of 1934, as amended, particularly Sections 23(a) and 10(b) thereof, deeming such action necessary and appropriate in the public interest and for the protection of investors, and necessary for the execution of its functions under the Act, hereby adopts Rule 10b-9 as stated below, effective November 5, 1962.

[Text of rule omitted]