Rule 144(f)-(g): Manner of sale

Overview

Rule 144(f) is one of the conditions to use of Rule 144

The manner of sale condition
Only applies to affiliates
For other conditions, see Rule 144: Conditions to Use

Requirements

Securities must be sold in brokers transactions or in transactions directly with a market maker

Rule 144(g) defines broker's transactions for this purpose
Market maker is defined in Exchange Act §3(a)(38)

Selling security holder is prohibited from:

Soliciting orders to buy the securities
Making any payment to any person other than the broker who executes the order to sell the securities

February 2008 Changes

Eliminate Rule 144(f) manner of sale requirements for debt securities

Eliminates requirement that debt securities be sold in brokers transactions or in transactions directly with a market maker
Eliminates prohibition on the seller soliciting potential purchasers or making payments in connection with the offer or sale to any person other than the broker who executes the order to sell the securities

Allows holders of debt securities greater flexibility in the resale of their securities, including the option to negotiate private resales of the securities

Debt securities defined

Per new Rule 144(a)(4) which adds debt securities as a defined term for purposes of Rule 144
Includes non-participating preferred stock and
asset-backed securities
________

Final release commentary II.D
Proposal release commentary II.D

Permit resales through riskless principal transactions

Where trades are executed at the same price, exclusive of any explicitly disclosed markup or markdown, commission equivalent, orother fee, and the rules of a self-regulatory organization permit the transaction to be reported as riskless
By adding new Rule 144(f)(1)(iii) and related note
________

Final release commentary II.C
Proposal release commentary II.C

Permit use of alternative trading systems

By amending the definition of broker's transactions so that the posting of bid and ask quotations in alternative trading systems will be deemed not to be a solicitation
________

Final release commentary II.C
Proposal release commentary II.C

Changes are effective 2.15.08

See 2008 Changes

Effective February 15, 2008

Rule 144(f) Manner of sale

(1) The securities shall be sold in one of the following manners:

(i) brokers transactions within the meaning of section 4(4) of the Act;

(ii) transactions directly with a market maker, as that term is defined in section 3(a)(38) of the Exchange Act; or

(iii) riskless principal transactions where:

(A) the offsetting trades must be executed at the same price (exclusive of an explicitly disclosed markup or markdown, commission equivalent, or other fee);

(B) the transaction is permitted to be reported as riskless under the rules of a self-regulatory organization; and

(C) the requirements of paragraphs (g)(2)(applicable to any markup or markdown, commission equivalent, or other fee), (g)(3), and (g)(4) of this section are met.

_______
Note to 230.144(f)(1).
For purposes of this section, a riskless principal transaction means a principal transaction where, after having received from a customer an order to buy, a broker or dealer purchases the security as principal in the market to satisfy the order to buy or, after having received from a customer an order to sell, sells the security as principal to the market to satisfy the order to sell.

(2) The person selling the securities shall not:

(i) Solicit or arrange for the solicitation of orders to buy the securities in anticipation of or in connection with such transaction, or

(ii) Make any payment in connection with the offer or sale of the securities to any person other than the broker or dealer who executes the order to sell the securities.

(3) Paragraph (f) of this section shall not apply to:

(i) Securities sold for the account of the estate of a deceased person or for the account of a beneficiary of such estate provided the estate or estate beneficiary is not an affiliate of the issuer; or

(ii) Debt securities.

Rule 144(g) Brokers' Transactions

Brokers' Transactions. The term brokers' transactions in Section 4(4) of the Act shall for the purposes of this rule be deemed to include transactions by a broker in which such broker:

1. Does no more than execute the order or orders to sell the securities as agent for the person for whose account the securities are sold;

2. Receives no more than the usual and customary brokers commission;

3. Neither solicits nor arranges for the solicitation of customers orders to buy the securities in anticipation of or in connection with the transaction; provided, that the foregoing shall not preclude:

(i) inquiries by the broker of other brokers or dealers who have indicated an interest in the securities within the preceding 60 days;

(ii) inquiries by the broker of his customers who have indicated an unsolicited bona fide interest in the securities within the preceding 10 business days;

(iii) the publication by the broker of bid and ask quotations for the security in an inter-dealer quotation system provided that such quotations are incident to the maintenance of a bona fide inter-dealer market for the security for the brokers own account and that the broker has published bona fide bid and ask quotations for the security in an inter-dealer quotation system on each of at least twelve days within the preceding thirty calendar days with no more than four business days in succession without such two-way quotations; or

(iv) the publication by the broker of bid and ask quotations for the security in an alternative trading system, as defined in 242.300 of this chapter, provided that the broker has published bona fide bid and ask quotations for the security in the alternative trading system on each of the last twelve business days; and
______
Note to Subparagraph g(3)(ii): The broker should obtain and retain in his files written evidence of indications of bona fide unsolicited interest by his customers in the securities at the time such indications are received.
______

4. after reasonable inquiry is not aware of circumstances indicating that the person for whose account the securities are sold is an underwriter with respect to the securities or that the transaction is a part of a distribution of securities of the issuer. Without limiting the foregoing, the broker shall be deemed to be aware of any facts or statements contained in the notice required by paragraph (h) below.
______
Notes

i. The broker, for his own protection, should obtain and retain in his files a copy of the notice required by paragraph (h).

ii. The reasonable inquiry required by paragraph (g)(3) of this section should include, but not necessarily be limited to, inquiry as to the following matters:

a. The length of time the securities have been held by the person for whose account they are to be sold. If practicable, the inquiry should include physical inspection of the securities;

b. The nature of the transaction in which the securities were acquired by such person;

c. The amount of securities of the same class sold during the past three months by all persons whose sales are required to be taken into consideration pursuant to paragraph (e) of this section;

d. Whether such person intends to sell additional securities of the same class through any other means;

e. Whether such person has solicited or made any arrangement for the solicitation of buy orders in connection with the proposed sale of securities;

f. Whether such person has made any payment to any other person in connection with the proposed sale of the securities; and

g. The number of shares or other units of the class outstanding, or the relevant trading volume.

Effective until February 15, 2008

Rule 144(f) Manner of sale

Manner of sale. The securities shall be sold in brokers' transactions within the meaning of section 4(4) of the Act or in transactions directly with a market maker, as that term is defined in section 3(a)(38) of the Securities Exchange Act of 1934, and the person selling the securities shall not

1. solicit or arrange for the solicitation of orders to buy the securities in anticipation of or in connection with such transaction, or

2. make any payment in connection with the offer or sale of the securities to any person other than the broker who executes the order to sell the securities. The requirements of this paragraph, however, shall not apply to securities sold for the account of the estate of a deceased person or for the account of a beneficiary of such estate provided the estate or beneficiary thereof is not an affiliate of the issuer; nor shall they apply to securities sold for the account of any person other than an affiliate of the issuer, provided the conditions of paragraph (k) of this rule are satisfied.

Rule 144(g) Brokers' Transactions

Brokers' Transactions. The term brokers' transactions in Section 4(4) of the Act shall for the purposes of this rule be deemed to include transactions by a broker in which such broker:

1. does no more than execute the order or orders to sell the securities as agent for the person for whose account the securities are sold; and receives no more than the usual and customary broker's commission;

2. neither solicits nor arranges for the solicitation of customers' orders to buy the securities in anticipation of or in connection with the transaction; provided, that the foregoing shall not preclude

i. inquiries by the broker of other brokers or dealers who have indicated an interest in the securities within the preceding 60 days,

ii. inquiries by the broker of his customers who have indicated an unsolicited bona fide interest in the securities within the preceding 10 business days; or

iii. the publication by the broker of bid and ask quotations for the security in an inter-dealer quotation system provided that such quotations are incident to the maintenance of a bona fide inter-dealer market for the security for the broker's own account and that the broker has published bona fide bid and ask quotations for the security in an inter-dealer quotation system on each of at least twelve days within the preceding thirty calendar days with no more than four business days in succession without such two-way quotations;
______
Note to Subparagraph g(2)(ii): The broker should obtain and retain in his files written evidence of indications of bona fide unsolicited interest by his customers in the securities at the time such indications are received.
______

3. after reasonable inquiry is not aware of circumstances indicating that the person for whose account the securities are sold is an underwriter with respect to the securities or that the transaction is a part of a distribution of securities of the issuer. Without limiting the foregoing, the broker shall be deemed to be aware of any facts or statements contained in the notice required by paragraph (h) below.
______
Notes

i. The broker, for his own protection, should obtain and retain in his files a copy of the notice required by paragraph (h).

ii. The reasonable inquiry required by paragraph (g)(3) of this section should include, but not necessarily be limited to, inquiry as to the following matters:

a. The length of time the securities have been held by the person for whose account they are to be sold. If practicable, the inquiry should include physical inspection of the securities;

b. The nature of the transaction in which the securities were acquired by such person;

c. The amount of securities of the same class sold during the past three months by all persons whose sales are required to be taken into consideration pursuant to paragraph (e) of this section;

d. Whether such person intends to sell additional securities of the same class through any other means;

e. Whether such person has solicited or made any arrangement for the solicitation of buy orders in connection with the proposed sale of securities;

f. Whether such person has made any payment to any other person in connection with the proposed sale of the securities; and

g. The number of shares or other units of the class outstanding, or the relevant trading volume.

Other Matters

SEC Interpretations

SEC Interpretive Release 33-6099 1979

II.F 144(f)
II.F.1 144(f)(1)
II.F.2 144(f)(2)
Complete index at SEC FAQs

SEC FAQs 2007

117.01 Principal of a brokerage firm
117.02 Customer limit order

Complete index at SEC FAQs

// This display the document title in the html page document.write(document.title);