Rule 144A --
Private Resales of Securities to Institutions
Preliminary Notes
1. This section relates solely to the application of section 5 of the Act and
not to antifraud or other provisions of the federal securities laws.
2. Attempted compliance with this section does not act as an exclusive
election; any seller hereunder may also claim the availability of any other
applicable exemption from the registration requirements of the Act.
3. In view of the objective of this section and the policies underlying the
Act, this section is not available with respect to any transaction or series of
transactions that, although in technical compliance with this section, is part
of a plan or scheme to evade the registration provisions of the Act. In such
cases, registration under the Act is required.
4. Nothing in this section obviates the need for any issuer or any other person
to comply with the securities registration or broker-dealer registration
requirements of the Securities Exchange Act of 1934 (the Exchange Act),
whenever such requirements are applicable.
5. Nothing in this section obviates the need for any person to comply with any
applicable state law relating to the offer or sale of securities.
6. Securities acquired in a transaction made pursuant to the provisions of this
section are deemed to be restricted securities within the meaning of Rule 144(a)(3)
of this chapter.
7. The fact that purchasers of securities from the issuer thereof may purchase
such securities with a view to reselling such securities pursuant to this
section will not affect the availability to such issuer of an exemption under section 4 (2) of the
Act, or Regulation D
under the Act, from the registration requirements of the Act.
- Definitions.
- For purposes of this section, qualified
institutional buyer shall mean:
- Any of the following entities, acting
for its own account or the accounts of other qualified institutional
buyers, that in the aggregate owns and invests on a discretionary basis
at least $100 million in securities of issuers that are not affiliated
with the entity:
- Any insurance company as
defined in section
2 (13) of the Act ;
Note: A purchase by an insurance company for one or more of its
separate accounts, as defined by section 2(a)
(37) of the Investment Company Act of 1940 (the "Investment
Company Act"), which are neither registered under section 8 of the
Investment Company Act nor required to be so registered, shall be
deemed to be a purchase for the account of such insurance company.
- Any investment company
registered under the Investment Company Act or any business
development company as defined in section 2(a)(48)
of that Act;
- Any Small Business
Investment Company licensed by the U.S. Small Business
Administration under section 301(c) or (d) of the Small Business
Investment Act of 1958;
- Any plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions, for the
benefit of its employees;
- Any employee benefit plan
within the meaning of title I of the Employee
Retirement Income Security Act of 1974;
- Any trust fund whose trustee is a
bank or trust company and whose participants are exclusively plans of
the types identified in paragraph (a)(1)(i)(D) or (E) of this section,
except trust funds that include as participants individual retirement
accounts or H.R. 10 plans.
- Any business development company as
defined in section 202(a)22 of the Investment
Advisers Act of 1940;
- Any organization described in section
501(c) (3) of the Internal Revenue Code, corporation (other than a bank
as defined in section
3(a) (2) of the Act or a savings and loan association or other
institution referenced in section 3(a) (5)
(A) of the Act or a foreign bank or savings and loan association or
equivalent institution), partnership, or Massachusetts or similar
business trust; and
- Any investment
adviser registered under the Investment
Advisers Act.
- Any dealer registered pursuant
to section 15
of the Exchange Act, acting for its own account or the accounts of other
qualified institutional buyers, that in the aggregate owns and invests
on a discretionary basis at least $10 million of securities of issuers
that are not affiliated with the dealer, Provided, That securities
constituting the whole or a part of an unsold allotment to or
subscription by a dealer as a participant in a public offering shall not
be deemed to be owned by such dealer;
- Any dealer registered pursuant
tosection 15 of
the Exchange Act acting in a riskless principal transaction on behalf of
a qualified institutional buyer;
Note: A registered dealer may act as agent, on a non-discretionary
basis, in a transaction with a qualified institutional buyer without
itself having to be a qualified institutional buyer.
- Any investment company registered
under the Investment Company Act, acting for its own account or for the
accounts of other qualified institutional buyers, that is part of a
family of investment companies which own in the aggregate at least $100
million in securities of issuers, other than issuers that are affiliated
with the investment company or are part of such family of investment
companies. Family of investment companies means any two or more
investment companies registered under the Investment Company Act, except
for a unit investment trust whose assets consist solely of shares of one
or more registered investment companies, that have the same investment
adviser (or, in the case of unit investment trusts, the same depositor),
Provided That, for purposes of this section:
- Each series of a series company (as
defined in Rule 18f-2 under the Investment
Company Act ) shall be deemed to be a separate investment company;
and
- Investment companies shall be deemed
to have the same adviser (or depositor) if their advisers (or
depositors) are majority-owned subsidiaries of the same parent, or if
one investment company's adviser (or depositor) is a majority-owned
subsidiary of the other investment company's adviser (or depositor);
- Any entity, all of the equity owners
of which are qualified institutional buyers, acting for its own account
or the accounts of other qualified institutional buyers; and
- Any bank as defined in section 3(a)(2) of the
Act, any savings and loan association or other institution as referenced
in section 3(a)(5)(A)
of the Act, or any foreign bank or savings and loan association or
equivalent institution, acting for its own account or the accounts of
other qualified institutional buyers, that in the aggregate owns and
invests on a discretionary basis at least $100 million in securities of
issuers that are not affiliated with it and that has an audited net
worth of at least $25 million as demonstrated in its latest annual
financial statements, as of a date not more than 16 months preceding the
date of sale under the Rule in the case of a U.S. bank or savings and
loan association, and not more than 18 months preceding such date of
sale for a foreign bank or savings and loan association or equivalent
institution.
- In determining the aggregate amount of
securities owned and invested on a discretionary basis by an entity, the
following instruments and interests shall be excluded: bank deposit notes
and certificates of deposit; loan participations; repurchase agreements;
securities owned but subject to a repurchase agreement; and currency,
interest rate and commodity swaps.
- The aggregate value of securities owned
and invested on a discretionary basis by an entity shall be the cost of
such securities, except where the entity reports its securities holdings
in its financial statements on the basis of their market value, and no
current information with respect to the cost of those securities has been
published. In the latter event, the securities may be valued at market
for purposes of this section.
- In determining the aggregate amount of
securities owned by an entity and invested on a discretionary basis,
securities owned by subsidiaries of the entity that are consolidated with
the entity in its financial statements prepared in accordance with generally
accepted accounting principles may be included if the investments of such
subsidiaries are managed under the direction of the entity, except that,
unless the entity is a reporting company under section 13 or 15(d) of the
Exchange Act, securities owned by such subsidiaries may not be included
if the entity itself is a majority-owned subsidiary that would be
included in the consolidated financial statements of another enterprise.
- For purposes of this section, riskless
principal transaction means a transaction in which a dealer buys a
security from any person and makes a simultaneous offsetting sale of such
security to a qualified institutional buyer, including another dealer
acting as riskless principal for a qualified institutional buyer.
- For purposes of this section, effective
conversion premium means the amount, expressed as a percentage of the
security's conversion value, by which the price at issuance of a
convertible security exceeds its conversion value.
- For purposes of this section, effective
exercise premium means the amount, expressed as a percentage of the
warrant's exercise value, by which the sum of the price at issuance and
the exercise price of a warrant exceeds its exercise value.
- Sales by persons other than issuers or
dealers. Any person, other than the issuer or a dealer, who offers or sells
securities in compliance with the conditions set forth in paragraph (d) of
this section shall be deemed not to be engaged in a distribution of such
securities and therefore not to be an underwriter of such securities
within the meaning of sections 2 (11) and 4(1) of the Act.
- Sales by Dealers. Any dealer who offers
or sells securities in compliance with the conditions set forth in
paragraph (d) of this section shall be deemed not to be a participant in a
distribution of such securities within the meaning of section 4 (3) (C) of the
Act and not to be an underwriter of such securities within the meaning of section (11) of the
Act, and such securities shall be deemed not to have been offered to the
public within the meaning of section (4)(3)(A) of the
Act.
- Conditions to be met. To qualify for
exemption under this section, an offer or sale must meet the following
conditions:
- The securities are offered or sold only
to a qualified institutional buyer or to an offeree or purchaser that the
seller and any person acting on behalf of the seller reasonably believe
is a qualified institutional buyer. In determining whether a prospective
purchaser is a qualified institutional buyer, the seller and any person
acting on its behalf shall be entitled to rely upon the following non-exclusive
methods of establishing the prospective purchaser's ownership and
discretionary investments of securities:
- The prospective purchaser's most
recent publicly available financial statements, Provided That
such statements present the information as of a date within 16 months
preceding the date of sale of securities under this section in the case
of a U.S. purchaser and within 18 months preceding such date of sale for
a foreign purchaser;
- The most recent publicly available
information appearing in documents filed by the prospective purchaser
with the Commission or another United States federal, state, or local
governmental agency or self-regulatory organization, or with a foreign
governmental agency or self-regulatory organization, Provided That
any such information is as of a date within 16 months preceding the date
of sale of securities under this section in the case of a U.S. purchaser
and within 18 months preceding such date of sale for a foreign
purchaser;
- The most recent publicly available
information appearing in a recognized securities manual, Provided That
such information is as of a date within 16 months preceding the date of
sale of securities under this section in the case of a U.S. purchaser
and within 18 months preceding such date of sale for a foreign
purchaser; or
- A certification by the chief financial
officer, a person fulfilling an equivalent function, or other executive
officer of the purchaser, specifying the amount of securities owned and
invested on a discretionary basis by the purchaser as of a specific date
on or since the close of the purchaser's most recent fiscal year, or, in
the case of a purchaser that is a member of a family of investment
companies, a certification by an executive officer of the investment
adviser specifying the amount of securities owned by the family of
investment companies as of a specific date on or since the close of the
purchaser's most recent fiscal year;
- The seller and any person acting on its
behalf takes reasonable steps to ensure that the purchaser is aware that
the seller may rely on the exemption from the provisions of section 5 of the Act
provided by this section;
- The securities offered or sold:
- Were not, when issued, of the same
class as securities listed on a national securities exchange registered
under section 6
of the Exchange Act or quoted in a U.S. automated inter-dealer quotation
system; Provided, That securities that are convertible or
exchangeable into securities so listed or quoted at the time of issuance
and that had an effective conversion premium of less than 10 percent,
shall be treated as securities of the class into which they are
convertible or exchangeable; and that warrants that may be exercised for
securities so listed or quoted at the time of issuance, for a period of
less than 3 years from the date of issuance, or that had an effective
exercise premium of less than 10 percent, shall be treated as securities
of the class to be issued upon exercise; and Provided further, That
the Commission may from time to time, taking into account then-existing
market practices, designate additional securities and classes of
securities that will not be deemed of the same class as securities
listed on a national securities exchange or quoted in a U.S. automated
inter-dealer quotation system; and
- Are not securities of
an open-end investment company, unit investment trust or face-amount
certificate company that is or is required to be registered under
section 8 of the Investment Company Act; and
-
- In the case of securities of an issuer
that is neither subject to section 13 or 15(d) of the
Exchange Act, nor exempt from reporting pursuant to Rule
12g3-2(b) under the Exchange Act, nor a foreign government as
defined in Rule
405 eligible to register securities under Schedule B of the Act, the
holder and a prospective purchaser designated by the holder have the
right to obtain from the issuer, upon request of the holder, and the
prospective purchaser has received from the issuer, the seller, or a
person acting on either of their behalf, at or prior to the time of
sale, upon such prospective purchaser's request to the holder or the
issuer, the following information (which shall be reasonably current in
relation to the date of resale under this section): a very brief
statement of the nature of the business of the issuer and the products
and services it offers; and the issuer's most recent balance sheet and
profit and loss and retained earnings statements, and similar financial
statements for such part of the two preceding fiscal years as the issuer
has been in operation (the financial statements should be audited to the
extent reasonably available).
- The requirement that the information
be reasonably current will be presumed to be satisfied if:
- The balance sheet is as of a date
less than 16 months before the date of resale, the statements of profit
and loss and retained earnings are for the 12 months preceding the date
of such balance sheet, and if such balance sheet is not as of a date
less than 6 months before the date of resale, it shall be accompanied
by additional statements of profit and loss and retained earnings for
the period from the date of such balance sheet to a date less than 6
months before the date of resale; and
- The statement of the nature of the
issuer's business and its products and services offered is as of a date
within 12 months prior to the date of resale; or
- With regard to foreign private
issuers, the required information meets the timing requirements of the
issuer's home country or principal trading markets.
- Offers and sales of securities pursuant to this
section shall be deemed not to affect the availability of any exemption or
safe harbor relating to any previous or subsequent offer or sale of such
securities by the issuer or any prior or subsequent holder thereof.