choi[1] 1.securitiesregulation.fall2006

8/12/2019 Choi[1] 1.SecuritiesRegulation.fall2006

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Seg. Reg. Outline Choi Fall 2006

Building a Policy Argument

SHAPING: How will the rule impact society when it is put into affect?a) Cost Benefits: future consequences who will !ain an" who will lose

#) Impact on $i!hts: esta#lishin! or un"erminin! them?

A%&INIS'$ABI(I': How is rule implemente"?a) *ill it actually wor+ in practice

,is the new or ol" rule unclear#) *ill it actually #e followe"c) $ules - Stan"ar"s Pro#lem

$ules: Bri!ht line #ut ri!i" easier to pre"ict o-er,"eterrence or un"er,"eterrenceStan"ar"s: Case #y case amorphous fle.i#le mi!ht #e more ri!ht #ut the ris+ of

!ettin! it wron! less pre"icti-e

/0N%A&1N'A( /AI$N1SS: 1lements of morality an" 2usticea) 0nfairness of a Chan!e: How will the transition perio" #e han"le"?

,$eliance on the ol" rule

#) 'reatin! (i+e Cases Ali+e: How will it fit with other rules of society?3) uniformity with other states

,-ersus promotin! e.perimentation 4/e"eralism)5) fairness across social cate!ories

c) &erit -s 1quality3) &eritocracy: accept unequal "istri#ution as somethin! to promote the social!oo"5) 1!alitarian: powerful aspect of our society especially for the necessities of life

INS'I'0'I6NA( $6(1: *hat are their roles are they #est suite" for it?a) Is this normally for 2u"!es of (e!islators

,*ill it un"ermine either institution to #e "oin! it?#) *ho is #est at "oin! it

,notion that le!islators are #etter at un"erstan"in! impact since they ha-e "e#atesreflect a !reater "i-ersity an" stu"y thin!s thorou!hly

N6N, IN'1$/1$1NC1: Is this somethin! !o-ernment shoul" #e "oin!?a) (aisse7 8faire: let people #e#) Inter-entionists: !o-ernments 2o# is to protect people from tyrannyc) *ill this action un"ermine the authority of !o-ernment as a whole

3) #ecause it won9t respon" to the in2ustice5) #ecause it has create" further in2ustice

I. INRO!"CION


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5 ey $e!ulations :

o Sec; Act of 9irtually all settle 3 !o to 2u"!ment 4only = in thenineties an" the "efen"ant won each)

i-; CIRC"#ARI$: the sharehol"ers are the ones who filean" then en" up payin! out since it comes from the

corporation; 'he only "ifference is the

transaction costs of filin! a motion 'H1 (1GA(/11S

%um# -s; Smart in-estors


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Some #elie-e that in-estors are completely irrational an" create mar+et #u##les; 6thers #elie-e thatin-estors are sa--y;

'ypes of $e!ulation

3) Disclosure: $equire man"atory "isclosure from issuers prior to sale of securities;

P$6B(1&: How "o you ensure that in-estors will rea" the info? Ha-e G0N @0&PING rules which require man"atory "isclosure at

certain times to focus attention on in-estors;

P$6B(1&: &an"atory "isclosure is cheap for lar!e companies #ut e.pensi-efor smaller companies;

5) SelfHelp: %on9t require man"atory "isclosure an" if in-estors aren9t satisfie" they cansimply not #uy any more securities from that company;

P$6B(1&: Althou!h some in-estors will not #uy a!ain you cannot !uaranteethat all in-estors will fin" out that other in-estors !ot screwe" an" stop #uyin!securities;


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/ormulas:i; Present >alue: the -alue of the return N6* at time

P% & F% ' () * r+,n- n i the num/er o 1eriod

ii; /uture >alue: the worth in the future at a specific point

F% & P% () * r+,n

iii; Net Present >alue /ormula:

NP% & 3(initial cot+ * P%

%i-ersification: accountin! for -aryin! ris+s in securities an" in-estin! in multiple types in or"er to"i-ersify ris+a; Certain ris+s are purely "i-ersifia#le 4e.ample to in-est in um#rella company an" lemona"ecompany)#; Systemic $is+s: ris+s that you cannot "i-ersify 4e.ample is the sun #lowin! up)

*ays to $aise Capital

$% Securities5; Internally8 throu!h e.cess cash&% 'oans


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II(A+. 4A5RIA#I$, (!O 5 S5C"RII5S #A7S APP#$8+

Information is &aterial9 if: there is asubstantial likelihoo"that the "isclosure woul" ha-e #een

-iewe" #y the reasonable investoras ha-in!significantlyaltere" the total mi( of information ma"eavailable%D 8 'SC In"ustries

*hat statements are &aterial un"er the a#o-e "efinition?

S5P )9 *hat +in" of statement is it an" what $ule is Affecte" 4PA$' I)?

3; &isstatement 8 Anythin! you say must #e truthful; S6&1'I&1S SI(1NC1 IS 1D i;e; Basic

5; 6mission 8 6nly material if there is a duty to dicloe; ou may remain silent or say no commentDif there is no "uty to "isclose;

1.chan!e Act:3; Rule )0/3:- 1 ;


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4c) 'he small percenta!e "oes not matter; 'he real num#er is important

ir!inia Ban+shares: Pro.y statement sai" that mer!er price was fairD an" hi!hD; H6(%ING:

%is#elief or un"isclose" moti-es alone are insufficient to ma+e opinions actiona#le; 'here must #eo#2ecti-eE-erifia#le information un"erlyin! the opinion in or"er to ma+e it actiona#le; 6pinions can #eactiona#le if the Boar"

bothmisstate" its #eliefs which can #e -erifie" throu!h factual information an" the

moti-e of the Boar" was not "ecepti-e or manipulati-e;4a) If the company comes out an" says it9s "oin! !reatD you mi!ht #e a#le to fin" some support

to -erify it;4#) &y life is peachyD, !oin! to #e tou!h to -erify this;

S5P =8 1-en if the information is &aterial "oes it affect the 'otal &i. of Information?)ruth on the Market DefenseD: if the material fact is alrea"y +nown to the whole mar+et i;e; that&icrosoft pro"uces *in"ows P it is consi"ere" alrea"y part of the 'otal &i. of information; /oo" (ion

S5P ;8 1-en if the information is &aterial an" affects the 'otal &i. of information "oes the companyha-e any "efenses to the materiality claim?Possi#le %efenses:3) #espeaks Caution DoctrineD: /orwar" (oo+in! statements are immaterial as a matter of law so lon! asthe forwar" loo+in! statements are accompanie" #y a list of ris+s that mi!ht preclu"e the future e-ent fromhappenin!; Co"ifie" as Safe Har#or in PS($A 53; %61S N6' APP( to IP69s 'en"er 6ffers or/inancial Statements;5) Stock MarketDrop)estD: 'he information is only material if it cause" a "rop in share price; /oo" (ionan" Ganino;


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II(B+. S5C"RI$ ,

!5FINIION

S5P )8 Shoul" the Security (aws not apply #ecause the thin! for sale is not a security?

S'1PS to "eterminin! whether a Stoc+D is a security un"er the Securities Acts:43) If the in-estment is calle" Stoc+D use the (an"reth Analysis;45) If the in-estment fails the (an"reth Analysis then apply the Howey test;

N.B.>> !O BO PARS OF S5P )9 A ? B>>>>

A9 %oes the thin! in question fall un"er the "efinition of SecurityD in 54a)43) of the 9


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3; %espite their passi-ity the General Partners9 powers were so si!nificant thatthere was no way the efforts of 'hompson woul" ha-e #een solely the "ecision of'hompson; 5; 'ypically General Partnerships are not consi"ere" in-estments


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III. P5RIO!IC !ISC#OS"R5S under the @=; AC

7hat com1anie are goerned /y the dicloure regime8 = S5PS

S5P ) IS 5 CO4PAN$ P"B#IC8

A. Companies who meet any of the < metho"s #elow are require" to re!ister as Pu#lic Companies an" arehence co-ere" #y "isclosure re!ime un"er the 3K


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o; 'emporary tra"in! suspension un"er employee #enefit plansp; Amen"ment to $e!istrant9s Co"e of 1thicsq; Anythin! the issuer at its option thin+s woul" #e of interest to sharehol"ersr; Any "isclosure require" to comply with $e!ulation /%

45) )03 (Annual Re1ort+ and )03G (Guarterly Re1ort+: Perio"ic %isclosures with some forwar"loo+in! information a#out the followin!:

a; Business#; Propertiesc; (e!al Procee"in!s"; &ar+et for Common Stoc+e; &ana!ement %iscussionf; Analysis of /inancial Con"ition!; $esults of 6perationh; %irectors an" 6fficersi; 1.ecuti-e Compensation2; Security 6wnership of certain Beneficial 6wners an" &ana!ement+; Certain relationships an" transactionsl; Principal accountin! fees an" ser-ices

4


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I%. 5JCAND5 AC ANI3FRA"! #IABI#I$ once a material -iolation #y a pu#lic companywas ma"e with re!ar"s to a security here9s what coul" happen;

O7 !O $O" DO ABO" BRINDIND A S"I FOR FRA"!8

S5P )9ou ha-e a pri-ate cause of action un"er $ule 3#,;

Pri-ate $i!ht of Action un"er $ule 34#), of the 9


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S5P :9 S'A'1 60$ CAS1

43) *as there a @0$IS%IC'I6NA( N10S: 'he mail telephone or some other means of interstatecommerce must ha-e #een use";45) *as there a &A'1$IA( &IS$1P$1S1N'A'I6N or 6&ISSI6N on a S1C0$I' of a P0B(ICC6&PAN8 0sin! the information on &aterialityESecurityEPu#lic Company was there a su#stantialli+elihoo" that the reasona#le in-estor woul" fin" the information useful in the total mi. of information?

45#) *ho is the %1/1N%AN'?a; Ai"ing , Abetting: 'here is no pri-ate cause of action for ai"ers an" a#ettors; 6nly the S1Ccan #rin! claim un"er 54e); 'he S1C "oes not nee" to show reliance;#; Primary Defen"ant:5" Cir; Says misstatement must #e "irectly attributableto %; Kth Cir;Says that su#stantial participationD is enou!h; Corporations are lia#le for the officers an""irectors;c; Control Person 'iability: Controller of issuer is the % if he intentionally or rec+lessly allowe"the frau"; eim

45c) %61S the C6&PAN ha-e the /6$*A$%,(66ING SA/1,HA$B6$? If yes SOP ere> Inot- go on.

PS($A 531: Safe Har#or for /orwar" (oo+in! Statements: APP(I1S '6 P0B(IC C6&PANI1S AN%%61S N6' APP( to IP69s 'en"er 6ffers T /inancial Statements; If the forwar" loo+in! statement areaccompanie" #y all the potential ris+s that coul" "amper the future e-ent you !et the safe har#or; Asher

4


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-ii; Sheer ma!nitu"e of the misstatement

4M) $1(IANC1:i; In .mission Cases: $eliance is presume"; Affiliate" Citi7ensii In Misstatement Cases: 'here are "ifferent tests:

4a) In a /AC1,'6,/AC1 '$ANSAC'I6N: P must show he #elie-e" the representationan" that the misrepresentation cause" him to enter into the "eal;4#) In an 6P1N &A$1' '$ANSAC'I6N: $eliance is presume" un"er the /rau" onthe &ar+et 'heoryD that all in-estors assume that the open mar+ets ha-e inte!rity; 'hepresumption can #e re#utte" #y se-erin! the lin+ #etween the misrepresentation an" theprice pai" #y P or his "ecision to tra"e at mar+et price; Basic4c) SH6$' S1((1$S: %6 N6' ha-e presumption of /rau" on the &ar+et 'heoryDlotnic+

4K) CA0SA'I6N

53%4#)4=) of


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%. P"B#IC OFF5RINDS

S5P ) Choose 'ype of 6fferin!:a; /irm Commitment: 0n"erwriter #uys all the shares from the company an" sells them toinstitutions at a hi!her price; 0n"erwriters #ear all the ris+;#; Best 1fforts: 0n"erwriter will ma+e #est efforts as sales a!ent for issuer #ut "oesn9t #uyshares from issuer;c; %irect Sale to the Pu#lic 8 Chances of frau" are hi!h;"; %utch Auction 8 If you ha-e < shares 3 #i"s 3 #i"s = 3 #i"s


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S5P (=/+ Incor1orate /y Reerence MM I you Gualiy

If you qualify for /orm S,5 or S,< you can incorporate #y reference anythin! you file" to S1C at a priortime;

S5P (=c+ A/ide /y Rule ;20@ tet'ont ie and /y Rule ;2)@ P#AIN 5ND#IS

S5P ; PR53FI#IND P5RIO! ime Prior to iling o Regitration Statement

I; Be!ins: at the latest when the letter of intent with the 0n"erwriter has #een si!ne"; S1C$elease 3M

II; = e.empts any Secon"ary mar+et transactions from these rules;

III; Prohi#ite":

: /I$S' "etermine if there has #een an instrumentality of interstate commerce;a; Sale, a 8 No sales until $e!; Statement !oes 1ffecti-e#; Oer, 4c) 8 No offers until $e!; Statement !oes 1ffecti-e; .-'0 APP'IES in P!E

1I'I-2 PE!I.D

i; An oer i an attem1t to oer or ell a ecurity or interet in ecurity. 54a)4


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"; *SI Safe Har#or 8 3L< 8 Allows *SI to ma+e oral an" written communications thatma+e offers an" that inclu"e information a#out the offer; 'hese communications arecalle"free-writing prospectusesan" must #e file" with S1C upon $e!istration Statementfilin! an" contain a le!en"

e; Short,/actual Safe Har#or , 3


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ii; 0se the "efinition of offerD a#o-e to see if the prospectus has ma"ean offer i;e; con"itions mar+et; If so 4#)43) has #een -iolate";

c; Selectie !icloure Prohi#ite" un"er $e!; /%

III; P1$&I''1%:a; Oral Communication o an Oer8 in a room o-er the phone $oa"show etc;#; )0A Pro1ectu the prospectus file" with $e!; Statementc; )0 B Pro1ectu L' #5D5N!8 $ule =


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c; 3LM:!eporting Issuers:6r"inary Course factual information an" forwar" loo+in!statements

"; 3LK:-on!eporting: 6r"inary course factual info 1C1P' forwar" loo+in!statements

N6N,A//I(IA'1% ANA(S' SA/1,HA$B6$#; 3


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L; 35: &ust up"ate Prospectus if there is any fun"amental chan!e;DF; /ile a Base ProspectusD pursuant to =; 0P%A'1ECHANG1 the P$6SP1C'0S when N1C1SSA$a; P6S',1//1C'I>1 A&1N%&1N' 8 any su#stanti-e chan!es from or a""itions to the

Prospectus must #e file" un"er =5=4a) as a post,effecti-e Amen"ment;#; &IN6$ CHANG1S 8 Any minor chan!es can simply #e stic+ere"D as per =5=4#);c; Prospectus more than K months ol": ou can use the same prospectus so lon! as it9s still part of

the ori!inal offerin!; Cannot contain information ol"er than 3L months if the information is+nown to the issuer an" can #e pro-i"e" without much e.pense; 34a)4


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%I. P"B#IC OFF5RIND ANI3FRA"! or R5DISRAION SA545N

))pro-i"es for anti,frau" lia#ility for any material tatement or material omiionin the $e!istrationStatement;

As per Hu""leston a plaintiff can sue un"er #oth 33 35 an" 3#, #ut there are "ifferentrequirements; P9s want to #rin! 33 cases rather than 3#, #ecause of the strict lia#ility no reliancerequire" % has to pro-e %ue %ili!ence an" % must pro-e (oss Causation;

S5P 09 a the Pu/lic Oering Proce /egun yet8

S5P )9 7a there a material mitatement or material omiion in the Regitration Statement8

0se the "efinition of materialityD a#o-e; Also see if the company is pu#lic an" if it9s sellin! a security;D

S5P 29 !etermine Lhether you hae tanding to ue.

A##ey : H6(%ING: 6nly those who purchase" stoc+ an" who can ha-e their shares trace" to theofferin! ha-e stan"in!; Shares co,min!le" with ol" shares in a trust "o not !i-e the whole truststan"in!;

334a): If the issuer has ma"e an earnin!s statement co-erin! at least 35 months aftereffecti-eness you nee" to show that you relie" on the material misstatement or omission when

you #ou!ht the shares; ou nee" not ha-e rea" the $e!; Statement to pro-e $eliance;

S5P =9 7ho can you ue8

334a): Anyone who si!ne" the $e!; Statement inclu"in! the Issuer C16 C/6 etc; see L4a)

334a)45)4


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&ust ha-e #een a &aterial &isstatement; 4No reliance no causation no scienter require" unless issuerhas ma"e an earnin!s statement co-erin! at least 35 months in which case you ha-e to pro-e reliance; 334a);

S5P 69 !O 5 !@ hae any !5F5NS5S8

43) Actual nowle"!e: Show that the P9s +new a#out the frau" yet purchase" anyhow or show that themar+et alrea"y +new a#out the frau";

QQQQN;B; ISS01$S CANN6' 0S1 'H1 /6((6*ING %1/1NS1SQQQQ:45) $esi!nation: If the % resi!ne" hisEher office #efore the effecti-e "ate of $e!istration an" a"-ise" theS1C that he "oes not ta+e responsi#ility for the $e!; Statement; 334#)4


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%II. P"B#IC OFF5RIND ANI3FRA"! or D"N3Q"4PIND %IO#AIONS

S5P 09 a the Pu/lic Oering Proce /egun yet8

S5P )9 7a there a iolation o any Rule during the Regitration Proce8

S5P 29 COOS5 O7 $O" 7AN O 4A5 54 #IAB#5

'P1 A: 354a)43) for any -iolations of such as sellin! offerin! etc; "urin! the $e!istrationprocess at an inappropriate time;

i; P9s are anyone who purchase shares while issuer was -iolatin! ;ii; % can #e anyone who solicit sales for themsel-es or the issuer ; Pinter

iii; % %efenses : 6nly that 3 year has passe" since the "isco-ery of the-iolation or if < years since 1ffecti-eness has passe";

i-; 1(1&1N'S : P only has to show a -iolation occurre"-; %A&AG1S : $escission if the stoc+s were sol" an" then the "ifference

#etween the purchase an" sale price;

'P1 B: 354a)45) for any &aterial &isstatements or 6missions in a )0PROSP5C"S or

ORA# CO44"NICAIONS R5#A5! to a PROSP5C"S ON#$

Step I; %etermine if the &isstatementE6mission was &aterial if a Security is #ein! sol"an" if the company is Pu#lic;

Step II; ou can only use this section in a Pu/lic Oering; Gustafson

Step III; ou can only use this section if there was a Pro1ectu !eliery reuirementan" you can deinitiely trace the hareto the offerin!. H4ot #iKely "oes not count;In re >alence

Step I>; 'he shares must ha-e #een purchase" "irectly from Issuer; Hert7#er!er

Step >; S'A'0'1 6/ (I&I'A'I6NS: 3E; %etermine if the material misstatementEomission was ma"e in connection with a 3 Prospectus or if the statements were ma"e orally; Gustafson

Step >I; % can #e anyone who solicit sales for themsel-es or the issuer or who Controlthe issuer 3 ece1t aider and a/ettorPinter

Step >II; P$6>1 'H1 1(1&1N'S:


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i; 'here was a misstatement or omission in the 3 Prospectus or in an 6ralCommunication relate" to a Prospectus;

ii; Instrumentality of Interstate Commerce was use"iii; By &eans ofD: Show that P purchase" shares #y some causation of the

misstatement; No nee" to show reliance; Showin! that there9s a mar+et for theshares seems to #e sufficient; San"ers

Step >III; %9s %1/1NS1Si; P9s ha" actual +nowle"!e of the frau" an" #ou!ht shares anyhow;ii; (oss Causation: If % can show that somethin! other than the frau" cause" the loss

to the purchaser 334e); In Ac+erman the price actually increase" after the frau"iii; %9s "i" not +now an" in the e.ercise of reaona/le careD coul" not have kno4n

a#out the misstatement or omission;

*hether an actual in-esti!ation is require" "epen"s on the circumstances#ut an 0n"erwriter woul" pro#a#ly ha-e to "o a reasonable investigationof the issuer; San"ers

Step I; %ama!es$escission "ama!es


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%III. PRI%A5 P#AC545NS (5J54P OFF5RINDS+

Companies "o Pri-ate Placements to escape the Gun @umpin! $ules 33 an" 35 lia#ility etc;

QQQQ >I6(A'ING 6N1 'P1 6/ 11&P' 6//1$ING %61SN9' P$1C(0%1 60 /$6&

0SING AN6'H1$QQQQ

H6* '6 %1'1$&IN1 I/ S6&1'HING IS AN 11&P' 6//1$ING:

Step 3: CH66S1 an 11&P' 6//1$ING 46N1 or B6'H)

'P1 A: =45) e.empts offerin!s #y an Issuer in-ol-e" in a NON3Pu/lic Oering

I; Are you an Issuer? : Issuer is clearly "efine" in 54a)4=)II; Are you "oin! a non31u/lic offerin!? %epen"s on wei!ht of a num#er of factors the 1 is

the 6fferees not the ultimate purchasers:a; %o the 6fferees nee" the protection of the 9


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a#sent a reprie-e if the issuer a "irector or !eneral partner of theissuer or an un"erwriter has #een in-ol-e" in -iolation of thesecurities law then the issuer is "isqualifie" from usin! Rule :0:;

I; 1C(0%1%ISS01$S

Q A(01 in35 &6N'H P1$I6%

3 millionE35 monthsinclu"es any shares

offere" pursuant to !eg

D ndany shares

offere" in violation of

5 8

millionE35 monthsinclu"es any shares

offere" pursuant to !eg

D ndany shares

offere" in violation of

5 8

N6 (I&I'

III; &A W ofP0$CHAS1$SA((6*1%

N6 (I&I'


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+nowle"!e in financialsan" #usiness that he is

a#le to e-aluatemeritsEris+s of the

in-estmentD:

Issuers must

reaona/ly /elieethein-estor to #esophisticate" usin!factors such as: *ealthincome e.periencecurrent in-estmentsresults on in-estmenttest e"ucation etc;

I>; ANS6(ICI'A'I6N1C1P'I6NS? GeneralSolicitation i;e; a"snoticescommunicationsseminars etc; are N6'A((6*1% un"er $ule54c)

Solicitation allowe"only if Issuer sells inState that pro-i"es for$e!istration un"er Statelaws; =4#)43)4i),4iii)

N6 S6(ICI'A'I6NA((6*1%

N6 S6(ICI'A'I6NA((6*1%

>; %1'1$&ININGACC1P'AB(1S6(ICI'A'I6N forA(( 'P1S

3; If Issuer an" In-estors ha-e a #usiness r9ship where the Issuer +nows theIn-estor9s financials an" e.pertise it9s not consi"ere" Solicitation

5; enman: Callin! people from L ar#itrary recor"s an" not +eepin! recor"s isstill solicitation;


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IJ. R53SA#5S in S5CON!AR$ 4AR5

;()+e.empts transactions from the Securities (aws #y anyone other than iuer- underLriter- ordealer.

S'1P 3: %61S 'H1 '$ANSAC'I6N IN>6(>1 AN 6N1 6/ ISS01$ 0N%1$*$I'1$ 6$%1A(1$ /6$ !ISRIB"ION OF 5 SOC? I/ 1S 'HIS 11&P'I6N %61S NOAPP("N#5SS $O"@R5 A !5A#5R CO4P#$IND 7I );;A(!+; I/ N6 &6>1 6N '6 S'1P 5;

43) Issuer: "efine" in 54a)4=)45) %ealer: "efine" in 54a)435) as professional #uyin! shares for hisEher own account41% S1((ING 'H$60GH ANIN'1$&1%IA$? I/ 1S 11&P'I6N CANN6' B1 0S1% 0N(1SS 60 &11' 'H1 3==A11&P'I6N B1(6*; I/ N6 SIP 'HIS S'1P;


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4I) Anyone who controlsD the issuer cannot "istri#ute shares with the help of any intermediarywithout re!isterin! them #ecause the interme"iary will #e consi"ere" an un"erwriter since an Issuer is"efine" in 54a)433) as someone who controls the issuer as well; *olfson

Summary: 'wo Step Inquirya; As+ whether the control person was actin! as an un"erwriter for

the issuer? 4for in-estors that are not control persons this isthe only inquiry)

#; As+ whether an interme"iary assistin! the control person in theresale is actin! as an un"erwriter for the control person

S'1P =: CAN 60 R0A(I/ /6$ 'H1 =43 Z) 11&P'I6N?'he $esale of securities ori!inally purchase" un"er =45) or $1G % an" then resol" is not a "istri#utionDan" hence the reseller "oes not ha-e the un"erwriter status an" any interme"iary is neither a "ealer nor0n"erwriter;

S'1P : IS 'H1$1 AN *A /6$ A C6N'$6( P1$S6N E 6'H1$ $1S'$IC'1% SHA$1S '6S1(( HIS S1C0$I'I1S un"er 3==A?

4I) Complyin! with 3==A ma+es your transaction not a "istri#ution an" hence the reseller cannot#e an un"erwriter an" !ets the =43) $esale 1.emption;

4II) H6* '6 C6&P(:a; 3==c: Current Pu/lic Inormation a/out the Iuer mut /e made aaila/le

i; /or $eportin! Companies: information is a-aila#leD if the company has#een a reportin!D company for K "ays orIssuer is current for the last 35months;ii; /or Non,$eportin! Companies: information is a-aila#leD if the info in rule$ule 3c5,334a)4)4i),4.i-) is ma"e a-aila#le

#; 3==": olding Period9&ust ha-e #een in the a!!re!ate for 3 year 4i;e; a "onor9s time

is tac+e" on to the recipients hol"in! perio" if the shares are !i-en as a !ift;)

Q N6 hol"in! perio" for C6N'$6( people sellin! 0N$1S'$IC'1% shares;

c; 3==e: Guantity #imitation: within a < &onth Perio" the greaterof the followin!may #e sol":

i; 3 of the outstan"in! shares of the class you want to sellii; A-era!e -olume on all Nat9l 1.chan!es for the = wee+s prior to your sale;

"; 3==A: File Lith the S5C8 file form 3== an" requires sellers to "isclose theiri"entity their relationship with the issuer the "ate an" nature of the acquisitiontransactions throu!h which the seller o#taine" the securities to #e sol" information on allsecurities of the issuer that the seller has sol" in the past three months an" the name an"

a""ress of each #ro+er an" mar+et ma+er throu!h whom securities are to #e sol";Q N6 N11% '6 /I(1 *I'H 'H1 S1C if within < months the reseller sells

or less shares -alue" at 3 or less;

e; 3==4f): Sell your hare9either throu!h an unsolicite" #ro+er transactionD un"er =4=) or on the open mar+et throu!h a &ar+et &a+er "efine" in


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choi[1] 1.securitiesregulation.fall2006

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