1934, see Part 240 of this chapter. For general requirements as to prospectuses, see §§ 230.400--230.434a.

§ 230.154

Definition of certain terms used in section 4(4).

(a) The term "brokers' transactions" in section 4 (4) of the act shall be deemed to include transactions by a broker acting as agent for the account of any person controlling, controlled by, or under common control with, the issuer of the securities which are the subject of the transactions where:

(1) The broker performs no more than the usual and customary broker's function,

(2) The broker does no more than execute an order or orders to sell as a broker and receives no more than the usual or customary broker's commission, and the broker's principal, to the knowledge of the broker, makes no payment in connection with the execution of such transactions to any other person,

(3) Neither the broker, nor to his knowledge his principal, solicits or arranges for the solicitation of orders to buy in anticipation of or in connection with such transactions, and

(4) The broker is not aware of circumstances indicating that his principal is an underwriter in respect of the securities or that the transactions are part of a distribution of securities on behalf of his principal.

(b) For the purpose of paragraph (a) of this section, the term "distribution" shall not apply to transactions involving an amount not substantial in relation to the numbers of shares or units of the security outstanding and the aggregate volume of trading in such security. Without limiting the generality of the foregoing, the term "distribution" shall not be deemed to include a sale or series of sales of securities which, together with all other sales of securities of the same class by or on behalf of the same person within the preceding period of six months, will not exceed the following: (1) If the security is traded only otherwise than on a securities exchange, approximately one percent of the shares or units of such security outstanding at the time of receipt by the broker of the order to execute such transactions or (2) if the security is admitted to trading on a securities exchange the lesser of approximately (i) one percent of the shares or units of such security outstanding at the time of receipt by the broker of the

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order to execute such transactions or (ii) the largest aggregate reported volume of trading on securities exchanges during any one week within the four calendar weeks preceding the receipt of such order.

(c) The term "solicitation of such orders" in section 4(4) of the act shall be deemed to include the solicitation of an order to buy a security, but shall not be deemed to include the solicitation of an order to sell a security.

(d) Where within the previous 60 days a dealer has made a written bid for a security or a written solicitation of an offer to sell such security, the term "solicitation" in section 4(4) shall not be deemed to include an inquiry regarding the dealer's bid or solicitation. (Sec. 4, 48 Stat. 77, as amended, 15 U.S.C. 77d) [19 F.R. 9375, Dec. 31, 1954, as amended at 30 F.R. 2022, Feb. 13, 1965]

§ 230.155 Definition of "Transactions by an Issuer Not Involving Any Public Offering" in section 4(2) of the Act for certain transactions with respect to convertible securities.

(a) The phrase "transactions by an issuer not involving any public offering" in section 4(2) of the Act shall not include (1) any public offering of a convertible security (which at the time of such offering is immediately convertible into another security of the same issuer) by or on behalf of any person or persons who purchased the convertible security directly or indirectly from an issuer as part of a non-public offering of such security, or (2) any public offering by or on behalf of any such person or persons of the security acquired on conversion of a convertible security, unless the security so acquired was acquired under such circumstances that such person or persons are not underwriters within the meaning of section 2(11) of the Act.

(b) The phrase "transactions by any person other than an underwriter"

in section 4(1) of the Act shall, in the situations covered in paragraph (a) of this section, be deemed to include transactions by the initial, and any intermediate, holder of the convertible security or of the underlying security who (1) has not acquired the convertible or underlying security with a view to the distribution of either of them, and (2) is not effecting, is not causing to be effected, and has not arranged for, a public offering of either security within the meaning of and subject to paragraph (a) of this section.

(c) This section shall apply to transactions of the character described in paragraph (a) of this section only with respect to convertible securities issued after February 7, 1962.

[27 F.R. 1415, Feb. 15, 1962, as amended at 30 F.R. 2022, Feb. 13, 1965; 31 F.R. 7740, June 1, 1966]

§ 230.156 Definition of "transactions by an issuer not involving any public offering" in section 4(2) of the Act for transactions exempted by rule 3c-3 under the Investment Company Act of 1940.

The phrase "transactions by an issuer not involving any public offering" in section 4(2) of the Act shall include any transaction with respect to a separate account group annuity contract with an employer, employers or persons acting on their behalf (herein called the "employer") provided that the contract (a) meets the conditions and limitations set forth in § 270.3c-3 of this chapter (Rule 3c-3 under the Investment Company Act of 1940) so that the transaction is exempt thereunder, (b) is separately negotiated with such employer, and (c) is not advertised in any written communication which, insofar as it relates to a separate account group annuity contract, does more than identify the insurance company, state that it is engaged in the business of writing such contracts and invite inquiries in regard thereto. The limitation of paragraph (c) of this section shall not apply to disclosure made in the course of direct discussion or negotiation of such contracts.

[28 F.R. 8208, Aug. 9, 1963, as amended at 30 F.R. 2022, Feb. 13, 1965]

§ 230.161 Amendments to rules and regulations governing exemptions.

The rules and regulations governing the exemption of securities under section 3(b) of the act, as in effect at the time the securities are first bona fide offered to the public in conformity therewith, shall continue to govern the exemption of such securities notwithstanding the subsequent amendment of such rules and regulations. This section shall not apply, however, to any new offering of such securities by an issuer or underwriter after the effective date of any such amendment, nor shall it apply to any offering after January 1, 1959, of securities by an issuer or underwriter pursuant to Regulation D or pursuant to

Regulation A as in effect at any time prior to July 23, 1956.

[23 F.R. 4454, June 20, 1958]

§ 230.170

Prohibition of use of certain financial statements.

Financial statements which purport to give effect to the receipt and application of any part of the proceeds from the sale of securities for cash shall not be used unless such securities are to be offered through underwriters and the underwriting arrangements are such that the underwriters are or will be committed to take and pay for all of the securities, if any are taken, prior to or within a reasonable time after the commencement of the public offering, or if the securities are not so taken to refund to all subscribers the full amount of all subscription payments made for the securities. The caption of any such financial statement shall clearly set forth the assumptions upon which such statement is based. The caption shall be in type at least as large as that used generally in the body of the statement. [21 F.R. 7566, Oct. 3, 1956]

§ 230.171 Disclosure detrimental to the national security.

(a) Any requirement to the contrary notwithstanding, no registration statement, prospectus, or other document filed with the Commission or used in connection with the offering or sale of any securities shall contain any document or information that has been classified or determined by an appropriate department or agency of the United States to require protection in the interests of national defense.

(b) Where a document is omitted pursuant to paragraph (a) of this section, there shall be filed, in lieu of such document, a statement from an appropriate department or agency of the United States to the effect that such document has been classified or that the status of such document is awaiting determination. Where a document is omitted pursuant to paragraph (a) of this section, but information relating to the subject matter of such document is nevertheless included in material filed with the Commission pursuant to a determination of an appropriate department or agency of the United States that disclosure of such information would not be contrary to the interests of national defense, a statement to that effect shall be submitted for the information of the Commission.

(c) The Commission may protect any information in its possession which may require classification in the interests of national defense pending determination by an appropriate department or agency as to whether such information should be classified.

[20 F.R. 7034, Sept. 20, 1955]

§ 230.172

Consent to service of process to be furnished by nonresident brokers or dealers and by nonresident general partners or managing agents of brokers or dealers.

(a) Each nonresident broker or dealer registered or applying for registration pursuant to section 15(b) of the Securities Exchange Act of 1934, each nonresident general partner of a broker or dealer partnership which is registered or applying for registration, and each nonresident managing agent of any other unincorporated broker or dealer which is registered or applying for registration, shall furnish to the Commission, in a form prescribed by or acceptable to it, a written irrevocable consent and power of attorney which (1) designates the Securities and Exchange Commission as an agent upon whom may be served any process, pleadings, or other papers in any civil suit or action brought in any appropriate court in any place subject to the jurisdiction of the United States, with respect to any cause of action (i) which accrues during the period beginning when such broker or dealer becomes registered pursuant to section 15 of the Securities Exchange Act of 1934 and the rules and regulations thereunder and ending either when such registration is cancelled or revoked, or when the Commission receives from such broker or dealer a notice to withdraw from such registration, whichever is earlier, (ii) which arises out of any activity, in any place subject to the jurisdiction of the United States, occurring in connection with the conduct of business of a broker or dealer, and (iii) which is founded, directly or indirectly, upon the provisions of the Securities Act of 1933, the Securities Exchange Act of 1934, the Trust Indenture Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1940, or any rule or regulation under any of said Acts; and (2) stipulates and agrees that any such civil suit or action may be commenced by the service of process upon the Commission and the forwarding of a copy thereof as provided in paragraph (c) of this section,

and that the service as aforesaid of any such process, pleadings, or other papers upon the Commission shall be taken and held in all courts to be as valid and binding as if due personal service thereof had been made.

(b) The required consent and power of attorney shall be furnished to the Commission within the following period of time:

(1) Each nonresident broker or dealer registered at the time this section becomes effective, and each nonresident general partner or managing agent of an unincorporated broker or dealer registered at the time this section becomes effective, shall furnish such consent and power of attorney within 60 days after such date;

(2) Each broker or dealer applying for registration after the effective date of this section shall furnish, at the time of filing such application, all the consents and powers of attorney required to be furnished by such broker or dealer and by each general partner or managing agent thereof: Provided, however, That where an application for registration of a broker or dealer is pending at the time this section becomes effective such consents and powers of attorney shall be furnished within 30 days after this section becomes effective.

(3) Each broker or dealer registered or applying for registration who or which becomes a nonresident broker or dealer after the effective date of this section, and each general partner or managing agent, of an unincorporated broker or dealer registered or applying for registration, who becomes a nonresident after the effective date of this section, shall furnish such consent and power of attorney within 30 days thereafter.

(c) Service of any process, pleadings or other papers on the Commission under this part shall be made by delivering the requisite number of copies thereof to the Secretary of the Commission or to such other person as the Commission may authorize to act in its behalf. Whenever any process, pleadings or other papers as aforesaid are served upon the Commission, it shall promptly forward a copy thereof by registered or certified mail to the appropriate defendants at their last address of record filed with the Commission. The Commission shall be furnished a sufficient number of copies for such purpose, and one copy for its file.

(d) For purposes of this section the following definitions shall apply:

(1) The term "broker" shall have the meaning set out in section 3 (a) (4) of the Securities Exchange Act of 1934.

(2) The term "dealer" shall have the meaning set out in section 3 (a) (5) of the Securities Exchange Act of 1934.

(3) The term "managing agent" shall mean any person, including a trustee, who directs or manages or who participates in the directing or managing of the affairs of any unincorporated organization or association which is not a partnership.

(4) The term "nonresident broker or dealer" shall mean (i) in the case of an individual, one who resides in or has his principal place of business in any place not subject to the jurisdiction of the United States; (ii) in the case of a corporation, one incorporated in or having its principal place of business in any place not subject to the jurisdiction of the United States; (iii) in the case of a partnership or other unincorporated organization or association, one having its principal place of business in any place not subject to the jurisdiction of the United States.

(5) A general partner or managing agent of a broker or dealer shall be deemed to be a nonresident if he resides in any place not subject to the jurisdiction of the United States.

(Sec. 23, 48 Stat. 901, as amended, sec 319, 53 Stat. 1173, secs. 38, 211, 54 Stat. 841, 855; 15 U.S.C. 78w, 77sss, 80a-37, 80b-11) [18 F.R. 2577, May 2, 1953, as amended at 23 F.R. 9691, Dec. 16, 1958; 29 F.R. 16982, Dec. 11, 1964] § 230.173 Consent to service of process

to be furnished by non-resident_investment advisers and by non-resident investment general partners or managing agents of investment advisers. (a) Each non-resident investment adviser registered or applying for registration pursuant to section 203 of the Investment Advisers Act of 1940, each non-resident general partner of an investment adviser partnership which is registered or applying for registration, and each non-resident managing agent of any other unincorporated investment adviser which is registered or applying for registration, shall furnish to the Commission, in a form prescribed by or acceptable to it, a written irrevocable consent and power of attorney which (1) designates the Securities and Exchange Commission as an agent upon whom may

be served any process, pleadings, or other papers in any civil suit or action brought in any appropriate court in any place subject to the jurisdiction of the United States, where the cause of action (i) accures on or after the effective date of this section, (ii) arises out of any activity, in any place subject to the jurisdiction of the United States, occurring in connection with the conduct of business of an investment adviser, and (iii) is founded, directly or indirectly, upon the provisions of the Securities Act of 1933, the Securities Exchange Act of 1934, the Trust Indenture Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1940, or any rule or regulation under any of said acts; and (2) stipulates and agrees that any such civil suit or action may be commenced by the service of process upon the Commission and the forwarding of a copy thereof as provided in paragraph (c) of this section, and that the service as aforesaid of any such process, pleadings, or other papers upon the Commission shall be taken and held in all courts to be as valid and binding as if due personal service thereof had been made.

(b) The required consent and power of attorney shall be furnished to the Commission within the following period of time:

(1) Each non-resident investment adviser registered at the time this section becomes effective, and each nonresident general partner or managing agent of an unincorporated investment adviser registered at the time this section becomes effective, shall furnish such consent and power of attorney within 60 days after such date;

(2) Each investment adviser applying for registration after the effective date of this section shall furnish, at the time of filing such application, all the consents and powers of attorney required to be furnished by such investment adviser and by each general partner or managing agent thereof: Provided, however, That where an application for registration of an investment adviser is pending at the time this rule becomes effective such consents and powers of attorney shall be furnished within 30 days after this section becomes effective.

(3) Each investment adviser registered or applying for registration who or which becomes a non-resident investment adviser after the effective date of this section, and each general partner or managing agent, of an unincorporated

investment adviser registered or applying for registration, who becomes a nonresident after the effective date of this section shall furnish such consent and power of attorney within 30 days thereafter.

(c) Service of any process, pleadings or other papers on the Commission under this part shall be made by delivering the requisite number of copies thereof to the Secretary of the Commission or to such other person as the Commission may authorize to act in its behalf. Whenever any process, pleadings or other papers as aforesaid are served upon the Commission, it shall promptly forward a copy thereof by registered or certified mail to the appropriate defendants at their last address of record filed with the Commission. The Commission shall be furnished a sufficient number of copies for such purpose, and one copy for its file.

(d) For purposes of this section the following definitions shall apply:

(1) The term "investment adviser" shall have the meaning set out in section 202(a) (11) of the Investment Advisers Act of 1940.

(2) The term "managing agent" shall mean any person, including a trustee, who directs or manages or who participates in the directing or managing of the affairs of any unincorporated organization or association which is not a partnership.

(3) The term "non-resident investment adviser" shall mean (i) in the case of an individual, one who resides in or has his principal place of business in any place not subject to the jurisdiction of the United States; (ii) in the case of a corporation, one incorporated in or having its principal place of business in any place not subject to the jurisdiction of the United States; (iii) in the case of a partnership or other unincorporated organization or association, one having its principal place of business in any place not subject to the jurisdiction of the United States.

(4) A general partner or managing agent of an investment adviser shall be deemed to be a nonresident if he resides in any place not subject to the jurisdiction of the United States.

(Sec. 23, 48 Stat. 901, as amended, sec. 319, 53 Stat. 1173, secs. 38, 211, 54 Stat. 841, 855; 15 U.S.C. 78w, 77sss, 80a-37, 80b-11) [19 F.R. 4300, July 14, 1954; 20 F.R. 2510, Apr. 16, 1955, as amended at 29 F.R. 16982, Dec. 11 1964]

§ 230.174 Delivery of prospectus by dealers; exemptions under section 4(3) of the Act.

The obligations of a dealer (including an underwriter no longer acting as an underwriter in respect of the security involved in such transactions) to deliver a prospectus in transactions in a security as to which a registration statement has been filed taking place prior to the expiration of the 40 or 90 day period specified in section 4(3) of the Act after the effective date of such registration statement or prior to the expiration of such period after the first date upon which the security was bona fide offered to the public by the issuer or by or through an underwriter after such effective date, whichever is later, shall be subject to the following provisions:

(a) No prospectus need be delivered if the registration statement is on Forms S-8 (17 CFR 239.16b), S-9 (17 CFR 239.22), S-12 (17 CFR 239.19), or F-1 (17 CFR 239.9): Provided, In the case of a registration statement on Forms S-12 (17 CFR 239.19) or F-1 (17 CFR 239.9), this provision shall not apply if registration of the deposited securities is also required.

(b) If the issuer has a class of security listed and registered on a national securities exchange pursuant to section 12(b) of the Securities Exchange Act of 1934, the period during which a prospectus must be delivered shall be 40 days.

(c) Where a registration statement relates to offerings to be made from time to time no prospectus need be delivered after the expiration of the initial prospectus delivery period specified in section 4(3) of the Act or in paragraphs (a) or (b) of this section following the first bona fide offering of securities under such registration statement.

(d) Notwithstanding the foregoing, the period during which a prospectus must be delivered by a dealer shall be:

(1) As specified in section 4(3) of the Act if the registration statement was the subject of a stop order issued under section 8 of the Act; or

(2) As the Commission may provide upon application or on its own motion in a particular case.

(e) Nothing in this section shall affect the obligation to deliver a prospectus pursuant to the provisions of section 5 of the Act by a dealer who is acting as an underwriter with respect to the securities