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REVISION OF RULES, REGULATIONS AND FORMS
The Commission maintains a continuing program of reviewing its rules, regulations, and forms under the various statutes administered by it in order to determine whether any changes are appropriate in the light of changing conditions, methods and procedures in business and in the financial practices of business. Certain members of the staff are specifically assigned to this task, but changes are also suggested, from time to time, by other members of the staff who are engaged in the examination of material filed with the Commission, and by persons outside of the Commission who are subject to the Commission's requirements or who have occasion to work with those requirements such as underwriters, attorneys, accountants, and other representatives. With a few exceptions provided for by the Administrative Procedure Act, proposed new rules, regulations, and forms and proposed changes in existing rules, regulations, and forms are published in preliminary form for the purpose of obtaining the views and comments of interested persons, including issuers and various industry groups.
During the 1962 fiscal year, the Commission adopted a number of changes in its rules, regulations, and forms. Other changes which the Commission published in preliminary form for the purpose of obtaining public comments thereon were pending at the end of the fiscal year. The changes made during the fiscal year and those pending at the end of the year are described below.
THE SECURITIES ACT OF 1933 Adoption of Rule 152A
The Commission adopted Rule 152A which provides that the offering or sale of securities, evidenced by scrip certificates, order forms or similar documents, which represent fractional interests resulting
1 The rules and regulations of the Commission are published in the Code of Federal Regulations, the rules adopted under the various acts administered by the Commission appearing in the following parts of Title 17 of that code :
Securities Act of 1933, pt. 230.
from a stock dividend, stock split, reverse stock split, conversion, merger or similar transaction is deemed to be a transaction by a person other than an issuer, underwriter or dealer within the meaning of the first clause of Section 4(1) of the Act, and therefore exempt from registration under the Act. The rule applies only to offers and sales involved in the matching and combination of fractional interests among security holders and the sale of whole shares representing the remaining fractional interests not so combined. The rule applies whether the transactions are effected on behalf of the security holders by the issuer or an affiliate of the issuer or by a bank or other independent agent. Adoption of Rule 155
During the fiscal year the Commission adopted a new Rule 155.3 The new rule relates to the interpretation of the exemptions afforded by Section 4(1) in the context of public offerings of convertible securities by or on behalf of any person who purchased such securities directly or indirectly from the issuer in a non-public transaction, or to a public offering of the securities received upon conversion of the securities so placed. Of course, where there is an initial public offering of convertible securities, immediate registration is required in the absence of some exemption, and the rule has no application to such a situation.
The new rule defines the phrase "transactions by an issuer not involving any public offering” in Section 4(1) of the Act, as not including certain public offerings of convertible securities or of securities received upon such a conversion. The rule excludes from the quoted exemption two types of public offerings. The first is a public offering of a security, which 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 the issuer in a non-public transaction. The other type of offering excluded from the quoted exemption is one by or on behalf of any such person or persons of the security acquired upon conversion, unless the person or persons making the public offering are not underwriters within the meaning of that term as defined in Section 2(11) of the Act. In determining whether any such person is an underwriter, the usual statutory tests are to be applied, as in other situations.
In order that intermediate persons who are not connected with any public offering of such securities may not be treated as underwriters, the rule provides that any such intermediate holder of the convertible security or of the underlying security who has not acquired it with a
2 Securities Act Release No. 4470 (March 28, 1962). 3 Securities Act Release No. 4450 (Feb. 7, 1962).
view to its distribution and is not instrumental in making or arranging a public offering is not to be deemed an underwriter for the purpose of the rule. Of course, even though a person is instrumental in making or arranging a public offering of the underlying security, the rule does not apply if the acquisition, retention and disposition of such security are such that the person is not an underwriter within the meaning of the term as defined in Section 2(11) of the Act.
The rule applies only with respect to convertible securities issued after the effective date of the rule. Adoption of Rule 236
The Commission adopted Rule 236 which exempts from registration under the Securities Act, under certain conditions, shares of stock or similar security which are publicly offered to provide funds to be distributed to security holders in lieu of issuing fractional shares, scrip certificates, order forms, or other evidences of such fractional interest, in connection with a stock dividend, stock split, reverse stock split, conversion, merger or similar transaction. The conditions of the exemption are that the issuer is required to file and has filed reports with the Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, that the aggregate gross proceeds from the sale of the shares do not exceed $100,000 and that the issuer furnish certain information to the Commission at least 10 days prior to the offering of the shares.*
From the date of adoption of the rule to the end of the 1962 fiscal year, 11 companies furnished notices to the Commission pursuant to the rule.
Amendment of Rule 458
Rule 458, which deals with the payment of fees in connection with the registration of securities under the Securities Act, and prescribes the manner in which the required fees shall be paid, was amended during the fiscal year. The amendment to the rule provides that payments of fees may be rounded to the nearest dollar and that the Commission will waive any deficiency in the fee amounting to less than $1. However, in no case may the amount of the registration fee be less than $25. The amendment also provides that refunds to issuers of excess payments amounting to less than $1 will be made only upon the request of the issuer and that refunds of $1 or more may be waived by the issuer. The purpose of the amendment is to reduce the time and clerical work involved in collecting or refunding insignificant amounts. However, as indicated above, the rule preserves the right of an issuer to receive a refund of any amount due it, if it so desires.
* Securities Act Release No. 4470 (March 28, 1962). - Securities Act Release No. 4381 (July 3, 1961).
Adoption of Rules 462 and 263
The Commission adopted Rule 462 which requires that if a bona fide effort is not made to proceed with the offering and sale of registered securities to the public within 3 business days after the registration statement becomes effective, or if the offering or sale is suspended within 15 days after the effective date, telegraphic or air mail notice of the delay or suspension must be filed with the Commission. A similar rule, designated as Rule 263, has been added to Regulation A with respect to offerings under that regulation. The new rules are intended to apply to situations where an offering is delayed or suspended by the issuer or principal underwriters and information with respect to such delay or suspension and the reasons therefor are not contained in the prospectus or offering circular. Adoption of Revised Form S-8
During the fiscal year, the Commission published notice that it had under consideration certain proposed amendments to Form S-8 which is the form authorized for use in registering securities under the Securities Act to be offered pursuant to certain stock purchases, savings or similar plans, and for registering the interests in such plans where such registration is required. A number of comments were received in regard to the proposed amendments and shortly after the close of the fiscal year the Commission adopted a revised Form S-8.8
The rule as to the use of the form has been simplified and clarified in certain respects and has been amplified to permit use of the form for securities other than "equity” securities and for securities to be offered pursuant to restricted stock options. The transmittal of annual reports and other material to employees is now required by undertakings set forth at the end of the form and the provisions making such transmittal a condition to the use of the form have been deleted. General Instruction E which defined the term "transactions within 1 year" as previously used in the third clause of Section 4(1) of the Securities Act, has been amended to define the term "transactions prior to the expiration of 40 days,” which is the present language of the statute. Additional items calling for information with respect to securities to be offered pursuant to restricted stock options have been added to the form. Adoption of Form S-11
During the fiscal year the Commission adopted a new form, designated Form S-11, for registration under the Securities Act of securities of certain real estate companies. The form is to be used for
Securities Set Release No. 4427 (November 14, 1981). - Securities Act Release No. 4440 (January 15, 1962). & Securities Act Release No. 4533 (August 30, 1962). Securities Act Release No. 4422 (October 26, 1961).
securities issued by real estate investment trusts, as defined in Section 856 of the Internal Revenue Code, or securities issued by other issuers whose business is primarily that of acquiring and holding for investment real estate or interests in real estate or interests in other issuers whose business is primarily that of acquiring and holding real etate or interests in real estate for investment. The new form is not to be used, however, for securities of any investment company which is registered or required to register under the Investment Company Act of 1940.
THE SECURITIES EXCHANGE ACT OF 1934 Adoption of Rules 13a–15 and 150–15 and Form 7-K
During the fiscal year, the Commission adopted two new rules with regard to the periodic reporting requirements and a new quarterly report form. The new rules, designated Rules 13a-15 and 15d-15, require certain real estate companies to file with the Commission, pursuant to Sections 13 and 15(d) of the Act, quarterly reports with respect to distributions made to shareholders. Such reports are required to be filed on the new Form 7-K within 45 days after the end of the fiscal quarter for which they are filed. However, investment companies registered under the Investment Company Act of 1940, and partnerships all of whose properties are under long term lease to other persons, are not required to file such reports. 10 Adoption of Rule 150-21 and Form 11-K; Amendment to Form 10-K
Shortly after the end of the fiscal year, the Commission adopted regulations governing the filing of annual reports pursuant to Section 15(d) of the Securities Exchange Act, relating to employee stock purchase, savings and similar plans. Proposed regulations relating to the filing of such reports were published for comment on June 13, 1961.11 As a result of further consideration of these proposals and the comments and suggestions received in regard thereto, certain changes have been made in the proposed regulations. A new Form 11-K has been adopted for use in filing annual reports with respect to such plans. A new Rule 15d-21 has been adopted which provides that separate annual and other reports need not be filed with respect to any plan if the issuer of the stock or other securities offered to employees through their participation in the plan files annual reports on Form 10-K or U5S and furnishes to the Commission as a part of its annual report on such form the information, financial statements and exhibits required by Form 11-K and furnishes to the Commission copies of any annual report submitted to employees in regard to the plan. A new general instruction has been added to Form 10-K which specifies the procedure
10 Securities Exchange Act Release No. 6820 (June 12, 1962). n Securities Exchange Act Release No. 6576 (June 18, 1961).