(10) Whether, in the opinion of counsel, the security is exempt from specified taxes, or the extent to which the issuer has agreed to pay any tax with respect to the security or measured by the income therefrom;

(11) Whether the security is being offered through rights issued to security holders, and, if so, the class of securities the holders of which will be entitled to subscribe, the subscription ratio, the actual or proposed record date, the date upon which the rights were issued or are expected to be issued, the actual or anticipated date upon which they will expire, and the approximate subscription price, or any of the foregoing;

(12) Any statement or legend required by any state law or administrative authority; and

(13) A communication concerning the securities of a registered investment company may also include any one or more of the following items of information: Offers, descriptions, and explanations of any products and services not constituting securities subject to registration under the Securities Act of 1933, and descriptions of corporations provided that such offers, descriptions and explanations do not relate directly to the desirability of owning or purchasing a security issued by a registered investment company and that all direct references in such communications to a security issued by a registered investment company contain only the statements required or permitted to be included therein by the other provisions of this rule, and that all such direct references be placed in a separate and enclosed area in the communication.

(b) Except as provided in paragraph (c) of this section, every communication used pursuant to this section shall contain the following:

(1) If the registration statement has not yet become effective, the following statement:

A registration statement relating to these securities has been filed with the Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This (communication) shall not constitute an offer to sell or the

solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State.

(2) A statement whether the security is being offered in connection with a distribution by the issuer or by a security holder, or both, and whether the issue represents new financing or refunding or both; and

(3) The name and address of a person or persons from whom a written prospectus meeting the requirements of section 10 of the act may be obtained.

(c) Any of the statements or information specified in paragraph (b) of this section may, but need not, be contained in a communication: (i) Which does no more than state from whom a written prospectus meeting the requirements of Section 10 of the Act may be obtained, identify the security, state the price thereof and state by whom orders will be executed; or (ii) which is accompanied or preceded by a prospectus or a summary prospectus which meets the requirements of section 10 of the act at the date of such preliminary communication.

(d) A communication sent or delivered to any person pursuant to this rule which is accompanied or preceded by a prospectus which meets the requirements of section 10 of the act at the date of such communication, may solicit from the recipient of the communication an offer to buy the security or request the recipient to indicate, upon an enclosed or attached coupon or card, or in some other manner, whether he might be interested in the security, if the communication contains substantially the following statement:

No offer to buy the securities can be accepted and no part of the purchase price can be received until the registration statement has become effective, and any such offer may be withdrawn or revoked, without obligation or commitment of any kind, at any time prior to notice of its acceptance given after the effective date. An indication of interest in response to this advertisement will involve no obligation or commitment of any kind.

Provided, That such statement need not be included in such a communication to a dealer if the communication refers to a prior communication to the dealer, with respect to the same security, in which the statement was included.

(Sec. 2, 48 Stat. 74, as amended; 15 U.S.C. 77b)

[20 FR 6524, Sept. 3, 1955, as amended at 23 FR 184, Jan. 10, 1958; 37 FR 10073, May 19, 1973; 39 FR 39869, Nov. 12, 1974; 40 FR 27443, June 30, 1975; 43 FR 47495, Oct. 16, 1978]

§ 230.135 Notice of certain proposed offerings.

(a) For the purpose only of section 5 of the Act, a notice given by an issuer that it proposes to make a public offering of securities to be registered under the Act shall not be deemed to offer any securities for sale if such notice states that the offering will be made only by means of a prospectus and contains no more than the following additional information:

(1) The name of the issuer;

(2) The title, amount, and basic terms of the securities proposed to be offered, the amount of the offering, if any, to be made by selling security holders, the anticipated time of the offering and a brief statement of the manner and purpose of the offering without naming the underwriters;

(3) In the case of a rights offering to security holders of the issuer, the class of securities the holders of which will be entitled to subscribe to the securities proposed to be offered, the subscription ratio, the proposed record date, the approximate date upon which the rights are proposed to be issued, the proposed term or expiration date of the rights and the approximate subscription price, or any of the foregoing;

(4) In the case of an offering of securities in exchange for other securities of the issuer or of another issuer, the name of the issuer and the title of the securities to be surrendered in exchange for the securities to be offered, the basis upon which the exchange may be made, or any of the foregoing; (5) In the case of an offering to employees of the issuer or to employees

of any affiliate of the issuer, the name of the employer and class or classes of employees to whom the securities are proposed to be offered, the offering price or basis of the offering and the period during which the offering is to be made, or any of the foregoing; and (6) Any statement or legend required by State law or administrative authority.

(b) Any notice contemplated by this section may take the form of a news release or a written communication directed to security holders or employees, as the case may be, or other published statement.

(15 U.S.C. 77d)

[35 FR 18456, Dec. 4, 1970]

§ 230.135a Generic advertising.

(a) For the purposes only of section 5 of the Act, a notice, circular, advertisement, letter, sign, or other communication, published or transmitted to any person which does not specifically refer by name to the securities of a particular investment company, to the investment company itself, or to any other securities not exempt under section 3(a) of the Act, will not be deemed to offer any security for sale, provided:

(1) Such communication is limited to any one or more of the following:

(i) Explanatory information relating to securities of investment companies generally or to the nature of investment companies, or to services offered in connection with the ownership of such securities,

(ii) The mention or explanation of investment companies of different generic types or having various investment objectives, such as "balanced funds," "growth funds," "income funds," "leveraged funds," "specialty funds," "variable annuities," "bond funds," and "no-load funds,"

(iii) Offers, descriptions, and explanation of various products and services not constituting a security subject to registration under the Act: Provided, That such offers, descriptions, and explanations do not relate directly to the desirability of owning or purchasing a security issued by a registered investment company,

(iv) Invitation to inquire for further information, and

(2) Such communication contains the name and address of a registered broker or dealer or other person sponsoring the communication.

(b) If such communication contains a solicitation of inquiries and prospectuses for investment company securities are to be sent or delivered in response to such inquiries, the number of such investment companies and, if applicable, the fact that the sponsor of the communication is the principal underwriter or investment adviser in respect to such investment companies shall be stated.

(c) With respect to any communication describing any type of security, service, or product, the broker, dealer, or other person sponsoring such communication must offer for sale a security, service, or product of the type described in such communication.

[37 FR 10073, May 19, 1973, as amended at 37 FR 10931, June 1, 1972]

§ 230.136 Definition of certain terms in relation to assessable stock.

(a) An "offer", "offer to sell", or "offer for sale" of securities shall be deemed to be made to the holders of assessable stock of a corporation when such corporation shall give notice of an assessment to the holders of such assessable stock. A "sale" shall be deemed to occur when a stockholder shall pay or agree to pay all or any part of such an assessment.

(b) The term "transactions by any person other than an issuer, underwriter or dealer" in section 4(1) of the Act shall not be deemed to include the offering or sale of assessable stock, at public auction or otherwise, upon the failure of the holder of such stock to pay an assessment levied thereon by the issuer, where the offer or sale is made for the purpose of realizing the amount of the assessment and any of the proceeds of such sale are to be received by the issuer. However, any person whose functions are limited to acting as auctioneer at such an auction sale shall not be deemed to be an underwriter of the securities offered or sold at the auction sale. Any person who acquires assessable stock at any

such public auction or other sale with a view to the distribution thereof shall be deemed to be an underwriter of such assessable stock.

(c) The term "assessable stock" means stock which is subject to resale by the issuer pursuant to statute or otherwise in the event of a failure of the holder of such stock to pay any assessment levied thereon.

[24 FR 6386, Aug. 8, 1959]

§ 230.137 Definition of “offers", "participates", or "participation" in section 2(11) in relation to certain publications by persons independent of participants in a distribution.

The terms "offers," "participates," or "participation" in section 2(11) of the Act shall not be deemed to apply to the publication or distribution of information, opinions or recommendations with respect to the securities of an issuer which is required to file reports pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 and has filed or proposes to file a registration statement under the Securities Act of 1933 if—

(a) Such information, opinions, and recommendations are published and distributed in the regular course of its business by a dealer which is not and does not propose to be a member of the underwriting syndicate or dealer group in connection with the distribution of the security to which the registration statement relates; and

(b) Such dealer receives no consideration, directly or indirectly, in connection with the publication and distribution of such information, opinions or recommendations from the issuer, a selling security holder or any member of the underwriting syndicate or dealer group or any other person interested in the securities to which the registration statement relates, and such information, opinions, or recommendations are not published or distributed pursuant to any arrangement or understanding, direct or indirect, with such issuer, underwriter, dealer, or selling security holder; Provided, however, That nothing herein shall forbid payment of the regular subscription or purchase price of the document or other written communica

tion in which such information, opinions or recommendations appear.

(15 U.S.C. 77d)

[35 FR 18457, Dec. 4, 1970]

§ 230.138 Definition of "offer for sale" and "offer to sell" in sections 2(10) and 5(c) in relation to certain publications. (a) Where an issuer which meets all of the conditions for the use of Form S-7 [§ 239.26 of this chapter] or S-9 [§ 239.22 of this chapter] has filed or proposes to file a registration statement under the Act relating solely to a nonconvertible debt security or to a nonconvertible, nonparticipating preferred stock, publication, or distribution in the regular course of its business by a dealer of information, opinions or recommendations relating solely to common stock or to debt or preferred stock convertible into common stock of such issue shall not be deemed to constitute an offer for sale or offer to sell the security to which such registration statement relates for purposes of sections 2(10) and 5(c) of the Act, even though such dealer is or will be a member of the underwriting syndicate or dealer group in connection with the distribution of the security to which such registration statement relates.

(b) Where an issuer which meets all of the conditions for the use of Form S-7 (§ 239.26 of this chapter) has filed or proposes to file a registration statement under the Act relating solely to common stock or to debt or preferred stock convertible into common stock, the publication or distribution in the regular course of its business by a dealer of information, opinions or recommendations relating solely to a nonconvertible debt security, or to a nonconvertible nonparticipating preferred stock, shall not be deemed to constitute an offer for sale or offer to sell the security to which such registration statement relates for purposes of sections 2(10) and 5(c) of the Act, even though such dealer is or will be a member of the underwriting syndicate or dealer group in connection with the distribution of the security to which such registration statement relates. (15 U.S.C. 77d)

[35 FR 18457, Dec. 4, 1970]

§ 230.139 Definition of "offer for sale" and "offer to sell" in sections 2(10) and 5(c) in relation to certain publications. Where an issuer which is required to file reports pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 has filed or proposes to file a registration statement under the Securities Act of 1933 relating to its securities, the publication or distribution by a dealer, in the regular course of its business, of information, an opinion or a recommendation with respect to the securities so registered or proposed to be registered shall not be deemed to constitute an offer for sale or offer to sell such securities for the purposes of sections 2(10) and 5(c) of the Act, even though such dealer is or will be a member of the underwriting syndicate or dealer group in connection with the distribution of such securities if all of the following conditions exist:

(a) Such information, opinion or recommendation is contained in a publication which has for at least the past 2 years been distributed with reasonable regularity on an annual or other more frequent basis and each issue of which contains a comprehensive list of securities currently recommended by such dealer;

(b) Such information, opinion or recommendation is given no greater space or prominence in such publication than that given to other securities, and does not include projections of sales or earnings beyond the issuer's current fiscal year or following fiscal year if within the last 6 months of the current fiscal year;

(c) An opinion or recommendation at least as favorable as to the security was published by the dealer in either the last publication of the same character or in a subsequent publication of a different character, which was previously distributed by such dealer. (15 U.S.C. 77d)

[35 FR. 18457, Dec. 4, 1970]

§ 230.140 Definition of "Distribution" in section 2(11) for certain transactions.

A person, the chief part of whose business consists of the purchase of the securities of one issuer, or of two

or more affiliated issuers, and the sale of its own securities, including the levying of assessments on its assessable stock and the resale of such stock upon the failure of the holder thereof to pay any assessment levied thereon, to furnish the proceeds with which to acquire the securities of such issuer or affiliated issuers, is to be regarded as engaged in the distribution of the securities of such issuer or affiliated issuers within the meaning of section 2(11) of the Act.

[24 FR 6386, Aug. 8, 1959]

§ 230.141 Definition of "commission from an underwriter or dealer not in excess of the usual and customary distributors' or sellers' commissions" in section 2(11), for certain transactions. (a) The term "commission" in section 2(11) of the act shall include such remuneration, commonly known as a spread, as may be received by a distributor or dealer as a consequence of reselling securities bought from an underwriter or dealer at a price below the offering price of such securities, where such resales afford the distributor or dealer a margin of profit not in excess of what is usual and customary in such transactions.

(b) The term "commission from an underwriter or dealer" in section 2(11) of the act shall include commissions paid by an underwriter or dealer directly or indirectly controlling or controlled by, or under direct or indirect common control with the issuer.

(c) The term “usual and customary distributors' or sellers' commission" in section 2(11) of the act shall mean a commission or remuneration, commonly known as a spread, paid to or received by any person selling securities either for his own account or for the account of others, which is not in excess of the amount usual and customary in the distribution and sale of issues of similar type and size; and not in excess of the amount allowed to other persons, if any, for comparable service in the distribution of the particular issue; but such term shall not include amounts paid to any person whose function is the management of the distribution of all or a substantial part of the particular issue, or who

performs the functions normally performed by an underwriter or underwriting syndicate.

[2 FR 1075, May 26, 1937]

§ 230.142 Definition of "participates" and "participation," as used in section 2(11), in relation to certain transactions.

(a) The terms "participates" and "participation" in section 2(11) (48 Stat. 74, 48 Stat. 905; 15 U.S.C. 77b) shall not include the interest of a person (1) who is not in privity of contract with the issuer nor directly or indirectly controlling, controlled by, or under common control with, the issuer, and (2) who has no association with any principal underwriter of the securities being distributed, and (3) whose function in the distribution is confined to an undertaking to purchase all or some specified proportion of the securities remaining unsold after the lapse of some specified period of time, and (4) who purchases such securities for investment and not with a view to distribution.

(b) As used in this section:

(1) The term "issuer" shall have the meaning defined in section 2(4) (48 Stat. 74, 48 Stat. 905; 15 U.S.C. 77b) and in the last sentence of section 2(11).

(2) The term "association" shall inIclude a relationship between two persons under which one:

(i) Is directly or indirectly controlling, controlled by, or under common control with, the other, or

(ii) Has, in common with the other, one or more partners, officers, directors, trustees, branch managers, or other persons occupying a similar status or performing similar functions, or

(iii) Has a participation, direct or indirect, in the profits of the other, or has a financial stake, by debtor-creditor relationship, stock ownership, contract or otherwise, in the income or business of the other.

(3) The term “principal underwriter" shall have the meaning defined in § 230.405.

[3 FR 3015, Dec. 16, 1938]