ule 10a-1. Short Sales

(a) No person shall, for his own account or for he account of any other person, effect on a ational securities exchange a short sale of any ecurity (1) below the price at which the last ale thereof, regular way, was effected on such xchange, or (2) at such price unless such price s above the next preceding different price at which a sale of such security, regular way, was effected on such exchange. In determining the price at which a short sale may be effected after a security goes ex-dividend, ex-right, or ex-any other distribution, all sale prices prior to the "ex" date may be reduced by the value of such distribution.

(b) No member of a national securities exchange shall, by the use of any facility of such exchange, execute any sell order unless such order is marked either "long" or "short."

(c) No member of a national securities exchange shall mark a sell order "long" unless (1) the security to be delivered after sale is carried in the account for which the sale is to be effected, or (2) such member is informed that the seller owns the security ordered to be sold and, as soon as is possible without undue inconvenience or expense, will deliver the security owned to the account for which the sale is to be effected.

(d) The provisions of paragraph (a) hereof shall not apply to—

(1) Any sale by any person, for an account in which he has an interest, if such person owns the security sold and intends to deliver such security as soon as is possible without undue inconvenience or expense;

(2) Any member in respect of a sale, for an account in which he has no interest, pursuant to an order to sell which is marked "long";

(3) Any sale of an odd-lot;

(4) Any sale by an odd-lot dealer to offset oddlot orders of customers;

(5) Any sale by an odd-lot dealer to liquidate a long position which is less than a round lot, provided such sale does not change the position of such odd-lot dealer by more than the unit of trading;

(6) Any sale of a security on a national securities exchange effected with the approval of such exchange which is necessary to equalize the price of such security thereon with the current price of such security on another national securities exchange which is the principal exchange market for such security;

(7) Any sale of a security for a special arbitrage account by a person who then owns another security by virtue of which he is, or presently will be, entitled to acquire an equivalent number of securities of the same class as the securities sold; provided such sale, or the purchase which such sale offsets, is effected for the bona fide purpose of profiting from a current difference between the price of the security sold and the security owned and that such right of acquisition was originally attached to or represented by another security or was issued to all the holders of any class of securities of the issuer;

(8) Any sale of a security on a national securities exchange effected for a special international arbitrage account for the bona fide purpose of profiting from a current difference between the price of such security on a securities market not within or subject to the jurisdiction of the United States and on such national securities exchange; provided the seller at the time of such sale knows or, by virtue of information currently received, has reasonable grounds to believe that an offer enabling him to cover such sale is then available to him in such foreign securities market and intends to accept such offer immediately; or

(9) Any sale of a security on a national securities exchange effected in accordance with a special offering plan declared effective by the Commission pursuant to paragraph (d) of Rule 10b-2. For the purpose of Clause (8) hereof a depositary receipt for a security shall be deemed to be the same security as the security represented by such receipt.

Rule 10a-2. Requirements for Covering Purchases

(a) No member of a national securities exchange shall lend, or arrange for the loan of,

any security for delivery to the broker for the purchaser after sale, or shall fail to deliver a security on the date delivery is due, if such member knows or has reasonable grounds to believe that the sale was effected, or will be effected, pursuant to an order marked "long," unless such member knows, or has been informed by the seller, (1) that the security sold has been forwarded to the account for which the sale was effected; or (2) that the seller owns the security sold, that it is then impracticable to deliver to such account the security owned and that he will deliver such security to such account as soon as is possible without undue inconvenience or expense.

(b) The provisions of paragraph (a) hereof shall not apply (1) to the lending of a security by a member through the medium of a loan to

another member, or (2) to any loan, or ar ment for the loan, of any security, or to any f to deliver any security if, prior to su A arrangement, or failure to deliver, the er upon which the sale requiring the delivery of security was effected finds (i) that such se sulted from a mistake made in good faith that due diligence was used to ascertain ths. circumstances specified in clause (1) of Rule! 1(c) existed or to obtain the information speci in clause (2) thereof, and (iii) either tha: = condition of the market at the time the mis was discovered was such that undue hards would result from covering the transaction by "purchase for cash," or that the mistake was m by the seller's broker and the sale was at a pre permissible for a short sale under Rule 10a-1:

Rule 10b-1. Prohibition of Use of Manipulative or Deceptive Devices or Contrivances With Respect to Certain Securities Exempted From Registration

The term manipulative or deceptive device or contrivance, as used in section 10(b), is hereby defined to include any act or omission to act with respect to any security exempted from the operation of section 12(a) pursuant to a rule which specifically provides that this rule shall be applicable to such security, if such act or omission to act would have been unlawful under section 9(a), or any rule or regulation heretofore or hereafter prescribed thereunder, if done or omitted to be done with respect to a security registered on a national securities exchange, and the use of any means or instrumentality of interstate commerce or of the mails or of any facility of any national securities exchange to use or employ any such device or contrivance in connection with the purchase or sale of any such security is hereby prohibited.

Rule 10b-2. Solicitation of Purchases on an Exchange to Facilitate a Distribution of Securities

(a) No person, participating or otherwise financially interested in the primary or secondary distribution of any security of any issuer, shall, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange

(1) Pay or offer or agree to pay, directly or directly, to any person any compensation for s liciting another to purchase any security of t same issuer on a national securities exchange, & for purchasing any security of the same issuer of any such exchange for any account other than the account of the person who pays or is to pay such compensation; or

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(2) Sell, offer to sell or induce an offer to buy! such security, or deliver such security after sale. if, in connection with such distribution, such per | son has paid, or has offered or agreed to pay, rectly or indirectly, to any person, any compensation for soliciting another to purchase any security of the same issuer on any national securities exchange, or for purchasing any security of the same issuer on any such exchange for any account other than the account of the person who has paid or is to pay such compensation.

(b) No person, participating or otherwise financially interested in the primary or secondary distribution of any security of any issuer, shall cause a purchase or sale of any security of the same issuer on a national securities exchange by paying or offering or agreeing to pay, directly or indirectly, to any person any compensation for soliciting another to purchase such security on any such exchange, or for purchasing such security on any such exchange for any account other than the account of the person who pays or is to pay such compensation.

) The provisions of this rule shall not apply spect to any salary paid by a broker or dealer ny person regularly employed by him whose nary duties include the solicitation or execuof brokerage orders on a national securities ange, if such salary represents only ordinary pensation for the discharge by such person of h duties in the regular course of his employnt, and is not paid, in whole or in part, directly indirectly, for the inducement by such person the purchase or sale on a national securities change of any security of the issuer of the serity in the primary or secondary distribution which such broker or dealer is participating or herwise financially interested.

(d) (1) The provisions of this rule shall not pply to any transaction involving the payment of ɔmpensation pursuant to the terms of an effective lan authorizing the payment of such compensaion in connection with a distribution of securities, vhich plan has been filed with the Commission by national securities exchange, provided that the person paying such compensation does not know or have reasonable grounds to believe, at the time he pays or offers or agrees to pay such compensation, that transactions connected with such distribution are being carried out in violation of such plan.

(2) For the purposes of this rule a plan filed with the Commission by a national securities exchange shall not become effective unless the Commission, having due regard for the public interest and for the protection of investors, declares the plan to be effective. The Commission in its declaration may impose such terms and conditions relating to the provisions of the plan and the period of its effectiveness as it deems necessary or appropriate in the public interest or for the protection of investors.

Rule 10b-3. Employment of Manipulative and Deceptive Devices

It shall be unlawful for any broker or dealer, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange, to use or employ, in connection with the purchase or sale of any security otherwise than on a national securities exchange, any act, practice, or course of business defined by the Commission to be included within the term "manipulative, deceptive, or other fraudulent device or contriv

ance," as such term is used in section 15 (c) (1) of the Act.

Rule 10b-4. Short tendering of Securities

(a) It shall constitute a "manipulative or deceptive device or contrivance" as used in section 10(b) of the Act for any person, in response to an offer for, or to a request or invitation for tenders of, any security.

(1) to tender any security for his own account unless (A) he owns the security or, (B) he owns a security convertible into or exchangeable for, or owns an option, warrant or right to purchase the tendered security, intends to acquire the tendered security, by conversion, exchange, or exercise of such option, warrant or right to the extent necessary to deliver the tendered security, and, upon the acceptance of his tender, he does convert, exchange, or exercise such option, warrant or right to the extent necessary to deliver the tendered security: Provided, however, That if he tenders a security on the basis of his ownership of an option to purchase such security, he shall have reason to believe that the maker or writer of the option has title to and possession of such security and will promptly deliver it upon exercise of the option; or,

(2) to tender or guarantee the tender of any security on behalf of another person, unless (A) such security is in the possession of the person making the tender or giving the guarantee, or (B) the person making the tender or giving the guarantee, upon information furnished by the person on whose behalf the tender or guarantee is made, has reason to believe that such person owns the security tendered and, as soon as possible, without undue inconvenience or expense, will deliver the security for the purpose of the tender to the person making the tender or giving the guarantee, or (C) the person on whose behalf the tender or guarantee is made owns a security convertible into, or exchangeable for, or owns an option, warrant or right to purchase the tendered security and the person making the tender has reason to believe that such other person intends to acquire the tendered security, by the conversion, exchange, or exercise of such option, warrant or right to the extent necessary to deliver the tendered security: Provided, however, That if the tender or guarantee of the tender of a security is made on the basis of the ownership of an option to purchase such security, the person

making the tender or guarantee shall have reason to believe that the maker or writer of the option has title to and possession of such security and will promptly deliver it upon exercise of the option.

(b) For the purposes of this rule, a person shall be deemed to own a security if (1) he or his agent has title to it; or (2) he has purchased, or has entered into an unconditional contract, binding on both parties thereto, to purchase it but has not yet received it; or (3) he owns a security convertible into or exchangeable for it and has tendered such security for conversion or exchange; or (4) he has an option to purchase or acquire it and has exercised such option; or (5) he has rights or warrants to subscribe to it and has exercised such rights or warrants: Provided, however, That a person shall be deemed to own securities only to the extent that he has a net long position in such securities.

(Adopted May 28, 1968, eff. July 1, 1968, Release 348321.)

Rule 10b-5. Employment of Manipulative and Deceptive Devices

It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange,

(1) to employ any device, scheme, or artifice to defraud,

(2) to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or

(3) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,

in connection with the purchase or sale of any security.

Rule 10b-6. Prohibitions Against Trading by Persons Interested in a Distribution

(a) It shall constitute a "manipulative or deceptive device or contrivance" as used in section 10(b) of the Act for any person,

(1) who is an underwriter or prospective underwriter in a particular distribution of securities, or

(2) who is the issuer or other person on whose behalf such a distribution is being made, or

(3) who is a broker, dealer, or other e who has agreed to participate or is partic in such a distribution, directly or indire the use of any means or instrumentality of state commerce, or of the mails, or of any f of any national securities exchange, either i or with one or more other persons, to bid fr purchase for any account in which he has a be ficial interest, any security which is the subj such distribution, or any security of the same and series, or any right to purchase any such rity, or to attempt to induce any person to F chase any such security or right until after he completed his participation in such distrib Provided, however, That this rule shall not? hibit (1) transactions in connection with the tribution effected otherwise than on a securi exchange with the issuer or other person or p sons on whose behalf such distribution is be made or among underwriters, prospective und writers, or other persons who have agreed participate or are participating in such distri tion; (2) unsolicited privately negotiated chases, each involving a substantial amount of 52 security, effected neither on a securities exchan nor from or through a broker or dealer; or ( purchases by an issuer effected more than 40 da after the commencement of the distribution for the purpose of satisfying a sinking fund or simil obligation to which it is subject; or (4) odd-le transactions (and the off-setting round-lot trans actions hereinafter referred to) by a person regis tered as an odd-lot dealer in such security on national securities exchange who offsets such oddlot transactions in such security by round-lo transactions as promptly as possible; or (5) brokerage transactions not involving solicitation of the customer's order; or (6) offers to sell or the solicitation of offers to buy the securities being distributed (including securities or rights ac quired in stabilizing) or securities or rights offered as principal by the person making such offer to sell or solicitation; or (7) the exercise of any right or conversion privilege to acquire any security; or (8) stabilizing transactions not in violation of Rule 10b-7; or (9) bids for or purchases of rights not in violation of Rule 10b-8; or (10) transactions effected on a national securities exchange in accordance with the provisions of a plan filed by such exchange under Rule 10b-2(d) and declared effective by the Commission; or (11) pur

es or bids by an underwriter, prospective erwriter or dealer otherwise than on a secuAs exchange, 10 or more business days prior he proposed commencement of such distribu

(or 5 or more business days in the case of olicited purchases), if none of such purchases bids are for the purpose of creating actual, or ɔarent, active trading in or raising the price such security. In the case of securities offered rsuant to an effective registration statement der the Securities Act of 1933 the distribution all not be deemed to commence for purposes of is clause (11) prior to the effective date of the gistration statement.

(b) The distribution of a security (1) which is mediately exchangeable for or convertible into nother security, or (2) which entitles the holder hereof immediately to acquire another security, hall be deemed to include a distribution of such ther security within the meaning of this rule. (c) The following shall be applicable for the urposes of this rule:

(1) The term "underwriter" means a person who has agreed with an issuer or other person on whose behalf a distribution is to be made (A) to purchase securities for distribution or (B) to distribute securities for or on behalf of such issuer or other person or (C) to manage or supervise a distribution of securities for or on behalf of such issuer or other person.

(2) The term "prospective underwriter" means a person (A) who has agreed to submit or has submitted a bid to become an underwriter of securities as to which the issuer, or other person on whose behalf the distribution is to be made, has issued a public invitation for bids, or (B) who has reached an understanding, with the issuer or other person on whose behalf a distribution is to be made, that he will become an underwriter, whether or not the terms and conditions of the underwriting have been agreed upon.

(3) A person shall be deemed to have completed his participation in a particular distribution as follows: (A) the issuer or other person on whose behalf such distribution is being made, when such distribution is completed; (B) an underwriter, when he has distributed his participation, including all other securities of the same class acquired in connection with the distribution, and any stabilization arrangements and trading restrictions with respect to such dis

tribution to which he is a party have been terminated; (C) any other person, when he has distributed his participation. A person, including an underwriter or dealer, shall be deemed for purposes of this paragraph (c)(3) to have distributed securities acquired by him for investment.

(d) The provisions of this rule shall not apply to any of the following securities: (1) "exempted securities" as defined in section 3(a) (12) of the Act, including securities issued, or guaranteed both as to principal and interest, by the International Bank for Reconstruction and Development; or (2) face-amount certificates issued by a face-amount certificate company, or redeemable securities issued by an open-end management company or a unit investment trust. Any terms used in clause (2) of this paragraph (d) which are defined in the Investment Company Act of 1940 shall have the meanings specified in such Act.

(e) The provisions of this rule shall not apply to any distribution of securities by an issuer to its employees, or to employees of its subsidiaries, or to a trustee or other person acquiring such securities for the account of such employees, pursuant to (1) a stock option plan involving only “qualified stock options," or qualifying as an "employee stock purchase plan" as those terms are defined in sections 422 and 423 of the Internal Revenue Code of 1954, as amended or "restricted stock options" as defined in section 424 (b) of the Internal Revenue Code of 1954, as amended: Provided however, That for the purposes of this paragraph an option which meets all of the conditions of that section other than the date of issuance shall be deemed to be "restricted stock options"; or (2) a savings, investment, or stock purchase plan providing for both (A) periodic payments (or payroll deductions) for acquisition of securities by participating employees and (B) periodic purchases of the securities by participating employees, or the person acquiring them for the account of such employees.

(f) This rule shall not prohibit any transaction or transactions if the Commission, upon written request or upon its own motion, exempts such transaction or transactions, either unconditionally or on specified terms and conditions, as not constituting a manipulative or deceptive device or contrivance comprehended within the purpose of this rule.

(Para. (e) amended eff. Aug. 27, 1964, Release 34-7403; further amended, eff. Nov. 20, 1964, Release 34-7467.)