Rule 16c-1. Exemption of Certain Securities From Section 16(c)

Any security shall be exempt from the operation of section 16(c) to the extent necessary to render lawful under such section the execution by a broker of an order for an account in which he has no direct or indirect interest.

Rule 16c-2. Exemption From Section 16(c) of Certain Transactions Effected in Connection With a Distribution

Any security shall be exempt from the operation of section 16(c) of the Act to the extent neces·· sary to render lawful under such section any sale made by or on behalf of a dealer in connection with a distribution of a substantial block of securities, upon the following conditions:

(a) The sale is represented by an over-allotment in which the dealer is participating as a member of an underwriting group, or the dealer or a person acting on his behalf intends in good faith to offset such sale with a security to be acquired by or on behalf of the dealer as a participant in an underwriting, selling or solicitingdealer group of which the dealer is a member at the time of the sale, whether or not the security to be so acquired is subject to a prior offering to existing security holders or some other class of persons; and

(b) Other persons not within the purview of section 16(c) of the Act are participating in the distribution of such block of securities on terms at least as favorable as those on which such dealer is participating and to an extent at least equal to the aggregate participation of all persons ex

empted from the provisions of section 16(c) of the Act by this rule. However, the performance of the functions of manager of a distributing group and the receipt of a bona fide payment for performing such functions shall not preclude an exemption which would otherwise be available under this rule.

Rule 16c-3. Exemption of Sales of Securities To Be Acquired

(a) Whenever any person is entitled, as an incident to his ownership of an issued security and without the payment of consideration, to receive another security "when issued" or "when distributed," the security to be acquired shall be exempt from the operation of section 16(c): Provided, That:

(1) The sale is made subject to the same conditions as those attaching to the right of acquisition, and

(2) Such person exercises reasonable diligence to deliver such security to the purchaser promptly after his right of acquisition matures, and

(3) Such person reports the sale on the appropriate form for reporting transactions by persons subject to section 16(a).

(b) This rule shall not be construed as exempting transactions involving both a sale of a security "when issued" or "when distributed" and a sale of the security by virtue of which the seller expects to receive the "when-issued" or "whendistributed" security, if the two transactions combined result in a sale of more units than the aggregate of those owned by the seller plus those to be received by him pursuant to his right of acquisition.

Rule 16e-1. Arbitrage Transactions Under Section 16 of the Act

It shall be unlawful for any director or officer of an issuer of an equity security which is registered pursuant to section 12 of the Act to effect

any foreign or domestic arbitrage transaction in any equity security of such issuer, whether registered or not, unless he shall include such transaction in the statements required by section 16(a) and shall account to such issuer for the profits aris

ing from such transaction, as provided in section 16(b). The provision of section 16(c) shall not apply to such arbitrage transactions. The provisions of section 16 shall not apply to any bona fide foreign or domestic arbitrage transaction

insofar as it is effected by any person other than such director or officer of the issuer of such security.

(Rule 16e-1 formerly Rule 16d-1 was redesignated and amended Feb. 5, eff. Mar. 8, 1965, Release 34-7525.)

Rule 17a-2. Reports on Stabilizing Activities (a) Scope of Rule. This rule shall apply to any person who effects any purchase of a security for the purpose of pegging, fixing or stabilizing (hereinafter called "stabilizing") the price of any security to facilitate an offering of any security (other than an "exempted security" as hereinafter defined) (1) with respect to which a registration statement has been, or is to be, filed pursuant to the Securities Act of 1933 as amended or (2) which is being, or is to be, offered pursuant to an exemption from registration under Regulation A adopted under the Securities Act of 1933 or (3) which is being, or is to be, otherwise offered, if the aggregate offering price of the securities being offered exceeds $300,000. This rule shall also apply to any person who has a participation in an account for which such a stabilizing purchase is effected.

(6) Definitions. Unless the context clearly indicates otherwise, for the purposes of this rule and the forms prescribed hereby, the following terms shall have the meanings indicated:

(1) The term "manager" shall mean the person stabilizing for his sole account or for the account of a syndicate or group in which he is a participant.

(2) The term "transfer" shall mean any change in the control of a position in a security unaccompanied by a change in ownership.

(3) The term "offered security" shall include any security of the same class and series.

(4) The term "exempted security" means an exempted security 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.

(c) Notifications by Managers. Any person subject to this rule who effects one or more sta bilizing purchases for his sole account or for the account of a syndicate or group shall:

(1) Promptly notify the Commission of (A) the name and class of the security being stabilized,

(B) the price, the date, and the time at which the first stabilizing purchase was effected and, (C) if the syndicate or group has then been formed, (i) the names and addresses of the members thereof and (ii) their respective commitments, or in the case of a standby or contingent underwriting the percentage participation of each member of the syndicate or group therein, except that in the case of a best-efforts underwriting only the total amount to be offered need be stated to meet the requirement of clause (C) (ii), or (D) if the syndicate or group has not been formed at the time when the first stabilizing purchase is effected, the information called for by clause (C) above shall be furnished to the Commission promptly after the group is formed: Provided, however, That if the information called for by clause (C) or (D) of this subparagraph (1) has been or is to be filed with the Commission pursuant to the Securities Act of 1933 as amended or pursuant to an exemption from registration under Regulation A adopted under the Securities Act of 1933 then such information shall not be included in the notice furnished pursuant to this subparagraph (1) And provided, further, That if such information has been otherwise filed with the Commission it may be incorporated by reference into such notice; and

(2) Promptly furnish to each of the members of the syndicate or group the information (other than price) called for by Clauses (A) and (B) of subparagraphs (1) hereof; and

(3) Promptly notify the Commission and the members of such syndicate or group of the date and time when stabilizing was terminated.

(d) Reports as Manager. Any person subject to this rule who effects one or more stabilizing purchases for his sole account or for the account of a syndicate or group shall:

(1) Report to the Commission "as manager" on Form X-17A-1, not later than 3 business days following the day upon which the first stabilizing purchase was effected, all purchases, sales and transfers, in the stabilized and offered securities, and if the offering is a rights offering, in the

rights, during the period beginning on the 9th business day prior to the first day upon which the offering was made or beginning on the business day prior to the day on which the first stabilizing purchase was effected, whichever date is earlier, and ending on the day upon which the first stabilizing purchase was effected: Provided, however, That in the case of securities offered pursuant to an effective registration statement under the Securities Act of 1933 the distribution shall not be deemed to commence for purposes of this subparagraph (1) prior to the effective date of the registration statement; and

(2) Until stablizing is terminated, report to the Commission "as manager" on Form X-17A-1, not later than the next business day, all purchases, sales and transfers, effected on any day in the stabilized and offered securities, and in the rights; and

(3) If such person has a short position in the stabilized or offered security when stabilizing is terminated, report to the Commission "as manager" on Form X-17A-1, not later than the next business day, all purchases, sales and transfers, effected on any day in such security, until such short position is covered.

(4) Notwithstanding the provisions of subparagraphs (1), (2) and (3) of this paragraph (d), if the person stabilizing is stabilizing for the account of a syndicate or group, he shall report "as manager" only such transactions as are effected for the account of such syndicate or group.

(e) Reports Not as Managers. The manager and any other person subject to this rule who has a participation in an account for which a stabilizing purchase is effected (other than a person stabilizing for his sole account all of whose transactions are reported "as manager") shall report "not as manager" to the Commission on Form X-17A-1, not later than 5 business days following the day upon which stabilizing was terminated, all purchases, sales and transfers in the stabilized and offered securities, and if the offering is a rights offering, in the rights, during the period beginning on the 9th business day prior to the first day upon which the offering was made or on the business day prior to the day upon which the first stabilizing purchase was effected, whichever date is earlier, and ending on the day when stabilizing was terminated: Provided, however, (i) That transactions reported "as manager" shall not again be reported "not as manager" and (ii)

that in the case of securities offered pursuant to an effective registration statement under the Securities Act of 1933 the distribution shall not be deemed to commence for purposes of this paragraph (e) prior to the effective date of the registration statement.

(f) Public Records. Reports filed pursuant to this rule will be available for public inspection after all of the required reports have been filed. Rule 17a-3. Records To Be Made by Certain Exchange Members, Brokers, and Dealers

(a) Every member of a national securities exchange who transacts a business in securities directly with others than members of a national securities exchange, and every broker or dealer who transacts a business in securities through the medium of any such member, and every broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934, as amended, shall make and keep current the following books and records relating to his business:

(1) Blotters (or other records of original entry) containing an itemized daily record of all purchases and sales of securities, all receipts and deliveries of securities (including certificate numbers), all receipts and disbursements of cash and all other debits and credits. Such records shall show the account for which each such transaction was effected, the name and amount of securities, the unit and aggregate purchase or sale price (if any), the trade date, and the name or other designation of the person from whom purchased or received or to whom sold or delivered.

(2) Ledgers (or other records) reflecting all assets and liabilities, income and expense and capital accounts.

(3) Ledger accounts (or other records) itemizing separately as to each cash and margin account of every customer and of such member, broker or dealer and partners thereof, all purchases, sales, receipts, and deliveries of securities and commodities for such account and all other debits and credits to such account.

(4) Ledgers (or other records) reflecting the following:

(A) Securities in transfer;

(B) Dividends and interest received;

(C) Securities borrowed and securities loaned;

(D) Monies borrowed and monies loaned (together with a record of the collateral therefor and any substitutions in such collateral);

(E) Securities failed to receive and failed to deliver.

(5) A securities record or ledger reflecting separately for each security as of the clearance dates all "long" or "short" positions (including securities in safekeeping) carried by such member, broker, or dealer for his account or for the account of his customers or partners and showing the location of all securities long and the offsetting position to all securities short and in all cases the name or designation of the account in which each position is carried.

(6) A memorandum of each brokerage order, and of any other instruction, given or received for the purchase or sale of securities, whether executed or unexecuted. Such memorandum shall show the terms and conditions of the order or instructions and of any modification or cancellation thereof, the account for which entered, the time of entry, the price at which executed and, to the extent feasible, the time of execution or cancellation. Orders entered pursuant to the exercise of discretionary power by such member, broker, or dealer, or any employee thereof, shall be so designated. The term "instruction" shall be deemed to include instructions between partners and employees of a member, broker, or dealer. The term "time of entry" shall be deemed to mean the time when such member, broker, or dealer transmits the order or instruction for execution or, if it is not so transmitted, the time when it is received.

(7) A memorandum of each purchase and sale of securities for the account of such member, broker, or dealer showing the price and, to the extent feasible, the time of execution; and, in addition, where such purchase or sale is with a customer other than a broker or dealer, a memorandum of each order received, showing the time of receipt, the terms and conditions of the order, and the account in which it was entered.

(8) Copies of confirmations of all purchases and sales of securities and copies of notices of all other debits and credits for securities, cash, and other items for the account of customers and partners of such member, broker, or dealer.

(9) A record in respect of each cash and margin account with such member, brokers, or dealer containing the name and address of the beneficial owner of such account and, in the case of a margin account, the signature of such owner: Provided, That, in the case of a joint account or an account of a corporation, such records are required only

in respect of the person or persons authorized to transact business for such account.

(10) A record of all puts, calls, spreads, straddles, and other options in which such member, broker, or dealer has any direct or indirect interest or which such member, broker, or dealer has granted or guaranteed, containing, at least, an identification of the security and the number of units involved.

(11) A record of the proof of money balances of all ledger accounts in the form of trial balances, and a record of the computation of aggregate indebtedness and net capital, as of the trial balance date, pursuant to Rule 15c3-1: Provided, however, (i) That such computation need not be made by any member, broker or dealer unconditionally exempt from Rule 15c3-1 by subparagraph (b)(1) or (b)(3), thereof; and (ii) that any member of an exchange whose members are exempt from Rule 15c3-1 by subparagraph (b) (2) thereof shall make a record of the computation of aggregate indebtedness and net capital as of the trial balance date in accordance with the capital rules of at least one of the exchanges therein listed of which he is a member. Such trial balaces and computations shall be prepared currently at least once a month.

(12) (A) A questionnaire or application for employment executed by each "associated person" (as hereinafter defined) of such member, broker or dealer, which questionnaire or application shall be approved in writing by an authorized representative of such member, broker or dealer and shall contain at least the following information with respect to such person:

(1) His name, address, social security number, and the starting date of his employment or other association with the member, broker or dealer;

(2) His date of birth;

(3) The educational institutions attended by him and whether or not he graduated therefrom;

(4) A complete consecutive statement of all his business connections for at least the preceding 10 years, including his reason for leaving each prior employment, and whether the employment was part-time or full-time;

(5) A record of any denial of membership or registration, and of any disciplinary action taken, or sanction imposed, upon him by any Federal or State agency, or by any national securities exchange or national securities association, including any finding that he was a cause of any disciplinary action or had violated any law;