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Section 138. Rule 144A — Private Resales of Securities to Institutions
us SEC - C&DI - Securities Act Rules
Question 138.01
Question: May affiliates of an issuer make resales of the issuer’s eligible securities under Rule 144A?
Answer: Yes. Affiliates of the issuer may make resales of eligible securities under Rule 144A. The rule is available to any person other than the issuer. “Issuer,” as used in Rule 144A(b), has only the meaning given by Securities Act Section 2(a)(4). (The “control” clause of Securities Act Section 2(a)(11) equates the issuer and its affiliates solely for the purpose of identifying intermediaries to the public market who are underwriters within the statute’s meaning. By definition, sales effected under Rule 144A are not made to the public market.) [Jan. 26, 2009]
Question 138.02
Question: When determining its status as a qualified institutional buyer eligible to participate in an offering eligible for resale under Rule 144A, may a buyer include the amount of securities expected to be purchased in such offering?
Answer: No. A buyer may not include the amount of securities expected to be purchased in the offering when calculating the amount of securities it owns or invests on a discretionary basis for the purpose of determining its status as a qualified institutional buyer eligible to participate in the offering. [Jan. 26, 2009]
Question 138.03
Question: Under Rule 144A, securities may be offered to persons other than qualified institutional buyers by means of general solicitation. Does the rule require that the general solicitation be conducted by only the issuer?
Answer: No. In Rule 144A offerings in which the securities were initially sold to financial intermediaries in transactions exempt under Securities Act Section 4(a)(2) or Regulation S, the general solicitation may be conducted by the issuer as well as initial purchasers involved in the Section 4(a)(2) or Regulation S transaction and other distribution participants. [Nov. 13, 2013]
Question 138.04
Question: Did the amendments to Rule 144A permitting the use of general solicitation change how directed selling efforts under Regulation S are analyzed in concurrent Rule 144A and Regulation S offerings?
Answer: No. [Nov. 13, 2013]
Question 138.05
Question: When determining its status as a qualified institutional buyer under Rule 144A, may an entity include securities that it purchased and continued to hold on margin in calculating whether it meets the $100 million threshold under Rule 144A(a)(1)(i)?
Answer: Yes. The fact that securities were purchased or are held on margin does not mean they are not owned by the entity. Therefore, the securities may be included in calculating whether the entity meets the threshold, so long as they are not subject to a repurchase agreement. See Rule 144A(a)(2). [December 8, 2016]
Question 138.06
Question: When determining its status as a qualified institutional buyer under Rule 144A, may an entity include securities that it owns but has loaned out to borrowers of securities in calculating whether it meets the $100 million threshold under Rule 144A(a)(1)(i)?
Answer: Yes. The fact that the entity may lend out securities does not mean they are not owned by the entity and thus may be included in calculating whether it meets the threshold. [December 8, 2016]
Question 138.07
Question: When determining its status as a qualified institutional buyer under Rule 144A, may an entity include securities that it has borrowed in calculating whether it meets the $100 million threshold under Rule 144A(a)(1)(i)?
Answer: No. Borrowed securities are not owned by the entity and thus may not be included in calculating whether it meets the threshold. [December 8, 2016]
Question 138.08
Question: When determining its status as a qualified institutional buyer under Rule 144A, may an entity include short positions in securities that it has established in calculating whether it meets the $100 million threshold under Rule 144A(a)(1)(i)?
Answer: No. Short positions do not represent ownership of securities but rather sales of securities and thus may not be included in calculating whether the entity meets the threshold. [December 8, 2016]
Question 138.09
Question: An investment company that is not registered under the Investment Company Act of 1940 is part of a family of funds, some of which may or may not be registered investment companies. When determining its status as a qualified institutional buyer under Rule 144A, may the non-registered investment company aggregate investments by the other funds that are part of the family in the manner described under Rule 144A(a)(1)(iv)?
Answer: No, only registered investment companies may use the aggregation method permitted under Rule 144A(a)(1)(iv). [December 8, 2016]
Question 138.10
Question: When determining its status as a qualified institutional buyer under Rule 144A, Rule 144A(a)(1)(v) provides that an entity will be deemed a qualified institutional buyer if all of its equity owners are qualified institutional buyers. Who are the equity owners of a limited partnership for purposes of Rule 144(a)(1)(v)?
Answer: The limited partners are the equity owners of a limited partnership. The general partner, unless that person is also a limited partner, need not be considered in determining whether a limited partnership is a qualified institutional buyer for purposes of Rule 144(a)(1)(v). See also Securities Act Rule CDI 255.18. [December 8, 2016]
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