239.01 A corporation may register shares for issuance pursuant to an employee plan (along with other securities to be offered by the issuer) even though the plan has not yet been approved by shareholders and will not become operative unless it is approved, provided that the prospectus makes the situation clear. A prospectus supplement should be filed when the shareholder approval is obtained. [Nov. 26, 2008]

239.02 A letter to be sent to holders of limited partnership units in various oil and gas programs, for the purpose of determining their interest in converting the smaller programs into one new large program, may involve the offer of a security of the new program within the meaning of Sections 2(a)(3) and 5. Any such communication, if it is an offer, would either have to be registered under the Securities Act or exempt from Securities Act registration. For registered offerings, Rule 135 would permit a simple notice describing the purpose and terms of such an offering, but would not allow the solicitation of indications of interest. [Nov. 26, 2008]

239.03 A typical non-qualified deferred compensation plan permits an employee to defer compensation over a set dollar amount. The employee will then either receive a fixed rate of return on the deferred monies or the employer may permit the employee to index the return on those monies off of a number of investment return alternatives. The debt owing to plan participants is analogous to investment notes, which typically are viewed as debt securities. The Division has not stated affirmatively, however, that all interest-only deferred compensation plans involve securities. Instead, the Division leaves that question for counsel’s analysis of the facts and circumstances. To the extent that interests in a non-qualified deferred compensation plan are securities, registration would be required unless the offerings under the plan would qualify for an exemption, e.g., Section 4(2). Form S-8 would be available when an employer registers the offer and sale of interests in the deferred compensation plan under the Securities Act. The filing fee should be based on the amount of compensation being deferred, not on the ultimate investment return. As the “deferred compensation obligations” to be registered are obligations of the issuer/employer, not interests in the plan, the registration of the “deferred compensation obligations” would not result in a requirement that a deferred compensation plan file a Form 11-K with respect to those securities. Further, based on the unique terms of the “deferred compensation obligations” (both with respect to interest and maturity), compliance with the Trust Indenture Act of 1939 has not been required. [Nov. 26, 2008]

239.04 Statutory mergers by means of security holders’ vote are defined by Rule 145(a)(2), for purposes of Section 2(a)(3), as events of sale. The rule excludes from this definition mergers for the sole purpose of changing the issuer's state of incorporation. The exclusion itself is limited to migratory transactions occurring exclusively within the United States, from one state to another. Despite the rule’s express domestic limitation, the Division believes that similar transactions changing a foreign issuer’s domicile from one political subdivision of a country to another (such as reincorporation from one Canadian province to another) likewise should not be treated as a sale. However, if a non-U.S. corporation undertakes a merger to incorporate within the United States, the migratory transaction is an event of sale that must be registered with the Commission or exempt from registration. [Nov. 26, 2008]

239.05 If its warrants are out of the money, an issuer does not have to keep the prospectus for the exercise of those warrants current. Of course, the prospectus must be amended at such time as the exercise of the warrants becomes in the money. No warrants may be exercised until the registrant has brought its prospectus covering such exercise current. [Nov. 26, 2008]

239.06 A registrant inquired whether an offering of shares under a stock purchase plan could be made by switching back and forth between: (1) shares acquired from the issuer registered under the Securities Act; and (2) shares acquired on the open market not registered under the Securities Act in reliance on the limited issuer involvement/no registration positions in Securities Act Release No. 4790 (Jul. 13, 1965) and Securities Act Release No. 5515 (Jul. 22, 1974). Because switching back and forth indicated too much issuer involvement to qualify for the limited issuer involvement exemption from registration, registration of all shares offered under the plan was required. [Nov. 26, 2008]

239.07 Warrants, and the shares issuable on their exercise, were registered. Now the warrants are being exchanged for warrants with a new expiration date and exercise price in reliance on Section 3(a)(9). The Division will not object if the original registration statement (updated to reflect the new terms through a post-effective amendment) is used in connection with the exercise of the new warrants. [Nov. 26, 2008]

239.08 An issuer may extend the exercise period for warrants and/or reduce the warrant exercise price through the filing and issuance of an appropriate Rule 424(b) prospectus supplement prior to the initial expiration date of the warrants. The issuer may not permit the exercise of such modified warrants, however, unless a current prospectus under Section 10(a)(3) with respect to the shares underlying the warrants is delivered. [Nov. 26, 2008]

239.09 A parent and its majority-owned subsidiary both have classes of securities registered under Section 12 of the Exchange Act. The parent wishes to make a public offering of convertible, exchangeable debentures. The debentures are immediately convertible into common stock of the parent, and exchangeable at the option of the parent into common stock of the subsidiary. The offer and sale of all three securities must be registered. [Nov. 26, 2008]

239.10 An issuer filed a Form S-3 registration statement for a secondary offering of common stock which is not yet effective. One of the selling shareholders wanted to do a short sale of common stock “against the box” and cover the short sale with registered shares after the effective date. The issuer was advised that the short sale could not be made before the registration statement becomes effective, because the shares underlying the short sale are deemed to be sold at the time such sale is made. There would, therefore, be a violation of Section 5 if the shares were effectively sold prior to the effective date. [Nov. 26, 2008]

239.11 The Liability Risk Retention Act of 1986 contains exemptions from the registration provisions of Section 5 of the Securities Act and Section 12 of the Exchange Act for interests in a “risk retention group.” A risk retention group is a corporation the primary activity of which is to assume and spread all or a portion of the liability exposure of its members, if certain conditions are met. In the absence of a formal no-action request, the Division staff declined to express any view as to whether the exemptions for interests in a risk retention group would extend to interests in a holding company for such group. The question has arisen because the exemption written into the statute is silent on that point. Ownership interests in a “risk retention group” are considered to be “securities” for purposes of Section 17 of the Securities Act and Section 10 of the Exchange Act, under the terms of The Liability Risk Retention Act of 1986. [Nov. 26, 2008]

239.12 In the King & Spalding no-action letter (Nov. 17, 1992) issued by the Division, the Division identified the conditions under which Securities Act registration would not be required for an issuer and/or its affiliates to operate a matching service to facilitate secondary resales of limited partnership interests of such issuer, including conditions relating to the Exchange Act reporting status of the issuer and the ways in which the matching service would operate. Other finite-life entities whose securities do not have an organized secondary market, such as certain real estate investment trusts or other entities that fall within the definition of partnership in Item 901(b) of Regulation S-K, similarly may operate a matching service if the conditions in the King & Spalding letter are met.[Nov. 26, 2008]

239.13 An acquiring company may seek a commitment from management and principal security holders of a target company to vote in favor of a business combination transaction, frequently referred to as a “lock-up agreement.” The execution of a lock-up agreement may constitute an investment decision under the Securities Act. If so, the offer and sale of the acquiror’s securities would be made to persons who entered into those agreements before the business combination is presented to non-affiliated security holders for their vote.

Recognizing the legitimate business reasons for seeking lock-up agreements in the course of business combination transactions, the staff has not objected to the registration of offers and sales where lock-up agreements have been signed in the following circumstances:

Where, however, the persons entering into the lock-up agreements also deliver written consents approving the business combination transaction, the staff has objected to the subsequent registration of the exchange on Form S-4 for any of the shareholders because offers and sales have already been made and completed privately, and once begun privately, the transaction must end privately. [Nov. 26, 2008]

239.14 Plans of financing can involve periodic adjustments of interest or dividend rates, rollovers of securities, and plans to buy back and re-market securities, sometimes coupled with “puts” or guarantees (which themselves are securities). Filings involving such plans require an analysis of Section 5 and Rule 415 issues with respect to all securities involved in the offerings. Even after the original offering of the securities has terminated, the registrant may still be engaged in a continuous or delayed offering with respect to the future periodic issuance or modification of securities. These subsequent transactions may involve primary offerings of the issuer’s securities to the extent the issuer pays a remarketing or auction agent or otherwise is involved in subsequent sales such as in the remarketings or auctions. [Nov. 26, 2008]

239.15 As a general matter, once an option becomes exercisable, an offer is made pursuant to Section 5. Further, if an option becomes exercisable within one year, it is deemed to be immediately exercisable. Therefore, a registration statement must be on file before the option is exercisable for the entire transaction to be a public offering. A later filing of the registration statement would convert a private offering into a public offering, which is inconsistent with Section 5. The only exception to this position is with respect to Form S-8, where shares underlying the options are permitted to be registered at any time before the option is exercised, without regard to when the option became exercisable. This departure from the analysis set forth above is based solely on a policy determination to treat Form S-8 issuances more liberally, based on the employer/employee relationship. [Nov. 26, 2008]

[withdrawn, September 22, 2016; see 139.33]