RESTRICTED SECURITIES

(f) Manner of Sale. The securities shall be sold in "brokers transaction" within the section 4(4) of the Act or in transactions directly with a "market maker." as that term is defined in section 3(a)(38) of the Securities Exchange Act of 1934. and the person selling the securities shall not (1) solicit or arrange for the solicitation of orders to buy the securities in anticipation of or in connection with such transaction. or (2) make any payment in connection with the offer or sale of the securities to any person other than the broker who executes an order to sell the securities. The requirements of this paragraph, however. shall not apply to securities sold for the account of the estate of a deceased person or for the account of a beneficiary of such estate provided the estate or beneficiary thereof is not an affiliate of the issuer: nor shall they apply to securities sold for the account of any person other than an affiliate of the issuer provided the conditions of paragraph (k) of this rule are satisfied.

(g) Brokers' Transactions. The term "broker transactions" in Section 4(4) of the Act shall for the purposes of this rule be deemed to include transactions by a broker in which such broker--

 (1) does no more than execute the order or orders to sell the securities agent for the person for whose account the securities are sold and receives no more than the usual and customary brokers' commissions;

(2) neither solicits nor arranges for the solicitation of customers' orders to buy the securities in anticipation of or in connection with the transaction; provided that the foregoing shall not preclude (i) inquires by the broker or other brokers or dealers who have indicated an interest in the securities within the preceding 60 days, (ii) inquiries by the broker of his customers who have indicated an unsolicited bona fide interest in the securities within the preceding 10 business days or (iii) the publication by the broker of bid and ask quotations for the security in an inter-dealer quotation system provided that such quotations are incident to the maintenance of a bona fide inter-dealer market for the security for the broker's own account and that the broker has published bona fide bid and ask questions for the security in an inter-dealer quotation system on each of at least twelve days within the preceding thirty calendar days with no more than four business days in succession without such two-way quotations;

Note to Subparagraph (g)(2)(ii): The broker should obtain and retain in his files written evidence of indications of bona fide unsolicited interest by his customers in the securities at the time such indications are received.

(3) after reasonable inquiry is not aware of circumstances indicating that the person for whose account the securities are sold is an underwriter with respect to the securities or that the transaction is a part of a distribution of securities of the issuer. Without limiting the foregoing, the broker shall be deemed to be aware of any facts or statements contained in the notice required by paragraph (h) below.

Notes. 1. The broker, for his own protection, should obtain and retain in his files a copy of the notice required by paragraph (h).

2. The reasonable inquiry required by paragraph (g)(3) above should include, but not necessarily be limited to, inquiry as to the following matters:

a. The length of time the securities have been held by the person for whose account they are to be sold. If practicable, the inquiry should include physical inspection of the securities;

b. The nature of the transaction in which the securities were acquired by such person;

c. The amount of securities of the same class sold during the part three months by all persons whose sales are required to be taken into consideration pursuant to paragraph (e) above:

d. Whether such person intends to sell additional securities of the same class through any other means;

e. Whether such person has solicited or made any arrangement for the solicitation of buy orders in connection with the proposed sales of securities:

f. Whether such person has made any payment to any other person in connection with the proposed sale of the securities; and

g. The number of shares or other units of the class outstanding. or the relevant trading volume.

(h) Notice of proposed sale. If the amount of securities to be sold in reliance upon the rule during any period of three months exceeds 500 shares or other units or has an aggregate sale price in excess of $l0,000, three copies of a notice on Form 144 shall be filed with the Commission at its principal office in Washington, D.C.; and if such securities are admitted to trading on any national securities exchange, one copy of such notice shall also be transmitted to the principal exchange on which such securities are so admitted. The Form 144 shall be signed by the person for whose account the securities are to be sold and shall be transmitted for filing concurrently with either the placing with a broker of an order to execute a sale of securities in reliance upon this rule or the execution directly with a market maker of such a sale. Neither the filing of such notice nor the failure of the Commission to comment thereon shall be deemed to preclude the Commission from taking any action it deems necessary or appropriate with respect to the sale of the securities referred to in such notice. The requirements of this paragraph, however, shall not apply to securities sold for the account of any person other than an affiliate of the issuer, provided the conditions of paragraph (k) of this rule are satisfied.

(i) Bona fide intention to sell. The person filing the notice required by paragraph (h) shall have a bona fide intention to sell the securities referred to therein within a reasonable time after the filing of such notice.

(j) Non-exclusive rule. Although this rule provides a means for reselling restricted securities and securities held by affiliates without registration, it is not the exclusive means for reselling such securities in that manner. Therefore, it does not eliminate or otherwise affect the availability of any exemption for resales under the Securities Act that a person or entity may be able to rely upon.

(k) Termination of certain restrictions on sales of restricted securities by persons other than affiliates. The requirements of paragraphs (c), (e), (f) and (h) of this rule shall not apply to restricted securities sold for the account of a person who is not an affiliate of the issuer at the time of the sale and has not been an affiliate during the preceding three months, provided a period of at least two years has elapsed since the later of the date the securities were acquired from the issuer or from an affiliate of the issuer. In computing the two-year period for purposes of this provision, reference should be made to paragraph (d) of this section.

INTERPRETIVE OPINIONS.--

Interpretations of Rule 144 by the Divisions of Corporation Finance and Market Regulations.

SUPPLEMENTARY INFORMATION: Commencing in September 1977, the Commission issued a number of releases concerning changes in certain of its rules under under the Securities Act of 1933 (the "1933 Act") [15 U.S.C. 77a et seq.] relating to the resale of restricted and other securities.

(16) Question: May a seller of restricted securities rely upon the issuer's representation in its most recent periodic report that it has filed all reports required under Section 13 or 15(d) of the 1934 Act?

Answer: Generally, Yes. Rule 144(c)(1 ) states that a seller under the rule may rely on a statement made by the issuer in its most recent quarterly or annual report filed under the 1934 Act that it (the issuer) has filed all reports required under Section 13 or 15(d) during the preceding 12 months, or such shorter period that it was required to file such reports. The rule also provides, however, that if the seller knows or has reason to believe that the issuer has not complied with the requirements of Section 13 or 15(d) the seller may not rely on the statement by the issuer concerning compliance with Section 13 or 15(d).

Illustration 1. FACTS: Y company stated in its most recent report on Form 10-Q that it had filed all reports required to be filed within the preceding 12 months. In fact, Y had not filed a Form 8-K required during that period. X owns restricted securities of Y and wants to sell them.

INTERPRETATION: X may rely on the statement made by Y and sell his securities under Rule 144. unless he knows or has reason to believe that the statement is incorrect.

Illustration 2: FACTS: Y company stated in its Form 10-Q for the quarter ended March 31, 1979 that it had filed all reports required during the preceding 12 months. X, who owns restricted securities of Y, decides on October 1. 1979 to sell them. He determines that the most recent periodic report by Y on file with the Commission is the 10-Q referred to above.

INTERPRETATION: X cannot rely on Rule 144 because he has reason to believe that Y has not filed a Form 10-Q for the quarter ended June 30, 1979. The Form 10-Q for that quarter was required to be filed by July 15, 1979, and the fact that 2-1/2 months have elapsed from its due date provides X with a substantial indication that the 10-Q in fact has not been filed. In such circumstances X should contact Y directly to determine the status of the 10-Q.

(17) Question: If an issuer which has been filing periodic reports with the Commission pursuant to Section 15(d) of the 1934 Act finds that it is no longer obligated to file reports under that section, may it voluntarily continue filing reports pursuant to that provision in order to satisfy the current public information requirement of Rule 144?

Answer. Yes. Continued voluntary reporting under Section 15(d) (or under Section 13, as well) is permissible in order to satisfy the requirements of Rule 144(c). 2.

Rule 144(c)(2): There shall be available adequate current public information with respect to the issuer of securities sold under the rule. In the case of an issuer which is not subject to Section 13 or 15(d) of the 1934 Act, this condition shall be satisfied if the issuer makes publicly available the information concerning itself specified in subsections (i) or (xiv) and subsection (xvi) of Rule 15c2-11(a)(4) [17 CFR 240.15c2-11(a)(4)] under the Act.

(18) Note: See 1990 Amendments to Rule 144(c)(2).

Question: If an issuer is not subject to the periodic reporting requirements of Section 13 or 15(d) of the 1934 Act, how may it satisfy the current public information requirement of Rule 144?

Answer: The issuer may comply in two ways: (1) it may make publicly available the information concerning itself specified in Rule 15c2-11(a)(4), or (2) it may voluntarily become subject to the reporting requirements of Section 13 by filing a Form 10 registration statement under Section 12(g) of the 1934 Act.

(19) Question: Is there a minimum period prior to a sale under Rule 144 during which the information specified in Rule 15c2-1 l(a)(4) must be available to the public before Rule 144(c)(2) will be deemed satisfied?

Answer: No. The rule requires only that the information be publicly available.

(20) Question: What must an issuer do to assure itself that the information concerning itself specified in Rule 15c-2-11(a)(4) is considered "publicly available" within the meaning of Rule 144(c)(2)?

Answer: The issuer should make the information available on an ongoing and continuous basis (e.g., through the issuance of annual and quarterly reports) to security holders, market makers, brokers, financial statistical services, and any other interested persons.

Illustration: FACTS: Y company is not subject to Section 13 or 15(d) of the 1934 Act. X owns restricted securities of Y and wants to sell such securities. Y has furnished the information specified in Rule 15c2-11 to the broker for X.

INTERPRETATION: Rule 144 is not available to X. Furnishing the specified information solely to the broker through whom X proposes to sell his restricted securities does not make such information publicly available.

D. Holding period for Restricted Securities

1. Rule 144(d)(1): Restricted securities sold pursuant to the rule must be beneficially owned and fully paid for by the seller for at least one year prior to their sale.

(21) Question: If restricted securities of the same class are acquired at different times, is it necessary for the holder to be able to trace the securities to their respective purchase dates at the time any of them are sold?

Answer: Yes. In order to assure that the holding period requirement of Rule 144 is satisfied, the seller must be able to trace the specific securities being sold.

Illustration: FACTS: On April 1, 1977, X acquired 5,000 shares of restricted securities of Y company. On December 1, 1977, X acquired an additional 5,000 shares of restricted securities of Y. On May 1, 1979, X wants to sell 4,000 shares of his restricted securities.

INTERPRETATION: Rule 144 is available to X, provided he sells the particular restricted securities acquired on April 1, 1977.

(22) Question: When does the holding period commence with respect to restricted securities issued under an employee benefit plan which requires the plan participants to remain as employees lot a specified period of time before the securities will vest?

Answer: The holding period in such circumstances will commence when the securities are allocated to the account of an individual plan participant. The fact that the securities may not vest until some later date does not alter the result.

(23) Question: If restricted securities are to be issued pursuant to a written agreement, does the holding period for such securities commence on the date of the agreement or on the date the securities are delivered?

Answer: The answer to this question depends on when the person who will receive the securities is deemed to have paid for the securities and thereby assumed the full risk of economic loss with respect to them. If that risk is assumed as of the date of the agreement, then the holding period starts on that date, even though actual delivery of the securities may not occur until later. Conversely, if the risk of loss is not assumed until the date of delivery, the holding period will not commence until the securities are actually delivered.

2. Rule 144(D)(2): A promissory note or other obligation given to the person from whom the securities are purchased shall not be deemed full payment of the purchase price unless the note or other obligation: (i) provides for full recourse against the purchaser; (ii) is secured by collateral, other than the securities purchased, having a fair market value at least equal to the purchase price of the securities; and (iii) is discharged by payment in full prior to the sale of the securities. Similarly, entering into an installment purchase contract with the seller shall not constitute full payment unless the three conditions specified above are met.

(24) Question: What is the effect of giving a promissory note to the seller that fails to comply with conditions (i) or (ii) above?

Answer: The holding period for the securities is tolled and will not begin to run until both conditions are satisfied. If the conditions are not satisfied during the life of the note, the holding period will not commence until the note is fully paid. Even if both conditions are satisfied and the securities are then held for two years, the holding period requirement will not be met and Rule 144 will not be available until the note is paid in full prior to the time the securities are resold.

E. Limitation on Amount of Securities Sold

1. General: Rule 144(e) states that, subject to certain exceptions, the amount of securities that can be sold under the rule during any three-month period shall not exceed the greater of one percent of the outstanding securities of the class being sold or the average weekly trading volume for the class during the four-week period preceding the sale of the securities.

(37) Question: How is the three-month period for measuring sales under the rule computed?

Answer: The period includes only the three months immediately. preceding the date of sale under the rule. Illustration: FACTS: On April 12. X decides to sell the maximum number of Y Company shares allowable under Rule 144. The volume limit at the time is 15,000 shares. X has made the following sales of Y stock since the beginning of the year: 7,000 shares on January 5, 2,000 on January 20 and 3,000 on February 15.

INTERPRETATION: X may immediately sell 10,000 shares of Y stock, since he has sold only 5,000 shares during the three-month period (viz., January 13-April 12) immediately preceding the date on which he intends to sell more shares of Y stock. Moreover, if the volume limit remains unchanged, X could sell an additional 2,000 shares on April 20. since the sale of a similar number of shares on January 20 would no longer have to be considered under the volume limitation provision, due to the fact it would be outside the three-month measuring period on that date.

(38) Question: How is the four-week period for computing the average weekly trading volume determined?

Answer. Rule 144(e)(1) makes it clear that the period includes only the four calendar weeks (rather than the 20 business days) preceding the filing of the notice on Form 144 required by paragraph (h) of the rule, or, if no such notice is required, the date of receipt of the order to execute the transaction by the broker or the date of execution of the transaction directly with a market maker.

(39) Question: If the average weekly trading volume increases during the three-month measuring period, may a person sell additional amounts of securities equal to the increase?

Answer: Yes. But in determining the new amount limitation, the person must exclude from the computation of the average weekly trading volume any securities that he sold during the new four-week period in which the increased trading volume occurred. Further, the person must file an amended Form 144 indicating the amount of additional securities he wants to sell.

Illustration: FACTS: On September 1, X, who has not made any sales under Rule 144 during the preceding three months, decides to sell the maximum number of Y company shares allowable under Rule 144. The average weekly trading volume for Y company during the four preceding calendar weeks was 20,000 shares, an amount greater than one percent of the outstanding shares of the class. X then proceeds to sell 20,000 shares on September 1. On September 15, X notes that the average weekly trading volume for Y shares during the four preceding weeks was 30,000 shares.

INTERPRETATION: X may sell up to 5,000 additional shares on September 15 but should file an amended Form 144 indicating the amount of additional securities he wants to sell. The determination that X may sell 500 additional shares was made as follows:

Total number of shares traded during the preceding 4 calendar weeks....120,000 (30,000 average per week multiplied by 4 weeks) ........................... Less shares traded by X during the 4 week period .................. (20,000) Total shares upon which revised volume limit may be computed ....... 100,000 Divided by the 4 weeks in the period ................................... +4 Average weekly volume during the preceding 4 weeks (excluding the shares traded by X) ............................................... 25,000 Less shares traded by x during the preceding 3 months ............. (20,000) Additional number of shares which X can sell on September 15 ........ 5,000

(40) Question: If the average weekly trading volume decreases during the three-month measuring period. may the seller nevertheless rely on the trading volume figure utilized at the time Form 144 was filed for the period?

Answer: Yes.

Illustration: FACTS: On April 1, X, who has not made any sales under Rule 144 during the preceding three months, decides to sell the maximum number of Y company shares allowable under the rule. The average weekly trading volume during the preceding four calendar weeks was 20,000 shares, an amount greater than one percent of the outstanding shares of the class. X files on April I a Form 144 for the sale of 20,000 shares. On May 1, X who has sold 16,000 shares since April 1, notes that the average weekly trading volume during the four preceding weeks has decreased to 15,000 shares.

INTERPRETATION: X may sell 4,000 additional shares during the remaining two months of his three-month measuring period, even though the average weekly trading volume has decreased below the amount already sold.

(41) Question: May a seller of securities under Rule 144 make concurrent sales of securities of the same class outside the rule without violating the rule's volume limitations?

Answer: Yes. Rule 144(e)(3)(vii) provides that securities sold pursuant to an effective registration statement under the 1933 Act or pursuant to an exemption provided by Regulation A under the Act or in a transaction exempt pursuant to Section 4 of the Act and not involving any public offering need not be included in determining the amount of securities sold in reliance upon the rule.

2. Unlimited Resale Provision: Rule 144(e)(2) permits holders of restricted securities to disregard the volume limitations (but not the other provisions) of the rule if: (1) the person is not an affiliate of the issuer and has not been an affiliate during the three months preceding the sale, and (2) the securities have been held either two years (in the case of securities which are listed on a national securities exchange or quoted in NASDAQ) or four years (in the case of securities which, although not exchange-listed or NASDAQ-quoted, are issued by an entity which files periodic reports under Section 13 or 15(d) of the 1934 Act).

(42) Question: Can the unlimited resale provision of Rule 144 be utilized if the issuer of the securities does not file periodic reports with the Commission pursuant to Section 13 or 15(d) of the 1934 Act?

Answer: No. The provision is available only for the securities of issuers which file such reports in accordance with the requirements of paragraph (c)(1) of Rule 144. Paragraph (c)(1) states that the issuer must have been subject to the reporting requirements of Section 13 or 15(d) for at least 90 days and must have filed all reports required to have been filed within the preceding 12 months or such shorter period that the issuer was subject to the reporting requirements.

(43) Question: During the three-month period following the termination of his status as an affiliate, may a person sell restricted securities under the unlimited resale provision?

Answer: No. The provision is not available to the former affiliate during that period. However, he is not precluded from making sales during the period that are within the volume limitations of the rule.

(44) Question: May a person utilize the unlimited resale provision at the same time he is selling securities of the same class pursuant to the volume limitations of the rule?

Answer: Yes. If the securities have been held the requisite two or three years and all other conditions of the unlimited resale provision have been met at the time of sale, the securities are free of any volume restrictions under the rule. Thus, sales of them need not be taken into account in connection with sales under the rule of other securities of the same class held less than the requisite period.

I. Transactions with a Market Maker

(50) Question. Are securities acquired by a market maker in a Rule 144 transaction thereafter subject, solely because it was a Rule 144 transaction, to any restrictions on the manner in which they may be resold?

Answer: No. Assuming that all applicable conditions of Rule 144 are complied with securities acquired by a market maker are not subject to any restrictions and may be treated as if they had been purchased in an open-market, non-Rule 144 transaction. Thus, e.g., a market maker may solicit buy orders subsequent to effecting his acquisition.*

(51) Question: Does Rule 144 permit a market maker which is acting as a broker in a Rule 144 transaction to avoid the restrictions applicable to a brokers' transaction?

Answer: No. The restrictions placed on a broker-dealer by Rule 144 are distinguished on the basis of the function of the broker-dealer during a Rule 144 transaction, not on the basis of its normal activities. Accordingly, in order to qualify as a market maker in a Rule 144 transaction, the broker-dealer must act as principal in the transaction. If the broker/dealer acts as a broker in the transaction (even though it is a market maker for the subject class of securities), the brokers' transaction restrictions are applicable and, except as provided by Rule 144(g)(2), the broker-dealer is precluded from soliciting buy orders.

(52) Question: As provided by the rule, a market maker must qualify as one of the three classes of persons described in Section 3(a)(38) of the 1934 Act. Those three classes are: 1. "any specialist permitted to act as a dealer," 2. "any dealer acting in the capacity of a block positioner," and 3. "any dealer who, with respect to a security, holds himself out (by entering quotations in an interdealer communications system or otherwise) as being willing to buy and sell such security for his own account on a regular or continuous basis."

Who may qualify as a block positioner under Section 3(a)(38) for purposes of Rule 144?

Answer: The term "block positioner" is not defined by' the 1934 Act.*6

For purposes of Rule 144, the staff would take the position that any person who qualifies as a block positioner within the meaning of Rule 17a-17(b)(1) and (3) _______________________________________________________________________________ [Footnote]

Recently, in Securities and Exchange Commission v. Aaron [Current] Fed. Sec. L. Rep. (CCH) [182]96,800 (2d Cir. March 12, 1979}, the court found that two transactions effected prior to the recent amendments to Rule 144 announced in Release No. 33-5979 violated Section 5 of the 1933 Act. That situation involved the solicitation by E.L. Aaron & Co. ("Aaron"), a market maker in Lawn-A-Mat Chemical & Equipment Corp. ("LAM") common stock, of two LAM affiliates to sell shares of their common stock to Aaron. In an effort to avoid the registration requirements under Section 5 by constructing a broker's transaction for purposes of Rule 144 {which at that time permitted only unsolicited brokers' transactions). Aaron arranged for J.W. Weller & Co., Inc., another broker-dealer to act as "agent" on behalf of the two LAM affiliates, for the purpose of selling their common stock to Aaron, which in turn would solicit buyers for the shares. The court refused to sanction "this obvious sham transaction." In response to the assertion that Rule 144 had been amended to permit direct purchases by market makers because the broker's transaction restriction was more stringent than necessary, the court further indicated (in dicta) that Aaron's "actions in soliciting the [LAM affiliates'] to sell and in soliciting other customer buy orders in anticipation of the purchase of the [LAM affiliates] shares would not have been in compliance with the amended Rule 144. Although the court correctly pointed out that brokers and market makers may not solicit buy orders for Rule 144 securities, the staff notes that the solicitation either by a broker or by a market maker of affiliates to sell their securities is not proscribed by the Rule. See also Item (56) herein. _______________________________________________________________________________ as modified by the definition of "block" for purposes of Rule 144." under the Act would qualify as a block positioner for purposes of Rule 144, provided that the Rule 144 transaction involves securities with the same type of trading characteristics as those of the securities the block positioner generally holds himself out as ready and able to purchase. For example, if a block positioner has traditionally limited its block activities to securities listed on the New York and American Stock Exchanges for which there is an interest among institutional purchasers, it may not claim that it is acting as a block positioner in a Rule 144 transaction when it purchases securities for which there is no bona fide institutional interest.

(53) Question: Assuming that the purchaser qualifies as a block positioner (but not otherwise as a market maker), may the amount of securities purchased in a Rule 144 transaction aggregate less than a block size?

Answer: No. In order for the purchase by a block positioner to qualify as a Rule 144 transaction, a "block"of securities must be purchased. However, if a person sells both securities subject to Rule 144 and other securities of the same class not subject to the rule in a single transaction to a block positioner, the sale would qualify as a Rule 144 transaction if the aggregate of securities purchased by the block positioner constituted a "block."

(54) Question: What is a "block'?

Answer: There is no definition of the term "block" in the 1934 Act. The Commissioner has stated in the past that the term "block transaction" means a transaction in which a member firm, by reason of the size of the order in relation to conditions in the exchange market, reasonably concludes that it is in the interest of the customer to search and negotiate for a matching interest on the other side of the market (including, if necessary, negotiating as principal with the customer) rather than to attempt to execute the order directly in the ordinary course of the auction market. Block positioners may rely on the sliding scale definition of a "block" provided in paragraph (a)(10)(J)(i) of Appendix C which is appended to routine exemptions granted from Rule 10b-6 [17 CFR 240.10b-6] under the 1934 Act.*9

(55) Question: The third class of market makers included within Section 3(a)(38) of the 1934 Act is "any dealer who, with respect to a security, holds himself out...as willing to buy and sell such security..." Under that definition may a broker-dealer initiate its market making with the Rule 144 transaction? _______________________________________________________________________________ [Footnote continued] For purposes of determining whether the purchaser qualifies as a "block positioner", the relevant portion of Rule 17a-17(b) would read (b) For the purpose of this rule. a "Block Positioner" is a dealer who is registered with the Commission pursuant to section 15 of the Act, or is a member of a national securities exchange. and is subject to and in compliance with Rule 15c3-1 [17 CFR 240.15c3-1] (or is subject to and in compliance with the capital rules of an exchange of which he is a member if the members thereof are exempt from Rule Ik3-l by subparagraph (b)(2) thereof), and who has and maintains net capital as defined in Rule 15c3-l (or in such capital rules of such exchange) of $1,000,000 and who. except when such activity is unlawful. meets all of the following conditions: (1) he engages in the activity of purchasing long or selling short as principal, from time to time. from or to a customer, (other than a partner or a joint venture or other entity in which a partner. the dealer, or a person associated with such dealer as defined in Section 3(a)(18) of the Act participates) a block of stock (other than a convertible security as described in section 3(a)(18) of Regulation U [12 CFR 221.3]) with a current market value as provided in paragraph (a)(10)(J) of Appendix C (see Item (54), infra.) in a single transaction. or in several transactions at approximately the same time from a single source. to facilitate a sale or purchase by such customer;... (3) he sells the shares comprising the block as rapidly as possible commensurate with the circumstances .... See Release No, 34-8791 (December 31. 1969). Appendix C is published at 2 CCH. Fed. Sec. L. Rep [182]22,797, at 16,613-4 to 16,614 (August 9. 1978). Paragraph (a)(10)(J) of Appendix C reads. in relevant part, as follows: The term "block" shall mean a quantity of a security which (i) has an aggregate price of not less than $50,000 if the market price per share of the security is less than $10; an aggregate price of not less than $75,000 if the market price per share of the security is at least $10 but less than $20; an aggregate price of not less than $125,000 if the market price per share of the security is at least $20 but less that $35; an aggregate price of not less than $175,000 if the market price per share of the security is at least $35 but less than $50; or an aggregate price of not less than $200,000 if the market price per share of the security is $50 or more; The remaining portion of the definition is not relevant for purposes of Rule 144.]. _______________________________________________________________________________ Answer: No. This is the so-called "instant" market maker problem. In order to qualify as a market maker for purposes of Rule 144, the broker-dealer must have previously held itself out and must currently be holding itself out as being willing to buy and sell the security being purchased in the Rule 144 transaction. Paragraph (g)(2)(iii) of Rule 144 provides a useful guideline for determining who is a bona fide market maker for purposes of that rule. The paragraph, which describes the circumstances under which a broker acting as an agent in a Rule 144 transaction may publish quotations during the pendency of a broker's transaction within the meaning of the rule, suggests that a market maker should have published bid and asked quotations for the security in an inter-dealer quotation system provided that such quotations are incident to the maintenance of a bona fide interdealer market for the security for the [market maker's] own account and that the [market maker] has published bona fide bid and ask quotations in an inter-dealer quotation system on each of at least twelve days within the preceding thirty calendar days [preceding the Rule 144 transaction] with no more than four business days in succession without such two-way quotations. In addition, if the subject security is covered by Rule 11Ac1-1 under the 1934 Act, the market maker must be currently disseminating quotations pursuant to Rule 11Acl-l (or be excepted or exempted from the rule by the Commission).

(56) Question: May a market maker specifically solicit a buy order for the securities he proposes to purchase in a Rule 144 transaction? Answer: No. The prior solicitation of buy orders would resemble a broker's transaction rather than a market maker purchase. and, except as provided in Rule 144(g)(2), a broker may not solicit the buy side of the Rule 144 transaction. But normal activities of a market marker should not be deemed to constitute a solicitation for purposes of Rule 144. Thus, for example. a market maker would not have to withdraw a buy recommendation or a favorable research report published prior to effecting a Rule 144 transaction, provided that those activities are consistent with the market maker's prior history and were not undertaken in direct anticipation of an effort to sell the securities to be purchased in the Rule 144 transaction. Similarly, the market maker would not be prohibited from engaging in its normal and customary activities associated with making a market in the particular securities (e.g.. disclosing an interest in AUTEX or other media designed to advertise an interest in a security). But the rule does not permit a special effort to solicit buyers for stock to be acquired in a Rule 144 transaction prior to the time that the market maker purchases the stock. Any such activity would be comparable to the activity which is precluded by Rule 144(g)(2). The staff recognizes that the no prior solicitation requirement may impose a special burden on block positioners. Due to the significant risks attendant to block positioning, block positioners, as a matter of course. attempt to solicit some or all of the buy side of a block order, usually from institutional investors, prior to agreeing to purchase the block as principal. Indeed, to the degree that a block positioner can find a purchaser(s) for the entire block sale at a price satisfactory to both buyer and seller, it will have performed successfully its function. But Rule 144(g) (2) would preclude. except as provided by that subsection (i.e., soliciting a customer that has expressed an unsolicited bona fide interest in the securities within the preceding ten days). the solicitation of buy orders prior to the time that the block positioner commits itself to buy the block. With respect to securities which are listed or admitted to unlisted trading privileges on an exchange which has restrictions on the offboard trading of its members, a block positioner which is a member of that exchange must execute the block on an exchange. _______________________________________________________________________________ [Footnote continued.] The staff notes that any person effecting a Rule 144 transaction with a market maker should document in his files that the purchaser is a bona fide market maker. _______________________________________________________________________________ INTERPRETIVE OPINIONS.-- Distribution by broker-dealers of unregistered securities. (See Act Rel No 4445, 2/2/62.)--Broker-dealers have definite responsibilities to determine whether a large block of unregistered securities that they are asked to sell should be registered as involving a distribution, particularly in situations where the securities are those of relatively obscure and unseasoned companies and where all of the circumstances surrounding the proposer distribution are not known to the broker-dealer. Where unregistered securities are offered to a dealer for distribution, exemption is commonly claimed under [Secs. 4{1) and 4(3)] which, speaking generally, exempt transactions not involving any distribution by, or for an issuer, or for a person controlling, controlled by, or under common control with the issuer. Consequently, for this exemption to be available, a dealer must not be participating directly or indirectly in any such distribution. He may become such a participant even if he has no direct contractual relationship with an issuer or controlling person, if he, in fact engaged in steps necessary to such a distribution. Section 4(1) doesn't exempt distributions by issuers or control persons or acts of other persons who engage in steps necessary to such distributions. So a dealer who offers to sell, or is asked to sell a substantial amount of securities must take steps necessary to assure that the transaction doesn't involve an issuer, a controlling person or an underwriter. It's not enough in this connection to rely on self-serving statements of the sellers and their counsel without reasonably exploring their veracity. Particularly searching inquiry is called for when the securities are of a little-known company, and when the sellers are reluctant to tell where the securities came from or when the surrounding circumstances raise a question as to whether the sellers may be merely intermediaries for controlling persons or underwriters. The problem becomes particularly acute where substantial amounts of a previously little known security appear in the trading markets within a fairly short period of time and without the benefit of registration under the Securities Act of 1933. In such situations, it must be assumed that these securities emanate from the issuer or from person controlling the issuer. Unless some other source is known and the fact that the certificates may be registered in the names of various individuals could merely indicate that those responsible for the distribution are attempting to cover their tracks. In U.S.v. Crosby, the court would not convict brokers of selling unregistered securities, when they relied in good faith on an opinion of the issuer's attorney, that the stock was exempt from registration. Although the legal opinion was based on incomplete facts. the court found the brokers' contention persuasive that in relying on it they were "doing business as usual" and to their best knowledge according to acceptable standards. However, the SEC expects brokers to proceed with far more caution than was displayed in this case. Dealers should not rely on an opinion of their own counsel that the stock doesn't have to be registered when that opinion is based on mere representations by the sellers that they are neither officers, directors nor large stockholders of the issuer. An attorney who furnishes an opinion based solely on such hypothetical facts that he has made no effort to verify knowing that the opinion will be relied on as the basis for a substantial distribution. may even be guilty of unprofessional conduct. A dealer must also avoid violating the anti-fraud provisions of the Securities Act. If an issue is unregistered, he may not have enough information about the issuer to justify recommending the stock to his clients. Recommending the stock under these circumstances may be inconsistent with professional standards in the securities business even if it's not fraudulent.