Rule 144: 6 or 12 Months, Then a Cap

Rule 13 of 14 in this unit1.4

1.4 Offerings

SIE outline 1.4

Rule 144: 6 or 12 Months, Then a Cap

6 months if reporting, 1 year if not. Then 1% of the class, or 4-week volume, greater wins. NOT an unrestricted resale.

The method for this kind of question

506(b) and 506(c) trade opposite things

Now answer

1 question on this screen, from this outline item's own pool, so some will test a rule you met earlier in the unit. Pick an answer, say how sure you are, then reveal. Being sure and wrong is the most useful thing that can happen here, and the coach treats it that way.

Question 1Above the exam

A company that has been public for 4 years files an automatic shelf registration and, 18 months later, takes down 2 million new shares. A single underwriter buys the whole 2 million at $24 and offers them at $26; 50,000 do not sell. Is the shelf still usable, and who holds the 50,000 unsold shares?

A. The shelf expired at 18 months; nobody may use it B. The shelf is still usable, inside the 3-year window; the underwriter holds the 50,000 unsold shares, since it purchased the whole issue C. The shelf is still usable; the issuer holds the 50,000 unsold shares, since best efforts always applies to shelf takedowns D. The shelf is still usable; the SEC holds the unsold shares until resold

How sure are you?

Sure Fairly sure Guessing

Correct: B. Eighteen months is well inside Rule 415(a)(5)'s three-year window, so the shelf is usable. The underwriter bought the entire 2 million shares outright, a firm commitment, so title passed to it and the 50,000 unsold shares are the underwriter's own, at its own cost.

A. Eighteen months is well under the three-year limit; the shelf has not expired.

C. A shelf is a timing mechanism, not an underwriting structure; this takedown was distributed firm commitment, so the issuer does not hold the unsold shares.

D. The SEC never owns a registered security; Section 23 states its process is not even an approval.

Unit: SIE outline 1.4

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