17 C.F.R. § 230.133

Definition for purposes of section 5 of the Act, of “sale”, “offer”, “offer to sell”, and “offer for sale”

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(a) For purposes only of section 5 of the Act, no sale, offer to sell, or offer for sale shall be deemed to be involved so far as the stockholders of a corporation are concerned where, pursuant to statutory provisions in the state of incorporation or provisions contained in the certificate of incorporation, there is submitted to the vote of such stockholders a plan or agreement for a statutory merger or consolidation or reclassification of securities, or a proposal for the transfer of assets of such corporation to another person in consideration of the issuance of securities of such other person or securities of a corporation which owns stock possessing at least 80 percent of the total combined voting power of all classes of stock entitled to vote and at least 80 percent of the total number of shares of all other classes of stock of such person, under such circumstances that the vote of a required favorable majority (1) will operate to authorize the proposed transaction as far as concerns the corporation whose stockholders are voting (except for the taking of action by the directors of the corporation involved and for compliance with such statutory provisions as the filing of the plan or agreement with the appropriate State authority), and (2) will bind all stockholders of such corporation except to the extent that dissenting shareholders may be entitled, under statutory provisions or provisions contained in the certificate of incorporation, to receive the appraised or fair value of their holdings.

(b) Any person who purchases securities of the issuer from security holders of a constituent corporation with a view to, or offers or sells such securities for such security holders in connection with, a distribution thereof pursuant to any contract or arrangement, made in connection with any transaction specified in paragraph (a) of this section, with the issuer or with any affiliate of the issuer, or with any person who in connection with such transaction is acting as an underwriter of such securities, shall be deemed to an underwriter of such securities within the meaning of section 2(11) of the Act. This paragraph does not refer to arrangements limited to provision for the matching and combination of fractional interests in securities into whole interests, or the purchase and sale of such fractional interests, among security holders of the constituent corporation and to the sale on behalf of, and as agent for, such security holders of such number of fractional or whole interests as may be necessary to adjust for any remaining fractional interests after such matching.

(c) Any constituent corporation, or any person who is an affiliate of a constituent corporation at the time any transaction specified in paragraph (a) of this section, is submitted to a vote of the stockholders of such corporation, who acquires securities of the issuer in connection with such transaction with a view to the distribution thereof shall be deemed to be an underwriter of such securities within the meaning of section 2(11) of the Act. A transfer by a constituent corporation to its security holders of securities of the issuer upon a complete or partial liquidation shall not be deemed a distribution for the purpose of this paragraph.

(d) Notwithstanding the provisions of paragraph (c) of this section, a person specified therein shall not be deemed to be an underwriter nor to be engaged in a distribution with respect to securities acquired in any transaction specified in paragraph (a) of this section, which are sold by him in brokers' transactions within the meaning of section 4(4) of the Act, in accordance with the conditions and subject to the limitations specified in paragraph (e) of this section, if such person:

(1) Does not directly or indirectly solicit or arrange for the solicitation of orders to buy in anticipation of or in connection with such brokers' transactions;

(2) Makes no payment in connection with the execution of such brokers' transactions to any person other than the broker; and

(3) Limits such brokers' transactions to a sale or series of sales which, together with all other sales of securities of the same class by such person or on his behalf within the preceding six months, will not exceed the following:

(i) If the security is traded only otherwise than on a securities exchange, approximately one percent of the shares or units of such security outstanding at the time of receipt by the broker of the order to execute such transactions, or

(ii) If the security is admitted to trading on a securities exchange, the lesser of approximately (a) one percent of the shares or units of such security outstanding at the time of receipt by the broker of the order to execute such transactions or (b) the largest aggregate reported volume of trading on securities exchanges during any one week within the four calendar weeks preceding the receipt of such order.

(e) For the purposes of paragraph (d) of this section:

(1) The term brokers' transactions in section 4(4) of the Act shall be deemed to include transactions by a broker acting as agent for the account of the seller where:

(i) The broker performs no more than the usual and customary broker's functions,

(ii) The broker does no more than execute an order or orders to sell as a broker and receives no more than the usual or customary broker's commissions,

(iii) The broker does not solicit or arrange for the solicitation of orders to buy in anticipation of or in connection with such transactions and

(iv) The broker is not aware of any circumstances indicating that his principal is failing to comply with the provisions of paragraph (d) of this section;

(2) The term solicitation of such orders in section 4(4) of the Act shall be deemed to include the solicitation of an order to buy a security, but shall not be deemed to include the solicitation of an order to sell a security;

(3) Where within the previous 60 days a dealer has made a written bid for a security or a written solicitation of an offer to sell such security, the term solicitation in section 4(4) shall not be deemed to include an inquiry regarding the dealer's bid or solicitation.

(f) For the purposes of this rule, the term constituent corporation means any corporation, other than the issuer, which is a party to any transaction specified in paragraph (a) of this section. The term affiliate means a person controlling, controlled by or under common control with a specified person.

Note:

This section is rescinded effective on and after January 1, 1973, except that it shall remain in effect: (1) For transactions submitted before that date for vote or consent of security holders; (2) for transactions formally submitted before such date for approval to any governmental regulatory agency, if such approval is required by law; and (3) for resales of securities received by persons in such transactions.

(Sec. 5, 48 Stat. 77; 15 U.S.C. 77e) [19 FR 7129, Nov. 3, 1954, as amended at 24 FR 5900, July 23, 1959; 30 FR 2022, Feb. 13, 1965; 33 FR 566, Jan. 17, 1968. Rescinded at 37 FR 23636, Nov. 7, 1972]

Notes of Decisions

Cited in 14 cases, 1968–1983 · leading case: Sec. & Exch. Comm'n v. Nat'l Sec., Inc., 393 U.S. 453 (1969).

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Sec. & Exch. Comm'n v. Nat'l Sec., Inc., 393 U.S. 453 (1969). “They rely upon the so-called “no-sale doctrine” presently set forth in the Commission’s Rule 133 under the Securities Act of 1933, 17 CFR § 230.133 (1968). 7 That rule, promulgated under the Commission’s authority to define “accounting, technical, and trade terms” used in the…”

United States v. Arnold Nelson Mahler & Dean H. Ubben, 579 F.2d 730 (2d Cir. 1978). “Mahler then caused Industries to acquire the “assets” of Bell-Ko by exchanging 664,-000 of Industries’ shares for the 664,000 shares of Bell-Ko in a manner which ostensibly complied with SEC Rule 133, 17 C.F.R. § 230.133 (repealed effective January 1, 1973), 8 but which in fact…”

Sec. & Exch. Comm'n v. Nat'l Student Mktg. Corp., 457 F. Supp. 682 (D.D.C. 1978). “17 C.F.R. § 230.133 (1969). Rule 133 was rescinded effective January 1, 1973, 37 Fed.”

In re the Acct. of Bankers Trust Co. of Rochester, 93 A.D.2d 583 (N.Y. App. Div. 1983). “uant to the merger agreement and applicable Federal securities laws, absent an agreement by Coleman Company to the removal of the restrictions on the shares, the trustee was prohibited from selling the shares for a period of three years from the date of the merger except…”

Mid-Continent Tel. Corp. v. Home Tel. Co., 319 F. Supp. 1176 (N.D. Miss. 1970). “By Rule 133, Lon and Rex Darley were the only stockholders classified as members of the control group who would be subject to the restriction of holding stock for investment purposes. 32 . Miss.Code Ann. § 5309-183; see also 19 Am.”

Fed. Sec. L. Rep. P 94,300 Sec. & Exch. Comm'n v. Spectrum, Ltd., Stuart Schiffman, 489 F.2d 535 (2d Cir. 1973). “17 C.F.R. § 230.133 (1973). Rule 133 was rescinded effective January 1, 1973.”

Fidelis Corp. v. Litton Indus., Inc., 293 F. Supp. 164 (S.D.N.Y. 1968). “However, Litton claims an exemption from the necessity of filing a registration statement by virtue of Rule 133 of the General Rules and Regulations promulgated pursuant to the 1933 Act ( 17 C.F.R. § 230.133 ). Rule 133 provides that (a) For purposes only of section 5 of the…”

Fed. Sec. L. Rep. P 94,794 James J. James v. George W. Dubreuil, 500 F.2d 155 (5th Cir. 1974). “Since the merger was subject to then-existing Securities and Exchange Commission Rule 133, 17 C.F. R. § 230.133 (rescinded, effective January 1, 1973), insiders were precluded by the Rule and SEC regulations and rulings from acquiring stock for a definite interval prior to…”

Fed. Sec. L. Rep. P 94,762 Sec. & Exch. Comm'n v. Alvin Dolnick, 501 F.2d 1279 (7th Cir. 1974). “His only argument in support of this contention is that his exchange of King Kastle stock for Pig’N Whistle stock was a “no sale” transaction under former SEC Rule 133 (17 C.F.R. 230.133 (1972)), so that he had not purchased the stock within the underwriter definition.”

Fed. Sec. L. Rep. P 94,316 M. Richard Andrews, & Cross-Appellant. v. Linden Blue, 489 F.2d 367 (10th Cir. 1973). “The court specifically stated that the “no sale doctrine” (Commission’s Rule 133, 17 C.F.R. § 230.133 ) did not apply to 10b-5 cases, which arise under § 10(b) of the 1934 Securities Act, but only to cases arising under § 5 of the 1933 Act.”

United States v. Daniel E. Manning & David A. Wooldridge, 509 F.2d 1230 (9th Cir. 1975). “A major element of the scheme was the attempt to shield the sale of unregistered stock under then Rule 133 of the Securities and Exchange Commission, 17 C.F.R. § 230.133 . Appellants distributed the stock of their two shell corporations, Empire Oil and Capitol Holding, through…”

Sec. & Exch. Comm'n v. Spectrum, Ltd., 54 F.R.D. 70 (S.D.N.Y. 1971). “* The exemption most likely to be claimed would be Rule 133, 17 C.F.R. § 230.133 , embodying the so-called “no sale” theory.”

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