- Rule 101 - syndicate members who are not market makers are - 1 or 5 business days, prohibited from purchaisng , biding for or inducing the purchase of teh underwritten security. can only accept unsolicited orders to buy teh security - - -
- - - Tier 1 Issue - Actively traded - no restrictions - average daily voluime > $1E6, float >$150E6, too big for manipulation
- -- Tier 2 Issue - Moderate trading - 1 day restriction daily trading $100,000, and float of $25E6
- -- Tier 3 Issue - Inactive trading - 5 day restriction - ave daily less than $100k, and floate less than $25E6
Reference Security - trading prohibited during restricted period - covered security - ex., if offering a convertible security, then the common it is convertible to is a reference security and trading it in is also prohibited
Note rule 101 doesn't restrict trading in equivalent or derivative securities during the restricted period - i.e., call options, can be traded.
Rule 102 - similar to 101, but applies to issuers and selling shareholders
Rule 103 - similar to 101, but applies to syndicate members who are market makers.
They can either seek to be excused from making a market during teh restricted period, or they can be a "passive market maker", whcih means they cannot raise a bid and any quotes have to be marked "PSMM" - these are restriced from trading because they are part of the syndicate and cannot make a market during the 20 day cooling off period.
- passive market makers are restricted from 30 percent of that market maker's average volume over the preceeding month or 200 shares, whicever is greater, each day. once that limit is reached, must withdraw quotes
Firms are to determine if they are subject to rule 101 or 103, and either the 1 or 5 day restriction based on teh trading volumen, and report to FINRA 1 day prior to beginning of restricted peroids first trading session.
Form M - used to report
Rule 104 - Stablization rules
Notice of Stabilization must appear on inside cover of prospectus
- only 1 stabilizing bid, it is a one sided quote, request must be made to NASDAQ in writing,
- - id of security
- - effective date of teh offering
- - whether bid is "penalty" (PBID), or non-penalty (SYND)
- -copy of cover page of prospectus
Placed always at or below POP
- If there is an independent market, then rules change:
- - bid cannot be entered any higher than last reported trade if the ask is equal to or higher than the last reported trade
- - if these conditions cannot be met, then bid cannot be higher than independent bid.
- - cannot be entered prior to effective date of offering
- - any orders to buy from the public have priority over the penalty bid to buy at that price or lower
No stabilization for an "at the market" offering
Records of stabilization have to be maintained for 3 years.
Rule 105 - Can't cover short positions created within 5 days of an offering's effective date. B/D's are prevented from buying shares either from under writer or open market to cover short positions created within 5 days of an issue's effective date.
- Transactions exempt from Regulation M:
- - odd lot trades
- - unsolicted customer order to buys an issue can be filled
- - exercises of options, warrants, rights or conversion privileges - since they don't go through the market, the do not affect the market price