(a) Unlawful activity. As a means reasonably designed to prevent fraudulent, deceptive, or manipulative acts or practices, it shall be unlawful for:
(1) Brokers or dealers. A broker or dealer to publish any quotation for a security or, directly or indirectly, to submit any such quotation for publication, in any quotation medium, unless:
(i)
(A) Such broker or dealer has in its records the documents and information specified in paragraph (b) of this section;
(B) Such documents and information specified in paragraph (b) of this section (excluding paragraphs (b)(5)(i)(N) through (P) of this section) are current and publicly available; and
(C) Based upon a review of the documents and information specified in paragraph (b) of this section, together with any other documents and information required by paragraph (c) of this section, such broker or dealer has a reasonable basis under the circumstances for believing that:
(1) The documents and information specified in paragraph (b) of this section are accurate in all material respects; and
(2) The sources of the documents and information specified in paragraph (b) of this section are reliable; or
(ii)
(A) The quotation medium is a qualified interdealer quotation system that made a publicly available determination that it has performed the activities described in paragraph (a)(2)(i) through (iii) of this section; and
(B) Such quotation is published or submitted for publication within three business days after such qualified interdealer quotation system makes such publicly available determination.
(2) Qualified interdealer quotation systems. A qualified interdealer quotation system to make known to others the quotation of a broker or dealer that is published or submitted for publication pursuant to paragraph (a)(1)(ii) of this section, unless:
(i) Such qualified interdealer quotation system has in its records the documents and information specified in paragraph (b) of this section (excluding paragraphs (b)(5)(i)(N) through (P) of this section except where the qualified interdealer quotation system has knowledge or possession of this information);
(ii) Such documents and information specified in paragraph (b) of this section (excluding paragraphs (b)(5)(i)(N) through (P) of this section) are current and publicly available;
(iii) Based upon a review of the documents and information specified in paragraph (b) of this section (excluding paragraphs (b)(5)(i)(N) through (P) of this section, except where the qualified interdealer quotation system has knowledge or possession of this information), together with any other documents and information required by paragraph (c) of this section, such qualified interdealer quotation system has a reasonable basis under the circumstances for believing that:
(A) The documents and information specified in paragraph (b) of this section are accurate in all material respects; and
(B) The sources of the documents and information specified in paragraph (b) of this section are reliable; and
(iv) The qualified interdealer quotation system makes a publicly available determination that it has performed the activities described in paragraphs (a)(2)(i) through (iii) of this section; or
(3) Qualified interdealer quotation systems or registered national securities Associations. A qualified interdealer quotation system or registered national securities association to make a publicly available determination described in paragraph (f)(2)(iii)(B), (f)(3)(ii)(A), or (f)(7) of this section, unless such qualified interdealer quotation system or registered national securities association establishes, maintains, and enforces reasonably designed written policies and procedures to determine whether:
(i) The documents and information specified in paragraph (b) of this section are current and publicly available; and
(ii) The requirements of an exception under paragraph (f) of this section are met, if it makes a publicly available determination described in paragraph (f)(7) of this section.
(b) Specified information.
(1) A copy of the prospectus specified by section 10(a) of the Securities Act of 1933 for an issuer that has filed a registration statement under the Securities Act of 1933, other than a registration statement on Form F-6, that became effective less than 90 calendar days prior to the day on which such broker or dealer publishes or submits the quotation to the quotation medium; Provided, That such registration statement has not thereafter been the subject of a stop order that is still in effect when the quotation is published or submitted; or
(2) A copy of the offering circular provided for under Regulation A (§§ 230.251 through 230.263 of this chapter) for an issuer that has filed an offering statement under Regulation A that was qualified less than 40 calendar days prior to the day on which such broker or dealer publishes or submits the quotation to the quotation medium; Provided, That the Regulation A exemption, with respect to such issuer, has not thereafter become subject to a suspension order that is still in effect when the quotation is published or submitted; or
(3) A current copy of:
(i) An annual report filed pursuant to section 13 or 15(d) of the Act, together with any periodic and current reports that have been filed thereafter under the Act by the issuer, except for current reports filed during the three business days prior to the publication or submission of the quotation; Provided, however, That, until such issuer has filed its first such annual report, the broker, dealer, or qualified interdealer quotation system has in its records a copy of the registration statement filed by the issuer under the Securities Act of 1933, other than a registration statement on Form F-6, that became effective within the prior 16 months, or a copy of any registration statement filed by the issuer under section 12 of the Act that became effective within the prior 16 months, together with any periodic and current reports filed thereafter under section 13 or 15(d) of the Act;
(ii) An annual report filed pursuant to Regulation A, together with any periodic and current reports filed thereafter under Regulation A by the issuer, except for current reports filed during the three business days prior to the publication or submission of the quotation; Provided, however, That, until such issuer has filed its first such annual report, the broker, dealer, or qualified interdealer quotation system has in its records a copy of the offering statement filed by the issuer under Regulation A, that was qualified within the prior 16 months, together with any periodic and current reports filed thereafter under Regulation A;
(iii) An annual report filed pursuant to Regulation Crowdfunding (§§ 227.100 through 227.503 of this chapter); Provided, however, that, until such issuer has filed its first such annual report, the broker, dealer, or qualified interdealer quotation system has in its records a copy of the Form C filed by the issuer under Regulation Crowdfunding within the prior 16 months, together with any Form C/A and Form C/U filed thereafter under Regulation Crowdfunding;
(iv) An annual statement referred to in section 12(g)(2)(G)(i) of the Act (in the case of an issuer required to file reports pursuant to section 13 or 15(d) of the Act), together with any periodic and current reports filed thereafter under the Act by the issuer, except for current reports filed during the three business days prior to the publication or submission of the quotation; Provided, however, that, until such issuer has filed its first such annual statement, the broker, dealer, or qualified interdealer quotation system has in its records a copy of the registration statement filed by the issuer under the Securities Act of 1933, other than a registration statement on Form F-6, that became effective within the prior 16 months, or a copy of any registration statement filed by the issuer under section 12 of the Act, that became effective within the prior 16 months, together with any periodic and current reports filed thereafter under section 13 or 15(d) of the Act; or
(v) An annual statement referred to in section 12(g)(2)(G)(i) of the Act (in the case of an issuer of a security that falls within the provisions of section 12(g)(2)(G) of the Act); or
(4) A copy of the information that, since the first day of its most recently completed fiscal year, the issuer has published as required to establish the exemption from registration under section 12(g) of the Act pursuant to § 240.12g3-2(b) of this chapter, which the broker or dealer must make available upon the request of a person expressing an interest in a proposed transaction in the issuer's security with the broker or dealer, such as by providing the requesting person with appropriate instructions regarding how to obtain the information electronically; or
(5)
(i) The following information, which must be (excluding paragraphs (b)(5)(i)(N) through (P) of this section) as of a date within 12 months prior to the publication or submission of the quotation, unless otherwise specified:
(A) The name of the issuer and any predecessors during the past five years;
(B) The address(es) of the issuer's principal executive office and of its principal place of business;
(C) The state of incorporation or registration of the issuer and of each of its predecessors (if any) during the past five years;
(D) The title, class, and ticker symbol (if assigned) of the security;
(E) The par or stated value of the security;
(F) The number of shares or total amount of the securities outstanding as of the end of the issuer's most recent fiscal year;
(G) The name and address of the transfer agent;
(H) A description of the issuer's business;
(I) A description of products or services offered by the issuer;
(J) A description and extent of the issuer's facilities;
(K) The name and title of all company insiders;
(L) The issuer's most recent balance sheet (as of a date less than 16 months before the publication or submission of the quotation) and profit and loss and retained earnings statements (for the 12 months preceding the date of the most recent balance sheet);
(M) Similar financial information for such part of the two preceding fiscal years as the issuer or its predecessors has been in existence;
(N) Whether the broker or dealer or any associated person of the broker or dealer is affiliated, directly or indirectly, with the issuer;
(O) Whether the quotation is being published or submitted on behalf of any other broker or dealer and, if so, the name of such broker or dealer; and
(P) Whether the quotation is being submitted or published, directly or indirectly, by or on behalf of the issuer or a company insider and, if so, the name of such person and the basis for any exemption under the federal securities laws for any sales of such securities on behalf of such person.
(ii) The broker or dealer must make the documents and information specified in paragraph (b)(5)(i) of this section available upon the request of a person expressing an interest in a proposed transaction in the issuer's security with the broker or dealer, such as by providing the requesting person with appropriate instructions regarding how to obtain such publicly available documents and information electronically. If such information is made available to others upon request pursuant to this paragraph, such delivery, unless otherwise represented, shall not constitute a representation by such broker or dealer that such information is accurate but shall constitute a representation by such broker or dealer that the information is current in relation to the day the quotation is submitted, the broker or dealer has a reasonable basis under the circumstances for believing the information is accurate in all material respects, and the information was obtained from sources that the broker or dealer has a reasonable basis under the circumstances for believing are reliable. The documents and information specified in paragraph (b)(5) of this section must be reviewed where paragraphs (b)(1) through (4) of this section do not apply to such issuer. For purposes of compliance with paragraph (a)(1)(i)(B) or (a)(2)(ii) of this section, the documents and information specified in paragraph (b)(5) of this section must be reviewed for an issuer for which the documents and information specified in paragraph (b)(1), (2), (3), or (4) of this section regarding such issuer are not current.
(c) Supplemental information. With respect to any security the quotation of which is within the provisions of this section, the broker or dealer submitting or publishing such quotation, or any qualified interdealer quotation system that makes known to others the quotation of a broker or dealer pursuant to paragraph (a)(2) of this section, shall have in its records the following documents and information:
(1) Records related to the submission or publication of such quotation, including the identity of the person or persons for whom the quotation is being published or submitted, whether such person or persons is the issuer or a company insider, and any information regarding the transactions provided to the broker, dealer, or qualified interdealer quotation system by such person or persons;
(2) A copy of any trading suspension order issued by the Commission pursuant to section 12(k) of the Act regarding any securities of the issuer or its predecessor (if any) during the 12 months preceding the date of the publication or submission of the quotation or a copy of the public release issued by the Commission announcing such trading suspension order; and
(3) A copy or a written record of any other material information (including adverse information) regarding the issuer that comes to the knowledge or possession of the broker, dealer, or qualified interdealer quotation system before the publication or submission of the quotation.
(d) Recordkeeping.
(1)
(i) The following persons shall preserve for a period of not less than three years, the first two years in an easily accessible place, the documents and information required under paragraphs (a), (b), and (c) of this section, except for the documents and information that are available on the Commission's Electronic Data Gathering, Analysis and Retrieval System (EDGAR):
(A) Any broker or dealer that publishes or submits a quotation pursuant to paragraph (a)(1) of this section for a security; or
(B) Any qualified interdealer quotation system that makes known to others the quotation of a broker or dealer pursuant to paragraph (a)(2) of this section for a security;
(ii) Any broker or dealer that publishes or submits a quotation pursuant to paragraph (a)(1)(ii) of this section shall preserve for a period of not less than three years, the first two years in an easily accessible place, the name of the qualified interdealer quotation system that made a publicly available determination that it has performed the activities described in paragraph (a)(2)(i) through (iii) of this section.
(2) The following persons shall preserve for a period of not less than three years, the first two years in an easily accessible place, the documents and information that demonstrate that the requirements for an exception under paragraph (f)(2), (3), (5), (6), or (7) of this section are met, except for the documents and information that are available on EDGAR:
(i) Any qualified interdealer quotation system or registered national securities association that makes a publicly available determination described in paragraph (f)(2)(iii)(B), (f)(3)(ii)(A), or (f)(7) of this section; and
(ii) Any broker or dealer that publishes or submits a quotation pursuant to paragraph (f) of this section; Provided, however, That any broker or dealer that relies on a publicly available determination described in paragraph (f)(2)(iii)(B) or (f)(3)(ii)(A) of this section shall preserve only a record of the name of the qualified interdealer quotation system or registered national securities association that determined whether the documents and information specified in paragraph (b) of this section are current and publicly available in addition to the documents and information that demonstrate that the other requirements of the exception provided in paragraph (f)(2) or (3), respectively, are met; and that any broker or dealer that relies on a publicly available determination described in paragraph (f)(7) of this section shall preserve only a record of the exception provided in paragraph (f)(1), (f)(3)(i), or (f)(4) or (5) for which the publicly available determination is made and the name of the qualified interdealer quotation system or registered national securities association that determined that the requirements of that exception are met.
(e) Definitions. For purposes of this section:
(1) Company insider shall mean any officer or director of the issuer, or person that performs a similar function, or any person who is, directly or indirectly, the beneficial owner of more than 10 percent of the outstanding units or shares of any class of any equity security of the issuer.
(2) Current shall mean, for the documents and information specified in:
(i) Paragraph (b)(1), (2), (4), or (5) of this section, filed, published, or are as of a date in accordance with the time frames specified in the applicable paragraph for such documents and information; or
(ii) Paragraph (b)(3) of this section, the most recently required annual report or statement filed pursuant to section 13 or 15(d) of the Act and any rule(s) thereunder, Regulation A, Regulation Crowdfunding, or section 12(G)(2)(g) of the Act, together with any subsequently required periodic reports or statements, filed pursuant to section 13 or 15(d) of the Act and any rule(s) thereunder, Regulation A, Regulation Crowdfunding, or section 12(G)(2)(g) of the Act.
(3) Interdealer quotation system shall mean any system of general circulation to brokers or dealers that regularly disseminates quotations of identified brokers or dealers.
(4) Issuer, in the case of quotations for American Depositary Receipts, shall mean the issuer of the deposited shares represented by such American Depositary Receipts.
(5) Publicly available shall mean available on EDGAR; on the website of a state or federal agency, a qualified interdealer quotation system, a registered national securities association, an issuer, or a registered broker or dealer; or through an electronic information delivery system that is generally available to the public in the primary trading market of a foreign private issuer as defined in § 240.3b-4 of this chapter; Provided, however, that publicly available shall mean where access is not restricted by user name, password, fees, or other restraints.
(6) Qualified interdealer quotation system shall mean any interdealer quotation system that meets the definition of an “alternative trading system” under § 242.300(a) of this chapter and operates pursuant to the exemption from the definition of an “exchange” under § 240.3a1-1(a)(2) of this chapter.
(7) Quotation, except as otherwise specified in this section, shall mean any bid or offer at a specified price with respect to a security, or any indication of interest by a broker or dealer in receiving bids or offers from others for a security, or any indication by a broker or dealer that wishes to advertise its general interest in buying or selling a particular security.
(8) Quotation medium shall mean any “interdealer quotation system” or any publication or electronic communications network or other device that is used by brokers or dealers to make known to others their interest in transactions in any security, including offers to buy or sell at a stated price or otherwise, or invitations of offers to buy or sell.
(9) Shell company shall mean any issuer, other than a business combination related shell company, as defined in § 230.405 of this chapter, or an asset-backed issuer as defined in Item 1101(b) of Regulation AB (§ 229.1101(b) of this chapter), that has:
(i) No or nominal operations; and
(ii) Either:
(A) No or nominal assets;
(B) Assets consisting solely of cash and cash equivalents; or
(C) Assets consisting of any amount of cash and cash equivalents and nominal other assets.
(f) Exceptions. Except as provided in paragraph (d)(2) of this section, the provisions of this section shall not apply to:
(1) The publication or submission of a quotation for a security that is admitted to trading on a national securities exchange and that is traded on such an exchange on the same day as, or on the business day next preceding, the day the quotation is published or submitted.
(2)
(i) The publication or submission by a broker or dealer, solely on behalf of a customer (other than a person acting as or for a dealer), of a quotation that represents the customer's unsolicited indication of interest;
(ii) Provided, however, that this paragraph (f)(2) shall not apply to a quotation:
(A) Consisting of both a bid and an offer, each of which is at a specified price, unless the quotation medium specifically identifies the quotation as representing such an unsolicited customer interest; or
(B) Published or submitted, directly or indirectly on behalf of a company insider or affiliate as defined in § 230.144(a)(1) of this chapter, unless the documents and information specified in paragraph (b) of this section are current and publicly available.
(iii) For purposes of paragraph (f)(2)(ii)(B) of this section, a broker or dealer that publishes or submits quotations may rely on either a:
(A) Written representation from the customer's broker that such customer is not a company insider or an affiliate if:
(1) Such representation is received prior to, and on the same day that, the quotation representing the customer's unsolicited indication of interest is published or submitted; and
(2) The broker or dealer has a reasonable basis under the circumstances for believing that the customer's broker is a reliable source; or
(B) Publicly available determination by a qualified interdealer quotation system or registered national securities association that the documents and information specified in paragraph (b) of this section are current and publicly available.
(3)
(i)
(A) The publication or submission, in an interdealer quotation system that specifically identifies as such unsolicited customer indications of interest of the kind described in paragraph (f)(2) of this section, of a quotation for a security that has been the subject of a bid or offer quotation (exclusive of any identified customer interests) in such a system at a specified price, with no more than four business days in succession without such a quotation;
(B) Provided, however, that this paragraph (f)(3) shall not apply to a quotation that is published or submitted by a broker or dealer for the security of an issuer that:
(1) Was the subject of a trading suspension order issued by the Commission pursuant to section 12(k) of the Act until 60 calendar days after the expiration of such order;
(2) Such broker or dealer, or any qualified interdealer quotation system or registered national securities association, has a reasonable basis under the circumstances for believing is a shell company, unless such quotation is published or submitted within the 18 months following the initial quotation for such issuer's security that is the subject of a bid or offer quotation in an interdealer quotation system at a specified price;
(C) Provided further, that this paragraph (f)(3) shall apply to the publication or submission of a quotation for a security of an issuer only if the documents and information regarding such issuer that are specified in:
(1) Paragraph (b)(3)(i), (iv), or (v) of this section are filed within 180 calendar days from the end of the issuer's most recent fiscal year or any quarterly reporting period that is covered by a report required by section 13 or 15(d) of the Act, as applicable;
(2) Paragraph (b)(3)(ii) or (iii) of this section are timely filed;
(3) Paragraph (b)(4) or (b)(5)(i) (excluding paragraphs (b)(5)(i)(N) through (P)) are current and publicly available; or
(4) Paragraph (b)(3)(i), (ii), (iii), (iv), or (v) are filed within 15 calendar days starting on the date on which a publicly available determination is made pursuant to paragraph (f)(3)(ii)(A) of this section; or
(ii) If the documents and information specified in paragraph (b) of this section (excluding paragraphs (b)(5)(i)(N) through (P)) regarding an issuer are no longer current and publicly available, timely filed, or filed within 180 calendar days, as specified in paragraph (f)(3)(i)(C) of this section, a broker or dealer may continue to publish or submit a quotation for such issuer's security in an interdealer quotation system during the time frame specified in in paragraph (f)(3)(ii)(C) if:
(A) Within the first four business days that such documents and information are no longer current and publicly available, timely filed, or filed within 180 calendar days, as applicable, a qualified interdealer quotation system or registered national securities association makes a publicly available determination that:
(1) Such documents and information are no longer current and publicly available, timely filed, or filed within 180 calendar days, as specified in paragraph (f)(3)(i)(C) of this section; and
(2) The exception provided in paragraph (f)(3)(ii) of this section is available only during the 15 calendar days starting on the date on which the publicly available determination described in paragraph (f)(3)(ii)(A)(1) of this section is made; and
(B) The broker or dealer complies with the requirements of paragraphs (d)(2) and (f)(3)(i) of this section, except for the requirement that the documents and information specified in paragraph (b) (excluding paragraphs (b)(5)(i)(N) through (P)) regarding such issuer be current and publicly available, timely filed, or filed within 180 calendar days, as applicable;
(C) Provided, however, that the provisions of this paragraph (f)(3)(ii) shall apply only during the shorter of the period beginning with the date on which a qualified interdealer quotation system or registered national securities association makes a publicly available determination identified in paragraph (f)(3)(ii)(A) and ending on:
(1) The date on which the documents and information specified in paragraph (b) of this section (excluding paragraphs (b)(5)(i)(N) through (P)) regarding such issuer become current and publicly available or filed; or
(2) The fourteenth calendar day following the date on which such publicly available determination was made.
(4) The publication or submission of a quotation for a municipal security.
(5) The publication or submission of a quotation for:
(i) A security with a worldwide average daily trading volume value of at least $100,000 reported during the 60 calendar days immediately before the publication of the quotation of such security; and
(ii) The issuer of such security has at least $50 million in total assets and $10 million in shareholders' equity as reflected in the issuer's publicly available audited balance sheet issued within six months after the end of its most recent fiscal year.
(6) The publication or submission of a quotation for a security by a broker or dealer that is named as an underwriter in a registration statement for an offering of that class of security referenced in paragraph (b)(1) of this section or in an offering statement for an offering of that class of security referenced in paragraph (b)(2) of this section; Provided, however, that this paragraph (f)(6) shall apply only to the publication or submission of a quotation for such security within the time frames specified in paragraph (b)(1) or (2) of this section.
(7) The publication or submission of a quotation by a broker or dealer that relies on a publicly available determination by a qualified interdealer quotation system or registered national securities association that the requirements of an exception provided in paragraph (f)(1), (f)(3)(i), or (f)(4) or (5) of this section are met; Provided, however, that any qualified interdealer quotation system or registered national securities association that makes a publicly available determination that the requirements of the exception provided in paragraph (f)(3)(i) of this section are met must subsequently make a publicly available determination under paragraph (f)(3)(ii)(A) of this section, as applicable.
(g) Exemptive authority. Upon written application or upon its own motion, the Commission may, conditionally or unconditionally, exempt by order any person, security, or transaction, or any class or classes of persons, securities, or transactions, from any provision or provisions of this section, to the extent that such exemption is necessary or appropriate in the public interest, and is consistent with the protection of investors.
[85 FR 68203, Oct. 27, 2020]