144 A & Regulation S

Rule 144A addresses an exemption from Section 5 of the Act of 1933 which prohibits the use of mail or
interstate commerce for unregistered securities, and is key to reclaiming the BC and SS bonds. [DTC
participants may not trade on any security not registered pursuant to Section 12, unless the security is
exempted.]
[BC and SS are exempt from registration requirement with SEC]
Rule 144A provides a safe harbor from the registration requirements of the Securities Act of 1933 for
certain private resales of restricted securities to “qualified institutional buyers” (QIBs)

When a broker or dealer is selling securities in reliance on Rule 144A, it is subject to the
condition that it may not make offers to persons other than those it reasonably believes to
be QIBs.

For firms registered with the SEC or a foreign company providing information to the SEC,
financial statements need not be provided to buyers. Rule 144A has become the principal
safe harbor on which non-U.S. companies [us] rely when accessing the U.S. capital markets.

What Does Rule 144A Mean?

A Securities & Exchange Commission rule modifying a two-year holding period requirement
on privately placed securities to permit qualified institutional buyers to trade these
positions among themselves…This has substantially increased the liquidity of the securities
affected because institutions can trade these securities amongst themselves, side-stepping
limitations that are imposed to protect the public.
Investopedia

In other words, when we certify that the issue is subject to resale under Rule 144A, we are certifying
that the issue is not registered with the SEC, but IS negotiable among large institutional investors and
therefore subject to holding at DTC as the securities depository and clearing through one of the
clearing corporation subdivisions of DTCC.

1. WHY IS THE ISSUE ELIGIBLE FOR RESALE UNDER REGULATION S OF THE ‘33 ACT? BECAUSE THE
ISSUE IS ELIGIBLE FOR DOMESTIC RESALE UNDER RULE 144A, THE ISSUE IS ELIGIBLE FOR RESALE
UNDER REGULATION S BY ELECTION OF THE ISSUER. THIS ALLOWS FOR GREATER
MARKETABILITY AMONGST FOREIGN QIBs.

2. CAN YOU PLEASE ELABORATE UPON REGULATION S OF THE SECURITIES ACT OF 1933?
REGULATION “S” PROVIDES SAFE HARBOR FOR THE SALE AND RESALE OF SECURITIES,
POTENTIALLY DEEMED TO COME TO REST ABROAD, TO AND BETWEEN FOREIGN QIB’S AND
THEREFORE NOT SUBJECT TO THE REGISTRATION OBLIGATIONS IMPOSED UNDER SECTION 5 OF
THE 1933 ACT. FOREIGN QIB’S MAY BUY FROM US CORPS BUT ONLY SELL TO OTHER FOREIGN
QIB’S.