Securities Lawyer's Deskbook                          published by The University of Cincinnati College of Law

Rule 0-10 -- Small Entities for Purposes of the Regulatory Flexibility Act

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1. When used with reference to an "issuer" or a "person," other than an investment company, mean an "issuer" or "person" that, on the last day of its most recent fiscal year, had total assets of $5 million or less;
   
   
2. When used with reference to an "issuer" or "person" that is an investment company, have the meaning ascribed to those terms by Rule 0-10;
   
   
3. When used with reference to a broker or dealer, mean a broker or dealer that:
   
   
   1. Had total capital (net worth plus subordinated liabilities) of less than $500,000 on the date in the prior fiscal year as of which its audited financial statements were prepared pursuant to Rule 17a-5(d) or, if not required to file such statements, a broker or dealer that had total capital (net worth plus subordinated liabilities) of less than $500,000 on the last business day of the preceding fiscal year (or in the time that it has been in business, if shorter); and
      
      
   2. Is not affiliated with any person (other than a natural person) that is not a small business or small organization as defined in this section;
      
      
4. When used with reference to a clearing agency, mean a clearing agency that:
   
   
   1. Compared, cleared and settled less than $500 million in securities transactions during the preceding fiscal year (or in the time that it has been in business, if shorter);
      
      
   2. Had less than $200 million of funds and securities in its custody or control at all times during the preceding fiscal year (or in the time that it has been in business, if shorter); and
      
      
   3. Is not affiliated with any person (other than a natural person) that is not a small business or small organization as defined in this section;
      
      
5. When used with reference to an exchange, mean any exchange that:
   
   
   1. Has been exempted from the reporting requirements of Rule 242.601 of this chapter;
      and
      
      
   2. Is not affiliated with any person (other than a natural person) that is not a small business or small organization as defined in this section;
      
      
6. When used with reference to a municipal securities dealer that is a bank (including any separately identifiable department or division of a bank), mean any such municipal securities dealer that:
   
   
   1. Had, or is a department of a bank that had, total assets of less than $10 million at all times during the preceding fiscal year (or in the time that it has been in business, if shorter);
      
      
   2. Had an average monthly volume of municipal securities transactions in the preceding fiscal year (or in the time it has been registered, if shorter) of less than $100,000; and
      
      
   3. Is not affiliated with any person (other than a natural person) that is not a small business or small organization as defined in this section;
      
      
7. When used with reference to a securities information processor, mean a securities information processor that:
   
   
   1. Had gross revenues of less than $10 million during the preceding fiscal year (or in the time it has been in business, if shorter);
      
      
   2. Provided service to fewer than 100 interrogation devices or moving tickers at all times during the preceding fiscal year (or in the time that it has been in business, if shorter); and
      
      
   3. Is not affiliated with any person (other than a natural person) that is not a small business or small organization under this section; and
      
      
8. When used with a reference to a transfer agent, mean a transfer agent that:
   
   
   1. Received less than 500 items for transfer and less than 500 items for processing during the preceding six months (or in the time that it has been in business, if shorter);
      
      
   2. Transferred items only of issuers that would be deemed "small businesses" or "small organizations" as defined in this section; and
      
      
   3. Maintained master shareholder files that in the aggregate contained less than 1,000 shareholder accounts or was the named transfer agent for less than 1,000 shareholder accounts at all times during the preceding fiscal year (or in the time that it has been in business, if shorter); and
      
      
   4. Is not affiliated with any person (other than a natural person) that is not a small business or small organization under this section.
      
      
9. For purposes of paragraph (c) of this section, a broker or dealer is affiliated with another person if:
   
   
   1. Such broker or dealer controls, is controlled by, or is under common control with such other person; a person shall be deemed to control another person if that person has the right to vote 25 percent or more of the voting securities of such other person or is entitled to receive 25 percent or more of the net profits of such other person or is otherwise able to direct or cause the direction of the management or policies of such other person; or
      
      
   2. Such broker or dealer introduces transactions in securities, other than registered investment company securities or interests or participations in insurance company separate accounts, to such other person, or introduces accounts of customers or other brokers or dealers, other than accounts that hold only registered investment company securities or interests or participations in insurance company separate accounts, to such other person that carries such accounts on a fully disclosed basis.
      
      
10. For purposes of paragraphs (d) through (h) of this section, a person is affiliated with another person if that person controls, is controlled by, or is under common control with such other person; a person shall be deemed to control another person if that person has the right to vote 25 percent or more of the voting securities of such other person or is entitled to receive 25 percent or more of the net profits of such other person or is otherwise able to direct or cause the direction of the management or policies of such other person.
    
    
11. For purposes of paragraph (g) of this section, "interrogation device" shall refer to any device that may be used to read or receive securities information, including quotations, indications of interest, last sale data and transaction reports, and shall include proprietary terminals or personal computers that receive securities information via computer-to-computer interfaces or gateway access.

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