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EXEMPTION OF CERTAIN SECURITIES FROM THE

OPERATION OF SECTION 7 (c) (2) Rule X-7C2-1. Exemption from Section 7 (c) (2) of Certain

Securities Exempted From Registration or Admitted to

Trading on Exchanges Exempted From Registration. (a) So long as any security continues to be listed on a national securities exchange as a security exempted from the operation of section 12 (a), pursuant to a rule which specifically provides that this rule shall be applicable to such security, such security shall be exempt from the operation of section 7 (c) (2) to the extent necessary to render lawful any direct or indirect extension or maintenance of credit thereon or any direct or indirect arrangement there for which would not have been unlawful if such security had been a security (other than an exempted security) registered on a national securities exchange.

(6) So long as any security which is not registered on a national securities exchange continues to be admitted to either listed or unlisted trading privileges on any exchange which is exempted from registration as a national securities exchange, such security shall be exempt from the operation of section 7 (c) (2) to the extent necessary to render lawful any direct or indirect extension or maintenance of credit thereon or any direct or indirect arrangement there for which would not have been unlawful if such security had been al security (other than an exempted security) registered on a national securities exchange.

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HYPOTHECATION OF CUSTOMERS' SECURITIES

Rule X-8C-1. Hypothecation of Customers' Securities.

(a) General provisions.—No member of a national securities exchange, and no broker or dealer who transacts a business in securities through the medium of any such member shall, directly or indirectly, hypothecate or arrange for or permit the continued hypothecation of any securities carried for the account of any customer under circumstances

(1) that will permit the commingling of securities carried for the account of any such customer with securities carried for the account of any other customer, without first obtaining the written consent of each such customer to such hypothecation;

(2) that will permit such securities to be commingled with securities carried for the account of any person other than a bona fide customer of such member, broker or dealer under a lien for a loan made to such member, broker or dealer; or

(3) that will permit securities carried for the account of customers to be hypothecated, or subjected to any lien or liens or claim or claims of the pledgee or pledgees, for a sum which exceeds the aggregate indebtedness of all customers in respect of securities carried for their accounts; except that this clause shall not be deemed to be violated by reason of an excess arising on any day through the reduction of the aggregate indebtedness of customers on such day, provided that funds or securities in an amount sufficient to eliminate such excess are paid or placed in transfer to pledgees for the purpose of reducing the sum of the liens or claims to which securities carried for the account of customers are subjected as promptly as practicable after such reduction occurs, but before the lapse of one-half hour after the commencement of banking hours on the next banking day at the place where the largest principal amount of loans of such member, broker or dealer are payable and, in any event, before such member, broker or dealer on such day has obtained or increased any bank loan collateralized by securities carried for the account of customers.

(6) Definitions.-For the purposes of this rule.

(1) the term “customer" shall not be deemed to include any general or special partner or any director or officer of such member, broker

or dealer, or any participant, as such, in any joint, group or syndicate account with such member, broker or dealer or with any partner, officer, or director thereof;

(2) the term "securities carried for the account of any customer” shall be deemed to mean:

(i) securities received by or on behalf of such member, broker or dealer for the account of any customer;

(ii) securities sold and appropriated by such member, broker or dealer to a customer, except that if such securities were subject to a lien when appropriated to a customer they shall not be deemed to be “securities carried for the account of any customer" pending their release from such lien as promptly as practicable;

(iii) securities sold, but not appropriated, by such member, broker or dealer to a customer who has made any payment therefor, to the extent that such member, broker or dealer owns and has received delivery of securities of like kind, except that if such securities were subject to a lien when such payment was made they shall not be deemed to be “securities carried for the account of any customer” pending their release from such lien as promptly as practicable;

(3) "aggregate indebtedness” shall not be deemed to be reduced by reason of uncollected items. In computing aggregate indebtedness, related guaranteed and guarantor accounts shall be treated as a single account and considered on a consolidated basis, and balances in accounts carrying both long and short positions shall be adjusted by treating the market value of the securities required to cover such short positions as though such market value were a debit; and

(4) in computing the sum of the liens or claims to which securities carried for the account of customers of a member, broker or dealer are subject, any rehypothecation of such securities by another member, broker or dealer who is subject to this rule or to rule X-15C2-1 shall be disregarded.

(c) Exemption for cash accounts. The provisions of paragraph (a) (1) hereof shall not apply to any hypothecation of securities carried for the account of a customer in a special cash account within the meaning of section 4 (c) of Regulation T of the Board of Governors of the Federal Reserve System, provided that at or before the completion of the transaction of purchase of such securities for, or of sale of such securities to, such customer, written notice is given or sent to such customer disclosing that such securities are or may be hypothecated under circumstances which will permit the commingling thereof with securities carried for the account of other customers. The term "the completion of the transaction” shall have the meaning given to such term by rule X-15C1-1 (6).

IHE URTVERSITY OF MICHIGAN LIBRARIES a

(d) Exemption for clearing house liens.—The provisions of paragraphs (a) (2), (a) (3), and (1) hereof shall not apply to any lien or claim of the clearing corporation, or similar department or association, of a national securities exchange, for a loan made and to be repaid on the same calendar day, which is incidental to the clearing of transactions in securities or loans through such corporation, department, or association, provided, however, that for the purpose of paragraph (a) (3) hereof, "aggregate indebtedness of all customers in respect of securities carried for their accounts" shall not include indebtedness in respect of any securities subject to any lien or claim exempted by this paragraph.

(e) Exemption for certain liens on securities of noncustomers.—The provisions of paragraph (a) (2) hereof shall not be deemed to prevent such member, broker, or dealer from permitting securities not carried for the account of a customer to be subjected (i) to a lien for a loan made against securities carried for the account of customers, or (ii) to a lien for a loan made and to be repaid on the same calendar day. For the purpose of this exemption, a loan shall be deemed to be "made against securities carried for the account of customers” if only securities carried for the account of customers are used to obtain or to increase such loan or as substitutes for other securities carried for the account of customers.

(f) Notice and certification requirements.—No person subject to this rule shall hypothecate any security carried for the account of a customer unless, at or prior to the time of each such hypothecation, he gives written notice to the pledgee that the security pledged is carried for the account of a customer and that such hypothecation does not contravene any provision of this rule, except that in the case of an omnibus account the member, broker or dealer for whom such account is carried may furnish a signed statement to the person carrying such account that all securities carried therein by such member, broker or dealer will be securities carried for the account of his customers and that the hypothecation thereof by such member, broker or dealer will not contravene any provision of this rule. The provisions of this paragraph shall not apply to any hypothecation of securities under any lien or claim of a pledgee securing a loan made and to be repaid on the same calendar day.

REGULATION X-9A6. PEGGING, FIXING, AND STABILIZ

ING THE PRICES OF SECURITIES TO FACILITATE
OFFERINGS AT THE MARKET

Rule X-9A6-1. Scope of Regulation.

This regulation shall apply to any person who, directly or indirectly, by the use of the mails or any means or irstrumentality of interstate commerce, or of any facility of any national securities erchange, effects either alone or with one or more other persons any series of transactions for the purchase and or sale of any security (other than an exempted security) registered on a national securities exchange for the purpose of pegging, fixing, or stabilizing the price of such security (hereinafter referred to as stabilizing) to facilitate an offering at the market of any registered security. Rule X-9A6-2. Definitions.

When used in this regulation and in the form prescribed thereby, unless the context otherwise requires

(a) The term “offering at the market” means an offering in which the offering price is represented to be “at the market" or at a price related to the market price.

(6) The term “designated exchange” means the national securities exchange designated in the notice of intention to stabilize as the principal exchange market for a security.

(c) The term “security which is subject of the offering" means any security comprised within such offering or any security of the same class.

(d) The term “security involved in the stabilization" means any security which is a subject of the offering or any other security being stabilized to facilitate such offering. Rule X-9A6-3. Notice of Intention to Stabilize.

No person subject to this regulation shall stabilize a security unless he has sent a notice of intention to stabilize such security to the Commission in triplicate on form X-9A6–1 and at least one copy to each national securities exchange on which it is intended to effect any stabilizing transactions. Rule X-9A6-4. Transactions While Stabilizing.

(a) In respect of any security involved in the stabilization, or of any right or warrant to subscribe to any such security, no person

THE UNIVERSITY OF MICHIGAN # #ISRARIES

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