17 CFR § 230.142 - Definition of “participates” and “participation,” as used in section 2(11), in relation to certain transactions.

---
identifier: "/us/cfr/t17/s230.142"
source: "ecfr"
legal_status: "authoritative_unofficial"
title: "17 CFR § 230.142 - Definition of “participates” and “participation,” as used in section 2(11), in relation to certain transactions."
title_number: 17
title_name: "Commodity and Securities Exchanges"
section_number: "230.142"
section_name: "Definition of “participates” and “participation,” as used in section 2(11), in relation to certain transactions."
chapter_name: "SECURITIES AND EXCHANGE COMMISSION"
part_number: "230"
part_name: "GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933"
positive_law: false
currency: "2026-04-05"
last_updated: "2026-04-05"
format_version: "1.1.0"
generator: "[email protected]"
authority: "15 U.S.C. 77b, 77b note, 77c, 77d, 77f, 77g, 77h, 77j, 77r, 77s, 77z-3, 77sss, 78c, 78d, 78j, 78 78m, 78n, 78o, 78o-7 note, 78t, 78w, 78(d), 78mm, 80a-8, 80a-24, 80a-28, 80a-29, 80a-30, and 80a-37, and Pub. L. 112-106, sec. 201(a), sec. 401, 126 Stat. 313 (2012), unless otherwise noted."
cfr_part: "230"
---


# 230.142 Definition of “participates” and “participation,” as used in section 2(11), in relation to certain transactions.

(a) The terms *participates* and *participation* in section 2(11) (48 Stat. 74, 48 Stat. 905; 15 U.S.C. 77b) shall not include the interest of a person (1) who is not in privity of contract with the issuer nor directly or indirectly controlling, controlled by, or under common control with, the issuer, and (2) who has no association with any principal underwriter of the securities being distributed, and (3) whose function in the distribution is confined to an undertaking to purchase all or some specified proportion of the securities remaining unsold after the lapse of some specified period of time, and (4) who purchases such securities for investment and not with a view to distribution.

(b) As used in this section:

(1) The term *issuer* shall have the meaning defined in section 2(4) (48 Stat. 74, 48 Stat. 905; 15 U.S.C. 77b) and in the last sentence of section 2(11).

(2) The term *association* shall include a relationship between two persons under which one:

(i) Is directly or indirectly controlling, controlled by, or under common control with, the other, or

(ii) Has, in common with the other, one or more partners, officers, directors, trustees, branch managers, or other persons occupying a similar status or performing similar functions, or

(iii) Has a participation, direct or indirect, in the profits of the other, or has a financial stake, by debtor-creditor relationship, stock ownership, contract or otherwise, in the income or business of the other.

(3) The term *principal underwriter* shall have the meaning defined in § 230.405.

[3 FR 3015, Dec. 16, 1938]

For interpretative release applicable to § 230.142, see No. 1862 in tabulation, part 231, of this chapter.