Does the locate requirement apply to convertible securities?
The locate requirement applies to all equity securities. The term “equity security” is defined in Section 3(a)(11) of the Exchange Act and Rule 3a11-1 thereunder (17 CFR 240.3a11-1). A security convertible into an equity security is an equity security; therefore, such convertibles would be subject to the locate requirement. The Staff will consider on a case-by-case basis securities, including structured products, to which the “equity” status may not be clear. A convertible security that is subject to the locate requirement may qualify for an exception. Rule 203(b)(2)(ii) provides an exception from the uniform locate requirement for situations in which a broker-dealer effects a sale on behalf of a customer that is deemed to “own” the security although, through no fault of the customer or the broker-dealer, it is not reasonably expected that the security will be in the physical possession or control of the broker-dealer by the settlement date. The Adopting Release states that such circum
