|
Overview Changes Effective 2.15.08
|
 SEC
adopts sweeping changes to Rules 144 and 145
- Summarized under Specific Changes
below
Changes
will be effective 2.15.08
- Which is 60 days from publication in Federal Register
- SEC has clarified that changes will apply to
securities acquired before the effective date
SEC
summaries
Prior
changes to Rules
- Rule 144 was last revised in 1997 when required
holding periods were shortened
- At that time, the SEC solicited comment on
whether to reduce the holding periods further and whether it should make other
changes such as eliminating Form 144 or abolishing the presumptive underwriter
rule for purposes of Rule 145, but it did not take action until now
|
SEC Releases
Final Release 33-8869 Dec 2007 |
Official
sources
Hyperlinked index to release
 Top of release
++
Background
I.
Discussion
of Final Amendments
II.
- Simplification of preliminary note and text of rule
II.A
- Holding periods for restricted securities
II.B
- Six-months for Exchange Act reporting companies
II.B.1
- Reduced conditions for non-affiliates
II.B.2
- Tolling provision
II.B.3
- Manner of sale requirements for resales by affiliates
II.C
- Conditions for resales of debt securities by affiliates
II.D
- Comments received
II.D.1
- No manner of sale requirements for resales of debt securities
II.D.2
- Raising volume limitations for debt securities
II.D.3
- Increased Form 144 filing thresholds
II.E
- Codification of SEC staff positions
II.F
- Securities issued under Securities Act 4(6) II.F.1
- Holding company formations II.F.2
- Conversions and exchanges of securities
II.F.3
- Cashless exercise of options and warrants
II.F.4
- Aggregation of pledged securities
II.F.5
- Securities issued by shell companies
II.F.6
- Holders relying on Rule 10b5-1(c)
II.F.7
- Amendments
to Rule 145
II.G
- Conforming and other amendments
II.H
- Regulation S II.H.1
- Asset-backed securities transactions II.H.2
- Securities Act Rule 701(g)(3)
II.H.3
Miscellaneous
Sections
- Paperwork Reduction Act III
- Cost-benefit analysis
IV
- Promotion of efficiency, etc
V
- Regulatory Flexibility Act VI
Statutory Basis and Text of
Amendments
VII
|
Proposal Release 33-8813 June 2007 |
Official
sources
Hyperlinked index to release
Top of release
++
Background
I Discussion
of Proposed Amendments
II
- Simplification of preliminary note and text of rule
II.A
- Holding periods for restricted securities
II.B
- Background II.B.1
- Amendments to holding period in rule 144(d)
II.B.2
- Six-months for Exchange Act reporting companies
II.B.2.a
- Tolling provision
II.B.2.b
- Reduced conditions for non-affiliates
II.B.3
- Manner of sale limitations for debt securities
II.C
- Increased Form 144 filing thresholds
II.D
- Codification of SEC staff positions
II.E
- Securities issued under Securities Act 4(6) II.E.1
- Holding company formations II.E.2
- Conversions and exchanges of securities
II.E.3
- Cashless exercise of options and warrants
II.E.4
- Aggregation of pledged securities
II.E.5
- Securities issued by shell companies
II.E.6
- Holders relying on Rule 10b5-1(c)
II.E.7
- Amendments
to Rule 145
II.F
- Conforming and other amendments
II.G
- Asset-backed securities transactions II.G.1
- Securities Act Rule 701(g)(3)
II.G.2
Form 144
- Form 4 co-ordination
III General
Request for Comments
IV Miscellaneous sections
- Paperwork Reduction Act
V
- Cost-benefit analysis VI
- Promotion of capital formation, etc
VII
- Regulatory Flexibility Analysis
VIII
- Small Business Regulatory Enforcement Fairness
Act
IX
Statutory
authority
X
|
Proposal Release 33-7391 1997
|
Official
sources
Summary
of 1997 proposals
- SEC proposed to
(1) revise the Preliminary Note to Rule 144 to restate the intent and effect of
the rule,
(2) add a bright-line test to the Rule 144 definition of "affiliate,"
(3) eliminate the Rule 144 manner of sale requirements,
(4) increase the Form 144 filing thresholds,
(5) include in the definition of "restricted securities" securities issued
pursuant to the Securities Act §4(6) exemption,
(6) clarify the holding period determination for securities acquired in certain
exchanges with the issuer and in holding company formations,
(7) streamline and simplify several Rule 144 provisions, and (8) eliminate the
presumptive underwriter provisions of
Rule 145
- SEC also solicited comment on
(1) further revisions to the Rule 144 holding periods,
(2) elimination of the trading volume tests to determine the amount of
securities that can be resold under Rule 144, and (3) several possible
regulatory approaches with respect to certain hedging activities.
- Source: Release 33-8813 (2007) at note 14
Hyperlinked index to release:
Top of release
++
Executive
summary
I Background
II Discussion
of Proposals
III
- Changes to preliminary note
III.A
- Change
to definition of "affiliate"'
III.B
- Manner of sale requirements
III.C
- Notice
of sale requirement
III.D
- Other proposed amendments to Rule 144
III.E
- Codification of SEC interpretive positions III.E.1
- Simplification and streamlining
III.E.2
Solicitation
of comments
IV Miscellaneous sections
- Cost-benefit analysis V
- Regulatory Flexibility Analysis
VI
- Paperwork Reduction Act
VII
Statutory
authority
VIII
|
Comment Letters
|
Comment
letters to SEC - 2007 Proposal
Notable
2007 letters
Comment
letters to SEC - 1997 Proposal
|
Specific Changes
Conditions to Rule 144
|
Rule
144(b) was substantially revised
- Changes are effective 2.15.08
New
Rule 144(i) was added
- Codifies SEC position that certain shell
companies are ineligible for Rule 144
- See
2008 Changes
Reporting company
- Affiliates and non-affiliates can resell
restricted securities after holding the restricted securities for six months
- Shortened from one year
- Company must be a reporting company
-- subject to the
reporting requirements of Exchange Act §13 or §15(d) for at least
90 days prior to the sale
- Other conditions of Rule 144 apply
Non-reporting company
- Affiliates and non-affiliates can resell restricted securities
after holding restricted securities for one year
- Unchanged from prior rule
- Note that'[[ resale restrictions on non-affiliates of non-reporting companies
under Rule 144 have been eliminated after
the one year holding period, allowing such non-affiliates to resell their
restricted securities after
meeting the required one year holding period without any further conditions
under Rule 144
_____________
- Includes a table summarizing holding period and
other requirements
Summary Table
|
Holding Period
|
Reporting company
- Affiliates and non-affiliates can resell
restricted securities after holding the restricted securities for six months
- Shortened from one year
- Company must be a reporting company
-- subject to the
reporting requirements of Exchange Act §13 or §15(d) for at least
90 days prior to the sale
- Other conditions of Rule 144 apply
Non-reporting company
- Affiliates and non-affiliates can resell restricted securities
after holding restricted securities for one year
- Unchanged from prior rule
- Note that resale restrictions on non-affiliates of non-reporting companies
under Rule 144 have been eliminated after
the one year holding period, allowing such non-affiliates to resell their
restricted securities after
meeting the required one year holding period without any further conditions
under Rule 144
_____________
|
Non-Affiliates
SEC_CODE_REF_0090001192884
|
Reporting
companies
- Persons who are not
affiliates of the issuer and have not
been an affiliate during the three months prior to the sale of securities can resell
their securities after their six month holding period
- Subject only to the Rule 144(c) requirement that
current
information regarding the issuer of the securities be publicly available if the
sale is made within
one year from the date of acquisition
- Non-affiliates of both reporting and
non-reporting companies would therefore be able to freely resell their restricted securities
publicly one year after the acquisition date of the securities (as computed under Rule 144(d)), without
having to comply with any other conditions of the Rule.
_________
For
more detailed coverage, see
____
- Simplify Rule 144 compliance for non-affiliates
- By allowing non-affiliates of reporting companies
to freely resell restricted securities after satisfying a six-month holding
period -- subject only to the Rule 144(c) public information requirement until
the securities have been held for one year
- By allowing non-affiliates of non-reporting
companies to freely resell restricted securities after satisfying a 12-month
holding period
- See Rule 144 Requirements for Non-affiliates below
|
Debt Securities
|
Changes
made to treatment of debt securities
- New Rule 144(a)(4)
adds debt securities as a defined term for purposes of Rule 144
- Include non-participating preferred stock and
asset-backed securities
- Definition is then used to distinguish treatment
of debt securities
Manner of sale requirements eliminated
for debt securities
Volume
limitations have been relaxed for debt securities
- Under a new alternative volume limitation
test, resales of debt securities in amounts up to 10% of the relevant tranche of
securities are permitted in a three month period
|
Form 144 Filing Thresholds
|
For
affiliates
- Form 144 filing required only if the intended sale
exceeds either 1,000 shares or $50,000 within a three month period
- Old threshold was 500 shares or $10,000 within a
three month period
- Effected by changes to Rule 144(h)
For
non-affiliates
- Persons that have not been affiliates of an
issuer for at least three months prior to a sale of securities will
no longer have any filing requirement under Rule 144
- Effected by changes to Rule 144(h)
_________
For
more detailed coverage, see
Form 144 Filings |
Codification of SEC Staff Positions
 Securities
issued under Securities Act §4(6)
- Codifies SEC Staff position that the resale
status of securities acquired in Section 4(6) exempt transactions should be the
same as securities received in other non-public offerings that are included in
the definition of restricted securities for purposes of Rule 144
- See definition of restricted securities
- New Rule 144(d)(3)(ix) permits securityholders to tack the
Rule 144
holding period for securities held prior to a
holding company formation
with the holding period for the securities received in the formation, if
specified
conditions are met
- See Rule 144(d)(3)(ix)
|
Conversions
and exchanges - Tacking
of holding periods
- Rule 144(d)(3)(ii) is amended to codify that securities acquired
from the issuer solely in
exchange for other securities of the same issuer will be deemed to have been
acquired at
the same time as the securities surrendered for conversion or exchange, even if
the
securities surrendered were not convertible or exchangeable by their terms
- New Rule 144(d)(3)(x) codifies that upon a cashless exercise of options or warrants, the newly
acquired
underlying securities are deemed to have been acquired when the corresponding
options or
warrants were acquired, even if the options or warrants originally did not
provide for cashless exercise by their terms
- See
Rule 144(d)(3)(x)
|
Aggregation
of pledged securities
- Adds a note to Rule 144(e)(3)(ii) to codify
that, in cases involving two or more pledgees, as long as the
pledgees are not the
same person under Rule 144(a)(2) and are not acting in concert and the loans
and pledges are
bona fide transactions, if a pledgor defaults on several pledges, each pledgee
may sell the pledged
restricted securities in the amount permitted by the volume limitations in Rule
144(e), less any ales made by the pledgor during the relevant period, without having to
aggregate the sale with
sales by other pledgees of the same securities from the same pledgor
- See Rule 144(e)(3)(ii)
- New Rule 144(i) codifies that Rule 144 is not available for the resale of
securities issued by
companies that are, or previously were reporting and non-reporting shell companies
- See Rule 144(i)
- Codifies that a
selling securityholder who satisfies Rule 10b5-1(c) may modify Form 144 to
indicate that he or she had no knowledge of material adverse information about
the issuer as of the
date on which the holder adopted a written trading plan or gave trading
instructions, specifying that date and indicating that the representation speaks
as of that date
- See Form 144: Reliance on Rule 10b5-1(c)
|
Rule 145 Changes
|
Eliminate
the presumptive underwriter provisions in
Rule 145
- The proposed amendments would eliminate the presumptive underwriter
provisions in
Rule 145 with respect to most transactions, except those involving shell
companies (other than
business combination related shell companies). Under the proposed rule, if a
transaction covered
by Rule 145 (i.e. exchanges of securities in connection with reclassifications,
mergers,
consolidations, and asset transfers where a shareholder vote is required)
involves a shell company
(other than a business combination related shell company), then any party to
that transaction
(other than the issuer) or any person who is affiliate of such party at the time
of the shareholder
vote is deemed to be a presumed underwriter subject to the resale restrictions
of Rule 145.
Under proposed Rule 145(d), the persons and parties that are deemed to be
presumed
underwriters would be permitted to resell their securities in substantially the
same way that
affiliates of a shell company would be permitted to resell their securities
under Rule 144, if
amended as proposed. The proposed rule provides that such presumed underwriters
may only sell
securities received in the Rule 145 transaction if the shell company ceases to
be a shell company
and one of the following conditions is met:
the current public information, volume limitation, and manner of sale
requirements of
Rule 144(c), (e), (f), and (g) are met and at least 90 days have passed since
the securities
were acquired;
(a) such person is not, and has not been for at least three months, an
affiliate of the issuer,
(b) at least six months have passed since the securities were acquired, and (c)
current
public information as required by Rule 144(c) is available for the issuer; or
(a) such person is not, and has not been for at least three months, an
affiliate of the issuer, and (b) at least one year has passed since the
securities were acquired
- Similar to the proposal for the Preliminary Note
in Rule 144, the proposed amendments would add a note that Rule 145(c) and (d)
are not available with respect to any transaction or series of transactions
that, although in technical compliance with the Rule, is part of a plan or
scheme to evade the registration requirements of the Securities Act
- The amendment also revised Rule 145 by
eliminating the presumptive underwriter rule, except for transactions involving
a shell company, and harmonizing the resale requirement in Rule 145 with the
resale provisions for the securities of a shell company in Rule 144. Prior to
elimination, the presumptive underwriter rule stated that affiliates of
corporations that engage in a merger or sale of assets in exchange for
securities are deemed to be underwriters for purposes of the Securities Act of
1933, unless they sold their securities in accordance with certain of the
requirements of Rule 144 or in a registered transaction
2008
changes to Rule 145
- Eliminates the presumptive underwriter provision,
except for transactions involving blank check or
shell companies
- Revises the resale provisions of Rule 145(d)
|
Plain English Revisions
|
Changes
to the Preliminary Note and text of Rule 144
- Preliminary Note to Rule 144 has been simplified
to incorporate plain English principles without altering the substantive
operation of the Rule
- Text about Rule 144 being a non-exclusive safe
harbor was removed from Rule 144(j) and put in the Preliminary Note
- Language changes have been made throughout Rule
144 to make the Rule less complex and easier to read
_________
|
Other Matters
Eliminated Rules
|
Rule
144(i)
- Rule required that a Form 144 filer have a bona
fide intention to sell
- This requirement is now included in Rule
144(h)(2)
- See Rule 144(h)(2)
- Rule 144(i) now rewritten to make shell companies
ineligible for use of Rule 144
- See Rule 144(i)
Rule
144(j)
- Stated that Rule 144 is a non-exclusive exemption
- Language moved to
Preliminary Note
Rule
144(k)
- Exempted non-affiliates from specified Rule 144
conditions
- Conditions for non-affiliates are now specified
by
Rule 144(b)(i)
|
Conforming Changes
|
Regulation
S
- Amends the distribution compliance period in Rule
903(b)(3)(iii) for Category 3 reporting issuers to the amended Rule 144 holding
period
- So that US reporting issuers will be
subject to a distribution compliance period of six months under Regulation S
_________
Asset-backed
securities transactions
Rule
701(g)(3)
- Revising Item 701 of Regulations S-B and S-K to
require disclosure regarding (a) whether
the securities issued in the reported unregistered transactions were restricted
securities, as
defined in Rule 144(a)(3); (b) if the securities were not restricted securities,
the resale
status of such securities under Rule 144; and (c) if the securities were
restricted securities,
the first date when such securities could be deemed to meet the holding period
requirement in Rule 144(d)
|
Proposals Not Adopted Tolling, Form 4 Coordination
|
SEC
had proposed to toll the required holding period when a security holder engaged
in hedging transactions
- A similar requirement was eliminated by the SEC
in 1990
- SEC decided not to adopt this requirement, in
light of the comments it received
_________
SEC
is exploring coordinating Form 4 with Form 144
- Because many Rule 144 affiliates are also Section
16 insiders, and are required to file a Form 4 just a few days after they file a
Form 144 to report information regarding the same sale of securities
- Several approaches were included in the Proposing
Release, including to fold Form 144 into Form 4
- SEC says that it expects to address this at a
later time
_________
|
Rule Change Index
|
Changes effective 2.15.08
Rule
144 changes
- Preliminary note revised
- Rule 144(a)(3)(vi) revised
- Rule 144(a)(3)(vii) revised
- Rule 144(a)(3)(viii) added
- Rule 144(a)(4) added
- Rule 144(b), (c), (d)(1), (d)(3)(i), (d)(3)(ii),
(d)(3)(vii) and (d)(3)(viii) revised
- Rule (d)(3)(ix) and (x) added
- Rule 144(e) and (e)(1) introductory text revised
- Rule 144 (e)(2) and (e)(3)
- Rule 144(f) revised
- Rule 144(g)(1) revised
- Rule 144(g)(2) redesignated as (g)(3) and revised
- New Rule 144(g)(2) added
- Rule 144(g)(3) redesignated as (g)(4)
- Rule 144(h) revised
- Rule 144(i) revised
- Rule 144(j) removed
- Rule 144(k) removed
Rule
145 changes
- Rule 145(c) revised
- Rule 145(d) revised
- Rule 145(e) revised
Form
144 revised
Conforming
changes
- Rule 190(a)(2) revised
- Rule 190(a)(3) revised
- Rule 190(a)(4) added
- Rule 701(g)(3) revised
- Rule 903 revised
|
Commentary
|
Law
Firms
|
Related Topics
|
