The SEC has relaxed some of its rules governing the resale of restricted securities and control securities.1 The SEC’s objective is to increase the liquidity of privately placed securities and decrease issuers’ cost of capital. The amendments to Rule 144 under the Securities Act of 1933 (i) shorten the holding periods for restricted securities of reporting issuers; and (ii) eliminate restrictions on the quantity of securities that non-affiliates may resell, the manner in which they may resell them, and the associated filing requirements. The amendments will take effect on February 15, 2008 and will apply to securities acquired before or after that date.

Holding Period for Restricted Securities

The holding period for restricted securities under Rule 144 is being shortened to six months, from one year, for issuers that file reports under the Securities Exchange Act of 1934 (including foreign private issuers and MJDS issuers). The SEC believes that a six-month holding period provides a reasonable indication that an investor has assumed the economic risk of investment and did not purchase with a view to resale. Securities of non-reporting issuers remain subject to a one-year holding period.

Other Conditions for Resale of Non-Affiliates’ Securities

The amendments substantially simplify the resale rules for non-affiliates.2 Once the six-month or one-year holding period has expired, resales of securities by non-affiliates are permitted without restriction, except that if the issuer is an SEC reporting issuer, it must continue to make adequate current public information available for an additional six months after the six-month holding period expires.3 The Form 144 filing requirement has been removed, as have the restrictions on the quantity of securities that may be resold and their manner of resale (see below for more detail about these restrictions, which continue to apply to sales by affiliates). In adopting the amendments, the SEC stated that it would not object to issuers removing restrictive legends from securities held by non-affiliates once the Rule 144 conditions are met.

Conditions for Resale of Control Securities

Under Rule 144, resales of securities held by executive officers, directors, major shareholders and other affiliates are permitted, subject to the following conditions (which apply indefinitely):

Expiration of holding period if securities are restricted. If securities held by an affiliate are also “restricted securities,” the holding periods described above must expire before resales under Rule 144 are permitted.

Adequate current public information. Adequate current public information must be available about the issuer in order for an affiliate to resell under Rule 144.4

Quantity limits. Securities may only be sold in limited quantities. The SEC has adopted a new limit for debt securities, which includes non-participatory preferred stock and asset-backed securities, of up to 10% of a tranche during any three-month period.5 For equity securities, the quantity limit during any three-month period remains at the greater of 1% of the securities outstanding or the average weekly volume of trading on U.S. exchanges during the past four calendar weeks.

Manner of sale for equity. Equity securities may be sold only in ordinary brokers’ transactions, transactions directly with a market maker or riskless principal transactions. The broker or dealer must not solicit the transaction or receive any more than a customary fee and must conduct a reasonable inquiry regarding whether the seller purchased with a view to distribution. These manner-of-sale restrictions no longer apply to resales of debt securities.

Filing form 144. Form 144 must be filed if sales exceed $50,000 or 5,000 shares. The threshold under the old rules was $10,000 or 500 shares.

Rule 144 Is Not Exclusive of Other Resale Exemptions

Rule 144 is not the exclusive means by which restricted or control securities may be resold. If all of the conditions for another exemption from registration are met, such as the exemption provided by Regulation S for resales outside the United States, resales can be completed without complying with the holding periods or the other requirements of Rule 144.