On November 15, 2007, the SEC adopted amendments to Rules 144 and 145. According to the SEC, the amendments are designed to improve “capital-raising, reporting and disclosure requirements for smaller companies” and will “make it more efficient for companies of all sizes to access the private markets.” The new amendments will become effective 60 days after they are published in the Federal Register. The full text of the newly adopted rules is not yet available. However, the SEC provided a brief summary of the changes in its November 15, 2007 press release.

The Amendments

Rule 144

Rule 144 provides a safe harbor exemption from the SEC registration requirement for persons selling restricted securities in public transactions and for affiliates who wish to sell restricted or unrestricted securities in public transactions.

The SEC voted to adopt the following amendments to the Rule:

  • Shortened Holding Period: Rule 144(d) holding period for restricted securities of reporting companies shortened from 1 year to 6 months.
  • Simplified Non-affiliate Compliance: Allow non-affiliates of reporting companies to resell restricted securities after 6 month holding period, after which time the securities can be freely resold without regard to volume limitations, manner of sale or Form 144 filing requirements, provided the Rule 144(c) public information requirement is met for securities held for up to one year. Non-affiliates of non-reporting companies may freely resell restricted securities after a 12-month holding period.
  • Revised Manner of Sale Requirements for Affiliates’ Sales: Manner of sale requirements for equity securities will be revised. Manner of sale requirements for debt securities will be eliminated. Volume limitations for debt securities will be relaxed.

Form 144 Changes:

  • Affiliates: Thresholds that trigger Form 144 filing requirements raised from 500 shares or $10,000 to 5,000 shares or $50,000.
  • Non-affiliates: Non-affiliates of issuer no longer required to file Form 144.

Rule 145

In addition to the amendments to Rule 144, the SEC also made the following changes to Rule 145:

  • Eliminated the “presumptive underwriter” provision: Amendments eliminate the presumptive underwriter provision of Rule 145 except for transactions involving shell or blank check companies. Under the revised rule “only a party to a Rule 145(a) transaction involving shell companies, other than business combination related shell companies, or an affiliate of the party, will be deemed a presumed underwriter of the transaction.”
  • Rule 145(d) revisions: The amendments will revise the resale provisions of Rule 145(d).