The US Securities and Exchange Commission has announced that it will soon issue new proposed rule changes that will relax aspects of the Sarbanes-Oxley Act, modernize and simplify the Regulation D exemption from registration for securities offerings, shorten the "restricted period" during which securities issued under exemptions from registration cannot be resold and make other issuer-friendly improvements to the US securities rules. These changes are the latest in a now ongoing series of official pronouncements that seem designed to improve the attractiveness of the US capital markets, including for non-US issuers.
The SEC intends to publish the new proposed rule changes "as soon as possible". In the meantime, the Commission has summarized its goals for the rule changes, including the following:
- providing a new exemption from registration for offers and sales of securities to a newly defined category of “qualified purchasers”; in these offerings, limited advertising would be permitted;
- shortening the holding periods under US Securities Act Rule 144 for "restricted securities" (generally, securities previously offered and sold under an exemption from registration); the holding period for restricted securities held by non-affiliates of the issuing company would be shortened from two years to one year if the issuing company is not public in the US, and from two years to 6 months if the issuing company is public in the US; and
- providing a new exemption for companies from the requirement to become a public reporting company in the US if their number of US shareholders rises above the current triggering number of 500 US shareholders, solely because the company issues new shares to US employees under compensatory stock option plans.
These and other aspects of the proposed rule changes could be of great use to non-US companies offering and selling securities into the US, whether the companies are public in the US or not. Reforms of the sort being announced have been called for in the past by various commentators, including practitioners at Dorsey. [See "More, Please" article].
We will report further on the proposed rule changes as they are published by the SEC and take shape during the public comment and adoption period that follows.