On December 6, the Securities and Exchange Commission issued its final rule amending Rules 144 and 145 of the Securities Act of 1933. The effective date for the Rule 144 and 145 amendments will be February 15, 2008, but the new rules, once effective, will apply to securities acquired before that date.
The amendments to Rule 144 of the Securities Act include:
- Shortening the holding period for restricted securities of reporting companies from one year to six months where the issuer is subject to Security Act reporting obligations for at least 90 days before the sale of the restricted securities.
- Simplifying compliance with Rule 144 for non-affiliates by allowing them to resell restricted securities after meeting the six month holding period, subject (for six additional months) to compliance by the reporting company with the current public information requirements under Rule 144(c) and provided that such non-affiliates have not been affiliates of the reporting company for at least three months before the sale.
- Permitting affiliates to resell restricted securities of a reporting company after a six month holding period, subject to compliance by the reporting company with the current public information requirements and by the selling affiliate with volume limitations, manner of sale requirements and filing of Form 144.
- Revising the manner of sale requirements that apply to the resale of equity securities by affiliates and eliminating the manner of sale requirements set forth in Rule 144(f) with respect to affiliate resales of debt securities.
- Raising the volume limitations for debt securities to permit the resale of debt securities in an amount that does not exceed 10% of the tranche (or class when the securities are non-participatory preferred stock) in any threemonth period.
- Increasing the Form 144 filing threshold for affiliates’ sales and eliminating the Form 144 filing requirement for non-affiliates.
- Simplifying and clarifying the Preliminary Note to Rule 144, incorporating plain English principles and codifying several interpretive positions issued by the staff of the Division of Corporate Finance.
The SEC did not adopt the proposed tolling provision under Rule 144 which would have tolled the holding period during any period the restricted security holder’s position in the restricted securities was hedged.
In addition, Rule 145 has been amended to:
- Eliminate the presumptive underwriter provision except with respect to transactions involving shell companies; and
- Revise the resale provisions of Rule 145(d).