Securities and Exchange Commission Approves New Rules for Reporting and Capital-Raising for Smaller Public Companies
RULES 144 AND 145
The SEC will also shorten the Rule 144 holding period from one year to six months where the issuer of the securities is subject to Exchange Act reporting obligations (reporting companies). Along with this change, the SEC will introduce a tolling provision that suspends the holding period while the security holder has a short position or has entered into a put equivalent position with respect to the securities in connection with the proposed six-month holding period for restricted securities of reporting companies. The tolling provision would not apply if the security holder has held the securities for one year or more, regardless of any hedging activity.
The SEC will permit the resale of restricted securities by non-affiliates of Exchange Act companies (reporting companies) after they satisfy a 6 month holding period (or 12 months if hedging occurs). Non-affiliates could sell restricted securities of non-reporting companies after satisfying a 12 month holding period.
The SEC will also eliminate the manner of sale limitations with respect to debt securities, raise the thresholds triggering a Form 144 filing requirement, and codify several staff positions relating to Rule 144.
Under the new revisions to Rule 144, only affiliates are required to file the notice of a proposed sale of securities on Form 144, and many of these affiliates are also required to file a Form 4 under Section 16 of the Exchange Act to report changes in beneficial ownership of their securities. In order to reduce duplicative paperwork requirements on individuals who are required to file both Form 144 and Form 4, the SEC will revise the filing deadline for Form 144 to coincide with the filing deadline for Form 4 and to permit affiliates subject to Section 16 requirements to, at their option, satisfy their Form 144 filing requirement by timely filing a Form 4 reporting the sale of securities. The SEC is presently seeking public comment on this proposal.
Finally, the SEC will eliminate the presumptive underwriter provision in Rule 145 except with regard to transactions involving blank check or shell companies. The SEC has made revisions to harmonize the resale restrictions in Rule 145(d) with the resale restrictions for securities of shell companies as proposed in Rule 144.
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