In December 2007, the U.S. Securities & Exchange Commission approved significant amendments to Rule 144 of the Securities Act of 1933. The amended rules include the first reductions to the holding periods for restricted securities in 10 years, and represent the SEC's efforts to simplify Rule 144 in order to reduce the cost to qualifying issuers and their security holders of complying with the Rule and to decrease the cost of raising capital. Generally speaking, the amendments reduce the holding period to six months for restricted securities of Exchange Act reporting companies and one year for restricted securities of non-reporting companies. In addition, the amendments reduce certain other impediments to sales of restricted securities imposed by Rule 144, particularly with respect to restricted securities held by non-affiliates.
The Rule 144 amendments are set forth in the SEC's Final Rule Release No. 33-8869, which is effective as of February 15, 2008. The amendments are applicable to securities acquired before or after the February 15 effective date. The Final Rule Release can be downloaded from the SEC's website at www.sec.gov.
Sellers of securities under Rule 144 can be grouped into one of the following five categories, with different holding period and other requirements applicable to each category: (1) Non-affiliates of Exchange Act reporting companies; (2) Non-affiliates of non-reporting companies; (3) Affiliates of Exchange Act reporting companies; (4) Affiliates of non-reporting companies; and (5) security holders of shell companies.
The final conditions applicable to resales under Rule 144 of restricted or unregistered securities held by both Affiliates and Non-Affiliates of a public company may be summarized as follows:
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Affiliate or Person Selling on Behalf of an Affiliate |
Non-Affiliate (and Who Has Not Been an Affiliate During the Prior Three Months) |
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Restricted Securities of Reporting Companies |
During six-month holding period - no resales under Rule 144 permitted. After six-month holding period - an Affiliate may resell in accordance with all Rule 144 requirements, including:
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During six-month holding period - no resales under Rule 144 permitted. After six-month holding period but BEFORE one year - unlimited public resales under Rule 144, except that the current public information requirement still applies. After one year holding period - unlimited public resales under Rule 144; need not comply with any other Rule 144 requirements. |
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Restricted Securities of Non-Reporting Companies |
During one year holding period - no resales under Rule 144 permitted. After one year holding period - an Affiliate may resell in accordance with all Rule 144 requirements, including:
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During one year holding period - no resales under Rule 144 permitted. After one year holding period - unlimited public resales under Rule 144; need not comply with any other Rule 144 requirements. |
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
