SPECIALTY FINANCE AT T O R N E Y A D V E R T I S I N G SEC AMENDS - PDF document

LOWENSTEIN SANDLER PC CLIENT ALERT SPECIALTY FINANCE AT T O R N E Y A D V E R T I S I N G SEC AMENDS RULES 144 AND 145 December 2007 The SEC has made significant The rule changes, described below, are requirements of Rule 144(c) for an changes to Rule 144 and 145 effective sixty days after publication in additional six months after the initial that are intended to facilitate the Federal Register and apply to secu- six month holding period. public and private capital- rities acquired both before or after the Tolling Provision raising actions and ease effective date. disclosure requirements for • Under the rule changes, there is Amendments to Holding small companies. Specifically, no tolling provision that would Period for Restricted the SEC has shortened the suspend the holding period where Securities holding period requirement the holder had a “short position” under Rule 144 for “restricted Six-Month Rule 144(d) Holding Period or “put equivalent position” in the securities” of issuers that are For Reporting Companies issuer’s security. subject to the reporting requirements of the Securities • The SEC has reduced from one Attached as Annex I is a chart Exchange Act of 1934 (the year to six months, the holding period contained in the SEC release “Exchange Act”) to six months. requirement for restricted securities of summarizing the new resale issuers that have been subject to the restrictions. The rule changes also reduce the reporting requirements of Section 13 Amendments to the restrictions applicable to the resale of or 15(d) of the Exchange Act for a Manner of Sale securities by non-affiliates. In addition, period of at least 90 days before the Requirements Applicable the rule changes amend the manner Rule 144 sale. Restricted Securities of to Resales by Affiliates of sale requirements and eliminate non-reporting issuers remain subject to them with respect to debt securities, a one-year holding period requirement. • The SEC has adopted two changes amend the volume limitations for debt to the manner of sale requirements securities, increase the Form 144 filing Reduction of Conditions Applicable that apply to resales of equity thresholds, and codify several staff to Non-Affiliates securities of affiliates under Rule 144. interpretations that relate to Rule 144. • Non-affiliates may freely resell the The amendment permits the resale of Finally, the SEC has eliminated the pre- restricted securities after the applicable securities through riskless principal sumptive underwriter provision in Rule holding period without any volume or transactions in which trades are 145, except for transactions involving manner of sale restrictions, except that a shell company, and revised the resale non-affiliates of reporting issuers are requirements in Rule 145(d). still subject to the public information

LOWENSTEIN SANDLER PC CLIENT ALERT Specialty Finance executed at the same price, exclusive Increase of Thresholds Rule 144 holding period in connection of any explicit disclosed markup or that Trigger the Form 144 with transactions made solely to form markdown, commission equivalent, Filing Requirements a holding company, where the follow- or other fee, and the rules of a self- for Affiliates ing conditions are met: (a) the newly regulatory organization permit the formed holding company’s securities • The SEC has raised the thresholds transaction to be reported as riskless. were issued solely in exchange for that trigger the Form 144 Filing The second amendment permits a securities of the predecessor company Requirements to cover sales of broker to insert bid and ask quotations as part of a reorganization of the 5,000 shares or $50,000 within a for the security in an alternative predecessor company into a holding three-month period. The SEC has also trading system, as defined in Rule 300 company; (b) security holders received indicated that it intends to issue a of Regulation ATS, provided that the securities of the same class evidencing release in the future which would broker has published bona fide bid the same proportional interest in the allow affiliates that are subject to and ask quotations for the security in holding company as they held in the both the Form 4 and Form 144 filing the alternative trading system on each predecessor company, and the rights requirements greater flexibility in of the last twelve business days. and interests of the holders of such satisfying their requirements. securities are substantially the same as Changes to Rule 144 Codification of those they possessed as holders of the Conditions Related to Staff Positions predecessor company’s securities; Resales of Debt and (c) immediately following the Securities by Affiliates The SEC has codified several inter- transaction, the holding company pretive positions issued by the staff of had no significant assets other than • The SEC has eliminated the the Division of Corporation Finance. securities of the predecessor and manner of sale requirements for its existing subsidiaries and had resales of debt securities held by Securities Acquired under Section 4(6) substantially the same assets and affiliates. The definition of debt of the Securities Act are Considered liabilities on a consolidated basis as securities under Rule 144 includes “Restricted Securities” the predecessor had before the non-participatory preferred stock and • Section 4(6) provides for an transaction. asset-backed securities in addition to exemption from registration for an other types of nonconvertible debt Tacking of Holding Periods for offering that does not exceed securities. Conversions and Exchanges of $5,000,000 that is made only to • The SEC has also raised the Rule Securities accredited investors, and that does not 144(e) volume limitations for debt involve any advertising or public • The SEC has codified the Division securities to permit the resale of debt solicitation by the issuer or anyone of Corporation Finance’s position that, securities in an amount that does not acting on the issuer’s behalf and for if securities to be sold were acquired exceed ten percent of a tranche which a Form D has been filed. The from the issuer solely in exchange for (or class when the securities are SEC has added securities acquired other securities of the same issuer, non-participatory preferred stock), under Section 4(6) to the definition the newly acquired securities shall be together with all sales of securities of of restricted securities. deemed to have been acquired at the same tranche sold for the account the same time as the securities Tacking of Holding Periods When a of the selling security holder within a surrendered for conversion or Company Reorganizes into a Holding three-month period. exchange, even if the securities Company Structure surrendered were not convertible or • The SEC has codified the Division exchangeable by their terms. of Corporation Finance’s position that permits security holders to tack the