Revision of Rule 144, Rule 145 and Form 144
Federal RegisterFeb 28, 1997
Ask Donna
What actually matters in this document.
Text
SUMMARY: The Commission proposes changes to make Rule 144, a safe
harbor from the Securities Act definition of the term ``underwriter,''
easier to understand and apply. The proposed amendments would revise
the Preliminary Note to Rule 144 to restate the intent and effect of
the rule, add a bright-line test to the Rule 144 definition of
``affiliate,'' eliminate the Rule 144 manner of sale requirements,
increase the Form 144 filing thresholds, include in the definition of
``restricted securities'' securities issued pursuant to the Securities
Act Section 4(6) exemption, clarify the holding period determination
for securities acquired in certain exchanges with the issuer and in
holding company formations, and streamline and simplify several rule
provisions. The Commission also proposes to eliminate the presumptive
underwriter provisions of Rule 145. Additionally, the release solicits
comment on changes to the Rule 144 holding periods that differ from
those being adopted today in a companion release, elimination of the
trading volume tests to determine the amount of securities that can be
resold under Rule 144, and several possible regulatory approaches with
respect to certain hedging activities.
DATES: Comments should be received on or before April 29, 1997.
ADDRESSES: Comments should be submitted in triplicate to Jonathan G.
Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549. Comments also may be submitted
electronically at the following E-mail address: rule-comments @
sec.gov. All comment letters should refer to File No. S7-07-97; this
file number should be included in the subject line if E-mail is used.
Comment letters will be available for inspection and copying in the
Commission's Public Reference Room, 450 Fifth Street, N.W., Washington,
D.C. 20549. Electronically submitted comment letters will be posted on
the Commission's Internet Web Site (http://www.sec.gov).
FOR FURTHER INFORMATION CONTACT: Elizabeth M. Murphy, Mark W. Green or
Michael Hyatte, Office of Chief Counsel, Division of Corporation
Finance, at (202) 942-2900, 450 Fifth Street, N.W., Washington, D.C.
20549.
SUPPLEMENTARY INFORMATION: The Commission is proposing amendments to
Rule 144,1 Rule 145 2 and Form 144 3 under the
Securities Act of 1933 (``Securities Act'').4
---------------------------------------------------------------------------
\1\ 17 CFR 230.144.
\2\ 17 CFR 230.145.
\3\ 17 CFR 239.144.
\4\ 15 U.S.C. 77a et seq.
---------------------------------------------------------------------------
I. Executive Summary
Securities Act Rule 144 provides a safe harbor for the resale of
restricted and control securities.5 The rule permits persons who
hold such securities to publicly sell them without registration and
without being deemed underwriters, if certain conditions are satisfied.
When Rule 144 was adopted in 1972, the Commission noted that it was
experimental in nature and would be rescinded or amended, as necessary,
based on actual experience.6 Since its adoption, the Commission
has monitored the operation of Rule 144 and has eliminated many
compliance burdens where consistent with the investor protection
objectives of the Securities Act.
---------------------------------------------------------------------------
\5\ Restricted securities generally are securities issued in
non-public offerings; control securities are securities owned by
affiliates of the issuer.
\6\ Release No. 33-5223 (January 11, 1972) [37 FR 591].
---------------------------------------------------------------------------
The Commission is continuing its efforts to improve the clarity and
usefulness of Rule 144 and to eliminate unnecessary compliance burdens.
In June 1995, the Commission proposed to permit limited resales of
restricted securities after a one-, rather than two-year holding
period, and to allow unlimited resales of such securities by non-
affiliates after a two-, rather than three-year holding period (``1995
Release'').7 The proposed new holding periods are being adopted in
a companion release being published today (``Adopting Release'').8
---------------------------------------------------------------------------
\7\ Release No. 33-7187 (June 27, 1995) [60 FR 35645].
Additionally, the Commission requested comment on whether Rule 144
should be revised to address new trading strategies such as equity
swaps. Comment letters on the 1995 Release are available for public
inspection and copying in the Commission's Public Reference Room,
450 Fifth Street, N.W., Washington, D.C. 20549. Interested persons
should refer to File No. S7-17-95.
\8\ Release No. 33-7390 (February 20, 1997).
---------------------------------------------------------------------------
After reviewing the comments received on the 1995 Release, the
Commission staff undertook a more comprehensive review of Rule 144 to
determine whether other provisions of the rule were unnecessarily
restrictive or in need of updating. This Release proposes several
revisions intended to make Rule 144 easier to understand and apply.
The proposals in this release would reorganize and rewrite the text
of Rule 144, including the Preliminary Note, in a more succinct and
straightforward fashion. The proposals also would simplify and update
the rule in three main ways.9
---------------------------------------------------------------------------
\9\ In addition, the Commission proposes to codify existing
staff positions regarding determination of the holding period for
securities acquired solely in exchange for other securities of the
same issuer and in holding company formations, as well as the
treatment of securities issued pursuant to the exemption under
Section 4(6) of the Securities Act [15 U.S.C. 77(d)(6)] as
restricted securities.
---------------------------------------------------------------------------
First, the proposals would make it easier to determine whether a
person is not an affiliate of an issuer for purposes of Rule 144 by
providing a bright-line exclusion from the Rule 144 definition of
affiliate. Pursuant to the proposal, all persons not subject to the
provisions of Section 16 10 of the Securities Exchange Act of 1934
(``Exchange Act'') 11 would be deemed not to be affiliates of an
issuer for purposes of Rule 144.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78p.
\11\ 15 U.S.C. 78a et seq.
---------------------------------------------------------------------------
Second, the proposals would eliminate the manner of sale
requirements. 12 This would facilitate innovation in the methods
used to resell restricted securities, such as the use of electronic
bulletin boards.
---------------------------------------------------------------------------
\12\ The manner of sale requirements are contained in current
Rule 144(f) [17 CFR 230.144(f)]. Current Rule 144(g) [17 CFR
230.144(g)], which defines the term ``brokers' transactions'' for
purposes of Rule 144, also would be rescinded.
---------------------------------------------------------------------------
Third, the threshold requirements for filing Form 144 would
increase from the current 500 shares or $10,000 sale price test to a
1,000 shares or $40,000 sale price test.
Additionally, this Release solicits comment on other possible
changes to Rule 144, including:
Further revisions to the Rule 144 holding periods that
would result in changes to either the one-or two-year holding
periods being adopted today, or both;
Elimination of the two trading volume tests that limit
the amount of securities that may be sold in reliance on Rule 144,
with the result that all sellers would rely on the percentage of
shares outstanding test; and
Several possible approaches to addressing the
application of the Securities Act to hedging of restricted and other
securities.
Finally, the Commission is proposing to amend Securities Act Rule
145, a Securities Act rule relating to certain significant
transactions, such as mergers, to eliminate the resale limitations that
are based on a ``presumptive underwriter'' approach.
[[Page 9247]]
Instead, persons who receive securities in these transactions would be
treated the same as other purchasers of securities.
II. Background
The Securities Act protects investors primarily by requiring public
information about issuers to be available to investors and potential
investors at the time they make decisions regarding investment in an
issuer's securities. The statute thus prohibits offerings unless the
securities being offered are registered with the Commission or an
exemption from registration is available.
The Securities Act requires registration not only of direct
distributions of securities by issuers to the public, but also indirect
distributions involving the transfer of unregistered securities from
issuers or affiliates to persons in non-public transactions followed by
large-scale public transfers of the securities by such persons. To
regulate these types of indirect distributions, the Securities Act,
under certain circumstances, treats even individual investors who are
not securities professionals as underwriters if they act as links in
the chain through which securities move from issuers to the public.
The term ``underwriter'' is defined in Section 2(11) of the
Securities Act 13 to mean ``any person who has purchased from an
issuer with a view to, or offers or sells for an issuer in connection
with, the distribution of any security or participates or has a direct
or indirect participation in any such undertaking, or participates or
has a participation in the direct or indirect underwriting of any such
undertaking.'' 14 The definition of underwriter is relevant to the
``ordinary trading'' exemption provided in Section 4(1) of the
Securities Act, 15 which states that the registration provisions
shall not apply to transactions by any person other than an issuer,
underwriter or dealer. 16
---------------------------------------------------------------------------
\13\ 15 U.S.C. 77(b)(11).
\14\ Section 2(11) states that the term ``underwriter'' shall
not include a person whose interest is limited to taking a
commission from an underwriter or dealer not in excess of the usual
and customary distributors' or sellers' commission, and uses the
term ``issuer'' to include, in addition to an issuer, any person
directly or indirectly controlling or controlled by the issuer, or
any person under direct or indirect common control with the issuer.
\15\ 15 U.S.C. 77(d)(1).
\16\ Sections 4(3) and 4(4) of the Securities Act [15 U.S.C.
77(d)(3) and (d)(4)] provide exemptions from the registration
requirements for transactions by dealers and brokers not acting as
underwriters.
---------------------------------------------------------------------------
The statutory definition of underwriter does not provide a means to
determine objectively whether a person purchased securities from the
issuer or an affiliate with a view to distribution of the securities.
Rule 144 was adopted as a non-exclusive safe harbor to set forth
objective criteria that could be relied on by persons who wanted to
resell restricted or control securities, but who were concerned whether
they could be deemed to be engaged in a distribution, and therefore
deemed to be underwriters under Section 2(11). The rule provides that a
person who complies with its terms and conditions will not be engaged
in a distribution of securities and, thus, not be an ``underwriter''
within the meaning of Section 2(11) of the Securities Act.
III. Discussion of Proposals
A. Changes to the Preliminary Note to Rule 144
The Preliminary Note to Rule 144 would be revised to better
describe the two types of common transactions that raise questions as
to whether a person who sells securities is acting as an underwriter
(the resale of restricted securities and the resale of securities,
whether or not restricted, by or on behalf of an affiliate of the
issuer). It also explains that satisfaction of the criteria of Rule 144
will cause the sale of restricted or control securities to be viewed as
an ordinary trading transaction rather than a ``distribution'' of such
securities that would require registration under the Act.
The proposed Note states explicitly that if a sale of securities is
made in accordance with all of the applicable provisions of Rule 144:
(1) any person who sells restricted securities will be deemed not to be
an underwriter for that transaction; (2) any person who sells
restricted or other securities on behalf of an affiliate of the issuer
will be deemed not to be an underwriter for that transaction; and (3)
the purchaser receives unrestricted securities. The proposed Note also
incorporates the statement in current Rule 144(j) 17 that Rule 144
is not an exclusive safe harbor and therefore does not eliminate or
otherwise affect the availability of any other exemption for resales
under the Securities Act.
---------------------------------------------------------------------------
\17\ 17 CFR 230.144(j).
---------------------------------------------------------------------------
Are there other matters that should be discussed in the Preliminary
Note? Are there matters discussed in the Preliminary Note that should
be removed?
B. Change to the Rule 144 Definition of ``Affiliate''
Rule 144 defines an affiliate of an issuer as a person that
directly, or indirectly through one or more intermediaries, controls,
or is controlled by, or is under common control with, such
issuer.18 This subjective ``facts and circumstances'' test
presents a great deal of uncertainty regarding whether a seller is an
affiliate of the issuer and introduces additional regulatory complexity
that is not always necessary. Issuers and sellers of securities have,
therefore, asked for greater guidance in determining who is an
affiliate.
---------------------------------------------------------------------------
\18\ Rule 144(a)(1) [17 CFR 230.144(a)(1)].
---------------------------------------------------------------------------
Under the proposal, the same criteria used to determine those
persons that are not ``insiders'' under Exchange Act Section 16 would
be used for Rule 144. Many practitioners already use the Section 16
criteria as a guide. The Commission believes it is likely that most
persons who are not officers, directors or 10% holders are not in a
``control'' position.19 Therefore, the Commission proposes to add
the following to the definition of affiliate in Rule 144.
\19\ Unlike Section 16, the Rule 144 safe harbor would ignore
whether the company has equity securities registered under Section
12 of the Exchange Act.
---------------------------------------------------------------------------
A person shall be deemed not to be an affiliate for purposes of
this section if the person: (i) is not the beneficial owner,
directly or indirectly, of more than 10% of any class of equity
securities of the issuer; (ii) is not an officer of the issuer; and
(iii) is not a director of the issuer.
A note would add:
The determination of a person's beneficial ownership and whether
that person is an ``officer'' shall be made in accordance with Rule
16a-1 20 of this chapter, regardless of whether the issuer's
securities are subject to Section 16 of the Securities Exchange Act
of 1934 (``Exchange Act'') and regardless of whether the class of
securities is registered under Section 12 of the Exchange
Act.21
\20\ 17 CFR 240.16a-1. The definitions of the terms ``beneficial
owner'' and ``officer'' in Rule 16a-1 would be used whether or not
the securities to be resold in reliance upon the Rule 144 safe
harbor are equity securities registered under Section 12 of the
Exchange Act.
\21\ Proposed Rule 144(a)(1).
---------------------------------------------------------------------------
The proposal clearly excludes from the definition persons who are
not executive officers, directors or 10% holders. Members of one or
more of these classes may contend, nevertheless, that they are not
affiliates because they are not in a ``control'' position. For such
persons, the determination of affiliate status would be a ``facts and
circumstances'' test.
The need for increased certainty in the definition of affiliate
also was recognized by the Advisory Committee on the Capital Formation
and Regulatory Processes (``Advisory Committee''). The Advisory
Committee recommended an objective test for
[[Page 9248]]
determining affiliate status as part of an overall reform package that
includes registration of most securities that, under the current
system, would not be registered.22 The Advisory Committee
definition would include only the following persons as affiliates: the
Chief Executive Officer; inside directors; holders of 20% of the
company's voting power; and holders of 10% of the voting power with at
least one director representative on the board.23 Should this
definition be adopted, instead of the one proposed, even in the absence
of the other reforms recommended by the Advisory Committee?
---------------------------------------------------------------------------
\22\ See Report of the Advisory Committee on the Capital
Formation and Regulatory Processes (July 24, 1996) (the ``Advisory
Committee Report'') at p. 24.
\23\ See Advisory Committee Report at p.24.
---------------------------------------------------------------------------
Is there a need to provide more objective guidance as to who is an
affiliate for purposes of Rule 144? Is reliance on the Section 16
insider test over-inclusive or under-inclusive? Should the exclusion
from the definition of affiliate include an express presumption that
those persons not so excluded are affiliates? If so, should such a
presumption be rebuttable?
For affiliate status based on shareholdings, is the 10% test
appropriate, or should it be higher (such as 20%), or lower (such as
5%)? Should the shareholdings test be combined, at a certain level of
ownership, with the ability to place persons on the board of directors?
For example, as recommended by the Advisory Committee, should the safe
harbor exclude only those 10% holders that also have the ability to
place at least one director on the board?
Should the definition of affiliate exclude non-employee directors?
Should non-employee directors be excluded from the definition only if
they have less than a specified amount of shareholdings, such as 2%, 3%
or 5%? If non-employee directors should be excluded from the definition
of affiliate, should the exclusion apply to non-employee directors who
are securities professionals? Should the exclusion apply to non-
employee directors who are representatives of controlling shareholders?
Some have argued in favor of retaining a subjective test, given the
varied contractual arrangements with a control feature entered into by
issuers, particularly smaller companies. Should a facts and
circumstances test be retained in order to reflect the different ways a
control relationship can be established with an issuer?
C. Manner of Sale Requirements
Rule 144(f) requires that securities be sold in ``brokers'
transactions,'' 24 or in transactions directly with a ``market
maker,'' as that term is defined in Section 3(a)(38) of the Exchange
Act.25 Additionally, the rule prohibits a seller from: (1)
soliciting or arranging for the solicitation of orders to buy the
securities in anticipation of, or in connection with, the Rule 144
transaction; or (2) making any payment in connection with the offer or
sale of the securities to any person other than the broker who executes
the order to sell the securities. These manner of sale restrictions do
not apply to securities sold for the account of a non-affiliate of an
issuer when the holding period of Rule 144(k) is met.26
---------------------------------------------------------------------------
\24\ Current Rule 144(g) defines the term for purposes of Rule
144.
\25\ 15 U.S.C. 78c(a)(38).
\26\ The manner of sale requirements also do not apply to
securities sold for the account of the estate of a deceased person
or for the account of a beneficiary of such estate, provided the
estate or beneficiary is not an affiliate of the issuer.
---------------------------------------------------------------------------
The manner of sale requirements were intended to assure that
special selling efforts and compensation arrangements usually
associated with a distribution are not present in a Rule 144
sale.27 The manner of sale requirements currently, however, appear
to impose obstacles to transactions that are not distributive in
nature. For example, a consequence of the manner of sale requirements
is that a seller may not privately negotiate a sale of a public
company's stock in reliance on Rule 144 without a broker even if the
seller does not solicit the buyer's purchase of the securities, the
holding period has been satisfied and the amount sold is within the
volume limitations. Similarly, sellers are unable to use trading
systems such as passive bulletin boards to contact potential buyers
that have indicated an interest in buying the type of securities to be
sold under Rule 144.28
---------------------------------------------------------------------------
\27\ Release No. 33-5186 (September 10, 1971) [36 FR 18586].
\28\ The use of electronic bulletin boards has been the subject
of recent no-action letters. See Real Goods Trading Corp. (June 24,
1996), PerfectData Corp. (August 5, 1996) and The Flamemaster Corp.
(October 29, 1996).
---------------------------------------------------------------------------
When a transaction is made in accordance with the current public
information, holding period, volume and notice requirements of Rule
144, the manner in which that transaction is effected does not appear
to be determinative of a distribution. Therefore, it appears that the
manner of sale requirements of Rule 144(f) are not necessary to satisfy
the purpose of Rule 144 and are proposed to be eliminated.29
---------------------------------------------------------------------------
\29\ If this proposal is adopted, Form 144 also would be amended
to eliminate references to the manner of sale requirements. Rule
144(g) defines the term ``brokers' transactions'' for purposes of
Rule 144. It would also be deleted if Rule 144(f) is eliminated.
---------------------------------------------------------------------------
Removal of the manner of sale requirements would permit holders of
restricted securities to solicit purchasers in a Rule 144
transaction.30 Is it consistent with the Rule's ``non-
distribution'' purpose to allow either transactions in which special
selling efforts may be used or privately negotiated transactions?
Should the manner of sale requirements be retained but modified to
permit specific types of transactions other than brokers' and market
makers' transactions, e.g., passive bulletin board transactions?
---------------------------------------------------------------------------
\30\ Elimination of the manner of sale requirements effectively
would treat resales complying with the public information, holding
period, volume, and notice requirements of the rule as not
constituting a ``distribution'' for Securities Act purposes. The
Commission notes, however, that such resales under certain
circumstances would be subject to the requirements of recently
adopted Regulation M. 17 CFR 242.100 et seq. Regulation M was
adopted in Release No. 34-38067 (December 20, 1996) [62 FR 520].
---------------------------------------------------------------------------
Are there other purposes served by the manner of sale requirements
that would justify retaining those requirements? For example, does the
manner of sale requirement serve an important purpose by inserting a
market professional as a ``gatekeeper'' that assures compliance with
the public information, holding period, volume, and notice requirements
of the rule? How will the removal of the manner of sale requirements
affect participants, such as transfer agents, brokers and market
makers, in Rule 144 transactions? Will transfer agents assume a greater
role in determining compliance with the resale provisions?
Would the elimination of the definition of ``brokers'
transactions'' in Rule 144(g) affect the ability of brokers to
determine compliance with the exemption provided by Securities Act
Section 4(4)? Would removal of the manner of sale requirements diminish
security transaction transparency by encouraging more privately
negotiated transactions? If so, would the markets be adversely
affected, particularly for stocks of smaller companies and more thinly
traded securities?
D. Notice of Sale Requirement
Rule 144(h) requires a person selling more than 500 shares or
$10,000 of securities in reliance on the rule during any three-month
period to file a notice on Form 144 with the Commission. The Report of
the Commission's Task Force
[[Page 9249]]
on Disclosure Simplification (``Task Force Report'') 31
recommended that the thresholds for small business issuers be raised to
500 shares or $40,000, and that the thresholds be raised to 1,000
shares or $100,000 for other issuers.
---------------------------------------------------------------------------
\31\ The Task Force Report was issued in March 1996. The
recommendations concerning Rule 144(h) are discussed on p. 71.
---------------------------------------------------------------------------
The $10,000 limit was established in 1972. This amount, adjusted
for inflation, is approximately $36,000 today. The Commission therefore
believes that it is appropriate to increase the $10,000 threshold.
Under the proposed requirements, Form 144 would be filed if the amount
of securities to be resold in reliance upon Rule 144 during any three-
month period exceeds 1,000 shares or has an aggregate sales price in
excess of $40,000.
Should the share number and dollar thresholds be set at a different
combination of share number and dollar amount, e.g., any share number
ranging between 500 and 2,000 shares and any dollar amount ranging
between $10,000 and $100,000 for sales of securities of all types of
issuers? Should there be a single filing threshold, and if so, which
threshold should be retained, the share number or dollar amount
threshold? If there were a single threshold based on share number,
would 500 shares, 1,000 shares or a different share number ranging
between 500 and 2,000 shares be appropriate? If there were a single
threshold based on dollar amount, would a different dollar value
ranging between $10,000 and $100,000 be appropriate?
The Commission is not proposing to establish different filing
thresholds for sales of small business issuer securities out of concern
that different standards for small business issuers and other issuers
would needlessly complicate the Form 144 requirements. Should the
Commission establish separate thresholds for small business and non-
small business issuers, and if so, are the thresholds recommended in
the Task Force Report appropriate? The Commission notes that a smaller
threshold for small businesses would result in more filings by persons
selling small business securities. This could be justified in that a
smaller transaction can have a greater impact on a small business
issuer.
E. Other Proposed Amendments to Rule 144
1. Codification of Staff Interpretive Positions
The Commission is proposing to codify a variety of staff
interpretive positions regarding Rule 144 in order to make it easier to
comply with the rule.
a. Holding Period--Conversions and Exchanges
First, the Commission proposes to amend the Rule 144 provision on
calculating the holding period for securities acquired upon conversion
of other securities of the same issuer. Rule 144 generally allows
holders to count the time they held securities surrendered for
conversion or exchange when counting the holding period for the
securities received in the conversion or exchange, what is commonly
referred to as ``tacking'' the holding periods.32 This provision
of Rule 144 does not state, however, whether the surrendered securities
must have been convertible by their terms in order for tacking to be
permitted. This silence has led to confusion by some persons regarding
how to calculate their Rule 144 holding period.
---------------------------------------------------------------------------
\32\ Rule 144(d)(3)(ii).
---------------------------------------------------------------------------
Rule 144 permits tacking of holding periods in the case of
securities received in a conversion because the exchange continues the
shareholder's investment in that same issuer. Because the significant
factor in this analysis is that securities of the issuer are exchanged
for other securities of that issuer, the staff has taken the
interpretive position that tacking is allowed whether or not the
surrendered securities are convertible by their terms. The proposed
amendment would clarify the application of this provision by codifying
the staff's interpretive position.33
---------------------------------------------------------------------------
\33\ Proposed Rule 144(d)(3)(ii). This would codify the position
taken in Planning Research Corporation (November 6, 1980). The
provision also would state that if securities are acquired from the
issuer solely in exchange (in addition to upon conversion) for other
securities of the issuer, the securities so acquired are deemed to
have been acquired at the same time as the securities surrendered in
the exchange. This also would codify a staff interpretive position.
---------------------------------------------------------------------------
b. Holding Period--Holding Company Formations
Second, the proposed revisions would codify a staff position to
clarify that holders can tack the Rule 144 holding period in connection
with transactions effected solely for the purpose of forming a holding
company.34 Although tacking through a holding company formation
appears to be contemplated by the rule, the rule does not clearly state
when and how this is allowed.35 The proposed revisions would
codify a staff interpretive position by allowing for tacking in holding
company formations, subject to the following conditions:
\34\ Proposed Rule 144(d)(3)(ix).
\35\ Rule 144(d)(3)(viii) [17 CFR 230.144(d)(3)(viii)].
---------------------------------------------------------------------------
The holding company's securities must be issued in a
transaction involving an exchange of securities as part of a
reorganization of the predecessor into a holding company structure;
Holders must receive securities of the same class
evidencing the same proportional interest in the holding company as
they held in the predecessor; and
Immediately following the transaction, the holding
company must have no significant assets other than securities of the
predecessor and its existing subsidiaries and have substantially the
same assets and liabilities on a consolidated basis as the
predecessor had prior to the transaction.36
---------------------------------------------------------------------------
\36\ Morgan Olmstead (January 8, 1988).
---------------------------------------------------------------------------
c. Definition of Restricted Securities
Third, the proposed revisions would codify the staff position that
securities acquired from the issuer pursuant to the exemption under
Section 4(6) of the Securities Act should be considered ``restricted
securities.'' 37 Section 4(6) provides an exemption for non-public
offerings of less than $5 million that are made only to accredited
investors.38 Because the resale status of securities received in
Section 4(6)-exempt transactions should be the same as securities
received in other non-public offerings, the staff has taken the
interpretive position that securities sold pursuant to the Section 4(6)
exemption also should be deemed to be restricted securities.39
---------------------------------------------------------------------------
\37\ Proposed Rule 144(a)(3)(vi).
\38\ The Section 4(6) exemption also requires the filing of a
notice of the offering with the Commission. This notice currently is
filed on Form D. In Release No. 33-7301 (June 14, 1996) [61 FR
30405], the Commission proposed to eliminate the Form D filing
requirement.
\39\ In Release No. 33-7392 (February 20, 1997) concerning
Regulation S (``Regulation S Proposing Release''), the Commission is
proposing to revise Rule 144(a)(3) [17 CFR 230.144(a)(3)] to define
equity securities of domestic issuers, and of foreign issuers where
the principal market for such securities is in the United States,
issued pursuant to Rule 901 or 903, as restricted securities.
---------------------------------------------------------------------------
2. Simplification and Streamlining
The Commission is proposing a number of revisions intended to make
Rule 144 more readable and easily understood. The simplifying revisions
would address the conditions to be met to satisfy the rule, the current
public information requirement, the volume limitations and the holding
period provisions relating to trusts and estates in addition to the
proposed revisions to the Preliminary Note to Rule 144 discussed above.
Current paragraph (k),40 which applies to restricted securities
held by non-affiliates for more
[[Page 9250]]
than two years, would be simplified and re-designated as paragraph (g).
---------------------------------------------------------------------------
\40\ 17 CFR 230.144(k).
---------------------------------------------------------------------------
Current paragraph (i) 41 requires the person filing a Form 144
to have a bona fide intention to sell the securities described in the
Form 144 within a reasonable period of time after that filing. The
wording of this requirement is proposed to be simplified and moved into
the Form 144 filing requirement.42
---------------------------------------------------------------------------
\41\ 17 CFR 230.144(i).
\42\ Proposed Rule 144(f).
---------------------------------------------------------------------------
Finally, current paragraph (j),43 which states that Rule 144
is a non-exclusive provision that does not affect the availability of
any Securities Act exemption from registration for resales of
securities, would be eliminated. As discussed above, the non-exclusive
nature of Rule 144 is proposed to be discussed in the Preliminary Note.
This would be consistent with other Commission safe harbor
provisions.44
---------------------------------------------------------------------------
\43\ 17 CFR 230.144(j).
\44\ See Preliminary Note 3 to Regulation D and Preliminary Note
3 to Rule 701.
---------------------------------------------------------------------------
F. Rule 145
Securities Act Rule 145 provides that exchanges of securities in
connection with reclassifications of securities, mergers or
consolidations or transfers of assets that are subject to a shareholder
vote constitute sales of those securities. As a result, unless an
exemption is available, the offering of securities in those
transactions must be registered under the Securities Act.
The rule explicitly deems persons who were affiliates of any party
to the transaction to be underwriters.45 Therefore, the Section
4(1) resale exemption is not available to these persons for resales of
securities acquired in connection with transactions described in the
rule. The rule provides some relief from this ``presumptive
underwriter'' provision, however, by permitting the affiliates to
resell securities received in the transaction in compliance with the
holding period and other requirements of Rule 145(d).46
---------------------------------------------------------------------------
\45\ Rule 145(c) [17 CFR 230.145(c)].
\46\ 17 CFR 230.145(d). The companion Adopting Release amends
Rule 145(d) by shortening the requisite holding periods from two and
three years to one and two years, respectively, consistent with the
amendments to the Rule 144 holding periods. Persons who are
effecting resales of registered securities issued in Rule 145
transactions generally fall into four categories. Rule 145(d)
applies to their resales as follows: (1) Non-affiliate of acquired
company who is a non-affiliate of the acquiring company after the
transactions--Rule 145 (c) and (d) not applicable and securities are
unrestricted; (2) Non-affiliate of acquiring company who is an
affiliate of the acquiring company after the transaction--Rule 145
(c) and (d) not applicable, but Rule 144 would be, if no other
exemption could be found; (3) Affiliate of acquired company who is a
non-affiliate of the acquiring company after the transaction--resale
may be made under Rule 145(d) (1), (2) or (3); and (4) Affiliate of
acquired company who is an affiliate of the acquiring company after
the transaction--Rule 145(d)(1) applies.
---------------------------------------------------------------------------
Rule 145 is the only Securities Act rule that contains a
presumptive underwriter provision. The Commission believes that it may
no longer be appropriate to rely on a presumptive underwriter approach
when addressing the resales of securities acquired in Rule 145
transactions. Rather, it appears to be more appropriate to rely on the
provisions of Rule 144 and traditional considerations in determining
whether the persons covered by current Rule 145(c) are underwriters in
connection with resales. The presumptive underwriter and resale
provisions of Rule 145(c) and (d) are, therefore, proposed to be
eliminated.
Are there some persons currently presumed to be underwriters under
Rule 145 that should continue to be presumed to be underwriters? If the
presumptive underwriter standard is removed, should Rule 145 still
include provisions addressing the underwriter issue with respect to
resales of securities acquired in Rule 145 transactions? Would it be
helpful to retain a resale safe harbor in the rule for those persons
who are concerned that they might be determined to be underwriters with
respect to their resales? Would it be unnecessary to retain a resale
safe harbor in the rule because affiliates of the surviving company
would be able to rely on Rule 144 for resales in any event?
IV. Solicitation of Comment
A. Other Possible Rule 144 Changes
The Commission solicits comment on additional revisions to Rule 144
in the two sections below. After review of the public comments on these
possible revisions, the Commission may choose to adopt either or both
without further solicitation of public comment.
1. Rule 144 Holding Periods
Under the Rule 144 amendments being adopted today in the Adopting
Release, all restricted securities must be held at least one year
before resale if Rule 144 is used, with the year measured from the date
the securities were purchased from the issuer or an affiliate.47
For restricted securities held between one and two years, other
provisions of the rule require current information about the issuer to
be available to the market, limit the amount of securities that may be
resold, require resales to be made in ordinary brokerage transactions
or directly with a market-maker,48 and require filing with the
Commission of a notification of the resale on Form 144, if the amount
of securities sold exceeds specified thresholds. After a two-year
holding period, restricted securities may be resold by non-affiliates
without compliance with any of these provisions.49
---------------------------------------------------------------------------
\47\ Rule 144(d) [17 CFR 230.144(d)].
\48\ This requirement is proposed to be rescinded, as discussed
above.
\49\ Current Rule 144(k) and proposed Rule 144(g).
---------------------------------------------------------------------------
There was a consensus among commenters that shortened holding
periods would facilitate efforts to raise capital through private
placements by shrinking the discount in price attributable to
illiquidity of capital during the restricted period and allowing
investors to recoup their capital faster. Two commenters, however,
argued that the holding period for limited resales should be shorter
than the proposed one year, with one commenter suggesting a six-month
period and the other suggesting a three-month period.
The holding period requirement provides an objective criterion for
determining that the securities are not being sold as part of a public
distribution by the issuer. As such, this holding period should be long
enough to prevent circumvention of the registration requirements by
assuring that the securities are not still linked to the issuer's
offering, but no longer than necessary to satisfy this purpose, so as
to avoid imposing unnecessary costs or placing unnecessary restraints
on the flow of capital.
The Commission seeks comment on whether the Rule 144(d) holding
period after which limited resales are allowed should be shortened from
one year to six months.50 Would this period be long enough to
ensure that the Rule 144 resales would not be part of an unregistered
public distribution? Should the further shortening be tied to some
other safeguard such as a prohibition on hedging during the holding
period?
---------------------------------------------------------------------------
\50\ Other provisions of the federal securities laws may offer
support for a six-month holding period. For example, it may be
useful to consider the six month anti-integration standard in
Regulation D, which is comprised of several rules governing the
limited offer and sale of securities without registration under the
Securities Act. Rule 502 of Regulation D provides that offers and
sales made more than six months before the start, or after the
completion, of a Regulation D offering will not be considered part
of that offering. Six months also is the test used in Exchange Act
Section 16 to evidence a sufficient separation between purchase and
sale to make recapture of ``short swing'' profits unnecessary.
---------------------------------------------------------------------------
Commenters favoring a six-month holding period are asked to
consider
[[Page 9251]]
whether the volume limitations 51 should be made more restrictive
and/or hedging activities should be proscribed or further restricted if
the holding period is reduced to six months. For example, if the
Commission reduced the holding period to six months, should it also
reduce by one-half, one-third, one quarter or some other measure the
amount of securities that could be resold in any three-month period
after completion of the holding period? Should there be a correlation
between the Rule 144 volume limitations and the length of the holding
period (for example, for resales between six months and one year the
volume would be more limited than between one year and two years)?
Should the volume limitations relate to the amount of securities to be
sold in a monthly, rather than quarterly, period? If so, should the
monthly volume test apply only during the six to twelve month period,
or through the entire Rule 144 holding period? If a monthly test is
used, should Form 144 also relate to monthly rather than quarterly
sales?
---------------------------------------------------------------------------
\51\ Rule 144(e) [17 CFR 230.144(e)].
---------------------------------------------------------------------------
Would it be appropriate to tie the volume limitations to the amount
of restricted and control securities owned by the seller? For example,
should the rule restrict Rule 144 sales in a quarterly period to ten
percent of the amount of restricted and/or control securities owned by
the seller on the date of the Rule 144 sale?
Should the holding period after which non-affiliates can sell
without restriction be shorter than the two-year period adopted today,
e.g., one year or 18 months? Assuming the newly adopted one-year
holding period is not shortened further, adoption of a one-year holding
period after which non-affiliates can sell without restriction would
significantly simplify the rule since it would include only one
measurement period. Is a one-year holding period for unrestricted
resales by non-affiliates sufficient to assure that the resales are not
part of an unregistered public distribution? Should such a one-year
period be adopted either alone or in conjunction with also adopting a
six-month period for limited resales?
Alternatively, should the holding period for limited and
unrestricted Rule 144 resales be set at a different but uniform period,
such as 18 months? Would such a test strike an appropriate balance
between simplifying the rule and restricting resales only in those
situations that raise the risk of an indirect unregistered
distribution?
Further comment is solicited on a number of other variations.
Should the holding period depend on the size of the company? For
example, would it be appropriate to implement a shorter holding period
for securities of larger companies? If a shorter period were
appropriate for larger companies, should it be limited to companies
eligible to use Form S-3,52 or to companies traded on national
securities exchanges? Should the period be reduced for securities of
larger companies to six months, while securities of all other companies
would be subject to a longer holding period, such as one year?
Moreover, should different holding periods be established for debt and
equity securities, such as allowing unlimited resales of debt
securities after six months?
---------------------------------------------------------------------------
\52\ 17 CFR 239.13.
---------------------------------------------------------------------------
2. Rule 144(e) Volume Limitations
The volume limitations in Rule 144(e) restrict the amount of
restricted or control securities that can be sold.53 Currently,
the amount of these securities, together with all sales by the seller
of restricted and control securities of the same class within the
preceding three month period, cannot exceed the greater of the
following three tests:
\53\ The staff has taken the interpretive position that offshore
resales of securities under Regulation S need not be included in the
calculation of the amount of securities sold under Rule 144. The
Regulation S Proposing Release proposes to codify this interpretive
position.
---------------------------------------------------------------------------
(1) one percent of the shares or other units of the class
outstanding as shown by the most recent report or statement
published by the issuer;
(2) the average weekly volume of trading in such securities on
all national securities exchanges and/or reported through the
automated quotation system of a registered securities association
during the four calendar weeks preceding the filing of Form 144, or
if no Form 144 is required to be filed, the date of receipt of the
order to execute the transaction by the broker or the date of
execution of the transaction directly with a market maker; or
(3) the average weekly volume of trading in such securities
reported through the consolidated transaction reporting system
during the four week period specified in (2).
The Commission solicits comment on whether the two tests based on
trading volume should be eliminated. There are two reasons why the
Commission is considering this possibility. First, the trading volume
tests appear to needlessly complicate the rule. Based on a review of a
large number of Rule 144 transaction filings by the staff, the
Commission believes that most persons selling securities under Rule 144
currently rely on the shares outstanding test because it allows
sufficient shares to be sold and is easier to apply than the trading
volume tests. Accordingly, it could be appropriate to simplify the rule
by eliminating these tests.
Second, there is an issue as to whether the trading volume
limitations are comparable between different markets because of the
effect on trading volume of market structure differences between the
Nasdaq market and the national securities exchanges.54 The New
York Stock Exchange has submitted a rule petition asking that this be
addressed.55 According to the New York Stock Exchange petition,
these differences in market structure may mean that the Rule 144 test
may not provide sufficiently comparable information to form the basis
for a uniform volume test.56
---------------------------------------------------------------------------
\54\ See Deborah Lohse & Dave Kansas, Big Board is Crying Foul
to Regulators Over How Nasdaq Figures Daily Volume, Wall St. J.,
August 5, 1996 at C1 and Big Board Seeks Volume Change, N.Y.T., July
16, 1996 at D7.
\55\ The Petition for Rulemaking was filed on July 9, 1996 and
is available in File No. 4-390 in the Commission's Public Reference
Room, 450 Fifth Street, N.W., Washington, D.C. 20549.
\56\ The petition asks the Commission to change Rule 144 and
other rules with trading volume standards so that the standards
would operate comparably in all markets. The petition asserts that
dealer interpositioning on Nasdaq ``on virtually every trade
approximately doubles the reported volume of trading of shares
changing hands between investors, as compared with auction markets
where buyers and sellers meet directly and reported volume reflects
that direct interaction as a single reported trade.'' The Commission
has not instituted rulemaking based on the New York Stock Exchange
petition. See Letter to the New York Stock Exchange regarding
Petition for Rulemaking, File No. 4-390 (February 19, 1997).
Commenters favoring retention of a trading volume test for Rule 144
resales may wish to address the comparability issues raised by the
petition.
---------------------------------------------------------------------------
Comment is sought on the extent to which persons use the trading
volume tests to calculate the number of securities they can sell in
reliance on Rule 144. If the trading volume tests are kept, should one
or both of the tests be adjusted to account for differences between the
Nasdaq market and the national securities exchanges to determine
trading volume? Should the Nasdaq volume test be one-half of the
national securities exchange volume, as the New York Stock Exchange
suggested, or would some smaller adjustment serve to make the tests
more comparable? Do differences in trading characteristics of
securities make a simple adjustment not practicable? Commenters are
asked to supply supporting data, if possible.
B. Possible Regulatory Approaches to Hedging Transactions
The 1995 Release noted that recent years have evidenced the growth
of a
[[Page 9252]]
variety of hedging strategies in both the private and public securities
markets associated with separating the bundle of rights that make up a
security, including voting, price appreciation and dividend rights.
57 Through the use of equity swaps 58 and similar strategies,
holders of restricted securities can retain legal title to their
securities, but sell some or all of the rights associated with the
securities in order to decrease or eliminate the risk that the market
value of their investment will decline during a specific period of
time.
---------------------------------------------------------------------------
\57\ Hedging is a risk limiting device much like buying
insurance. For example, a person could hedge common stock by
purchasing a put option to sell the common stock at a fixed price.
If the stock value increases, the holder profits. If the stock price
falls, the put option can be exercised to sell the stock at a
predetermined price.
\58\ Equity swaps are individually negotiated contracts, the
specific terms of which may vary from agreement to agreement. One
form of equity swap involves an agreement by a holder of equity
securities to pay, or ``swap,'' the return on the securities (which
may include dividends as well as any change in market value) in
exchange for the return on an equity index, basket of securities, or
an interest-rate based cash flow.
---------------------------------------------------------------------------
The 1995 Release solicited public comment on whether it is
appropriate to treat the securities underlying equity swaps as ``held''
in the private markets if the economic risk of the investment has been
shifted. It also stated that the Commission was examining whether it
may be appropriate to revise Rule 144 to reflect the economic realities
of these transactions either by reintroducing the holding period
tolling concept that was deleted in 1990 for periods when the holder
has entered into a hedging strategy or by prohibiting risk-shifting
transactions altogether during the holding period.59 Commenters
also were asked to provide their views as to the need to have a
fungibility doctrine underlie Rule 144.
---------------------------------------------------------------------------
\59\ Deletion of the tolling provision in 1990 did not mean that
holders could freely engage in hedging activities with respect to
their restricted securities without consideration of the
registration requirements. The Commission staff historically has
viewed the question of whether a hedging transaction would toll the
holding period as separate from the question of whether a hedging
transaction was subject to Section 5 of the Securities Act. With
respect to short sales ``against the box,'' (meaning that the person
sells short even though the person owns securities that can be
delivered) the Division continues to take the position expressed in
the 1979 Rule 144 interpretative release (Release No. 33-6099,
(August 2, 1979) [44 FR 46572]) that a person who has held
restricted securities for less than one year cannot effect a short
sale of securities of that class and then cover the short position
with restricted securities (even after expiration of the one year
holding period) since the initial short sale did not qualify under
Rule 144. Similarly, exchange-traded puts and calls may be used for
Rule 144 sales, but in the case of restricted securities, the one-
year holding period requirement of Rule 144(d) must have been
satisfied by the date the put is purchased or call is sold. See Bear
Stearns & Co., Inc., (April 4, 1991) and Release 33-6099.
---------------------------------------------------------------------------
Several commenters argued that hedging strategies should not be
restricted or prohibited during the Rule 144 holding periods, primarily
because hedging strategies do not permit holders of restricted
securities to shift all of the economic risks of holding the securities
to another person or the public markets and do not result in any
leakage of restricted stock into the public markets. Other commenters
thought that holders of restricted securities should not be engaging in
hedging transactions during the holding period.
Since issuance of the 1995 Release, the Commission has given
further consideration to the issue of whether the entry into equity
swaps and other hedging arrangements with respect to restricted
securities is inconsistent with the principles underlying the
registration requirements of the Securities Act and the Rule 144 safe
harbor. The Commission recognizes that arguments can be made in favor
of treating ``short against the box'' transactions and equity swaps as
sales of the underlying restricted securities since these transactions
typically hedge fully a holder of restricted securities against any
economic risk. Without risk, there is arguably no investment intent,
suggesting that the holder is more of an underwriter than an investor.
At the same time, it can be argued that hedging transactions do not
raise Section 5 issues because the restricted securities are not being
sold into the open marketplace. Instead, only freely tradeable
securities are actually redistributed to the public. Proponents of this
view argue that the two types of securities are not ``fungible'' or
interchangeable.
The economic substance of the transactions, however, gives rise to
concern. For example, it is arguable that, in economic reality, a
distribution occurs when a company sells unregistered restricted stock
to an investor who, in turn, hedges the market risk through an equity
swap with an investment bank, which then sells an equal number of
securities into the market. A staff review of industry practices found
that practitioners were more concerned about the Section 5
ramifications of hedging during a short period of time following
acquisition of the restricted securities (typically three months)
because a disposition of risk so soon after acquisition raises
questions about the nature of the investment. The industry also seems
less concerned about partial hedges. Partial hedges with options may
raise fewer concerns because the investment bank is less likely to sell
an equal number of shares into the marketplace (thereby involving less
of a distribution).
The Commission requests comment on a number of possible regulatory
approaches to hedging. First, it could make the Rule 144 safe harbor
unavailable for persons who hedge during the restricted period. Second,
independent of Rule 144, it could promulgate a rule that would define a
sale for purposes of Section 5 to include specified hedging
transactions. In order to hedge, a person would need an exemption from
registration for the transaction or else would have to register the
transaction with the Commission. Under this approach, a hedging
transaction would be treated the same as a sale of the underlying
security, so hedging would be constrained in the same way (e.g., if an
exemption is used such as Rule 144, the Rule 144 volume restrictions
would apply). Third, as a variant of the first approach, it could adopt
a shorter holding period (e.g., three or six months) during which
hedging could not occur without losing the safe harbor. After that,
hedging could occur, but the underlying restricted securities would be
held the remainder of the one-year holding period adopted today.
Fourth, it could reintroduce a tolling provision in Rule 144 similar to
the provision that was included prior to 1990. The last approach would
be to maintain the status quo with no specific prohibition against
hedging, relying instead upon practitioners to apply a facts and
circumstances test to determine when Section 5 is implicated. Comment
is solicited generally on each of the above approaches.
For purposes of a definition, the Commission is considering
defining hedging to include any sale or combination of swap, option, or
short sale intended to limit or eliminate the market risk of restricted
or control stock. Alternatively, the Commission could use the
definition of ``put equivalent'' position in Exchange Act Rule 16a-
1(h).60 Should the definition be expanded to include futures,
contracts, ``collars'' or other instruments that operate similarly to a
swap or option?
---------------------------------------------------------------------------
\60\ 17 CFR 240.16a-1(h).
---------------------------------------------------------------------------
If the second overall approach were adopted, should all hedging be
considered a sale for purposes of Section 5? If not, should only
transactions like swaps and short sales of securities of the same class
as the restricted securities be deemed sales because they most closely
approximate a sale of the restricted securities? If options are
included, should there be a
[[Page 9253]]
difference between in-the-money options (which are likely to be
exercised) and out-of-the-money options (which are less likely to be
exercised)? For example, should transactions involving options be
ignored if the options are sufficiently out-of-the-money (e.g., 5%,
10%, 20%)? Should there be different treatment for hedging with cash
settled derivative securities since their exercise does not result in
any distribution of securities into the market? Should hedging a
transaction be considered a sale of the underlying security only if it
results in a sale of securities of the same class as the underlying
security to a third party?
Since hedging can be a dynamic process, should there be a
difference between the initial hedge and a subsequent ``maintenance''
hedge? For example, a holder of restricted securities might hedge only
a portion of the market risk initially. As the value of the securities
fluctuates, the holder may have to adjust the hedge by buying more put
options, for example, or selling more stock short to maintain the same
risk as initially envisioned. Presumably, this adjustment has less
distributive aspects than the initial hedge. Should it make a
difference if the security being hedged is control stock rather than
restricted stock?
Should control stock be treated differently in general? It is not
uncommon for individual affiliates to have a significant portion of
their net worth represented by control or restricted stock. Such
persons might want to diversify or limit their risk through hedging.
Should the Commission adopt a rule that permits some limited hedging by
these persons without raising Section 5 concerns? If such a safe harbor
were crafted, should it be limited to a percentage of the affiliate's
total holdings of control stock (e.g., 5%, 10%, 20% or even 49%)? Is it
sufficient to permit only hedging in accordance with the volume
limitations of Rule 144(d)?
C. General Request for Comment
Any interested persons wishing to submit comment on any of the
proposals set forth in this release are invited to do so by submitting
them in triplicate to Jonathan G. Katz, U.S. Securities and Exchange
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. Comments
also may be submitted electronically at the following e-mail address:
rule-comments @sec.gov. All comment letters should refer to File Number
S7-07-97; this file number should be included on the subject line if e-
mail is used. Comments received will be available for public inspection
and copying in the Commission's Public Reference Room, 450 Fifth
Street, N.W., Washington, D.C. 20549. Electronically submitted comment
letters will be posted on the Commission's Internet Web site (http://
www.sec.gov). Comments are solicited from the point of view of issuers,
holders of restricted and control securities, investment bankers and
the investing public.
V. Cost-Benefit Analysis
The proposed amendments, if adopted, should reduce the costs of
complying with the Rule 144 safe harbor requirements by making the rule
easier to understand and apply. Elimination of the manner of sale
requirements would result in fewer brokerage commissions being paid by
persons reselling securities in reliance on the Rule 144 safe harbor,
since resale transactions no longer would have to involve a broker or
market-maker. The proposed increase in Form 144 filing thresholds would
result in fewer filings and also reduce compliance costs.
For purposes of the Small Business Regulatory Enforcement Act of
1996, the Commission also is requesting information regarding the
potential impact of the proposed rules on the economy on an annual
basis. Commenters should provide empirical data to support their views.
The Commission does not believe that the proposed amendments would
have an adverse effect on competition, employment, investment,
productivity, innovation, market efficiency, or capital formation. In
fact, the Commission believes that the proposed amendments will promote
capital formation and efficient, competitive markets by enhancing
investors' confidence in the integrity of the securities markets.
However, the Commission requests comment on these preliminary views.
The Commission encourages commenters to provide empirical data or other
facts to support their views.
VI. Initial Regulatory Flexibility Analysis
This Initial Regulatory Flexibility Analysis has been prepared in
accordance with Section 603 of the Regulatory Flexibility Act,\61\ and
relates to the proposed amendments to Rules 144 and 145 and Form 144
under the Securities Act.
---------------------------------------------------------------------------
\61\ 5 U.S.C. Sec. 603.
---------------------------------------------------------------------------
Reasons for, and Objectives of, Proposed Action
Rule 144 provides a safe harbor for the resale of restricted and
control securities. It sets forth conditions which, if satisfied,
permit persons who hold such securities to publicly sell them without
registration and without being deemed underwriters.
Rule 145 governs the offer or sale of securities received in
connection with reclassifications, mergers, consolidations and asset
transfers. It provides that any party to a transaction covered by the
rule (other than the issuer), or any person who is an affiliate of such
party at the time the transaction is submitted for vote or consent, who
publicly offers or sells securities of the issuer acquired in
connection with such a transaction will be deemed to be engaged in a
distribution, and therefore to be an underwriter of the securities,
except where the securities are resold in accordance with Rule 145(d).
Rule 145(d) requires its own holding periods that track the holding
periods for resales found in Rule 144.
Form 144 is required to be filed by persons intending to sell
securities in reliance on Rule 144 if the amount of securities to be
sold in any three month period exceeds 500 shares or other units or the
aggregate sales price exceeds $10,000. The primary purpose of the form
is to publicly disclose the proposed sale of unregistered securities by
persons not deemed to be engaged in the distribution of securities.
The Commission has determined to propose amendments that would make
Rule 144 easier to understand and apply. The staff has reorganized and
shortened the rule to make it easier to understand and apply. In
addition to codifying certain staff interpretive positions, the
proposals would make the following substantive changes to Rule 144:
Provide a bright-line exclusion from the Rule 144
definition of affiliate. Pursuant to the proposal, persons who would
not be subject to the provisions of Section 16, i.e., persons who are
not officers, directors or 10% holders of the issuer, would be deemed
not to be affiliates of an issuer for purposes of Rule 144;
Eliminate the manner of sale requirements; and
Increase the thresholds for filing Form 144 from the
current 500 shares or $10,000 sale price test to a 1000 shares or
$40,000 sale price test.
The proposals also would amend Rule 145, which relates to certain
significant transactions, such as mergers, to eliminate the resale
limitations that are based on a ``presumptive underwriter'' approach.
Instead of that approach, persons who receive securities in these
transactions would be treated the same as other purchasers of
securities.
[[Page 9254]]
The revision to the definition of affiliate would provide more
objective guidance for issuers and sellers of securities as to the
types of persons that are not affiliates for purposes of Rule 144.
Elimination of the manner of sale requirements would remove obstacles
to transactions that are not distributive in nature. An increase in the
Form 144 filing thresholds would take into account the effects of
inflation since adoption of Rule 144 in 1972.
The release solicits comment on shorter Rule 144(d) and/or 144(k)
holding periods. Persons holding restricted and control stock,
including small entities holding such stock, and all issuers, including
small business issuers, would benefit from shortened holding periods.
The release also solicits comment on elimination of the trading volume
limitation in Rule 144(e). It is unlikely that this change would have a
significant economic impact on persons holding restricted and control
stock, including small entities owning such stock.
Legal Basis
The amendments are proposed pursuant to Sections 2(11), 4(1), 4(4)
and 19(a) of the Securities Act.
Small Entities Subject to Requirements
The proposed rules will affect both small entities that issue
restricted or control securities and small entities that hold such
securities. When used with reference to an issuer, other than an
investment company, the term ``small business'' is defined by
Securities Act Rule 157 as an issuer whose total assets on the last day
of its most recent fiscal year were $5 million or less and is engaged
or proposing to engage in small business financing. An issuer is
considered to be engaged in small business financing if it is
conducting or proposes to conduct an offering of securities that does
not exceed the dollar limitation prescribed by Section 3(b) of the
Securities Act. When used with reference to an issuer or person, other
than an investment company, Exchange Act Rule 0-10 \62\ defines small
entity to mean an issuer or person that, on the last day of its most
recent fiscal year, had total assets of $5,000,000 or less.\63\
---------------------------------------------------------------------------
\62\ 17 CFR 240.0-10.
\63\ There is no comparable definition of ``person'' under the
Securities Act.
---------------------------------------------------------------------------
The Commission is aware of approximately 1,019 Exchange Act
reporting companies that currently satisfy the definition of ``small
business'' under Rule 157 and may be affected by the proposed rules.
The proposed rules also may affect small businesses that are not
subject to Exchange Act reporting requirements. The Commission is
unable to determine the number of such small businesses due to the
absence of filings with the Commission by such companies. Comment is
solicited on the number of small businesses that are not subject to
Exchange Act reporting requirements that may be affected by the
proposed rules.
An estimated 3,800 entities, excluding natural persons, annually
file Form 144 based upon a sample study of Form 144 filings by the
Commission's Office of Economic Analysis. Since the form does not
require disclosure of the size of entities reselling securities in
reliance on Rule 144, the Commission has no basis for estimating the
number of these entities that are small entities. Comment is solicited
as to the number of small entities who may rely on Rule 144 in
reselling restricted or control securities if the proposed rules are
adopted.
The proposals would favorably affect small businesses and small
entities owning restricted or control securities of issuers by
improving the usefulness of the Rule 144 safe harbor and removing
unnecessary and outdated requirements.
Reporting, Recordkeeping and Other Compliance Requirements
If the change to the definition of affiliate is adopted, it is
expected that fewer persons, including small entities, owning
restricted and control stock of all issuers, including small issuers,
will file Form 144. The reduction would result from the fact that some
persons who are not officers, directors or 10% holders of an issuer
presumably consider themselves to be affiliates under the current Rule
144 definition. The Commission has no basis, however, for estimating
the size of this expected decrease since it does not collect any
information that would provide a basis for such an estimate and such
information is not otherwise available to the Commission. Comment is
solicited as to how to quantify the expected decrease.
If the manner of sale requirements were eliminated, persons
(including small entities) owning restricted and control stock of all
issuers, including small issuers, no longer would have to sell their
stock in a broker's transaction or directly with a market-maker. Those
choosing to sell their stock in a transaction not involving a broker or
market-maker would not incur the expense of commission fees.
Adoption of increased share number and dollar amount thresholds for
filing Form 144 also is expected to decrease the number of Form 144
filings required to be made by persons (including small entities)
owning restricted and control stock of all issuers, including small
issuers. Based on studies by the Commission's Office of Economic
Analysis, the number of Form 144 filings is expected to decrease by
approximately 5% (1,339 filings) if the thresholds are increased to
1,000 shares or $40,000 in market value.
The release solicits comment on whether the thresholds should be
increased as high as 2,000 shares or $100,000. It is estimated that if
these higher thresholds were adopted, the number of Form 144 filings
would decrease by approximately 14% (3,677 filings).
Finally, some persons (including small entities) owning stock in
issuers, including small issuers, that engage in the type of
transactions covered by Rule 145 would benefit from the proposed
revisions since there no longer would be a presumption that persons who
receive securities in these transactions are underwriters. The
Commission has no basis for estimating the number of persons who may be
deemed to be underwriters under the current rule that would not be
determined to be underwriters if the proposed change is adopted since
it does not collect any information that would provide a basis for such
an estimate and such information is not otherwise available to the
Commission. Comment is solicited as to how to quantify such number.
Clerical skills are necessary to complete Form 144.
Overlapping or Conflicting Federal Rules
No current federal rules duplicate, overlap or conflict with the
rules and forms to be proposed, except that persons subject to the
reporting requirements under Section 16 of the Securities Exchange Act
of 1934 may need to file reports on Form 4 as well as Form 144 under
certain circumstances.
Significant Alternatives
The Commission considered the establishment of different compliance
standards for small entities owning restricted and control securities,
as well as for persons owning restricted and control securities of
small issuers. For example, the Commission could establish shorter
holding periods or more lenient Form 144 filing requirements. Such
differences, however, would be inconsistent with the purposes served by
the holding period and Form 144 filing requirements and would
needlessly
[[Page 9255]]
complicate the Form 144 filing requirements. The Commission also
considered the other types of alternatives set forth in section 603 of
the Regulatory Flexibility Act to minimize the economic impact of the
amendments on small entities: (1) the clarification, consolidation, or
simplification of compliance and reporting requirements for such small
entities; (2) the use of performance rather than design standards; and
(3) an exemption from coverage of the proposed amendments, or any part
thereof, for small entities. Because the proposed amendments would
benefit all issuers and holders of restricted securities, differing
compliance timetables for small entities would not be appropriate.
Neither could the compliance requirements of the amendments be
clarified or simplified further for small entities. Finally, the
proposed amendments do not use design standards, and an exemption from
the amendments for small entities would not be desirable or consistent
with the stated objectives of the applicable statutes.
Solicitation of Comments
Written comments are encouraged with respect to any aspect of this
Initial Regulatory Flexibility Analysis. In particular, the Commission
seeks comment on: (i) the number of small entities that would be
affected by the proposed rule; (ii) the expected impact of the
proposals as discussed above; and (iii) how to quantify the number of
small entities that would be affected by, and how to quantify the
impact of, the proposed rules. Commenters are asked to describe the
nature of any impact and provide empirical data supporting the extent
of the impact. Such comments will be considered in the preparation of
the Final Regulatory Flexibility Analysis if the proposed revisions are
adopted. Persons wishing to submit written comments should file them
with Jonathan G. Katz, Secretary, Securities and Exchange Commission,
450 Fifth Street, N.W., Washington, D.C. 20549. All comments received
will be available for public inspection and copying at the Commission's
Public Reference Room at the same address.
VII. Paperwork Reduction Act
Form 144 contains ``collection of information'' requirements within
the meaning of the Paperwork Reduction Act of 1995 (``PRA'').64
The Commission has submitted the proposed revisions to Form 144 to the
Office of Management and Budget for review in accordance with PRA
procedures.65 The title for the information collection is ``Notice
of Proposed Sale of Securities Pursuant to Rule 144 under the
Securities Act of 1933.''
---------------------------------------------------------------------------
\64\ 44 U.S.C. Sec. 3501 et seq.
\65\ 44 U.S.C. Sec. 3507(d) and 5 CFR Sec. 1320.11.
---------------------------------------------------------------------------
As proposed to be revised, Form 144 would be filed with the
Commission by persons who intend to sell securities in reliance on Rule
144 if the amount of securities to be sold during a three-month period
exceeds 1,000 shares or other units or has an aggregate sales price in
excess of $40,000. The proposed thresholds for filing Form 144 would be
increased from existing thresholds of 500 shares or a $10,000 sale
price. Form 144 may be filed electronically using the EDGAR filing
system. The information is used for the primary purpose of disclosing
the proposed sale of unregistered securities by persons deemed not to
be engaged in the distribution of the securities. It is made publicly
available. Persons reselling securities in reliance on the Rule 144
safe harbor are the likely respondents to the information required by
Form 144.
An estimated 18,096 respondents are expected to file Form 144
annually for a total burden of 36,192 hours if the proposed revisions
to Form 144 are adopted. This represents a decrease of 2,678 hours from
the current annual burden under existing thresholds. The information
collection requirements imposed by Form 144 are mandatory. The
Commission may not require Form 144 filings unless the form displays a
currently valid OMB control number.
The Commission solicits comment to: (i) evaluate whether Form 144,
as proposed to be revised, is necessary for the proper performance of
the functions of the agency, including whether the information shall
have practical utility; (ii) evaluate the accuracy of the agency's
estimate of the burden of the proposed collection of information; (iii)
enhance the quality, utility, and clarity of the information to be
collected; and (iv) minimize the burden of collection of information on
those who are to respond, including through the use of automated
collection techniques or other forms of information technology.
Persons desiring to submit comments on the collection of
information requirements should direct them to the Office of Management
and Budget, Attention: Desk Officer for the Securities and Exchange
Commission, Office of Information and Regulatory Affairs, Washington,
D.C. 20503, and should also send a copy of their comments to Jonathan
G. Katz, Secretary, Securities and Exchange Commission, 450 5th Street,
N.W., Washington, D.C. 20549 with reference to File No. S7-07-97. OMB
is required to make a decision concerning the collections of
information between 30 and 60 days after publication, so a comment to
OMB is best assured of having its full affect if OMB receives it within
30 days of publication.
VIII. Statutory Basis
The amendments to Rules 144 and 145 and Form 144 are being proposed
pursuant to sections 2(11), 4(1), 4(4) and 19(a) of the Securities Act.
List of Subjects in 17 CFR Parts 230 and 239
Reporting and recordkeeping, Securities.
Text of the Proposals
For the reasons set out above, title 17, chapter II of the Code of
Federal Regulations is proposed to be amended as follows:
PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933
1. The authority citation for Part 230 continues to read in part,
as follows:
Authority: 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77s, 77sss, 78c,
78d, 78l, 78m, 78n, 78o, 78w, 78ll(d), 79t, 80a-8, 80a-29, 80a-30,
and 80a-37, unless otherwise noted.
* * * * *
2. Section 230.144 is amended by revising the Preliminary Note,
paragraphs (a)(1), (a)(3), (b), and (c), adding notes to paragraph (c),
revising paragraphs (d)(3)(ii), (d)(3)(vi), (d)(3)(vii) and
(d)(3)(viii), adding paragraph (d)(3)(ix), revising the introductory
text of paragraph (e)(1), revising paragraph (e)(2), removing
paragraphs (f) and (g), re-designating paragraph (h) as paragraph (f),
removing paragraphs (i) and (j), re-designating paragraph (k) as
paragraph (g) and by revising newly designated paragraphs (f) and (g)
to read as follows:
Sec. 230.144 Persons deemed not to be engaged in a distribution and
therefore not underwriters.
Preliminary Note
The Securities Act of 1933 requires that all offers and sales of
securities in interstate commerce or by use of the mails must be
registered with the Commission or exempt from registration. While
Section 4(1) exempts most routine trading, transactions by
underwriters are not exempt. Rule 144 creates safe harbor exemptions
for two common situations arising from the Act's definition of
``underwriter.''
First, anyone who has taken securities directly from the issuer
in an unregistered
[[Page 9256]]
transaction and who effects a public resale in the short term may be
said to be a ``person who has purchased from an issuer with a view
to * * * distribution,'' and thus an ``underwriter'' within the
meaning of Section 2(11) of the Act. An investment banking firm that
arranges with an issuer for the public sale of its securities is
clearly an ``underwriter'' under that Section. Individual investors
who are not professionals in the securities business may also be
``underwriters'' within the meaning of that term as used in the Act
if they act as links in a chain of transactions through which
securities move from an issuer to the public. Rule 144 provides an
exemptive safe harbor for the resale of these ``restricted
securities.''
Second, Section 2(11) treats persons in a relationship of
control with the issuer (``affiliates'') as if they were the issuer
for the purpose of determining which intermediaries to the public
markets are ``underwriters.'' As a result, a public sale of an
affiliate's securities (``control securities''), whether or not the
securities are ``restricted,'' is subject to the same regulatory
requirements as a public offering by the issuer. Rule 144 provides
an exemptive safe harbor for the resale of control securities on
behalf of an affiliate of the issuer.
Rule 144 sets forth certain conditions which are intended to
distinguish between a distribution and routine trading. First,
adequate current public information is required to protect
investors. Second, a holding period before resale is needed to
assure that persons who buy restricted securities in unregistered
offerings have assumed the economic risks of investment and are not
acting as conduits for the issuer in an unregistered public
distribution. Third, Rule 144 requires a person relying on the Rule
to sell the securities in limited quantities to further demonstrate
that trading is ordinary, rather than distributive.
If a sale of securities is made in accordance with all of the
provisions of Rule 144, (1) any person who sells restricted
securities will be deemed not to be an underwriter for that
transaction; (2) any person who sells restricted or other securities
on behalf of an affiliate of the issuer will be deemed not to be an
underwriter for that transaction; and (3) the purchaser receives
unrestricted securities.
Rule 144 is not an exclusive safe harbor. It does not affect the
availability of any other exemption for resales under the Securities
Act.
(a) * * *
(1) An affiliate of an issuer is a person that directly, or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such issuer. A person
shall be deemed not to be an affiliate for purposes of this section if
the person:
(i) Is not the beneficial owner, directly or indirectly, of more
than 10% of any class of equity securities of the issuer;
(ii) Is not an officer of the issuer; and
(iii) Is not a director of the issuer.
Note to paragraph (a)(1): The determination of a person's
beneficial ownership and whether that person is an ``officer'' shall
be made in accordance with Sec. 240.16a-1 of this chapter,
regardless of whether the issuer's securities are subject to Section
16 (15 U.S.C 78(p)) of the Securities Exchange Act of 1934
(``Exchange Act'') and regardless of whether the class of securities
is registered under Section 12 (15 U.S.C. 78l) of the Exchange Act.
* * * * *
(3) The term restricted securities means:
(i) Securities acquired directly or indirectly from the issuer, or
from an affiliate of the issuer, in a transaction or chain of
transactions not involving any public offering;
(ii) Securities acquired from the issuer that are subject to the
resale limitations of Sec. 230.502(d) under Regulation D or
Sec. 230.701(c);
(iii) Securities acquired in a transaction or chain of transactions
meeting the requirements of Sec. 230.144A;
(iv) Securities acquired from the issuer in a transaction subject
to the conditions of Regulation CE (Sec. 230.1001);
(v) Equity securities of domestic issuers, and of foreign issuers
where the principal market for such securities is in the United States,
acquired in a transaction or chain of transactions subject to the
conditions of Sec. 230.901 or Sec. 230.903 under Regulation S
(Secs. 230.901 thru 230.905 and Preliminary Notes); or
(vi) Securities acquired from the issuer that were issued pursuant
to an exemption under section 4(6) (15 U.S.C. 77(d)(6)) of the Act.
(b) Conditions to be met. (1) Any affiliate or other person who
sells restricted securities of an issuer for such person's own account
shall be deemed not to be an underwriter thereof within the meaning of
section 2(11) (15 U.S.C. 77(b)(11)) of the Act if all of the conditions
of this section are met.
(2) Any person who sells restricted or any other securities for the
account of an affiliate of the issuer of such securities shall be
deemed not to be an underwriter thereof within the meaning of Section
2(11) of the Act if all of the conditions of this section are met.
(c) Current public information. Adequate current public information
with respect to the issuer of the securities must be available. Such
information will be deemed to be available only if either of the
following conditions is met:
(1) Reporting Issuers. The issuer is, and for at least 90 days
before the sale has been, subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act (15 U.S.C. 78(m) or (o)(d)) and
has filed all required reports during the 12 months preceding such sale
(or for such shorter period that the issuer was required to file such
reports); or
(2) Non-reporting Issuers. If the issuer is not subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act,
there is publicly available the information concerning the issuer
specified in paragraph (a)(5)(i) to (xiv), inclusive, and paragraph
(a)(5)(xvi) of Sec. 240.15c2-11 of this chapter, or, if the issuer is
an insurance company, the information specified in Section
12(g)(2)(G)(i) of the Exchange Act.
Notes to paragraph (c): 1. With respect to paragraph (c)(1), the
seller can rely upon:
(A) A statement in whichever is the most recent report,
quarterly or annual, required to be filed and filed by the issuer
that such issuer has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12
months (or for such shorter period that the issuer was required to
file such reports) and has been subject to such filing requirements
for the past 90 days; or
(B) A written statement from the issuer that it has complied
with such reporting requirements. Neither type of statement may be
relied upon, however, if the person knows or has reason to believe
that the issuer has not complied with such requirements.
2. Rule 144(c) cannot be satisfied during the first 90 days
after an issuer becomes subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act.
(d) * * *
(3) * * *
(ii) Conversions and exchanges. If the securities sold were
acquired from the issuer solely in exchange for other securities of the
same issuer, the newly acquired securities shall be deemed to have been
acquired at the same time as the securities surrendered for conversion
or exchange, even if the securities surrendered were not convertible or
exchangeable by their terms;
* * * * *
(vi) Trusts. Where a trust settlor is an affiliate of the issuer,
securities acquired from the settlor by the trust, or acquired from the
trust by the beneficiaries, shall be deemed to have been acquired when
they were acquired by the settlor.
(vii) Estates. Where a deceased person was an affiliate of the
issuer, securities held by the estate of such person or acquired from
such an estate by the beneficiaries shall be deemed to have been
acquired when they were acquired by the deceased person. Regardless of
whether the deceased person was an affiliate of the issuer, no further
holding period is required if the estate is not an affiliate of the
issuer or if the securities
[[Page 9257]]
are sold by a beneficiary of the estate who is not an affiliate.
(viii) Rule 145(a) transactions. The holding period for securities
acquired in a transaction specified in Sec. 230.145(a) shall be deemed
to commence on the date the securities were acquired by the purchaser
in such transaction, except as otherwise provided in paragraphs
(d)(3)(ii) and (ix) of this section.
(ix) Holding company formations. Securities acquired from the
issuer in a transaction effected solely for the purpose of forming a
holding company shall be deemed to have been acquired at the same time
as the securities of the predecessor issuer exchanged in the holding
company formation where:
(A) The holding company's securities were issued in a transaction
involving an exchange of securities as part of a reorganization of the
predecessor into a holding company structure;
(B) Holders received securities of the same class evidencing the
same proportional interest in the holding company as they held in the
predecessor; and
(C) Immediately following the transaction, the holding company has
no significant assets other than securities of the predecessor and its
existing subsidiaries and has substantially the same assets and
liabilities on a consolidated basis as the predecessor had prior to the
transaction.
(e) * * *
(1) Sales by affiliates. If any securities are sold for the account
of an affiliate of the issuer, regardless of whether those securities
are restricted, the amount of securities sold, together with all sales
of securities of the same class sold for the account of such person
within the preceding three months, shall not exceed the greatest of:
* * * * *
(2) Sales by persons other than affiliates. The amount of
restricted securities sold for the account of any person other than an
affiliate of the issuer, together with all other sales of restricted
securities of the same class sold for the account of such person within
the preceding three months, shall not exceed the greatest of the
amounts specified in paragraphs (e)(1)(i), (ii) or (iii) of this
section, whichever is applicable.
* * * * *
(f) Notice of proposed sale. (1) If the amount of securities to be
sold in reliance upon this section during any period of three months
exceeds 1,000 shares or other units or has an aggregate sale price in
excess of $40,000, three copies of a notice on Form 144 (Sec. 239.144
of this chapter) shall be filed with the Commission at its principal
office in Washington, DC. If such securities are admitted to trading on
any national securities exchange, one copy of such notice also shall be
transmitted to the principal exchange on which such securities are
admitted.
(2) The Form 144 shall be signed by the person for whose account
the securities are to be sold and shall be transmitted for filing
concurrently with either the sale of securities in reliance upon this
section or the placing with a broker of an order to sell securities in
reliance upon this section. Neither the filing of such notice nor the
failure of the Commission to comment thereon shall be deemed to
preclude the Commission from taking any action it deems necessary or
appropriate with respect to the sale of the securities referred to in
such notice. The person filing the notice required by this paragraph
shall have a bona fide intention to sell the securities referred to
therein within a reasonable time after the filing of such notice.
(g) Termination of certain restrictions on sales of restricted
securities by persons other than affiliates. The requirements of
paragraphs (c), (e) and (f) of this section shall not apply to the sale
of restricted securities if:
(1) The sale is for the account of a person who is not an affiliate
of the issuer at the time of the sale and who has not been an affiliate
of the issuer during the three months preceding the sale; and
(2) A period of at least two years has elapsed since the later of
the date the securities were acquired from the issuer or from an
affiliate of the issuer. The two-year period should be calculated as
described in paragraph (d) of this section.
3. By amending Sec. 230.145 by removing paragraphs (c) and (d) and
re-designating paragraph (e) as paragraph (c).
* * * * *
PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933
4. The authority citation for part 239 continues to read in part as
follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77sss, 78c, 78l,
78m, 78n, 78o(d), 78w(a), 78ll(d), 79e, 79f, 79g, 79j, 79l, 79m,
79n, 79q, 79t, 80a-8, 80a-29, 80a-30 and 80a-37, unless otherwise
noted.
* * * * *
5. By amending Sec. 239.144 by revising paragraphs (a) and (b) to
read as follows:
Sec. 239.144. Form 144, for notice of proposed sale of securities
pursuant to Sec. 239.144 of this chapter.
(a) Except as indicated in paragraph (b) of this section, this form
shall be filed in triplicate with the Commission at its principal
office in Washington, DC by each person who intends to sell securities
in reliance upon Sec. 230.144 of this chapter and shall be transmitted
for filing concurrently with either the execution of a sale of
securities in reliance upon Sec. 230.144 of this chapter or the placing
with a broker of an order to execute a sale of securities in reliance
upon Sec. 230.144 of this chapter.
(b) This form need not be filed if the amount of securities to be
sold during any period of three months does not exceed 1,000 shares or
other units and the aggregate sale price does not exceed $40,000.
* * * * *
6. By amending Form 144 (referenced in Sec. 239.144) by revising
the statement appearing under the Form title, revising the caption to
Item 3(b) in the undesignated table, removing the ``s'' at the end of
``Instructions'' after Table I, removing Instruction 2 to Table I, and
removing the designation number for the remaining instruction to read
as follows:
Note: The text of Form 144 does not, and the amendments thereto
will not, appear in the Code of Federal Regulations.
Form 144
Notice of Proposed Sale of Securities Pursuant to Rule 144 Under the
Securities Act of 1933
Attention: Transmit for filing 3 copies of this form concurrently
with either placing an order with a broker to execute a sale or
executing a sale directly with a market maker, or at the time of
executing a sale not involving a broker or market maker.
* * * * *
Item 3(b). Name and Address of Each Broker Through Whom the
Securities are to be Offered or Each Market Maker who is Acquiring the
Securities, if Applicable
* * * * *
Table I--Securities To Be Sold
* * * * *
Instruction if the securities were purchased and full payment
therefore was not made in cash at the time of purchase, explain in the
table, or in a note thereto, the nature of the consideration given. If
the consideration consisted of any note or other obligation, or if
payment was made in installments, describe the arrangement and state
when the note or other
[[Page 9258]]
obligation was discharged in full or the last installment paid.
By the Commission.
Dated: February 20, 1997.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-4667 Filed 2-27-97; 8:45 am]
BILLING CODE 8010-01-P
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.