Rules 144 and 145
Amendments to Rule 144 and 145 took effect on February 15, 2008. Under the new Rule 144, restricted securities are now exempted from registration as long as certain requirements are complied with like the 6-month holding period. On the other hand, Rule 145 provides that any party, other than an issuer, who sells securities of a shell company wherein the approval of the shareholders are required, shall be regarded as an underwriter transaction. There will likely be much uncertainty on both sides. Companies should take a closer look at these amendments in order to understand their impact on transacting securities. The Knowledge Congress is assembling a panel of distinguished experts to talk about the key features of these amendments, the comparison between these two rules and its effect on companies. The panel is scheduled to speak in a two-hour teleconference and webinar.
SEGMENT 1: Katherine Hsu, Special Counsel, Office of Rulemaking, Division of Corporation Finance, U.S. Securities and Exchange Commission 1. Amendments to Holding Periods for Restricted Securities • Restricted Securities of Exchange Act Reporting Companies – Shortened the Rule 144(d) holding period to six months – Between six months and one year, public resales of restricted securities by non-affiliates are subject only to the current public information requirement – After one year, non-affiliates can publicly resell their securities without any restriction • Restricted Securities of Non-Reporting Companies – Continue to be subject to a one-year Rule 144(d) holding period – After one year, however, non-affiliates can publicly resell their restricted securities without restriction 2. Amendments Relating to Other Rule 144 Conditions (Applicable Now Only To Affiliates’ Sales) • Amended the manner of sale requirements to permit sales through certain riskless principal transactions where trades are executed at the same price • Brokers posting of bid and ask quotations on certain alternative trading systems is not a solicitation • Form 144 filing threshold increased to 5,000 shares and $50,000 3. Rule 144 Amendments Relating to Affiliates’ Sales of Debt Securities • Manner of sale requirements eliminated for debt securities • Volume limitations raised – Alternative method of calculating volume limitation for debt securities – Up to 10% of tranche, together with all sales of securities of the same tranche sold for the account of the security holder within a three-month period 4. Rule 144 Amendments Relating to Shell Companies • Codification of Worm letter (Division of Corporation Finance letter to Ken Worm (Jan. 21, 2000)) – Rule 144 is not available for resale of securities of blank check companies (or former blank check companies) • Modifications from letter – Used Securities Act Rule 405 definition of “shell company” which includes blank check companies – Securities can be sold subject to Rule 144 if certain conditions are met: • Issuer (formerly a shell) has ceased to be a shell company • Issuer of securities is now subject to Exchange Act reporting requirements • Issuer has filed all reports and material required to be filed during preceding 12 months • At least one year has elapsed from the time the issuer filed current Form 10 type information. (Form 10 information is deemed filed when the initial filing is made with the Commission.) 5. Other Rule 144 Amendments • Codified several other staff interpretations – See Section II.F of the Adopting Release (Release No. 33-8869) • Simplified and streamlined the Preliminary Note to Rule 144 and parts of the Rule 144 text, using plain English principles • Conforming and other amendments – Regulation S distribution compliance period is six months for reporting Category Three issuers – Securities Act Rule 190 (ABS securities) 6. Amendments to Rule 145 • Rule 145(c) previously deemed parties to such transaction (other than the issuer) or affiliates of parties to be underwriters. • The amendments eliminated the presumed underwriter provision EXCEPT when the transaction involves a shell company. • Those deemed an underwriter under the amendments are subject to revised resale restrictions in paragraph (d) of the rule. SEGMENT 2: Laurie L. Green, Partner, Holland & Knight LLP 1. Effect of changes on private placements 2. The future of registration rights agreements • When will resale registration statements be required for private equity offerings • When will exchange offers and resale registration statements be required for private debt offerings 3. Practical guidance for drafting registration rights agreements • Effect of changes on existing registration rights agreements • Market practice for new registration rights agreements following changes to Rule 144 • Suggested registration rights provisions SEGMENT 3: Ronald O. Mueller, Partner, Gibson Dunn & Crutcher 1. Issuer compliance practice and procedures • what do representation letters now need to address • how are companies handling de-legending requests • what are the main issues that remain in handling restricted and control securities 2. Practical effects of SEC interpretations that have been codified into Rule 144 3. Changes to Rule 145 • What the changes to Rule 145 mean • Effect of changes on companies involved in M&A transactions • Effect of changes on shareholders of acquired companies
Who Should Attend:
- Lawyers - Counsel - Brokers - Transfer Agents - Compliance Personnel - Chief Executive Officer - Executives and Directors - Corporate Secretaries - Administrators - Consultants
Katherine Hsu is a Special Counsel in the Office of Rulemaking for the Division of Corporation Finance at the U.S. Securities and Exchange Commission. She joined the Commission as a staff attorney in 2001 and worked in the Division’s Operations section and the Office of Enforcement Liaison before joining the Office of Rulemaking in 2005. Katherine played a key role in the drafting of the recently adopted amendments to Rules 144 and 145 of the Securities Act.
Katherine Hsu is a Special Counsel in the Office of Rulemaking for the Division of Corporation Finance at the U.S. …
Laurie L. Green advises public companies on the corporate governance requirements of the NYSE, AMEX, and NASDAQ, and the SEC's corporate governance standards under Sarbanes-Oxley.
In addition to her corporate governance experience, Ms. Green represents companies in securities offerings, proxy solicitations, periodic reporting and compliance matters under the Securities Exchange Act of 1934, mergers and acquisitions, cash tender offers, cross-border tender offers, and distressed debt restructuring and exchange offers. Before entering private practice, Ms. Green spent 11 years at the SEC and served as Special counsel in the SEC's Division of Corporation Finance in Washington, D.C. in its Office of Mergers and Acquisitions.
Laurie L. Green advises public companies on the corporate governance requirements of the NYSE, AMEX, and NASDAQ, and the SEC's …
Ronald O. Mueller is a partner in the Washington, D.C. office of Gibson, Dunn & Crutcher. Mr. Mueller works in the corporate/securities area with an emphasis on proxy and disclosure issues, corporate governance, executive compensation (including Section 16 and Rule 144) and corporate transactions.
Mr. Mueller has written articles and spoken at seminars about a variety of securities law issues, including trends and developments in proxy disclosures and proxy contests, the SEC's disclosure requirements, corporate governance developments, and executive compensation disclosure rules. He is Chair of the Subcommittee on Employee Benefits and Executive Compensation of the Committee on Federal Regulation of Securities, Section of Business Law, American Bar Association. Likewise, he chairs the West Legalworks Annual Institute on Proxy Statements and Critical Corporate Disclosures and is a speaker at the ABA Annual Institute on Executive Compensation and at The Corporate Counsel/Corporate Executive seminars on executive compensation. Mr. Mueller is a contributing author to A Practical Guide to Section 16, Prentice Hall, A Practical Guide to SEC Proxy and Compensation Rules, Prentice Hall, Securities in the Electronic Age, Glasser LegalWorks, and Federal Securities Exchange Act of 1934, Insider Reporting and Short-Swing Trading, Matthew Bender.
Mr. Mueller is admitted to practice before the courts of New York and Washington, D.C., and is a member of the District of Columbia Bar Association and the American Bar Association. Mr. Mueller received his J.D., from Columbia Law School in 1986, where he was both a Harlan Fisk Stone Scholar and a James Kent Scholar, and his B.A., magna cum laude, from Vanderbilt University in 1982. From September 1989 to June 1991, Mr. Mueller separated from the firm to work as legal counsel to Commissioner Edward H. Fleischman at the United States Securities & Exchange Commission (SEC). While at the SEC, Mr. Mueller worked on many of the matters before the Commission, including enforcement matters and regulatory initiatives.
Ronald O. Mueller is a partner in the Washington, D.C. office of Gibson, Dunn & Crutcher. Mr. Mueller works in …
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