Rule 144 and Form 144 Revision (2007)...
Rule 144 promulgated by the SEC under the 1933 Act, permits, under limited circumstances, the sale of restricted and controlled securities without registration. In addition to restrictions on the minimum length of time for which such securities must be held and the maximum volume permitted to be sold, the issuer must agree to the sale. If certain requirements are met, Form 144 must be filed with the SEC. Often, the issuer requires that a legal opinion be given indicating that the resale complies with the rule. The amount of securities sold during any subsequent 3-month period generally does not exceed any of the following limitations:
- 1% of the stock outstanding
- the average weekly reported volume of trading in the securities on all national securities exchanges for the preceding 4 weeks
- the average weekly volume of trading of the securities reported through the consolidated transactions reporting system (NASDAQ)
Notice of resale is provided to the SEC if the amount of securities sold in reliance on Rule 144 in any 3-month period exceeds 5,000 shares or if they have an aggregate sales price in excess of $50,000. After one year, Rule 144(k) allows for the permanent removal of the restriction except as to 'insiders'.[1]
In cases of mergers, buyouts or takeovers, owners of securities who had previously filed Form 144 and still wish to sell restricted and controlled securities must refile Form 144 once the merger, buyout, or takeover has been completed.
Rule 144 is not to be confused with Rule 144A that provides a safe harbor from the registration requirements of the Securities Act of 1933 for certain private resales of restricted securities to qualified institutional buyers. Rule 144A has become the principal safe harbor on which non-U.S. companies rely when accessing the U.S. capital markets.
http://en.wikipedia.org/wiki/Rule_144#Rule_144
Form 144 revising Rule 144 in 2007
On December 6, 2007, the SEC published final rules revising Rule 144 under the Securities Act of 1933, which regulates the resale of restricted securities and securities held by affiliates. The amendments to Rule 144, among other things:
- Shorten the holding period for affiliate and non-affiliate holders of restricted securities of SEC-reporting companies to six months, subject to certain conditions
- Permit unlimited resale by non-affiliate holders of restricted securities by complying only with the current public information condition for resale of restricted securities issued by SEC reporting companies made after the six-month holding period; and without complying with any Rule 144 conditions for resale of restricted securities issued by both SEC reporting and non-reporting companies made after a one-year holding period.
- permit resale of equity securities by affiliates that meet certain conditions through riskless principal transactions and brokers’ transactions in which the broker has published bid and asked quotations for the security in an alternative trading system.
- Eliminate the manner of sale conditions and ease the volume limitations for resale of debt securities by affiliates.
- Increase the thresholds that trigger the Form 144 filing requirement to 5,000 shares or $50,000.
The SEC did not adopt previously proposed provisions relating to the tolling of holding periods in connection with hedging transactions.
The amendments will become effective on February 15, 2008, and will apply to securities acquired before or after that date. Background
Rule 144 regulates the resale of “restricted securities”1 and “control securities,”2 by establishing certain conditions that must be satisfied in order for the resale to be exempt from the Securities Act registration requirements pursuant to Section 4(1) of the Securities Act—a safe harbor from “underwriter” status for the selling security holder.
The conditions include the following:
- There must be adequate current public information available about the issuer;
- If the securities being sold are restricted securities, the security holder must have held the security for a specified holding period;
- The resale must be within specified sales volume limitations;
- The resale must comply with the manner of sale requirements of the rule; and
- The selling security holder must file Form 144 with the SEC if the amount of securities being sold exceeds specified thresholds.
SEC Staff Interpretations
The SEC has also codified various staff interpretations relating to Rule 144, including the following:
- Stating that securities acquired by accredited investors pursuant to Section 4(6) of the Securities Act are considered restricted securities
- Permitting tacking of holding periods when a company reorganizes into a holding company structure
- Permitting tacking of holding periods for conversions and exchanges of securities
- Deeming the acquisition dates for securities acquired pursuant to the cashless exercise of options and warrants as the dates the options or warrants were acquired
- Permitting a pledgee of restricted securities to sell the pledged securities without having to aggregate the sale with sales by other pledgees from the same pledgor (as long as there is no concerted action by those pledgees), for purposes of the Rule 144 volume limitation condition
- Permitting the Form 144 representations required from security holders relying on Exchange Act Rule 10b5-1 to be made as of the date the holder adopted a trading plan or gave trading instructions
- Confirming the unavailability of Rule 144 for the resale of securities by reporting and non-reporting firms
