Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 5063 

List of Subjects 

14 CFR Part 241 

Air carriers, Reporting and 

recordkeeping requirements, Uniform 

system of accounts. 

14 CFR Part 298 

Air taxis, Reporting and 

recordkeeping requirements. 

Issued in Washington, DC. 

Elaine L. Chao, 

Secretary of Transportation. 

Proposed Rule 

Accordingly, the Department 

proposes to amend 14 CFR parts 241 

and 298 as follows: 

PART 241—UNIFORM SYSTEM OF 

ACCOUNTS AND REPORTS FOR 

LARGE CERTIFICATED AIR CARRIERS 

■ 1. The authority citation for part 241 

continues to read as follows: 

Authority: 49 U.S.C. 329, 41101, 41708, 

and 41709. 

Sec. 19–7 [Removed] 

■ 2. Remove Sec. 19–7. 

■ 3. Add Sec. 19–8 to read as follows: 

Sec. 19–8 Passenger Origin—Destination 

Survey applicability. 

(a) All U.S. certificated and commuter 

air carriers conducting scheduled 

passenger services (except helicopter 

carriers) shall participate in a Passenger 

Origin-Destination (O&D) Survey 

covering domestic and international air 

carrier operations, as prescribed by the 

Department’s Bureau of Transportation 

Statistics (BTS), Office of Airline 

Information (OAI). 

(b) A statistically valid sample of 

flight coupons shall be selected for 

reporting purposes. The sample shall 

consist of a selection of all Tickets 

involving a Reporting Carrier that meet 

the reporting criteria as defined in the 

Instructions, or further defined in 

Directives, except those participating 

O&D carriers with nonstandard ticketing 

procedures, or other special operating 

characteristics, may propose alternative 

procedures. Such departures from 

standard O&D Survey practices shall not 

be authorized unless approved in 

writing by the Director, Office of Airline 

Information under the procedures in 

Sec. 1–2. The data to be recorded and 

reported, as stipulated in the 

Instructions and Directives, shall 

include at a minimum the following 

data elements: Reporting Carrier, 

Reporting Month, Reporting Year, 

Record Identification Number, Issuing 

Carrier, Total Amount, Tax Amount, 

Exchanged Ticket Indicator, Airport, 

Operating Carrier, Marketing Carrier, 

Scheduled Flight Year, Scheduled 

Flight Month, Dwell Time and Via 

Airport(s). 

(c) Any Ticket that is submitted that 

involves a O&D Survey Reporting 

Carrier providing service in whole or in 

part under this part or 49 U.S.C. 41308 

or 41309 and any data covering the 

operations of foreign air carriers that are 

similar to the information collected in 

the Passenger Origin-Destination Survey 

are generally not available to the 

Department, the U.S. carriers, or U.S. 

interests. Therefore, because of the 

damaging competitive impact on U.S. 

carriers and the adverse effect upon the 

public interest that would result from 

unilateral disclosure of the U.S. survey 

data, the Department will not disclose 

the international data in the Passenger 

Origin-Destination Survey except: 

(1) To an air carrier directly 

participating in and contributing input 

data to the Survey or to a legal or 

consulting firm designated by an air 

carrier to use on its behalf O&D data in 

connection with a specific assignment 

by such carrier; 

(2) To parties to any proceeding 

before the Department to the extent that 

such data are relevant and material to 

the issues in the proceeding upon a 

determination to this effect by the 

Administrative Law Judge or by the 

Department’s decision-maker. Any data 

to which access is granted pursuant to 

this section may be introduced into 

evidence subject to the normal rules of 

admissibility of evidence. 

(3) To agencies and other components 

of the U.S. Government. 

(4) To other persons upon a showing 

that the release of the data will serve 

specifically identified needs of U.S. 

users which are consistent with U.S. 

interests. 

(5) To foreign governments and 

foreign users as provided in formal 

reciprocal arrangements between the 

foreign and U.S. Governments for the 

exchange of comparable O&D data. 

(6) Or as otherwise determined by the 

Department as consistent with its 

regulatory functions and 

responsibilities. 

(d) Each O&D Survey Reporting 

Carrier shall maintain its prescribed 

reportable records in a manner and at 

such locations as will permit ready 

accessibility for examination by 

representatives of DOT. The record 

retention requirements are prescribed in 

part 249 of this chapter. 

PART 298—EXEMPTIONS FOR AIR 

TAXI AND COMMUTER AIR CARRIER 

OPERATIONS 

■ 4. The authority citation for part 298 

continues to read as follows: 

Authority: 49 U.S.C. 329 and chapters 401, 

411, and 417. 

■ 5. In § 298.60, revise paragraph (a) to 

read as follows: 

§ 298.60 General reporting instructions. 

(a) Each commuter air carrier and 

each small certificated air carrier shall 

file the applicable schedules of Form 

298–C, ‘‘Report of Financial and 

Operating Statistics for Small Aircraft 

Operators’’, Schedule T–100, ‘‘U.S. Air 

Carrier Traffic and Capacity Data by 

Nonstop Segment and On-Flight 

Market’’, and the ‘‘Passenger Origin— 

Destination Survey’’ prescribed in part 

241, Sec. 19–8, of this subchapter. 

* * * * * 

[FR Doc. 2020–29229 Filed 1–15–21; 8:45 am] 

BILLING CODE 4910–9X–P 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 230, 232, 239, and 249 

[Release Nos. 33–10911; 34–90773; File No. 

S7–24–20] 

RIN 3235–AM78 

Rule 144 Holding Period and Form 144 

Filings 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Proposed rule. 

SUMMARY: The Securities and Exchange 

Commission (‘‘Commission’’) is 

proposing to amend Rule 144 to revise 

the holding period determination for 

securities acquired upon the conversion 

or exchange of certain market-adjustable 

securities of issuers that do not have 

securities listed on a national securities 

exchange. Under the proposed 

amendments, the holding period for 

those securities would not begin until 

the securities are acquired upon the 

conversion or exchange of the marketadjustable security. The Commission is 

also proposing to mandate electronic 

filing of Form 144 with respect to 

securities issued by issuers subject to 

Exchange Act reporting requirements, to 

amend the filing deadline for Form 144 

to coincide with the filing deadline for 

Form 4, and to streamline the filing 

process in cases where both Form 4 and 

Form 144 are required to report the 

same transaction. Finally, the 

Commission is proposing to eliminate 


khammond on DSKJM1Z7X2PROD with PROPOSALS
5064 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 

1 15 U.S.C. 78f. 

the requirement to file a Form 144 for 

resales of securities of issuers that are 

not subject to Exchange Act reporting. 

DATES: Comments should be received on 

or before March 22, 2021. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/submitcomments.htm). 

Paper Comments 

• Send paper comments to Vanessa 

A. Countryman, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE, Washington, DC 20549–1090. 

All submissions should refer to File 

Number S7–24–20. We will post all 

submitted comments, requests, other 

submissions and other materials on our 

internet website (http://www.sec.gov/ 

rules/proposed.shtml). Typically, 

comments are also available for website 

viewing and printing in the 

Commission’s Public Reference Room, 

100 F Street NE, Washington, DC 20549, 

on official business days between the 

hours of 10 a.m. and 3 p.m. Due to 

pandemic conditions, however, access 

to the Commission’s public reference 

room is not permitted at this time. All 

comments received will be posted 

without change. Persons submitting 

comments are cautioned that we do not 

redact or edit personal identifying 

information. You should submit only 

information that you wish to make 

available publicly. 

Studies, memoranda or other 

substantive items may be added by the 

Commission or staff to the comment file 

during this rulemaking. A notification of 

the inclusion in the comment file of any 

such materials will be made available 

on the Commission’s website. To ensure 

direct electronic receipt of such 

notifications, sign up through the ‘‘Stay 

Connected’’ option at www.sec.gov to 

receive notifications by email. 

FOR FURTHER INFORMATION CONTACT: John 

Fieldsend or Sean Harrison, at (202) 

551–3430, in the Office of Rulemaking, 

Division of Corporation Finance, U.S. 

Securities and Exchange Commission, 

100 F Street NE, Washington, DC 20549. 

SUPPLEMENTARY INFORMATION: We are 

proposing amendments to: 

Commission reference CFR citation 

(17 CFR) 

Regulation S–T [17 CFR 232.10 through 232.903] ................................................................................... Rule 101 .............. § 232.101. 

Securities Act of 1933 (‘‘Securities Act’’) [15 U.S.C. 77a et seq.] ............................................................. Rule 144(b)(3) ...... § 230.144(b)(3). 

Rule 144(d)(3)(ii) .. § 230.144(d)(3)(ii). 

Rule 144(h) .......... § 230.144(h). 

Form 144 .............. § 239.144. 

Securities Exchange Act of 1934 (‘‘Exchange Act’’) [15 U.S.C. 78a et seq.] ........................................... Form 4 ................. § 249.104. 

Form 5 .................. § 249.105. 

Table of Contents 

I. Discussion of the Proposed Amendments 

A. Overview of the Proposed Amendments 

B. Proposed Amendment to Rule 

144(d)(3)(ii) 

1. Background 

a. Rule 144 Safe Harbor 

b. Rule 144 Holding Period Condition and 

Tacking 

c. Market-Adjustable Securities 

Transactions 

2. Proposed Amendment 

C. Proposed Amendment to the Form 144 

Filing Requirements 

1. Background 

2. Proposed Amendments 

a. Mandatory Electronic Filing of Form 144 

b. Eliminating Form 144 Filing 

Requirement for Investors Selling 

Securities of Non-Reporting Issuers 

c. Filing Options for Form 4 and Form 144 

d. Rule 10b5–1(c) Transaction Indication in 

Forms 4 and 5 

II. Economic Analysis 

A. Introduction 

B. Proposed Amendments to Holding 

Period for Market-Adjustable Securities 

1. Broad Economic Considerations 

2. Economic Baseline 

3. Benefits and Costs to Proposed 

Amendment to Rule 144(d)(3)(ii) 

4. Effects on Efficiency, Competition, and 

Capital Formation 

5. Reasonable Alternatives 

6. Request for Comment 

C. Proposed Amendments to Form 144, 

Form 4 and Regulation S–T 

1. Broad Economic Considerations 

2. Economic Baseline. 

a. Affected parties 

b. EDGAR 

3. Benefits and Costs of Proposed 

Amendments to Form 144, Form 4, and 

Regulation S–T 

4. Efficiency, Competition, and Capital 

Formation 

5. Reasonable Alternatives 

D. Request for Comment 

III. Paperwork Reduction Act 

A. Summary of the Collections of 

Information 

B. Summary of the Proposed Amendments’ 

Effects on the Collections of Information 

C. Incremental and Aggregate Burden and 

Cost Estimates 

D. Request for Comment 

IV. Initial Regulatory Flexibility Act Analysis 

A. Reasons for, and Objectives of, the 

Proposed Action 

B. Legal Basis 

C. Small Entities Subject to the Proposed 

Rules 

D. Proposed Reporting, Recordkeeping, and 

other Compliance Requirements 

E. Duplicative, Overlapping, or Conflicting 

Federal Rules 

F. Significant Alternatives 

G. Request for Comment 

V. Small Business Regulatory Enforcement 

Fairness Act 

VI. Statutory Authority 

Text of the Proposed Amendments 

I. Discussion of the Proposed 

Amendments 

A. Overview of the Proposed 

Amendments 

We are proposing to amend Rule 144, 

Form 144, Form 4, Form 5 and Rule 101 

of Regulation S–T. We propose to 

amend Rule 144(d)(3)(ii) to revise the 

holding period determination for 

securities acquired upon the conversion 

or exchange of certain market-adjustable 

securities of an issuer that does not have 

a class of securities listed, or approved 

to be listed, on a national securities 

exchange registered pursuant to Section 

6 1 of the Exchange Act (‘‘unlisted 

issuer’’) so that the holding period 

would not begin until the conversion or 

exchange. As used in this release, a 

‘‘market-adjustable security’’ is a 

convertible or exchangeable security 

that provides for a conversion rate, 

conversion price, or other terms that, in 

each case, would have the effect of 

offsetting, in whole or in part, declines 

in value of the underlying securities that 

may occur prior to conversion or 

exchange. 

We are proposing this amendment to 

mitigate the risk of unregistered 

distributions in connection with sales of 

market-adjustable securities. As 


khammond on DSKJM1Z7X2PROD with PROPOSALS
Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 5065 

2The term ‘‘underwriter’’ is broadly defined 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. See Securities Act Section 

2(a)(11) [15 U.S.C. 77b(a)(11)]. The interpretation of 

this definition traditionally has focused on the 

words ‘‘with a view to’’ in the phrase ‘‘purchased 

from an issuer with a view to . . . distribution.’’ For 

simplicity, in this release we often only refer to the 

‘‘with a view to’’ prong of the underwriter 

definition. 

3 15 U.S.C. 77d(a)(1). 

4 15 U.S.C. 78p. 

5 15 U.S.C. 77e. 

6As used in Section 2(a)(11), the term ‘‘issuer’’ 

includes any person directly or indirectly 

controlling or controlled by the issuer, or any 

person under direct or indirect common control 

with the issuer. 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. See 17 

CFR 230.405 and 17 CFR 230.144(a)(1). 

7See Definition of Terms ‘‘Underwriter’’ and 

‘‘Brokers’ Transactions,’’ Release No. 33–5223 (Jan. 

11, 1972) [37 FR 591 (Jan. 14, 1972)] (‘‘1972 

Adopting Release’’). 

8Restricted securities are securities acquired 

pursuant to one of the transactions listed in 

Securities Act Rule 144(a)(3), such as securities 

issued in a private placement. Although not defined 

in Rule 144, the term ‘‘control securities’’ 

commonly refers to securities held by an affiliate of 

the issuer, regardless of how the affiliate acquired 

the securities. See Rule 144(b)(2). 

9 In general, these are the conditions that a selling 

security holder must satisfy when seeking to rely 

on the safe harbor for the resale of securities. 

However, a person seeking to rely on the safe harbor 

when reselling securities of certain types of 

companies must satisfy different conditions. See 17 

CFR 230.144(i). 

10See 17 CFR 230.144(c). A sale by a non-affiliate 

also must satisfy the current public information 

condition if the non-affiliate is selling securities of 

a reporting issuer and has held the securities for 

less than one year. 

11See 17 CFR 230.144(d). 

12See 17 CFR 230.144(e). 

13See 17 CFR 230.144(f) and (g). 

14See Rule 144(h). 

15See 1972 Adopting Release, supra note 7, at 

594 (noting that the holding period condition in 

Rule 144 was designed to assure that the 

registration provisions of the Securities Act are not 

circumvented by persons acting, directly or 

indirectly, as conduits for an issuer in connection 

with resales of restricted securities and that to 

accomplish this, the rule provides that such persons 

be subject to the full economic risks of investment 

during the holding period). 

discussed below, the application of the 

‘‘tacking’’ provisions of Rule 144 to 

market-adjustable securities undermines 

one of the key premises of Rule 144, 

which is that holding securities at risk 

for an appropriate period of time prior 

to resale can demonstrate that the seller 

did not purchase the securities with a 

view to distribution 2 and, therefore, is 

not an underwriter for the purpose of 

Securities Act Section 4(a)(1).3

Amending the Rule 144 holding period 

for the securities received on conversion 

or exchange of market-adjustable 

securities so that it will not commence 

until the time the underlying securities 

are acquired would help maintain the 

effectiveness of this key aspect of the 

Rule 144 safe harbor. 

We are also proposing amendments to 

update and simplify the Form 144 filing 

requirements by mandating the 

electronic filing of all Form 144 notices 

related to the resale of securities of 

issuers that are subject to the reporting 

requirements of Section 13 or 15(d) of 

the Exchange Act, and eliminating the 

filing requirement for Form 144 notices 

related to the resale of securities of 

issuers that are not subject to Exchange 

Act reporting. Additionally, we are 

proposing to eliminate two unnecessary 

data fields and intend to create an 

online fillable document for entering the 

information required by Form 144. In 

connection with these amendments, we 

are planning to streamline filing 

procedures for individuals who are 

subject to notice filing requirements 

under Rule 144 and reporting 

requirements under Section 16 4 of the 

Exchange Act. These amendments 

would also change the filing deadline 

for Form 144 to coincide with the filing 

deadline for Form 4. In addition, we are 

proposing to amend Forms 4 and 5 to 

add a check box to permit filers to 

indicate that a sale or purchase reported 

on the form was made pursuant to a 

transaction that satisfied 17 CFR 

240.10b5–1(c) (‘‘Rule 10b5–1(c)’’). 

We welcome feedback and encourage 

interested parties to submit comments 

on any or all aspects of the proposed 

rule amendments. When commenting, it 

would be most helpful if you include 

the reasoning behind your position or 

recommendation. 

B. Proposed Amendment to Rule 

144(d)(3)(ii) 

1. Background 

a. Rule 144 Safe Harbor 

Securities Act Section 5 requires 

registration of all offers and sales of 

securities in interstate commerce or by 

use of the United States mails, unless an 

exemption from the registration 

requirement is available.5 Securities Act 

Section 4(a)(1) provides an exemption 

for ‘‘transactions by any person other 

than an issuer, underwriter, or dealer.’’ 

Securities Act Section 2(a)(11) defines 

an ‘‘underwriter’’ 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.6

In 1972,7 the Commission adopted 

Rule 144 to provide a non-exclusive safe 

harbor from the statutory definition of 

‘‘underwriter’’ to assist security holders 

in determining whether the Section 

4(a)(1) exemption is available for their 

resale of restricted or control securities.8

Rule 144 sets forth objective criteria on 

which security holders seeking to resell 

such securities may rely to be assured 

they would not be deemed to be 

engaged in a distribution and, therefore, 

not be considered an underwriter under 

Section 2(a)(11). A selling security 

holder that seeks to rely on the safe 

harbor for the resale of securities must 

satisfy the following conditions: 9

• There must be adequate current 

public information available about the 

issuer if the selling security holder is an 

affiliate of the issuer; 10

• The selling security holder must 

have held the securities for a specified 

holding period if the securities being 

sold are restricted securities; 11

• The resale must be within specified 

sales volume limitations if the selling 

security holder is an affiliate of the 

issuer; 12

• The resale must comply with the 

manner of sale requirements if the 

selling security holder is an affiliate of 

the issuer; 13 and 

• The selling security holder must file 

a Form 144 if the selling security holder 

is an affiliate of the issuer and the 

amount of securities being sold exceeds 

specified thresholds.14

b. Rule 144 Holding Period Condition 

and Tacking 

One of the conditions of Rule 144 for 

restricted securities is that a selling 

security holder must have held the 

securities for a specified period of time 

prior to resale. This condition helps to 

ensure that a holder who claims an 

exemption under Section 4(a)(1) has 

assumed the full economic risks of 

investment and, therefore, is not acting 

as a conduit, directly or indirectly, on 

behalf of the issuer for the sale of 

unregistered securities to the public.15

Under Rule 144(d)(1)(i), restricted 

securities acquired from an issuer that 

has been subject to Exchange Act 

reporting for at least 90 days before the 

sale (a ‘‘reporting issuer’’) must be held 

for a minimum of six months. If the 

issuer is not subject to Exchange Act 

reporting, or has not been for a period 

of at least 90 days immediately before 

the sale (a ‘‘non-reporting issuer’’), the 

restricted securities must be held for a 

minimum of one year pursuant to Rule 

144(d)(1)(ii). 

As originally adopted, Rule 144 

required a two-year holding period 

before a security holder could make 


khammond on DSKJM1Z7X2PROD with PROPOSALS
5066 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 

16See id. 

17See Resales of Securities, Release No. 33–6032 

(Mar. 5, 1979) [44 FR 15610 (Mar. 14, 1979)] and 

Resales of Securities, Release No. 33–6286 (Feb. 6, 

1981) [46 FR 12195 (Feb. 13, 1981)] (‘‘1981 

Adopting Release’’). 

18See Revision of Holding Period Requirements 

in Rules 144 and 145, Release No. 33–7390 (Feb. 

20, 1997) [62 FR 9242 (Feb. 28, 1997)]. In that 

adopting release, the Commission stated that it was 

shortening the holding to reduce the cost of capital, 

lower the illiquidity discount given by companies 

raising capital in private placements, and increase 

the usefulness of the Rule 144 safe harbor. See id. 

at 9242. Additionally, the Commission stated that 

it did not believe that the shorter holding periods 

would diminish investor protection because the 

holding periods were still sufficiently long to 

ensure that resales under Rule 144 would not 

facilitate indirect public distributions of 

unregistered securities by issuers or affiliates. 

19See Revisions to Rules 144 and 145, Release 

No. 33–8869 (Dec. 6, 2007) [72 FR 71546 (Dec. 17, 

2007)] (‘‘2007 Adopting Release’’). In the 2007 

Adopting Release, the Commission eliminated the 

bifurcated holding periods for affiliates and nonaffiliates, and added different holding periods for 

reporting and non-reporting issuers because nonreporting issuers are not obliged to file periodic 

reports with updated financial information that are 

publicly available on EDGAR. 

20See id. 

21See 1972 Adopting Release, supra note 7, at 

597. 

22See 2007 Adopting Release, supra note 19, at 

71555. 

23See infra Section II.B.1; see also, Convertible 

Securities, U.S. Sec. & Exchange Commission (last 

visited Dec. 18, 2020), available at https://

www.sec.gov/fast-answers/ 

answersconvertibleshtm.html. 

24For example, the conversion or exchange rate 

of the overlying convertible securities into the 

underlying equity securities may be discounted 

from a weighted average price of the publicly traded 

class of securities, typically, common stock, 

calculated for a period leading up to the date of 

conversion or exchange. Therefore, the conversion 

price provides a discount from the recent market 

price that can be realized at the time sales of the 

underlying equity securities begin. 

25See 1972 Adopting Release, supra note 7. 

26Prior to conversion or exchange, a holder of 

market-adjustable securities is at risk of bankruptcy 

of the issuer. However, this risk is borne for a 

briefer duration currently than when Rule 144 was 

originally adopted because of the shortened holding 

periods. 

27This period of time can be very limited because 

the discounted equity securities acquisition, 

through conversion or exchange, and the marketpriced sales can occur almost simultaneously. For 

example, when the applicable holding period ends, 

the holder may demand that the issuer issue the 

required number of underlying securities at the 

discounted conversion or exchange price and 

concurrently sell those securities at market prices. 

The underlying securities are received from the 

issuer in time to settle the sales at market prices 

made earlier. 

limited sales of restricted securities.16

Later changes to the rule established a 

separate three-year holding period for 

unlimited sales of restricted securities 

by non-affiliates of the issuer.17 In 1997, 

the Commission shortened the holding 

periods for restricted securities to oneyear and two-year periods, 

respectively.18 In 2007, the Commission 

adopted the current holding periods of 

six months for reporting issuers and one 

year for non-reporting issuers based on 

its observations of Rule 144’s 

application since 1997 and its desire 

that the holding period be no longer 

than necessary nor impose any 

unnecessary costs or restrictions on 

capital formation.19 By reducing the 

holding periods for restricted securities, 

the Commission intended to help 

companies to raise capital more easily 

and less expensively.20

Rule 144 contains ‘‘tacking’’ 

provisions in specified situations that 

allow holders to count other holding 

periods—either of prior owners of the 

securities or of different securities 

owned by the holders—to satisfy their 

holding period requirement. One 

situation where Rule 144 permits 

tacking of the holding period involves 

convertible securities. Rule 144(d)(3)(ii) 

allows securities acquired solely in 

exchange for other securities of the same 

issuer to be deemed to have been 

acquired at the same time as the 

securities surrendered for conversion or 

exchange. A variation of this provision 

has existed since 1972,21 and the 

current version of this provision was 

adopted in 2007.22

c. Market-Adjustable Securities 

Transactions 

A typical convertible security, for 

example a convertible bond, a 

convertible promissory note, or 

convertible preferred stock, can be 

converted into a different security, such 

as shares of the issuer’s common stock, 

under specified terms and conditions.23

In a conventional convertible security 

transaction, the conversion formula is 

generally fixed, such that the 

convertible security converts into 

common stock based on a conversion 

price that is fixed at the time the 

convertible security is sold and remains 

at that fixed price through its 

conversion. Convertible securities may 

contain mechanical adjustments to the 

number of underlying shares and the 

conversion price upon the occurrence of 

events such as splits, dividends, or 

other distributions on the underlying 

securities. They also may contain antidilution provisions designed to protect 

the holder’s economic interest if the 

issuer subsequently issues shares of the 

underlying securities at a price below 

their current market value or below the 

holder’s original purchase price. The 

terms of market-adjustable securities, 

however, go beyond these typical 

adjustments and anti-dilution 

provisions to adjust for, and protect the 

holder against, general decreases in 

market value of the underlying 

securities.24

While the holder of a typical 

convertible security is at substantial 

economic risk upon conversion with 

respect to the underlying security if the 

underlying security fails to appreciate or 

declines in value, this is not the case in 

market-adjustable securities transactions 

where the conversion or exchange price 

and/or the amount of securities received 

on conversion are not fixed at the time 

of the initial transaction. In these 

transactions, holders have the right to 

convert the securities into the 

underlying securities (often shares of 

common stock) at a conversion price 

that yields a substantial discount to the 

market price of the underlying securities 

at the time of conversion or exchange. 

If the securities are converted or 

exchanged after the Rule 144 holding 

period is satisfied, the underlying 

securities may be sold quickly into the 

public market at prices above the price 

at which they were acquired. 

Accordingly, initial purchasers or 

subsequent holders have an incentive to 

purchase the market-adjustable 

securities with a view to distribution of 

the underlying securities following 

conversion to capture the difference 

between the built-in discount and the 

market value of the underlying 

securities. As noted above, when a 

holder purchases with a view to 

distribution, it is acting as an 

underwriter and is unable to rely on the 

Section 4(a)(1) exemption from 

registration. 

A holding period is essential to assure 

that purchasers have assumed the 

economic risks of investment, and 

therefore, are not acting as conduits for 

sale to the public of unregistered 

securities, directly or indirectly, on 

behalf of an issuer.25 The discounted 

conversion or exchange features in 

market-adjustable securities typically 

provide holders with protection against 

investment losses that would occur due 

to declines in the market value of the 

underlying securities prior to 

conversion or exchange. As a result, 

these holders are not exposed to the 

market risk associated with holding the 

underlying security prior to conversion 

or exchange; 26 they are only exposed to 

that market risk during the time that 

they hold the underlying security after 

the conversion or exchange.27 In these 

circumstances, holders that convert and 

promptly resell the underlying security 

in order to secure a profit on the sale 

based on the built-in discount have not 

assumed the economic risks of 

investment of the underlying security. 

Therefore, under Rule 144’s current 


khammond on DSKJM1Z7X2PROD with PROPOSALS
Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 5067 

28Nothing in this proposed amendment is 

intended to impact the availability of the Securities 

Act Section 3(a)(9), 15 U.S.C. 77c(a)(9), exemption 

from registration for such conversions or exchanges 

as long as the requirements of Section 3(a)(9) are 

otherwise met. 

29See, e.g., Section 312.03(c) of the New York 

Stock Exchange LLC Listed Company Manual 

(requiring shareholder approval of any issuance of 

securities in any transaction or related transactions 

relating to 20 percent or more of a listed company’s 

stock before the issuance) and Nasdaq Stock Market 

LLC Listing Rule 5635(d) (requiring shareholder 

approval prior to an issuance or potential issuance 

by a company of common stock (or securities 

convertible into or exercisable for common stock), 

which alone or together with sales by officers, 

directors, or certain other shareholders equals 20 

percent or more of the common stock or 20 percent 

or more of the voting power outstanding before the 

issuance at a price that is less than the certain, 

minimum price). 

30 In addition to lacking the disclosure and 

liability protections that registration provides, 

market-adjustable securities may result in extreme 

dilution to holders of the underlying securities, 

especially when the conversions or exchanges occur 

in tranches at subsequently lower market prices. 

31 In addition to this amendment, due to current 

Federal Register formatting requirements we are 

also proposing a technical change to move the rest 

of Rule 144’s Preliminary Note to a note that 

immediately follows the rule. Neither new Rule 

144(b)(3) nor this technical change would alter the 

substance of the Preliminary Note. 

formulation, holders are able to 

purchase market-adjustable securities 

with a view to distribution while still 

satisfying the holding period 

requirements and tacking period 

provisions of Rule 144. 

Permitting the holding period of the 

underlying securities to be ‘‘tacked’’ 

onto the holding period of the 

convertible or exchangeable security 

allows the initial holders of marketadjustable securities to structure 

transactions without significant 

economic risk prior to conversion. The 

structure of these transactions 

incentivizes purchases with a view to 

distribution because, by selling the 

underlying securities into the market 

promptly after conversion, holders of 

market-adjustable securities can capture 

the value of the built-in discount to the 

then-current market value. This is 

inconsistent with the purpose of Rule 

144 to provide a safe harbor for 

transactions that are not distributions of 

securities. These unregistered 

transactions pose the risk that 

distributions of securities will reach the 

public markets without the same level 

of disclosure and liability protections 

that registration provides to investors. 

2. Proposed Amendment 

We are proposing to amend Rule 

144(d)(3)(ii) to provide that the holding 

period for the securities acquired upon 

conversion or exchange of certain 

market-adjustable securities issued by 

unlisted issuers would not begin until 

conversion or exchange.28 The proposed 

amendment would be limited to 

unlisted issuers because national 

securities exchanges registered pursuant 

to Section 6 of the Exchange Act have 

certain listing requirements, such as 

requiring shareholder approval of an 

issuance of 20 percent or more of a 

company’s common stock. Because 

market-adjustable securities have the 

potential to result in highly dilutive 

issuances of large amounts of the 

issuer’s securities, these required 

approvals are not likely to be granted in 

the situations the amendment is 

intended to address.29

We have also observed that issuers 

that are able to satisfy the listing criteria 

of these exchanges have generally not 

been engaging in these transactions. The 

proposed amendment is intended to 

avoid the potential under the current 

Rule 144 safe harbor for holders to 

acquire market-adjustable securities 

with a view to an unregistered 

distribution of the underlying securities 

acquired upon their conversion or 

exchange, resulting in significant resales 

of the underlying securities without 

investors having the benefit of 

registration.30

The proposed amendment would not 

affect the use of Rule 144 for most 

convertible or variable-rate securities 

transactions. The proposed amendment 

would apply only to market-adjustable 

securities transactions where: 

• The newly acquired securities were 

acquired from an issuer that, at the time 

of the conversion or exchange, does not 

have a class of securities listed, or 

approved for listing, on a national 

securities exchange registered pursuant 

to Section 6 of the Exchange Act; and 

• The convertible or exchangeable 

security contains terms, such as 

conversion rate or price adjustments, 

that offset, in whole or in part, declines 

in the market value of the underlying 

securities occurring prior to conversion 

or exchange, other than terms that 

adjust for stock splits, dividends, or 

other issuer-initiated changes in its 

capitalization. 

We believe the proposed amendment 

would reduce the potential for 

unregistered distributions because after 

the conversion or exchange of the 

overlying convertible securities, the 

underlying securities would need to be 

held for the applicable Rule 144 holding 

period before they would be eligible for 

resale under the Rule 144 safe harbor. A 

holder who has held the underlying 

securities for the entire six months or 

one year, as applicable, during which 

period market adjustments are no longer 

available, is generally appropriately 

excluded from the definition of an 

underwriter. 

While we believe the proposed 

amendment would mitigate the risk of 

unregistered distributions in connection 

with market-adjustable securities 

transactions, we also emphasize that the 

Rule 144 safe harbor is not available to 

any person with respect to any 

transaction or series of transactions that 

is part of a plan or scheme to evade the 

registration requirements of the 

Securities Act, as currently stated in the 

Preliminary Note to Rule 144. We 

propose to move this statement to new 

paragraph (b)(3) of Rule 144 so that the 

statement is explicitly included in the 

rule text.31

Request for Comment 

1. Should we amend Rule 144(d)(3)(ii) 

as proposed? 

2. Should the rule only apply if the 

issuer is an ‘‘unlisted issuer’’ at the time 

of conversion or exchange, as proposed? 

Or should the determination of whether 

an issuer is unlisted be made at the time 

the holder buys the market-adjustable 

security, the time of the resale of any of 

the underlying equity securities, or 

some other time? Should the 

determination be made both at the time 

of the purchase of the market-adjustable 

security and at the time of the 

conversion or exchange, or some other 

combination of times? 

3. Is the description of marketadjustable securities in proposed Rule 

144(d)(3)(ii) sufficient to achieve the 

purpose of the proposal? If not, how 

should we modify the description? 

4. Should we define the securities that 

would be subject to the proposed rules 

more narrowly or more broadly? If so, 

how? We do not intend for adjustments 

for recapitalizations, stock or cash 

dividends, or other anti-dilution 

adjustments that apply to issuerinitiated actions, to be considered the 

type of adjustments that would cause a 

security to be considered a marketadjustable security. However, are there 

specific additional factors or 

clarification that we should provide in 

the rule to indicate when a transaction 

may be considered a market-adjustable 

securities transaction? 

5. As an alternative to the proposed 

amendment to Rule 144(d)(3)(ii), should 

we amend Rule 144(d)(1)(i) to increase 

from six months to one year (or some 

other period) the holding period that 

would apply to the market-adjustable 

securities that are issued by reporting, 

unlisted issuers? Should we amend Rule 

144(d)(1)(i) to increase the holding 

period to one year (or some other 

period) for these market-adjustable 


khammond on DSKJM1Z7X2PROD with PROPOSALS
5068 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 

32See Rule 144(h). 

33See Rule 144(a)(1) (defining ‘‘affiliate of the 

issuer as a person who directly, or indirectly 

through one or more intermediaries, controls, or is 

controlled by, or is under common control with, the 

issuer). 

34 In April 2020, in recognition of several 

logistical difficulties related to the submission of 

Form 144 in paper pursuant to Rules 101(b)(4) or 

101(c)(6) of Regulation S–T, as well as ongoing 

health and safety concerns related to COVID–19, the 

Division of Corporation Finance provided 

temporary no-action relief that specified that it 

would not recommend enforcement action to the 

Commission if Forms 144 for the period from and 

including April 10, 2020 to June 30, 2020 were 

submitted as a complete PDF attachment and 

emailed to the Commission in lieu of filing the form 

in paper. Subsequently, on June 25, 2020, the 

Division of Corporation Finance updated this noaction relief by indefinitely extending it from the 

period beginning on April 10, 2020. See Division of 

Corporation Finance Statement Regarding 

Requirements for Form 144 Paper Filings in Light 

of COVID–19 Concerns, U.S. Sec. & Exchange 

Comm’n (June 25, 2020), available at https://

www.sec.gov/corpfin/announcement/form-144- 

paper-filings-email-option-update. 

35The paper filings of Form 144 are retained in 

the Commission’s public reference room for a 

period of 90 days. Investors or other interested 

parties wishing to access and review a Form 144 

filed in paper must do so in person at our public 

reference room or subscribe to a third party 

information service that records and distributes the 

information electronically after a paper Form 144 is 

filed. Due to pandemic conditions, prospective data 

users cannot, at this time, access the Commission’s 

public reference room. Therefore, access to paper 

filings is limited to those records which have been 

obtained and incorporated by vendor databases. 

36An affiliate, however, would be able to file the 

form in paper pursuant to a temporary hardship 

exemption under 17 CFR 232.201 (Rule 201 of 

Regulation S–T) if the affiliate experiences 

unanticipated technical difficulties preventing the 

timely preparation and submission of the electronic 

filing. 

37Many exchanges have rules or guidance that 

specify that it is not necessary for a company listed 

on the exchange to provide it with physical copies 

of any documents that the company has filed on 

EDGAR. See, e.g., New York Stock Exchange Listed 

Company Regulation Guidance Memo, N.Y. Stock 

Exch. (Feb. 20, 2018), available at https://

www.nyse.com/publicdocs/nyse/regulation/nyse/ 

2018_Listed_Company_Regulation_Guidance_

Memo.pdf. 

38For purposes of Form 144, we have determined 

that we can achieve our regulatory objectives 

without the PII. Furthermore, the IRS identification 

number of the issuer is redundant as this 

information is required to be disclosed on the cover 

securities in addition to amending Rule 

144(d)(3)(ii) as proposed? 

6. Are there alternative approaches 

that we should consider that would 

better mitigate the risk of unregistered 

distributions of securities acquired upon 

the conversion or exchange of marketadjustable securities? 

7. Should market-adjustable securities 

of both listed and unlisted issuers be 

covered by the amendment to Rule 

144(d)(3)(ii) rather than only those of 

unlisted issuers, as proposed? Do an 

exchange’s listing criteria provide 

sufficient safeguards against the type of 

transaction that the proposal seeks to 

address? If not, are there alternatives 

that we should consider? 

8. Should the proposed amendment to 

Rule 144(d)(3)(ii) only apply to issuers 

that do not have a class of equity 

security listed on an exchange, rather 

than to issuers that do not have any 

class of security listed on an exchange, 

as proposed? 

9. Are there any additional 

amendments or changes to the proposed 

amendments that we should consider 

that would help achieve the purposes of 

the proposal? 

C. Proposed Amendment to the Form 

144 Filing Requirements 

1. Background 

Form 144 is a notice form that must 

be filed with the Commission by an 

affiliate of an issuer who intends to 

resell restricted or control securities 32

of that issuer in reliance upon Securities 

Act Rule 144.33 Under Securities Act 

Rule 144(h), an affiliate who intends to 

resell securities of the issuer during any 

three-month period in a transaction that 

exceeds either 5,000 shares or has an 

aggregate sales price of more than 

$50,000 must file a Form 144 

concurrently with either the placing of 

an order with a broker to execute the 

sale or the execution of a sale directly 

with a market maker. 

Rule 101(b) of Regulation S–T permits 

Form 144 to be filed electronically or in 

paper if the issuer of the securities is 

subject to Exchange Act reporting 

requirements. If the issuer of the 

securities is not subject to Exchange Act 

reporting requirements, Rule 101(c)(6) 

of Regulation S–T requires Form 144 to 

be filed in paper.34 During the 2019 

calendar year, the Commission received 

over 31,000 Form 144 filings. Based on 

an analysis of these filings, Commission 

staff estimates that approximately 99 

percent related to the resale of securities 

of issuers subject to Exchange Act 

reporting requirements. Although most 

of these Form 144 filings can be made 

electronically, during the 2019 calendar 

year, only 221 Form 144 filings were 

made electronically and the vast 

majority were filed in paper.35

2. Proposed Amendments 

a. Mandatory Electronic Filing of Form 

144 

Since the Commission’s 

implementation of the Electronic Data 

Gathering, Analysis, and Retrieval 

system (‘‘EDGAR’’), we have sought to 

make the system more comprehensive 

by subjecting more filings to our 

mandated electronic filing 

requirements. The mandated electronic 

submission of documents required to be 

filed with the Commission has enabled 

investors, market participants, and other 

EDGAR users to access more quickly the 

information contained in registration 

statements, periodic reports, and other 

filings made with the Commission. We 

are proposing rule amendments that 

would mandate the electronic filing of 

Form 144 and eliminate the paper filing 

option. Specifically, we propose to 

amend Rules 101(a) and 101(b) of 

Regulation S–T to mandate the 

electronic filing of all Form 144 filings 

for the sale of securities of Exchange Act 

reporting companies. 

Mandating the electronic filing of 

Form 144 would facilitate more efficient 

storage and retrieval of the transaction 

information and facilitate analysis of 

this information. In addition, as 

described in more detail below, Form 

144 filers would benefit from the 

planned EDGAR changes to make the 

form an online fillable document that 

would make electronic filing easier. 

Under the proposed amendments, 

affiliates of an issuer that is subject to 

Exchange Act reporting who resell or 

expect to resell securities in reliance 

upon Rule 144 in an amount exceeding 

the Form 144 filing thresholds would be 

required to file a Form 144 

electronically on EDGAR.36 Any Form 

144 filer who has not previously made 

an electronic filing on EDGAR would 

need to apply for EDGAR access in 

accordance with the EDGAR Filer 

Manual in order to file documents on 

EDGAR. We are also proposing to 

provide a six-month transition period 

after the effective date of the 

amendments to Regulation S–T to give 

Form 144 paper filers who would be 

first-time electronic filers sufficient time 

to apply for codes to make filings on 

EDGAR. 

In addition, we propose to amend 

Rule 144(h)(1) to delete the requirement 

that an affiliate send one copy of the 

Form 144 notice to the principal 

exchange, if any, on which the restricted 

securities are admitted to trading. This 

provision was designed for Form 144 

filings made in paper and will no longer 

be needed if we mandate the electronic 

filing of Form 144.37

We are also proposing minor changes 

to Form 144 to update the form and 

eliminate certain personally identifiable 

information (‘‘PII’’) and immaterial 

information fields that are unnecessary. 

Specifically, we propose to delete the 

fields requiring the home address of the 

person for whose account the securities 

are to be sold and the IRS identification 

number of the issuer of the securities.38


khammond on DSKJM1Z7X2PROD with PROPOSALS
Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 5069 

page of registration statements and periodic reports 

and would be available through these forms. 

39We are proposing to amend the filing deadline 

for Form 144 to facilitate the simultaneous filing of 

Form 144 and Form 4. See infra Section II.B.2.c. 

40Consistent with the exception to the Form 4 

two-business day filing deadline provided in 

Exchange Act Rule 16a–3(g)(2)(i) [17 CFR 240.16a– 

3(g)(2)(i)], the proposed amendments provide that if 

the transaction is pursuant to a contract, instruction 

or written plan that satisfies the affirmative defense 

conditions of Exchange Act Rule 10b5–1(c), and the 

affiliate does not select the date of execution, the 

date on which the executing broker, dealer notifies 

the security holder of the execution of the 

transaction is deemed the date of execution for a 

transaction. 

41To better reflect the proposed change to the 

Form 144 filing deadline, we also propose to revise 

the title of Form 144 to read: ‘‘Notice of sale or 

proposed sale of securities pursuant to Rule 144 

under the Securities Act of 1933.’’ We are also 

proposing a conforming amendment to Instruction 

3(d) to Form 144 to clarify that the filer should 

provide the total sales proceeds for completed sales 

rather than the aggregate market value for sales that 

have not yet been completed. 

42See 1972 Adopting Release, supra note 7, at 

595. 

43See Resales of Securities, Release No. 33–6252 

(Oct. 24, 1980) [45 FR 72685 (Nov. 3, 1980)] at 

72686. 

44See, e.g., 1981 Adopting Release, supra note 17, 

at 12197 (amending Rule 144 to relieve nonaffiliates from the Form 144 filing requirement and 

explaining that the ‘‘costs and burdens of the 

requirement outweigh its usefulness, at least in this 

area’’). 45See infra Section I.C.1. 

We intend to provide an online 

fillable document on EDGAR for 

entering information required by Form 

144 and to streamline the electronic 

filing process for those filing both a 

Form 144 and a Form 4 to report the 

same sale of equity securities, as 

discussed in more detail below. In 

connection with these changes, we are 

also proposing to amend the Form 144 

filing deadline to coincide with the 

Form 4 filing deadline.39 Specifically, 

we propose to amend Securities Act 

Rule 144(h)(2) to revise the filing 

deadline to require that a Form 144 be 

filed before the end of the second 

business day following the day on 

which the sale of securities has been 

executed or the deemed date of 

execution 40 rather than have it due 

concurrently with either the placing of 

an order with a broker to execute the 

sale or the execution of a sale directly 

with a market maker, as currently 

required. 

The proposed amendment to the Form 

144 filing deadline would facilitate this 

new filing process. This filing deadline 

would apply to all Forms 144, 

regardless of whether a Form 4 also 

needs to be filed for the same 

transaction.41 The proposal therefore 

would provide all Form 144 filers more 

time to file the form, yet would 

generally result in the Form 144 

becoming publicly available earlier than 

under the existing filing deadline 

because the Form 144 would be filed 

electronically rather than mailed to the 

Commission in paper at the time the 

sale is executed. The proposed filing 

deadline, however, would not preclude 

filers from filing a Form 144 

concurrently with either the placing of 

an order to execute a sale with a broker, 

or the execution of a sale directly with 

a market maker. 

Finally, we observe that the 

Commission considered Rule 144 to be 

in the nature of an experiment at the 

time of its adoption in 1972.42 The 

Commission has used Form 144 filings 

to monitor the operation of the rule and 

as an enforcement tool to assist in the 

detection of abuses.43 Since the 

Commission initially adopted the Rule 

144 requirements, the Commission has 

amended the rule to eliminate certain 

Form 144 filing requirements.44 While, 

at this time, we are not proposing the 

elimination of the current Form 144 

filing requirement for sales of securities 

by affiliates of issuers that are subject to 

Exchange Act reporting, we are 

soliciting comment on the continued 

utility of Form 144 filings. 

Request for Comment 

10. Do investors or other market 

participants have an interest in the 

information provided by Form 144? 

Does Form 144 provide important 

information that would not otherwise be 

publicly available? Do investors or other 

market participants obtain benefits from 

this information? If so, please describe 

the benefits. 

11. How do market participants and 

the public currently access Form 144 

information? Should we mandate the 

electronic filing of Form 144 for 

affiliates’ sales of securities of issuers 

that are subject to Exchange Act 

reporting and that exceed the thresholds 

in Rule 144(h), as proposed? Would 

electronic filing of Form 144 make those 

forms more readily accessible to the 

public? Would electronic filing result in 

cost savings? Given that the majority of 

Form 144 filings are made in paper, has 

the inability to access the paper Forms 

144 filed during the pandemic had any 

effect on the usefulness of this 

information to market participants and 

the public? 

12. Should we, as proposed, amend 

Rule 144(h)(1) to eliminate the 

requirement that an affiliate send one 

copy of the Form 144 notice to the 

principal exchange, if any, on which the 

restricted securities are admitted to 

trading? 

13. Should we amend Form 144 to 

update the form and eliminate certain 

information, as proposed? Is there any 

other information in Form 144 that we 

should remove because it is unnecessary 

to further the purposes of Rule 144? Is 

there any other information that should 

be included in the form? 

14. Should we instead continue to 

permit a Form 144 filer to have the 

option of filing in paper or 

electronically? 

15. In the alternative, should we 

eliminate the Form 144 filing 

requirement altogether? 

16. Is the proposed six-month 

transition period appropriate? Would a 

shorter or longer transition period be 

more appropriate (e.g., three months, 

nine months)? 

17. Is it common for Form 144 filers 

to use a filing agent or a third party such 

as a broker to prepare and submit the 

Form 144 filing? If so, would the 

proposed amendments create any 

difficulties in the filing process or add 

costs to the process? 

18. Should we amend the Form 144 

filing deadline to coincide with the 

Form 4 filing deadline, as proposed? If 

not, should we change the deadline in 

some other way? 

19. If we mandate the electronic filing 

of Form 144 without amending the 

filing due date, the Form 144 

disclosures would be available to 

investors and other EDGAR users more 

quickly than if we amend the Form 144 

filing deadline to coincide with the 

Form 4 filing deadline. Should we 

maintain the existing Form 144 filing 

deadline that requires the form to be 

transmitted for filing concurrently with 

either the placing with a broker of an 

order to execute a sale of securities in 

reliance on the rule or execution of the 

sale directly with a market maker? Is 

there a benefit to having the Form 144 

filed at an earlier date than a Form 4 

that reports the same sale? If so, how 

does that benefit compare to the 

efficiencies that a filer subject to both 

the Form 144 and Form 4 requirements 

could realize from being able to file both 

forms simultaneously? 

b. Eliminating Form 144 Filing 

Requirement for Investors Selling 

Securities of Non-Reporting Issuers 

As noted above, the Commission staff 

estimates that approximately one 

percent of the Form 144 filings made 

during the 2019 calendar year related to 

the resale of securities of issuers that are 

not subject to Exchange Act reporting.45

The proposed amendments discussed 

above that would mandate the 

electronic filing of a Form 144 notice for 

the securities of an Exchange Act 


khammond on DSKJM1Z7X2PROD with PROPOSALS
5070 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 

46See Electronic Filing, Processing and 

Information Dissemination System, Release No. 33– 

6519 (Mar. 22, 1984) [49 FR 12707 (Mar. 30, 1984)]. 47See 17 CFR 240.17a-3 and 17 CFR 240.17a-4. 48See 17 CFR 240.17a-4(j). 49See 17 CFR 230.144(g)(4) (Rule 144(g)(4)). 

50See letter from OTC Markets Group Inc. (dated 

Sept. 24, 2019), available at https://www.sec.gov/ 

comments/s7-08-19/s70819-6193364-192517.pdf, 

which was submitted in response to the Concept 

Release on Harmonization of Securities Offerings 

Exemptions, Release No. 33–10649 (Jun. 18, 2019) 

[84 FR 30460 (Jun. 26, 2019)] (recommending ‘‘prepublication’’ of Form 144 so that the information 

contained in it is publicly available for the purposes 

of rule 144(c)(2)). See also U.S. Sec. & Exch. 

Comm’n, Report on the 39th Annual Small Business 

Forum 31 (2020) (recommending ‘‘pre-publication’’ 

of Form 144), available at https://www.sec.gov/files/ 

2020-oasb-forum-report-final_0.pdf. 

51See 17 CFR 240.15c2–11. Rule 15c2– 

11(b)(5)(i)(N) requires information about whether 

the broker or dealer or any associated person of the 

broker or dealer is affiliated, directly or indirectly, 

with the issuer. Rule 15c2–11(b)(5)(i)(P) requires 

information about whether the quotation is being 

submitted or published, directly or indirectly, by or 

on behalf of the issuer or a company insider and, 

if so, the name of such person and the basis for any 

exemption under the Federal securities laws for any 

sales of such securities on behalf of such person. 

In the recently adopted amendments to Rule 15c2– 

11, the prior references to Rule 15c2–11(a)(5)(xiv) 

and (a)(5)(xvi) were changed to (b)(5)(i)(N) and 

(b)(5)(i)(P). See Publication or Submission of 

Quotations Without Specified Information, Release 

No. 33–10842 (Sept. 16, 2020) [85 FR 68124 (Oct. 

27, 2020)]. 

52 15 U.S.C. 78l. 

53 17 CFR 240.16a–3. 

54The Sarbanes-Oxley Act of 2002 [Public Law 

107–204, 116 Stat. 745] amended Section 16(a) to 

require insiders to file Form 4 before the end of the 

second business day following the day on which 

the subject transaction has been executed or at such 

other time as the Commission shall establish if the 

reporting issuer would reduce a large 

majority of the paper Form 144 filings 

that the Commission receives. Although 

one of the primary goals of EDGAR is to 

facilitate the dissemination of financial 

and business information contained in 

Commission filings,46 given the limited 

number of paper Form 144 filings 

related to non-reporting issuers that we 

receive, we believe that the benefits of 

having this information filed 

electronically would not justify the 

burdens on filers. For this reason, we 

are proposing to amend Rule 144 and 

Rule 101(c)(6) of Regulation S–T to 

require affiliates relying on Rule 144 to 

file a notice of sale on Form 144 only 

when the issuer of the securities is 

subject to the reporting requirements of 

Section 13 or 15(d) of the Exchange Act. 

Form 144 provides the Commission, 

among other things, with information 

concerning the issuer, the person on 

whose behalf the securities are to be 

sold, the broker who will execute the 

sale order, the securities to be sold, the 

approximate date of sale, and other 

securities of the same issuer sold during 

the past three months. The form, 

however, is not the sole source of 

information available to the 

Commission regarding resale 

transactions under the rule. For 

example, brokers are generally required 

to make and maintain records, for a 

period of time, of all purchases and 

sales of securities 47 and to furnish 

promptly legible, true, complete, and 

current copies of those records upon 

request by a representative of the 

Commission.48 In addition, brokers that 

execute a sale under Rule 144 must 

conduct a reasonable inquiry to 

determine that the person for whose 

account the securities are sold is not an 

underwriter or that the transaction is 

not part of a distribution of securities of 

the issuer.49

Although the Form 144 filing 

requirement would be eliminated for 

resales of securities by affiliates of 

issuers that are not subject to Exchange 

Act reporting, the proposed 

amendments to eliminate the Form 144 

filing requirement would not change 

any of the other conditions of the Rule 

144 safe harbor. 

Request for Comment 

20. Should we eliminate the Form 144 

filing requirement for affiliates’ sales of 

securities of non-reporting companies, 

as proposed? Does Form 144 provide 

important information concerning the 

resale of securities of non-reporting 

issuers that would not otherwise be 

publicly available to investors or other 

users of this information? Do investors 

or market participants currently rely on 

Form 144 for this information or do they 

rely on other publicly available sources? 

If so, which other public sources are 

relied upon? 

21. Do investors have an interest in 

the information provided by Form 144 

regarding the resale of securities of nonreporting issuers? Do investors or 

market participants obtain benefits from 

this information? If so, please describe 

the benefits. 

22. We have received comments 

indicating that the information 

contained in Form 144 could be used to 

satisfy some of the public information 

requirements in Rule 144(c)(2),50 in 

particular the information specified in 

Rule 15c2–11(b)(5)(i)(N) and 

(b)(5)(i)(P).51 For the purpose of Rule 

144(c)(2), is the Rule 15c2–11 

information specified in paragraphs 

(b)(5)(i)(N) and (b)(5)(i)(P) publicly 

available from other sources? If so, 

which sources? 

23. Rule 15c2–11 does not require that 

the information specified in paragraphs 

(b)(5)(i)(N) and (b)(5)(i)(P) of Rule 15c2– 

11 be publicly available but requires, in 

certain circumstances, that a brokerdealer make it available upon request of 

a person expressing an interest in a 

proposed transaction in the issuer’s 

security. Rule 144(c)(2) requires the 

information specified in these 

paragraphs to be publicly available. 

Should we amend Rule 144(c)(2) to 

require the information in these 

paragraphs to be available upon request 

in accordance with the provisions of 

Rule 15c2–11(b)(5)(ii) instead of 

publicly available? 

24. How do the costs of electronically 

filing a Form 144 notice related to the 

resale of securities of a non-reporting 

issuer compare with the benefits of 

having the form available on EDGAR? 

c. Filing Options for Form 4 and Form 

144 

Section 16 of the Exchange Act 

applies to every person who is the 

beneficial owner of more than 10 

percent of any class of equity security 

registered under Section 12 of the 

Exchange Act 52 and each officer and 

director (collectively, ‘‘reporting 

persons’’ or ‘‘insiders’’) of the issuer of 

the security. Upon becoming a reporting 

person, or upon the Section 12 

registration of that class of securities, 

Section 16(a) requires a reporting person 

to file an initial report with the 

Commission disclosing the amount of 

his or her beneficial ownership of all 

equity securities of the issuer. To keep 

this information current, Section 16(a) 

also requires insiders to report changes 

in such ownership. Under Rule 16a–3 of 

the Exchange Act,53 insiders are 

required to report most changes in 

beneficial ownership, including 

purchases and sales of securities, on 

Form 4. 

As discussed above, Rule 144 requires 

an affiliate of an issuer to file a Form 

144 concurrently with either the placing 

with a broker of an order to execute a 

sale of securities in reliance upon Rule 

144 or the execution directly with a 

market maker of such a sale. Some of 

the disclosures required by Form 144 

duplicate the disclosure requirements of 

Form 4. For example, both Form 144 

and Form 4 require disclosure 

concerning the title of the class of 

securities being sold, the number of 

shares subject to sale, the aggregate 

market value of those shares, and the 

date of sale. 

Many affiliates of an issuer under 

Rule 144 are also insiders of that issuer 

under Section 16 of the Exchange Act. 

Affiliates selling securities under Rule 

144 often are required to file a Form 4 

within two business days after they file 

a Form 144 to report information 

regarding the same sale of securities.54


khammond on DSKJM1Z7X2PROD with PROPOSALS
Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 5071 

2-day period is not feasible. On August 27, 2002, 

the Commission adopted rule and form 

amendments to implement this filing deadline. See 

Ownership Reports and Trading by Officers, 

Directors and Principal Security Holders, Release 

No. 34–46421 (Aug. 27, 2002) [67 FR 56462 (Sept. 

3, 2002)]. 

55 17 CFR 230.145. See Revisions to Rule 144 and 

Rule 145, Release No. 33–8813 (June 22, 2007) [72 

FR 36822 (July 5, 2007)]. 

56 In the 2007 Adopting Release, the Commission 

stated that it expected to issue a separate release in 

the future to provide affiliates that are subject to 

both the Form 4 and Form 144 filing requirements 

with greater flexibility in satisfying their 

requirements. See 2007 Adopting Release, supra 

note 19, at 72 FR 71554 and 71555. 

57See Request for rulemaking to combine Form 

144 into Form 4, File No. 4–671 (Dec. 13, 2013) 

(requesting that the Commission amend its rules to 

combine Form 144 with Form 4), https://

www.sec.gov/rules/petitions/2013/petn4-671.pdf. 

The proposal, if adopted, would achieve the 

objectives sought by the petitioner. 

58Form 4 permits multiple insiders to file on a 

single form if they all have an interest in the 

transaction(s) being reported. Form 144, however, 

does not have a similar feature. 

59 17 CFR 239.500. 

60See 2007 Adopting Release, supra note 19. 

Exchange Act Rule 10b5–1 defines when a purchase 

or sale of a security constitutes trading ‘‘on the basis 

of’’ material nonpublic information in insider 

trading cases brought under Section 10(b) of the 

Exchange Act [15 U.S.C. 78j] and Rule 10b–5. 

Specifically, a purchase or sale of a security of an 

issuer is ‘‘on the basis of’’ material nonpublic 

information about that security or issuer if the 

person making the purchase or sale was aware of 

the material nonpublic information when the 

person made the purchase or sale. Rule 10b5–1(c) 

establishes affirmative defenses that permit a 

person to trade in circumstances where it is clear 

that the information was not a factor in the decision 

to trade. 

61 17 CFR 249.103. 

62Reporting persons sometimes provide 

additional disclosure in the ‘‘Explanation of 

Responses’’ portion of Form 4 indicating that a 

transaction satisfies the affirmative defenses 

conditions of Rule 10b5–1(c). For example, a 

reporting person may state that a transaction was 

made pursuant to a written trading plan and 

indicate the date the plan was adopted. 

63See 17 CFR 240.16a–3(g)(2) (Exchange Act Rule 

16a-3(g)(2)) and 17 CFR 240.16a–3(g)(4) (Exchange 

Act Rule 16a–3(g)(4)). If the notification date is later 

than the third business day following the trade date, 

the date of execution is deemed to be the third 

business day following the trade date. 

64Under the proposal, the check boxes on Forms 

4 and 5 would permit filers to indicate whether a 

transaction was made pursuant to a binding 

contract, instruction, or written trading plan for the 

purchase or sale of equity securities of the issuer 

that satisfies the conditions of Rule 10b5–1(c). This 

is broader than the representation on Form 144, 

which refers only to written trading plans and 

trading instructions, because the purpose of the 

proposed amendment is to simplify reporting for 

filers who provide Rule 10b5–1(c) transaction 

information in the ‘‘Explanation of Responses’’ 

portion of Forms 4 and 5, and some filers provide 

this information with respect to transactions made 

pursuant to binding contracts. 

In June 2007, the Commission issued 

a release proposing amendments to 

update Securities Act Rules 144 and 

145.55 In that release, the Commission 

discussed possible approaches to, and 

requested comment about, amending 

Form 144 and Form 4 in order to reduce 

duplicative requirements and 

coordinate the filing requirements of 

these two forms. The Commission 

ultimately did not adopt any 

amendments to the forms to reduce 

duplicative requirements.56 The 

Commission also has received a 

rulemaking petition requesting that the 

Commission revise its rules and 

regulations so that Form 144 be 

combined into Form 4 for persons that 

need to file both forms.57

If we adopt the proposed amendments 

to Form 144 discussed above, we intend 

to modify EDGAR to provide filers with 

the option to file a Form 144 and a Form 

4 through a single user interface. The 

system would use the information 

entered into the fields to create separate 

Form 4 and Form 144 filings. After the 

information is entered, a filer would 

have the opportunity to correct errors 

and verify the accuracy of the 

information before choosing to file one 

or both forms on EDGAR. Once the 

information is filed on EDGAR, the 

system would provide the filer with 

separate accession numbers for the 

Form 4 and Form 144 and also a return 

copy for both the Form 4 and Form 144 

shortly after filing. We believe these 

changes would make the filing of these 

forms more efficient for filers subject to 

both reporting requirements. This filing 

option, however, would not be available 

for a Form 4 filing that is made on 

behalf of multiple insiders.58

In addition, we would make Form 144 

available online as a fillable document 

that could be used by filers that do not 

have a corresponding Form 4 reporting 

obligation, as well as those who need to 

report the same sale on Form 4 and 

Form 144 but choose to enter the 

information separately for each form. 

An online fillable form would enable 

the convenient input of information, 

and support the electronic assembly of 

such information and transmission to 

EDGAR, without requiring a Form 144 

filer to purchase or maintain additional 

software or technology. The fillable 

form would be similar to other fillable 

forms that are currently available to file 

Forms D,59 3, 4, and 5. 

Request for Comment 

25. If the Commission adopts the 

proposed rules, should we enable the 

filing of a Form 4 and Form 144 on 

EDGAR through a single user interface? 

Would this option make the filing of 

these documents more efficient for 

filers? 

26. Are there alternative methods that 

we should consider that could reduce 

the duplicative requirements of Form 

144 and Form 4? 

d. Rule 10b5–1(c) Transaction 

Indication in Forms 4 and 5 

Form 144 requires a selling security 

holder to represent, as of the date that 

the form is signed, that he or she does 

not know any material adverse 

information in regard to the current and 

prospective operations of the issuer of 

the securities to be sold which has not 

been publicly disclosed. In 2007, we 

amended Form 144 to allow filers who 

satisfy Rule 10b5–1(c) by adopting a 

written trading plan or providing 

trading instructions to make that 

representation as of the date they 

adopted the plan or gave instructions, 

rather than the date they signed the 

Form 144.60

Exchange Act Rule 16a–3(g) provides 

that a reporting person must report 

specified changes in beneficial 

ownership on Form 4 before the end of 

the second business day following the 

date of execution for the transaction. In 

addition, Rule 16a–3(f) provides that 

every person who at any time during an 

issuer’s fiscal year was subject to 

Section 16 of the Exchange Act must file 

a Form 5 within 45 days after the 

issuer’s fiscal year end to disclose 

certain beneficial ownership 

transactions and holdings not reported 

previously on Forms 3,61 4, or 5. For 

transactions executed pursuant to a 

contract, instruction, or written plan for 

the purchase or sale of equity securities 

that satisfies the affirmative defense 

conditions of Rule 10b5–1(c) 62 and for 

which the reporting person does not 

select the date of execution, the date on 

which the executing broker, dealer, or 

plan administrator notifies the reporting 

person of execution of the transaction is 

deemed the date of execution, so long as 

the notification date is not later than the 

third business day following the trade 

date.63

We propose to permit a Form 4 filer, 

at the filer’s option, to indicate through 

a check box on the form that a sale or 

purchase reported on the form was 

made pursuant to Rule 10b5–1(c).We 

believe that the check box option would 

provide Form 4 filers with an efficient 

method to provide this disclosure. 

Consistent with current practice, filers 

could provide additional information, 

such as the date of a Rule 10b5–1 plan, 

in the ‘‘Explanation of Responses’’ 

portion of the form along with other 

relevant information about the 

transactions reported on the Form 4. We 

propose to add a similar checkbox to 

Form 5.64


khammond on DSKJM1Z7X2PROD with PROPOSALS
5072 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 

65Section 2(b) of the Securities Act, 15 U.S.C. 

77b(b), and Section 3(f) of the Exchange Act, 15 

U.S.C. 78c(f), require us, when engaging in 

rulemaking that requires us to consider or 

determine whether an action is necessary or 

appropriate in the public interest, to consider, in 

addition to the protection of investors, whether the 

action will promote efficiency, competition and 

capital formation. In addition, Section 23(a)(2) of 

the Exchange Act, 15 U.S.C. 78w(a)(2), requires us 

to consider the effects on competition of any rules 

that the Commission adopts under the Exchange 

Act and prohibits the Commission from adopting 

any rule that would impose a burden on 

competition not necessary or appropriate in 

furtherance of the purposes of the Exchange Act. 

66Marie Dutordoir et al., What We Do and Do Not 

Know About Convertible Bond Financing, 24 J. 

CORP. FIN. 3 (2014) (‘‘Dutordoir’’). 

67 Id.; see also Craig Lewis and Patrick 

Verwijmeren, Convertible Security Design and 

Contract Innovation, 17 J. CORP. FIN. 809 (2011). 

68See Dutordoir, supra note 66; see also Sudha 

Krishnaswami & Devrim Yaman, The Role of 

Convertible Bonds in Alleviating Contracting Costs, 

78 Q. REV. ECON. FIN. 942 (2008); Craig Lewis et 

al., Agency Problems, Information Asymmetries, 

and Convertible Debt Security Design, J. FIN. 

INTERMEDIATION (1998). 

69See Felix Ziedler et al., Risk Dynamics 

Surrounding the Issuance of Convertible Bonds, 18 

J. CORP. FIN. 273 (2012); Dutordoir, supra note 66; 

Craig Lewis et al., The Long-Run Performance of 

Firms that Issue Convertible Debt: An Empirical 

Analysis of Operating Characteristics and Analysts 

Forecasts, 7 J. CORP. FIN. 447 (2001). 

70See Eric Duca et al., Why are Convertible Bond 

Announcements Associated with Increasingly 

Negative Issuer Stock Returns? An Arbitrage-Based 

Explanation, 36 J. BANKING & FIN. 2884 (2012); 

see also Stephen Brown et al., Convertibles and 

Hedge Funds as Distributors of Equity Exposure, 25 

REV. FIN. STUD. 3077 (2012), and Darwin Choi et 

al., Convertible Bond Arbitrage, Liquidity 

Externalities, and Stock Prices, 91 J. FIN. ECON. 

227 (2009) 

71 In the empirical literature cited in the 

Economic Analysis section, the term ‘‘floating 

priced convertibles’’ is often used to denote the 

‘‘market-adjustable securities’’ referred to in this 

release. Other terms, such as ‘‘floating rate 

convertibles’’ or ‘‘future-priced convertibles,’’ also 

may be used in the literature referring to the same 

securities. 

72See Dutordoir, supra note 66. 

73See Austin Dwyer et al., An Investigation of 

Death Spiral Convertible Bonds, (Tenn. State Univ., 

Working Paper, 2018) (‘‘Dwyer et al.’’); Zachary T. 

Knepper, Future-Priced Convertible Securities and 

the Outlook for Death Spiral Securities-Fraud 

Litigation, 26 WHITTIER L. REV. 359 (2004); Pierre 

Hillion & Theo Vermaelen, Death Spiral 

Convertibles, 71 J. Fin. Econ. 381 (2004) (‘‘Hillion 

& Vermaelen’’) (examining 467 floating-priced 

convertibles issued over the 1994–1998 period and 

finding, among other things, that such convertibles 

are issued by younger, smaller, riskier issuers, for 

which adverse selection problems are potentially 

large.) 

74One common method that may provide such 

protection is the inclusion of a floating conversion 

rate. When the amount of securities to be received 

upon conversion of a convertible security is 

conditioned on the stock price performance of the 

issuer prior to conversion, the conversion ratio is 

known as a floating conversion rate. 

75For example, investors are exposed to risk 

during the pre-conversion period if the company 

becomes bankrupt and its stock price declines to 

zero value. 

Request for Comment 

27. Should we add a check box to 

Forms 4 and 5 to provide filers the 

option of disclosing that their sales or 

purchases were made pursuant to Rule 

10b5–1(c)? 

28. Should we instead require Form 4 

and Form 5 to indicate via a check box 

whether any of their reported 

transactions were made pursuant to 

Rule 10b5–1(c) rather than provide it as 

an option for the filer? 

29. Would a Rule 10b5–1(c) check box 

on Forms 4 and 5 provide useful 

information to investors and market 

participants? 

II. Economic Analysis 

A. Introduction 

The Commission is proposing 

amendments to Rule 144, Form 144, 

Form 4, Form 5, and Regulation S–T. 

We are mindful of the costs imposed by 

and the benefits obtained from our rules 

and the proposed amendments.65 The 

discussion below addresses the 

potential economic effects of the 

proposed amendments. These effects 

include the likely benefits and costs of 

the proposed amendments and 

reasonable alternatives thereto, as well 

as the potential effects on efficiency, 

competition, and capital formation. We 

attempt to quantify these economic 

effects whenever possible; however, due 

to data limitations, in many cases we are 

unable to do so. When we are unable to 

provide a quantitative assessment, we 

provide a qualitative discussion of the 

economic effects instead. 

Due to the differing nature of the 

proposed amendments’ baselines, 

affected parties, and anticipated 

economic effects, we provide separate 

analyses of the proposed changes. We 

first discuss the economic effects of the 

proposed amendments to the holding 

period for securities acquired upon 

conversion or exchange of certain 

market-adjustable securities issued by 

unlisted issuers, and then separately 

discuss the proposed amendments to 

Form 144, Form 4, Form 5, and 

Regulation S–T. 

B. Proposed Amendments to Holding 

Period for Market-Adjustable Securities 

1. Broad Economic Considerations 

The size of the market for all U.S.- 

issued convertible securities has 

historically been slightly less than half 

the size of the seasoned equity market 

and just less than one-tenth the size of 

the regular bond market.66 Despite this 

difference in size, it is generally 

understood that the market for 

convertible securities is an important 

and highly innovative market that can 

provide solutions to investment 

inefficiencies or barriers to capital 

formation that would otherwise occur if 

issuers were restricted to offerings of 

only non-hybrid securities.67 Studies 

have suggested that because convertible 

securities can mitigate certain agency 

problems, forms of adverse selection, 

overinvestment, and misallocation of 

risk, they enable firms to make 

investments in business opportunities 

that would otherwise be infeasible for 

those firms.68 Empirical evidence on the 

impact of these investments on longerterm firm value and shareholder wealth, 

however, is ambiguous on whether such 

investments represent efficient 

allocations of external financing.69

Interpreting the value of convertible 

bond financing from market outcomes 

like short-term stock returns or longterm stock price performance is further 

complicated by the increase in arbitrage 

hedge fund activity and arbitrage-related 

short-selling.70 Therefore, while there 

are a number of reasons why convertible 

securities can uniquely facilitate 

investments of economic value, it is 

difficult to generalize about their impact 

on shareholder wealth. 

Market-adjustable securities 71 are an 

innovation in the market for convertible 

securities dating back to the 1990s.72 By 

allowing the holder of the marketadjustable security to convert at 

discount to the market price (or a 

reference price based on recent market 

prices), the issuer can avoid the adverse 

selection problems it would face by 

offering equity or fixed-rate convertible 

securities instead. In practice, however, 

it does not appear that many issuers 

have taken advantage of this aspect of 

market-adjustable securities, and their 

use has been concentrated in the 

subpopulation of issuers who are unable 

to issue additional equity or fixed-rate 

convertibles, such as financially 

distressed firms, other low- or norevenue firms, and those approaching 

bankruptcy.73

The main economic characteristic of 

market-adjustable securities is that they 

may provide protection to the holder 

against declines in market value from 

the time of purchase of the overlying 

security until the time of conversion or 

exchange.74 Although the risk to 

investors from purchasing such a 

security is significantly lower than the 

risk associated with a convertible 

security with a fixed conversion rate, 

risks associated with the investment 

during the pre-conversion period still 

exist.75

We are proposing to amend Rule 

144(d)(3)(ii) to provide that the holding 

period for certain securities acquired 


khammond on DSKJM1Z7X2PROD with PROPOSALS
Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 5073 

76See Ming Dong et al., Why Do Firms Issue 

Convertible Bonds? 7 CRITICAL FIN. REV. 111 

(2018) (‘‘Dong et al.’’). See also Hillion & 

Vermaelen, supra note 73; Helgi Walker et al., 

Aggressive SEC Enforcement Actions Could Limit 

Small Business Recovery Resources, NATIONAL 

LAW JOURNAL (Aug. 20, 2020, 1:08 p.m.), 

available at https://www.gibsondunn.com/wpcontent/uploads/2020/08/Walker-GoldsmithSeibald-Richman-Aggressive-SEC-EnforcementActions-Could-Limit-Small-Business-RecoveryResources-NLJ-08-20-2020.pdf. 

77See Section I.B.2 

78This estimate is based upon staff review of all 

filers who submitted a 10–K, 20–F, 40–F, or an 

amendment thereto within calendar year 2019. 

Unlisted reporting issuers are identified by unique 

CIKs as those without a class of securities registered 

pursuant to Section 12(b) of the Exchange Act. 

Because of limitations in available data, we were 

unable to construct a reliable estimate of the 

number of unlisted, non-reporting issuers who may 

also be affected by the proposed amendments. We 

request information on such issuers in the Request 

for Comment. See infra Section II.B.6. 79This number is based on a search of Forms 8– 

K (17 CFR 249.308) filed by unlisted issuers that 

indicate the issuance of a convertible security that 

appears to have a floating conversion rate. If there 

are other issued securities by unlisted issuers that 

meet the definition of a market-adjustable security, 

the number reported represents a lower bound of 

the prevalence of such securities in the market. 80Although Rule 12b–2 defines the terms 

‘‘accelerated filer’’ and ‘‘large accelerated filer,’’ it 

does not define the term ‘‘non-accelerated filer.’’ If 

an issuer does not meet the definition of accelerated 

filer or large accelerated filer, it is considered a nonaccelerated filer. See Accelerated Filer and Large 

Accelerated Filer Definitions, Release No. 34–88365 

(Mar. 12, 2020) [85 FR 17178 (Mar. 26, 2020)] 

(Accelerated Filer Adopting Release), https://

www.sec.gov/rules/final/2020/34-88365.pdf 

81 ‘‘Smaller reporting company’’ is defined in 17 

CFR 229.10(f) as an issuer that is not an investment 

company, an asset-backed issuer (as defined in 17 

CFR 229.1101), or a majority-owned subsidiary of 

a parent that is not a smaller reporting company 

and that: (i) Had a public float of less than $250 

million; or (ii) had annual revenues of less than 

$100 million and either no public float, or a public 

float of less than $700 million. 

82 In calendar year 2019, all 106 identified 

unlisted reporting issuers of floating-rate 

convertibles self-identified as either a nonaccelerated filer, a smaller reporting company, or 

both. Insofar as recently adopted amendments to 

the definitions of accelerated filer and smaller 

reporting company will effect cost savings for 

issuers newly eligible as non-accelerated filers or 

smaller reporting companies, the ability to reinvest 

such savings in business operations may to some 

degree offset the potential increased costs of 

financing to issuers affected by the proposed 

amendment to Rule 144(d)(1)(ii). 83See supra Section I.B.1. 

upon conversion or exchange of marketadjustable securities issued by unlisted 

issuers would not begin until the 

conversion or exchange occurs. The 

proposed amendment would expose the 

holder of the market-adjustable security 

to the economic risk of the underlying 

securities during the proposed 

corresponding holding period following 

the conversion or exchange. 

We expect that exposing these 

investments to risk during the postconversion or post-exchange period 

would limit market-adjustable security 

holders’ ability to immediately resell 

converted or exchanged marketadjustable securities, which might 

otherwise constitute a public 

distribution of securities without the 

investor protections afforded by 

registration. However, the proposed 

holding period would reduce the 

liquidity of these investments, and thus 

could prevent some unlisted issuers 

from obtaining financing or increasing 

the costs of doing so, particularly since 

market-adjustable securities may 

constitute a ‘‘last resort’’ form of 

financing for issuers.76 To the extent 

that such firms have presented attractive 

arbitrage opportunities, it is foreseeable 

that demand-side investors would hold 

significant bargaining power in the 

design of the securities’ specific terms 

and could require additional 

compensation for limitations imposed 

upon that power or on final contract 

terms in future exchanges. 

Overall, we believe that the net 

impact of the proposed amendments 

may depend on the relative significance 

of these two competing consequences. 

2. Economic Baseline 

The economic baseline for the 

proposed amendment includes unlisted 

issuers that issue, or may seek to issue, 

market-adjustable securities.77 We 

estimate that as of the end of 2019, there 

were approximately 2,760 unlisted 

reporting issuers.78 We find that during 

2019, 106 of these issuers submitted a 

combined 207 disclosures regarding 

convertible securities issued that 

included a floating conversion rate 

feature.79 Of the identified floating 

conversion rate issues, roughly 80 

percent involved convertible debt and 

20 percent involved convertible 

preferred stock. Issuers of these 

securities are predominantly nonaccelerated filers 80 and smaller 

reporting companies (‘‘SRCs’’) 81

concentrated in pharmaceutical, 

biotechnology, and business technology 

industries.82 Approximately 25 percent 

of these convertible issuers had no 

revenue in their most recent fiscal year, 

but had average net income and market 

capitalization of approximately ¥$5.3 

million and $18.8 million, respectively. 

For the remaining 75 percent of issuers, 

average revenue, net income, and 

market capitalization values were $7.2 

million, ¥$12.0 million, and $12.3 

million for the most recent fiscal year 

reported in 2019. We are unable to 

assess such characteristics for the 

population of unlisted, non-reporting 

issuers given current limitations to data 

availability. 

Of Form 144 filings submitted in 

calendar year 2019, approximately two 

percent pertained to transactions in 

reporting, unlisted issuances and only 

one percent to intended sales of nonreporting, unlisted issuances. 

3. Benefits and Costs to Proposed 

Amendment to Rule 144(d)(3)(ii) 

As observed, use of the current 

tacking provisions essentially eliminates 

the holding period that would otherwise 

apply to the underlying securities after 

conversion or exchange, enabling 

holders of the overlying securities to 

convert and then immediately sell the 

underlying securities received upon 

conversion or exchange to the open 

market.83 Investments in such securities 

carry little risk given the floating 

conversion rate and the ability of 

holders to sell the stock to the open 

market immediately upon conversion. 

The proposed amendment to Rule 

144(d)(3)(ii) would require the holding 

period of the underlying securities to 

begin upon conversion or exchange of 

the overlying securities by the holder. 

Upon conversion or exchange, the 

amount or value of the underlying 

securities received by the holder would 

have been determined. The proposed 

restriction from selling the underlying 

securities in the open market during the 

holding period would put the value of 

the underlying securities and the 

holder’s investment at risk because, 

upon conversion or exchange, any 

subsequent decline in the stock price of 

the underlying securities during the 

holding period would result in a 

decrease in the value of the investment 

to the holder. 

The proposed amendment to Rule 

144(d)(3)(ii) would likely have a number 

of benefits. We believe this proposed 

amendment would curb the occurrence 

of situations where purchasers of such 

instruments have a view to an 

unregistered public distribution. 

Restricting the underlying securities 

from being sold to the broader market 

during the proposed holding period 

would introduce greater risk to the 

holder of the market-adjustable 

securities. During the holding period, 

any decline in the price of the 

underlying securities would decrease 

the value of the investment. We expect 

that this proposed amendment would 

discourage parties from engaging in 

such transactions because they would 

no longer be able to immediately 

distribute the underlying securities on 

an unregistered basis to capture the 

discount feature of these instruments. 

Instead, such parties would now be 

exposed to economic risk for the 

requisite holding period following 


khammond on DSKJM1Z7X2PROD with PROPOSALS
5074 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 

84See Hillion & Vermaelen, supra note 73; Dwyer 

et al., supra note 73; Dong et al., supra note 76. 

85See supra note 66 and accompanying text. 

86See supra at note 30; see also supra Section 

II.B.3. 

conversion. To the extent that this 

would lead to fewer instances of 

significant, unregistered but public 

distributions of the underlying 

securities, it would enhance investor 

protection. 

However, we anticipate that the 

proposed amendment to Rule 

144(d)(3)(ii) may also impose costs on 

some market participants including, but 

not limited to, an increase in the cost of 

financing and a decrease in total access 

to financing for unlisted issuers. The 

proposed post-conversion holding 

period would reduce the liquidity of 

these investments. As a consequence, 

investors are likely to demand 

additional compensation for providing 

capital through market-adjustable 

securities to these issuers. Academic 

literature links the issuance of 

convertibles with a floating conversion 

rate, such as market-adjustable 

securities, to smaller, potentially higher 

growth issuers with elevated likelihoods 

of bankruptcy and less diversified 

sources of potential revenue that are in 

need of immediate financing.84 The 

same literature also suggests that such 

issuers have limited options to raise 

capital due to their characteristics and 

issue market-adjustable securities, as a 

‘‘last resort’’ form of financing. To the 

extent that these issuers have limited 

options to raise capital, the proposed 

amendment may also trigger changes to 

the design of these contracts in order to 

provide additional compensation to 

investors for the increase in risk. For 

example, investors may demand a 

steeper upfront discount when investing 

in these securities. 

The net effect of the proposed 

amendment on the affected issuers’ 

other existing shareholders is unclear.85

The proposed amendment could affect 

existing shareholders of affected issuers 

if it changes the propensity of such 

issuers to issue unregistered marketadjustable securities or if it changes the 

terms of those securities. Conversion of 

these unregistered securities may dilute 

the holdings of existing shareholders, 

which may lead to a significant decline 

in the value of existing shareholders’ 

holdings. If the proposed amendment 

changes the propensity of issuers to 

issue unregistered market-adjustable 

securities, it could also affect the 

likelihood of such effects on existing 

shareholders. 

Similarly, if as a result of the 

proposed amendment, potential buyers 

of unregistered market-adjustable 

securities demand a higher conversion 

rate, the proposed amendment may 

increase the potential dilutive effects of 

conversion. If shareholders are unaware 

of the existence of these contracts and 

plan of distribution, such as for nonreporting issuers, or if shareholders are 

aware but not able to infer the 

consequences of these contracts, they 

may experience the negative effects of 

these unregistered distributions. 

Because of uncertainty surrounding how 

the proposed amendment would affect 

the issuance of unregistered marketadjustable securities across issuer types 

and the terms of such securities, the net 

effect of the proposed amendment on 

the affected issuers’ other existing 

shareholders is unclear. Below we 

request comment on the effects of the 

proposal on non-converting, existing 

shareholders. 

4. Effects on Efficiency, Competition, 

and Capital Formation 

As discussed above, the proposed 

amendment is likely to have an effect on 

capital formation. To the extent that the 

sales of underlying securities into the 

broader market following a conversion 

of market-adjustable securities 

constitute a distribution of securities, 

the proposed amendment is likely to 

reduce the number of instances in 

which existing shareholders and new 

investors would not have the disclosure 

and liability protections that registration 

provides. In addition, investors in the 

underlying securities may be more 

willing to increase their investments in 

the issuer because they are less 

concerned about potential dilution of 

their holdings and therefore capital 

formation may be improved.86 However, 

if the costs to the issuers of these 

market-adjustable securities increase, 

issuers continuing to sell such securities 

may raise less capital. Other issuers may 

be required to seek other options for 

raising capital. 

Because total effects on efficiency and 

competition would aggregate across 

issuers, industries, and markets that the 

proposed changes may impact 

differentially, we anticipate that the 

unique impact of the amendment to the 

holding period requirements would not 

be readily observable or reliably 

quantified. We invite commenters to 

submit data or studies that would 

facilitate estimating such effects. 

5. Reasonable Alternatives 

We could propose to amend the 

holding period for only a subset of 

unlisted issuers, either reporting or nonreporting. Such an alternative would 

create an asymmetry within the subset 

of unlisted issuers with regard to the 

required holding period, and 

accordingly provide a disincentive for 

transactions in market-adjustable 

securities that in effect may result in an 

unregistered distribution of securities 

for only a subset of unlisted issuers. 

Under such alternative, it is possible 

that currently observed unregistered 

distributions would continue to take 

place in the subset of unlisted issuers 

that would not be affected by the 

proposed amendments. 

We could, in addition to amending 

the start of the holding period, propose 

to increase the holding period for 

market-adjustable securities that are 

issued by reporting unlisted issuers 

from six months to one year to align 

with the holding period for such 

securities issued by non-reporting 

unlisted issuers. Such alternative would 

reduce the liquidity of these 

investments to the holder, and 

accordingly increase the issuers’ 

financing costs. To the extent that 

market-adjustable securities are issued 

by reporting unlisted issuers to replicate 

the distribution of securities, it is 

possible that increasing the holding 

period could provide disincentives for 

potentially abusive practices. 

6. Request for Comment 

30. What are the economic effects of 

the proposed amendments to Rule 

144(d)(3)(ii)? To the extent possible, 

please provide any data, studies, or 

other evidence that would allow us to 

quantify or better qualitatively assess 

the costs and benefits of the proposed 

amendments to affected parties. In 

particular, have we assessed all of the 

costs and benefits to market participants 

who would be affected by the change in 

tacking provisions? 

31. We seek information on the 

prevalence of market-adjustable 

securities issued by non-reporting 

unlisted issuers. Please provide any 

data, studies, or other evidence that 

would allow us to quantify this 

component of the industry baseline. 

32. What is the impact of the 

proposed rule on efficiency, 

competition, and capital formation? 

C. Proposed Amendments to Form 144, 

Form 4, and Regulation S–T 

1. Broad Economic Considerations 

Existing Commission rules require the 

filing in paper of Form 144 for securities 

of issuers not subject to Exchange Act 

reporting requirements, and allow for 

either paper or electronic filing of Form 

144 for securities of issuers subject to 


khammond on DSKJM1Z7X2PROD with PROPOSALS
Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 5075 

87See supra Section I.C.1. 

88See id.; see also 1972 Adopting Release, supra 

note 7, at 595. 

89See supra note 34. 

90Staff analysis is based on all Form 144 filings 

received by the Commission between April 13 and 

August 31, 2020. The average number of filings 

received during this same window of time in the 

four preceding years was approximately 11,800 

Form 144s. 

Exchange Act reporting requirements.87

By requiring the electronic filing of all 

Forms 144, the proposed amendments 

seek to lower the cost of access to Form 

144 information and to enable investors, 

market participants and other EDGAR 

users to access that information more 

quickly.88 The proposed amendments 

are expected to enable those filers that 

currently are permitted to file Form 144 

either in paper or electronically to 

benefit from the technology and 

efficiency associated with electronic 

filing, thereby potentially lowering the 

cost and burden of existing compliance 

requirements. As discussed in more 

detail below, while some filers may 

incur an initial cost to transition to 

electronic filing, we expect that the 

proposed amendments to file Form 144 

electronically on EDGAR would result 

in cost savings on an ongoing basis and 

over the long term. Because we are 

additionally proposing a six-month 

transition period, filers for whom the 

initial costs of transition might 

otherwise be highest might reduce their 

transition costs by availing themselves 

of the additional time to adopt requisite 

technological changes to their 

submissions processes. 

Additionally, the proposed 

amendments would eliminate the filing 

requirement for affiliates of issuers not 

subject to Exchange Act reporting 

requirements, thus eliminating certain 

compliance costs for those affiliates. 

Finally, we are proposing to allow 

Form 4 and Form 5 filers, at their 

discretion, to include a check box to 

indicate that a sale or purchase of 

securities was made pursuant to Rule 

10b5–1(c). Because this would be 

discretionary, we expect that filers will 

elect to do so when the anticipated 

benefits of doing so exceed the related 

costs and that this additional 

information may provide benefits to 

Form 144 data users. 

The discussion below addresses the 

potential economic effects of the 

proposed amendments, including their 

likely costs and benefits as well as the 

likely effects of the proposed 

amendments on efficiency, competition, 

and capital formation, relative to the 

economic baseline, which comprises the 

filing practices in existence today. 

2. Economic Baseline 

Existing Commission rules permit 

Form 144 to be submitted either 

electronically via EDGAR or in paper 

form only for forms reporting proposed 

sales of reporting issuers. Regulation S– 

T does not provide for the electronic 

filing of Form 144 to report proposed 

sales of securities of issuers not subject 

to Exchange Act reporting requirements. 

Recently, in response to COVID–19 

conditions, Commission staff 

announced a no-action position that 

temporarily affords Form 144 filers a 

third option to submit paper Form 144s 

via email.89 In the period following this 

announcement, the Commission 

received approximately 13,400 Form 

144 submissions: 52.9 percent in paper 

form, 46.5 percent electronically via 

email, and 0.6 percent electronically on 

EDGAR.90 Thus, while when given the 

option, many paper filers have elected 

to submit their forms electronically via 

email, very few filers have opted to file 

Form 144 electronically on EDGAR. 

Figures 1 and 2 provide examples to 

illustrate the lag time between when 

Form 144 is received by the 

Commission and when that information 

becomes available in a commercial 

database. As seen in Figure 1, in one 

commercial database, pre-COVID–19, 

most Form 144 filings became available 

in commercial databases six days after 

being received by the Commission. We 

further observe that in 2020, while the 

six-day lag time for availability of the 

majority of the filings remains true for 

the year on aggregate, after the 

additional ability to file via email was 

introduced, the majority of Form 144 

filings have been processed and posted 

in that commercial database in fewer 

than five days (Figure 2). Overall, the 

number of records available via that 

commercial database is considerably 

lower in 2020 than in 2019, which may 

reflect increased difficulty and delays in 

integrating the paper form submissions 

into such databases under COVID–19 

conditions. Thus, while access to data 

from paper submissions has been 

significantly reduced by the pandemic, 

we observe in Figure 2 that for 

transactions disclosed via a Form 144 

submitted electronically via email or 

EDGAR, data vendors and those who 

access Form 144 filing data from such 

sources now appear to receive that 

information with a shorter delay. 

BILLING CODE 8011–01–P 


khammond on DSKJM1Z7X2PROD with PROPOSALS
5076 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 

BILLING CODE 8011–01–C 


khammond on DSKJM1Z7X2PROD with PROPOSALSEP19JA21.026</GPH>
Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 5077 

91Based on Form 144 filings accessed via 

Thomson Reuters Insiders Data with the field ‘‘SEC 

Receipt’’ dated between January 1, 2019 and August 

31, 2020. 

92Based on Form 144 filings accessed via 

Thomson Reuters Insiders Data with the field ‘‘SEC 

Receipt’’ dated between January 1, 2020 and August 

31, 2020. 

93See supra Section I.C.1. 

94See letter from Jesse Brill (dated Dec. 18, 2013), 

available at https://www.sec.gov/rules/petitions/ 

2013/petn4-671.pdf. 

95See supra Section I.C.2.b. 

96These estimates assume that filers of Form 144 

submissions in our data are not also affiliates of 

other issuers. Because we lack data on the holdings 

of filers in securities of issuers other than those 

disclosed in the Form 144, we are unable to identify 

any filers that are such affiliates. 

97Paper filings submitted via email based on the 

staff’s no-action position are available at https://

www.sec.gov/corpfin/form-144-email. See supra 

note 34. 

98A rate of change based on the current one 

percent EDGAR submission rate may slightly 

overestimate the changes in volume to the extent 

that the proposed removal of a filing requirement 

for securities not subject to Exchange Act reporting 

requirements may simultaneously decrease total 

submissions. Further, based on the observed 

EDGAR filing behavior of affiliates who use an 

issuer’s existing access to EDGAR, the number of 

new Form IDs required to be processed could be 

reduced, but would not otherwise affect the 

increase in submission volume. 

99 Data users who continue to choose to access 

these filings via a commercial database rather than 

accessing EDGAR might also be able to access them 

more quickly than at present, depending on the 

interplay of the two-business-day-delay and the 

change from paper to electronic filing. We note that, 

as seen in Figure 2, electronic databases appear to 

incorporate email filings more quickly than paper 

submissions, which may indicate that electronic 

filings would also be processed more quickly. 

100The proposed amendments also benefit filers 

by avoiding uncertainty about how to comply with 

paper filing obligations in events similar to the 

current COVID–19 pandemic. 

101We estimate, for example, that annual 

subscription costs for access to Form 144 data from 

a third party vendor would approach $2,600 per 

person. 

102See supra Section I.C.2.c. 

a. Affected Parties 91 92

The main parties that would be 

affected by the proposed amendments 

are current and future filers of Form 

144, specifically affiliates of an issuer 

subject to Exchange Act reporting 

requirements.93 It is our understanding 

that the majority of affected filers 

currently prepare and file these forms 

individually or with the assistance of a 

broker or personal counsel.94 Filings of 

Forms 144 from holders of securities of 

an issuer not subject to Exchange Act 

reporting requirements currently make 

up approximately one percent of all 

Form 144 filings.95 As the majority of 

Form 144 filings are paper filings, most 

filers would have to modify their 

processes for submitting their Form 144 

filings if the Commission adopts the 

proposed amendments. Based on past 

filings, we estimate that approximately 

12,250 filers would be required to 

switch from paper filings to electronic 

filings and 313 filers would no longer be 

subject to filing Form 144.96

Additionally, the proposed change to 

electronic filing may affect the manner 

by which members of the public obtain 

these filings. Currently, the public can 

access these filings using EDGAR on the 

Commission’s website or, for paper 

filings (under normal operating 

conditions), by visiting the 

Commission’s public reference room in 

person, or, for either format, by 

subscribing to a third-party information 

vendor (such as private information 

aggregators that distribute the 

information obtained from EDGAR or 

the Commission’s public reference room 

and records).97 While the proposed 

amendments would not change the 

general public’s ultimate access to the 

Form 144 information from affiliates 

selling securities of an issuer subject to 

Exchange Act reporting requirements, 

the public would no longer have access 

to similar information from the 

relatively small subpopulation of 

affiliates filing Form 144 to report sales 

(or potential sales) of securities of 

issuers not subject to Exchange Act 

reporting requirements. 

b. EDGAR 

From 2016 to 2019, an average of 

30,000 Form 144 filings were made each 

year, of which an average of 

approximately 250 were submitted 

electronically via EDGAR. As EDGAR 

submissions thus constitute less than 

one percent of all Form 144 submissions 

per year, the proposed amendments 

could be anticipated to significantly 

increase the volume of Form 144 filings 

made electronically on EDGAR.98

3. Benefits and Costs of Proposed 

Amendments to Form 144, Form 4, and 

Regulation S–T 

The proposed amendments would 

change some of the Commission’s 

current practices related to making 

Form 144 information available to the 

public. First, holders of securities of an 

issuer subject to Exchange Act reporting 

requirements would be required to file 

Form 144 electronically. In contrast, 

holders of securities of an issuer not 

subject to Exchange Act reporting 

requirements would no longer be 

required to file Form 144. Second, the 

deadline for filing a Form 144 would be 

revised to coincide with the filing 

deadline of Form 4, which reports 

changes in beneficial ownership 

(purchases and sales of securities and 

derivatives and exercise of options) 

rather than have it due concurrently 

with either the placing of an order with 

a broker to execute the sale or the 

execution of a sale directly with a 

market maker, as currently required. As 

Form 4 is required to be submitted 

within two business days of a change in 

beneficial ownership, this could result 

in a delay of the reporting of an 

affiliate’s sale of restricted or control 

securities on Form 144 by two business 

days. 

This proposed change in the Form 

144 filing deadline could result in the 

information on Form 144 sales being 

made available later than under the 

current rule. However, because 

currently most Form 144 filings are 

made in paper form and thus as a 

practical matter are generally accessible 

to most of the public only after a delay 

of a number of days (e.g., after being 

uploaded into electronic databases for 

purchase as in Figure 1), it is likely that 

any delay due to changing the deadline 

of Form 144 to align with Form 4 

submissions would be offset by the 

proposed change to require electronic 

filing. Under the proposal, the public 

would be able to access the filing 

electronically via EDGAR upon 

submission rather than needing to wait 

for electronic access via a commercial 

database.99

After initial transition costs, the 

proposed amendments are expected to 

benefit all Form 144 filers. Filers are 

expected to realize direct benefits in the 

form of reduced time required to file 

forms electronically, compared to a 

paper filing, and avoided copying and 

mailing expenses. Filers who make 

multiple submissions of Form 144 per 

year or longer submissions likely would 

benefit most. Electronic filing using 

EDGAR and the revised filing deadline 

are expected to make the filing process 

more efficient by making it easier and 

less costly for filers to assure timely 

receipt of the filing (e.g., filers would 

have no reason to pay for premium 

services such as delivery 

confirmation).100 We anticipate that the 

proposed amendments will also provide 

benefits to users of the Form 144 

disclosures by significantly reducing 

both time and costs currently associated 

with obtaining the data contained in 

paper form submissions.101

The proposal would also modify the 

data format in which Form 144 would 

be electronically submitted. Form 144 

would be available on EDGAR as a 

fillable document, similar to other 

fillable forms that filers can use such as 

Forms D, 3, 4, and 5.102 An online 

fillable form would enable the 

convenient input of information and 

support the electronic assembly of such 


khammond on DSKJM1Z7X2PROD with PROPOSALS
5078 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 

103This estimate does not account for filers who 

previously filed via EDGAR but who currently 

submit via email pursuant to the staff no-action 

position, and may therefore include filers who 

would not incur new costs. Based on staff review 

of Form 144 submissions in 2020 by filers with 

filings both before and after April 10th, 

approximately 50 percent of filers who previously 

used EDGAR opted to submit their Form 144s via 

email after April 10, 2020. 

104See 17 CFR 232.10(b); see also supra Section 

I.C.2.a. 

105Specifically, we observe that approximately 23 

percent of calendar year 2019 Form 144 filers also 

submitted Form 4 filings in EDGAR, while a 

remaining two percent without Form 4 filings in 

EDGAR submitted a miscellany of other forms 

related to beneficial ownership. 

106This estimate represents an extreme upper 

bound because it assumes that each named 

individual who filed at least one Form 144 in 

calendar year 2019 who is not currently associated 

with a unique CIK would need to file a Form ID. 

To the extent that some Form 144 filers are affiliates 

of issuers who may use the issuer’s CIK to file via 

EDGAR, the estimate likely overstates the required 

number of new Form IDs required and the burden 

hours associated with such applications. 

107 44 U.S.C. 3501 et seq. 

108See infra Section III.C.2. 

109See supra Section I.C.2.c. Based on filings in 

calendar year 2019, we estimate that approximately 

23 percent of Form 144 filers are also Form 4 filers. 

110See supra Section II.B.2. 

111This estimate is based upon the average 

number of Form 144s submitted pertaining to such 

securities as a proportion of total Form 144 

submissions in each of the four prior calendar years 

(2016–2019). 

112See supra Section II.C.2.a. 

information and transmission to 

EDGAR, without requiring a Form 144 

filer to purchase or maintain additional 

software or technology, thus minimizing 

the compliance costs. This modification 

of the data format of Form 144 would 

also benefit data users by standardizing 

the inputted data into a structured, 

machine-readable custom XML format 

and thus making it easier to extract and 

process that data. 

The fillable form would be similar to 

other fillable forms that are currently 

available to file Forms D, 3, 4, and 5. 

We expect that filers who use EDGAR 

for purposes of complying with filing 

obligations under existing rules would 

not incur additional EDGAR access 

costs due to the proposed rules. If filers 

with EDGAR experience require time or 

specialized training to switch Form 144 

from paper to EDGAR, then they may 

incur an additional initial transition 

cost. Given the experience of such filers 

with EDGAR filing, as well as the sixmonth transition period proposed, we 

expect such cost would be minimal. 

The proposed amendments also 

would result in the direct costs of 

transitioning to filing electronically 

using EDGAR for the large subset of 

filers who do not currently file 

electronically on EDGAR. Currently, 

52.9 percent of filers file paper forms 

and 46.5 percent file via email.103 In 

particular, such filers would need to 

prepare a Form ID as required by Rule 

10(b) of Regulation S–T and submit the 

Form ID following the processes 

detailed in Volume I of the EDGAR Filer 

Manual.104 Once a Form ID has been 

successfully completed and processed, 

EDGAR establishes a Central Index Key 

(‘‘CIK’’) number, which permits each 

authorized user to create an EDGAR 

access code, enabling the filer to use 

EDGAR. We estimate that approximately 

25 percent of Form 144 filers have 

already prepared a Form ID and 

obtained a CIK number through other 

EDGAR filing obligations.105 Therefore, 

we estimate that at most 75 percent of 

Form 144 filers would need to file a 

Form ID as a result of the proposed 

amendments.106 For purposes of the 

PRA, we estimate that respondents 

require 0.15 hours to complete the Form 

ID and that 100 percent of the burden 

of preparation for Form ID is carried by 

the respondent. For purposes of the 

Paperwork Reduction Act of 1995 

(‘‘PRA’’) 107 discussed below, we 

estimate that the proposed amendments 

would result in an incremental increase 

of at 1,378 annual burden hours for 

Form ID.108 We believe that such direct 

costs would be justified by the 

anticipated benefits from eliminating 

paper filing of Form 144. 

The remaining costs of transitioning 

to EDGAR, which would apply to all 

Form 144 filers that do not currently file 

using EDGAR, would be mitigated by 

the ease of filing Form 144. The revised 

Form 144 would be an online fillable 

form with a similar user interface to 

Form 4, and for simultaneous filings of 

Forms 4 and 144, the same user 

interface could be used to file both 

forms.109 Because current EDGAR filers 

represent such a small proportion of 

those who submit Form 144, our ability 

to generalize electronic filing behavior 

from this group to the full population of 

filers may be of limited reliability.110

However to the extent that behavior may 

be similar, we estimate that up to onethird of affiliates submitting a Form 144 

who do not currently access EDGAR 

may be able use an issuer’s existing 

connection to EDGAR or rely upon other 

support by issuers in meeting their 

Form 144 electronic filing obligations. 

These filers likely will incur lower costs 

as a result of the proposed amendments 

than filers who cannot or will not use 

an issuer’s existing connection to 

EDGAR. We lack the data to quantify the 

difference in costs. 

In addition, we estimate that the 

proposed amendment to eliminate the 

requirement to file a Form 144 to report 

the resale of securities of issuers that are 

not subject to Exchange Act reporting 

requirements would result in a one 

percent reduction of current filings of 

Form 144.111

For Form 144 filers, we do not expect 

that the proposed custom XML format 

would impose any incremental costs, 

because filers would be able to enter 

their disclosures directly into the online 

fillable form. We expect that completing 

this XML-based fillable form would not 

require any more time than any other 

fillable form and would generally 

require the same time as completing the 

paper form. Some filers may choose to 

file directly in custom XML format 

(pursuant to the Commission’s custom 

XML schema) integrated into their 

software because it enables greater 

automation of reporting. Other filers 

without XML experience or software 

could simply use the online fillable 

form and would not be required to 

license any XML-based filing 

preparation software or establish any 

XML-based filing processes. 

The proposed amendments could 

reduce revenue for market information 

aggregators who currently aggregate the 

information from Form 144 fillings into 

databases and provide access to such 

databases to various users of this data 

for a fee.112 The online filing of Form 

144 may make it more cost-effective for 

some data users to extract the data 

themselves. The reduction in revenue 

could be mitigated by the lower cost of 

retrieving information from Form 144 

filings that is filed in an electronic 

format. Data aggregators could sell fewer 

subscriptions to make the same profit or 

lower the fee that they charge which 

might make their services continue to be 

attractive even with the electronic 

availability of the filings. 

We recognize that the potential costs 

and benefits of electronic filing are 

sensitive to various assumptions, 

including the number of affected filers; 

the effect of electronic filing using 

EDGAR on the time burden of filing 

Form 144; printing and mailing costs 

incurred today; and the type and cost of 

staff, if any, involved in the electronic 

filing of Form 144. The cost savings 

realized by individual filers may vary 

across all filers depending on variables 

such as filer size, number of filings 

submitted, existing filing practices (e.g., 

current reliance on electronic document 

preparation; current experience with 

using EDGAR; use of in-house staff, 

brokers, or outside counsel for the filing 

of Form 144; number, types, and cost of 

in-house staff involved in the paper 


khammond on DSKJM1Z7X2PROD with PROPOSALS
Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 5079 

113See supra note 97. 

114See supra Section I.B.2.c. 

filing of Form 144; actual hours and 

printing and mailing costs required for 

paper filing today), and the amount of 

time required for filers to be trained in 

the use of EDGAR and any required 

related processes, and the amount of 

time to resolve any technical issues 

related to electronic filing on EDGAR. 

4. Efficiency, Competition, and Capital 

Formation 

The proposed amendments are 

expected to increase the efficiency and 

decrease the costs of filing Form 144 

and retrieving information from Form 

144 filings. Electronic filing and the 

revised filing deadline in the proposed 

amendments are expected to make the 

filing process more efficient by making 

it easier and less costly for filers to 

assure timely receipt of the filing. 

Likewise, for investors currently using 

information from paper filings, the costs 

of accessing these filings are expected to 

be significantly reduced. In addition, 

replacing paper filing with electronic 

filing is expected to result in filer 

savings of labor, printing, and mailing 

costs. 

The proposed amendments should 

facilitate the efficient and rapid 

incorporation of price-relevant 

information in Form 144 filings into the 

market and enhance the sum of 

information available to investors. To 

the extent that there is value-relevant 

information in Form 144 filings, prices 

may become more efficient, which 

should help to facilitate capital 

formation (e.g., by enhancing valuation 

quality). 

However, the proposal may reduce 

some investors’ or market information 

aggregators’ competitive advantages. 

Particularly, market information 

aggregators whose present role includes 

converting paper filings of Form 144 to 

an electronic information source may 

find that this service is less attractive to 

data users due to those users’ ability to 

access these filings directly due to the 

proposed rule changes. These 

information aggregators’ loss of 

competitive advantage in converting 

paper filings of Form 144 to an 

electronic information source may 

reduce their revenue and thus may 

affect their ability to offer other 

ancillary services that are valuable to 

data users. 

Aligning the reporting timeline of 

Form 144 with that of Form 4 could 

cause up to a two-day delay in 

reporting, and thereby potentially delay 

the incorporation of information into 

markets. However, at the same time, the 

proposed electronic filing mandate 

could accelerate the incorporation of 

that information into the markets 

compared with the current system. We 

do not have adequate data with which 

to estimate the net effect of these two 

proposed changes. Since data users 

currently observe this delay with 

respect to filings of Forms 144 and 4 

that are both publicly available 

immediately upon submission, such as 

via EDGAR, we have limited data with 

which to form an expected value of 

having Form 144 information in 

advance of a Form 4 filing, and 

consequently what related costs might 

be incurred by synchronizing 

submissions. We are therefore 

requesting comments and the 

submission of data or other information 

that would inform our estimates. 

We do not expect marked effects on 

either competition or capital formation 

as a result of allowing Forms 4 and 5 

filers to check a box to indicate that a 

sale or purchase of securities was made 

pursuant to Rule 10b5–1(c). As 

discussed above, due to the 

discretionary nature of the checkbox 

inclusion, we expect filers to do so only 

when they perceive it will increase 

efficiency. As a result, there may be 

modest increases to efficiency for both 

such filers and data users who access 

their submissions. 

5. Reasonable Alternatives 

Eliminating the Form 144 Filing 

Requirement 

One alternative that we could have 

proposed is the elimination of the 

current Form 144 filing requirement for 

sales of securities by affiliates of issuers 

that are subject to Exchange Act 

reporting. Such an alternative would 

eliminate compliance costs for such 

affiliates. However, such an alternative 

would also prevent investors and 

various other data users from obtaining 

any information on such sales of 

securities. We are soliciting comment on 

the continued utility of Form 144 

filings. 

Email Submissions 

Given the significant number of 

submissions via email in response to the 

temporary staff no-action position, we 

could have proposed making this 

manner of filing a permanent option for 

Form 144 filers. Such an alternative 

would allow filers to avoid the direct 

costs of transitioning to filing 

electronically using EDGAR. Such an 

alternative, however, would result in 

issuers incurring expenses in scanning 

the forms and emailing them to the 

Commission. Additionally, issuers 

would forgo potential direct benefits in 

the form of reduced time required to file 

forms electronically. Such costs could 

be higher for filers who make multiple 

submissions of Form 144 per year and 

for Form 144 filings with multiple 

pages. 

Data users might also incur higher 

costs under this alternative since the 

site used to access Form 144 email 

submissions is distinct from EDGAR.113

Specifically, under this alternative, a 

data user interested in obtaining the 

information from all Form 144 filings 

pertaining to a given issuer would be 

required to search both EDGAR and the 

daily folders posted to the Form 144 

website. Furthermore, Form 144 data 

submitted via email submissions is not 

structured, therefore analysis that would 

require aggregating data from multiple 

submissions would be more difficult or 

most costly to perform. 

Format Requirements 

While the proposed rule does not 

expressly prescribe a specific format for 

Form 144 that would be required for 

filing in EDGAR, Form 144 would be 

made available as an online fillable 

form, similar to other fillable forms such 

as Forms D, 3, 4, and 5.114 As an 

alternative, we could require Form 144 

to be filed in the Inline eXtensible 

Business Reporting Language (‘‘Inline 

XBRL’’) format, a derivation of XML that 

is designed for financial reporting and is 

both machine-readable and humanreadable. Compared to the proposal, the 

Inline XBRL alternative for Form 144 

would provide more sophisticated 

validation, presentation, and reference 

features for filers and data users. 

However, the Inline XBRL alternative 

would also impose initial 

implementation costs (e.g., learning how 

to prepare filings in Inline XBRL, 

licensing Inline XBRL filing preparation 

software) upon filers that do not have 

prior experience structuring data in the 

Inline XBRL format. By contrast, 

because the proposal would allow filers 

to submit Form 144 using an online 

fillable Form, filers that lack experience 

structuring data in a custom XML 

format would not incur implementation 

costs. 

D. Request for Comment 

33. What are the economic effects of 

the proposed amendments to Form 144, 

Form 4, and Regulation S–T? To the 

extent possible, please provide any data, 

studies, or other evidence that would 

allow us to better quantify or otherwise 

qualitatively assess the costs and 

benefits of the proposed amendments to 

affected parties. 


khammond on DSKJM1Z7X2PROD with PROPOSALS
5080 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 

115See supra note 107. 

116See 44 U.S.C. 3507(d); see also 5 CFR 1320.11. 

117We do not believe that the proposed 

amendments to permit Form 4 and Form 5 filers to 

indicate through a check box on the forms that a 

sale or purchase reported on the forms was made 

pursuant to Rule 10b5–1(c) would affect an issuer’s 

burden hours or costs for PRA purposes. Filers must 

already determine whether their sale or purchase 

reported on the forms was made pursuant to Rule 

10b5–1(c), so adding a check a box on the forms 

would not substantively modify existing collection 

of information requirements or otherwise affect the 

overall burden estimates associated with Forms 4 or 

5. Therefore, we are not adjusting any burden or 

cost estimates in connection with the check box for 

the proposed amendments. 

118See supra Section I.B. 

119Although the proposed amendments to the 

holding period are expected to reduce the number 

of market-adjustable securities transactions, we do 

not anticipate that these proposed amendments 

would affect the burdens and costs associated with 

Form 144. The requirement to file Form 144 only 

applies to affiliates of the issuer. The investors in 

these securities generally do not meet the definition 

of affiliate in our regulations and therefore are not 

required to file Form 144. 

120See supra Section I.C. 

121We do not believe that the proposed 

amendment to change the filing deadline for Form 

144 to coincide with the filing deadline for Form 

4 would affect an issuer’s burden hours or costs for 

PRA purposes. The information in the form that 

must be filed would not change as a result of this 

amendment, so changing the filing deadline would 

not substantively modify existing collection of 

information requirements or otherwise affect the 

overall burden estimates associated with Form 144. 

Therefore, we are not adjusting any burden or cost 

estimates in connection with the deadline change 

for the proposed amendments. 

34. We expect that the proposed 

amendments may benefit Form 144 data 

users by facilitating easier access to 

Form 144 data, potentially reducing the 

incentive to purchase such data from 

third-party data providers. At the same 

time, the proposed changes may affect 

the timing of the availability of such 

information. What are the economic 

effects of the proposed timing and 

format changes to Form 144? To the 

extent possible, please provide any data, 

studies, or other evidence that would 

allow us to better quantify or otherwise 

qualitatively assess the impact of these 

proposed changes, including the 

benefits and costs. 

35. We seek comment on the ways 

that Form 144 information is used by 

affected parties. In particular, what data 

uses of Form 144 data do not coincide 

with information available via Form 4? 

Are there currently any uses of Form 

144 data in advance of Form 4 filings, 

and if so, would there be any costs 

incurred by losing such information in 

advance? 

36. Are there other methods or 

databases by which Form 144 data users 

currently access such information? If so, 

please provide information about those 

methods, including how many Form 

144 filings may be accessed via those 

methods and how soon they are made 

available after they are filed with the 

SEC. To what extent might the 

availability and use of these alternative 

databases affect our analysis of the 

anticipated benefits and costs to our 

proposed amendments? Please provide 

data, studies, or other evidence. 

37. Should we adopt any of the 

alternative approaches outlined above 

instead of the proposed amendments, 

including requiring the use of XBRL for 

electronic submissions of Form 144? We 

considered requiring the use of XBRL as 

a possible alternative approach but have 

not proposed it for the reasons stated 

above. In addition or instead of XBRL, 

should the form provide for use of a 

format based on a new derivation of 

XML or another machine readable 

format that the Commission may 

determine is appropriate in the future? 

If so, what would be the attendant costs 

and benefits of such flexibility? 

38. Are there any other potential 

alternative approaches we should 

consider and what are their economic 

effects? 

39. Because we are proposing to allow 

Form 4 and Form 5 filers, at their 

discretion, to check a box to indicate 

that a sale or purchase of securities was 

made pursuant to Rule 10b5–1(c) we 

expect that filers will only elect to do 

so when their anticipated benefits of 

doing so exceed their related costs. Are 

there other anticipated benefits, costs, or 

economic effects related to this proposal 

that we should consider? 

III. Paperwork Reduction Act 

A. Summary of the Collections of 

Information 

Certain provisions of our rules and 

forms that would be affected by the 

proposed amendments contain 

‘‘collection of information’’ 

requirements within the meaning of the 

PRA.115 We are submitting the proposal 

to the Office of Management and Budget 

(‘‘OMB’’) for review in accordance with 

the PRA.116 An agency may not conduct 

or sponsor, and a person is not required 

to respond to, a collection of 

information requirement unless it 

displays a currently valid OMB control 

number. Compliance with the 

information collections is mandatory. 

Responses to the information collections 

are not kept confidential and there is no 

mandatory retention period for the 

information disclosed. The titles for the 

collections of information are: 

• Form ID (OMB Control Number 

3235–0328); 

• Form 144 (OMB Control Number 

3235–0101); 

• Form 4 (OMB Control Number 

3235–0287); 

• Form 5 (OMB Control Number 

3235–0362) 117

Form ID is used by registrants, 

individuals, third party filers, or their 

agents to request access codes that 

permit the filing of documents on 

EDGAR. Form 144 is used by security 

holders to disclose the proposed sale of 

securities by the holder and to indicate 

that the holder is not to be engaged in 

the distribution of the securities and 

therefore not an underwriter. Form 4 is 

used by an issuer’s insiders to report the 

insider’s changes in beneficial 

ownership of the issuer’s equity 

securities. A description of the proposed 

amendments, including the need for the 

information and its proposed use, as 

well as a description of the likely 

respondents, can be found in Section I 

above, and a discussion of the economic 

effects of the proposed amendments can 

be found in Section II above. 

As described in more detail above,118

we are proposing to amend Rule 144 to 

provide that the holding period for 

securities acquired upon the conversion 

or exchange of certain, specific 

securities that are market adjustable and 

issued by unlisted issuers would not 

begin until the time of conversion or 

exchange.119 Also, as described 

above,120 we are proposing to mandate 

electronic filing of Form 144 with 

respect to securities issued by 

companies subject to Exchange Act 

reporting requirements, eliminate the 

requirement to file a Form 144 for 

resales of securities of issuers that are 

not subject to Exchange Act reporting, 

amend the filing deadline for Form 144 

to coincide with the filing deadline for 

Form 4,121 and amend Form 4 to 

include a check box that would provide 

the filer with the option to indicate if 

securities were sold or purchased 

pursuant to a plan intended to satisfy 

the affirmative defense conditions of 

Exchange Act Rule 10b5–1(c). 

B. Summary of the Proposed 

Amendments’ Effects on the Collections 

of Information 

We anticipate that the proposed 

amendment to mandate the electronic 

filing of Form 144 would result in a 

number of filers using EDGAR to file 

their Form 144 electronically who do 

not currently do so. Filers who have not 

previously made an electronic filing on 

EDGAR are required to file a Form ID to 

obtain access codes that will enable 

them to file a document on EDGAR. As 

discussed above, we estimate that 

approximately 12,250 filers would be 

required to switch from paper filings of 

their Form 144 to electronic filings of 


khammond on DSKJM1Z7X2PROD with PROPOSALS
Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 5081 

122See supra note 96. 

123See supra note 105. 

124See supra note 106. 

125 22,250 × 0.75 = 9,187.5. 

126 9,188 × 0.15 = 1,378.2, which is rounded to 

1,378. 

127See supra note 96. 

128The OMB PRA filing inventory represents a 

three-year average. 

that form.122 Of those 12,250 filers, 

however, we estimate that 25 percent 

have already filed a Form ID through 

other EDGAR filing obligations,123 so 

only approximately 75 percent of Form 

144 filers would need to file a Form 

ID.124 As a result, we estimate that 

approximately 9,188 filers would be 

required to file a Form ID because of the 

proposed amendment to mandate the 

electronic filing of Form 144.125 We 

estimate that respondents require 0.15 

hours to complete the Form ID and, for 

purposes of the PRA, that 100 percent 

of the burden of preparation for Form ID 

is carried by the respondent internally. 

Therefore, we estimate that this 

proposed amendment would result in 

an incremental increase of 1,378 annual 

burden hours for Form ID.126

We expect that the proposed 

amendment to eliminate the 

requirement to file a Form 144 to report 

the resale of securities of issuers that are 

not subject to the reporting 

requirements of Sections 13 or 15(d) of 

the Exchange Act would reduce the 

number of filings of the form. As 

discussed above, we estimate that 313 

filers would no longer be subject to 

filing Form 144.127 We estimate that 

each notice on Form 144 imposes a 

burden for PRA purposes of one hour 

and, for purposes of the PRA, that 100 

percent of the burden of preparation for 

Form 144 is carried by the respondent 

internally. Therefore, we estimate that 

this proposed amendment would result 

in an incremental decrease of 313 

annual burden hours for Form 144. 

PRA Table 1 summarizes the 

estimated effects of the amendments on 

the paperwork burdens associated with 

the affected collections of information 

listed in Section III.A. 

PRA TABLE 1—ESTIMATED PAPERWORK BURDEN EFFECTS OF THE AMENDMENTS

Proposed amendments and effects 

Proposed affected 

collections 

of information 

Estimated net effect 

Form ID: 

• Amend Rules 101(a) and 101(b) of Regulation S–T to 

mandate the electronic filing of all Form 144 filings 

for the sale of securities of Exchange Act reporting 

companies.

• Form ID .............. • Increase of 0.15 hour compliance burden per response to 

the new collection of information. 

Form 144: 

• Eliminate the requirement to file a Form 144 for resales of securities of issuers that are not subject to 

Exchange Act reporting.

• Form 144 ............ • Decrease of 1.0 hour compliance burden per response to 

the new collection of information. 

C. Incremental and Aggregate Burden 

and Cost Estimates 

Below we estimate the incremental 

and aggregate changes in paperwork 

burden as a result of the amendments. 

These estimates represent the average 

burden for all issuers, both large and 

small. In deriving our estimates, we 

recognize that the burdens will likely 

vary among individual issuers based on 

a number of factors, including the 

nature of their business. We believe that 

the amendments will change the 

frequency of responses to the existing 

collections of information and the 

burden per response. 

PRA Table 2 below illustrates the 

incremental change to the total annual 

compliance burden of affected forms, in 

hours and in costs, as a result of the 

amendments’ estimated effect on the 

paperwork burden per response. The 

number of estimated affected responses 

shown in PRA Table 2 is based on the 

number of responses in the 

Commission’s current OMB PRA filing 

inventory adjusted to reflect the change 

in the number of responses we estimate 

as a result of the proposed 

amendments.128

PRA TABLE 2—CALCULATION OF THE INCREMENTAL CHANGE IN BURDEN ESTIMATES OF CURRENT RESPONSES

RESULTING FROM THE AMENDMENTS

Current burden Proposed burden change 

Current 

annual responses 

Current 

burden 

hours 

Current cost 

burden 

Proposed 

change in 

annual responses 

Proposed 

change in 

burden 

hours 

Proposed 

change in 

professional 

costs 

Proposed 

annual affected responses 

Proposed 

Burden 

Hours for 

Affected Responses 

Proposed 

Cost Burden 

for Affected 

Responses 

(A) (B) (C) (D) (E) (F) (G) = (A) + 

(D) 

(H) = (B) + 

(E) 

(I) = (C) + 

(F) 

Form ID ..................................... 46,842 7,026 $0 9,188 1,378 $0 56,030 8,404 $0 

Form 144 ................................... 33,725 33,725 0 (313) (313) 0 33,412 33,412 0 

D. Request for Comment 

We request comments in order to 

evaluate: (1) Whether the proposed 

collection of information is necessary 

for the proper performance of the 

functions of the agency, including 

whether the information would have 

practical utility; (2) the accuracy of our 

estimate of the burden of the proposed 

collection of information; (3) whether 

there are ways to enhance the quality, 

utility, and clarity of the information to 

be collected; and (4) whether there are 

ways to minimize the burden of the 

collection of information on those who 

are to respond, including through the 

use of automated collection techniques 


khammond on DSKJM1Z7X2PROD with PROPOSALS
5082 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 

129We request comment pursuant to 44 U.S.C. 

3506(c)(2)(B). 

130 5 U.S.C. 601 et seq. 

131 5 U.S.C. 601(6). 

132See 17 CFR 240.0–10(a). 

133Business development companies are a 

category of closed-end investment company that are 

not registered under the Investment Company Act 

[15 U.S.C. 80a–2(a)(48) and 80a–53—64]. 

134 17 CFR 270.0–10(a). 

135This estimate is based on staff analysis of 

issuers, excluding co-registrants, with EDGAR 

filings of Form 10–K, 20–F and 40–F, or 

amendments filed during the calendar year of 

January 1, 2019 to December 31, 2019. This analysis 

is based on data from XBRL filings, Compustat, and 

Ives Group Audit Analytics. 

136This estimate is based on staff review of Forms 

N–CEN filed with the Commission as of November 

5, 2020 and is based on the definition of small 

entity under Investment Company Act Rule 0–10. 

See 17 CFR 240.0–10. 

or other forms of information 

technology.129

Any member of the public may direct 

to us any comments concerning the 

accuracy of these burden estimates and 

any suggestions for reducing the 

burdens. Persons who desire to submit 

comments on the collection of 

information requirements should direct 

their comments to the Office of 

Management and Budget, Attention: 

Desk Officer for the Securities and 

Exchange Commission, Office of 

Information and Regulatory Affairs, 

Washington, DC 20503, and send a copy 

of the comments to Vanessa A. 

Countryman, Secretary, Securities and 

Exchange Commission, 100 F Street NE, 

Washington, DC 20549, with reference 

to File No. S7–24–20. Requests for 

materials submitted to the OMB by us 

with regard to these collections of 

information should be in writing, refer 

to File No. S7–24–20 and be submitted 

to the Securities and Exchange 

Commission, Office of FOIA Services, 

100 F Street NE, Washington DC 20549. 

Because the OMB is required to make a 

decision concerning the collections of 

information between 30 and 60 days 

after publication, a comment to the 

OMB is best assured of having its full 

effect if the OMB receives it within 30 

days of publication. 

IV. Initial Regulatory Flexibility Act 

Analysis 

This Initial Regulatory Flexibility 

Analysis (‘‘IRFA’’) has been prepared in 

accordance with the Regulatory 

Flexibility Act (‘‘RFA’’).130 It relates to 

proposed amendments that would: (1) 

Amend Rule 144(d)(3)(ii) to provide that 

the holding period for securities 

acquired upon the conversion or 

exchange of certain, specific securities 

that are market adjustable and issued by 

unlisted issuers would not begin until 

the time of conversion or exchange; (2) 

mandate electronic filing of Form 144 

with respect to securities issued by 

companies subject to Exchange Act 

reporting requirements; (3) eliminate the 

requirement to file a Form 144 for 

resales of securities of issuers that are 

not subject to Exchange Act reporting; 

(4) amend the filing deadline for Form 

144 to coincide with the filing deadline 

for Form 4; and (5) amend Forms 4 and 

5 to include a check box that would 

provide the filer with the option to 

indicate if a transaction intended to 

satisfy the affirmative defense 

conditions of Exchange Act Rule 10b5– 

1(c). In addition, if we adopt the 

proposed amendments, we plan to 

simplify and streamline the electronic 

filing of Form 144 and Form 4. 

A. Reasons for, and Objectives of, the 

Proposed Action 

One purpose of the proposed 

amendments is to mitigate the risk of 

unregistered distributions in connection 

with sales of market-adjustable 

securities. The proposed amendments 

are also intended to facilitate more 

efficient transmission, dissemination, 

and analysis, of certain forms, and to 

reduce the costs of storing and 

retrieving documents that are currently 

filed in paper. 

B. Legal Basis 

We are proposing the amendments 

under the authority set forth in Sections 

4, 6, 7, 8, 10, 19(a) and 28 of the 

Securities Act, and Sections 3, 16, and 

23(a) of the Exchange Act. 

C. Small Entities Subject to the 

Proposed Rules 

The proposed amendments would 

affect small entities that issue securities 

as well as those that hold securities. The 

RFA defines ‘‘small entity’’ to mean 

‘‘small business,’’ ‘‘small organization,’’ 

or ‘‘small governmental 

jurisdiction.’’ 131 For purposes of the 

RFA, under our rules, a registrant, other 

than an investment company, is a 

‘‘small business’’ or ‘‘small 

organization’’ if it had total assets of $5 

million or less on the last day of its most 

recent fiscal year and is engaged or 

proposing to engage in an offering of 

securities that does not exceed $5 

million.132 An investment company, 

including a business development 

company,133 is considered to be a 

‘‘small business’’ if it, together with 

other investment companies in the same 

group of related investment companies, 

has net assets of $50 million or less as 

of the end of its most recent fiscal 

year.134 We estimate that there are 1,056 

issuers that file with the Commission, 

other than investment companies, 

which may be considered small entities 

and are potentially subject to the final 

amendments.135 In addition, we 

estimate that there are 37 investment 

companies that would be subject to the 

proposed amendments that may be 

considered small entities.136

D. Proposed Reporting, Recordkeeping, 

and Other Compliance Requirements 

As noted above, the proposed 

amendment to Rule 144(d)(3)(ii) would 

provide that the holding period for 

securities acquired upon the conversion 

or exchange of certain, specific 

securities that are market adjustable and 

issued by unlisted issuers would not 

begin until the time of conversion or 

exchange. We expect the proposed 

amendment to reduce the number of 

market-adjustable securities 

transactions. As noted in Section III, we 

do not anticipate that the proposed 

amendments would affect the reporting 

or compliance burdens associated with 

Form 144, including those for small 

entities, because the requirement to file 

the form only applies to affiliates of the 

issuer and the investors in these 

securities generally do not meet the 

definition of affiliate in our regulations. 

Affected parties may decide to adjust 

their recordkeeping methods if needed 

to account for the change in the start 

date for the holding period. 

Additionally, the proposed 

amendments would mandate electronic 

filing of Form 144 with respect to 

securities issued by companies subject 

to Exchange Act reporting requirements. 

We anticipate that this proposed 

amendment would cause a number of 

filers, including small entities, using 

EDGAR to file their Form 144 

electronically who do not currently do 

so, thereby modestly increasing their 

compliance obligations. 

Further, the proposed amendments 

would eliminate the requirement to file 

a Form 144 to report the resale of 

securities of issuers that are not subject 

to the reporting requirements of 

Sections 13 or 15(d) of the Exchange 

Act. As a result, some filers, including 

small entities would no longer be 

required to file Form 144, which would 

reduce their compliance obligations. 

The proposed amendments to revise 

the filing deadline for Form 144 and to 

include an optional check box in Forms 

4 and 5 would not change the reporting, 

recordkeeping, or compliance 

requirements or otherwise affect the 

overall compliance burden for small 

entities. 

Compliance with the proposed 

amendments may require the use of 


khammond on DSKJM1Z7X2PROD with PROPOSALS
Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 5083 

137See supra note 73 and accompanying text. 

138Public Law 104–121, Title II, 110 Stat. 857 

(1996). 

professional skills, including legal 

skills. 

Section I discusses the proposed 

amendments in detail. Sections II and III 

discuss the economic impact, including 

the estimated costs and benefits, of the 

proposed amendments to all affected 

entities. 

E. Duplicative, Overlapping, or 

Conflicting Federal Rules 

The proposed amendments would not 

duplicate, overlap, or conflict with other 

Federal rules. 

F. Significant Alternatives 

The RFA directs us to consider 

alternatives that would accomplish our 

stated objectives, while minimizing any 

significant adverse impact on small 

entities. In connection with the 

proposed amendments, we considered 

the following alternatives: 

• Establishing different compliance or 

reporting requirements or timetables 

that take into account the resources 

available to small entities; 

• Clarifying, consolidating or 

simplifying compliance and reporting 

requirements under the rules for small 

entities; 

• Using performance rather than 

design standards; and 

• Exempting small entities from all or 

part of the requirements. 

We are proposing to amend Rule 

144(d)(3)(ii) to provide that the holding 

period for the securities acquired upon 

conversion or exchange of certain 

market-adjustable securities issued by 

unlisted issuers would not begin until 

conversion or exchange. We recognize 

that the proposal could 

disproportionately affect small issuers 

because it is those entities that typically 

issue market-adjustable securities 137 but 

we believe this proposal would benefit 

issuers and investors by mitigating the 

risk of unregistered distributions in 

connection with sales of marketadjustable securities. The features of 

certain market-adjustable securities, 

combined with the tacking provisions of 

Rule 144, can undermine one of the key 

premises of Rule 144, which is that 

holding securities at risk for an 

appropriate period of time prior to 

resale can demonstrate that the seller 

did not purchase the securities with a 

view to distribution and, therefore, is 

not an underwriter. We could propose 

to exempt the securities of small entities 

from the proposed amendment or 

establish a different holding period for 

their securities, but doing so would not 

address the risk that holders may 

participate in unregistered distributions 

of the market-adjustable securities of 

these issuers. 

The proposed amendments to 

mandate the electronic filing of Form 

144 clarify and streamline the filing 

requirements for the form and should 

benefit all filers, as well as benefit users 

of the information in Form 144 by 

facilitating easier access to, and faster 

retrieval of such information. We do not 

believe that it is necessary to partially 

or completely exempt small entities 

from the proposed amendments to 

require the electronic filing of Form 144 

because the amendments are expected 

to result in cost benefits on an ongoing 

basis compared to paper filing, and 

increased efficiencies for all filers who 

would be required to file Form 144, 

including small entities that are filers. 

We preliminarily believe that it is not 

necessary to establish different 

compliance timetables for small entities 

or to further clarify, consolidate, or 

simplify the proposed amendments’ 

requirements. But we are proposing a 

six-month transition period after the 

effective date of the amendments to 

Regulation S–T to give Form 144 paper 

filers who would be first-time electronic 

filers, including any small entities, 

sufficient time to apply for codes to 

make filings on EDGAR. In addition, we 

solicit comment on whether we should 

provide a different timetable for paper 

Form 144 filers to transition to 

electronic filing. 

We have used design rather than 

performance standards in connection 

with the proposed filing revisions to 

Form 144 in order to promote uniform 

filing requirements and also to facilitate 

a simpler and less costly filing method 

for Form 144 filers. 

G. Request for Comment 

We encourage the submission of 

comments with respect to any aspect of 

this Initial Regulatory Flexibility 

Analysis. In particular, we request 

comments regarding: 

• The number of small entity issuers 

that may be affected by the proposed 

amendments; 

• The existence or nature of the 

potential impact of the proposed 

amendments on small entity issuers 

discussed in the analysis; 

• How the proposed amendments 

could further lower the burden on small 

entities; and 

• How to quantify the impact of the 

proposed amendments. 

Please 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 

amendments are adopted, and will be 

placed in the same public file as 

comments on the proposed amendments 

themselves. 

V. Small Business Regulatory 

Enforcement Fairness Act 

For purposes of the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (‘‘SBREFA’’),138 the Commission 

must advise OMB as to whether the 

proposed amendments constitute a 

‘‘major’’ rule. Under SBREFA, a rule is 

considered ‘‘major’’ where, if adopted, it 

results, or is likely to result, in: 

• An annual effect on the economy of 

$100 million or more (either in the form 

of an increase or a decrease); 

• A major increase in costs or prices 

for consumers or individual industries; 

or 

• Significant adverse effects on 

competition, investment or innovation. 

We request comment on whether the 

proposed amendments would be a 

‘‘major rule’’ for purposes of SBREFA. 

We solicit comment and empirical data 

on: (a) The potential effect on the U.S. 

economy on an annual basis; (b) any 

potential increase in costs or prices for 

consumers or individual industries; and 

(c) any potential effect on competition, 

investment or innovation. Commenters 

are requested to provide empirical data 

and other factual support for their views 

to the extent possible. 

VI. Statutory Authority 

The amendments contained in this 

release are being proposed under the 

authority set forth in Sections 4, 6, 7, 8, 

10, 19(a), and 28 of the Securities Act, 

and Sections 3, 16, and 23(a) of the 

Exchange Act. 

List of Subjects in 17 CFR Parts 230, 

232, 239, and 249 

Reporting and recordkeeping 

requirements, Securities. 

Text of the Proposed Amendments 

For the reasons set out in the 

preamble, the Commission is proposing 

to amend Title 17, chapter II of the Code 

of Federal Regulations as follows: 

PART 230—GENERAL RULES AND 

REGULATIONS, SECURITIES ACT OF 

1933 

■ 1. The authority citation for part 230 

continues to read as follows: 

Authority: 15 U.S.C. 77b, 77b note, 77c, 

77d, 77f, 77g, 77h, 77j, 77r, 77s, 77z–3, 77sss, 

78c, 78d, 78j, 78l, 78m, 78n, 78o, 78o–7 note, 

78t, 78w, 78ll(d), 78mm, 80a–8, 80a–24, 80a– 

28, 80a–29, 80a–30, and 80a–37, and Pub. L. 


khammond on DSKJM1Z7X2PROD with PROPOSALS
5084 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 

112–106, sec. 201(a), sec. 401, 126 Stat. 313 

(2012), unless otherwise noted. 

■ 2. Amend § 230.144 by: 

■ a. Removing the Preliminary Note; 

■ b. Adding introductory text and 

paragraph (b)(3); 

■ c. Revising paragraphs (d)(3)(ii) and 

(h); and 

■ d. Adding Notes 1 through 5 to 

§ 230.144. 

The additions and revisions to read as 

follows: 

§ 230.144 Persons deemed not to be 

engaged in a distribution and therefore not 

underwriters. 

A Notes section appears at the end of 

this rule to assist in understanding its 

provisions. 

* * * * * 

(b) * * * 

(3) Not part of a scheme to evade: 

Section 230.144 (Rule 144) is not 

available to any person with respect to 

any transaction or series of transactions 

that, although in technical compliance 

with this § 230.144, is part of a plan or 

scheme to evade the registration 

requirements of the 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, unless: 

(A) The newly acquired securities 

were acquired from an issuer that, at the 

time of conversion or exchange, does 

not have a class of securities listed, or 

approved for listing, on a national 

securities exchange registered pursuant 

to Section 6 of the Exchange Act (15 

U.S.C. 78f); and 

(B) The convertible or exchangeable 

security contains terms, such as 

conversion rate or price adjustments, 

that offset, in whole or in part, declines 

in the market value of the underlying 

securities occurring prior to conversion 

or exchange, other than terms that 

adjust for stock splits, dividends or 

other issuer-initiated changes in its 

capitalization. 

Note 1 to paragraph (d)(3)(ii). If the 

surrendered securities originally did not 

provide for cashless conversion or 

exchange by their terms and the holder 

provided consideration, other than 

solely securities of the same issuer, in 

connection with the amendment of the 

surrendered securities to permit 

cashless conversion or exchange, then 

the newly acquired securities shall be 

deemed to have been acquired at the 

same time as such amendment to the 

surrendered securities, so long as, in the 

conversion or exchange, the securities 

sold were acquired from the issuer 

solely in exchange for other securities of 

the same issuer.3 

* * * * * 

(h) Notice of sale or proposed sale. (1) 

If the issuer is, and has been for a period 

of at least 90 days immediately before 

the sale, subject to the reporting 

requirements of section 13 or 15(d) of 

the Exchange Act and the amount of 

securities to be sold in reliance upon 

this rule during any period of three 

months exceeds 5,000 shares or other 

units or has an aggregate sale price in 

excess of $50,000, a notice on Form 144 

(§ 239.144 of this chapter) shall be filed 

electronically with the Commission. 

(2) The Form 144 shall be signed by 

the security holder and shall be filed 

before the end of the second business 

day following the day on which the 

subject transaction has been executed. 

Provided however, if the transaction 

satisfies the affirmative defense 

conditions of § 240.10b5–1(c) of this 

chapter, and the security holder does 

not select the date of execution, the date 

on which the executing broker, dealer or 

plan administrator notifies the security 

holder of the execution of the 

transaction is deemed the date of 

execution for a transaction. Neither the 

filing of such notice nor the failure of 

the Commission to comment on such 

notice shall be deemed to preclude the 

Commission from taking any action that 

it deems necessary or appropriate with 

respect to the sale of the securities 

referred to in such notice. The security 

holder filing the notice required by this 

paragraph shall have sold or have a 

bona fide intention to sell the securities 

referred to in the notice within a 

reasonable time after the filing of such 

notice. 

Note 1 to § 230.144. Certain basic 

principles are essential to an 

understanding of the registration 

requirements in the Securities Act of 

1933 (the Act or the Securities Act) and 

the purposes underlying Rule 144. If 

any person sells a non-exempt security 

to any other person, the sale must be 

registered unless an exemption can be 

found for the transaction. Section 4(a)(1) 

of the Securities Act provides one such 

exemption for a transaction ‘‘by a 

person other than an issuer, 

underwriter, or dealer.’’ Therefore, an 

understanding of the term 

‘‘underwriter’’ is important in 

determining whether or not the Section 

4(a)(1) exemption from registration is 

available for the sale of the securities. 

Note 2 to § 230.144. Section 2(a)(11) 

of the Securities Act defines the term 

‘‘underwriter’’ broadly 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. The 

interpretation of this definition 

traditionally has focused on the words 

‘‘with a view to’’ in the phrase 

‘‘purchased from an issuer with a view 

to . . . distribution.’’ An investment 

banking firm which arranges with an 

issuer for the public sale of its securities 

is clearly an ‘‘underwriter’’ under that 

section. However, individual investors 

who are not professionals in the 

securities business also may be 

‘‘underwriters’’ if they act as links in a 

chain of transactions through which 

securities move from an issuer to the 

public. 

Note 3 to § 230.144. Since it is 

difficult to ascertain the mental state of 

the purchaser at the time of an 

acquisition of securities, prior to and 

since the adoption of Rule 144, 

subsequent acts and circumstances have 

been considered to determine whether 

the purchaser took the securities ‘‘with 

a view to distribution’’ at the time of the 

acquisition. Emphasis has been placed 

on factors such as the length of time the 

person held the securities and whether 

there has been an unforeseeable change 

in circumstances of the holder. 

Experience has shown, however, that 

reliance upon such factors alone has led 

to uncertainty in the application of the 

registration provisions of the Act. 

Note 4 to § 230.144. The Commission 

adopted Rule 144 to establish specific 

criteria for determining whether a 

person is not engaged in a distribution. 

Rule 144 creates a safe harbor from the 

Section 2(a)(11) definition of 

‘‘underwriter.’’ A person satisfying the 

applicable conditions of the Rule 144 

safe harbor is deemed not to be engaged 

in a distribution of the securities and 

therefore not an underwriter of the 

securities for purposes of Section 

2(a)(11). Therefore, such a person is 

deemed not to be an underwriter when 

determining whether a sale is eligible 

for the Section 4(a)(1) exemption for 

‘‘transactions by any person other than 

an issuer, underwriter, or dealer.’’ If a 

sale of securities complies with all of 

the applicable conditions of Rule 144: 

Any affiliate or other person who sells 


khammond on DSKJM1Z7X2PROD with PROPOSALS
Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 5085 

restricted securities will be deemed not 

to be engaged in a distribution and 

therefore not an underwriter for that 

transaction; any person who sells 

restricted or other securities on behalf of 

an affiliate of the issuer will be deemed 

not to be engaged in a distribution and 

therefore not an underwriter for that 

transaction; and the purchaser in such 

transaction will receive securities that 

are not restricted securities. 

Note 5 to § 230.144. Rule 144 is not 

an exclusive safe harbor. A person who 

does not meet all of the applicable 

conditions of Rule 144 still may claim 

any other available exemption under the 

Act for the sale of the securities. 

PART 232—REGULATION S–T— 

GENERAL RULES AND REGULATIONS 

FOR ELECTRONIC FILINGS 

■ 3. The general authority citation for 

part 232 continues to read as follows: 

Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 

77s(a), 77z–3, 77sss(a), 78c(b), 78l, 78m, 78n, 

78o(d), 78w(a), 78ll, 80a–6(c), 80a–8, 80a–29, 

80a–30, 80a–37, 7201 et seq.; and 18 U.S.C. 

1350, unless otherwise noted. 

■ 4. Amend § 232.101 by adding 

paragraph (a)(1)(xxii), and removing and 

reserving paragraphs (b)(4) and (c)(6), to 

read as follows: 

§ 232.101 Mandated electronic 

submissions and exceptions. 

(a) * * * 

(1) * * * 

(xxii) Form 144 (§ 239.144 of this 

chapter), where the issuer of the 

securities is subject to the reporting 

requirements of Section 13 or 15(d) of 

the Exchange Act (15 U.S.C. 78m or 

78o(d), respectively). 

* * * * * 

PART 239—FORMS PRESCRIBED 

UNDER THE SECURITIES ACT OF 1933 

■ 5. The general authority citation for 

part 239 continues to read as follows: 

Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 

77j, 77s, 77z–2, 77z–3, 77sss, 78c, 78l, 78m, 

78n, 78o(d), 78o–7 note, 78u–5, 78w(a), 78ll, 

78mm, 80a–2(a), 80a–3, 80a–8, 80a–9, 80a– 

10, 80a–13, 80a–24, 80a–26, 80a–29, 80a–30, 

and 80a–37; and sec. 107, Pub. L. 112–106, 

126 Stat. 312, unless otherwise noted. 

■ 6. Amend § 239.144 by revising 

paragraphs (a) and (b) to read as follows: 

(a) Except as indicated in paragraph 

(b) of this section, each person who 

intends to sell securities in reliance 

upon § 230.144 of this chapter shall file 

this form in electronic format by means 

of the Commission’s Electronic Data, 

Gathering, Analysis, and Retrieval 

system (EDGAR) in accordance with the 

EDGAR rules set forth in Regulation S– 

T (17 CFR part 232 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 5,000 shares or other units and 

the aggregate sale price does not exceed 

$50,000. 

* * * * * 

■ 7. Amend Form 144 (referenced in 

§ 239.144) by: 

■ a. Removing the title text ‘‘NOTICE 

OF PROPOSED SALE OF SECURITIES 

PURSUANT TO RULE 144 UNDER THE 

SECURITIES ACT OF 1933’’ and add in 

its place ‘‘NOTICE OF SALE OR 

PROPOSED SALE OF SECURITIES 

PURSUANT TO RULE 144 UNDER THE 

SECURITIES ACT OF 1933’’; 

■ b. Removing the text ‘‘ATTENTION: 

Transmit for filing 3 copies of this form 

concurrently with either placing an 

order with a broker to execute sale or 

executing a sale directly with a market 

maker.’’ and add in its place 

‘‘ATTENTION: This form must be filed 

in electronic format by means of the 

Commission’s Electronic Data 

Gathering, Analysis, and Retrieval 

system (EDGAR) in accordance with the 

EDGAR rules set forth in Regulation S– 

T (17 CFR part 232). For assistance with 

technical questions about EDGAR or to 

request an access code, call the EDGAR 

Filer Support Office at (202) 551– 

8900.’’; 

■ c. Removing the text ‘‘INSTRUCTION: 

The person filing this notice should 

contact the issuer to obtain the I.R.S. 

Identification Number and the SEC. File 

Number.’’ and add in its place 

‘‘INSTRUCTION: The filer should 

contact the issuer to obtain the SEC. File 

Number.’’; 

■ d. Removing the data field box ‘‘1(b)’’; 

■ e. Redesignating the data field boxes 

1(c) through 1(e) as 1(b) through 1(d); 

■ f. Removing the data field box ‘‘2(c)’’; 

■ g. Removing Instructions 1(b) and 

2(c); 

■ h. Redesignating Instructions 1(c) 

through 1(e) as 1(b) through 1(d); and 

■ i. Removing ‘‘(d) Aggregate market 

value of the securities to be sold as of 

a specified date within 10 days prior to 

the filing of this notice’’ and add in its 

place ‘‘(d) Aggregate market value of the 

securities to be sold as of a specified 

date within 10 days prior to the filing 

of this notice. For completed sales, 

provide instead the total sales proceeds 

(amount of securities sold multiplied by 

the price per share)’’. 

Note: The text of Form 144 does not and 

this amendment will not appear in the Code 

of Federal Regulations. 

PART 249—FORMS, SECURITIES 

EXCHANGE ACT OF 1934 

■ 8. The general authority citation for 

part 249 continues to read as follows: 

Authority: 15 U.S.C. 78a et seq. and 7201 

et seq.; 12 U.S.C. 5461 et seq.; 18 U.S.C. 1350; 

Sec. 953(b) Pub. L. 111–203, 124 Stat. 1904; 

Sec. 102(a)(3) Pub. L. 112–106, 126 Stat. 309 

(2012), Sec. 107, Pub. L. 112–106, 126 Stat. 

313 (2012), and Sec. 72001 Pub. L. 114–94, 

129 Stat. 1312 (2015), unless otherwise 

noted. 

* * * * * 

■ 9. Amend Form 4 (referenced in 

§ 249.104) by: 

■ a. Adding new General Instruction 10; 

and 

■ b. Adding text and a check box at the 

top of the first page immediately below 

the text ‘‘Check this box if no longer 

subject to Section 16. Form 4 or Form 

5 obligations may continue. See 

Instruction 1(b).’’ 

The additions to read as follows: 

Note: The text of Form 4 does not, and this 

amendment will not, appear in the Code of 

Federal Regulations. 

UNITED STATES SECURITIES AND 

EXCHANGE COMMISSION 

Washington, DC 20549 

FORM 4 

* * * * * 

General Instructions 

* * * * * 

10. Optional Rule 10b5–1(c) 

Transaction Indication 

If a transaction was made pursuant to 

a contract, instruction or written plan 

for the purchase or sale of equity 

securities of the issuer that satisfies the 

conditions of Rule 10b5–1(c) under the 

Exchange Act [§ 240.10b5–1(c) of this 

chapter], a reporting person may elect to 

check the Rule 10b5–1 box appearing on 

this Form. Additional information, such 

as the date of a Rule 10b5–1 plan, may 

be provided at the filer’s option in the 

‘‘Explanation of Responses’’ portion of 

the Form. 

* * * * * 

b Check this box to indicate that a 

transaction was made pursuant to Rule 

10b5–1(c). See Instruction 10. 

* * * * * 

10. Amend Form 5 (referenced in 

§ 249.105) by: 

a. Adding new General Instruction 10; 

and 

b. Adding text and a check box at the 

top of the first page immediately below 

the text ‘‘Form 4 Transactions 

Reported’’. 

The additions to read as follows: 


khammond on DSKJM1Z7X2PROD with PROPOSALS
5086 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Proposed Rules 

Note: The text of Form 5 does not, and this 

amendment will not, appear in the Code of 

Federal Regulations. 

UNITED STATES SECURITIES AND 

EXCHANGE COMMISSION 

Washington, DC 20549 

FORM 5 

* * * * * 

General Instructions 

* * * * * 

10. Optional Rule 10b5–1(c) 

Transaction Indication 

If a transaction was made pursuant to 

a contract, instruction or written plan 

for the purchase or sale of equity 

securities of the issuer that satisfies the 

conditions of Rule 10b5–1(c) under the 

Exchange Act [§ 240.10b5–1(c) of this 

chapter], a reporting person may elect to 

check the Rule 10b5–1 box appearing on 

this Form. Additional information, such 

as the date of a Rule 10b5–1 plan, may 

be provided at the filer’s option in the 

‘‘Explanation of Responses’’ portion of 

the Form. 

* * * * * 

b Check this box to indicate that a 

transaction was made pursuant to Rule 

10b5–1(c). See Instruction 10. 

* * * * * 

By the Commission. 

Dated: December 22, 2020. 

Vanessa A. Countryman, 

Secretary. 

[FR Doc. 2020–28790 Filed 1–15–21; 8:45 am] 

BILLING CODE 8011–01–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 52 

[EPA–R09–OAR–2020–0523; FRL–10017– 

10–Region 9] 

Air Plan Approval; California; Feather 

River Air Quality Management District 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Proposed rule. 

SUMMARY: The Environmental Protection 

Agency (EPA) is proposing to approve a 

revision to the Feather River Air Quality 

Management District (FRAQMD or 

‘‘District’’) portion of the California 

State Implementation Plan (SIP). This 

revision concerns emissions of volatile 

organic compounds (VOCs) from surface 

preparation and clean-up operations. 

We are proposing to approve a local rule 

to regulate these emission sources under 

the Clean Air Act (CAA or the ‘‘Act’’). 

We are taking comments on this 

proposal and plan to follow with a final 

action. 

DATES: Comments must be received on 

or before February 18, 2021. 

ADDRESSES: Submit your comments, 

identified by Docket ID No. is EPA– 

R09–OAR–2020–0523 at https://

www.regulations.gov. For comments 

submitted at Regulations.gov, follow the 

online instructions for submitting 

comments. Once submitted, comments 

cannot be edited or removed from 

Regulations.gov. The EPA may publish 

any comment received to its public 

docket. Do not submit electronically any 

information you consider to be 

Confidential Business Information (CBI) 

or other information whose disclosure is 

restricted by statute. Multimedia 

submissions (audio, video, etc.) must be 

accompanied by a written comment. 

The written comment is considered the 

official comment and should include 

discussion of all points you wish to 

make. The EPA will generally not 

consider comments or comment 

contents located outside of the primary 

submission (i.e., on the web, cloud, or 

other file sharing system). For 

additional submission methods, please 

contact the person identified in the FOR

FURTHER INFORMATION CONTACT section. 

For the full EPA public comment policy, 

information about CBI or multimedia 

submissions, and general guidance on 

making effective comments, please visit 

https://www.epa.gov/dockets/ 

commenting-epa-dockets. If you need 

assistance in a language other than 

English or if you are a person with 

disabilities who needs a reasonable 

accommodation at no cost to you, please 

contact the person identified in the FOR

FURTHER INFORMATION CONTACT section. 

FOR FURTHER INFORMATION CONTACT: 

Christine Vineyard, EPA Region IX, 75 

Hawthorne St., San Francisco, CA 

94105. By phone: (415) 947–4125 or by 

email at vineyard.christine@epa.gov. 

SUPPLEMENTARY INFORMATION: 

Throughout this document, ‘‘we,’’ ‘‘us’’ 

and ‘‘our’’ refer to the EPA. 

Table of Contents 

I. The State’s Submittal 

A. What rule did the State submit? 

B. Are there other versions of this rule? 

C. What is the purpose of the submitted 

rule revision? 

II. The EPA’s Evaluation and Action 

A. How is the EPA evaluating the rule? 

B. Does the rule meet the evaluation 

criteria? 

C. The EPA’s Recommendations to Further 

Improve the Rule 

D. Public Comment and Proposed Action 

III. Incorporation by Reference 

IV. Statutory and Executive Order Reviews 

I. The State’s Submittal 

A. What rule did the State submit? 

Table 1 lists the rule addressed by this 

proposal with the date that it was 

adopted by the local air agency and 

submitted by the California Air 

Resources Board (CARB). 

TABLE 1—SUBMITTED RULE

Local agency Rule No. Rule title Amended Submitted 

FRAQMD ........... 3.14 Surface Preparation and Clean-up .............................................................. 08/01/16 01/24/17 

On April 17, 2017, the EPA 

determined that the submittal for 

FRAQMD Rule 3.14 met the 

completeness criteria in 40 CFR part 51, 

appendix V, which must be met before 

formal EPA review. 

B. Are there other versions of this rule? 

We approved an earlier version of 

Rule 3.14 into the SIP on April 23, 2015 

(80 FR 22646). The FRAQMD adopted 

revisions to the SIP-approved version on 

August 1, 2016, and CARB submitted 

them to us on January 24, 2017. 

C. What is the purpose of the submitted 

rule revision? 

Emissions of VOCs contribute to the 

production of ground-level ozone, (or 

‘‘smog’’) and particulate matter, which 

harm human health and the 

environment. Section 110(a) of the CAA 

requires states to submit regulations that 

control VOC emissions. Rule 3.14 was 


khammond on DSKJM1Z7X2PROD with PROPOSALS