36822 Federal Register / Vol. 72, No. 128 / Thursday, July 5, 2007 / Proposed Rules 

1 17 CFR 230.144. 

2 17 CFR 230.145. 

3 17 CFR 230.190. 

4 17 CFR 230.701. 

5 17 CFR 239.144. 

6 15 U.S.C. 77a et seq. 

7See 15 U.S.C. 77e. 

8 15 U.S.C. 77d(1). 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 230 and 239 

[Release No. 33–8813; File No. S7–11–07] 

RIN 3235–AH13 

Revisions to Rule 144 and Rule 145 to 

Shorten Holding Period for Affiliates 

and Non-Affiliates 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Proposed rule. 

SUMMARY: Rule 144 under the Securities 

Act of 1933 creates a safe harbor for the 

sale of securities under the exemption 

set forth in Section 4(1) of the Securities 

Act. We are proposing a six-month 

holding period requirement under Rule 

144 for ‘‘restricted securities’’ of 

companies that are subject to the 

reporting requirements of the Securities 

Exchange Act of 1934. The proposed 

six-month holding period for restricted 

securities of reporting companies would 

be extended, for up to an additional six 

months, by the amount of time during 

which the security holder has engaged 

in hedging transactions. Restricted 

securities of companies that are not 

subject to the Exchange Act reporting 

requirements would continue to be 

subject to a one-year holding period 

prior to any public resale. We also 

propose to substantially reduce the 

restrictions on the resale of securities by 

non-affiliates. In addition, we propose 

to simplify the Preliminary Note to Rule 

144, eliminate the manner of sale 

restrictions with respect to debt 

securities, increase the Form 144 filing 

thresholds, and codify several staff 

interpretive positions that relate to Rule 

144. We also solicit comment on how 

best to coordinate Form 144 and Form 

4 filing requirements. Finally, we 

propose amendments to Securities Act 

Rule 145, which establishes resale 

limitations on certain persons who 

acquire securities in business 

combination transactions, to eliminate 

the presumptive underwriter position in 

Rule 145(c), except for transactions 

involving a shell company, and to revise 

the resale requirements in Rule 145(d). 

We believe that the proposed changes 

will increase the liquidity of privately 

sold securities and decrease the cost of 

capital for all companies without 

compromising investor protection. 

DATES: Comments should be received on 

or before September 4, 2007. 

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/proposed.shtml); or 

• Send an E-mail to rulecomments@sec.gov. Please include File 

Number S7–11–07 on the subject line; 

or 

• Use the Federal eRulemaking Portal 

(http://www.regulations.gov). Follow the 

instructions for submitting comments. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number S7–11–07. This file number 

should be included on the subject line 

if e-mail is used. To help us process and 

review your comments more efficiently, 

please use only one method. The 

Commission will post all comments on 

the Commission’s Web site (http:// 

www.sec.gov/rules/proposed.shtml). 

Comments are also available for public 

inspection and copying in the 

Commission’s Public Reference Room, 

100 F Street, NE., Washington, DC 

20549. All comments received will be 

posted without change; we do not edit 

personal identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. 

FOR FURTHER INFORMATION CONTACT: 

Katherine Hsu, Special Counsel, and 

Ray Be, Special Counsel, Office of 

Rulemaking, Division of Corporation 

Finance, at (202) 551–3430, 100 F 

Street, NE., Washington, DC 20549. 

SUPPLEMENTARY INFORMATION: The 

Commission is proposing amendments 

to Rule 144,1 Rule 145,2 Rule 190,3 Rule 

701 4 and Form 144 5 under the 

Securities Act of 1933.6

Table of Contents 

I. Background and Overview 

II. Discussion of Proposals 

A. Simplification of the Preliminary Note 

and Text of Rule 144 

B. Amendments to Holding Period 

Requirement and Reduction of 

Requirements Applicable to NonAffiliates 

1. Background 

2. Amendments to Holding Period in Rule 

144(d) 

a. Six-Month Holding Period for Exchange 

Act Reporting Companies 

b. Tolling Provision 

3. Significant Reduction of Requirements 

Applicable to Non-Affiliates 

C. Elimination of Manner of Sale 

Limitations for Debt Securities 

D. Increase of the Form 144 Filing 

Thresholds 

E. Codification of Several Staff Positions 

1. Securities Issued Under Section 4(6) of 

the Securities Act Are Considered 

‘‘Restricted Securities’’ 

2. Tacking of Holding Periods When a 

Company Reorganizes Into a Holding 

Company Structure 

3. Tacking of Holding Periods for 

Conversions and Exchanges of Securities 

4. Cashless Exercise of Options and 

Warrants 

5. Aggregation of Pledged Securities 

6. Treatment of Securities Issued by 

‘‘Reporting and Non-Reporting Shell 

Companies’’ 

7. Representations Required From Security 

Holders Relying on Rule 10b5–1(c) 

F. Amendments to Rule 145 

G. Conforming and Other Amendments 

1. Underlying Securities in Asset-Backed 

Securities Transactions 

2. Securities Act Rule 701(g)(3) 

III. Coordination of Form 144 Filing 

Requirements With Form 4 Filing 

Requirements 

IV. General Request for Comments 

V. Paperwork Reduction Act 

A. Background 

B. Summary of Proposed Amendments 

C. Solicitation of Comments 

VI. Cost-Benefit Analysis 

A. Background 

B. Description of Proposal 

C. Benefits 

D. Costs 

E. Request for Comments 

VII. Consideration of Burden on Competition 

and Promotion of Efficiency, 

Competition and Capital Formation 

VIII. Initial Regulatory Flexibility Analysis 

A. Reasons for, and Objectives of, Proposed 

Action 

B. Legal Basis 

C. Small Entities Subject to Rule 

D. Reporting, Recordkeeping and Other 

Compliance Requirements 

E. Overlapping of Conflicting Federal Rules 

F. Significant Alternatives 

G. Solicitation of Comments 

IX. Small Business Regulatory Enforcement 

Fairness Act 

X. Statutory Basis and Text of Proposed 

Amendments 

I. Background and Overview 

The Securities Act requires 

registration of all offers and sales of 

securities in interstate commerce or by 

use of the U.S. mail, unless an 

exemption from the registration 

requirement is available.7 Section 4(1) 

of the Securities Act provides such an 

exemption for transactions by any 

person other than an issuer, underwriter 

or dealer.8


sroberts on PROD1PC70 with PROPOSALS
Federal Register / Vol. 72, No. 128 / Thursday, July 5, 2007 / Proposed Rules 36823 

9 15 U.S.C. 77b(a)(11). 

10Release No. 33–5223 (Jan. 14, 1972) [37 FR 

591]. 

11See Release No. 33–7390 (Feb. 28, 1997) [62 FR 

9242]. 

12See 17 CFR 230.144(a)(3). 

13The term ‘‘affiliate’’ is defined in 17 CFR 

230.144(a)(1) as ‘‘a person that directly, or 

indirectly through one or more intermediaries, 

controls, or is controlled by, or is under common 

control with, [the] issuer.’’

14Release No. 33–7391 (Feb. 28, 1997) [62 FR 

9246] (‘‘the 1997 proposing release’’). In that 

release, we proposed to (1) revise the Preliminary 

Note to Rule 144 to restate the intent and effect of 

the rule, (2) add a bright-line test to the Rule 144 

definition of ‘‘affiliate,’’ (3) eliminate the Rule 144 

manner of sale requirements, (4) increase the Form 

144 filing thresholds, (5) include in the definition 

of ‘‘restricted securities’’ securities issued pursuant 

to the Securities Act Section 4(6) exemption, (6) 

clarify the holding period determination for 

securities acquired in certain exchanges with the 

issuer and in holding company formations, (7) 

streamline and simplify several Rule 144 

provisions, and (8) eliminate the presumptive 

underwriter provisions of Rule 145. We also 

solicited comment on (1) further revisions to the 

Rule 144 holding periods, (2) elimination of the 

trading volume tests to determine the amount of 

securities that can be resold under Rule 144, and 

(3) several possible regulatory approaches with 

respect to certain hedging activities. 15 17 CFR 230.144(a)(3). 16See the 1997 proposing release. 17See 17 CFR 230.144(k). 18 17 CFR 230.144(c). 19 17 CFR 230.144(d). 20 17 CFR 230.144(e). 21 17 CFR 230.144(f) and (g). 22 17 CFR 230.144(h). 

23 17 CFR 230.144(k). 

24See the proposed Preliminary Note, proposed 

paragraph (b), proposed paragraph (c) and related 

note, and proposed paragraphs (d)(3)(i), (e)(1), 

(e)(2)(vii) and (f). 

25 15 U.S.C. 78a et seq. 

26See proposed Rule 144(d). 

27See proposed Rule 144(d)(3)(xi). 

28See proposed Rules 144(b)(1) and (d). 

29See proposed Rule 144(f). 

30See proposed Rule 144(h). 

31See proposed Rule 144(a)(3)(viii). 

32See proposed Rule 144(d)(3)(ix). 

33See proposed Rule 144(d)(3)(ii). 

34See proposed Rule 144(d)(3)(xi). 

The definition of the term 

‘‘underwriter’’ is key to the operation of 

the Section 4(1) exemption. Section 

2(a)(11) of the Securities Act defines an 

underwriter as ‘‘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.’’ 9 The Securities Act does 

not, however, provide specific criteria 

for determining when a person 

purchases securities ‘‘with a view to 

* * * the distribution’’ of those 

securities. In 1972, the Commission 

adopted Rule 144 to provide a safe 

harbor from this definition of 

‘‘underwriter’’ to assist security holders 

in determining whether the Section 4(1) 

exemption is available for their resale of 

securities.10 If a selling security holder 

satisfies all of Rule 144’s applicable 

conditions in connection with a 

transaction, he or she is deemed not to 

be an ‘‘underwriter,’’ and the Section 

4(1) exemption would be available for 

the resale of the securities. 

Since its adoption, we have reviewed 

and revised Rule 144 several times. We 

last made major changes in 1997.11 At 

that time, we shortened the required 

holding period for securities that are 

defined as ‘‘restricted securities.’’ 12

Before the 1997 amendments, affiliates 

and non-affiliates could resell restricted 

securities, subject to limitation, after 

two years, and non-affiliates (who had 

not been affiliates during the prior three 

months) could resell restricted 

securities without limitation after three 

years.13 The 1997 amendments changed 

these two-year and three-year periods to 

one-year and two-year periods, 

respectively. 

At the time we adopted those 

changes, we proposed and solicited 

comment on several possible additional 

changes to Rule 144, Rule 145 and Form 

144, including reducing the holding 

period further.14 We received 38 

comment letters on those proposed 

changes. As discussed more fully below, 

most commenters were divided between 

supporting further shortening of the 

holding period and waiting to see the 

results of the 1997 amendments. We 

have not taken further action to adopt 

the 1997 proposals. 

Rule 144 regulates the resale of two 

categories of securities—restricted 

securities and control securities. 

Restricted securities are securities 

acquired pursuant to one of the 

transactions listed in Rule 144(a)(3).15

Although it is not a term defined in Rule 

144, ‘‘control securities’’ is used 

commonly to refer to securities held by 

affiliates of the issuer, regardless of how 

the affiliates acquired the securities.16

Therefore, if an affiliate acquires 

securities in a transaction that is listed 

in Rule 144(a)(3), those securities would 

be both restricted securities and control 

securities. 

Rule 144 states that a selling security 

holder shall be deemed not to be 

engaged in a distribution of securities 

and therefore not an underwriter with 

respect to such securities, thus making 

available the Section 4(1) exemption 

from registration, if the resale meets 

particular criteria. If the security holder 

is an affiliate of the issuer, or a nonaffiliate that has held the restricted 

securities for less than two years,17

these criteria include the following: 

• There must be available adequate 

current public information about the 

issuer; 18

• If the securities being sold are 

restricted securities, the seller must 

have held the security for a specified 

holding period; 19

• The resale must be within specified 

sales volume limitations; 20

• The resale must comply with the 

manner of sale conditions; 21 and 

• The selling security holder may be 

required to file a Form 144.22

Under the current rule, a non-affiliate 

may publicly resell restricted securities 

without being subject to the above 

limitations if he or she has held the 

securities for two years and if he or she 

is not, and for the prior three months 

has not been, an ‘‘affiliate’’ of the 

issuer.23

We now are proposing amendments 

that would: 

• Simplify the Preliminary Note to 

Rule 144 and text of Rule 144, using 

plain English principles; 24

• Amend the Rule 144 holding period 

requirement for restricted securities of 

companies that are required to file 

reports under the Securities Exchange 

Act of 1934 25 to provide for a six-month 

holding period if the security holder has 

not engaged in certain hedging 

transactions; 26

• Require that security holders toll, or 

suspend, the holding period during the 

time they enter into certain hedging 

transactions, although under no 

circumstance would the holding period 

extend beyond one year; 27

• Substantially reduce the 

requirements for non-affiliates so that 

they can resell securities freely after the 

holding period (except that nonaffiliates of reporting companies would 

be subject to the current public 

information requirement until one year 

after the acquisition of the securities); 28

• Eliminate the ‘‘manner of sale’’

limitations with respect to debt 

securities; 29

• Increase the thresholds that would 

trigger a Form 144 filing requirement; 30

• Codify the staff’s positions, as they 

relate to Rule 144, concerning the 

following issues: 

Æ Inclusion of securities acquired 

under Section 4(6) of the Securities Act 

in the definition of ‘‘restricted 

securities,’’ 31

Æ The effect that creation of a holding 

company structure has on a security 

holder’s holding period,32

Æ Holding periods for conversions 

and exchanges of securities,33

Æ Holding periods for the cashless 

exercise of options and warrants,34


sroberts on PROD1PC70 with PROPOSALS
36824 Federal Register / Vol. 72, No. 128 / Thursday, July 5, 2007 / Proposed Rules 

35See proposed note to Rule 144(e)(2)(ii). 

36See proposed Rule 144(i). 

37 17 CFR 240.10b5–1(c). See proposed 

amendments to Form 144. 

38See proposed Rule 145(d). 

39 17 CFR 249.104. 

40 15 U.S.C. 78p. 

41Section 16 applies to every person who is the 

beneficial owner of more than 10% of any class of 

equity securities registered under Section 12 of the 

Exchange Act, and each officer and director 

(collectively, ‘‘reporting persons’’ or ‘‘insiders’’) of 

the issuer of such security. Section 16(a) of the 

Exchange Act requires that reporting persons report 

changes in their beneficial ownership of all equity 

securities of the issuer on Form 4 before the end 

of the second business day following the day on 

which the subject transaction (which caused the 

change in beneficial ownership) was executed. 

42 In 1997, all commenters to such amendments 

favored the simplification of the Preliminary Note. 

We note, however, that the current proposal would 

result in a significantly shorter note than the 

Preliminary Note proposed in 1997. 

43Because we make this clarification in the 

Preliminary Note, we propose to delete current Rule 

144(j), which currently provides that Rule 144 is a 

non-exclusive safe harbor. 

44Release No. 33–5223. 

Æ Aggregation of a pledgee’s resales 

with resales by other pledgees of the 

same security,35

Æ The extent to which securities 

issued by ‘‘reporting and non-reporting 

shell companies’’ are eligible for resale 

under Rule 144,36 and 

Æ Representations required from 

security holders relying on Rule 10b5–

1(c); 37 and 

• Eliminate the presumptive 

underwriter provision in Securities Act 

Rule 145, except for transactions 

involving a shell company, and 

harmonize the resale requirements in 

Rule 145 with the resale provisions for 

the securities of shell companies in Rule 

144.38

We also solicit comment on delaying 

the Form 144 filing deadline to coincide 

with the deadline for filing a Form 4 39

under Section 16 40 of the Exchange Act 

and permitting persons who are subject 

to Section 16 to meet their Form 144 

filing requirement by filing a Form 4. 41

The following table briefly compares 

some of the most significant proposed 

amendments to the current regulatory 

scheme: 

Current regulations Proposed amendments 

Resales of Restricted Securities by Non-Affiliates 

Under Rule 144.

—Limited resales after holding restricted securities for 

one year.

—Unlimited resales after holding restricted securities of 

Exchange Act reporting companies for six months if 

they have not been affiliates during the prior three 

months, except that such resales would be subject to 

the current public information requirement between 

the end of the six-month holding period and one year 

after the acquisition date of the securities. 

—Unlimited resales after holding restricted securities 

for two years if they have not been affiliates during 

the prior three months.

—Unlimited resales after holding restricted securities of 

non-reporting companies for one year if they have 

not been affiliates during the prior three months. 

—No tolling of holding period as a result of hedging 

transactions.

—Specific provision tolling the holding period when engaged in certain hedging transactions. Maximum 

one-year holding period. 

Resales by Affiliates Under 

Rule 144.

—Limited resales after holding restricted securities for 

one year.

—Limited resales after holding restricted securities of 

Exchange Act reporting companies for six months. 

—Limited resales after holding restricted securities of 

non-reporting companies for one year. 

—No tolling of holding period as a result of hedging 

transactions.

—Specific provision tolling the holding period when engaged in certain hedging transactions. Maximum 

one-year holding period. 

Manner of Sale Restrictions —Apply to resale of any type of security under Rule 

144.

—Would not apply to resale of debt securities by affiliates or to any resale by non-affiliates. 

Form 144 .............................. —Filing threshold at 500 shares or $10,000 .................. —With respect to affiliates, filing threshold at 1,000 

shares or $50,000. 

—No Form 144 filing required for non-affiliates. 

Rule 145 ............................... —Presumptive underwriter provision applies to all Rule 

145(a) transactions.

—Presumptive underwriter provision applies only to 

Rule 145(a) transactions involving shell companies, 

with revised resale requirements in Rule 145(d). 

II. Discussion of Proposals 

A. Simplification of the Preliminary 

Note and Text of Rule 144 

As in the 1997 proposing release, we 

again are proposing amendments to 

simplify and clarify the Preliminary 

Note to Rule 144 and to incorporate 

plain English principles.42 The current 

Preliminary Note is complex and may 

be confusing to many security holders. 

These proposed amendments to the 

Preliminary Note are not intended to 

alter the substantive operation of the 

rule. The revised Preliminary Note 

would briefly explain the benefits of 

complying with the rule. It also would 

clarify that any person who sells 

restricted securities, and any affiliate or 

any person who sells restricted 

securities or other securities on behalf of 

an affiliate, shall not be deemed to be 

engaged in a distribution of such 

securities and therefore not an 

underwriter with respect to such 

securities if the sale in question is made 

in accordance with all the applicable 

provisions of the rule. The Preliminary 

Note would further clarify that, 

although Rule 144 provides a safe 

harbor for establishing the availability of 

the exemption provided by Section 4(1), 

it is not the exclusive means for 

reselling securities without registration. 

Therefore, it does not eliminate or 

otherwise affect the availability of any 

other exemption for resales.43

In the original adopting release for Rule 144, 

we stated: 

In view of the objectives and policies 

underlying the Act, the rule shall not be 

available to any individual or entity with 

respect to any transaction which, although in 

technical compliance with the provisions of 

the rule, is part of a plan by such individual 

or entity to distribute or redistribute 

securities to the public. In such case, 

registration is required.44

Consistent with this statement, we 

propose to add a statement to the 

Preliminary Note that the Rule 144 safe 

harbor is not available with respect to 

any transaction or series of transactions 


sroberts on PROD1PC70 with PROPOSALS
Federal Register / Vol. 72, No. 128 / Thursday, July 5, 2007 / Proposed Rules 36825 

45See proposed Preliminary Note to Rule 144. 

Similar language can also be found in other rules 

such as in the Preliminary Note to Securities Act 

Rule 144A [17 CFR 230.144A]. 

46Release No. 33–7390 (Feb. 28, 1997) [62 FR 

9242]. See 17 CFR 230.144(d) and (k). 

47These other conditions included the 

availability of current public information, the 

volume of sale limitations, the manner of sale 

limitations, and the filing of a notice. See 17 CFR 

230.144(c), (e), (f) and (h). 

48See letters from American Society of Corporate 

Secretaries (ASCS); Association for Investment 

Management & Research (AIMR); Association of the 

City Bar of New York (NY City Bar); Baltimore Gas 

& Electric (BG&E); Investment Company Institute 

(ICI); Charles Lilienthal (Lilienthal); Loeb & Loeb; 

New York Bar Association (NY Bar); Schwartz 

Investments; Sullivan & Cromwell; Testa, Hurwitz 

& Thibeault (Testa Hurwitz); and Willkie, Farr & 

Gallagher (Willkie Farr). 

49See letters from Argent and The Corporate 

Counsel (Corporate Counsel). 

50See letters from ABA; joint letter from Goldman 

Sachs, JP Morgan, Morgan Stanley and Salomon 

Brothers (Four Brokers); Lehman Brothers; Merrill 

Lynch; Morgan Stanley; Regional Investment 

Bankers Association (Regional Bankers); Securities 

Industry Association (SIA); and Smith Barney. 

51As proposed, the six-month holding period 

would apply to securities of the issuer that is, and 

has been for at least 90 days before the sale, subject 

to the reporting requirements of Section 13 or 15(d) 

of the Exchange Act. As proposed, a non-reporting 

issuer would be an issuer that is not, or has not 

been for at least 90 days immediately before the 

sale, subject to the reporting requirements of 

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

delineation between reporting and non-reporting 

companies and the 90-day waiting period for 

reporting companies are similar to the provisions in 

Rule 144(c). 

52See proposed Rule 144(d)(1)(i). These proposed 

amendments would not change the Rule 144(d) 

requirement that, if the acquiror takes by purchase, 

the holding period will not commence until the full 

purchase price is paid. 

53See Section VI. of this release. 

54 17 CFR 230.901 through 230.905 and 

Preliminary Notes. 

55See Release No. 33–5223 (Jan. 14, 1972) [37 FR 

591]. 

56See also letter to John W. White, Director, SEC 

Division of Corporation Finance, from Keith F. 

Higgins, Chair, Committee on Federal Regulation of 

Securities, ABA Section of Business Law (Mar. 22, 

2007) (‘‘the 2007 ABA Letter’’), available at http:// 

www.abanet.org/buslaw/committees/CL410000pub/

comments/20070322000000.pdf. The 2007 ABA 

Letter recommended that the Commission 

reconsider the 1997 proposals and shorten the Rule 

144(d) holding period to six months and the Rule 

144(k) period to one year. The letter pointed out 

that, in light of the increased volatility of today’s 

marketplace, holding periods of six months and one 

year represent greater economic risk than they did 

when the current holding periods were adopted, 

and they are more than long enough to ensure that 

a purchaser has assumed the economic risk of 

investment. 

that, although in technical compliance 

with the rule, is part of a plan or scheme 

to evade the registration requirements of 

the Act.45

In addition, we are proposing changes 

throughout the rule to attempt to make 

the rule less complex and easier to read. 

Request for Comment 

• Should we adopt the simplified 

Preliminary Note? Should we keep more 

detail in the Preliminary Note than 

proposed? Does the Preliminary Note 

need further revision? If so, how should 

we revise it? 

• Does the proposed language of the 

Preliminary Note delete or omit any 

information that should be addressed? 

Does the proposed language change the 

meaning of any information in the 

existing Preliminary Note? 

• Should we not make any changes to 

the Preliminary Note? Does the existing 

Preliminary Note provide useful 

background information on Rule 144, 

the Section 2(a)(11) definition of an 

underwriter, or the Section 4(1) 

exemption? Is the Preliminary Note 

necessary or helpful? Should we 

eliminate it entirely? 

• We also have streamlined and 

proposed plain English changes to 

various portions of the rule other than 

the Preliminary Note. Would any of the 

proposed language inadvertently change 

the substantive requirements of the 

rule? Do any of the changes create 

ambiguity with respect to settled issues? 

B. Amendments to Holding Period 

Requirement in Rule 144(d) for 

Restricted Securities and Reduction of 

Requirements Applicable to NonAffiliates 

1. Background 

As stated above, in 1997, we reduced 

the Rule 144 holding periods for 

restricted securities for both affiliates 

and non-affiliates.46 Before the 1997 

amendments, under Rule 144(d), 

security holders could sell limited 

amounts of restricted securities after 

holding their securities for two years if 

they satisfied all other conditions 

imposed by Rule 144.47 Under 144(k), 

non-affiliates could sell restricted 

securities without limitation and be 

subject to no other conditions after 

holding their securities for three years. 

The 1997 amendments to Rule 144 

reduced the two-year Rule 144(d) 

holding period to one year and amended 

Rule 144(k) so that non-affiliates could 

freely sell an unlimited amount of 

securities after two years, instead of 

three. 

In the 1997 proposing release, we 

solicited comment on whether these 

holding periods should be reduced even 

further, with a focus on six months for 

the Rule 144(d) holding period. We 

received numerous comments on this 

issue. Twelve commenters 

recommended that we further reduce 

the holding period to six months.48 Two 

other commenters thought that we 

should maintain the holding periods 

adopted in 1997.49 Eight commenters 

recommended that we gain more 

experience with the new holding 

periods created in 1997 before 

proposing further amendments to those 

holding periods.50

2. Amendments to Holding Period in 

Rule 144(d) 

a. Six-Month Holding Period for 

Exchange Act Reporting Companies 

We now propose amendments to 

provide for a reduced holding period 

under Rule 144(d) for restricted 

securities of Exchange Act reporting 

companies held by affiliates and nonaffiliates. Under the proposed revisions 

to Rule 144(d), affiliates and nonaffiliates would both be permitted to 

resell restricted securities of Exchange 

Act reporting companies 51 publicly 

after holding the securities for six 

months, subject to other conditions of 

Rule 144, when applicable, if they have 

not engaged in hedging transactions 

with respect to the securities.52 We 

believe that shortening the holding 

period in this way would increase the 

liquidity of privately sold securities and 

decrease the cost of capital for reporting 

companies without compromising 

investor protection.53 By reducing the 

holding period for restricted securities, 

the proposed amendments could enable 

companies to raise capital more often 

through the issuance of securities in 

unregistered transactions, such as 

offshore offerings under Regulation S 54

or other transactions not involving a 

public offering, rather than through 

financing structures such as extremely 

dilutive convertible securities. 

The fundamental purpose of Rule 144 

is to provide objective criteria for 

determining whether an investor is an 

underwriter or has acquired securities 

for distribution. At the same time, we do 

not want the holding period to be longer 

than necessary or impose any 

unnecessary costs or restrictions on 

capital formation. Assumption of the 

economic risk of investment is a critical 

factor in determining whether a security 

holder purchased the securities for 

distribution.55 After observing the 

operation of Rule 144 since the 1997 

amendments, with regard to reporting 

companies, we believe that holding 

securities for six months is a reasonable 

indication that an investor has assumed 

the economic risk of investment in those 

securities.56

Because we are concerned that the 

market does not have sufficient 

information and safeguards with respect 

to non-reporting companies, we propose 

that the holding period for restricted 

securities in non-reporting companies 


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36826 Federal Register / Vol. 72, No. 128 / Thursday, July 5, 2007 / Proposed Rules 

57See proposed Rule 144(d)(1)(ii). The 2007 ABA 

letter also recommended that in the case of nonreporting companies, the Commission should 

consider permitting resales without restriction 

under Rule 144 after a one-year holding period. 

58The proposals would delete paragraph (k) of 

Rule 144 and permit non-affiliates to resell 

restricted securities of non-reporting companies 

freely after one year. 

59See Release No. 33–6862 (Apr. 23, 1990) [55 FR 

17933]. 

60We reasoned that, ‘‘a single period running 

from the date of the purchase from the issuer or an 

affiliate of the issuer is sufficient to prevent the 

distribution by the issuer of securities to the 

public.’’ Release No. 33–6862. 

61For a discussion on hedging arrangements in 

prior releases, see Section IV.B of the 1997 

proposing release and Section II.A of Release No. 

33–7187 (Jul. 10, 1995) [60 FR 35645]. 

62See the 1997 proposing release. In that release, 

we proposed five different alternatives. These were 

the following: (1) Make the Rule 144 safe harbor 

unavailable to persons who hedge during the 

restricted period; (2) independent of Rule 144, 

promulgate a rule that would define a sale for 

purposes of Section 5 to include specified hedging 

transactions; (3) adopt a shorter holding period 

during which hedging could not occur without 

losing the safe harbor; (4) reintroduce a tolling 

provision in Rule 144 similar to the provision that 

was included prior to 1990; or (5) maintain the 

status quo with no specific prohibition against 

hedging. We believe that the proposed tolling 

provision in this release offers a balanced approach 

to addressing hedging activities in Rule 144. 

63See letters from ABA; AIMR; Argent; ASCS; 

Constantine Katsoris; Corporate Counsel; and 

Schwartz Investments. 

64See letters from Bear Stearns; BG&E; Intel; 

Paine Webber; Wilkie Farr; and XXI Securities. 

65See letters from Four Brokers; NY Bar; SIA; 

Merrill Lynch; Citibank; and Lehman Brothers. 

66See proposed Rule 144(d)(3)(xi). 

67 17 CFR 240.16a–1(h). Rule 16a–1(h) defines a 

‘‘put equivalent position’’ as a derivative security 

position that increases in value as the value of the 

underlying equity decreases, including, but not 

limited to, a long put option and a short call option 

position. 68 ‘‘Tacking’’ the holding period is the ability of 

the security holder to count the period that the 

securities are held by a previous owner as part of 

his or her own holding period for the purposes of 

Rule 144(d). Further discussion about tacking is 

located in Section II.E.2 of this release. 

69See proposed Rule 144(d)(3)(xi)(C). If the 

security holder relying on Rule 144 is unable to 

determine that the previous owner did not engage 

in hedging activities with respect to the securities, 

then the security holder should omit the period in 

which the security holder is not able to determine 

whether the previous owner had a short position or 

a put equivalent position when calculating the 

holding period under Rule 144(d). 

would remain at one year for affiliates 

and non-affiliates.57 However, as 

discussed below, we propose to 

eliminate the resale restrictions imposed 

on non-affiliates of non-reporting 

companies after the one-year holding 

period. Non-affiliates of non-reporting 

companies would be subject to no other 

Rule 144 condition after meeting the 

one-year holding period under the 

proposals.58

b. Tolling Provision 

In 1990, we eliminated a Rule 144 

provision that tolled the holding period 

of a security holder maintaining a short 

position in, or any put or other option 

to dispose of, securities equivalent to 

the restricted securities owned by the 

security holder.59 We eliminated this 

provision in conjunction with an 

amendment to broaden a security 

holder’s ability to tack the holding 

periods of prior owners to the security 

holder’s own holding period.60

Despite the prior elimination of the 

tolling provision, we are concerned 

about the effect of hedging activities 

designed to shift the economic risk of 

investment away from the security 

holder with respect to restricted 

securities to be resold under Rule 144.61

It becomes more difficult to conclude 

that the security holder who engages in 

hedging transactions, and thereby 

transfers the economic risk of the 

investment to a third party, soon after 

acquiring the security, has held the 

security for investment purposes and 

not with a view to distribution. 

For example, prior to the expiration of 

the required holding period, a security 

holder may enter into an equity swap 

agreement with a third party, under 

which the security holder exchanges the 

dividends received on the restricted 

securities for the dividends on, for 

example, a securities index. In addition, 

that shareholder may agree to exchange, 

at a set date, any price change in the 

security since the date of the agreement 

for any price change in the securities 

index. The effect of such a transaction 

would be the economic equivalent of 

selling the restricted securities before 

the holding period has expired and 

purchasing the securities index. 

The concern regarding hedging 

transactions is particularly acute if we 

provide for a six-month holding period 

requirement, as proposed. At the time of 

the 1990 amendments, Rule 144 

provided for a two-year holding period 

before a security holder could sell 

limited amounts of restricted securities, 

and a three-year period before a nonaffiliate security holder could sell an 

unlimited amount of the securities. The 

proposed six-month holding period 

requirement could make the entry into 

such hedging arrangements significantly 

easier and less costly because they 

would cover a much shorter period. 

The 1997 proposing release proposed 

several alternatives for addressing these 

concerns.62 Seven commenters 

recommended that we adopt measures 

to eliminate or restrict hedging activities 

during the holding period.63 Six 

commenters recommended maintaining 

the status quo.64 Six commenters 

suggested that we adopt a safe harbor for 

certain hedging activities that would be 

deemed permissible under Rule 144.65

Because the proposed shortening of the 

holding period requirement would make 

hedging arrangements significantly 

easier, we believe that it is appropriate 

to reintroduce a tolling provision to 

Rule 144. Therefore, we propose to add 

a new paragraph to Rule 144 to toll the 

holding period for restricted securities 

of Exchange Act reporting companies 

while an affiliate or a non-affiliate is 

engaged in certain hedging 

transactions.66

We also propose to expand the scope 

of the earlier tolling provision, which 

covered only short sales and options. 

Since 1990, many new risk-hedging 

products such as equity swaps and 

single stock futures have been 

introduced into the market that also 

have the effect of limiting or eliminating 

risk. We are proposing to exclude from 

the holding period any period in which 

the security holder had a short position, 

or had entered into a ‘‘put equivalent 

position,’’ as defined by Exchange Act 

Rule 16a–1(h),67 with respect to the 

same class of securities (or in the case 

of nonconvertible debt, with respect to 

any nonconvertible debt securities of 

the same issuer). 

Given that the proposed tolling 

provision would work in conjunction 

with the Rule 144 provisions that permit 

tacking of holding periods,68 a selling 

security holder would be required to 

determine whether a previous owner of 

the securities had engaged in hedging 

activities with respect to the securities, 

if the holding period includes a period 

in which a previous owner held the 

securities. Accordingly, we propose to 

provide that the holding period should 

not include any period in which the 

previous owner held a short position or 

put equivalent position with respect to 

the securities. There would be no tolling 

of the previous owner’s holding period, 

if the security holder for whose account 

the securities are to be sold reasonably 

believes that no such short or put 

equivalent position was held by the 

previous owner.69 In other words, the 

proposed provision would permit a 

security holder to tack the period during 

which the security holder reasonably 

believes that the previous owner did not 

engage in hedging activities to his or her 

holding period. We are proposing a 

‘‘reasonable belief’’ standard, because it 

may be difficult for a selling security 

holder to determine definitively 

whether a previous owner had engaged 

in hedging activities with respect to the 

securities. 

Also, we believe that the proposed 

tolling provision should not result in a 


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Federal Register / Vol. 72, No. 128 / Thursday, July 5, 2007 / Proposed Rules 36827 

70See proposed note to Rule 144(d)(3)(xi). 

71See Release No. 33–5223. 

72 15 U.S.C. 77d(4). 

73 17 CFR 230.144(g)(3). 

74See proposed Paragraph 2 of Note 2 to Rule 

144(g)(3). 

75See 17 CFR 230.144(b) and (d). A person who 

has held restricted securities for more than two 

years and has not been an affiliate for at least the 

most recent three months may resell those 

securities without complying with Rule 144’s other 

requirements. See 17 CFR 230.144(k). 

76We have concerns, however, about the indirect 

distribution of securities through resales by nonaffiliates when those non-affiliates hold securities 

in shell companies. As discussed below, we 

propose to codify the staff’s interpretive position 

that security holders cannot rely on Rule 144 in the 

resale of securities of reporting and non-reporting 

shell companies. 

77While the SEC Advisory Committee on Smaller 

Public Companies did not specifically address Rule 

144 in its final report, the Committee acknowledged 

the need to reduce the complexity of our rules for 

the benefit of smaller companies. See Final Report 

of the Advisory Committee on Smaller Public 

Companies to the United States Securities and 

Exchange Commission (Apr. 23, 2006), available at 

http://www.sec.gov/info/smallbus/acspc.shtml. See 

also Report on the Advisory Committee on the 

Capital Formation and Regulatory Process (Jul. 24, 

1996) (suggesting that the SEC minimize the resale 

restrictions on restricted securities), available at 

http://www.sec.gov/news/studies/capform.htm. 

78See proposed Rule 144(b)(1)(i). As set forth in 

paragraphs (c) and (d) of the proposed rules, a 

reporting company is an issuer that is, and has been 

for at least 90 days immediately before the sale, 

subject to the reporting requirements of Section 13 

or 15(d) of the Exchange Act. A non-reporting 

company is an issuer that is not, or has not been 

for at least 90 days immediately before the sale, 

subject to the reporting requirements of Section 13 

or 15(d) of the Exchange Act. 

79See proposed Rule 144(b)(1). 

longer holding period than under the 

current rule. Because the fact that the 

current rule does not toll the one-year 

holding period while the security holder 

has engaged in hedging activities has 

not raised concerns, we believe, on 

balance, that one year between the 

acquisition date of the securities from 

the issuer or affiliate of the issuer and 

the resale date sufficiently protects 

against the indirect distribution of the 

securities by the issuer to the public. 

The proposed rule would therefore 

impose a ceiling on the proposed tolling 

provision so that, regardless of the 

security holder’s hedging transactions, 

the holding period, as computed under 

all other paragraphs in Rule 144(d), 

would in no event extend beyond one 

year.70 Under the proposed rules, 

security holders who wish to rely on 

Rule 144 to resell restricted securities of 

non-reporting companies already would 

be required to hold their securities for 

at least one year, and therefore would 

not be subject to the tolling provision. 

In concert with the proposed tolling 

provision, we also propose other related 

changes to Rule 144. First, we propose 

to require that information be provided 

in Form 144 regarding any short or put 

equivalent position held with respect to 

the securities prior to the resale of the 

securities. A similar requirement was 

part of Form 144 before the tolling 

provision was eliminated in 1990.71

The second related change concerns 

the manner of sale requirements in Rule 

144(f), which we propose to retain for 

equity securities of affiliates. One option 

to meet the manner of sale requirements 

is to sell the securities through ‘‘brokers’

transactions’’ within the meaning of 

Section 4(4) of the Securities Act.72 Rule 

144(g) specifies transactions by a broker 

that are deemed to be included as 

‘‘brokers’ transactions.’’ One criteria for 

these ‘‘brokers’ transactions’’ is that the 

broker, after reasonable inquiry, is not 

aware of circumstances indicating that 

the person for whose account the 

securities are sold is an underwriter 

with regard to the securities or that the 

transaction is a part of a distribution of 

the securities of an issuer. Existing Note 

(ii) of Rule 144(g)(3) 73 contains a list of 

some questions that brokers should ask 

in order to satisfy this inquiry. We are 

proposing to amend Note (ii) to Rule 

144(g)(3) to explain that in order to 

satisfy the reasonable inquiry 

requirement, a broker should also 

inquire into, if the securities have been 

held for less than one year, the existence 

and character of any short position or 

put equivalent position with regard to 

the securities held by the person for 

whose account the securities are to be 

sold, whether such person has made 

inquiries into the existence and 

character of any short position or put 

equivalent position held by the previous 

owner of the securities, and the results 

of such person’s inquiries.74 We believe 

that an inquiry into such positions 

would not impose an undue burden on 

brokers as part of their existing inquiry. 

We believe that this proposed 

amendment would be a valuable 

component in determining and 

monitoring whether security holders 

have met their holding period 

requirement under Rule 144. 

3. Significant Reduction of 

Requirements Applicable to NonAffiliates 

Non-affiliates currently are required 

to hold their restricted securities for one 

year under Rule 144(d). During this oneyear period, non-affiliates are not 

permitted to resell any securities under 

the rule. When selling restricted 

securities that have been held for 

between one and two years, nonaffiliates, like affiliates, are subject to all 

other applicable conditions of Rule 144, 

including the requirement that current 

information be publicly available about 

the issuer of the securities, limitations 

on the amount of securities that can be 

sold in any three-month period, manner 

of sale limitations and Form 144 filing 

requirements.75 We believe that, for the 

most part, holding the securities for the 

length of the holding period should be 

a sufficient indication that these nonaffiliates have assumed the economic 

risk of investment in those securities.76

As such, we believe that it is 

appropriate to reduce the complexity of 

resale restrictions that may inhibit sales 

by, and impose costs on, nonaffiliates.77

Because Rule 144 is relied upon by 

many individuals to resell their 

restricted securities, we believe that it 

would be particularly helpful to 

streamline and reduce the complexity of 

the rule as much as possible while 

retaining its integrity. We therefore 

propose to reduce the restrictions for a 

person who is not an affiliate of the 

issuer at the time of the sale of the 

securities and has not been an affiliate 

during the three months prior to the sale 

of the securities. These non-affiliates 

with restricted securities of reporting 

companies would be permitted to resell 

their securities after their holding 

period, subject only to the requirement 

in Rule 144(c) that current information 

regarding the issuer of the securities be 

publicly available.78 We preliminarily 

believe that retaining the current public 

information requirement would 

continue to be important in this 

instance so that the market has adequate 

information regarding the issuer of the 

securities and also would not impose an 

undue burden on a non-affiliate selling 

security holder. Non-affiliates of both 

reporting and non-reporting companies 

would be able to freely resell their 

restricted securities publicly one year 

after the acquisition date of the 

securities (as computed under Rule 

144(d)) and without having to comply 

with any of the other conditions of the 

rule.79

The proposed requirements for the 

resale of restricted securities held by 

affiliates and non-affiliates under Rule 

144 can be summarized as follows: 


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36828 Federal Register / Vol. 72, No. 128 / Thursday, July 5, 2007 / Proposed Rules 

80 17 CFR 230.903(b)(3)(iii). 

81Offshore Offers and Sales, Release No. 33–7505 

(Feb. 17, 1998). 

Affiliate or person selling on behalf of an affiliate Non-affiliate (and has not been an affiliate during the 

prior three months) 

Restricted Securities of Reporting Companies.During six-month holding period*—no resales under 

Rule 144 permitted. 

During six-month holding period*—no resales under 

Rule 144 permitted. 

After six-month holding period*—may resell in accordance with all Rule 144 requirements including: 

• Current public information, 

• Volume limitations, 

• Manner of sale for equity securities, and 

• Filing of Form 144. 

After six-month holding period* but before one year—

may resell in accordance with the current public information requirement. 

After one year—unlimited public resale under Rule 144; 

need not comply with other Rule 144 requirements. 

Restricted Securities of NonReporting Companies.During one-year holding period—no resales under Rule 

144 permitted. Tolling provision does not apply. 

During one-year holding period—no resales under Rule 

144 permitted. Tolling provision does not apply. 

After one-year holding period—may resell in accordance with all Rule 144 requirements except holding 

period, including: 

• Current public information, 

• Volume limitations, 

• Manner of sale for equity securities, and 

• Filing of Form 144. 

After one-year holding period—unlimited public resale 

under Rule 144; need not comply with other Rule 

144 requirements. 

* Such holding period may be longer than six months (but not longer than one year), depending on hedging activities. 

Request for Comment 

• Should the holding period 

requirement for restricted securities of 

reporting companies be shortened to six 

months? Is six months sufficient time to 

indicate that the affiliate has not 

acquired the securities for distribution? 

Are there any concerns that six months 

would lead to an increase in abuse with 

regard to the resale of restricted 

securities? Should a six-month holding 

period requirement apply to restricted 

securities of reporting companies held 

by non-affiliates as well as affiliates? If 

you suggest that either affiliates or nonaffiliates should be required to comply 

with a holding period that is shorter 

than six months, what objective criteria 

demonstrate that such holding period is 

sufficient to indicate that the security 

holder has not acquired the securities 

for distribution? 

• Should the one-year holding period 

requirement continue to apply to 

restricted securities of non-reporting 

companies held by non-affiliates as well 

as affiliates? Should the holding period 

for restricted securities of non-reporting 

companies also be shortened to six 

months? Should affiliates and nonaffiliates of non-reporting companies be 

subject to the same holding period, or 

should they be required to comply with 

a longer or shorter holding period? 

• For the purposes of the holding 

period, is it appropriate that a reporting 

company is an issuer that is, and has 

been for at least 90 days immediately 

before the sale, subject to the reporting 

requirements of Section 13 or 15(d) of 

the Exchange Act? Is there a more 

appropriate formulation? 

• Should we amend Regulation S to 

conform the one-year distribution 

compliance period in Rule 

903(b)(3)(iii) 80 to the proposed sixmonth holding period? When 

Regulation S was amended in 1998,81

the distribution compliance period 

applicable to U.S. companies (Category 

3 issuers) was conformed to the oneyear holding period under Rule 144. 

The purpose of the distribution 

compliance period in Regulation S is to 

ensure that during the offering period 

and the subsequent aftermarket trading 

that takes place offshore, the persons 

relying on the Rule 903 safe harbor 

(issuers, distributors and their affiliates) 

are not engaged in an unregistered, nonexempt distribution into the United 

States capital markets. We are now 

proposing to shorten the Rule 144 

holding period for the resale of 

restricted securities of Exchange Act 

reporting companies to six months. 

Should we amend Regulation S to 

conform the one-year distribution 

compliance period for reporting U.S. 

companies under Rule 903(b)(3)(iii) to 

the proposed six-month holding period 

under Rule 144? In light of problematic 

practices with respect to offerings of 

U.S. companies under Regulation S, 

should the distribution compliance 

period for reporting U.S. companies 

remain one year consistent with the 

longest distribution compliance period 

that would be applicable to securities 

offered under Regulation S and with the 

default one-year holding period under 

Rule 144? 

• Is it appropriate to retain the 

current public information requirement 

for non-affiliates with restricted 

securities in reporting companies during 

the period between the end of the sixmonth holding period (which may be 

longer depending on hedging activities) 

and one year after the securities were 

acquired? Should non-affiliates be 

subject to the current public information 

condition for a longer period of time? If 

so, how long? 

• Should non-affiliates with restricted 

securities of non-reporting companies 

remain subject after the holding period 

to all conditions of Rule 144 for an 

additional year, as under the current 

rule? Are there any specific conditions 

to which non-affiliates with restricted 

securities of reporting companies 

should still be subject after the holding 

period, other than the current public 

information requirement? Are there any 

specific conditions to which nonaffiliates with restricted securities of 

non-reporting companies should still be 

subject after the holding period? For 

example, should non-affiliates continue 

to be subject to volume limitations 

during a specified period of time after 

the holding period? What should that 

specified time be (e.g., six months, one 

year)? Should non-affiliates be subject to 

some sort of notice requirement when 

they have made a sale above the 

specified threshold amount? What are 

the benefits if non-affiliates are still 

subject to such requirements or 

concerns if they are not? 

• Is the proposed language requiring 

that the security holder toll the holding 

period if the holder had ‘‘a short 

position, or had entered into a ‘put 

equivalent position’ as defined by 

Exchange Act Rule 16a–1(h)’’

appropriate? Does the proposed tolling 

provision sufficiently cover the hedging 

transactions that would result in the 

circumvention of the purposes of Rule 

144? Does it cover too few or too many 

hedging transactions? If too many, what 

specific forms of hedging transactions 

should be excluded and why? If too few, 


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Federal Register / Vol. 72, No. 128 / Thursday, July 5, 2007 / Proposed Rules 36829 

82Current Rule 144(g) defines the term for 

purposes of Rule 144. 

83 15 U.S.C. 78c(a)(38). 

84The manner of sale requirements also do not 

apply to securities sold for the account of the estate 

of a deceased person or for the account of a 

beneficiary of such estate, provided the estate or 

beneficiary is not an affiliate of the issuer. 

85Release No. 33–5186 (Sept. 10, 1971) [36 FR 

18586]. 

86See letters from ABA; AT&T; ASCS; Intel; 

BG&E; Lehman Brothers; Morgan Stanley; NY Bar; 

NY City Bar; Sullivan & Cromwell; and Testa 

Hurwitz. 

87See letters from Corporate Counsel; Matthew 

Crain; Constantine Katsoris; Merrill Lynch; 

Regional Bankers; SIA; and Smith Barney. 

88See letters from ASCS and BG&E. 

89Brokers also must comply with the criteria set 

forth in Rule 144(g) in order to claim the ‘‘brokers’’

transactions’’ exemption under Section 4(4) of the 

Securities Act. 

90See also the 2007 ABA Letter. 

91See proposed Rule 144(f). As discussed above, 

we also propose to eliminate the manner of sale 

limitations for resales by non-affiliates. 

92Section III.C. of the 1997 proposing release. 

93See Release No. 33–8518 (Dec. 22, 2004) [70 FR 

1506]. 

what other forms of hedging 

transactions should be covered? 

• Given that the proposed tolling 

provision is not applicable if the 

security holder has held the securities 

for one year, would a security holder be 

able to determine whether and how long 

previous owners entered into hedging 

transactions in order to properly 

calculate the holding period? Would the 

proposed tolling provision make it too 

difficult to determine whether a security 

holder has complied with the holding 

period requirement? By what other 

methods could we ensure that persons 

do not attempt to skirt the purposes of 

Rule 144 by engaging in hedging 

transactions? 

• Should security holders be held to 

a ‘‘reasonable belief’’ standard with 

regard to the previous owner’s hedging 

activities, or is a ‘‘bona fide belief’’ or 

some other standard more appropriate? 

Should we specify what statements or 

documentation could security holders 

rely upon in order to formulate a 

reasonable belief that the previous 

owner has not engaged in hedging 

activities in the securities? If so, what 

documentation should they be 

permitted to rely upon? 

• Is it unnecessarily restrictive to 

require tolling if the security holder has 

engaged in hedging transactions with 

respect to any of his or her securities of 

the same class (or, in the case of 

nonconvertible debt, with respect to any 

nonconvertible debt securities of the 

same issuer)? Are there any 

circumstances in which the proposed 

tolling provision would not be 

appropriate? If so, describe the 

circumstances and explain why the 

proposed tolling provision would not be 

appropriate. 

• Should we address hedging in a 

different manner? For example, should 

we preclude security holders who hedge 

securities during the holding period 

from relying on Rule 144? Should we 

treat such hedging transactions as 

‘‘sales’’ of the securities? 

• Should the tolling provision apply 

only during the first year after the date 

of the acquisition of the securities from 

the issuer or affiliate? Is one year the 

appropriate time period, or should the 

period be longer than one year? 

• Is there any reason why we should 

not amend Note (ii) to Rule 144(g)(3) to 

add that if the securities have been held 

for less than one year, the broker’s 

reasonable inquiry should also include 

an inquiry into the existence and 

character of any short position or put 

equivalent position with regard to the 

securities held by the person for whose 

account the securities are to be sold and 

whether that person has made inquiries 

into the existence and character of any 

short position held by a previous owner 

with regard to the securities? Is the 

proposed amendment sufficiently clear? 

Does the proposed amendment place an 

undue burden on the broker or the 

holder of the securities? What level of 

inquiry should the brokers be required 

to conduct into the security holder’s 

hedging transactions or the previous 

owner’s hedging transactions? What 

statements or documentation, if any, 

regarding hedging transactions should 

security holders be required to provide 

to brokers? 

• What level of due diligence did 

brokers conduct to determine 

compliance with the holding period 

requirement before we eliminated the 

Rule 144 tolling provision in 1990? 

Were there any problems with tracking 

hedging positions when the tolling 

provision was in place, especially in 

relation to the limited provisions that 

permitted tacking that existed prior to 

1990? 

• Is there any reason we should not 

amend Form 144 to require disclosure of 

hedging transactions? Is the proposed 

disclosure appropriate and should it be 

changed in any way? 

C. Elimination of Manner of Sale 

Limitations for Debt Securities 

Rule 144(f) currently requires that 

securities be sold in ‘‘brokers’’

transactions,’’ 82 or in transactions 

directly with a ‘‘market maker,’’ as that 

term is defined in Section 3(a)(38) of the 

Exchange Act.83 Additionally, the rule 

prohibits a seller from: (1) soliciting or 

arranging for the solicitation of orders to 

buy the securities in anticipation of, or 

in connection with, the Rule 144 

transaction; or (2) making any payment 

in connection with the offer or sale of 

the securities to any person other than 

the broker who executes the order to sell 

the securities. These manner of sale 

limitations do not apply to securities 

sold for the account of a non-affiliate of 

an issuer after the two-year period in 

Rule 144(k) has elapsed.84

The limitations on manner of sale 

were intended to assure that special 

selling efforts and compensation 

arrangements usually associated with a 

distribution are not present in a Rule 

144 sale.85 In the 1997 proposing 

release, we proposed to eliminate the 

manner of sale requirement entirely. 

Commenters were split as to that 

proposal. Eleven commenters supported 

the proposal,86 while seven commenters 

opposed it.87 Commenters who opposed 

the proposal noted that brokers act as 

gatekeepers to ensure selling 

shareholders are complying with the 

requirements of Rule 144. Two 

commenters supported the proposal 

because transfer agents would not 

transfer shares without a release from 

the issuer.88

We agree that, as financial 

intermediaries, brokers serve an 

important function as gatekeepers for 

promoting compliance with Rule 144,89

and we are concerned that eliminating 

the manner of sale limitations for equity 

securities may lead to abusive 

transactions. However, we believe that 

the fixed income securities market does 

not raise the same concerns, and that 

the manner of sale provision may place 

an unnecessary burden on the resale of 

such securities.90 Such securities 

generally are traded in dealer 

transactions in which the dealer seeks 

buyers for securities to fill sell orders 

instead of through the means prescribed 

in Rule 144(f). Thus, we are proposing 

that the manner of sale limitations 

would not apply to resales of debt 

securities.91 This would allow holders 

of debt securities greater flexibility in 

the resale of their securities, including, 

as discussed in the 1997 proposing 

release, the option to privately negotiate 

the resale of the securities.92

In addition, we believe that nonparticipating preferred stock, which has 

debt-like characteristics, and assetbacked securities, where the 

predominant purchasers are 

institutional investors, including 

financial institutions, pension funds, 

insurance companies, mutual funds and 

money managers,93 should be treated 

similarly to debt securities. Thus, we 

have included these securities in the 

‘‘debt securities’’ category for the 


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36830 Federal Register / Vol. 72, No. 128 / Thursday, July 5, 2007 / Proposed Rules 

94See proposed Rule 144(f). This proposal is for 

Rule 144(f) purposes only and does not affect the 

classification of these securities as debt or equity for 

other purposes. This treatment is consistent with 

the treatment of such securities under Regulation S. 

See Release No. 33–7505. 

95See discussion in 2007 ABA Letter. 

96 17 CFR 230.144(h). 

97The 500 share and $10,000 thresholds have 

remained constant since Rule 144’s inception in 

1972. However, in 1978, we shortened the relevant 

time period during which sales volume is to be 

calculated from six months to three months to 

conform to a change shortening the time period in 

which sale volume should be calculated for the 

purposes of the Rule 144 volume limitation 

condition from six months to three months. Release 

No. 33–5995 (Nov. 8, 1978) [43 FR 54229]. 

98See letters from ABA; ASCS; AT&T; BG&E; 

Corporate Counsel; Merrill Lynch; Morgan Stanley; 

NY Bar; NY City Bar; Regional Bankers; SIA; Smith 

Barney; and Sullivan & Cromwell. 

99See letters from ABA; Benesch, Friedlander, 

Coplan & Aranoff (Benesch Friedlander); NY Bar; 

NY City Bar; and Sullivan & Cromwell. 

100See letter from ABA. 

101See letter from NY Bar. 

102See proposed Rule 144(h). 

103The adjustment would be approximately 

$42,000 if based on the Personal Consumption 

Expenditures Chain-Type Price Index, as published 

by the Department of Commerce. In addition, if 

based on the Consumer Price Index, the adjustment 

would be approximately $50,000. To achieve a 

round number, we are proposing to raise the filing 

threshold to $50,000. 

104 15 U.S.C. 77d(6). Section 4(6) was included in 

the Securities Act pursuant to the Small Business 

Investment Incentive Act of 1980 [Pub. L. No. 96–

477 (Oct. 21, 1980)]. 

105 17 CFR 230.144(a)(3). See the Division of 

Corporation Finance’s Compliance and Disclosure 

Interpretations on Rule 144 (Updated April 2, 

2007), at Section 104 (Rule 144(a)(3)), Question No. 

104.03. 

106See 15 U.S.C. 77d(6). 

purpose of the proposed revisions to the 

manner of sale limitations in Rule 144.94

Request for Comment 

• Would eliminating the manner of 

sale requirement be appropriate for debt 

securities, as proposed? Is there a need 

for brokers to serve as an intermediary 

for such a secondary market? Would 

transfer agents be able to adequately 

confirm compliance with Rule 144? 

• Should we eliminate the manner of 

sale requirement for equity securities as 

well? If so, why? What problems or 

abuses may arise if the proposal were 

extended to equity securities? Would 

removal of the manner of sale 

requirements for equity securities 

diminish security transaction 

transparency by encouraging more 

privately negotiated transactions? If so, 

would the markets be adversely 

affected, particularly for stocks of 

smaller companies and more thinly 

traded securities? 

• Are there other purposes served by 

the manner of sale requirements that 

justify retaining those requirements? 

How would the removal of the manner 

of sale requirements affect participants, 

such as transfer agents, brokers and 

market makers, in Rule 144 

transactions? Would transfer agents 

assume a greater role in determining 

compliance with the resale provisions? 

How would removing the manner of 

sale limitations affect brokers’

obligations with respect to their ability 

to qualify for the ‘‘brokers’ transactions’’

exemption under Section 4(4) of the 

Securities Act? 

• Is it appropriate to include assetbacked securities and non-participating 

preferred stock as debt securities for the 

purposes of this rule? Are there any 

other types of securities to which the 

limitations on manner of sale should not 

apply? If so, why? 

• Are there any other conditions in 

Rule 144 to which debt securities 

should not be subject? For example, 

should we raise the volume limitations 

in Rule 144(e) for debt securities, or 

eliminate the volume limitations for 

debt securities altogether? 95

D. Increase of the Form 144 Filing 

Thresholds 

Rule 144(h) requires a selling security 

holder to file Form 144 if the security 

holder’s intended sale exceeds either 

500 shares or $10,000 within a threemonth period.96 These filing thresholds 

have been in place since 1972.97 In the 

1997 proposing release, we proposed to 

increase the filing thresholds to 1,000 

shares or $40,000. Thirteen commenters 

supported raising the filing threshold 

and no commenters opposed it.98 Six 

commenters suggested that we eliminate 

Form 144.99 One commenter suggested 

raising the threshold to $100,000.100

Another commenter suggested raising it 

to $250,000.101

As discussed above, under the 

proposed rules, only affiliates of the 

issuer would be required to file a notice 

of proposed sale on Form 144 when 

relying on Rule 144. We now are 

proposing to increase the Form 144 

filing thresholds to trades of 1,000 

shares or $50,000 within a three-month 

period for affiliates.102 The purpose of 

raising the dollar threshold to $50,000 is 

to adjust for inflation since 1972.103 We 

believe that the 1,000 share threshold is 

an appropriate alternate threshold that 

would capture trades which merit 

notice but for which the dollar amount 

of the trades may not be as significant. 

In addition to this proposed amendment 

to Rule 144(h), we solicit comment 

below on how best to coordinate the 

filing deadline for Form 144 with the 

filing deadline for Form 4 and permit 

affiliates subject to Section 16 filing 

requirements to, at their option, satisfy 

their Form 144 filing requirements by 

timely filing a Form 4 to report the sale 

of their securities. 

Request for Comment 

• Should the dollar threshold be 

higher or lower than proposed (e.g., 

$25,000, $75,000, or $100,000)? Should 

the threshold based on the number of 

shares be higher or lower than proposed 

(e.g., 500, 1,500, 2,000 or 2,500 shares)? 

• Should the threshold be based 

solely on the number of shares sold, or 

solely on the dollar amount of the 

transaction? Should it be based on a 

formula using both variables? Should 

we allow for adjustments to the dollar 

amount threshold every five years that 

would reflect changes due to inflation? 

• Should thresholds be based on a 

different number such as a percentage of 

the company’s public float, or a 

different self-adjusting index? 

• If you believe the thresholds should 

be different, please explain why your 

suggested threshold would be 

appropriate, including information and 

data to support your beliefs. 

E. Codification of Several Staff Positions 

The following are proposed 

codifications of staff positions issued by 

the Division of Corporation Finance. 

These codifications should simplify the 

rule by making these staff positions 

more transparent and readily available 

to the public. The first three proposals 

were included in the 1997 proposing 

release. The last four proposals are new 

proposed codifications of existing staff 

positions. 

1. Securities Acquired Under Section 

4(6) of the Securities Act Are 

Considered ‘‘Restricted Securities’’

The 1997 proposing release proposed 

to codify the Division of Corporation 

Finance’s interpretive position that 

securities acquired from the issuer 

pursuant to an exemption from 

registration under Section 4(6) of the 

Securities Act 104 are considered 

‘‘restricted securities’’ under Rule 

144(a)(3).105 We did not receive any 

comments on this proposal. 

Section 4(6) provides for an 

exemption from registration for an 

offering that does not exceed $5,000,000 

that is made only to accredited 

investors, that does not involve any 

advertising or public solicitation by the 

issuer or anyone acting on the issuer’s 

behalf and for which a Form D has been 

filed.106 Because the resale status of 

securities acquired in Section 4(6) 

exempt transactions should be the same 

as securities received in other nonpublic offerings that are included in the 

definition of restricted securities, we 


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107See proposed Rule 144(a)(3)(viii). 

108 Morgan Olmstead (Jan. 8, 1988). 

109See proposed Rule 144(d)(3)(ix). 

110See Planning Research Corp. (Dec. 8, 1980). 

111See proposed Rule 144(d)(3)(ii). 

112See Morgan Stanley & Co., Inc. (June 30, 

1993). 

113See the Division of Corporation Finance’s 

Compliance and Disclosure Interpretations on Rule 

144 (Updated April 2, 2007), at Section 212 (Rule 

144(d)(3)), Interpretation No. 212.01. 

114See proposed Rule 144(d)(3)(x). 

115See Morgan Stanley & Co., Inc. (June 30, 

1993). 

116See Morgan Stanley & Co., Inc. (June 30, 1993) 

and Malden Trust Corporation (Feb. 21, 1989). 

117 17 CFR 230.144(e)(2)(ii). 

118 If the proposed amendments eliminating 

certain requirements for non-affiliates are adopted, 

then the volume limitations in Rule 144(e) would 

apply only to affiliates. 

119See the Division of Corporation Finance’s 

Compliance and Disclosure Interpretations on Rule 

144 (Updated April 2, 2007), at Section 216 (Rule 

Continued 

believe that securities acquired under 

Section 4(6) should be defined as 

restricted securities for purposes of Rule 

144. Therefore, we are proposing an 

amendment to Rule 144 to codify the 

staff’s position that securities acquired 

under Section 4(6) of the Securities Act 

are ‘‘restricted securities’’ under Rule 

144(a)(3).107

2. Tacking of Holding Periods When a 

Company Reorganizes Into a Holding 

Company Structure 

The 1997 proposing release also 

proposed codifying the Division of 

Corporation Finance’s interpretive 

position that holders may tack the Rule 

144 holding period in connection with 

transactions made solely to form a 

holding company.108 In ‘‘tacking,’’

holders may count the period that the 

securities are held before the transaction 

made to form a holding company as part 

of period they hold the securities used 

to meet the Rule 144(d) requirement. We 

did not receive any comments on this 

proposal. 

We are proposing again to codify that 

interpretive position.109 This provision 

would permit tacking of the holding 

period if the following three conditions 

are satisfied: 

• The newly formed holding 

company’s securities are issued solely 

in exchange for the securities of the 

predecessor company as part of a 

reorganization of the predecessor 

company into a holding company 

structure; 

• Security holders receive securities 

of the same class evidencing the same 

proportional interest in the holding 

company as they held in the 

predecessor company, and the rights 

and interests of the holders of such 

securities are substantially the same as 

those they possessed as holders of the 

predecessor company’s securities; and 

• Immediately following the 

transaction, the holding company has 

no significant assets other than 

securities of the predecessor and its 

existing subsidiaries and has 

substantially the same assets and 

liabilities on a consolidated basis as the 

predecessor had before the transaction. 

In such transactions, tacking would be 

appropriate because the securities being 

exchanged are substantially equivalent, 

and there is no significant change in the 

economic risk of the investment in the 

restricted securities. We believe that the 

codification of this interpretation and as 

well as the codification of the following 

two interpretations below would assist 

security holders in determining whether 

they have met the Rule 144(d) holding 

period requirement. 

3. Tacking of Holding Periods for 

Conversions and Exchanges of 

Securities 

The 1997 proposing release proposed 

codifying the Division of Corporation 

Finance’s position that 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.110 As 

noted in the 1997 release, Rule 144 does 

not state whether the surrendered 

securities must have been convertible by 

their terms in order for tacking to be 

permitted, which led to some confusion 

on how to calculate the Rule 144 

holding period. We did not receive any 

comments on this proposal. 

We are proposing again these 

amendments to Rule 144(d)(3)(ii).111 In 

addition, we are proposing a note to this 

provision that clarifies the Division’s 

position that if: 

• The original securities do not 

permit cashless conversion or exchange 

by their terms; 

• The parties amend the original 

securities to allow for cashless 

conversion or exchange; and 

• The security holder provides 

consideration, other than solely 

securities of the issuer, for that 

amendment, 

then shares will be deemed to have been 

acquired on the date that the original 

securities were so amended.112

4. Cashless Exercise of Options and 

Warrants 

Several commenters responding to the 

1997 release suggested that we codify 

the Division of Corporation Finance’s 

position that, upon a cashless exercise 

of options or warrants, the newly 

acquired underlying securities are 

deemed to have been acquired when the 

corresponding options or warrants were 

acquired, even if the options or warrants 

originally did not provide for cashless 

exercise by their terms.113 We are 

proposing to revise Rule 144 to codify 

that position in response to those 

comments.114

In addition, we are proposing to add 

two notes to this new paragraph. The 

first note would codify the Division’s 

position that if: 

• The original options or warrants do 

not permit cashless exercise by their 

terms; and 

• The holder provides consideration, 

other than solely securities of the issuer, 

to amend the options or warrants to 

allow for cashless exercise, 

then the options or warrants would be 

deemed to have been acquired on the 

date that the original options or 

warrants were so amended.115 This 

treatment is analogous to our treatment 

of conversions and exchanges. 

The second note would codify the 

Division’s position that the grant of 

certain options or warrants that are not 

purchased for cash or property does not 

create any investment risk in the holder 

in a manner that would justify 

identification of the holding period of 

the securities received upon exercise of 

the options or warrants with that of the 

options or warrants.116 This is the case 

for employee stock options. The note 

would clarify that in such instances, the 

holder would not be allowed to tack the 

holding period of the option or warrant 

and would be deemed to have acquired 

the underlying securities on the date the 

option or warrant was exercised, if the 

conditions of Rule 144(d)(1) and Rule 

144(d)(2) are met at the time of exercise. 

5. Aggregation of Pledged Securities 

In response to suggestions from 

commenters, we are proposing to add a 

note to Rule 144(e)(2)(ii) 117 that would 

address calculation of the volume of 

securities that a pledgee of securities 

may sell.118 It would codify the Division 

of Corporation Finance’s position that, 

so long as the pledgees are not the same 

‘‘person’’ under Rule 144(a)(2), a 

pledgee of securities may sell the 

pledged securities without having to 

aggregate the sale with sales by other 

pledgees of the same securities from the 

same pledgor, as long as there is no 

concerted action by those pledgees.119


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144(e)(3)), Interpretation No. 216.01. See also 

Standard Chartered Bank (June 22, 1987). 

120 17 CFR 230.419. The term ‘‘penny stock’’ is 

defined in 17 CFR 240.3a51–1. 

121See Release No. 33–6932 (Apr. 28, 1992) [57 

FR 18037]. 

122 17 CFR 230.419. 

123See 17 CFR 230.405 and Release No. 33–8587 

(Jul. 15, 2005) [70 FR 42234]. 

124Ken Worm, NASD Regulation, Inc. (Jan. 21, 

2000). In that letter, the Division stated that 

‘‘transactions in blank check company securities by 

their promoters or affiliates * * * are not the kind 

of ordinary trading transactions between individual 

investors of securities already issued that Section 

4(1) [of the Securities Act] was designed to 

exempt.’’ The Division stated its view that ‘‘both 

before and after the business combination or 

transaction with an operating entity or other person, 

the promoters or affiliates of blank check 

companies, as well as their transferees, are 

‘underwriters’ of the securities issued. * * * Rule 

144 would not be available for resale transactions 

in this situation, regardless of technical compliance 

with that rule, because these resale transactions 

appear to be designed to distribute or redistribute 

securities to the public without compliance with 

the registration requirements of the Securities Act.’’

125See proposed Rule 144(i). 

126See proposed paragraph (i)(1) of Rule 144. 

127 ‘‘Business combination related shell 

company’’ is defined in Securities Act Rule 405. 

128We are not proposing a comparable provision 

for security holders of non-reporting companies that 

have ceased to be shell companies because they 

have business operations or more than nominal 

non-cash assets. We have not proposed a 

comparable provision for these companies, because 

we preliminarily believe that the information that 

a non-reporting company would provide to the 

market does not adequately protect against potential 

abuse in those situations. 

129 17 CFR 239.16b. 

130See Release No. 33–8587. These provisions are 

consistent with the Form S–8 provisions for shell 

companies, except that Form S–8 requires a former 

shell company to wait 60 days, rather than 90 days, 

before it is able to use the form to register securities. 

131 17 CFR 249.210; 17 CFR 249.210b; and 17 CFR 

249.220f. 

132 17 CFR 249.308. Items 2.01(f) and 5.01(a)(8) of 

Form 8–K require a company in a transaction where 

the company ceases being a shell company to file 

a current report on Form 8–K containing the 

information (or identifying the previous filing in 

which the information is included) that would be 

required in a registration statement on Form 10 or 

Form 10–SB to register a class of securities under 

Section 12 of the Exchange Act. 

133For the purposes of computing the holding 

period under the proposed rule, the securities shall 

be deemed to have been acquired either at the time 

the securities were acquired from the issuer or 

affiliate of the issuer, or at the time the ‘‘Form 10 

information’’ is filed with the Commission, 

As an example, assume that a security 

holder (the pledgor) pledges the 

securities he owns in Company A to two 

banks, Bank X and Bank Y (the 

pledgees). If the pledgor defaults: 

• Upon default, Bank X does not have 

to aggregate its sales of Company A 

securities with Bank Y’s sales of 

Company A securities unless Bank X 

and Bank Y are acting in concert, but 

• Bank X individually still must 

aggregate its sales with the pledgor’s 

sales, and 

• Bank Y individually still must 

aggregate its sales with the pledgor’s 

sales. 

Provided that the loans and pledges 

are bona fide transactions and there is 

no concerted action among pledgees and 

no other aggregation provisions under 

Rule 144(e) apply, we do not believe 

that extra burdens on pledgees to track 

and coordinate resales by other pledgees 

are warranted. 

6. Treatment of Securities Issued by 

‘‘Reporting and Non-reporting Shell 

Companies’’

A blank check company is a company 

that: 

• Is in the development stage; 

• Has no specific business plan or 

purpose, or has indicated that its 

business plan is to merge with or 

acquire an unidentified third party; and 

• Issues penny stock.120

Such companies historically have 

provided opportunity for abuse of the 

federal securities laws, particularly by 

serving as vehicles to avoid the 

registration requirements of the 

securities laws.121 Rule 419 under the 

Securities Act 122 was adopted in 1992 

to control the extent to which such 

companies are able to access funds from 

a public offering. 

In 2005, we amended Securities Act 

Rule 405 to define a ‘‘shell company’’ to 

mean a registrant, other than an assetbacked issuer, that has: 

(1) no or nominal operations; and 

(2) either: 

• no or nominal assets; 

• assets consisting solely of cash and 

cash equivalents; or 

• assets consisting of any amount of 

cash and cash equivalents and nominal 

other assets.123

On January 21, 2000, the Division of 

Corporation Finance concluded in a 

letter to NASD Regulation, Inc. that Rule 

144 is not available for the resale of 

securities issued by companies that are, 

or previously were, blank check 

companies.124 In an effort to curtail 

misuse of Rule 144 by security holders 

through transactions in the securities of 

blank check companies, we are 

proposing to codify this position with 

some modifications.125 First, we 

propose to modify the staff 

interpretation to address securities of all 

companies, other than asset-backed 

issuers, that meet the definition of 

‘‘shell company.’’ 126 These companies 

would include any company, including 

a blank check company, that meets the 

definition. The category of companies to 

whom the staff interpretation is 

proposed to apply would be broader 

than the definition of ‘‘shell company’’

in Rule 405, however, as it would apply 

to any ‘‘issuer’’ meeting that standard, 

whereas the Rule 405 definition refers 

only to ‘‘registrants.’’ We believe that 

this provision better describes the 

companies that are the subject of the 

abuse that the staff interpretation is 

designed to address. For the purposes of 

the discussion in this release only, we 

call these companies, ‘‘reporting and 

non-reporting shell companies.’’ Under 

the proposed rule, a person who wishes 

to resell securities issued by a company 

that is, or was, a reporting or a nonreporting shell company, other than a 

business combination related shell 

company,127 would not be able to rely 

on Rule 144 to sell the securities. 

Second, because the reasons for 

prohibiting reliance on Rule 144 do not 

appear to be present after a reporting 

company has ceased to be a shell 

company and there is adequate 

disclosure in the market that would 

serve to protect against further abuse,128

we propose to permit the availability of 

Rule 144 for resales under provisions 

that are similar to our provisions that 

permit the use of a Securities Act Form 

S–8 129 registration statement by 

reporting companies that were formally 

shell companies.130 We propose to 

permit reliance on Rule 144 for resales 

by a security holder when: 

• the issuer of the securities that was 

formally a reporting or non-reporting 

shell company has ceased to be a shell 

company; 

• the issuer of the securities is subject 

to the reporting requirements of Section 

13 or 15(d) of the Exchange Act; 

• the issuer of the securities has filed 

all reports and material required to be 

filed during the preceding 12 months (or 

for such shorter period that the 

registrant was required to file such 

reports and materials); and 

• at least 90 days have elapsed from 

the time the issuer files current ‘‘Form 

10 information’’ with the Commission 

reflecting its status as an entity that is 

not a shell company. 

Form 10 information is equivalent to 

information that a company would be 

required to file if it were registering a 

class of securities on Form 10, Form 10–

SB, or Form 20–F under the Exchange 

Act,131 and such information is 

ordinarily filed on Form 8–K.132

Under the proposed amendments, an 

affiliate security holder selling control 

securities would have to wait at least 90 

days before being permitted to resell the 

securities, and a security holder selling 

restricted securities would be required 

to wait the duration of the holding 

period before being permitted to resell 

the securities.133 The 90-day delay or 


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whichever is the latest date. See proposed Rule 

144(d)(3)(xii). 

134 17 CFR 240.10b5–1. 

135 15 U.S.C. 78j(b). 

136 17 CFR 240.10b–5. As stated in Rule 10b5–

1(a), the ‘‘manipulative and deceptive devices’’

prohibited by Section 10(b) and Rule 10b–5 

include, among other things, the purchase or sale 

of a security of any issuer, on the basis of material 

nonpublic information about that security or issuer, 

in breach of a duty of trust or confidence that is 

owed directly, indirectly, or derivatively, to the 

issuer of that security or the shareholders of that 

issuer, or to any other person who is the source of 

the material nonpublic information. 

137See the Division of Corporation Finance 

Manual of Publicly Available Telephone 

Interpretations, Fourth Supplement (May 30, 2001), 

at Rule 10b5–1; Form 144, Interpretation No. 2. 

138 17 CFR 240.15c2–11. 

139See letters from ABA; ASCS; AT&T; BG&E; 

Brobeck, Phleger & Harrison, LLP (Brobeck); 

Corporate Counsel; Intel; NY Bar; NY City Bar; SIA; 

Smith Barney; Sullivan & Cromwell; and Testa 

Hurwitz. 

140We also propose to add the definition of 

‘‘affiliate’’ to paragraph (e) and transfer the 

definition of ‘‘party’’ from paragraph (c) to 

paragraph (e). 

141See proposed Rule 145(c). The terms, ‘‘shell 

company’’ and ‘‘business combination related shell 

company,’’ are defined in Securities Act Rule 405. 

See also Release No. 33–8587 (Jul. 15, 2005) [70 FR 

42233]. 

the duration of the holding period 

would provide the market with time to 

absorb the Form 10 information filed 

with the Commission regarding the 

company, and the 90-day delay here is 

consistent with the 90-day waiting 

period in Rule 144(c) and proposed Rule 

144(d). 

7. Representations Required From 

Security Holders Relying on Exchange 

Act Rule 10b5–1(c) 

Rule 10b5–1 134 under the Exchange 

Act defines when a purchase or sale 

constitutes trading ‘‘on the basis of’’

material nonpublic information in 

insider trading cases brought under 

Exchange Act Section 10(b) 135 and Rule 

10b–5.136 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. However, 

Rule 10b5–1(c) provides an affirmative 

defense that a person’s purchase or sale 

was not ‘‘on the basis of’’ material 

nonpublic information. For this defense 

to be available, the person must 

demonstrate that: 

• before becoming aware of the 

material nonpublic information, he or 

she had entered into a binding contract 

to purchase or sell the securities, 

provided instructions to another person 

to execute the trade for the instructing 

person’s account, or adopted a written 

plan for trading the securities; 

• the contract, instructions or written 

trading plan satisfy the conditions of 

Rule 10b5–1(c); and 

• the purchase or sale that occurred 

was pursuant to the contract instruction 

or plan. 

Currently, 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.’’

The Division of Corporation Finance has 

indicated that a selling security holder 

who satisfies Rule 10b5–1(c) may 

modify the Form 144 representation to 

indicate that he or she had no 

knowledge of material adverse 

information about the issuer as of the 

date on which the holder adopted the 

written trading plan or gave the trading 

instructions, specifying that date and 

indicating that the representation speaks 

as of that date.137

In order to reconcile the Form 144 

representation with Rule 10b5–1, we are 

proposing to codify this interpretive 

position. Under the proposed 

amendments, Form 144 filers would be 

able to make the required representation 

as of the date that they adopted written 

trading plans or gave trading 

instructions that satisfy Rule 10b5–1(c). 

Request for Comments 

• Should we codify all of the above 

staff positions? Is the codification of the 

staff position on securities acquired 

under Section 4(6) appropriate and 

consistent with the purposes of Rule 

144? Would codification of the staff 

positions on the Rule 144 holding 

period help to resolve any confusion 

regarding how to calculate the holding 

period? Would codification of the 

position on the aggregation of pledgees 

securities assist security holders in 

determining their volume limitations? If 

you believe we should not codify any of 

these positions, which one or ones 

should we not codify? If so, why? 

• Should we revise any of the staff’s 

existing positions on these matters? If 

so, which position and why? Does the 

wording of any of the proposed 

language suggest a change, or create 

ambiguity, in the staff’s position? 

• Would codification of the staff 

position on the treatment of securities 

issued by blank check companies 

protect against abuse relating to the 

resale of such securities? Should we 

expand the staff position to preclude 

reporting and non-reporting shell 

companies from relying on Rule 144? 

• Should we permit reliance on Rule 

144 for the resale of securities of former 

shell companies if the company is a 

reporting company, the company is no 

longer a shell company, the company 

has filed Form 10 information reflecting 

its status as an entity that is not a shell 

company, and either 90 days have 

elapsed since the filing of the Form 10 

information or the holding period has 

been met? Is 90 days an appropriate 

amount of time? Should the delay be 

longer (e.g., 180 days or one year)? Are 

there any reasons not to adopt such an 

amendment? Should we expand the 

proposed revision to permit reliance on 

Rule 144 also for the resale of securities 

of non-reporting companies that were 

formerly non-reporting shell companies 

where there is publicly available 

information (provided under Rule 15c2–

11) 138 reflecting that such companies 

have obtained business operations or 

more than nominal assets? 

F. Amendments to Rule 145 

Securities Act Rule 145 provides that 

exchanges of securities in connection 

with reclassifications of securities, 

mergers or consolidations or transfers of 

assets that are subject to shareholder 

vote constitute sales of those securities. 

Rule 145(c) deems persons who were 

parties to such a transaction, other than 

the issuer, or affiliates of such parties to 

be underwriters. Rule 145(d) sets forth 

the restrictions on the resale of 

securities received in such transactions 

by persons deemed underwriters. In the 

1997 proposal, we proposed to 

eliminate the presumed underwriter and 

resale provisions in Rule 145(c) and (d). 

Many commenters supported the 1997 

proposal.139

After reviewing comments on the 

proposal, we believe it is appropriate to 

eliminate the presumptive underwriter 

provision in Rule 145, as it is no longer 

necessary in most circumstances. 

However, based on our experience with 

business combinations involving shell 

companies that have resulted in abusive 

sales of securities, we believe that there 

continues to be a need to apply the 

presumptive underwriter provision to 

shell companies and their affiliates and 

promoters. Accordingly, we propose 

amendments to Rule 145(c) and (d) that 

would: 140

• Eliminate the presumed 

underwriter status provision in Rule 

145(c) except with regard to Rule 145(a) 

transactions that involve a shell 

company (other than a business related 

shell company); 141 and 

• Harmonize the requirements in 

Rule 145(d) with the proposed 


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36834 Federal Register / Vol. 72, No. 128 / Thursday, July 5, 2007 / Proposed Rules 

142See proposed Rule 145(d). 143The securities acquired by the parties and 

persons deemed presumed underwriters would be 

acquired pursuant to an effective registration 

statement. As in the proposed Rule 144 

amendments, this 90-day delay would allow the 

market extra time to absorb the information in the 

registration statement before these persons and 

parties can publicly resell the securities. 

144See proposed Note to Paragraphs (c) and (d) 

of Rule 145. 

145We propose to revise the phrase in Rule 145(d) 

relating to ‘‘registered securities’’ to say instead 

‘‘securities acquired in a transaction specified in 

paragraph (a) that was registered under the Act,’’

which we believe is a more accurate description. 

146 17 CFR 230.190 and Release No. 33–8518 

(Dec. 22, 2004) [70 FR 1506]. 

147 17 CFR 230.190(a)(3). 

148Although the ABS securities we are discussing 

may be privately placed, the issuing trust will have 

also registered the sale of other ABS and may have 

a reporting obligation under Section 15(d) for some 

time. 

149This proposed change would not in any way 

impact the disclosure requirements for 

resecuritizaitons. 

provisions in Rule 144 that would apply 

to securities of shell companies.142

Under the proposed rule, parties to 

the transaction in Rule 145(a), other 

than the issuer, and their affiliates, 

where a party to the transaction is a 

shell company, other than a business 

combination related shell company, 

could resell securities acquired in 

connection with the transaction only in 

accordance with Rule 145(d). 

Under proposed Rule 145(d), the 

persons and parties that are deemed 

presumed underwriters would be 

permitted to resell their securities to the 

same extent that affiliates of a shell 

company would be permitted to resell 

their securities under Rule 144, as 

proposed. The securities could be only 

sold after any company that was a shell 

company and a party to the transaction 

has ceased to be a shell company and 

at least 90 days have elapsed since the 

securities were acquired in the 

transaction, subject to Rule 144 

conditions.143 The 90-day delay is 

consistent with the 90-day delay that we 

are proposing in paragraph (i) of Rule 

144 relating to the use of Rule 144 for 

the resale of securities of a former shell 

company. As in the proposed 

amendments to Rule 144, after six 

months have elapsed since the 

securities were acquired in the 

transaction, the persons and parties 

would be permitted to resell their 

securities, subject only to the current 

public information condition in Rule 

144, provided that the sellers are not 

affiliates of the issuer at the time of sale 

and have not been affiliates during the 

three months before the sale. As in the 

proposed amendments to Rule 144, one 

year after the securities were acquired in 

the transaction the persons and parties 

would be permitted to freely resell their 

securities, provided that they are nonaffiliates at the time of sale and have not 

been affiliates during the three months 

before the sale. 

In addition, similar to the proposal for 

the Preliminary Note in Rule 144, we 

propose to add a note that Rule 145(c) 

and (d) are not available with respect to 

any transaction or series of transactions 

that, although in technical compliance 

with the rule, is part of a plan or scheme 

to evade the registration requirements of 

the Act.144 We also propose to clarify 

language in Rule 145(d) regarding the 

securities that were acquired in a 

transaction specified in paragraph Rule 

145(a).145

Request for Comment 

• Should we limit the Rule 145 

presumptive underwriter provision only 

to transactions involving shell 

companies? Are there any other 

transactions for which the presumptive 

underwriter provision should continue 

to apply? Should we eliminate this 

provision with respect to transactions 

involving shell companies? 

• Are the proposed amendments to 

Rule 145(d) appropriate? Should we 

retain the requirement that the issuer of 

the securities must meet the current 

public information requirements of Rule 

144(c) for a prescribed period of time 

before the party is permitted to resell 

freely its securities in the issuer? 

• Are the time periods that the parties 

and their affiliates must wait before 

being permitted to resell the securities 

in proposed Rule 145(d) appropriate? Is 

it appropriate to require those deemed 

underwriters to wait at least 90 days 

before being permitted to resell their 

securities? Should the requirement be 

shorter or longer (e.g., 30, 60, 120, or 

180 days, or one year)? If so, why? 

• Should we add the note that Rule 

145(c) and (d) are not available with 

respect to any transaction or series of 

transactions that, although in technical 

compliance with the rule, is part of a 

plan or scheme to evade the registration 

requirements of the Act? 

G. Conforming and Other Amendments 

1. Underlying Securities in AssetBacked Securities Transactions 

The proposals we make today 

necessitate consideration of proposed 

changes to other rules that refer to Rule 

144. In particular, we are proposing 

changes to the asset-backed rules. We 

adopted Securities Act Rule 190 to 

clarify when registration of the sale of 

underlying securities in asset-backed 

securities transactions is required.146

One of the basic premises underlying 

ABS offerings is that an investor is 

buying participation in the underlying 

assets. Therefore, if the assets being 

securitized are themselves securities 

under the Securities Act (commonly 

referred to as a ‘‘resecuritization’’), the 

offering of the underlying securities 

must itself be registered or exempt from 

registration under the Securities Act. 

Rule 190 provides the framework for 

determining if registration of the sale of 

these underlying assets is required at 

the time of the registered ABS offering. 

One of the requirements of Rule 190 

is that the depositor would be free to 

publicly resell the securities without 

registration under the Securities Act.147

This provision currently notes as an 

example that if the underlying securities 

are Rule 144 restricted securities, they 

must meet the condition of 144(k) (e.g., 

a two-year holding period by nonaffiliates). Because of the manner of sale 

restrictions on asset-backed securities, 

this example means that in order to 

meet this condition under Rule 190, at 

least two years must have elapsed from 

the date the securities were acquired 

from the issuer of the underlying 

securities, or an affiliate, and the date 

they are pooled and resecuritized 

pursuant to Rule 190. 

Our proposed revisions to Rule 144 

with no concurrent revision to Rule 190 

would allow privately placed debt or 

other ABS to be publicly resecuritized 

in as little as six months after their 

original issuance without registration of 

the underlying securities.148 Given that 

that Rule 190 addresses the public 

distribution of privately placed 

securities via resecuritization 

transactions, we are proposing revisions 

to Rule 190 in order to keep the current 

two-year period for resecuritizations 

that do not require registration of the 

underlying securities.149

A particular issuance of asset-backed 

securities often involves one or more 

publicly offered classes (e.g., classes 

rated investment grade) as well as one 

or more privately placed classes (e.g., 

non-investment grade subordinated 

classes). In most instances, the 

subordinated classes act as structural 

credit enhancement for the publicly 

offered senior classes by receiving 

payments after, and therefore absorbing 

losses before, the senior classes. These 

unregistered asset-backed securities are 

typically rated below investment grade 

or are unrated and as such could not be 

offered on Form S–3. They typically are 

not fungible with registered securities 

from the same offering and are held by 

very few investors. Further, the trust or 

issuing entity usually ceases reporting 

under the Exchange Act with respect to 


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150See Saskia Scholtes, Left in the Dark on Debt 

Obligations, FT.com (Mar. 27, 2007) (describing 

privately placed collateralized debt obligations 

(CDOs) vehicles used to repackage portfolios of 

other debt and noting that ‘‘the biggest category of 

deals, at 44%, consisted of CDOs backed by assetbacked securities such as those backed by subprime 

mortgages’’). 

151 17 CFR 230.701(g)(3). 

152See proposed Rule 701(g)(3). 

153See Rule 144(h). As noted above, we are 

proposing to raise the thresholds that trigger the 

Form 144 filing requirement. 

154See Section II.B above. 

155Section 16 requirements apply to every person 

who is directly or indirectly the beneficial owner 

of more than 10% of any class of any equity 

security (other than an exempted security) which is 

registered pursuant to Section 12, or who is a 

director or an officer of the issuer. 

156 17 CFR 240.16a–3. 

157 17 CFR 249.104 and 17 CFR 274.203. 

158Pub. L. No. 107–204, 116 Stat. 745. 

159See also letter from Corporate Counsel. 

160See Exchange Act Rule 16a–3(g). 

161 17 CFR 228.701 and 229.701. We recently 

proposed to integrate Regulation S–B disclosure 

requirements into Regulation S–K disclosure 

requirements. See SEC Press Release No. 2007–102 

(May 23, 2007), available at http://www.sec.gov/ 

news/press.shtml. 

the publicly offered classes after its 

initial Form 10–K is filed. We 

understand the privately placed 

subordinated securities in these 

transactions are often the types of 

securities that are pooled and 

resecuritized into new asset-backed 

securities.150

Due to the particular circumstances of 

asset-backed securities and the 

established experience with a two-year 

period under both the ABS rules and the 

prior staff positions that were codified 

by those rules, we are not persuaded at 

this time that we should shorten the 

current two-year holding period for 

restricted securities that are to be sold 

into publicly-registered securitizations. 

As a result, we are proposing to amend 

Rule 190 to provide that if the 

underlying securities are Rule 144 

restricted securities, Rule 144 must be 

available for the sale of the securities in 

the resecuritization, except that at least 

two years must have elapsed since the 

later of the date the securities were 

acquired from the issuer of the 

underlying securities or from an affiliate 

of the issuer of the underlying 

securities. Of course, the underlying 

securities could still be resecuritized if 

they do not meet this requirement; their 

sale would just need to be concurrently 

registered with the offering of the assetbacked securities on a form for which 

the offering of the class of underlying 

securities would be eligible. In addition, 

nothing in Rule 190 as we propose to 

amend it would lengthen the holding 

period of the underlying securities for 

resales other than in connection with 

publicly registered resecuritizations. 

2. Securities Act Rule 701(g)(3) 

Securities Act Rule 701(g)(3) 151

outlines the resale limitations for 

securities issued under Rule 701. The 

limitations for resales by non-affiliates 

includes references to paragraphs (e) 

and (h) of Rule 144, which under the 

proposed rules, would no longer apply 

to resales by non-affiliates. Accordingly, 

it is appropriate to propose a 

conforming amendment to remove 

references to Rule 144(e) and (h) from 

Rule 701.152

Request for Comment 

• Is the revision to Rule 190 

appropriate? Are we correct in 

understanding that privately placed 

securities that are resecuritized 

pursuant to Rule 190 typically were 

acquired from the issuer two or more 

years ago? Should we shorten the twoyear period for resecuritizations, but to 

not as short as the six months we 

propose for certain other resales under 

Rule 144? What interim length would be 

appropriate (e.g., one year)? 

• Should we limit our revision to just 

underlying securities that are assetbacked securities and allow non-assetbacked securities such as corporate debt 

to be securitized without registration in 

the revised Rule 144 periods? 

• Are there other instances where our 

rules reference Rule 144 or Rule 145 

that would warrant change as a result of 

our proposed revisions to those rules? 

• Is the proposed change to Rule 701 

appropriate? 

III. Coordination of Form 144 Filing 

Requirements with Form 4 Filing 

Requirements 

Rule 144 requires a seller to transmit 

a Form 144 for filing 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, if the sale has exceeded certain 

filing thresholds.153 The proposed 

amendments above eliminate the Form 

144 filing requirement for non-affiliates, 

and therefore, the Form 144 filing 

requirements would apply only to 

affiliates of the issuer.154

Many affiliates of an issuer under 

Rule 144 are also insiders of the issuer 

under Section 16 of the Exchange 

Act.155 Pursuant to Exchange Act Rule 

16a–3,156 insiders are required to report 

changes in beneficial ownership, 

including purchases and sales of 

securities, on Form 4.157 Some of the 

items required by Form 144 are 

duplicative of the requirements on Form 

4. The Sarbanes-Oxley Act of 2002 158

changed the Form 4 filing deadline to 

two business days after the transaction 

is executed. As a result, affiliates selling 

securities under Rule 144 often are 

required to file a Form 4 just a few days 

after they file a Form 144 to report 

information regarding the same sale of 

securities. 

In order to reduce duplicative 

requirements on individuals who are 

subject to both the Form 144 filing 

requirements and the Section 16 filing 

requirements, we solicit comment on 

how best to coordinate the Form 144 

filing requirement with the filing 

requirements under Section 16 of the 

Exchange Act for an affiliate who 

wishes to rely on Rule 144 and is 

subject to the Section 16 filing 

requirements.159 Specifically, we solicit 

comment on the following: 

• Revising the filing deadline for 

Form 144 to coincide with the filing 

deadline for Form 4 (before the end of 

the second business day following the 

day on which the subject transaction 

was executed); 160

• Permitting affiliates subject to 

Section 16 filing requirements to, at 

their option, satisfy their Form 144 

filing requirements by timely filing a 

Form 4 to report the sale of their 

securities; and 

• Revising Item 701 of Regulations 

S–B and S–K 161 to require additional 

disclosure about the resale status of 

securities issued in unregistered 

transactions at the time the company 

first issues the securities. 

While Form 144 and Form 4 both 

provide information regarding the title 

of the class of securities sold, the 

number of shares subject to sale, the 

aggregate market value of those shares, 

and the date of sale, there are, however, 

some differences in the disclosure 

required by Form 144 and Form 4 with 

respect to sales of securities. For 

example, Form 4 does not request some 

information that is required to be 

provided in Form 144, including: 

• The date that the securities were 

acquired; 

• The nature of the acquisition 

transaction; 

• The name of the person from whom 

the securities were acquired; 

• The amount of securities acquired; 

• The date of payment for the 

securities; and 

• The nature of payment. 

In addition, while Form 144 requires 

disclosure regarding securities sold in 

the three months prior to the sale, if a 

person has not been subject to the 

Section 16 reporting obligations for 

three months, that person’s Section 16 


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162See Section II.E.7 of this release. 

163We believe that this item should be added to 

Form 4, because if the security holder was deemed 

to have acquired the securities on an earlier date 

under the tacking provisions in Rule 144(d), the 

date that the security holder acquired the securities 

for Rule 144 purposes could differ from the date 

that would have been previously reported on the 

Form 4 covering the acquisition transaction. 

164Existing Note (i) of Rule 144(g)(3) also states 

that the broker, for his own protection, should 

obtain and retain in his files a copy of the notice 

required by paragraph (h). 

165Such an amendment would also necessitate 

revising the rule to modify or delete the 

requirement in proposed Rule 144(h) that the 

security holder filing the notice shall have a bona 

fide intention to sell the securities referred to 

therein within a reasonable time after the filing of 

such notice. 

reports would not provide complete 

information regarding sales of securities 

in the last three months. Also, Form 4 

does not contain the proposed 

representation that is given by security 

holders that they do not know material 

adverse information about the company 

as of the date that they adopted a plan 

under Exchange Act Rule 10b5–1 or 

gave trading instructions, as 

applicable.162

We preliminarily believe that if we 

permit a security holder to satisfy a 

Form 144 filing requirement by filing a 

Form 4, Form 4 should be amended to 

require the security holder that wishes 

to satisfy a Form 144 filing requirement 

to provide the following information 

regarding Rule 144 compliance in Form 

4: 

• The date that the securities were 

acquired (for purposes of the holding 

period calculation under Rule 

144(d)); 163

• The name of the person from whom 

the securities were acquired; 

• The date of payment for the 

securities; and 

• The nature of the payment. 

Regarding the items in Form 144 

relating to the nature of the acquisition 

transaction and the amount of securities 

acquired, we believe that such 

information or similar information 

could be available in a previously filed 

Form 4 reporting the purchase of the 

securities, unless the security holder 

was not subject to Section 16 

requirements at the time the securities 

were acquired. We solicit comment on 

which Form 144 disclosure items we 

should preserve and transfer from Form 

144 to Form 4, if we were to permit 

security holders to satisfy their Form 

144 obligations with a Form 4. 

We also solicit comment on whether 

Form 4 should be expanded to include 

these additional disclosure items. We 

have concerns, however, that simply 

combining the required disclosures on 

the two forms into Form 4 may be 

confusing to filing persons as well as 

other market participants. For example, 

because some of the information 

required on Form 144 is not relevant to 

all persons filing Form 4, a person filing 

a Form 4 who is not required to file a 

Form 144 should not be required to 

provide that information. Similarly, the 

two forms also can report different 

events. Form 4 reports both purchases 

and sales, while Form 144 reports only 

sales. In short, much of the information 

in each form may not be relevant to 

filers of the other form and may cause 

confusion among filers of the forms and 

investors. 

Because Form 4 is an electronic filing 

on the Commission’s Electronic Data 

Gathering, Analysis, and Retrieval 

System (EDGAR), one alternative may 

be to implement programming changes 

to EDGAR to modify the user interface 

for Form 4 in such a way as to provide 

access to the portion of that form that 

would request Rule 144 information 

only if the filer affirmatively asserts that 

he or she wishes to satisfy his or her 

Rule 144 notice obligations on Form 4. 

Programming changes also could be 

made to enable a filer to enter all 

relevant information on one user 

interface which would automatically 

create two separate filings, one on Form 

4 and the other on Form 144. To the 

extent possible, we seek to reduce filing 

requirements without losing important 

disclosure or causing confusion to filers 

and users of Form 4 and Form 144. 

Such coordination also would require 

a revision to the statement in Rule 

144(g) that the broker would deemed to 

be aware of any facts or statements 

contained in the notice required by Rule 

144(h).164 If a security holder has filed 

a Form 4 to satisfy his or her Form 144 

filing requirement, we preliminarily 

believe that a broker should also be 

deemed to be aware of any facts 

contained in a Form 4 that are relevant 

to Rule 144, if this is the approach we 

adopt in the end. We request comment 

on this point and how to best address 

this issue. 

Because some information on Form 

144 would no longer be provided if we 

were to adopt these amendments, we 

believe that additional disclosure in 

registration statements or periodic 

reports filed by the issuer of the 

securities may help to inform the market 

about the number of restricted securities 

available for resale. We solicit comment 

on a possible amendment to Item 701 of 

Regulations S–K and S–B that would 

require disclosure regarding: (1) 

Whether the securities issued in 

unregistered transactions were restricted 

securities, as defined in Rule 144(a)(3); 

(2) if the securities were not restricted 

securities, the resale status of such 

securities under Rule 144; and (3) if the 

securities were restricted securities, the 

first date when such securities could be 

deemed to meet the holding period 

requirement in Rule 144(d). 

Request for Comment 

• Should we permit persons who are 

subject to Section 16 reporting 

obligations to provide the disclosure 

required by Form 144 on Form 4 

instead? Is there any particular 

information currently disclosed on 

Form 144 that would otherwise not be 

disclosed on Form 4 which industry 

participants or security holders want or 

find material? If so, what is that 

information? 

• Could relevant information be 

reported elsewhere? Should we revise 

Item 701 of Regulations S–K and S–B to 

require added disclosure in a company’s 

registration statement or periodic 

reports about the resale status of 

securities issued in unregistered 

transactions at the time when the 

company first sells the securities? What 

other types of disclosure regarding 

restricted securities (other than the 

resale status of the securities) would be 

useful to the market? Would disclosure 

regarding the securities at the time they 

were first issued be beneficial, or would 

such disclosure be premature and 

speculative? 

• If we permit persons subject to 

Section 16 reporting obligations to file 

a Form 4 in lieu of a Form 144, is it 

appropriate to delay the filing deadline 

of Form 144 to two business days after 

the transaction is completed? 165 Is there 

a benefit to having this information at 

an earlier time, rather than two business 

days after the transaction is completed? 

How do market participants use the 

information in Form 144 today? 

• If we expand Form 4 by adding 

requirements from Form 144, would 

Form 144 information contained in 

Form 4 be more difficult to find? Should 

we provide a means to allow persons 

searching on EDGAR to determine 

whether a Form 4 is being used to 

disclose Form 144 information (e.g., a 

checkbox on Form 4)? 

• Should we mandate that Form 144 

be filed electronically on EDGAR when 

the form relates to the securities of a 

reporting company? 

• Should we expand Form 4 to add 

disclosure requirements from Form 144 

for these purposes? If so, which 

disclosures from Form 144 should we 

retain? Should we modify Form 4 to 

incorporate them or should this 


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166 44 U.S.C. 3501 et seq. 

167See 44 U.S.C. 3507 and 5 CFR 1320.11. 

168We propose to amend Form 144 to include 

information regarding security holders’ hedging 

activities and to allow security holders to represent 

that they do not know of material adverse 

information about the company as of the date they 

adopt a plan under Exchange Act Rule 10b5–1. 

169This reflects current OMB estimates. 

170The Office of Economic Analysis obtained 

data from the Thomson Financial Wharton Research 

Database. The estimate is based on information 

contained in notices on Form 144 filed in 2005. 

171This estimate is based on information 

contained in notices on Form 144 filed in 2005. 

172This is the same as the current OMB estimate. 

173 (27,127 filings + 3,025 filings) * 2 hours/filing 

= 60,304 hours. 

information be provided as a 

supplement to Form 4? For example, 

should Form 144 information be in a 

new separate table? Would a combined 

Form 4/Form 144 be confusing to 

investors, other persons using the forms, 

or persons submitting the forms? 

• Should we require only persons 

that seek to satisfy both their Rule 144 

and Form 4 requirements with one form 

to fill out all of the questions on a 

combined Form 4/Form 144? If so, what 

mechanisms can we use to prevent 

confusion and assist filers in providing 

only the information that they are 

required to provide? For example, 

should we implement programming 

changes to EDGAR that would 

electronically filter out any filers not 

seeking to report information pursuant 

to Rule 144 on their Form 4 by 

withholding questions relevant to Rule 

144 unless the filer indicates that he or 

she intends to provide such information 

on Form 4? 

• Would combining the forms and 

delaying the Rule 144 filing date make 

it more difficult for brokers to perform 

the inquiries required in order to qualify 

the transaction as a ‘‘brokers’

transaction’’? Do brokers and transfer 

agents need to see Form 144 information 

prior to executing the transaction? Is 

there a better way for these parties to 

obtain this information prior to 

executing the transaction other than a 

separate filing? Should brokers be 

deemed to be aware of facts contained 

in Form 4 to the extent that the form is 

filed for Rule 144 purposes? 

• Should we implement programming 

changes to EDGAR that would enable 

security holders to create two separate 

filings, one Form 4 and one Form 144, 

at the same time by completing only one 

submission to EDGAR? Would this 

lessen the probability of confusion that 

would result if items on Form 144 were 

transferred to Form 4? 

IV. General Request for Comments 

We request and encourage any 

interested person to submit comments 

regarding: 

• The proposed rule changes that are 

the subject of this release; 

• Additional or different changes; or 

• Other matters that may have an 

effect on the proposals contained in this 

release. 

We request comment from the point 

of view of registrants, investors and 

other users of information about the 

resale of restricted securities and 

securities owned by affiliates of the 

issuer. 

V. Paperwork Reduction Act 

A. Background 

Our proposals contain ‘‘collection of 

information’’ requirements within the 

meaning of the Paperwork Reduction 

Act of 1995 (‘‘PRA’’). 166 We are 

submitting the proposed revisions to 

Form 144 to the Office of Management 

and Budget (OMB) for review in 

accordance with the PRA.167 The title 

for the information collection is ‘‘Notice 

of Proposed Sale of Securities Pursuant 

to Rule 144 under the Securities Act of 

1933’’ (OMB Control No. 3235–0101). 

An agency may not conduct or sponsor, 

and a person is not required to respond 

to, a collection of information unless it 

displays a current valid control number. 

B. Summary of Proposed Amendments 

The proposed amendments would 

eliminate the need for non-affiliates of 

the issuer to file Form 144. In addition, 

the proposal would raise the filing 

threshold for Form 144 to 1,000 shares 

or $50,000 worth of securities during a 

three-month period. Currently, the Form 

144 filing threshold is 500 shares and 

$10,000. Form 144 may be filed in paper 

or electronically using the EDGAR filing 

system. The proposed amendments also 

include two limited changes to Form 

144.168 The primary purpose of this 

collection of information is the 

disclosure of a proposed sale of 

securities by security holders deemed 

not to be engaged in the distribution of 

the securities. The filings are publicly 

available. Persons reselling securities in 

reliance on Rule 144 are the 

respondents to the information required 

by Form 144. The information collection 

requirements imposed by Form 144 are 

mandatory. 

Currently, an estimated 60,500 notices 

on Form 144 are filed annually for a 

total burden of 121,000 hours.169 If 

adopted, the amendments would 

eliminate the need for non-affiliates to 

ever file a Form 144. We currently 

estimate that approximately 45%, or 

27,127, of the total 60,500 filings are 

filed by non-affiliates.170 Under the 

proposals, these filings would no longer 

be required. In addition, we estimate 

that increasing the Form 144 filing 

thresholds from 500 shares or $10,000 to 

1,000 shares or $50,000 would reduce 

the number of filings by affiliates by 

approximately 5%, or 3,025 filings.171

We estimate that each notice on Form 

144 imposes a burden for purposes of 

the Paperwork Reduction Act of two 

hours.172 Therefore, we estimate that the 

proposals would reduce the burden on 

selling security holders by 

approximately 60,300 burden hours.173

C. Solicitation of Comments 

Pursuant to 44 U.S.C. 3506(c)(2)(B), 

we request comments to (1) evaluate 

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) evaluate the accuracy of our 

estimate of the burden of the proposed 

collection of information; (3) determine 

whether there are ways to enhance the 

quality, utility and clarity of the 

information to be collected; and (4) 

evaluate 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 or 

other forms of information technology. 

Persons submitting comments on the 

collection of information requirements 

should direct the 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 

should send a copy to Nancy M. Morris, 

Secretary, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–9303, with 

reference to File No. S7–11–07. 

Requests for materials submitted to 

OMB by the Commission with regard to 

these collections of information should 

be in writing, refer to File No. S7–11–

07, and be submitted to the Securities 

and Exchange Commission, Records 

Management, Office of Filings and 

Information Services, 100 F Street, NE., 

Washington, DC 20549. OMB is required 

to make a decision concerning the 

collection of information between 30 

and 60 days after publication of this 

release. Consequently, a comment to 

OMB is best assured of having its full 

effect if OMB receives it within 30 days 

of publication. 


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174These filings were obtained through Thomson 

Financial’s Wharton Research Database which 

includes Forms 144 filed from 1996 through 2007. 

175There is also evidence that the non-trading 

period is associated with the premium that 

investors charge for lack of liquidity. See, for 

example, Silber, W.L., Discounts on restricted stock: 

The impact of illiquidity on stock prices, Financial 

Analysts Journal, 47, 60–64 (1991). Several studies 

have attempted to separate the discount associated 

with the non-transferability of the shares from other 

factors that affect the discount. See, for example, 

Wruck, K.H., Equity Ownership Concentration and 

Firm Value, Evidence from Private Equity 

Financings, Journal of Financial Economics, 23, 3–

28 (1989); Hertzel, M., and R.L. Smith, Market 

Discounts and Shareholder Gains for Placing Equity 

Privately, Journal of Finance, 459–485 (1993); Bajaj, 

M., Denis, D., Ferris, S.P., and A. Sarin, Firm Value 

and Marketability Discounts, Journal of Corporate 

Law, 27, 89–115 (2001); Finnerty, J.D., The Impact 

of Transfer Restrictions on Stock Prices (Fordham 

U. Working Paper, 2002). The average discounts 

attributed to lack of transferability across these 

studies is estimated between 7% and 20%. Other 

factors that could affect the discount are the amount 

of resources that private investors need to expend 

to assess the quality of the issuing firm or to 

monitor the firm, the ability of the investors to 

diversify the risk associated with the investment, 

whether the investors are cash constrained, the 

financial situation of the firm, etc. 176We are not aware of any empirical work that 

examines the effect of shortening the holding period 

in Rule 144 on the discount. Longstaff (1995) 

calculates an upper bound for percentage discounts 

for lack of marketability. According to his model, 

drops in a restriction from two years to one year 

and from one year to 180 days are associated each 

with a 30% drop in the discount. Longstaff, F.A., 

How Much Can Marketability Affect Security 

Values? Journal of Finance, 50, 1767–1774 (1995). 

VI. Cost-Benefit Analysis 

A. Background 

Rule 144 under the Securities Act of 

1933 creates a safe harbor for the sale of 

securities under the exemption set forth 

in Section 4(1) of the Securities Act. 

Specifically, a selling shareholder is 

deemed not an underwriter under 

Section 2(a)(11), and therefore may take 

advantage of the Section 4(1) exemption 

and need not register its sale of 

securities, if the sale complies with the 

provisions of the rule. Rule 145 requires 

Securities Act registration of certain 

types of business combination 

transactions. Rule 145 contains a safe 

harbor provision similar to Rule 144 for 

presumed underwriters who receive 

securities in such a business 

combination transaction. Form 144 is 

required to be filed by persons 

intending to sell securities in reliance 

on Rule 144 if the amount of securities 

to be sold in any three-month period 

exceeds 500 shares or other units or the 

aggregate sales price exceeds $10,000. 

The primary purpose of the form is to 

publicly disclose the proposed sale of 

securities by persons not deemed to be 

engaged in the distribution of the 

securities. 

B. Description of Proposal 

We are proposing amendments to 

Rule 144, Rule 145, and Form 144 that 

would accomplish the following: 

• Simplify the Preliminary Note to 

Rule 144 and text of Rule 144, using 

plain English principles; 

• Reduce the Rule 144(d) holding 

period for restricted securities of 

reporting companies to six months for 

both affiliates and non-affiliates; 

• Significantly reduce requirements 

applicable to non-affiliates of reporting 

and non-reporting companies so that: 

Æ Non-affiliates of reporting 

companies would be subject only to the 

current public information requirement 

after meeting the six-month (or more 

depending on hedging activities) 

holding period and up until one year 

since the date they acquired their 

securities; and 

Æ Non-affiliates of non-reporting 

companies would be able to resell freely 

after the one-year holding period; 

• Require that security holders toll 

the holding period during the time they 

enter into certain hedging transactions, 

but in no event would the holding 

period extend beyond one year; 

• Eliminate the ‘‘manner of sale’’

limitations with respect to debt 

securities; 

• Increase the thresholds that would 

trigger a Form 144 filing requirement; 

• Codify the staff’s positions, as they 

relate to Rule 144, concerning the 

following issues: 

Æ Inclusion of securities acquired in a 

transaction under Section 4(6) of the 

Securities Act in the definition of 

‘‘restricted securities,’’

Æ The effect that creation of a holding 

company structure has on a security 

holder’s holding period, 

Æ Holding periods for conversions 

and exchanges of securities, 

Æ Holding periods for cashless 

exercise of options and warrants, 

Æ Aggregation of a pledgee’s resales 

with resales by other pledgees of the 

same security for the purpose of 

determining the amount of securities 

sold, 

Æ The extent to which securities 

issued by reporting and non-reporting 

shell companies are eligible for resale 

under Rule 144, and 

Æ Representations required from 

security holders relying on Rule 10b5–

1(c); and 

• Eliminate the presumptive 

underwriter status in Securities Act 

Rule 145, except for transactions 

involving a shell company, and 

harmonize the resale requirements in 

that rule with the proposed resale 

requirements for securities of shell 

companies in Rule 144. 

We also solicit comment on how best 

to coordinate the Form 144 filing 

deadline with the Form 4 filing deadline 

and permit persons who are subject to 

Section 16 to meet their Form 144 filing 

requirement by filing a Form 4. 

C. Benefits 

If adopted, the proposed amendments 

should reduce the cost of complying 

with Rules 144 and 145. We have 

examined the Forms 144 that have been 

filed with the Commission since 

1997.174 In 2006, the volume of 

transactions filed under Rule 144 

exceeded $71 billion, and more than 

50% of U.S. public companies, large 

and small alike, have reported every 

year at least one transaction on Form 

144. Reducing the burden associated 

with these transactions can reduce the 

cost of capital to these companies. 

One item on Form 144 requires 

security holders to provide information 

on the nature of the acquisition 

transaction. Some Form 144 filers 

acquire their securities from the 

company as a private investment, while 

others receive the securities as part of 

their employee awards, or as a form of 

payment for services to the company. 

Reducing the burden associated with 

selling these securities not only can 

reduce the cost of raising capital, but 

also may increase the value of these 

securities in non-cash transactions and 

reduce the cost of services and 

employment. 

For the most part, transactions that 

were filed on Form 144 have been small. 

In 2006, about 90% of the transactions 

had a market value of less than $2 

million and 99% of these transactions 

had a market value of less than $20 

million. More than half of the investors 

report total annual transactions of a 

market value of less than $240,000 with 

any specific company. Thus, reducing 

the costs associated with filing Form 

144 and raising the thresholds that 

trigger a Form 144 filing requirement are 

likely to affect many small investors. 

We expect that the increase in the 

value of these securities would come 

from several sources under the proposed 

rule. The first is the increase in the 

liquidity of the securities. Investors, 

suppliers, or employees who are 

restricted from selling securities and 

who cannot hedge their positions are 

generally exposed to more risk than 

those who are not subject to such 

limitations, and generally require higher 

compensation (or a larger discount) for 

this risk.175 We should also expect that 

the longer the non-trading period, the 

higher the premium that investors 

charge for their lack of liquidity.176


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177We base the estimate on number of filings that 

indicated that the securities were debt securities in 

the section of the Form 144 that requests 

information on the nature of the acquisition 

transaction. 

Thus, reducing the time limit for selling 

these securities in the market is likely 

to reduce the discount that investors 

will charge for these securities, or the 

amount of securities that the company 

will need to provide for services. The 

actual reduction in this cost of capital 

will depend on the extent to which the 

six-month limit has a binding impact on 

security holders’ decisions to resell their 

securities, and the extent to which 

investors, employees, or service 

providers can protect themselves against 

such exposure. 

Also, resale transactional costs for 

non-affiliate selling security holders 

should decrease as a result of the 

removal of all conditions other than the 

holding period and the current public 

information condition applicable to 

non-affiliates. Reducing restrictions on 

resales by non-affiliates would 

streamline the rule and reduce the 

complexity of the rule. This and other 

simplifications of the rule and 

Preliminary Note to Rule 144 should 

make it easier to understand and follow, 

reducing the time that investors must 

spend analyzing whether or not they 

can rely on the rule as a safe harbor 

from the requirement to register the 

resale of their securities. However, 

because we are proposing to shorten the 

holding period only with respect to 

securities of reporting companies, the 

proposals would add some additional 

complexity that would diminish the 

effect of simplifying the other aspects of 

the rule. 

If the proposals are adopted, nonaffiliates would no longer have to file a 

Form 144. Therefore, they would save 

the cost of preparing and filing this 

form, as well as the transactional costs 

related to Rule 144’s manner of sale 

requirements and volume of sale 

limitations. The increase in the Form 

144 filing thresholds should further 

reduce the number of transactions for 

which a Form 144 needs to be filed for 

affiliates of the issuer. This would 

eliminate the cost of filing the form for 

transactions that fall below the 

thresholds. 

The elimination of the manner of sale 

limitations would reduce costs for debt 

security holders. It is difficult to 

estimate the amount of reduction. 

Among the Forms 144 filed in 2005, we 

found at least 200 filings covering a sale 

of debt securities, although we believe 

the actual number of debt securities 

resales relying on Rule 144 may be 

higher than this.177 The elimination of 

the manner of sale limitation may also 

reduce brokers’ fees, and therefore result 

in a reduction of revenue for brokers. 

The codification of existing staff 

positions should create no added cost to 

companies or investors because, 

substantively, there is no expected 

change in practice. However, these 

codifications should provide substantial 

benefit to the investing community by 

clarifying and better publicizing the 

staff’s positions. Greater clarity and 

transparency of our rules should reduce 

security holders’ transactional costs by 

eliminating uncertainty and reducing 

the need for legal analysis. 

The proposed amendments to Rule 

145 remove what we preliminarily 

believe are unnecessary restraints on the 

resale of securities by parties or their 

affiliates to a merger, recapitalization, or 

other transaction listed in Rule 145(a). 

The proposed amendments to Rule 145 

would reduce costs incurred by 

companies, parties to the transaction, 

and their affiliates to comply with the 

resale and other restrictions of the rule. 

Retaining the presumptive underwriter 

provision for transactions involving 

shell companies is intended to afford 

investors with additional protection 

against manipulative practices or 

abusive sales by parties to the 

transaction and their affiliates after the 

completion of the Rule 145 transaction. 

The primary benefit of permitting an 

affiliate to satisfy a Form 144 filing 

requirement by timely filing a Form 4 

reporting the sale of securities would be 

to reduce duplicative paperwork costs 

incurred by these individuals. We 

solicit comment on a number of 

alternatives to address this point, 

including which items on Form 144 

could be transferred to Form 4 in order 

to ascertain which items on Form 144 

are more important to the market and 

should therefore be preserved. While 

the market would receive the 

information later if the Form 144 filing 

deadline were to be revised to coincide 

with the Form 4 filing deadline, the 

information that would have been 

contained on Form 144 may be more 

easily accessible to users of the 

information, if transferred to Form 4, 

which is filed electronically. 

D. Costs 

The proposal to reintroduce a 

provision that tolls the holding period if 

the shareholder had entered into a 

transaction that hedges the economic 

risk of ownership of the securities may 

increase the cost of a private offering. 

The proposal provides that regardless of 

the presence of such hedging, the 

holding period would not extend 

beyond one year, which is the current 

holding period before security holders 

may begin to sell their restricted 

securities. After one year, affiliates 

would be able to trade subject to the 

conditions to which they are subject 

under the current rules. However, the 

tolling provision may add a layer of 

complexity to calculating whether the 

holding period requirement has been 

met between the six-month and oneyear marks because subsequent 

purchasers must determine whether 

previous owners of the securities have 

entered into such hedging transactions. 

We seek to minimize the burden on 

security holders of making this 

determination by providing, under the 

proposed rules, that the holding period 

need not be suspended if the security 

holder reasonably believes that the 

previous owner has not engaged in 

hedging transactions. We also believe 

that the ceiling on the proposed tolling 

provision minimizes burdens. For 

example, a security holder who wishes 

to rely on proposed Rule 144 but is 

unable to determine the previous 

owner’s hedging activities would be 

able to omit the period in which the 

previous owner held the securities in 

the calculation of the holding period or 

be subject to a maximum one-year 

holding period, as under the current 

rule, and a non-affiliate security holder 

would be permitted to resell the 

securities after one-year, regardless of 

any hedging activities in connection 

with the securities. Also, as provided 

under the proposed revision to Note (ii) 

of Rule 144(g)(3), brokers would also be 

required to inquire into security 

holders’ hedging transaction which may 

increase some costs for them, although 

we preliminarily believe such costs 

would not be significant. 

Under the proposed amendments, 

after one year, non-affiliates would be 

permitted to sell their restricted 

securities freely without being subject to 

any other condition. One concern is 

whether, in cases of the securities of a 

non-reporting company, relieving nonaffiliates from compliance with Rule 

144’s existing conditions, including the 

current public information condition 

requiring that there be adequate 

available current information with 

respect to the issuer of the securities, 

would lead to abuse. 

Reducing the requirements under 

Rule 144 might also cause a substitution 

effect, where companies might choose to 

rely more on private transactions than 

on public transactions to raise capital. 

There is also the risk that the market 

would not be informed about the nature 

of these transactions, given that these 

transactions would not need to be 

registered and given the changes to the 


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178Osborne, Alfred E., Rule 144 Volume 

Limitations and the Sale of Restricted Securities in 

the Over-The-Counter Market, Journal of Finance, 

37,505–523 (1982). 179 15 U.S.C. 77b(b). 

Form 144 filing requirements. The 

market may also be less informed, given 

that restricted securities of reporting 

companies could be resold by nonaffiliates earlier without complying with 

the condition that current information 

on the issuer of the securities be 

publicly available, and restricted 

securities of non-reporting companies 

could be resold by non-affiliates without 

ever complying with the current public 

information condition. This, in return, 

could lead to a less efficient price 

formation. Direct negotiated deals with 

companies could also lead to 

informational advantage of some 

investors. Reducing the requirements 

could also lead to movement of certain 

investors from public transactions to 

private transactions. The effect of the 

proposed rule on these movements and 

their effect on investor wealth are thus 

subject to many factors. 

While these are potential costs, we 

believe that they are justified by the 

potential benefits of the proposal and 

may not be significant in the aggregate. 

First, there is some evidence that, on 

average, the announcement of resales 

under Rule 144 by security holders has 

no adverse effect on stock prices, 

suggesting that the market does not 

attribute an information advantage to 

these security holders at the time of 

selling.178 Second, the rule provides 

several barriers to selling restricted 

securities by affiliated investors to 

alleviate these concerns. Third, to the 

extent that privately negotiated deals 

give private investors lucrative terms at 

the expense of public investors, public 

investors may avoid such companies, 

and these companies may eventually be 

worse off. We solicit comment as to 

whether information regarding the 

resale status of an issuer’s securities 

should be provided by other means such 

as pursuant to Item 701 of Regulation S–

K or Regulation S–B. 

As noted above, the proposed 

amendments to Rule 145 would reduce 

costs incurred by companies, parties to 

the transaction, and their affiliates to 

comply with the resale and other 

restrictions of the presumed underwriter 

provision. The magnitude of such 

reduction may vary. 

E. Request for Comments 

We seek comments and empirical data 

on all aspects of this Cost-Benefit 

Analysis. Specifically, we ask the 

following: 

• What would be the effect on the 

liquidity discount for privately issued 

securities of reducing the holding 

period for securities of reporting 

companies to six months? Would this 

effect significantly increase a company’s 

ability to raise capital in private 

securities transactions? Would the 

reduced holding period have an impact, 

in particular, on the ability of smaller 

businesses to raise capital? 

• Would shortening the holding 

period to six months for reporting 

companies increase the frequency of 

abusive transactions where the security 

holder has not taken a sufficient 

economic risk of investment? What if 

the holding period for non-reporting 

companies is shortened to six months as 

well? 

• What is the impact of eliminating 

the conditions to which non-affiliates 

are currently subject for a period of time 

prior to free public resale (i.e., the 

current public information requirement, 

the volume limitations, the manner of 

sale limitations, and the notice 

requirement)? Do any of the current 

conditions to which non-affiliates are 

subject provide a measurable benefit to 

the market? For example, would buyers 

of restricted securities of non-reporting 

companies be disadvantaged because 

sellers relying on Rule 144 are no longer 

subject to the condition requiring that 

current information of the issuer be 

publicly available? 

• Who uses the information filed on 

Form 144? Would the proposed 

elimination of the requirement to file a 

Form 144 by non-affiliates and the 

proposed filing thresholds result in a 

loss of important information for these 

individuals? 

• What would be the effect of 

reintroducing the tolling concept to 

Rule 144? How would it affect a 

company’s ability to raise capital? 

Would the tolling provision impose 

undue costs on brokers and security 

holders due to the additional duties 

relating to tracking the security holders’

or previous owners’ hedging 

transactions? Would the tolling 

provision impose costs on transfer 

agents? 

• What would be the impact of the 

proposed elimination of the limitations 

on the manner of sale for debt 

securities? How much would debt 

security holders save in fees that they 

would no longer incur under the 

proposed amendments? What impact 

would the elimination have on brokers? 

Would this proposal increase the 

burden on transfer agents? 

• What are the benefits and costs of 

codifying the staff’s existing 

interpretations under Rule 144? 

• What is the effect of the elimination 

of the presumptive underwriter 

provision in Rule 145 for all 

transactions except those involving a 

shell company? 

VII. Consideration of Burden of 

Competition and Promotion of 

Efficiency, Competition and Capital 

Formation 

Securities Act Section 2(b) 179 requires 

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. 

The proposed amendments are 

intended to reduce regulatory 

requirements for the resale of securities 

and simplify the process of reselling 

such securities. Currently, a shareholder 

owning restricted securities must wait 

until at least one year after the securities 

are last sold by the issuer or an affiliate 

before that shareholder can rely on Rule 

144 safe harbor to resell those securities. 

The amendments would reduce this 

holding period to as little as six months 

for restricted securities of Exchange Act 

reporting companies if the security 

holder did not engage in hedging 

transactions with respect to the 

securities. The holding period would 

extend past six months to the extent the 

security holder engaged in hedging 

transactions, but in no event would the 

holding period extend beyond one year. 

Restricted securities of non-reporting 

companies would continue to be subject 

to a one-year holding period. A shorter 

holding period for restricted securities 

of reporting companies may increase the 

liquidity of securities sold in private 

transactions. This could result in 

increased efficiency in securities 

offerings because companies will be 

able to sell securities in private offerings 

at prices closer to prices that they may 

obtain in public markets, without the 

need to register those securities, and 

otherwise obtain better terms in private 

offerings. We also believe that this 

would promote capital formation, 

particularly for smaller companies, 

because the proposals would increase 

the liquidity of securities sold in private 

transactions. The amendments should 

increase a company’s ability to raise 

capital in private securities transactions, 

which may improve the competitiveness 

of those companies, particularly smaller 

businesses that do not have ready access 

to public markets. 

We do not believe that the proposed 

tolling provision that suspends the 

holding period while a security holder 


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180 15 U.S.C. 78w(a)(2). 181 5 U.S.C. 603. 

182 17 CFR 230.157. See 5 U.S.C. 601(2). 

183 15 U.S.C. 77c(b). 

184 17 CFR 240.0–10. 

is engaged in hedging transactions 

places an undue burden on competition. 

The proposed tolling provision also may 

decrease efficiency somewhat by 

discouraging security holders from 

engaging in hedging with respect to 

their securities, however this effect 

should not be significant, as the 

proposed tolling provision would apply 

only for up to six months. 

The other proposed amendments to 

Rule 144 generally should increase 

efficiency and assist in capital 

formation. We believe that the proposed 

elimination of most of the Rule 144 

conditions applicable to non-affiliates 

may further increase the liquidity of 

privately sold securities. We anticipate 

that the proposed elimination of the 

manner of sale limitations for debt 

securities would provide security 

holders with greater flexibility in the 

resale of their securities, thereby 

increasing efficiency. Raising the Form 

144 filing thresholds, as proposed, 

should also improve efficiency by 

reducing security holders’ paperwork 

burden. 

Under the proposed amendment to 

Rule 145, individuals and small entities 

owning stock in companies that engage 

in transactions specified in Rule 145(a) 

would no longer be subject to the 

presumptive underwriter provision, 

except in the case of transactions 

involving a shell company. These 

proposed amendments should improve 

competitiveness of many small entities 

by permitting them to resell securities 

without the restrictions imposed by the 

current rule. 

We request comment on whether the 

proposals, if adopted, would promote 

efficiency, competition, and capital 

formation. Commenters are requested to 

provide empirical data and other factual 

support for their views, if possible. 

Section 23(a)(2) of the Exchange 

Act 180 requires us, when adopting rules 

under the Exchange Act, to consider the 

impact that any new rule would have on 

competition. In addition, Section 

23(a)(2) prohibits us from adopting any 

rule that would impose a burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Exchange Act. We do 

not believe that the proposed 

coordination of the Form 144 filing 

requirements with Form 4 filing 

requirements, if implemented, would 

cause a burden on competition. We 

request comment on whether such 

amendments would have competitively 

harmful effects, and how we can 

minimize those effects. 

VIII. Initial Regulatory Flexibility 

Analysis 

We have prepared this Initial 

Regulatory Flexibility Analysis in 

accordance with Section 603 of the 

Regulatory Flexibility Act.181 This 

analysis relates to the proposed 

amendments to Rules 144 and 145 and 

Form 144 under the Securities Act. 

A. Reasons for, and Objectives of, 

Proposed Action 

Rule 144 creates a safe harbor for the 

sale of securities under the exemption 

set forth in Section 4(1) of the Securities 

Act. If a selling security holder satisfies 

its conditions, that selling security 

holder may resell his or her securities 

publicly without registration and 

without being deemed an underwriter. 

Rule 145 governs the offer and sale of 

certain securities received in connection 

with reclassifications, mergers, 

consolidations and asset transfers. It 

imposes restrictions similar to Rule 144 

on a party to such transactions and to 

persons who are affiliates of that party 

at the time the transaction is submitted 

for vote or consent, with regard to 

securities acquired in that transaction. 

Rule 145 contains holding period 

requirements similar to those in Rule 

144. 

Form 144 is required to be filed by 

persons intending to sell securities in 

reliance on Rule 144 if the amount of 

securities to be sold in any three-month 

period exceeds 500 shares or other units 

or the aggregate sales price exceeds 

$10,000. The primary purpose of the 

form is to publicly disclose the 

proposed sale of securities by persons 

deemed not to be engaged in the 

distribution of the securities. 

We are proposing amendments that 

would make Rule 144 easier to 

understand and apply. We propose to 

streamline both the Preliminary Note to 

Rule 144 and the rule. In addition to 

codifying several staff interpretive 

positions, the proposals would reduce 

the Rule 144 holding period and 

substantially reduce requirements for 

non-affiliates. The proposals would 

reintroduce a provision tolling the 

holding period but only up to one year 

after the acquisition of the securities 

from the issuer or an affiliate of the 

issuer, which is the holding period 

under the current rules. 

The reduction of the Rule 144 holding 

periods for restricted securities of 

reporting companies for affiliates and 

non-affiliates should increase the 

liquidity of privately issued securities, 

enabling companies to raise private 

capital more efficiently. An increase in 

the Form 144 filing threshold would 

take into account the effects of inflation 

since the last amendment to that 

provision in 1972. Although the 

codification of several staff interpretive 

positions is not intended to 

substantively change the rules, they 

should simplify analyses under Rule 

144 by compiling these interpretations 

in one readily accessible location. The 

objectives of the proposed amendments 

are to simplify Rule 144, to reduce its 

burdens on investors where consistent 

with investor protection, and to 

facilitate capital formation. 

The release solicits comment on how 

best to coordinate the Form 144 filing 

deadline with the Form 4 filing deadline 

and permit a person who is subject to 

Section 16 of the Exchange Act to meet 

a Form 144 filing requirement with a 

Form 4 filing, to the extent possible. 

Such amendments could simplify filing 

requirements for Section 16 persons 

even further by allowing them to file 

only one form to meet the requirements 

of both Rule 144 and Form 4. 

B. Legal Basis 

The amendments are proposed 

pursuant to Sections 2(a)(11), 4(1), 4(4), 

7, 10, 19(a) and 28 of the Securities Act, 

as amended. 

C. Small Entities Subject to Rule 

The proposed rules would affect both 

small entities that issue securities and 

small entities that hold such securities. 

An issuer, other than an investment 

company, is considered a ‘‘small 

business’’ for purposes of the Regulatory 

Flexibility Act if that issuer: 

• Has assets of $5 million or less on 

the last day of its most recent fiscal year, 

and 

• Is engaged or proposing to engage in 

a small business financing.182

An issuer is considered to be engaged in 

a small business financing if it is 

conducting or proposes to conduct an 

offering of securities that does not 

exceed the dollar limitation prescribed 

by Section 3(b) 183 of the Securities Act. 

This dollar amount is currently $5 

million. When used with reference to an 

issuer or person, other than an 

investment company, Exchange Act 

Rule 0–10 184 defines small entity to 

mean an issuer or person that, on the 

last day of its most recent fiscal year, 

had total assets of $5 million or less. 

We are aware of approximately 1,100 

Exchange Act reporting companies that 

currently satisfy the definition of ‘‘small 


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36842 Federal Register / Vol. 72, No. 128 / Thursday, July 5, 2007 / Proposed Rules 

185The estimated number of reporting small 

entities is based on 2007 data including the 

Commission’s EDGAR database and Thomson 

Financial’s Worldscope database. This represents 

an update from the number of reporting small 

entities estimated in prior rulemakings. See, for 

example, Executive Compensation and Related 

Disclosure, Release No. 33–8732A (Aug. 29, 2006) 

[71 FR 53158] (in which the Commission estimated 

a total of 2,500 small entities, other than investment 

companies). 

186This reflects current OMB estimates. 

187For purposes of the Regulatory Flexibility Act, 

a broker or dealer is small entity if it (i) had total 

capital of less than $500,000 on the date in its prior 

fiscal year as of which its audited financial 

statements were prepared or, if not required to file 

audited financial statements, on the last business 

day of its prior fiscal year, and (ii) is not affiliated 

with any person that is not a small entity and is 

not affiliated with any person that is not a small 

entity. 17 CFR 240.0–1. 

business’’ and may be affected by the 

proposed amendments as issuers.185

The proposed amendments also may 

affect companies that are small 

businesses, but that are not subject to 

Exchange Act reporting requirements. 

As noted above, we currently estimate 

that approximately 60,500 notices on 

Form 144 are filed annually.186 The 

Commission does not collect 

information about the size of private 

companies about which a Form 144 is 

filed, but some of these non-reporting 

issuers may be ‘‘small.’’ The proposed 

tolling provision and the proposals to 

eliminate the manner of sale limitations 

may also affect brokers that qualify as 

small entities. We estimate that 910 

broker-dealers registered with the 

Commission are small entities for the 

purposes of the Regulatory Flexibility 

Act.187 We ask for comments regarding 

an estimate of the number of small 

entities that may be affected if the 

proposed amendments are adopted. 

D. Reporting, Recordkeeping and Other 

Compliance Requirements 

We expect several of the proposed 

amendments to reduce the number of 

Form 144 filings made to the SEC by 

selling security holders. These proposed 

amendments are: 

• Elimination of all Rule 144 

requirements, other than the holding 

period and the current public 

information requirement for six months, 

for non-affiliates; and 

• Increased share number and dollar 

amount thresholds for filing Form 144. 

As a result of the elimination of all 

requirements for non-affiliate security 

holders, other than the holding period 

and the current public information 

requirement, non-affiliates no longer 

would have to file a Form 144, 

regardless of the amount of securities 

sold. We estimate that 45% of the Form 

144 filings that we currently receive are 

from non-affiliates. Therefore, this 

particular amendment should result in a 

corresponding reduction in Form 144 

filings. 

The increase in the filing threshold 

for Form 144 should decrease the 

number of Form 144 filings filed by 

affiliates. Based on studies by the 

Commission’s Office of Economic 

Analysis, we expect the number of Form 

144 filings to decrease by approximately 

5%, or 3,025 filings, if the thresholds 

are increased to 1,000 shares or $50,000 

in sales price. 

Clerical skills are necessary to 

complete Form 144. 

Also, because the proposed 

amendments would significantly reduce 

the conditions in Rule 144 to which 

non-affiliates are subject, non-affiliates 

would also no longer be required to 

keep track of compliance with those 

conditions. Non-affiliates with 

securities of both reporting companies 

and non-reporting companies would no 

longer be required to comply with the 

manner of sale limitations and volume 

limitations. Non-affiliates of nonreporting companies would no longer be 

required to comply with the 

requirement that there be current 

information regarding the issuer that is 

publicly available. 

The reintroduction of the tolling 

provision would require the security 

holder and brokers to determine 

whether the security holder or a 

previous owner had engaged in hedging 

transactions with respect to the 

securities, which may require them to 

maintain some additional 

documentation. However, the holding 

period need not be suspended if the 

security holder reasonably believes that 

the previous owner had not engaged in 

hedging transactions in the securities. 

Also, a determination regarding hedging 

activities would only need to be made 

where the issuer of the securities is a 

reporting company and the securities 

are sold before a year has passed since 

the date the securities were acquired 

from the issuer or affiliate. 

The proposal to eliminate the manner 

of sale limitation for debt securities 

would also obviate the need for security 

holders to determine whether such 

condition has been met in the resale of 

their debt securities. The amendments 

to Rule 145 eliminate the need for 

parties to a Rule 145(a) transaction or 

their affiliates to determine whether 

they have met the resale provisions of 

Rule 145, except when the transaction 

involves a shell company. 

E. Overlapping or Conflicting Federal 

Rules 

No current federal rules duplicate, 

overlap or conflict with the rules and 

forms that we are proposing, except that 

persons subject to the reporting 

requirements under Section 16 of the 

Securities Exchange Act of 1934 may 

need to file reports on Form 4 as well 

as Form 144 under certain 

circumstances. However, the class of 

Form 144 filers is different than that for 

Form 4 filers because affiliates of 

companies not subject to the Exchange 

Act reporting requirements must file 

Form 144, but not Form 4. Further, 

persons who may be deemed affiliates 

under Rule 144 may not necessarily be 

the same persons who also are subject 

to Section 16. Also, Form 144 is 

required to be filed earlier than Form 4 

and Form 144 contains some 

information that is not required to be 

included on Form 4. As noted above, 

the release also solicits comment on 

whether Form 4 and Form 144 filing 

requirements should be coordinated to 

delay the Form 144 filing deadline to 

match the Form 4 filing deadline and so 

that persons subject to Section 16 could 

be exempt from filing a Form 144 

regarding a particular transaction if they 

have already filed a Form 4 with respect 

to that transaction. 

F. Significant Alternatives 

We considered different compliance 

standards for small entities that would 

be affected by the proposed 

amendments. In the 1997 proposing 

release, we solicited comment regarding 

the possibility of different standards for 

small entities. However, we believe that 

such differences would be inconsistent 

with the purposes of the rules. 

Commenters on this issue in the 1997 

proposing release unanimously agreed 

that different standards would not be 

feasible and would only add to the 

complexity and difficulty of applying 

the rules. 

We also considered the other types of 

alternatives set forth in the Regulatory 

Flexibility Act to minimize the 

economic impact of the amendments on 

small entities. These included the 

following: 

• the clarification, consolidation, or 

simplification of compliance and 

reporting requirements for small 

entities; 

• the use of performance rather than 

design standards; and 

• an exemption from some or all of 

the proposed amendments for small 

entities. 

Because the proposed amendments 

would benefit all companies and 

holders of restricted securities, differing 

compliance timetables or standards for 

small entities would not be appropriate. 

In addition, the proposed holding 

period would likely have a favorable 


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188Pub. L. 104–121, Title II, 110 Stat. 857 (1996). 

impact on small entities by increasing a 

company’s ability to raise capital in 

private securities transactions, which 

may improve the competitiveness of 

those companies, particularly smaller 

businesses that do not have ready access 

to public markets. The amendments 

which clarify and streamline Rule 144 

should benefit all companies, including 

small entities. We continue to believe 

that further changes such as the use of 

performance standards or other 

exemptions with regard to small entities 

would overly complicate the rule, 

which would be contrary to our stated 

purpose. The proposed hedging 

provision seeks to ensure that any 

security holder relying on Rule 144 has 

taken sufficient economic risk of 

investment in the securities and the 

prohibition against security holders of 

reporting and non-reporting shell 

companies protect against abuses 

relating to the resale of privately issued 

securities. 

The proposed changes to Rule 145 

would eliminate presumptive 

underwriter provision and resale 

restrictions on parties to a transaction 

specified in Rule 145(a) and their 

affiliates, including small entities and 

their affiliates, except when the 

transaction involves a shell company. 

We believe that retaining the 

presumptive underwriter provision 

when the transaction involves a shell 

company is necessary, given the 

potential for abuse relating to such 

transactions. 

G. Solicitation of Comments 

We encourage you to submit written 

comments with respect to any aspect of 

this Initial Regulatory Flexibility 

Analysis. In particular, we seek 

comment on: (a) The number of small 

entities that would be affected by the 

proposed rule; (b) the expected impact 

on small entities of the proposals as 

discussed above; and (c) a reliable 

means to quantify the number of small 

entities that would be affected by the 

proposed rules and the rules’ impact on 

small entities. 

We ask commenters to describe the 

nature of any impact and provide 

empirical data supporting the extent of 

the impact. We will consider comments 

when we prepare the Final Regulatory 

Flexibility Analysis if the proposed 

revisions are adopted. Persons wishing 

to submit written comments should file 

them with: Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549. All comments received will be 

available for public inspection and 

copying at the SEC’s Public Reference 

Room at the same address. 

IX. Small Business Regulatory 

Enforcement Fairness Act 

For purposes of the Small Business 

Regulatory Enforcement Fairness Act of 

1996,188 a rule is ‘‘major’’ if it has 

resulted, or is likely to result in: 

• An annual effect on the economy of 

$100 million or more; 

• 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 our 

proposals would be a ‘‘major rule’’ for 

purposes of SBREFA. We solicit 

comment and empirical data on: 

• The potential effect on the U.S. 

economy on an annual basis; 

• Any potential increase in costs or 

prices for consumers or individual 

industries; and 

• Any potential effect on competition, 

investment or innovation. 

X. Statutory Basis and Text of Proposed 

Amendments 

We are proposing to adopt the 

amendments pursuant to Sections 

2(a)(11), 4(1), 4(4), 7, 10, 19(a) and 28 

of the Securities Act, as amended. 

List of Subjects 

17 CFR Part 230 

Advertising, Reporting and 

recordkeeping requirements, Securities. 

17 CFR Part 239 

Reporting and recordkeeping 

requirements, Securities. 

For the reasons set out above, title 17, 

chapter II of the Code of Federal 

Regulations is proposed to be amended 

as follows: 

PART 230—GENERAL RULES AND 

REGULATIONS, SECURITIES ACT OF 

1933 

1. Revise the authority citation for 

Part 230 to read, in part, as follows: 

Authority: 15 U.S.C. 77b, 77c, 77d, 77f, 

77g, 77h, 77j, 77r, 77s, 77z–3, 77sss, 78c, 78d, 

78j, 78l, 78m, 78n, 78o, 78w, 78ll(d), 78mm, 

78t, 80a–8, 80a–24, 80a–28, 80a–29, 80a–30, 

and 80a–37, unless otherwise noted. 

* * * * * 

2. Amend § 230.144 by: 

a. Revising the preliminary note; 

b. Revising paragraphs (a)(3)(vi) and 

(a)(3)(vii), and adding paragraph 

(a)(3)(viii); 

c. Revising paragraphs (b), (c), (d)(1), 

(d)(3)(i), (d)(3)(ii), and (d)(3)(viii); 

d. Adding paragraphs (d)(3)(ix) 

through paragraphs (d)(3)(xii); 

e. Revising the heading and the 

introductory text to paragraphs (e) and 

(e)(1); 

f. Removing paragraph (e)(2); 

g. Redesignating existing paragraph 

(e)(3) as paragraph (e)(2); 

h. Revising newly redesignated 

paragraph (e)(2); 

i. Revising paragraphs (f), the notes to 

paragraph (g)(3), paragraph (h) and 

paragraph (i); and 

j. Removing paragraphs (j) and (k). 

The revisions and additions read as 

follows: 

§ 230.144 Persons deemed not to be 

engaged in a distribution and therefore not 

underwriters. 

Preliminary Note: Rule 144 creates a safe 

harbor from the definition of the term 

‘‘underwriter’’ found in Section 2(a)(11) of 

the Securities Act. If a sale of securities 

complies with all of the applicable 

provisions of Rule 144: 

1. Any person who sells restricted 

securities will be deemed not to be engaged 

in a distribution and therefore not an 

underwriter for that transaction; 

2. An affiliate or 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 

3. The purchaser will receive securities 

that are not restricted securities. 

This means that someone entitled to claim 

the safe harbor would be able to sell his or 

her securities under Section 4(1) of the Act. 

Rule 144 is not an exclusive safe harbor. 

This means that a person who does not meet 

all the requirements of Rule 144 still may 

claim any other available exemption for 

resales under the Act. The Rule 144 safe 

harbor is not available with respect to any 

transaction or series of transactions that, 

although in technical compliance with the 

rule, is part of a plan or scheme to evade the 

registration requirements of the Act. 

(a) * * * 

(3) * * * 

(vi) Securities acquired in a 

transaction made under § 230.801 to the 

same extent and proportion that the 

securities held by the security holder of 

the class with respect to which the 

rights offering was made were, as of the 

record date for the rights offering, 

‘‘restricted securities’’ within the 

meaning of this paragraph (a)(3); 

(vii) Securities acquired in a 

transaction made under § 230.802 to the 

same extent and proportion that the 

securities that were tendered or 

exchanged in the exchange offer or 

business combination were ‘‘restricted 

securities’’ within the meaning of this 

paragraph (a)(3); and 

(viii) Securities acquired from the 

issuer in a transaction subject to an 

exemption under section 4(6) (15 U.S.C. 

77d(6)) of the Act. 


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(b) Conditions to be met. Subject to 

paragraph (i) of this section, the 

following conditions must be met: 

(1) Non-Affiliates. (i) If the issuer of 

the securities is, and has been for at 

least 90 days immediately before the 

sale, subject to the reporting 

requirements of Section 13 or 15(d) of 

the Exchange Act, any person who is 

not an affiliate of the issuer, and has not 

been an affiliate during the preceding 

three months, who sells restricted 

securities of an issuer for his or her own 

account shall be deemed not to be an 

underwriter of those securities within 

the meaning of section 2(a)(11) of the 

Act if all of the conditions of paragraphs 

(c)(1) and (d) of this section are met. The 

requirements of paragraph (c)(1) of this 

section shall not apply to restricted 

securities sold for the account of a 

person who is not an affiliate of the 

issuer at the time of the sale and has not 

been an affiliate during the preceding 

three months, provided a period of one 

year has elapsed since the later of the 

date the securities were acquired from 

the issuer or from an affiliate of the 

issuer. 

(ii) If the issuer of the securities is not, 

or has not been for at least 90 days 

immediately before the sale, subject to 

the reporting requirements of Section 13 

or 15(d) of the Exchange Act, any person 

who is not an affiliate of the issuer, and 

has not been an affiliate during the 

preceding three months, who sells 

restricted securities of an issuer for his 

or her own account shall be deemed not 

to be an underwriter of those securities 

within the meaning of section 2(a)(11) of 

the Act if the condition of paragraph (d) 

of this section is met. 

(2) Affiliates. Any affiliate who sells 

restricted securities or any other 

securities of an issuer for his or her own 

account shall be deemed not to be an 

underwriter of those securities within 

the meaning of section 2(a)(11) of the 

Act if all of the conditions of this 

section are met. 

(3) Persons selling on behalf of 

affiliates. Any person who sells 

restricted or any other securities for the 

account of an affiliate of the issuer of 

such securities shall be deemed not to 

be an underwriter of those securities 

within the meaning of section 2(a)(11) of 

the Act if all of the conditions of this 

section are met. 

(c) Current public information. 

Adequate current public information 

with respect to the issuer of the 

securities must be available. Such 

information will be deemed to be 

available only if at least one of the 

following conditions is met: 

(1) Reporting Issuers. The issuer is, 

and has been for at least 90 days 

immediately before the sale, subject to 

the reporting requirements of section 13 

or 15(d) of the Exchange Act and has 

filed all required reports under section 

13 or 15(d) during the 12 months 

preceding such sale (or for such shorter 

period that the issuer was required to 

file such reports), other than Form 8–K 

reports (§ 249.308 of this chapter); or 

(2) Non-reporting Issuers. If the issuer 

is not subject to the reporting 

requirements of section 13 or 15(d) of 

the Exchange Act, there is publicly 

available the information concerning the 

issuer specified in paragraphs (a)(5)(i) to 

(xiv), inclusive, and paragraph 

(a)(5)(xvi) of § 240.15c2–11 of this 

chapter, or, if the issuer is an insurance 

company, the information specified in 

section 12(g)(2)(G)(i) of the Exchange 

Act (15 U.S.C. 78l(g)(2)(G)(i)). 

Note to § 230.144(c). With respect to 

paragraph (c)(1), the person can rely upon: 

1. A statement in whichever is the most 

recent report, quarterly or annual, required to 

be filed and filed by the issuer that such 

issuer has filed all reports required under 

section 13 or 15(d) of the Exchange Act 

during the preceding 12 months (or for such 

shorter period that the issuer was required to 

file such reports), other than Form 8–K 

reports (§ 249.308 of this chapter), and has 

been subject to such filing requirements for 

the past 90 days; or 

2. A written statement from the issuer that 

it has complied with such reporting 

requirements. 

3. Neither type of statement may be relied 

upon, however, if the person knows or has 

reason to believe that the issuer has not 

complied with such requirements. 

(d) * * * 

(1) General rule. (i) If the issuer of the 

securities is, and has been for at least 90 

days immediately before the sale, 

subject to the reporting requirements of 

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

a minimum of six months must elapse 

between the later of the date of the 

acquisition of the securities from the 

issuer, or from an affiliate of the issuer, 

and any resale of such securities in 

reliance on this section for the account 

of either the acquiror or any subsequent 

holder of those securities. 

(ii) If the issuer of the securities is not, 

or has not been for at least 90 days 

immediately before the sale, subject to 

the reporting requirements of Section 13 

or 15(d) of the Exchange Act, a 

minimum of one year must elapse 

between the later of the date of the 

acquisition of the securities from the 

issuer, or from an affiliate of the issuer, 

and any resale of such securities in 

reliance on this section for the account 

of either the acquiror or any subsequent 

holder of those securities. 

(iii) If the acquiror takes the securities 

by purchase, the holding period shall 

not begin until the full purchase price 

or other consideration is paid or given 

by the person acquiring the securities 

from the issuer or from an affiliate of the 

issuer. 

* * * * * 

(3) * * * 

(i) Stock dividends, splits and 

recapitalizations. Securities acquired 

from the issuer as a dividend or 

pursuant to a stock split, reverse split or 

recapitalization shall be deemed to have 

been acquired at the same time as the 

securities on which the dividend or, if 

more than one, the initial dividend was 

paid, the securities involved in the split 

or reverse split, or the securities 

surrendered in connection with the 

recapitalization. 

(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. 

Note to § 230.144(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 the conversion or 

exchange itself meets the conditions of this 

section. 

* * * * * 

(viii) Rule 145(a) transactions. The 

holding period for securities acquired in 

a transaction specified in § 230.145(a) 

shall be deemed to commence on the 

date the securities were acquired by the 

purchaser in such transaction, except as 

otherwise provided in paragraphs 

(d)(3)(ii) and (ix) of this section. 

(ix) Holding company formations. 

Securities acquired from the issuer in a 

transaction effected solely for the 

purpose of forming a holding company 

shall be deemed to have been acquired 

at the same time as the securities of the 

predecessor issuer exchanged in the 

holding company formation where: 

(A) The newly formed holding 

company’s securities were issued solely 

in exchange for the securities of the 

predecessor company as part of a 

reorganization of the predecessor 

company into a holding company 

structure; 


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(B) Holders received securities of the 

same class evidencing the same 

proportional interest in the holding 

company as they held in the 

predecessor, and the rights and interests 

of the holders of such securities are 

substantially the same as those they 

possessed as holders of the predecessor 

company’s securities; and 

(C) Immediately following the 

transaction, the holding company has 

no significant assets other than 

securities of the predecessor company 

and its existing subsidiaries and has 

substantially the same assets and 

liabilities on a consolidated basis as the 

predecessor had before the transaction. 

(x) Cashless exercise of options and 

warrants. If the securities sold were 

acquired from the issuer solely upon 

cashless exercise of options or warrants 

issued by the issuer, the newly acquired 

securities shall be deemed to have been 

acquired at the same time as the 

exercised options or warrants, even if 

the options or warrants exercised 

originally did not provide for cashless 

exercise by their terms. 

Note 1 to § 230.144(d)(3)(x): If the options 

or warrants originally did not provide for 

cashless exercise by their terms and the 

holder provided consideration, other than 

solely securities of the same issuer, in 

connection with the amendment of the 

options or warrants to permit cashless 

exercise, then the newly acquired securities 

shall be deemed to have been acquired at the 

same time as such amendment to the options 

or warrants. 

Note 2 to § 230.144(d)(3)(x): If the options 

or warrants are not purchased for cash or 

property and do not create any investment 

risk to the holder, as in the case of employee 

stock options, the newly acquired securities 

shall be deemed to have been acquired at the 

time the options or warrants are exercised, so 

long as the conditions of Rule 144(d)(1) and 

Rule 144(d)(2) are met at the time of exercise. 

(xi) Short sales and hedging 

transactions. In computing the sixmonth holding period the following 

periods shall be excluded: 

(A) If the securities sold are equity 

securities, as defined in § 230.405, there 

shall be excluded any period during 

which the person for whose account 

they are sold had a short position, or 

had entered into a ‘‘put equivalent 

position’’ (as defined in § 240.16a–1(h) 

of this chapter), with respect to any 

equity securities of the same class or 

any securities convertible into securities 

of such class; and 

(B) If the securities sold are 

nonconvertible debt securities, there 

shall be excluded any period during 

which the person for whose account 

they are sold had a short position, or 

had entered into a ‘‘put equivalent 

position’’ (as defined in § 240.16a–1(h) 

of this chapter), with respect to any 

nonconvertible debt securities of the 

same issuer. 

(C) If the holding period is based on 

a period that a previous owner has held 

the securities, there shall be excluded 

any period during which the previous 

owner had a short position or had 

entered into a ‘‘put equivalent position’’

(as defined in § 240.16a–1(h) of this 

chapter), with respect to any equity 

securities of the same class or any 

securities convertible into securities of 

such class, if the securities sold are 

equity securities, or with respect to any 

nonconvertible debt securities of the 

same issuer, if the securities sold are 

nonconvertible debt securities, unless 

the person for whose account the 

securities are sold reasonably believes 

that no such position was held by a 

previous owner. 

Note to § 230.144(d)(3)(xi): This paragraph 

shall not apply if the holding period 

computed under paragraph (d) of this rule 

(excluding this paragraph) has been twelve 

months or more. 

(xii) Securities sold under paragraph 

(i)(2). For the purposes of computing the 

holding period of securities sold under 

paragraph (i)(2) of this rule, securities of 

an issuer that has ceased to be an issuer 

described in paragraph (i)(1)(i) shall be 

deemed to have been acquired at the 

time the securities were acquired from 

the issuer, at the time they were 

acquired from an affiliate of the issuer, 

or at the time the ‘‘Form 10 

information’’ regarding the issuer is 

filed with the Commission, whichever is 

the latest date. 

(e) Limitation on amount of securities 

sold by or for affiliates. Except as 

hereinafter provided, the amount of 

securities which may be sold by or for 

affiliates in reliance upon this rule shall 

be determined as follows: 

(1) If any securities are sold for the 

account of an affiliate of the issuer, 

regardless of whether those securities 

are restricted, the amount of securities 

sold, together with all sales of securities 

of the same class sold for the account of 

such person within the preceding three 

months, shall not exceed the greatest of: 

* * * * * 

(2) Determination of amount. For the 

purpose of determining the amount of 

securities specified in paragraph (e)(1) 

of this section, the following provisions 

shall apply: 

(i) Where both convertible securities 

and securities of the class into which 

they are convertible are sold, the 

amount of convertible securities sold 

shall be deemed to be the amount of 

securities of the class into which they 

are convertible for the purpose of 

determining the aggregate amount of 

securities of both classes sold; 

(ii) The amount of securities sold for 

the account of a pledgee of those 

securities, or for the account of a 

purchaser of the pledged securities, 

during any period of three months 

within six months after a default in the 

obligation secured by the pledge, and 

the amount of securities sold during the 

same three-month period for the 

account of the pledgor shall not exceed, 

in the aggregate, the amount specified in 

paragraph (e)(1) of this section; 

Note to § 230.144(e)(2)(ii): Sales by a 

pledgee of securities pledged by a borrower 

will not be aggregated under paragraph 

(e)(2)(ii) with sales of the securities of the 

same issuer by other pledgees of such 

borrower in the absence of concerted action 

by such pledgees. 

(iii) The amount of securities sold for 

the account of a donee of those 

securities during any three-month 

period within six months after the 

donation, and the amount of securities 

sold during the same three-month 

period for the account of the donor, 

shall not exceed, in the aggregate, the 

amount specified in paragraph (e)(1) of 

this section; 

(iv) Where securities were acquired by 

a trust from the settlor of the trust, the 

amount of such securities sold for the 

account of the trust during any threemonth period within six months after 

the acquisition of the securities by the 

trust, and the amount of securities sold 

during the same three-month period for 

the account of the settlor, shall not 

exceed, in the aggregate, the amount 

specified in paragraph (e)(1) of this 

section; 

(v) The amount of securities sold for 

the account of the estate of a deceased 

person, or for the account of a 

beneficiary of such estate, during any 

three-month period and the amount of 

securities sold during the same threemonth period for the account of the 

deceased person prior to his death shall 

not exceed, in the aggregate, the amount 

specified in paragraph (e)(1) of this 

section; provided, that no limitation on 

amount shall apply if the estate or 

beneficiary of the estate is not an 

affiliate of the issuer; 

(vi) When two or more affiliates or 

other persons agree to act in concert for 

the purpose of selling securities of an 

issuer, all securities of the same class 

sold for the account of all such persons 

during any period of three months shall 

be aggregated for the purpose of 

determining the limitation on the 

amount of securities sold; 

(vii) The following sales of securities 

need not be included in determining the 


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36846 Federal Register / Vol. 72, No. 128 / Thursday, July 5, 2007 / Proposed Rules 

amount of securities sold in reliance 

upon this rule: 

(A) Securities sold pursuant to an 

effective registration statement under 

the Act; 

(B) Securities sold pursuant to an 

exemption provided by Regulation A 

(§ 230.251 through § 230.263) under the 

Act; 

(C) Securities sold in a transaction 

exempt pursuant to section 4 of the Act 

(15 U.S.C. 77d) and not involving any 

public offering; and 

(D) Securities sold offshore pursuant 

to Regulation S (§ 230.901 through 

§ 230.905, and Preliminary Notes) under 

the Act. 

(f) Manner of sale. (1) The securities 

shall be sold in brokers’ transactions 

within the meaning of section 4(4) of the 

Act or in transactions directly with a 

market maker, as that term is defined in 

section 3(a)(38) of the Exchange Act, 

and the person selling the securities 

shall not: 

(i) Solicit or arrange for the 

solicitation of orders to buy the 

securities in anticipation of or in 

connection with such transaction, or 

(ii) Make any payment in connection 

with the offer or sale of the securities to 

any person other than the broker who 

executes the order to sell the securities. 

(2) Paragraph (f)(1) shall not apply to: 

(i) Securities sold for the account of 

the estate of a deceased person or for the 

account of a beneficiary of such estate 

provided the estate or estate beneficiary 

is not an affiliate of the issuer; or 

(ii) Debt securities. 

Note to § 230.144(f)(2): For the purposes of 

paragraph (f)(2), ‘‘debt securities’’ is defined 

to mean: 

1. Any security other than an equity 

security as defined in § 230.405; 

2. Non-participatory preferred stock, which 

is defined as non-convertible capital stock, 

the holders of which are entitled to a 

preference in payment of dividends and in 

distribution of assets on liquidation, 

dissolution, or winding up of the issuer, but 

are not entitled to participate in residual 

earnings or assets of the issuer; and 

3. Asset-backed securities, as defined in 

§ 229.1101 of this section. 

(g) * * * 

(3) * * * 

Note 1 to paragraph (g)(3): The broker, for 

his own protection, should obtain and retain 

in his files a copy of the notice required by 

paragraph (h) of this section. 

Note 2 to paragraph (g)(3): The reasonable 

inquiry required by paragraph (g)(3) of this 

section should include, but not necessarily 

be limited to, inquiry as to the following 

matters: 

1. The length of time the securities have 

been held by the person for whose account 

they are to be sold. If practicable, the inquiry 

should include physical inspection of the 

securities; 

2. If the securities have been held for less 

than one year, the existence and character of 

any short position or put equivalent position 

with regard to the securities held by the 

person for whose account they are to be sold 

and whether such person has made inquiries 

about the existence and character of any 

short position or put equivalent position with 

regard to the securities held by the previous 

owner of the securities and the results of 

such person’s inquiries; 

3. The nature of the transaction in which 

the securities were acquired by such person; 

4. The amount of securities of the same 

class sold during the past 3 months by all 

persons whose sales are required to be taken 

into consideration pursuant to paragraph (e) 

of this section; 

5. Whether such person intends to sell 

additional securities of the same class 

through any other means; 

6. Whether such person has solicited or 

made any arrangement for the solicitation of 

buy orders in connection with the proposed 

sale of securities; 

7. Whether such person has made any 

payment to any other person in connection 

with the proposed sale of the securities; and 

8. The number of shares or other units of 

the class outstanding, or the relevant trading 

volume. 

(h) Notice of proposed sale. (1) If the 

amount of securities to be sold in 

reliance upon this rule during any 

period of three months exceeds 1,000 

shares or other units or has an aggregate 

sale price in excess of $50,000, three 

copies of a notice on Form 144 

(§ 239.144 of this chapter) shall be filed 

with the Commission at its principal 

office in Washington, DC. If such 

securities trade on any national 

securities exchange, one copy of such 

notice also shall be transmitted to the 

principal exchange on which such 

securities are traded. 

(2) The Form 144 shall be signed by 

the person for whose account the 

securities are to be sold and shall be 

transmitted for filing concurrently with 

either the placing with a broker of an 

order to execute a sale of securities in 

reliance upon this rule or the execution 

directly with a market maker of such a 

sale. Neither the filing of such notice 

nor the failure of the Commission to 

comment on such filing 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 person filing the notice required by 

this paragraph shall have a bona fide 

intention to sell the securities referred 

to therein within a reasonable time after 

the filing of such notice. 

(i) Inapplicability to issuers with no or 

nominal operations and no or nominal 

non-cash assets. (1) A selling security 

holder may not rely on this section to 

resell securities if the issuer of the 

securities is: 

(i) An issuer, other than a business 

combination related shell company, as 

defined in § 230.405, or an asset-backed 

issuer, as defined in Item 1101(b) of 

Regulation AB (§ 229.1101(b) of this 

chapter), that has: 

(A) No or nominal operations; and 

(B) Either: 

(1) No or nominal assets; 

(2) Assets consisting solely of cash 

and cash equivalents; or 

(3) Assets consisting of any amount of 

cash and cash equivalents and nominal 

other assets; or 

(ii) An issuer that has been at any 

time previously an issuer described in 

paragraph (i)(1)(i). 

(2) Notwithstanding paragraph (i)(1), 

if the issuer of the securities previously 

had been an issuer described in 

paragraph (i)(1)(i) but has ceased to be 

an issuer described in paragraph 

(i)(1)(i); is subject to the reporting 

requirements of Section 13 or 15(d) of 

the Exchange Act; has filed all reports 

and other materials required to be filed 

by such requirements during the 

preceding 12 months (or for such 

shorter period that the registrant was 

required to file such reports and 

materials); and has filed current ‘‘Form 

10 information’’ with the Commission 

reflecting its status as an entity that is 

no longer an issuer described in 

paragraph (i)(1)(i), then a security 

holder may resell those securities 

subject to the requirements of this rule 

90 days after the ‘‘Form 10 information’’

is filed. 

(3) The term ‘‘Form 10 information’’

means the information that is required 

by Form 10, Form 10–SB, or Form 20–

F (§ 249.210, § 249.210b, or § 249.220f of 

this chapter), as applicable to the issuer 

of the securities, to register under the 

Securities Exchange Act of 1934 each 

class of securities being sold under this 

rule. The issuer may provide the Form 

10 information in any issuer filing with 

the Commission. 

3. Amend § 230.145 by revising 

paragraphs (c), (d) and (e) and removing 

the authority citation at the end of the 

section to read as follows: 

§ 230.145 Reclassification of securities, 

mergers, consolidations and acquisitions of 

assets. 

* * * * * 

(c) Persons and parties deemed to be 

underwriters. For purposes of this 

section, if any party to a transaction 

specified in paragraph (a) of this section 

is a shell company, other than a 

business combination related shell 

company, as those terms are defined in 

§ 230.405, any party to that transaction, 


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other than the issuer, or any person who 

is an affiliate of such party at the time 

such transaction is submitted for vote or 

consent, who publicly offers or sells 

securities of the issuer acquired in 

connection with any such transaction, 

shall be deemed to be engaged in a 

distribution and therefore to be an 

underwriter thereof within the meaning 

of Section 2(a)(11) of the Act. 

(d) Resale provisions for persons and 

parties deemed underwriters. 

Notwithstanding the provisions of 

paragraph (c) of this section, a person or 

party specified in that paragraph shall 

not be deemed to be engaged in a 

distribution and therefore not to be an 

underwriter of securities acquired in a 

transaction specified in paragraph (a) of 

this section that was registered under 

the Act if: 

(1) Any shell company specified in 

paragraph (c) of this section is no longer 

a shell company; and 

(2) One of the following three 

conditions is met: 

(i) Such securities are sold by such 

person or party in accordance with the 

provisions of paragraphs (c), (e), (f), and 

(g) of § 230.144 and at least 90 days have 

elapsed since the date the securities 

were acquired from the issuer in such 

transaction; or 

(ii) Such person or party is not, and 

has not been for at least three months, 

an affiliate of the issuer, and a period of 

at least six months, as determined in 

accordance with paragraph (d) of 

§ 230.144, have elapsed since the date 

the securities were acquired from the 

issuer in such transaction, and the 

issuer meets the requirements of 

paragraph (c) of § 230.144; or 

(iii) Such person or party is not, and 

has not been for at least three months, 

an affiliate of the issuer, and a period of 

at least one year, as determined in 

accordance with paragraph (d) of 

§ 230.144, has elapsed since the date the 

securities were acquired from the issuer 

in such transaction. 

Note to paragraphs (c) and (d): Paragraphs 

(c) and (d) are not available with respect to 

any transaction or series of transactions that, 

although in technical compliance with the 

rule, is part of a plan or scheme to evade the 

registration requirements of the Act. 

(e) Definitions. (1) The term affiliate 

as used in paragraphs (c) and (d) of this 

section shall have the same meaning as 

the definition of that term in § 230.405. 

(2) The term party as used in 

paragraphs (c) and (d) of this section 

shall mean the corporations, business 

entities, or other person, other than the 

issuer, whose assets or capital structure 

are affected by the transactions specified 

in paragraph (a). 

(3) The term person as used in 

paragraphs (c) and (d) of this section, 

when used in reference to a person for 

whose account securities are to be sold, 

shall have the same meaning as the 

definition of that term in paragraph 

(a)(2) of § 230.144. 

4. Amend § 230.190 by: 

a. Revising paragraphs (a)(2) and 

(a)(3); and 

b. Adding paragraph (a)(4). 

The revisions and addition read as 

follows: 

§ 230.190 Registration of underlying 

securities in asset-backed securities 

transactions. 

(a) * * * 

(1) * * * 

(2) Neither the issuer of the 

underlying securities nor any of its 

affiliates is an affiliate of the sponsor, 

depositor, issuing entity or underwriter 

of the asset-backed securities 

transaction; 

(3) If the underlying securities are 

restricted securities, as defined in 

§ 230.144(a)(3), § 230.144 must be 

available for the sale of the securities, 

provided however, that notwithstanding 

any other provision of § 230.144, 

§ 230.144 shall only be so available if at 

least two years have elapsed since the 

later of the date the securities were 

acquired from the issuer of the 

underlying securities or from an affiliate 

of the issuer of the underlying 

securities; and 

(4) The depositor would be free to 

publicly resell the underlying securities 

without registration under the Act. For 

example, the offering of the asset-backed 

security does not constitute part of a 

distribution of the underlying securities. 

An offering of asset-backed securities 

with an asset pool containing 

underlying securities that at the time of 

the purchase for the asset pool are part 

of a subscription or unsold allotment 

would be a distribution of the 

underlying securities. For purposes of 

this section, in an offering of assetbacked securities involving a sponsor, 

depositor or underwriter that was an 

underwriter or an affiliate of an 

underwriter in a registered offering of 

the underlying securities, the 

distribution of the asset-backed 

securities will not constitute part of a 

distribution of the underlying securities 

if the underlying securities were 

purchased at arm’s length in the 

secondary market at least three months 

after the last sale of any unsold 

allotment or subscription by the 

affiliated underwriter that participated 

in the registered offering of the 

underlying securities. 

* * * * * 

§ 230.701 [Amended] 

5. Amend § 230.701, paragraph (g)(3), 

to revise the phrase ‘‘without 

compliance with paragraphs (c), (d), (e), 

and (h) of § 230.144’’ to read ‘‘without 

compliance with paragraphs (c) and (d) 

of § 230.144’’. 

PART 239—FORMS PRESCRIBED 

UNDER THE SECURITIES ACT OF 1933 

6. The authority citation for part 239 

continues to read in part as follows: 

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

77z–2, 77sss, 78c, 78l, 78m, 78n, 78o(d), 

78u–5, 78w(a), 78ll(d), 79e, 79f, 79g, 79j, 79l, 

79m, 79n, 79q, 79t, 80a–8, 80a–24, 80a–29, 

80a–30 and 80a–37, unless otherwise noted. 

* * * * * 

7. Amend § 239.144 by revising 

paragraph (b) to read as follows: 

§ 239.144 Form 144, for notice of proposed 

sale of securities pursuant to § 230.144 of 

this chapter. 

* * * * * 

(b) This form need not be filed if the 

amount of securities to be sold during 

any period of three months does not 

exceed 1,000 shares or other units and 

the aggregate sale price does not exceed 

$50,000. 

* * * * * 

8. Form 144 (referenced in § 239.144) 

is revised as set forth in the Appendix. 

Dated: June 22, 2007. 

By the Commission. 

Nancy M. Morris, 

Secretary. 

Note: This Appendix to the Preamble will 

not appear in the Code of Federal 

Regulations. 

Appendix 

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[FR Doc. 07–3217 Filed 7–3–07; 8:45 am] 

BILLING CODE 8010–01–C 


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