SEC Adopts Rule 144 and Rule 145 Amendments

November 15 , 2007

At an open meeting today, the SEC adopted the previously proposed amendments to Rule 144 and Rule 145.  The final amendments are substantially as proposed except that the final amendments do not toll the Rule 144 holding period while the security holder has entered into hedging transactions.

Based on the SEC’s press release and the dialogue at the open meeting today, we expect that the final rule will amend Rule 144 and Rule 145 to:

• Shorten the holding period.  The amendments shorten the Rule 144 holding period during which resales of restricted securities are prohibited from one year to six months, if the issuer is an Exchange Act reporting company for at least 90 days before the sale of the securities.  Security holders of restricted securities of non-reporting companies are required to hold their securities for one year before any public resale, consistent with existing requirements.


• Substantially reduce restrictions on non-affiliate resales.  The amendments allow non-affiliates to resell restricted securities of reporting companies after satisfying the six-month holding period (subject only to the Rule 144(c) public information requirement until the securities have been held for one year) and of non-reporting companies after satisfying the 12-month holding period – with no additional requirements – thereby eliminating the current volume, manner of sale and filing requirements for non-affiliates.  To qualify as a non-affiliate, the seller must not have been an affiliate of the issuer during the prior three months.


• Ease the restrictions on resales by affiliates.  With respect to affiliates’ sales, the amendments revise the manner of sale requirements for equity securities and eliminate them for debt securities.  Although not in the proposed rules, the final rules also relax the volume limitations for debt securities.


• Eliminate Presumptive Underwriter Doctrine in Rule 145.  Lastly, the amendments eliminate the Rule 145 presumptive underwriter doctrine except in the case of certain blank check or shell company transactions.

• See the SEC press release announcing the Rule 144 and Rule 145 amendments

The SEC did not include the previously proposed amendments to Regulation D on its open meeting agenda today, but John White, Director of the SEC Division of Corporation Finance, has indicated that he hopes to finalize these amendments by the end of the year.

Davis Polk & Wardwell

This newsflash is a summary for general information only. It is not a full analysis of the matters presented and should not be relied upon as legal advice. If you would rather not receive these memoranda, please respond to this email and indicate that you would like to be removed from our distribution list. Thank you.