The SEC (Securities and Exchange Commission) voted unanimously on 15 November 2007 to reduce the required retention period in half from twelve to six months for selling restricted and control securities.
This exciting change will enter into force on 15 February 2008. The change provides relief for many smaller businesses, because the reduction of the operating period is designed to reduce the cost of capital and make it more accessible to companies.
While this is an interesting news for many and their effects will be far reaching, the matter may be a little confusing. Here is a brief description.
What are restricted and Securities control?
A restricted security certificate paper to show ownership of an action that was published in an unregistered or private sale of a company or a subsidiary of the company. Restricted securities are generally sold to investors or given as employee benefits.
Control values are usually held by the members or shareholders of a company that has the power to run the company. When the affiliate sells these control values, which are restricted securities to the buyer.
When limited to security, generally have a "restricted" legend stamped on it. This legend must be removed before security can be sold to the public. To delete the legend, the conditions of Rule 144 must be met and the approval of the issuer, given before a transfer agent, First American Stock legally be removed.
What is Article 144?
Rule 144 is a rule of the Securities and Exchange Commission established under the Securities Act of 1933. This standard defines the conditions to be met before the sale of a limited warranty. The rule states the following five conditions:
1. The required waiting period must be met (the retention period is six months decreased compared to one year).
2. There should have adequate information on the current issuer, which means that it is keeping up with their reporting obligations.
3. Trade volume the formula is met. This formula states that no more than 1% of the shares of a company may be sold in any period of 3 months and must be less than 1% of Company average trading volume during the month.
4. That routine business conditions, which apply to all trades have been completed.
5. The Form 144 is filed with the SEC prior to the sale of more than 500 shares or stock worth more than $ 10,000 within a period of three months.
Restricted Securities can also be sold freely without the restrictions of Rule 144 after two years if the seller is not affiliated with the issuer security.
What is the difference to changes in the periods of interruption do?
The short answer is many. The more shorter the holding period for restricted securities was required to assist small companies to raise capital and expand the availability of capital, but the effects reach beyond the small business spectrum.
According to John W. White, the Director of the Division of the SEC corporate finance, "The revisions to Rule 144 should make more efficient for companies of all sizes to access private markets. In the coming months, we expect to recommend the Commission to conclude additional rules that will serve to promote capital formation by smaller companies. "
In essence, the changes with Article 144 will help an old rule to keep up with the new market.
About the Author:
By Amy Vincent, sponsored by First American Stock Transfer, Inc., registered with the Securities & Exchange Commission as a Registrar and
Stock Transfer Agent
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http://www.firstamericanstock.com
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Article Source: ArticlesBase.com – Rule 144 Holding Periods Shorten
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