Gersten Savage Comments On Sec Change To Rule 144
Shortening Holding Period For Restricted Securities

Rule 144 among several SEC rule changes for small companies

NEW YORK, February 12, 2008 - The SEC has approved a variety of rule changes effective February 15 which are designed to make capital-raising, reporting and disclosure easier for small companies.  The SEC change to Securities Act Rule 144 governing the sale of restricted securities will expand capital-raising opportunities for small companies, according to New York law firm Gersten Savage LLP, which specializes in securities regulation, corporate law and finance.  Gersten Savage advises small- and mid-cap companies and start-ups.

The change to Securities Act Rule 144 shortens the holding period for restricted securities from one year to six months, creating greater liquidity for investors and increasing access to capital at lower cost for small-cap companies, said Gersten partner Arthur Marcus.

"The shortened holding period lessens the registration risk for restricted securities and provides a viable exit strategy.  It should allow companies to structure deals on more favorable terms," Marcus said.
With the change, Marcus sees a larger market for private placements and potentially a greater valuation for PIPEs (private investment in public equity).

"Because it's now easier to resell them, the reduced lock-up takes out the speculation factor for restricted securities and potentially makes them more valuable, which should increase their appeal," he said.
In addition to reducing the holding period, the SEC has simplified rules for the resale of restricted securities, raising the threshold that triggers Form 144 filing requirements from 500 shares or $10,000 to 5,000 shares or $50,000, and eliminating certain sale requirements for debt securities. 
Other SEC rule changes targeted to small business include the following:

• Companies with less than $75 million in public equity float or less than $50 million in revenues are now considered "smaller reporting companies" and are subject to less stringent disclosure rules.
• The SEC has created new exemptions from filing reports under the Exchange Act for stock options used as a means of compensation.

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