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

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\
---------------------------------------------------------------------------

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

    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\
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    \163\ We 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.
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     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.
---------------------------------------------------------------------------

    \164\ Existing 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).
---------------------------------------------------------------------------

    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?
---------------------------------------------------------------------------

    \165\ Such 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.
---------------------------------------------------------------------------

     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

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.
---------------------------------------------------------------------------

    \166\ 44 U.S.C. 3501 et seq.
    \167\ See 44 U.S.C. 3507 and 5 CFR 1320.11.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \168\ We 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.
---------------------------------------------------------------------------

    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\
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    \169\ This reflects current OMB estimates.
    \170\ The 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.
    \171\ This estimate is based on information contained in notices
on Form 144 filed in 2005.
    \172\ This is the same as the current OMB estimate.
    \173\ (27,127 filings + 3,025 filings) * 2 hours/filing = 60,304
hours.
---------------------------------------------------------------------------

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.

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:
    [cir] 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
    [cir] 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:
    [cir] Inclusion of securities acquired in a transaction under
Section 4(6) of the Securities Act in the definition of ``restricted
securities,''
    [cir] The effect that creation of a holding company structure has
on a security holder's holding period,
    [cir] Holding periods for conversions and exchanges of securities,
    [cir] Holding periods for cashless exercise of options and
warrants,
    [cir] 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,
    [cir] The extent to which securities issued by reporting and non-
reporting shell companies are eligible for resale under Rule 144, and
    [cir] 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.
---------------------------------------------------------------------------

    \174\ These filings were obtained through Thomson Financial's
Wharton Research Database which includes Forms 144 filed from 1996
through 2007.
---------------------------------------------------------------------------

    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\

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.
---------------------------------------------------------------------------

    \175\ There 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.
    \176\ We 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).
---------------------------------------------------------------------------

    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, non-affiliates 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.
---------------------------------------------------------------------------

    \177\ We 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.
---------------------------------------------------------------------------

    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 one-
year 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 non-affiliates 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

Form 144 filing requirements. The market may also be less informed,
given that restricted securities of reporting companies could be resold
by non-affiliates 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.
---------------------------------------------------------------------------

    \178\ Osborne, 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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \179\ 15 U.S.C. 77b(b).
---------------------------------------------------------------------------

    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

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.
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    \180\ 15 U.S.C. 78w(a)(2).
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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.
---------------------------------------------------------------------------

    \181\ 5 U.S.C. 603.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

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

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.
---------------------------------------------------------------------------

    \183\ 15 U.S.C. 77c(b).
    \184\ 17 CFR 240.0-10.
---------------------------------------------------------------------------

    We are aware of approximately 1,100 Exchange Act reporting
companies that currently satisfy the definition of ``small

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.
---------------------------------------------------------------------------

    \185\ The 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).
    \186\ This reflects current OMB estimates.
    \187\ For 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.
---------------------------------------------------------------------------

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 non-reporting 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

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:
---------------------------------------------------------------------------

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

     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 Sec.  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:

Sec.  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 Sec.  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 Sec.  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.

    (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 (Sec.  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 Sec.  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 Sec.  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 (Sec.  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 Sec.  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 Sec.  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;

    (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 Sec.  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 Sec.  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 six-
month holding period the following periods shall be excluded:
    (A) If the securities sold are equity securities, as defined in
Sec.  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 Sec.
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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 three-month 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 three-month 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

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 (Sec.  230.251 through Sec.  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 (Sec.
230.901 through Sec.  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 Sec.  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
Sec.  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 Sec.  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 (Sec.  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 Sec.  230.405, or an asset-backed issuer, as
defined in Item 1101(b) of Regulation AB (Sec.  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 (Sec.  249.210, Sec.
249.210b, or Sec.  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 Sec.  230.145 by revising paragraphs (c), (d) and (e) and
removing the authority citation at the end of the section to read as
follows:

Sec.  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 Sec.  230.405, any
party to that transaction,

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 Sec.
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 Sec.
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 Sec.  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 Sec.  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 Sec.  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 Sec.  230.144.
    4. Amend Sec.  230.190 by:
    a. Revising paragraphs (a)(2) and (a)(3); and
    b. Adding paragraph (a)(4).
    The revisions and addition read as follows:

Sec.  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 Sec.  230.144(a)(3), Sec.  230.144 must be available for the
sale of the securities, provided however, that notwithstanding any
other provision of Sec.  230.144, Sec.  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 asset-
backed 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.
* * * * *

Sec.  230.701  [Amended]

    5. Amend Sec.  230.701, paragraph (g)(3), to revise the phrase
``without compliance with paragraphs (c), (d), (e), and (h) of Sec.
230.144'' to read ``without compliance with paragraphs (c) and (d) of
Sec.  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 Sec.  239.144 by revising paragraph (b) to read as
follows:

Sec.  239.144  Form 144, for notice of proposed sale of securities
pursuant to Sec.  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 Sec.  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]

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