Interesting New Comment to SEC Proposals: Reduce the Regulation S Holding Period

I noticed that a lawyer has posted a comment to the SEC proposal to change the holding periods for Rule 144 suggesting that Regulation S also be amended to reduce the holding periods there to six months from one year.

As many of you know, Regulation S was passed originally to ease the process of capital formation when the money is being raised outside the US and in other circumstances. It became controversial when a poorly drafted section was interpreted to allow public resale in the US just 41 days after issuing stock. In fact, some say the modern PIPE market was born in Reg S deals at this time. The SEC dealt with the problem (after awhile) by changing the period to one year; at the time suggesting it should be parallel with the holding periods under Rule 144.

Thus, says the commenter, Regulation S should continue to be parallel, so if you are changing Rule 144, Reg S also should have a reduced holding period. Makes sense to me. Anything that eases the regulatory burden without encouraging bad guys is probably a good thing. We’ll see if the SEC Staff responds on this point.

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