Request for Rulemaking Coming on Evergreen Requirement

A group of prominent reverse merger professionals met telephonically last week. We decided to move forward with a “request for rulemaking” with the SEC to ask the Commission to eliminate the requirement for companies to stay current for Rule 144 to be available in a former shell.

Since all holders must wait until one year following a reverse merger and release of the “super” Form 8-K to avail themselves of Rule 144, we believe that is more than sufficient time for the information to be disseminated. After this one year, the company should be treated like any other public company.

I am hopeful we can erase the “scarlet letter” (I have neglected in all this to credit California lawyer Marc A. Indeglia for first using that term in an email to me) that the SEC pinned on all former shells, regardless of how long it was since they were public. As mentioned in prior entries, the SEC staff has told me they “share” and “understand” my concerns about this. This leads me to believe this attempt to seek a rulemaking to reverse this ill-advised requirement is worth the effort.

Thanks to those who are supporting this request, including Richard Anslow, Mitchell Littman, Nimish Patel, Michael Williams, Nanette Heide, Sam Krieger, Spencer Feldman and Tim Keating. We are working on the draft and hope to submit it to the SEC within a matter of weeks.

Timing is everything in life. We hope to make clear to the Staff and the Commission the urgency of this situation, with the hope that maybe we can make it to the Commission’s agenda before the election in November. If not, we will continue to push to get it addressed in the very near future.

Wednesday, I did a podcast on www.deallawyers.com on this subject with former SEC Corporation Finance Chief Counsel David Lynn. I will get you all a link when the podcast is posted. In addtion you can look at the coverage of this topic by the Reverse Merger Wire at http://reversemerger.dealflowmedia.com/wires/top_wires.cfm#1.

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