SEC Staffer Signals Possible Action on 144(i); Chairman Goldschmidt?
By David Feldman at 21 November, 2008, 7:19 am
Yesterday I attended the SEC’s annual Government-Business Forum on Small Business Capital Formation. Much of the “doom and gloom” attitude we saw at the PIPE Conference last week was continued at this event.
There was some good news however. One of the panelists mentioned that “a group of prominent law firms” (thanks for the plug Jack Hogoboom) had submitted a rulemaking request to the Commission to eliminate the “evergreen” requirement for a company to be current for the last 12 months prior to an attempt to sell using Rule 144 if a company ever was a shell company. He supported this change and suggested the Commission take it up.
On the same panel, Brian Breheny, Deputy Director of the SEC’s Division of Corporation Finance, decided to respond. He indicated that the final rule’s result was “unfortunate,” that he believed that this was probably not what the Commission intended, and that the Staff had “started to move” on dealing with the issue.
This is very big news. It appears the Staff will hopefully recommend that the Commission look to eliminate this onerous burden on former shells. Can it happen before Chairman Cox leaves the Commission when Bush leaves office? We can only hope!
Speaking of which. It was made clear at the conference that Chairman Cox has said he will leave at the end of this Presidential term. A rumor circulating around the conference was that Columbia Law professor Harvey Goldschmidt might be tapped to be our new SEC Chairman when President-elect Obama takes office. Goldschmidt is well-respected and has been around the block quite a bit. I guess my suggestion of Mike Bloomberg didn’t take! What will be interesting to see is if he turns out to be the guy who oversees the complete restructuring of our regulators. Stay tuned!
I know lifting the evergreen restriction would have much bigger ramifications but as an non-affiliate of an ex-shell company that’s failed to file it’s 10-Q I currently appear to be stuck with my shares.
So, in laymens terms for us non-lawyers or SEC experts… if they did lift the evergreen clause, would non-affiliates who’ve held for over 6 months then be able to:
a. de-legendy their shares, and (if they wanted),
b. sell them?!
Hoping for a happy new year….
srsl
With interest,
srsl
With Jack Hogoboom leading the discussion, the Smaller Public Company breakout working group catalogued sevaral other important suggestions to the staff at the SEC forum last week. We suggested full forward incorporation by reference for all S-1 filings, even for previously non-reporting issuers, elimination of the distinction between exchange traded registrants and others (OTC companies presently do not have the opporrtunity to utilize Form S-3 under the revisions adopted recenlty), and elimination of the 1/3 limitation, both for S-3 and for Rule 415 registration purposes. These changes would support the capital raising efforts of our smaller public company clients immediately. In this environment they should be considered by the SEC on an emergency basis, but that is highly unlikely. Many other important suggestions were captured for recommendation..
Thanks for the update Harvey, I had to leave after the morning session. And who knows what might be possible before Chairman Cox leaves? Mr. SRSL, assuming all they do is lift the evergreen restriction, if you are past one year from ceasing to be a shell, once you have held for a full year you should be able to have the legend removed, but of course consult with counsel and don’t rely on me! Also, depending on how long you have held now, it is possible there are lawyers who will give an opinion that, while Rule 144 is not available, the statute under which it was created, Section 4(1) of the Securities Act, might permit the removal of the legend. Talk to your counsel about it.