Senior Writer Analyst, CCH, Inc.
The ABA State and Federal Securities Subcommittees submitted a White Paper to John White, Director of the Corporate Finance Division of the Securities Exchange Commission on March 22, 2007. The ABA State and Federal Subcommittees believe that over the years the demarcation between what is a “public offering” and what is a “private offering” has become muddled. The SEC has already taken action (applauded by the ABA) to clarify its rules and interpretations on public offerings. Now the ABA recommends a similar venture be undertaken for private offerings. Specifically, the ABA recommends that the SEC amends (or eliminates) portions of the rules and staff interpretations it has adopted over the past 75 years to interpret Section 4(2) of the Securities Act of 1933, that exempts “issuer transactions not involving a public offering.” Some of the recommendations include:
- eliminate the “general solicitation” and “general advertising” requirements from Regulation D (at least for Rule 506 of Reg. D);
- liberalize Rule 144 to enhance liquidity for investors while retaining a suitable period to ensure they are not acting as conduits for the issuer (control person), i.e., reduce holding periods for securities of reporting issuers from one year and two years to six months and one year;
- streamline Rule 144A by, among other things, eliminating the restriction on “offers”;
- define the term “control” to simplify the application of private placement law without diminishing investor protection;
- eliminate the presumptive underwriter and resale provisions of paragraphs (c) and (d) of Rule 145;
- review certain staff interpretations of Rule 152;
- make available Form S-3 for all resale registrations, whether or not the issuer is listed on an exchange or eligible to use the form for primary offerings;
- consider extending “testing the waters” beyond Rule 163 and Rule 254 under Regulation A;
- consider eliminating restrictions on “directed selling efforts” in Regulation S; and
- take no action to interfere with existing legitimate derivatives and other hedge fund activity.