August 15, 2007
I generally support the Commission in its proposal to shorten the holding period for resales of restricted securities under Rules 144 and 145. I believe that with the current availablity of information on issuers, both the seller of restricted securities and potential purchasers can make informed decisions. And becasue of the increase in financing options, companies can potentially save time and resources if the proposals are accepted.
Many investors in registrants require short-term liquidity. This has resultied in the filing of numerous registration statements to register either restricted stock sold or stock to be issued under conversion instruments. Many of these registration statements can take up to 6 months or more to prepare and clear comments. With a reduced holding period, companies could eliminate many registrations statements, since liquidity would be available on a shortened basis. The time and resources spent on such registrations would be then available to the company to further its business interests.
I also support the proposed exception for shareholders of restricted stock of shell companies, not becasue there is inadequate information available (a reporting company still must file periodic reports), but becasue of potential for misuse of restricted stock by those who might control such stock. However, I am not sure that once a reporting company ceases to be a shell, a full Form 10 disclosure document should be required before restricted stock of that company can be sold. A shell company can cease being such by begining operations or other substantive business activity. So long as a reporting company files its period reports showing its activity, and elects to not check the shell status box on those reports, I believe the restrictions for resale of stock for those companies should be lifted after 90 days from the date the first periodic report is filed indicating a company is no longer a shell.
I also believe that the holding period for stock sold under Regulation S should also be reduced to 6 months. While there may be evidence of abuse in the resale of Regulation S stock abroad, those abuses are not affected by holding periods. If there is a difference in holding periods between stock sold under Regulation D and Regulation S, it could restrict U.S. companies from capital markets abroad, at a time when such markets have substantial potential for the U.S. markets. Again, with the access to information on U.S. compamies from any place in the world, investors outside of the U.S. have the same information available as those in this country.
Thank you for the opportunity to comment on thse proposals.