The SEC has proposed amendments that would mandate electronic filing of Form 144 (currently it may be filed either by mail or electronically), eliminate the requirement to file a Form 144 with respect to sales of securities issued by companies that are not subject to reporting under the Securities Exchange Act of 1934, and amend the Form 144 filing deadline to coincide with the Form 4 filing deadline (currently it is required to be filed concurrently with placing a sell order). If adopted, the SEC would make an online fillable Form 144 available to simplify the process and streamline the filing of Forms 4 and 144 where the seller is required to file both forms.
The amendments would also amend Forms 4 and 5 to add an optional check box to indicate that a reported transaction was intended to satisfy Rule 10b5-1(c), which provides an affirmative defense for trading on the basis of material non-public information in insider trading cases (so-called “10b5-1 plans”).
The SEC also proposed an amendment to Rule 144 to revise the holding period determination for securities acquired upon the conversion or exchange of certain "market-adjustable securities." Currently, Rule 144 deems securities acquired solely in exchange for other securities of the same issuer to have been acquired at the same time as the securities surrendered for conversion or exchange. Under the amendments, the holding period for the underlying securities acquired upon conversion or exchange of "market-adjustable securities" would not begin until conversion or exchange, meaning that a purchaser would need to hold the underlying securities for the applicable Rule 144 holding period before reselling them under Rule 144. The proposed amendment is intended to reduce the risk of unregistered distributions in connection with sales of those securities.
The proposed amendment would not affect the use of Rule 144 for most convertible or variable-rate securities transactions. It would apply only to market-adjustable securities transactions in which:
- The newly acquired securities were acquired from an issuer that, at the time of the conversion or exchange, does not have a class of securities listed, or approved for listing, on a national securities exchange registered pursuant to Section 6 of the Exchange Act; and
- The convertible or exchangeable security contains terms, such as conversion rate or price adjustments, that offset, in whole or in part, declines in the market value of the underlying securities occurring prior to conversion or exchange, other than terms that adjust for stock splits, dividends, or other issuer-initiated changes in its capitalization.
The public comment period will remain open for 60 days following publication of the proposing release in the Federal Register.
