Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Thursday, May 24, 2007

SEC Proposed Rules for Smaller Company Capital-Raising

PROPOSED  MODERNIZATION  OF  SMALLER   COMPANY   CAPITAL-RAISING   AND DISCLOSURE REQUIREMENTS:

On May 23, the Commission proposed a series of six  measures  to  modernize  and  improve  its capital  raising  and reporting requirements for smaller companies. Many  of  the  proposals address key recommendations made by the SEC's  Advisory  Committee  on Smaller Public Companies in its final report. They include:

        * A new  system  of  securities  regulation  for  smaller  public companies that would make scaled regulation available to  a  much larger group of smaller public companies;

        * Modified eligibility requirements so companies  with  a  public float below $75 million can take advantage  of  the  benefits  of shelf registration;

        * A new exemption from Securities Act  registration  requirements for sales of securities to a newly defined category of "qualified purchasers" in which limited advertising would be permitted;

        * Shortened holding periods under Securities  Act  Rule  144  for restricted securities to  reduce  the  cost  of  capital  and  to increase access to capital;

        * New exemptions  for  compensatory  employee  stock  options  so Exchange Act registration requirements  would  not  be  triggered solely by a company's compensation decisions; and

        * Electronic filing of the form filed by companies making private or limited offerings to ease burdens  for  filers  and  make  the information filed more readily available.

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