The Lebrecht Group, APLC

History of Rule 144

The Securities Act of 1933 (the "Securities Act") requires all offers and sales of securities in interstate commerce to be either registered or have a valid exemption from registration. Rule 144 under the Securities Act creates a safe harbor for the sale of securities under the exemption provided for in Section 4(1) of the Securities Act. Section 4(1) provides an exemption for transactions by any person other than an issuer (the company), underwriter or dealer. Historically, Rule 144 has treated shares held by affiliates and non-affiliates different in terms of the amount of time each must hold the shares prior to qualifying to use Rule 144, whether the issuer was a reporting or non-reporting company (one year for reporting companies and two years for non-reporting companies) and certain volume limitations.

Rule 144 Amendments

Effective February 15, 2008, the SEC amended Rule 144. These amendments have been discussed in detail over the past year; but in a nutshell, affiliate shareholders are subject to the following in order to utilize Rule 144: (i) six month holding period if the shares are held in an Exchange Act reporting company, one year for a non-reporting company, (ii) the company must have current public information, (iii) volume limitations, and (iv) filing of a Form 144. For non-affiliate shareholders, they are subject to the following in order the utilize Rule 144 as a resale exemption: (i) six month holding period if the shares are held in an Exchange Act reporting company, one year for a non-reporting company, and (ii) if the shares are shares of an Exchange Act reporting company and the shareholder is attempting to sell after six months and less than one year, then the company must have current public information...[more]

"Pink Sheets Current"

What are the OTC Market Tiers?

Pink OTC Markets, Inc. assigns an OTC Market Tier to each OTC traded company based upon the disclosure it provides to the marketplace. For a detailed explanation of the different OTC market tiers, click here. Pink Sheets companies can decide which OTC Market Tier they wish to be in and tailor their disclosure accordingly. One of these tiers - Pink Sheets Current Information - offers considerable benefits to the companies identified on it.

Why be on the Pink Sheets Current Information Tier?

1. Raise Capital. If you are not currently a shell company and you never have been a shell company, the resale of your company's securities pursuant to Rule 144 may be available to your shareholders. This is particularly important if you wish to raise capital because anyone who purchases securities directly or indirectly from you or any of your affiliates in a private placement may be able to sell such securities in an open market transaction after Rule 144's mandatory one year holding period. If Rule 144 is not available to your shareholders, new investors cannot resell their securities in an open market transaction, and thus are unlikely to invest in your company. For companies that were previously shells, Rule 144 is not currently available unless and until you become a '34 Act reporting issuer and meet other requirements; however, we hear rumors that a change to Rule 144 may be coming to allow resales for shareholders of former shells who satisfy current information requirements.

2. Increased Liquidity. According to the Pink Sheets, approximately 98% of the average dollar trading volume is generated by companies whose securities are identified on the Pink Sheets Current Information tier and higher, suggesting a strong correlation between company transparency and trading volume...[more]