Proposed Modernization Of Smaller Company Capital — Raising and Disclosure Requirements


Washington, D.C., May 23, 2007 — The Securities and Exchange Commission today 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:

“This focus on capital formation and the removal of obstacles to the growth of smaller companies goes hand-in-hand with our responsibility to protect investors,” said SEC Chairman Christopher Cox. “It’s investors who are injured and whose money is lost when the small businesses in which they invest can’t get affordable access to new capital.”

“As we all recognize, smaller companies are critical players for our capital markets and for the U.S. economy more broadly. By proposing to rationalize the regulations that apply to capital raising and public reporting by smaller companies, as well as by adopting guidance for management evaluations of internal control under SOX 404 in an earlier action today, the Commission has again confirmed its commitment to the health and robustness of this important segment of our markets,” said John W. White, Director of the SEC’s Division of Corporation Finance. “Companies of all sizes will be able to benefit from the proposed revisions and updates to Rule 144 which should enhance the ease and efficiency with which public companies access the private markets.”

Additional information about each of the proposals:

Smaller Reporting Company Regulatory Relief and Simplification

The proposed amendments would:

Revisions to the Eligibility Requirements for Primary Securities Offerings on Forms S-3 and F-3

The proposed amendments to Form S-3 and Form F-3 would revise the eligibility requirements of those forms to allow companies that do not meet the current public float requirements of the forms to nevertheless register primary offerings of their securities, subject to a restriction on the amount of securities those companies may sell pursuant to the expanded eligibility standard in any one-year period. The amendments are intended to allow smaller public companies that have been timely filing their reports for at least one year to benefit from the greater flexibility and efficiency in accessing the public securities markets afforded by Form S-3 and Form F-3.

Specifically, companies with less than $75 million in public float would be able to register primary offerings of their securities on Form S-3 or F-3, provided such companies:

Exemption of Compensatory Employee Stock Options from Registration under Section 12(g) of the Exchange Act

The Commission is proposing two amendments to Exchange Act Rule 12h-1. These amendments would:

New Regulation D Limited Offering Exemption

The proposed amendments would:

Electronic Filing of Form D

The proposed amendments would:

Revisions to Securities Act Rules 144 and 145

The proposed amendments to Rule 144 would:

In addition, the Commission solicits comment on whether to permit affiliates of issuers that are subject to the filing requirements of Section 16 of the Exchange Act to satisfy their Form 144 filing requirements instead by timely filing a Form 4.

The proposed amendments to Rule 145 would:

Comments on these proposals should be received by the Commission within 60 days of their publication in the Federal Register.

The full text of the detailed releases concerning these items will be posted to the SEC Web site as soon as possible.

Additional materials: Video of Chairman's Statement
 Windows Media Player (15 MB)
 MPEG-4 (11 MB)