SECURITIES EXEMPTIONS – AMENDED AND REINTERPRETED’

SECURITIES EXEMPTIONS –   AMENDED AND REINTERPRETED’

AMENDMENTS TO RULE 504 AND INTRASTATE OFFERINGS NEW INTERPRETATIONS
OF RULE 701 AND RULE 144(d)

By Herrick K. Lidstone, Jr. Burns, Figa & Will, P.C. November 22, 2016

On October 26, 2016, The Securities and Exchange Commission (the “SEC”) adopted rules 2 that:

1. Amended Rule 504 of Regulation D to both: (A) increase the maximum amount of securities which may be sold under the exemption from $1,000,000 to $5,000,000; and (B) to disqualify certain bad actors from participation in Rule 504 offerings;
2. Eliminated former Rule 505 as no longer being necessary given the changes to Rule 504;
3. Modernized intrastate securities offerings under existing Rule 147 ; and
4. Adopted new Rule 147A to broaden the availability of the existing safe harbor for intrastate securities offerings.

Also in October 2016, the SEC staff adopted interpretations that will aid users in the application of:

5. Rule 701 and its application as a result of merger and acquisition transactions; and
6. Rule 144(d), and the holding period applicable to individually-negotiated employer stock options.

Effective Dates

The interpretations are effective immediately. The amendments and new rules addressed in the Adopting Release (and the elimination of Rule 505) will be effective at various dates in the first half of 2017:

• Rule 147 amendments and new Rule 147A will be effective on April 20, 2017;
• The amendments to Rule 504 will be effective on January 20, 2017; and
• The repeal of Rule 505 will be effective on May 22, 2017.

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