In an open meeting on November 15th, the Securities and Exchange Commission unanimously adopted three measures to “modernize and improve its capital-raising, reporting and disclosure requirements for smaller companies,” including significant changes to Rule 144 holding period provisions, according to a current press release. The final rules:

• make scaled disclosure regulations available to an additional 1,500 smaller companies; 
• shorten the holding periods under Rule 144 for restricted securities of public companies from one year to six months to reduce the cost of capital and to increase access to capital; and 
• create two new exemptions for compensatory employee stock options so that the Exchange Act registration requirements will not be triggered solely by a company's compensation decisions.

The amended rules do not change the current one-year holding period for restricted securities of non-reporting companies, according to follow-up remarks by the Commission’s corporate finance division, and—despite approval by public commentators—they do not toll the holding period for up to six months while a security holder is engaged in hedging transactions.  Effective sixty days after publication, the new rules “will certainly provide much needed relief in terms of liquidity for those purchasing restricted securities,” says TheCorporateCounsel.net (Nov. 16, 2007), but “the opening up of the rules may also potentially increase the possibility for non-compliance.  As a result, issuers, brokers and transfer agents will need to significantly change—and tighten—their procedures.”