Law Blog Tag: restricted securities
Securities which are bona fide pledged may be tacked to the holding period of the pledgor as long as the pledge has full recourse against the pledgor. Gifted securities may be tacked with the holding period of the donor. Securities transferred to a trust may be tacked with the holding period of the settlor. Likewise securities transferred to a 401(k) or other individual retirement account will tack to the original issuance date. Securities obtained by beneficiaries of an estate may be tacked with the holding period of the deceased.
SEC Rule 145 – Registration and Resale Requirements For Securities Issued in Merger, Consolidation or Acquisition
Rule 145 addresses the registration and resale requirements for securities issued in a merger, consolidation, acquisition of assets or reclassification of securities. Rule 145 sets forth the Securities and Exchange Commission (SEC) view that an offer, offer to sell, offer for sale or sale occurs when there is submitted to security holders a plan or agreement pursuant to which such security holders are asked to vote on an exchange of their existing securities for new securities in a merger, consolidation, acquisition of assets or reclassification of securities transaction. Offers, offers to sell, offers for sale or sales all require registration pursuant to Section 5 of the Securities Act of 1933, as amended (Securities Act) unless an exemption to such registration is available.
There are many questions regarding the application of Securities Act of 1933 (“Securities Act”) Rule 144 for the resale of securities. Section 4(1) of the Securities Act provides an exemption for a transaction “by a person other than an issuer, underwriter, or dealer.” Therefore, an understanding of the term “underwriter” is important in determining whether or not the Section 4(1) exemption from registration is available for the sale of the securities. Rule 144 provides a safe harbor from the definition of “underwriter”. If all the requirements for Rule 144 are met, the seller will not be deemed an underwriter and the purchaser will receive unrestricted securities.