On November 15, 2007, the SEC announced that it had adopted three significant rule changes including the following:

• Expand the category of companies which are eligible for the more lenient disclosure rules and integrating those rules into the set of rules and forms used by larger reporting companies.
• Shorten the holding period for resales of restricted securities under Rule 144 to six months from one year for reporting companies, allowing non-affiliates of reporting companies to resell after a six month holding period (subject only to the issuer satisfying the current public information requirement of Rule 144(c)), allowing non-affiliates of non-reporting companies to resell restricted securities without restriction after a one year holding period rather than the current two year period, and raise the threshold for affiliates filing Form 144 to 5,000 shares or $50,000 up from $10,000 or 500 shares.
• Provide an exemption from registration under the Securities Exchange Act of 1934 (but not the Securities Act of 1933) for compensatory employee stock options.

Small Business Issuers
The new rules replace the current “small business issuer” category which qualifies for the more lenient disclosure requirements with a new category of “smaller reporting companies.” The public float limit is increased to $75 million from $25 million.

Regulation S-B is eliminated and the disclosure rules moved into new sections Regulation S-K and Regulation S-X which will apply only to smaller reporting companies. The SB forms will also be phased out.

Rule 144 Amendments
Rule 144 is amended to shorten the holding period for restricted securities of reporting companies to six months from one year. In addition, non-affiliates of reporting companies can freely resell securities after a six month holding period subject only to the issuer satisfying the public information requirement of Rule 144(c). After one year, their resales are no longer subject to the public information requirement. Non-affiliates of non-reporting companies can also freely resell after a one year holding period.

These new holding periods are a substantial easing of the current requirements. The general holding period requirement for restricted securities was one year for affiliates and non-affiliates. After two years, non-affiliates could freely resell restricted securities. During the period between one year and two years, non-affiliates could resell but only subject to all of the requirements of Rule 144 including the volume limitations, manner of sale (i.e. brokers’ transactions), and filing of Form 144. One additional effect of the rule amendments is that non-affiliates will no longer be required to file Rule 144 because at the close of the applicable holding periods for non-affiliates, they can resell freely (subject only to the public information requirement for the six month holding period as discussed above).

Affiliates who resell restricted securities will remain subject to substantially the same requirements of Rule 144 as previously in effect, except, as noted above, affiliates of reporting companies can sell after a six month holding period and the following additional changes. The threshold for filing Form 144 is increased to 5,000 shares or $50,000 from 500 shares or $10,000. The manner of sale requirements for equity securities is revised and they are eliminated for debt securities and the volume limitations for debt securities are relaxed. Also, the resale provisions of Rule 145(d) (applicable to shares acquired in mergers and certain other corporate transactions) are revised.

Exemption of Compensatory Employee Stock Options from Registration under the Securities Exchange Act of 1934 (”Exchange Act”)
Amendments to Rule 12h-1 will provide an exemption from registration under Section 12(g) of the Exchange Act for compensatory employee stock options. Non-reporting companies which meet the thresholds for Exchange Act registration based on the number of holders of such options but not the number of stockholders will now be exempt from registration. Similarly, companies which are already reporting under the Exchange Act will not have to register compensatory employee stock options under the Exchange Act.

It is important to note that these exemptions are only applicable to registration under the Exchange Act. Registration under the Exchange Act typically subjects a company to the reporting requirements, proxy rules, Section 16, and various other requirements. However, the new rules do not affect the requirements of the Securities Act of 1933. The issuance of the options and the offer and sale of the underlying stock must either be registered or qualify for an exemption from registration under the Securities Act of 1933.

Effective Dates
The effective dates of the new rules are as follows:

Small Business Issuers—30 days after publication in the Federal Register

Rule 144—60 days after publication in the Federal Register

Employee Stock Options—upon publication in the Federal Register

Explanatory Note
This alert is only a simplified overview and not a comprehensive description of the new rules. In addition, the full text of the releases adopting these rules including the text of the rules is not yet available and it likely will affect the information provided in this alert.

Questions or Additional Information
With questions or requests for additional information, please contact Neal A. Klegerman at 702.792.7025 or nklegerman@kkbrf.com; or John C. Jeppsen at 702.792.7000 or jjeppsen@kkbrf.com.

Our client alerts are intended for informational purposes only. Nothing in this client alert is to be considered as either creating an attorney-client relationship between the reader and Kummer Kaempfer or as rendering of legal advice. Readers are responsible for obtaining such advice from their own legal counsel.

No client or other reader should act or refrain from acting on the basis of any information contained in this client alert without seeking appropriate legal or other professional advice on the particular facts and circumstances at issue.