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From Securities Regulation Daily, December 19, 2014

SEC proposes amendments to Exchange Act registration requirements

By Jacquelyn Lumb

The SEC this week proposed amendments to the thresholds for the registration, termination of registration, and suspension of reporting under 1934 Act Section 12(g) as mandated by the JOBS Act. If approved, the rules will treat savings and loan holding companies similar to banks and bank holding companies and apply the definition of accredited investor in determining the holders of record under Section 12(g)(1). The comment period is open for 60 days (Release No. 33-9693).

The JOBS Act raised the threshold for registering a class of equity securities. An issuer that is not a bank or bank holding company is required to register the securities if it has more than $10 million of total assets and the securities are held of record by either 2,000 persons or 500 persons who are not accredited investors. An issuer that is a bank or bank holding company must register the securities if it has more than $10 million in total assets and the securities are held of record by 2,000 or more persons.

The JOBS Act also raised the threshold at which a bank or bank holding company may terminate or suspend the registration of a class of securities from 300 to 1,200 persons. The Act directed the SEC to revise the definition of “held of record” to exclude those who received the securities under an employee compensation plan in transactions exempt from registration.

Under the proposal, the definition of “held of record” will be revised. When determining whether an issuer is required to register a class of equity securities, it could exclude the securities held by persons who received them under an employee compensation plan in a transaction that is exempt from the 1933 Act Section 5 registration requirements or those that did not involve a sale under 1933 Act Section 2(a)(3). In certain circumstances, an issuer may also exclude securities held by persons who received them in exchange for securities received under an employee compensation plan.

The SEC also proposed a non-exclusive safe harbor under which a person will be deemed to have received securities under an employee compensation plan if the employee received them in a transaction that met the conditions of 1933 Act Rule 701(c).

The Release is No. 33-9693.

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