SEC Adopts Rules on Thresholds for Exchange Act Reporting

Earlier this month, the Securities and Exchange Commission approved amendments to, among other things, revise the rules related to the thresholds for registration, termination of registration, and suspension of reporting under Section 12(g) of the Securities Exchange Act of 1934 (the “Exchange Act”).

The amendments, include establishing:

• a higher threshold of (1) a minimum of $10 million in assets; and (2) 2,000 holders of record or 500 holders of record that are not “accredited investors” for an issuer to be required to register a class of equity pursuant to Rules 12(g)(1);
• a higher threshold of 300 holders of record (or 500 holders of record, if total assets have not exceeded $10 million) below which an issuer may terminate registration under Rule 12g-4(a);
• a higher threshold of 300 holders of record (or 500 holders of record, where if the issuer’s total assets have not exceeded $10 million) below which an issuer may suspend Exchange Act reporting under Rule 12h-3; and
• flexibility in calculating securities “held of record” for purposes of determining registration requirements under Exchange Act Section 12(g) by permitting the exclusion of certain securities held by employees and other persons who receive them under employee compensation plans exempt from Section 5 of the Securities Act and establishing a non-exclusive safe harbor for determining securities “held of record” for purposes of Rule 12g5-1.

Thresholds were also amended for banks and savings and loan holding companies.

These amendments implement provisions of the Jumpstart Our Business Startups Act (JOBS Act) and the Fixing America’s Surface Transportation Act and completes the rulemaking mandated by the JOBS Act. These rules generally harmonize the SEC rules with the statutory changes to the Exchange Act.

The amendments will become effective on June 9. 2016. The final rules are available here.