In one of the most dramatic and potentially far reaching reforms in recent years, the Securities and Exchange Commission recently adopted rules shortening the holding period for restricted securities under Rule 144, expanding the class of companies able to use abbreviated disclosure in their SEC filings and increasing the number of issuers that can use a short-form S-3 registration statement. The combined effect of these reforms will promote capital formation at lower cost and reduce certain reporting obligations, which is of particular benefit to smaller public companies going public. We should see less documentation, certain reduced requirements in financings and more streamlined SEC reporting for many companies.

As a result of the new six-month holding period for non-affiliates, which goes into effect on February 15, 2008, strategies are already being reworked regarding companies engaged in PIPE financings having to file “resale” registration statements, because the typical period under a registration rights agreement to have a registration statement prepared, filed and declared effective is very close to the new six-month holding period. Because non-affiliates will be able to sell after the six-month holding period without regard to volume limitations or other elements of Rule 144, other than current public information being available between six and twelve months, the need to register such securities in a PIPE transaction should be dramatically reduced. Instead, among other strategies, expect to see penalty provisions kicking in if a company is not current in its SEC filings six months after the financing closes.

Once public, companies with less than $75 million in public equity float – an expansion of over 1000 additional reporting companies of what used to be “SB” status – will qualify for abbreviated disclosure in their SEC reports. Among other benefits, significantly reduced financial reporting is required of smaller reporting companies and complex executive compensation disclosure is lessened.

Additionally, the SEC has amended the eligibility requirements of Form S-3 to allow companies with less than $75 million in public float to register primary offerings if they are not shell companies at the time of filing the registration statement and have not been shell companies for at least 12 months before the filing; have a class of common equity listed on a national securities exchange; and do not sell more than one-third of their public float in any 12 calendar months.

Expect a wave of shelf registration statements to be filed by smaller public companies who meet the new eligibility requirements. S-3 registration statements are significantly shorter than full registration statements, because they rely on incorporation by reference for a large part of their disclosure. Accordingly, S-3s are faster and much less expensive to prepare. Additionally, by having an effective registration statement “on the shelf” a company can move quickly to use its registered securities as currency in a transaction – such as a financing or an acquisition – when the need arises, simply by filing an amendment with the specifics of the particular transaction.

As the city grows and becomes more and more accessible, there is a widespread prediction that Shanghai is well on its way to becoming the Finance Capital of Asia. Belmont Partners will be taking advantage of the opportunities that China has to offer in 2008 with the opening of its newest location in Shanghai. The Shanghai business development office will be managed by William Luckman and Matthew Tsou, and will also employ auditors and a small Chinese staff.

The demand for reverse mergers in China is on the rise. There are 10 million mid-sized private companies in China with many interested in having publicly traded stock in the U.S., which provides a solid foundation for attracting capital. Belmont Partners expansion to China will enable the firm to bridge the geographic and cultural barriers, heightening the company’s commitment to better serve its clients.