In late January, the U.S. Securities and Exchange Commission (the “SEC”) issued updated Compliance and Disclosure Interpretations (“CD&I”), including with respect to Rule 905 of Regulation S. See the full CD&I here.

Rule 905 of Regulation S provides that equity securities of domestic issuers acquired through a transaction under Rule 901 or Rule 903 are deemed to be “restricted securities” as defined in Rule 144 of the Securities and Exchange Act of 1933, as amended (the “Securities Act”); it also includes a statement that “restricted securities” as defined in Rule 144 that are equity securities of a domestic issuer will continue to be deemed to be restricted securities, even though they were acquired in a resale transaction pursuant to either Rule 901 or Rule 904.

The question was posed to the SEC if whether a holder of restricted securities, which were originally acquired from a foreign private issuer in a transaction described in Rule 144(a)(3) (other than Rule 144(a)(3)(v)) can resell those securities offshore pursuant to Rule 904 and without regard to Rule 905 if the issuer no longer qualifies as a foreign private issuer at the time of resale?

The SEC confirmed that Rule 905 only applies to equity securities that, at the time of issuance, were those of a domestic issuer.  Therefore, Rule 905 does not apply to securities that were originally issued by a foreign private issuer who subsequently has become a domestic issuer.  In the CD&I, the SEC has confirmed that Rule 905 only looks to the status of the issuer at the time of sale, rather than at the time of the resale.

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