Introduction

On November 15, 2007, the Securities and Exchange Commission (“SEC”) addressed certain key recommendations made in the final report of the SEC Advisory Committee on Smaller Public Companies and adopted rules designed to modernize and improve reporting, capital-raising and

disclosure requirements for small companies. These rules include, among other changes:

shortening the holding periods under Rule 144 of the Securities Act of 1933 (the “Securities

Act”) for restricted securities of public companies from one year to six months to help reduce the cost of capital;

making scaled disclosure regulations with reduced disclosure obligations available to an estimated additional 1,500 companies that qualify as “smaller reporting companies”; and

creating two new exemptions for compensatory employee stock options, so that the registration requirements of the Securities Exchange Act of 1934 (the “Exchange Act”), will not be triggered solely by a company’s compensation decisions.

The rationale for the adoption of these rules, according to SEC Chairman Christopher Cox, arises from the substantial role small businesses play in the U.S. economy. The rules are intended mainly to enable smaller companies to raise capital more effectively, ease some of the burdens of the

SEC’s reporting and disclosure requirements, and increase the number of smaller companies eligible to comply with the scaled disclosure requirements.

This client alert will summarize each of the three new rules.