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Rule 144: Selling Restricted and Control Securities
Under Rule 144 of the Securities Act of 1933, individuals intending to sell restricted or controlled securities must apply an exemption listed in the rule. Restricted securities, securities purchased from unregistered sales, are acquired from private placement offerings not public offerings, Regulation D offerings, employee stock benefit plans, or company stock exchanged to raise initial capital. Controlled securities are stocks held by individuals with the ability to dictate company policies such as directors or large shareholders. If an individual purchases stock from a shareholder holding controlled securities, regardless of whether those securities are restricted, the purchaser’s stocks are now classified as restricted. Restricted securities are usually marked with a legend preventing sell on the market unless exemptions are met. Exemptions: • Holding Limit: Before securities are sold, they must be held for a certain amount of time. If a company is subject to the reporting requirements of the Securities Exchange Act of 1934, securities must be held for at least 6 months. If it is not, securities must be held for at least one year • Current Information: Issuer must comply with reporting requirements of the Securities Exchange Act of 1934 • Trading Volume: An individual selling controlled securities, cannot sell more than 1% of stocks of the same class. If listed on a stock exchange, no more than 1% of average trading volume from four preceding weeks can be sold • Transaction: An individual selling controlled securities must conduct transactions as any other normal transaction would be handled, not solicit sells, and, if a broker sold the securities, receive a normal commission • Form 144: An individual selling more than 5000 shares or more than $50,000 worth of controlled securities during any three month period must file a Form 144 with the SEC |
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