Rule 144 is the most commonly used exemption allowing the resale of unregistered, controlled, or restricted securities in the public stock market, which is ordinarily illegal in the United States.
Does This Rule Apply to You?
Because these three types of securities are so commonly given in situations like mergers, the exchange of start-up capital, as compensation, and even in employee benefits packages, it is important to know how to manage them. If you are planning a public market sale involving a brokerage firm or you would like to make a private transaction, like a gift or the distribution of an estate, this rule does not apply to your plans.
How Can You Use Rule 144?
If you meet the five following conditions, you may sell your unregistered securities using Rule 144:
- The issuing company must have updated and accurate information publicly available before the sale is initiated. Reporting companies must follow SEC reporting requirements, and non-reporting companies must give forth business information that has been verified by an accountant.
- You must have possessed the securities for the minimum holding period, which is six months or greater for reporting companies and twelve months or greater for non-reporting companies.
- The brokerage transaction must be within ordinary conditions.
- You must file a notice with the SEC on form 144 if you plan to sell what amounts to more than $50,000 or five hundred shares within a three-month period.
- If you are an affiliate, you must abide by limits on the number of securities you can sell.
If you have held the stock for more than twelve months and you are not (and have never been) an affiliate, you can sell your securities in the public market without adhering to Rule 144. Visit Colonial Stock Transfer Company, Inc. for more information.
