Rule 144 sale of restricted securities
Direct answer
A Rule 144 sale of restricted securities is a resale that fits the SEC’s safe harbor under 17 C.F.R. § 230.144 so the seller is deemed not to be an “underwriter” under Securities Act of 1933 § 2(a)(11), 15 U.S.C. § 77b(a)(11), and the purchaser receives securities that are no longer restricted.[1][2] Whether the sale qualifies depends on the issuer’s reporting status, the seller’s affiliate status, the holding period, current public information, volume limits, manner-of-sale requirements, and, in some cases, a Form 144 filing.[1][3]
What Rule 144 does
Rule 144 is a safe harbor, not the exclusive method, for reselling restricted securities.[2][3] If the sale complies with all applicable conditions, the seller is deemed not to be engaged in a distribution and therefore not an underwriter.[2][3]
The practical effect is that the resale can proceed without registration under the Securities Act if the transaction satisfies Rule 144’s conditions.[2][3]
Core requirements for a Rule 144 resale of restricted securities
| Requirement | Reporting issuer | Non-reporting issuer |
|---|---|---|
| Holding period | Six months minimum[1][3] | One year minimum[1][3] |
| Current public information | Issuer must be current in Exchange Act reporting[1][3] | Adequate current public information must be available[1][3] |
| Volume limits | Apply if seller is an affiliate[1][3] | Apply if seller is an affiliate[1][3] |
| Manner of sale | Applies to affiliates[1][3] | Applies to affiliates[1][3] |
| Form 144 filing | Required if thresholds are met[1][3] | Required if thresholds are met[1][3] |
Key points
1. Holding period
For restricted securities, the seller must wait:
- Six months if the issuer has been subject to Exchange Act reporting for at least 90 days before the sale; or
- One year if the issuer is not subject to Exchange Act reporting.[3]
The clock starts when the securities were acquired and fully paid for.[1][3]
2. Affiliate status matters
If the seller is not an affiliate of the issuer and has not been an affiliate for the prior three months, Rule 144 is more flexible once the holding period and current information requirements are met.[3]
If the seller is an affiliate, additional conditions apply, including:
3. Volume limits for affiliates
An affiliate’s sales during any three-month period generally may not exceed the greater of:
- 1% of the outstanding shares of the same class; or
- For exchange-listed securities, the average weekly trading volume during the preceding four weeks.[1][3]
For OTC securities, the 1% measurement applies.[1]
4. Manner of sale
Affiliate sales must be handled as routine trading transactions through brokers, with no solicitation and no more than a normal commission.[1][3]
5. Form 144
If the issuer is reporting, a Form 144 filing is required when the sale exceeds 5,000 shares or $50,000 in any three-month period.[3] The same threshold applies to non-reporting issuers, though the filing mechanics differ.[3]
Bottom line
A Rule 144 sale of restricted securities is the resale of privately acquired securities in reliance on Rule 144’s safe harbor. If the seller satisfies the rule’s conditions, the sale is treated as not involving an underwriter, and the securities may be sold without registration.[2][3]