SEC Rule 144 – Reselling Your Restricted Stock?
When strictly followed, this “safe harbor” rule allows holders of “restricted” securities to resell.
HOW LONG MUST I HOLD RESTRICTED STOCK?
It depends. If the issuing company is a reporting issuer then there is a six-month holding period to satisfy before resale. Otherwise the restrictive stock must be held for a 12-month holding period.
ARE THERE OTHER CONSIDERATIONS TO BE AWARE OF?
Yes. You need to make sure that the purchaser of the stock has materially accurate information about the company. If the company is a reporting issuer, this is relatively simple since you can require the purchaser to warrant that they have reviewed the public filings for the company. If the company is private, then a little more work is involved.
You also need to determine whether you are an “affiliate” of the issuer or company whose stock you hold. The general test for affiliate is that of control. Officers, directors, and shareholders which hold more than 10% of the voting shares of the issuing company are presumptuously deemed “affiliates” and have heightened requirements under SEC Rule 144. These groups of individuals or companies typically have access to confidential and non-public information about the company and/or have such large interest that their sales can severely impact the price the stock. Thus, the SEC Rule 144 requirements for resale include limitations on how much or quickly their positions can be sold into the market and reporting requirements so that the investing public is aware of their sales. On the other hand, “non-affiliates” are persons who have limited or no control over the company’s operations or access to non-public information.
If you are an affiliate, then a SEC Form 144 must be filed in a timely manner, there are limitations as to how many shares you can sell all at once, and the transaction must be routed through a broker.
If you would like more information on the SEC Rule 144 you can easily reach me through my contact page on my website: www.PrivatePlacementMemorandumAttorney.com. To learn more about me go here: About Me – the PPM Attorney