SEC Rule 144 provides a safe harbor for reselling restricted securities (acquired in private placements) and control securities (held by affiliates — insiders with control over the issuer).
For non-affiliates (general public who bought in a private placement): - Holding period: Must hold restricted securities for 6 months if the issuer is a reporting company; 1 year if the issuer is not a reporting company. - After the holding period, non-affiliates can freely resell with no volume or manner-of-sale limitations.
For affiliates (insiders): - Holding period: 6 months for restricted securities; no holding period for control securities already freely tradeable. - Volume limits: May sell no more than 1% of outstanding shares or the average weekly trading volume for the prior 4 weeks (whichever is greater) per 90-day period. - Manner of sale: Must be sold in broker transactions or directly to a market maker. - Form 144 filing: Required when sale exceeds 5,000 shares or $50,000. - Current public information: Issuer must be current on SEC filings.
Key terms: - Restricted securities: Acquired in unregistered, private transactions. - Control securities: Securities held by an affiliate, regardless of how acquired. - Affiliate: Person controlling, controlled by, or under common control with the issuer (e.g., directors, officers, 10%+ shareholders).
> Exam tip: Rule 144 is tested on the Series 7 and Series 65. The key distinction is affiliate vs. non-affiliate — affiliates face ongoing volume and manner-of-sale restrictions even after the holding period.