Rule 144
Quick Definition
SEC rule that sets conditions under which restricted and control securities can be sold in the public market.
Key Takeaways
- Governs the resale of restricted and control securities in public markets
- Minimum holding period: 6 months (reporting companies) or 1 year (non-reporting)
- Volume limits: greater of 1% of outstanding shares or average weekly volume
- Form 144 must be filed for sales exceeding 5,000 shares or $50,000
- Critical for insiders and early investors seeking to liquidate positions
What Is Rule 144?
SEC Rule 144 provides a safe harbor exemption for the public resale of restricted securities (those acquired in unregistered private offerings) and control securities (those held by affiliates or insiders of the issuing company). The rule sets specific conditions that must be met, including a minimum holding period (six months for reporting companies, one year for non-reporting companies), current public information about the issuer, volume limitations (the greater of 1% of outstanding shares or the average weekly trading volume over four weeks), ordinary brokerage transactions, and filing of Form 144 with the SEC for sales exceeding 5,000 shares or $50,000 in value. Rule 144 is essential for venture capitalists, private equity investors, and company insiders who need to liquidate their positions after IPOs or private placements.
Rule 144 Example
- 1After holding restricted shares for six months following the company's IPO, an early-stage investor used Rule 144 to sell up to 1% of the outstanding shares per quarter.
- 2A company founder filed Form 144 with the SEC before selling $2 million worth of restricted shares through their broker.
Related Terms
SEC (Securities and Exchange Commission)
The primary U.S. federal agency responsible for regulating securities markets, protecting investors, and enforcing federal securities laws.
Regulation D
SEC rules that provide exemptions from registration requirements, allowing companies to raise capital through private placements.
Regulation S
SEC rules that provide exemptions for securities offerings made outside the United States to non-U.S. persons.
Insider Trading
The illegal practice of trading securities based on material, non-public information obtained through a position of trust or confidence.
Accredited Investor
An individual or entity that meets SEC-defined financial thresholds, qualifying them to invest in certain unregistered securities offerings.
FDIC
Independent federal agency that insures bank deposits up to $250,000 per depositor, per institution, and supervises financial institutions for safety and soundness.
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