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Article by Brian A. Lebrecht, Esq. |
Rule 144 of the Securities Act of 1933 allows investors who purchased restricted stock to sell that stock into the open market, subject to certain conditions. The purpose of this article is to summarize Rule 144, and to provide a practical outline for you to sell restricted stock that you may hold
History of Rule 144
The Securities Act of 1933 (the “Securities Act”) requires all offers and sales of securities in interstate commerce to be either registered or have a valid exemption from registration. Rule 144 under the Securities Act creates a safe harbor for the sale of securities under the exemption provided for in Section 4(1) of the Securities Act. Section 4(1) provides an exemption for transactions by any person other than an issuer (the company), underwriter or dealer. Historically, Rule 144 has treated shares held by affiliates and non-affiliates different in terms of the amount of time each must hold the shares prior to qualifying to use Rule 144, whether the issuer was a reporting or non-reporting company (one year for reporting companies and two years for non-reporting companies) and certain volume limitations.
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