Rule 144

Rule 144 of the Federal Securities Act of 1933 concerns restricted securities. Stock issued directly by an issuer or acquired by an insider or control person is always restricted in nature unless there is an exemption, registration, or other safe harbor that allows the stock to be issued without legend. Rule 144 is the most popular exemption to registration that allows shareholders to sell stock in the public marketplace that is not registered with the SEC.

A common misunderstanding about Rule 144 is that once a holding period has been met, Rule 144 allows shares to simply become “free trading.”  Nothing could be farther from the truth. There is no such thing as  “free trading” shares under Rule 144. The Rule is merely an exemption to registration that allows shares to be sold in the public marketplace, once certain conditions are met. The process of removing the restrictive legend from a stock certificate is done only to facilitate such a public resale, and in no way alleviates an investor from complying with all aspects of Rule 144 at all times.

Legend Removal Made Simple! Click on any of the squares below to download a customized package of your required forms.

Caution: This chart assumes that the issuer has either never been a shell or, if so, has complied with Rule 144(i)(2).

Affiliate or person selling on behalf of an affiliate

Non-Affiliate
(and has not been an affiliate during the prior three months)

Restricted Securities of
Reporting Issuer

During six month holding period – no resales under Rule 144 permitted.
After six monthholding period – may resell in accordance with all Rule 144 requirements including:

  • Current public information,
  • Volume limitations,
  • Manner of sale requirements for equity securities &
  • Filing of Form 144
During six month holding period – no resales under Rule 144 permitted.

After six month holding period but before one year – unlimited public resales under Rule 144 except that the current public information requirement still applies.
After one year holding period – unlimited public resales under Rule 144; need not comply with any other Rule 144 requirements.

Restricted Securities of
Non-Reporting Issuer

During one year holding period – no resales under Rule 144 permitted.
After one yearholding period – may resell in accordance with all Rule 144 requirements including:

  • Current public information,
  • Volume limitations,
  • Manner of sale requirements for equity securities &
  • Filing of Form 144
During one year holding period – no resales under Rule 144 permitted.
After one year holding period – unlimited public resales under Rule 144; need not comply with any other Rule 144 requirements.

If you are eligible to sell your shares under Rule 144, you have two options.

Option 1: Broker Submission

You can submit your certificate(s) to your broker for 144 processing. In most cases, your broker will assist you in gathering the required documents so that stock can be deposited directly into your brokerage account for resale. (Please note: Insiders, control persons, and affiliates of an issuer must follow this option.)

Option 2: Direct Submission

You can submit your certificate(s) to ClearTrust directly for legend removal if you are a non-insider/non-affiliate of the issuing company. We will arrange for an un-restricted stock certificate to be sent to the destination of your choice (usually your home, office, or broker). Please send us a package with the following documents:

  • Original Stock Certificate(s)
  • Seller’s Representation Letter
  • Legal Opinion from qualified securities counsel
  • Instruction Letter
  • Applicable Fees

Need a legal opinion? Click here!

Want all the details? Check out the SEC’s published information and the complete rule. Click here!

Have questions about Rule 144? Click to request our popular Rule 144 Guide. A ClearTrust Exclusive!

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