The rule's five conditions are summarized below:Īdditional securities purchased from the issuer do not affect the holding period of previously purchased securities of the same class. The rule is not the exclusive means for selling restricted or control securities, but provides a "safe harbor" exemption to sellers. If you want to sell your restricted or control securities to the public, you can meet the applicable conditions set forth in Rule 144. Certificates for control securities usually are not stamped with a legend. The legend indicates that the securities may not be resold in the marketplace unless they are registered with the SEC or are exempt from the registration requirements. If you acquire restrictive securities, you almost always will receive a certificate stamped with a "restrictive" legend. If you buy securities from a controlling person or "affiliate," you take restricted securities, even if they were not restricted in the affiliate's hands. Control means the power to direct the management and policies of the company in question, whether through the ownership of voting securities, by contract, or otherwise. An affiliate is a person, such as an executive officer, a director or large shareholder, in a relationship of control with the issuer. Rule 144(a)(3) identifies what sales produce restricted securities.Ĭontrol securities are those held by an affiliate of the issuing company. Investors typically receive restricted securities through private placement offerings, Regulation D offerings, employee stock benefit plans, as compensation for professional services, or in exchange for providing "seed money" or start-up capital to the company. Restricted securities are securities acquired in unregistered, private sales from the issuing company or from an affiliate of the issuer. What Are Restricted and Control Securities?
It also describes how to have a restrictive legend removed. This overview tells you what you need to know about selling your restricted or control securities. Rule 144 allows public resale of restricted and control securities if a number of conditions are met. When you acquire restricted securities or hold control securities, you must find an exemption from the SEC's registration requirements to sell them in a public marketplace. Five Questions to Ask Before You Invest.
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