Rule Atlas
Rule 144: Rule 144: Resales of Restricted and Control Securities
Under Rule 144 (FINRA / SEC M&A & Securities Act of 1933), rule 144: Resales of Restricted and Control Securities establishes the authoritative rules tested on the FINRA Series 79. This lesson provides an in-depth analysis of Rule 144 under the Securities Act of 1933, covering holding periods, volume limitations, manner of sale requirements, and notice filings (Form 144) for resales of, verified against VoraPrep's FINRA Series 79 blueprint.
Core Statutory Concepts
| Feature | Restricted Securities (Non-Affiliate) | Restricted Securities (Affiliate) | Control Securities (Affiliate) |
|---|---|---|---|
| Holding Period | 6 months (reporting co.) / 12 months (non-reporting co.) | 6 months (reporting co.) / 12 months (non-reporting co.) | None (if purchased in open market) |
| Volume Limit | None (after holding period) | Greater of 1% outstanding shares OR average weekly trading volume (preceding 4 weeks) over any 90-day period | Greater of 1% outstanding shares OR average weekly trading volume (preceding 4 weeks) over any 90-day period |
| Manner of Sale | None (after holding period) | Broker's transactions or directly with a market maker (no solicitation) | Broker's transactions or directly with a market maker (no solicitation) |
| Notice Filing | None (after holding period) | Form 144 required if sale exceeds 5,000 shares OR $50,000 in value in any 3-month period | Form 144 required if sale exceeds 5,000 shares OR $50,000 in value in any 3-month period |
| Current Info | None (after holding period) | Issuer must have current public information available | Issuer must have current public information available |
A control person for 'Tech Growth Inc.', a publicly traded reporting company, wishes to sell 150,000 shares of restricted stock. Tech Growth Inc. has 10,000,000 shares outstanding, and its average weekly trading volume over the preceding four weeks was 125,000 shares. The control person acquired the shares 9 months ago. What is the maximum number of shares this individual can sell over the next 90-day period under Rule 144?
Practitioner Application: Rule 144: Resales of Restricted and Control Securities
A private equity firm is looking to sell a significant block of shares in a portfolio company that recently went public. The shares were acquired through a private placement and are considered restricted securities. One of the firm's partners, who is also a director of the portfolio company, holds additional shares purchased in the open market, making them a control person. The firm needs to execute these sales quickly to capitalize on market conditions but must ensure full compliance with Rule 144 to avoid unregistered distribution violations. How does the firm navigate the different holding periods, volume limitations, and filing requirements for both the restricted shares and the control person's shares, especially when considering the interplay of these rules?
- Rule 144, under the Securities Act of 1933, provides a safe harbor for the resale of restricted and control securities without requiring registration. Without Rule 144, such sales could be deemed an unregistered distribution, violating Section 5 of the Securities Act. Understanding the distinctions between restricted and control securities, along with their respective requirements, is crucial for compliance.
- Restricted securities are those acquired in unregistered, private transactions from the issuer or an affiliate of the issuer. This typically includes securities acquired through private placements (e.g., Regulation D offerings), Regulation A offerings, or employee stock benefit plans. They are 'restricted' because they have not been registered with the SEC and carry a legend indicating their restricted status.
Common FINRA Series 79 Distractors on Rule 144
- 1Test-makers frequently try to confuse candidates on the specific conditions of Rule 144, especially regarding the distinctions between restricted and control securities, and the application of rules to affiliates versus non-affiliates.
- 2Restricted securities are acquired in private transactions; control securities are owned by affiliates.
- 3Holding Period: 6 months for restricted securities of reporting companies; 12 months for non-reporting companies. No holding period for control securities purchased in the open market.
- 4Volume Limit (Affiliates Only): Over any 90-day period, the GREATER of 1% of outstanding shares OR average weekly trading volume over the preceding 4 weeks.
- 5Manner of Sale (Affiliates Only): Broker's transactions or directly with a market maker; no solicitation.
Frequently Asked Questions: Rule 144
What is the core rule under Rule 144 (Rule 144: Resales of Restricted and Control Securities)?
Under Rule 144 (FINRA / SEC M&A & Securities Act of 1933), rule 144: Resales of Restricted and Control Securities establishes the authoritative rules tested on the FINRA Series 79. This lesson provides an in-depth analysis of Rule 144 under the Securities Act of 1933, covering holding periods, volume limitations, manner of sale requirements, and notice filings (Form 144) for resales of, verified against VoraPrep's FINRA Series 79 blueprint.
How is Rule 144 tested on the FINRA Series 79?
Test-makers frequently try to confuse candidates on the specific conditions of Rule 144, especially regarding the distinctions between restricted and control securities, and the application of rules to affiliates versus non-affiliates. Restricted securities are acquired in private transactions; control securities are owned by affiliates.
Where can I practice FINRA Series 79 questions on Rule 144: Resales of Restricted and Control Securities?
Test yourself instantly with the free playable FINRA Series 79 question on this page, or launch VoraPrep's full FINRA Series 79 adaptive question bank, interactive lessons, and 1:1 exam simulator at voraprep.com/series79.