Introduction
You have worked hard to get where you are. Now that the company has grown and your patience has paid off, it may be time to enjoy the results of your effort—whether that means funding major goals or diversifying your portfolio.
Selling restricted or control securities allows you to unlock value you have built over time. The paperwork and regulations can look complex, but with knowledgeable guidance the process can be handled smoothly and on a timely basis.
U.S. federal securities laws strictly govern these transactions. This page summarizes the core concepts most investors ask about—especially the rules commonly used for resale: Rule 144, Rule 145 and Rule 701.
This material is for informational purposes only and is not legal or tax advice.
Sales of Restricted Securities
The conditions and procedures under Rules 144, 145 and 701 require care to ensure that sales are executed in compliance with applicable law. Drawing on trading, sales and operations expertise, an experienced team can coordinate preparation, execution and clearance to help deliver proper execution at competitive prices.
With substantial experience in this area, investors selling restricted or control securities can be confident that their transactions will receive the attention and support they deserve.
Rule 144
Rule 144 permits holders of restricted or control securities to sell those securities in the public market when certain conditions are satisfied by the seller, the broker and the issuer.
Restricted Securities
In general, restricted securities are acquired in non-public transactions (such as a private placement). They are unregistered and may only be resold subject to specific conditions and limitations. Such securities typically bear a legend indicating their restricted status.
A Control Person / Control Securities
A control person is anyone who directly or indirectly controls the management or policies of a company (often senior officers, directors or large shareholders). Certain related persons or entities may also be treated as control persons depending on the facts and circumstances.
Conditions of Rule 144 for the Sale of Restricted or Control Stock
Current Public Information
The issuer must have adequate current public information available. Generally, this means being current with required SEC filings for a specified period leading up to the sale.
Holding Period
Restricted securities must be fully paid for and held for a minimum period prior to sale. Control securities that are not restricted have no minimum holding period, although other limitations may still apply.
Amount to Be Sold
During any three-month period, sales are subject to volume limits (for example, a percentage of shares outstanding or the average weekly trading volume). In determining the amount, the seller must include shares sold by certain related persons within the prior three months.
- Relatives living in the same household.
- Trusts or estates in which the seller has a material interest or serves in a fiduciary capacity.
- Entities in which the seller or such relatives collectively own a significant interest.
- Persons acting in concert with the seller.
Filing of Notice Requirements
A Form 144 (Notice of Proposed Sale) generally must be filed with the SEC at or before the time the sell order is placed. If the security is exchange-traded, a copy may also need to be filed with the principal exchange.
Manner of Sale
Sales must be made in “brokers’ transactions” or in agency transactions. The broker may inquire only of customers and dealers who have recently indicated interest in the security. (If the broker is a market maker, additional conditions may apply.)
Intent to Sell
The seller must have a bona fide intention to sell the securities after filing Form 144, and in many cases must complete the sale within 90 days of filing.
Exemptions from Certain Requirements (144(k))
Under specific circumstances, restricted securities may be sold without certain volume, manner-of-sale or holding-period requirements, provided the securities have been fully paid and beneficially owned for the required time.
Rule 145
Rule 145 generally applies to securities received in connection with business combinations such as mergers, consolidations or transfers of assets. Unless a registration statement covers resales, persons who receive such securities are typically subject to restrictions similar to Rule 144 until certain conditions are met (including a holding period).
Former holders of the acquired company who later become control persons of the acquiring company may remain subject to Rule 144 for resales of their shares.
Rule 701
Rule 701 provides an exemption from registration for securities issued by an issuer to employees and other participants under certain compensatory benefit plans (for example, an employee stock option plan). If the holder is not an affiliate of the issuer after the company becomes a reporting company, resale may occur without some of Rule 144’s requirements, subject to conditions.
If the seller is an affiliate, the sale remains subject to the holding-period requirement and other Rule 144 conditions.
Our Service to You
We provide end-to-end support for restricted or control stock transactions—confirming eligibility, handling forms and documentation, coordinating execution and settlement, and helping you integrate proceeds into your broader financial plan.
When you are ready to begin, contact your financial professional to discuss the best path forward for your situation.