Shareholders in OTC Markets public companies with audited financials listed on the OTCQB are often surprised to learn that they cannot sell shares even after their six (6) month holding period. Why? The answer is usually because the company is a “voluntary filer.”
Only Mandatory SEC Filers Can Use a 6 Month Holding Period Under Rule 144
The Rule 144 holding period of six months only applies to mandatory SEC Reporting Companies. These are otherwise known as “SEC Filers” or “mandatory filers.” The technical reason is that under Rule 144, the SEC only considers a “fully reporting company” to be an SEC filer with audited financials that is subject to the reporting requirements of Section 12 of the Securities Exchange Act of 1934.
Voluntary SEC Filers Are Not Subject to Section 12 of the Exchange Act
That means that shareholders of public companies which went public by filing an S-1 Registration Statement under the Securities Act of 1933 may not actually qualify for the Rule 144 six month holding period unless they also filed a form 8A-12g or a Form 10, which are both 34 Act filings.
Voluntary Filers Have a 12 Month Holding Period Like a Pink Sheet
If not, they are subject to a twelve month holding period just like a non reporting Pink Sheet.
Prior to issuing a legal opinion for restricted stock, an experienced securities attorney can review an issuer’s filings to quickly determine your holding period at no cost.