Under SEC Rule 144, there are essentially three restrictions on the sale of restricted stock by officers, directors, insiders or shareholders owning greater than 10% of the issuer’s stock, or other control persons of a public company (“Affiliates”).
Affiliates must file Form 144 with the SEC detailing the number of shares being sold under Rule 144, the total number of shares beneficially owned by the Affiliate, showing the total issued and outstanding shares of the same class of securities as those being sold; and
Affiliates must sell their restricted stock through a registered broker-dealer; and
Affiliates must comply with the trading volume limitations for Affiliates under Rule which says that Affiliates of OTC Bulletin Board and OTC Markets public companies cannot sell greater than 1% of the total issued and outstanding shares of stock in any 3 month period.
So, if an Affiliate filed Form 144 and was prepared to meet those three requirements but did not sell all of the shares indicated on Form 144, the Affiliate has two choices:
Affiliates can file a new Form 144, which adds those shares unsold with other shares up to the 1% limit; or
Affiliates can direct their broker to return the unsold shares to the Issuer’s Transfer Agent, which will reissue the Affiliate a certificate with a Rule 144 restrictive legend that adds the unsold shares back in.
Affiliates seeking assistance in preparing a Rule 144 legal opinion for the sale of restricted stock can contact securities lawyer Matt Stout at (410) 429-7076 or email@example.com
SEC Rule 144 Provides Exemptions from SEC Registration Under Certain Conditions
If a Shareholder wants to remove a restricted legend in order to sell restricted stock or control stock, he or she must qualify for an exemption to the normal registration process for securities mandated by the SEC. The SEC Rule 144 criteria including different provisions for Affiliates and Non Affiliates.
Rule 144 Affiliate
An Affiliate is a control person (giving rise to the term control stock), usually an officer, company founder, director, spouse or child of such persons living under the same roof. Affiliates have more stringent requirements in order to qualify for the safe harbor provisions in Rule 144.
Restricted Stock Opinion Considerations for Securities Attorneys
The main points to consider when talking with an experienced broker and securities attorney are:
Is the Shareholder an Affiliate (or has he or she ever been an Affiliate)?
Did the Shareholder acquire the Shares in a registration directly from the Company (S-1 or S-2 etc)?
How long has the Shareholder owned or held the securities?
Did the Shareholder acquire the Shares from an Affiliate?
Has the Company been a “shell” or “blank check company” within the last year?
An experienced stockbroker familiar with 144 stock can be of great help to Shareholders hoping to sell restricted stock. These brokers are often the quarterback and main point of contact for the team that includes a qualified securities attorney and the Company’s transfer agent.
Yes, absolutely. We can accept your broker’s standard 144 forms including the legend removal request, and usual certifications of non affiliate and non shell status. These forms can simply be emailed to us to start the process. If your broker also provides a template 144 opinion letter known as a seller representation letter, we can also use this as part of the documentation our securities attorneys review when drafting a 144 opinion. But we always draft our own Rule 144 opinion letters, which transfer agents expect.
These Rule 144 Forms Are Just The Beginning of a Thorough Research Process
No matter what documentation the shareholder is able to provide, our securities attorneys review the issuing company’s filings on SEC.gov or OTC Markets. They also review the company’s history, and the transactions between affiliates and related parties leading up to the issuance of the restricted stock.
144 Opinion Letters Will Address All Relevant Provisions of SEC Rule 144
After that process is complete, a thorough 144 opinion letter is drafted within one day and addressed to the company’s transfer agent. In all of the 144 opinion letters issued by the securities lawyers working with RestrictedStockOpinion.net, the requisite provisions of SEC Rule 144 are systematically addressed, so that the transfer agent is able to rely with confidence on the 144 opinions they receive from us.