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 firstname.lastname@example.org