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Rule 10b5-1 Trading Plans   
Rule 144   
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Insider Trading
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SEC Law: Basics

What is an affiliate, and why does affiliate status affect the ability to resell company stock?

"Affiliate" is a term used in the securities laws to refer to a person in a relationship of control with a company. "Control" denotes the power to direct the management or policies of the company in some way (e.g. by voting or by contract), and this is generally means a director, executive officer, or large-block shareholder (usually 10% or more). The term also applies to people who live in the same household as the affiliate, and to trusts or estates in which an insider has an interest or serves as a trustee. The shares affiliates own are also called control stock, and if not registered with the SEC can also be restricted securities (which should not be confused with restricted stock).

An affiliate has restrictions and reporting requirements on company-stock sales under Rule 144 and Section 16(a). Affiliates must also comply with the rules on insider trading that apply to everybody. Even if you are not an affiliate, you must still follow the Rule 144 holding period rules (plus any company restrictions) before you can resell unregistered stock.

Any resale of shares by an affiliate (including anyone who has been an affiliate during the three months before the resale) must follow each condition in Rule 144. However, no holding period applies under Rule 144 when the affiliate buys the stock on the open market or receives SEC-registered shares, such as through grants of stock compensation registered on Form S-8.

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