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SEC Law › Rule 144

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Articles

How Executives And Directors Can Avoid SEC Troubles Before Trading Their Company Stock (Part 2)

Merrill Freed and Steven Schraibman

Before you sell company stock or exercise options, you must understand the securities laws that apply to you. Part 1 of this series focused on insider trading and Rule 10b5-1 plans. This article looks at other pitfalls of securities law, including Section 16(b) violations involving short-swing profits, and at required SEC filings, such as Form 4 and Form 144.

Ten Compliance Concerns That Executives Must Understand To Prevent SEC, IRS, And Corporate Problems (Part 1): Company Stock Trades

Richard Friedman

Podcast included! An often underestimated danger companies face is the risk that an executive or employee may violate corporate, tax, or securities laws. This article series outlines practices for executives to help them avoid compliance problems, and explains the possible penalties of noncompliance. Part 1 focuses on compliance issues involving company stock holdings and transactions.

FAQs

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, and this is generally means...

What are restricted securities? Do they differ from restricted stock?

Don't confuse restricted securities and restricted stock. They are very different...

What are the rules for resales of restricted securities? What requirements must affiliates (e.g. executives and directors) follow to sell their stock to the public under Rule 144?

This is the most common way to resell restricted securities not registered with the SEC, and the most common way for senior managers and directors to sell their stock. There are five core requirements of a Rule 144 sale, which include...

Show More FAQs (17 more)

For Rule 144 resale requirements, what is the difference between (1) restricted securities I own as a company officer or director that are not registered with the SEC and (2) company shares I bought on the open market?

Rule 144 requires directors, officers, and large-block shareholders to follow certain...

Do the holding period and other requirements under Rule 144 always apply to sales of company stock by both senior executives and regular employees?

For resales of restricted securities, the holding period depends on whether the stock is of a reporting or nonreporting company. Restricted securities must be held six months for...

If I am no longer an officer or director of a public company, do I still need to meet the requirements of Rule 144 to sell my company stock?

To satisfy Rule 144, you must follow the resale rules for...

What are the company-information requirements of Rule 144 that affect my stock sales?

The SEC Rule 144 requirement that current public information about the company be available is met if the company has filed all the required reports under the Securities Exchange Act of 1934...

How soon after an IPO can I sell my stock under Rule 144?

This can depend on whether you are still affiliated with the company. For options and stock issued under Rule 701...

Does the period I held unexercised options count towards the holding period for resales of unregistered securities under Rule 144?

Under Rule 144, you must hold these restricted securities...

What are the volume limitations imposed on an affiliate under Rule 144?

The amount of stock sold by an affiliate, together with all other sales by the affiliate within the preceding three months, cannot exceed the greater of...

How and when is Form 144 filed? Can I amend my form after I have filed it?

Once your total sales during any three-month period exceed 5,000 shares or $50,000, you must make this filing even if the sale that puts you over the threshold is much smaller. Three copies...

Do I still file Form 144 even though I have held the restricted securities long enough?

You make the filing if you are an affiliate (e.g., a senior executive or a director) or a control person (e.g., you own a big block of stock) or have been one within...

What regulations govern the sales activities of brokers under Rule 144?

Rule 144 requires that in most instances affiliates sell their securities in a "broker's transaction." The stockbroker must do no more than...

UPDATES! Is the tax treatment different if I work for a pre-IPO company? For example, are taxes delayed at exercise until the stock is registered with the SEC?

The tax treatment for private, pre-IPO, and large publicly traded companies is...

How does an affiliate sell shares in a private resale?

These privately negotiated sales may use what is informally referred to as the "Section 4(1-1/2)" exemption, which is a hybrid provision based on...

After an acquisition is completed, can I immediately sell the shares I receive in the buyer?

The legality of exercising stock options, swapping the stock for the buyer's shares, and then immediately...

Do Rule 144, Section 16, and the insider-trading rules apply to gifts and donations of company stock by senior executives or directors?

Not surprisingly, anything you do with your company stock as an executive or director raises issues involving the securities laws, potential SEC reporting requirements, and liability risks...

How do I have the legend removed from my restricted securities?

You need to show that resale does not require you or your company to...

Do securities laws and regulations place restrictions on stock options or shares granted to consultants and on their freedom to sell the stock?

Yes. A consultant to a private company needs to find out whether the options or shares...

Are there any special securities law issues and filing requirements with stock appreciation rights (SARs) for senior executives and directors?

For senior executives, stock-settled SARs avoid the concerns about cashless exercises by officers and directors raised by...