What Is SEC Form 144: Notice of Proposed Sale of Securities?
Form 144: Notice of Proposed Sale of Securities is a document issued by the Securities and Exchange Commission (SEC). It must be filed with the SEC by an executive officer, director, or the affiliate of a company when placing an order to sell that company's stock during any three-month period in which the sale exceeds 5,000 shares or units or has an aggregate sales price greater than $50,000. This is also known as Rule 144 of the Securities Act of 1933.
Key Takeaways
- Form 144 must be filed with the SEC when there's an order to sell a company's stock during any three-month period in which the sale exceeds 5,000 shares or units or has an aggregate sales price greater than $50,000.
- The party filing Form 144 must have a bona fide intention to sell the securities within a reasonable time frame after filling.
- Since sales covered under Form 144 are often very close to the interests of the issuing company, filers must register the securities under Section 5 of the Securities Actof 1933.
Understanding Form 144: Notice of Proposed Sale of Securities
Anyone who sells restricted, unregistered, and control securities in the United States must follow Rule 144 of the Securities Act of 1933, which was passed as a way to protect investors after the stock market crashed in 1929. Selling these types of securities can often be complicated, so Rule 144 helps make the process a little easier. Under this rule, sellers can be exempt from registering the sale of securities as long as they meet several conditions, which are noted below. Sellers can be anyone including the issuer of a security, a broker-dealer, or even underwriters.
Since sales covered under Form 144 are often very close to the interests of the issuing company, filers must register the securities under Section 5 of the Securities Act. If the correct conditions are met, Rule 144 can provide the necessary exemption and permit the resale to take place. Still, all parties must obtain a transfer agent to remove the securities’ legend prior to sale.
Form 144 must be filed with the SEC by an affiliate as a notice of the proposed sale of securities when the amount to be sold under Rule 144 during any three-month period exceeds 5,000 shares or units or has an aggregate sales price in excess of $50,000. An entity filing a Form 144 must have a bona fide intention to sell the securities referred to in the form within a reasonable time after the filing of the Form. While the SEC does not require the form to be sent electronically to the SEC’s EDGAR database, some filers choose to do so. Others may choose to do so in print form.
SEC Form 144 may be filed in print or electronically.
Additional information on Form 144 for individuals may include a physical address, an Internal Revenue Service (IRS) number, the nature of the payment, and additional similar sales in the preceding several months.
Special Considerations
There are certain conditions that must be met under Rule 144 for these securities to be sold. They are:
- Companies must meet certain holding or lock-up periods—six months for public companies and one year for others. More on this below.
- Companies must provide enough information to the public including a description of the business, financial statements, disclosures, and information about the company's officers and other key personnel.
- Company affiliates cannot resell more than 1% of the total amount of shares outstanding.
- Trading conditions still apply as they would under normal circ*mstances.
- As noted above, affiliated sellers must file a notice proposing the sale of securities. This is required if more than 5,000 shares will be sold or if the value of the sale is expected to be more than $50,000 during a three-month period.
Lock-Up Agreement
Underwriters will have company executives, managers, employees, and venture capitalists sign lock-up agreements surrounding a company’s initial public offering (IPO) to encourage an element of stability in the stock's price in the first few months of trading.
A lock-up agreement is a legally binding contract between company underwriters and insiders that prohibits inside individuals from selling any shares of stock for a specified period of time. Lock-up periods typically last 180 days but can on occasion last for as little as 120 days or as long as 365 days.
Other Relevant Forms
In addition to From 144, critical SEC filing forms include:
- S-1 and S-1/A —both of which are registration statements
- 10-K and 10-Q or annual and quarterly reports
- SEC Form 4: Statement of Changes in Beneficial Ownership of Securities
- SEC Form 12b-25: Notification of Late Filing
- SEC Form 15: Certification and Notice of Termination of Registration
Keep in mind, this isn't an exhaustive list of related forms. A full list, along with descriptions and downloadable forms, can be found on the SEC’s website.
Example of Form 144: Notice of Proposed Sale of Securities
Examples of Form 144 can be found by looking up a company on EDGAR. On April 26, 2018, Lee Kirk, a director of Guaranty Bancshares filed to sell 20,891 shares of company stock for an aggregate market value of $686,896.08 on the Nasdaq. The approximate date of the sale was set for the period between April 7, 2018, and June 12, 2018.
FAQs
Form 144 must be filed with the SEC by an affiliate as a notice of the proposed sale of securities when the amount to be sold under Rule 144 during any three-month period exceeds 5,000 shares or units or has an aggregate sales price in excess of $50,000.
What are the filing rules for Form 144? ›
Filing Form 144 on EDGAR
- Securities to be sold: You must have held and/or paid for the shares for at least 10 calendar days prior to filing.
- Securities sold in the past three months: You cannot list any securities that were sold in the past 10 calendar days or securities that were sold more than 9 months in the past.
Rule 144 is the most common exemption that allows the resale of unregistered securities in the public stock market, which is otherwise illegal in the U.S. The regulation gives a specific set of conditions that a shareholder must meet in order to sell unregistered, "restricted," or "controlled" securities in the public ...
What is Rule 144 simplified? ›
Basically, if you are an executive for the issuer or own a bunch of their stock, you're considered an insider (affiliate). Rule 144 regulates this type of stock and prevents insiders from selling significant amounts of their shares quickly. This part of Rule 144 is referred to as the “dribble” rule.
What is 144 SEC rule? ›
Rule 144 provides an exemption from registration requirements for the sale of securities through the public markets if a number of specific conditions are met. The regulation applies to all types of sellers, in addition to issuers of securities, underwriters, and dealers.
What is the Rule 144 filing 90 days? ›
Form 144 includes a timeline. This form must be filed by the time the shares are put up for sale, and the sale must take place within 90 days of the filing of this form. If the shares are not sold within this time frame, a new Form 144 must be filed.
Do non affiliates need to file Form 144? ›
With respect to affiliates, filing threshold at the lesser of 5,000 shares or $50,000. No Form 144 filing required for non- affiliates.
What are the most common uses of Rule 144? ›
Rule 144 is one such exemption that allows for the sale of restricted and control securities without registration under specific conditions. The Rule 144 exemption isn't the only means by which you can sell these types of securities, but it's usually preferable to registering the securities with the SEC.
Who is considered an affiliate under Rule 144? ›
Rule 144 at (a)(1) defines an “affiliate” of an issuing company as a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such issuer.”
What is the purpose of a Rule 144 filing quizlet? ›
The Form 144 is simply a notification to the SEC that stock will be sold in compliance with the Rule - the SEC does not approve of the sale. The Form must be filed by the seller at, or prior to, with the placement of the sell order.
Rule 144 does not apply to private transactions, including sales, gifts, estate distributions and pledges, but does apply to the purchaser, donee, beneficiary and pledgee, when they sell the stock into the public market. Back to top?
What is the difference between Rule 144 and 144A? ›
Rule 144 allows selling restricted and controlled securities to accredited and non-accredited investors. Rule 144A is more restrictive, as it permits sales solely to Qualified Institutional Buyers (QIBs) with at least $100 million in assets under management.
Does Rule 144 apply to warrants? ›
The holding period for shares issued upon a cash exercise of privately-placed warrants typically begins when the warrants are exercised and the stock is issued, which means that a new Rule 144 holding period begins at that time.
What happens if you violate the Rule 144? ›
A selling security holder that does not comply with Rule 144 and does not have an alternative available exemption from registration requirements may be deemed an underwriter that has sold without registration. Non-compliance could result in rescission of the transaction, civil liability, or even criminal liability.
What is Rule 144 date conversion? ›
The Rule 144 date problem
If the company is not a reporting company, the qualifying holding period is one year. The Rule 144 holding period begins from the security's original date of issuance regardless of resale or conversion.
What is Rule 701 and Rule 144? ›
Rule 701 is an exemption for the offer and sale of unregistered securities by the issuer company. The exemption that applies to sales of unregistered stock by the shareholder is Rule 144.
What are the requirements for Rule 144 manner of sale? ›
What is the manner of sale requirement? In a Rule 144 transaction, securities must be sold in: unsolicited brokers' transactions within the meaning of Section 4(a)(4) of the Securities Act, transactions directly with a market maker, or riskless principal transactions.
What is the Rule 144 date? ›
The Rule 144 date problem
If the company is not a reporting company, the qualifying holding period is one year. The Rule 144 holding period begins from the security's original date of issuance regardless of resale or conversion.
Is form 144 bullish or bearish? ›
Form 144 filings indicate insider selling and therefore can trigger a bearish reaction in the underlying stock.
How long is a Form 144 good for? ›
Form 144 is notification to the SEC of this intention to sell and must take place at the time the sell order is placed with the broker-dealer. The securities may be sold within the 90-day period after Form 144 is filed.
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