Rule 144

Rule 144 is a Securities and Exchange Commission rule that provides a safe harbor for the public resale of restricted securities and control securities without requiring the seller to register the sale. Restricted securities are shares acquired outside a public offering — typically through a private placement — while control securities are shares held by affiliates of the issuer, such as officers, directors, and large shareholders.

For restricted securities, the rule imposes a holding period before any resale: six months for securities of companies that file reports with the SEC, and one year for non-reporting companies. Meeting the holding period does not by itself end all conditions. A non-affiliate holding restricted securities of a reporting issuer may resell at six months only while adequate current public information about the issuer is available; unrestricted resale becomes available once the securities have been held for one year. Affiliates face ongoing conditions no matter how long they have held.

Affiliates selling under Rule 144 are subject to volume limits. During any 90-day period, an affiliate may sell no more than the greater of 1% of the outstanding shares or the average weekly trading volume over the prior four weeks. Affiliates must also file Form 144 with the SEC when their planned sale exceeds 5,000 shares or $50,000 in any three-month period, and sales must occur in unsolicited brokers' transactions or directly with market makers.

The rule matters because it balances two goals: giving insiders and private investors a path to liquidity, while preventing unregistered shares from flooding the market. Rule 144 appears regularly on the SIE, Series 6, and Series 7 exams — expect questions on the holding periods, the volume formula, and who counts as an affiliate.