If you want to sell restricted, unregistered, or control securities in a public market, you will need to get an exemption from the SEC’s (The Securities and Exchange Commission) registration requirements. The rule lays out a series of requirements that a shareholder must complete in order to sell or resell unregistered, “restricted”, or “controlled” securities in the open market.
Restricted securities are those purchased from the issuing corporation or an affiliate of the issuer through unregistered, private transactions.
The securities owned by an affiliate of the issuing firm are known as control securities, so this person is a person who has a controlling relationship with the issuer, such as an executive officer, a director, or a major shareholder.
So, if you are in this position and intend to sell these types of securities, you can comply with Rule 144’s requirements.
As we mentioned in the previous paragraphs, restricted, unregistered, and control securities must satisfy five criteria before being sold or resold:
1. Holding period of restricted securities before you can sell them on the market
2. Investors have access to current public information
3. Trading volume formula
4. Typical brokerage transactions- All of the standard trading requirements for each trade must be satisfied
5. A proposed sale notice is required by the Securities and Exchange Commission for an affiliated seller
An overall conclusion is that Rule 144 establishes a safe harbor for the resale of control and restricted securities. The Securities Act’s Rule 144 specifies criteria for assessing whether or not a person is engaging in securities distribution. A person who applies this rule for a securities resale is not regarded as an underwriter and can use the registration exemption of the Securities Act for the unregistered resale of their securities. Despite the fact that Rule 144 is intended to be a non-exclusive safe harbor, it is the principal procedure for an affiliate to resell securities in practice.
