While many people think that the rules don’t apply to them or wish there weren’t so many, they are important. Rule 144 is no different; when you hold any control securities or acquire restricted ones, you cannot sell them in the public market without an exemption from the SEC. The rule allows you to publicly resell the control or restricted securities if you meet certain conditions. Learning more about the rules and how to sell restricted securities can help you.
What are They?
Restricted securities are any securities that are acquired through a private, unregistered sale from an issuing company or affiliate of the issuing company. You, as an investor, can receive a restricted security through Regulation D offerings, private placement offerings, as compensation for services, as part of your employee benefit plan, or as a thank you for providing start-up capital.
Control securities are always held by an affiliate with the issuer. The affiliate is usually an executive officer or director of the shareholder. They are allowed to direct the policies and management of the company, and you can buy shares through them. Even if the securities weren’t restricted while in the affiliate’s hands, they are when you purchase them and want to resell them.
When you acquire any restrictive securities, you’re likely to get a certificate that is stamped with the restrictive legend. This indicates that the security you hold cannot be resold unless it is registered with the SEC. However, some of them could be exempt from any registration requirements. However, you should note that control securities aren’t usually stamped with the restrictive legend, though they can still be restricted, which means you must register them with the SEC or ensure that they are exempt from requiring the registration. For more information Colonial Stock Transfer Company, Inc.