Rule 144 limits the amount of stock an individual can sell. It generally applies to affiliates of a publicly traded company—officers, board members, large shareholders, or people who may have significant influence over the company. It can also apply to restricted securities, or shares that haven’t been registered with the SEC. Often these are shares paid as executive compensation or issued as part of a deal (like an investment or a merger).
If you’re subject to Rule 144, you must file paperwork tied to any shares you sell to ensure that the trades comply with the relevant rules and restrictions.
Who does Rule 144 apply to?
The best way to know if you, or your shares, are subject to Rule 144 is to ask your company’s general counsel. Usually, this conversation happens during onboarding, when the company is outlining the rules and restrictions around trading company stock.
Most often, Rule 144 will apply to C-suite executives, board members, or people who have high concentrations of the company stock.
What are the restrictions tied to Rule 144?
This varies; it is usually a function of the average trading volume of the stock in the month before you file a Notice of Proposed Sale (Form 144) with the SEC.
What happens if you don’t follow Rule 144?
If your trades are subject to Rule 144 and you don’t file the Form 144, any profits tied to the transaction may be forfeited.
