Rule 144
Rule 144 is the SEC safe harbor that lets holders publicly resell restricted or control securities without registration once conditions such as a holding period are met.
Last verifiedWhat it covers
Shares bought in a private placement, issued in an acquisition, or received as compensation are usually restricted securities: they cannot be resold publicly without registration or an exemption. Rule 144 is the main exemption. It also governs sales by affiliates (officers, directors and controlling holders), whose shares are "control securities" even if bought in the market.
The main conditions
- Holding period for restricted securities: six months if the company has been an SEC reporting company for at least 90 days and is current in its filings; one year otherwise.
- For non-affiliates: after the holding period they can generally sell freely (between six months and one year, only while the company is current in its reports).
- For affiliates: sales in any three months are capped at the greater of 1% of the shares outstanding or the average weekly trading volume over the prior four weeks; manner-of-sale rules apply to equity; and a Form 144 notice is required if sales in three months exceed 5,000 shares or $50,000.
- Shell companies: Rule 144 is generally unavailable for securities of a shell or former shell until specific conditions are met.
Worked example
Hypothetical: a fund buys 3,000,000 unregistered Company X shares in a PIPE on January 10. Company X is a current reporting company and no resale registration is filed. From July 10, as a non-affiliate, the fund can generally rely on Rule 144 to sell those shares publicly.
Why it matters
Rule 144 sets the date when restricted shares can reach the market even without an S-1 resale registration. Some deals add a contractual leak-out or lockup on top.
How to spot it
Form 144 filings on EDGAR show proposed affiliate sales. Restricted share issuances appear in 8-K Item 3.02 and the equity footnotes. See Form 144.
Guides that use this term
- How to Trade Penny Stocks Without Getting DilutedA dilution-first guide to penny stocks. How new shares reach the tape, which SEC filings announce them, worked examples, and a 20-minute filing check.
- Registered Direct vs PIPE vs Underwritten OfferingRegistered direct vs PIPE vs underwritten offering: how each sells a block of shares at a fixed price, how each is registered and disclosed, and what fees cost.
- Float vs Shares Outstanding: What Is the Difference?Float vs shares outstanding explained: how shares outstanding, non-affiliate float and tradeable float differ, where each is disclosed and when each matters.
- Beneficial Ownership Blockers: 4.99% and 9.99% CapsHow 4.99% and 9.99% beneficial ownership blockers cap a holder's stake at any moment but not total dilution, explained with a worked convert-and-sell cycle.
- Warrant Inducement Offers: How Repricing Deals WorkHow a warrant inducement offer works: why holders get a lower exercise price and new warrants for exercising early, and how to count shares added now and later.
- Form 4 Transaction Codes Explained: P, S, A, M, FForm 4 transaction codes explained: what P, S, A, M, F, G and X mean, why code F is not an insider sale, the two-day filing deadline and 10b5-1 footnotes.
Related terms
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Definition from the Signal8 Academy glossary. Educational content only. DilutionScan and Signal8 are not broker-dealers or investment advisers, and nothing here is a recommendation to buy or sell any security.