Rule 144
An SEC safe harbor rule that establishes the conditions under which holders of restricted or control securities may sell those shares in the public market.
What is Rule 144?
SEC Rule 144 provides a safe harbor that allows holders of restricted securities (shares acquired in private offerings) and control securities (shares held by affiliates such as officers, directors, and large shareholders) to sell those shares publicly without registration, provided specific conditions are met. Key requirements include a holding period (six months for reporting companies, one year for non-reporting companies after acquisition), adequate current public information about the issuer, volume limitations (affiliates may sell no more than the greater of 1% of outstanding shares or the average weekly trading volume over the prior four weeks per 90-day period), the requirement that ordinary brokerage transactions be used, and a Form 144 filing with the SEC when selling more than 5,000 shares or $50,000 worth of securities in a three-month period.
Example
A startup employee receives restricted stock options as compensation. After the company goes public, she must wait six months (Rule 144 holding period) before selling. As an insider, she is also subject to volume limits — she cannot dump all her shares at once. She files a Form 144 and sells in broker transactions over 90 days, staying within her permitted volume.
Source: SEC — Rule 144: Selling Restricted and Control Securities