Key takeaways
– SEC Form 144 is a notice of proposed sale that must be filed by an affiliate (insider) — typically an officer, director or large shareholder — when proposed sales of restricted or control securities exceed 5,000 shares (or units) or $50,000 in aggregate sales price during any three‑month period.
– Form 144 is tied to Rule 144 of the Securities Act of 1933, which sets conditions (holding period, current public information, volume limits, manner of sale, and filing/legend removal) under which restricted and control securities can be resold without registration.
– Filers must have a bona fide intent to sell within a reasonable time after filing. Form 144 may be filed on paper or electronically (EDGAR filing is optional but common); a transfer agent must clear any restrictive legend before resale.
What is Form 144 and why it matters
Form 144 is a short notification to the Securities and Exchange Commission (SEC) that an affiliate intends to sell restricted or control securities of an issuer. The form does not itself grant a right to sell — it is a disclosure/notice tied to Rule 144. The form helps the market and regulators track insider sales and provides transparency about sales that may affect market supply and price.
Who must file Form 144
– Affiliates or persons who are selling as affiliates (officers, directors, large shareholders, or others with control) must file Form 144 if, during any three‑month period, proposed sales of the issuer’s securities exceed:
– 5,000 shares (or units), or
– $50,000 in aggregate sales price.
– Non‑affiliates and transactions that do not exceed the threshold do not require Form 144.
When to file
– File Form 144 when you place an order to sell (or otherwise intend to effect a sale) and the proposed sales in the rolling three‑month period will exceed the 5,000 shares or $50,000 threshold.
– The filer must have a bona fide intention to sell within a reasonable time after the filing.
– Filings are often made concurrently with placing an order with a broker.
What the form requires (typical fields)
Form 144 collects basic identifying and transaction information, including:
– Name and address of seller and relationship to issuer (affiliate status)
– IRS taxpayer identification number (for individuals)
– Name of issuer and class of securities
– Number of shares/units proposed to be sold, and estimated aggregate sales price
– Nature of the transaction (e.g., sale, distribution)
– Date of proposed sale or range of dates
– Method of disposition (brokered sale, private sale, etc.)
– Any similar sales in the preceding three months
– Signature and certification that the filer intends to sell within a reasonable time
Rule 144 conditions you must meet to resell (overview)
If you plan to rely on Rule 144 to permit resale without registration, you must satisfy these five key requirements (summaries — consult the SEC or counsel for details):
1) Holding period (restricted securities)
– If the issuer is subject to the Exchange Act reporting requirements (i.e., current reporting company), the holding period for restricted securities is typically 6 months.
– If the issuer is not subject to reporting requirements, the holding period is typically 12 months.
(Note: Rule particulars have been amended over time — verify current holding‑period rules for your security.)
2) Current public information
– Adequate current public information about the issuer must be publicly available (generally current Exchange Act reports for reporting companies).
3) Volume limitations (for affiliates)
– For affiliates, the amount sold in any three‑month period is limited to the greater of:
– 1% of the outstanding shares of the same class, or
– The average weekly reported volume of trading in the securities during the four calendar weeks preceding the filing (the “4‑week average weekly trading volume”).
– Sales under Rule 144 that are below the Form 144 thresholds may still be subject to these volume limits.
4) Manner of sale
– Sales conducted by affiliates must typically be handled in certain customary ways (e.g., brokers’ transactions that do not involve a special arrangement or underwriting). Specific manner‑of‑sale rules vary by type of security and marketplace.
5) Filing and legend removal
– If Rule 144 conditions are met, the issuer’s transfer agent should be asked to remove any restrictive legend before resale.
– Form 144 is a notice only; it does not replace the transfer‑agent steps needed to clear legend and transfer ownership.
Lock‑up agreements (IPOs and other public offerings)
– Underwriters often require insiders to sign lock‑up agreements at an IPO that prohibit selling shares for a set period to help stabilize trading post‑IPO.
– Typical lock‑up durations are 180 days, but can range from 120 to 365 days or more. A lock‑up may prevent sales even if Rule 144 conditions and Form 144 filings would otherwise permit a sale.
Practical step‑by‑step guide to preparing and filing Form 144
1. Determine whether you are an affiliate or seller subject to Rule 144.
2. Determine if the securities are restricted (acquired in a private placement) or are control securities (held by an affiliate).
3. Calculate proposed sales for the rolling three‑month period.
– If the sales exceed 5,000 shares or $50,000 aggregate value during any three‑month period, you must file Form 144.
4. Confirm Rule 144 conditions you must meet:
– Check the holding period for restricted securities (6 or 12 months depending on issuer reporting status).
– Verify the issuer has current public information available.
– Calculate volume limitations (greater of 1% of outstanding shares or 4‑week average weekly trading volume).
– Determine manner of sale that will be used and confirm broker can comply.
5. Coordinate with your broker and the company’s transfer agent:
– Notify broker of intended sale and confirm broker will accept order consistent with Rule 144 and Form 144 notice.
– Contact transfer agent early to arrange removal of restrictive legend, if applicable, once conditions are met.
6. Prepare Form 144:
– Complete all required fields accurately (see form instructions on the SEC website).
– Include signature and certification of bona fide intent to sell within reasonable time.
7. File Form 144:
– You may file in paper with the SEC or choose to file electronically via EDGAR (many filers do). Filing with EDGAR is not required but is common.
– Keep copies of the filed form and confirmations from broker and transfer agent.
8. Execute sale consistent with the stated manner and timing in Form 144 and Rule 144 limits.
9. If sales are spread out, monitor three‑month rolling totals; future additional filings may be required if thresholds are exceeded again.
Example (real‑world filing)
– As an example available on EDGAR, on April 26, 2018, Lee Kirk (a director of Guaranty Bancshares) filed a Form 144 to sell 20,891 shares, with an approximate sale window between April 7, 2018 and June 12, 2018, for an aggregate market value listed on the filing (this illustrates timing fields and the three‑month period concept).
Other SEC forms often encountered by insiders
– Form 4 — Statement of changes in beneficial ownership (filed for actual transactions by insiders)
– Form 3 — Initial statement of beneficial ownership (when someone first becomes an insider)
– Form 5 — Annual statement of changes in beneficial ownership (for certain transactions not reported on Form 4)
– Schedule 13D/G — beneficial ownership disclosures for large shareholders
Note: Form 144 is a proposed sale notice; actual sale(s) by insiders are typically reported on Form 4 (or Form 5 when applicable).
Common pitfalls and practical tips
– Don’t confuse a Form 144 filing with registration: Form 144 is only a notice; it does not register the sale.
– Make sure the filing corresponds with a bona fide intention to sell within a reasonable time; speculative filings can raise questions.
– Even if a sale is below Form 144 thresholds, affiliates must still comply with volume limitations and manner‑of‑sale requirements.
– Coordinate early with legal counsel, your broker, and the transfer agent to avoid delays in legend removal and sale execution.
– Stay current: Rule 144 and Form 144 technical rules have been amended periodically; always confirm the latest SEC guidance.
Where to find official forms and rules
– SEC – Rule 144: Selling Restricted and Control Securities: https://www.sec.gov (search “Rule 144”)
– SEC – Form 144 page and instructions: https://www.sec.gov (search “Form 144”)
– EDGAR company filings: https://www.sec.gov/edgar
– Investopedia overview of Form 144 and Rule 144 for background and examples
Final notes
If you are an affiliate contemplating a sale, treat Form 144 as one compliance step in a broader Rule 144 and insider‑reporting process. Work with securities counsel and your broker early — mistakes or missed conditions (holding period, volume tests, manner of sale, legend removal) can result in blocked trades, regulatory scrutiny, or the need to register a resale.
Sources
– U.S. Securities and Exchange Commission — Rule 144: Selling Restricted and Control Securities (SEC.gov)
– U.S. Securities and Exchange Commission — Form 144 (SEC.gov)
– Investopedia — “Form 144: Notice of Proposed Sale of Securities” (Investopedia.com)
(Continuation — additional sections, examples, and conclusion)
Additional Sections
Who Is an “Affiliate”?
– An affiliate is any person (individual or entity) that controls, is controlled by, or is under common control with the issuer. Typical affiliates include officers, directors, large shareholders, and certain large institutional holders.
– Determination is facts-and-circumstances based. Control can be contractual (board seats, voting agreements) or de facto (ability to direct management).
Restricted vs. Control Securities — Quick Distinction
– Restricted securities: securities acquired in unregistered, private placements (Rule 144 applies once holding period and other conditions met).
– Control securities: securities held by an affiliate. Even if purchased in the open market (not “restricted”), an affiliate’s resale is subject to Rule 144’s volume, manner of sale, and Form 144 filing rules.
Rule 144 Conditions (Safe Harbor Elements)
To rely on Rule 144’s safe harbor for selling restricted/control securities, sellers generally must satisfy:
1. Holding period
– For reporting companies: generally 6 months if the issuer is subject to Exchange Act reporting requirements and has filed all required reports.
– For non-reporting companies: generally 12 months.
2. Current public information: adequate current information about the issuer must be publicly available.
3. Volume limitations (for affiliates): within any three-month period, the amount sold cannot exceed the greater of:
– 1% of the outstanding shares of the same class; or
– the average reported weekly trading volume in the same class during the four calendar weeks preceding the sale.
4. Manner of sale requirements (for affiliates of listed companies): sales must be handled in certain ways (e.g., brokers or certain types of bids) to avoid manipulatory sales.
5. Filing requirement: if an affiliate’s sale in any three-month period exceeds 5,000 shares or $50,000 aggregate sales price, the affiliate must file Form 144 (notice of proposed sale).
6. Transfer agent legend removal: transfer agent must remove restrictive legend before shares can be freely transferred.
Practical Steps — How to Prepare and File Form 144 (Checklist)
1. Determine whether you are an affiliate and whether the securities are restricted or control securities.
2. Calculate whether proposed sales in any three-month period will exceed either:
– 5,000 shares; or
– $50,000 aggregate sales price.
If neither threshold will be exceeded, Form 144 is not required (but other Rule 144 conditions may still apply).
3. Confirm holding period and public information requirements are met.
4. If you are an affiliate, confirm you will comply with the volume limitation and manner-of-sale requirements.
5. Complete Form 144:
– Obtain the current Form 144 from the SEC’s website.
– Fill in filer’s name, address, IRS number (social security for individuals), relationship to issuer, title and amount of securities, amount to be sold, approximate date of sale, broker information, and whether the issuer will receive proceeds.
6. Sign and date the form; the filer must have a bona fide intention to sell within a reasonable time after filing.
7. File the form:
– Historically filed in paper with the SEC’s Office of Filings; electronic filing via EDGAR is optional but commonly used.
– Provide copies to broker-dealer and, if requested, to the issuer or transfer agent.
8. Coordinate with broker and transfer agent to arrange sale execution and legend removal.
9. If sale plans change materially, amend Form 144 (amendment procedures are specified on the Form).
Where and How to Find Form 144 Filings
– Use the SEC’s EDGAR database and search for “Form 144” or the issuer’s filings to find Form 144 submissions.
– Many broker-dealers and transfer agents can advise whether a Form 144 has been filed for a given insider sale.
Practical Coordination Between Insider, Broker, and Transfer Agent
– Broker: ensures manner-of-sale compliance (e.g., not using an agency cross or certain types of conditional orders) and will often require a copy of Form 144 for large insider trades.
– Transfer agent: will check that Rule 144 conditions are satisfied, then remove the restrictive legend so shares can be transferred. Transfer agents frequently require documentation (Form 144, broker confirmation, legal opinion, or other indemnities).
– Issuer: may have internal policies (e.g., blackout periods or pre-clearance) that restrict or pre-approve insider sales.
Examples
Example 1 — Real-world example (summarized)
– On April 26, 2018, Lee Kirk (a director of Guaranty Bancshares) filed a Form 144 for 20,891 shares with an aggregate market value of $686,896.08. The Form stated an approximate sale period between April 7, 2018, and June 12, 2018. (Source: SEC Form 144 filing via EDGAR.)
Example 2 — Calculation of Filing Threshold and Volume Limit
– Hypothetical facts:
– Affiliate owns 10,000 shares of XYZ Corp.
– Plan: sell 6,000 shares over the next two months.
– Market price: $15 per share.
– 90-day proposed sale = 6,000 shares; aggregate sales price = 6,000 × $15 = $90,000.
– Filing threshold:
– Since 6,000 shares > 5,000 and $90,000 > $50,000, Form 144 must be filed.
– Volume limitation check (affiliate rule):
– Outstanding shares of XYZ class = 1,000,000. 1% = 10,000 shares.
– Average weekly reported trading volume during prior 4 weeks = 8,000 shares.
– Volume limit = greater of 1% (10,000) and average weekly vol (8,000) = 10,000 shares.
– Proposed sale of 6,000 shares is within the volume limitation (6,000 < 10,000), so the volume condition is satisfied.
– Holding period and manner-of-sale requirements would also need to be confirmed.
Example 3 — Holding-period variation
– If XYZ Corp is an Exchange Act reporting company, an investor who acquired restricted shares in a private placement must generally hold shares for at least 6 months before reselling under Rule 144 (subject to current public information requirement). If XYZ is not reporting, the holding period is generally 12 months.
Special Considerations and Risks
Lock-Up Agreements
– Underwriters commonly require insiders to sign lock-up agreements at IPOs that prohibit sales for a specified period (typically 90–365 days; commonly 180 days). Lock-ups are contractual and separate from Rule 144; they can prevent sales even when Rule 144 conditions are satisfied.
Insider Trading and Tipping Rules
– Even if Rule 144 is satisfied and Form 144 filed, selling while in possession of material non-public information may violate insider trading laws and company policies. Filers should coordinate with legal counsel and corporate compliance.
Failure to Comply
– Consequences for failing to meet Rule 144 conditions or to file Form 144 when required can include:
– Rejection of transfers by transfer agents or brokers.
– Potential rescission of trades, civil liability, or SEC enforcement actions for serious violations.
– Criminal liability for insider trading if sales are based on material non-public information.
Amendments and Regulatory Updates
– The SEC has periodically proposed amendments to Rule 144 and Form 144 to modernize filing requirements, address changes in market practices, and improve disclosure. Filers should consult the latest SEC releases for current filing methods and any changes in thresholds or procedures. (See SEC rulemaking pages.)
Practical Tips for Filers
– Start early: coordinate with counsel, broker, and transfer agent well before planned sale dates.
– Keep records: retain copies of Form 144 filings, broker confirmations, and communications showing compliance with Rule 144 conditions.
– Consult counsel: complex facts (e.g., attribution of shares, hedging arrangements, family trusts, and complex ownership structures) often require legal advice.
– Check issuer policies: pre-clear trades with the issuer if required (many public companies require advance notice or pre-clearance for officer/director trades).
– Consider timing: avoid selling during blackout periods and be mindful of short windows when current public information is unclear.
Additional Examples (Hypothetical Scenarios)
– Scenario A (small sale by affiliate): Affiliate plans to sell 3,000 shares trading at $10 per share (aggregate $30,000). Because 3,000 < 5,000 and $30,000 < $50,000, no Form 144 filing is required; however, the seller still must comply with Rule 144 volume limits and manner of sale rules if an affiliate.
– Scenario B (non-affiliate transfer): A regular shareholder who is not an affiliate sells restricted shares after satisfying the holding period and public information requirements. Form 144 is not required for non-affiliate sellers; however, the broker/transfer agent may still request documentation to effect the transfer.
Where to Find the Form and Official Guidance
– SEC Form 144 (fillable PDF and instructions): https://www.sec.gov/forms
– SEC rule text and explanation for Rule 144: https://www.sec.gov/rules/final/2016/33-10064.pdf (and current Rule 144 materials on SEC website)
– EDGAR search for Form 144 filings: https://www.sec.gov/edgar/search
Concluding Summary
Form 144 is the SEC notice that an affiliate must file when proposing to sell more than 5,000 shares or more than $50,000 in aggregate sales of a company’s securities within any three-month period. The filing is one element of the broader Rule 144 safe harbor that allows resales of restricted and control securities without registration if certain conditions—holding period, public information, volume and manner-of-sale limits, and (when applicable) filing—are met. Practical compliance requires coordination among the seller, broker, transfer agent, issuer, and often securities counsel. Before selling securities covered by Rule 144, insiders should verify thresholds, calculate volume limits, ensure current public information, and file Form 144 when required to avoid transfer delays or regulatory risk.
Sources
– U.S. Securities and Exchange Commission. “Rule 144: Selling Restricted and Control Securities.” https://www.sec.gov/
– U.S. Securities and Exchange Commission. “Form 144.” https://www.sec.gov/forms
– Investopedia. “Form 144: Notice of Proposed Sale of Securities.” https://www.investopedia.com/terms/f/form144.asp
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