Restricted Stock Rule 144 - For Affiliates
If you want to sell your restricted stock or control securities, you can follow the
conditions set forth in Rule 144.
The rule's five conditions on restricted stock are summarized below:
1. Holding Period. Before you may sell restricted stock, you must hold the restricted stock for a certain period of time. If the company that issued the restricted stock is subject to the reporting requirements of the Securities Exchange Act of 1934, then you must hold the restricted stock for at least six months. If the issuer of the securities is not subject to the reporting requirements, then you must hold the restricted stock for at least one year. The relevant holding period for restricted stock begins when the securities were bought and fully paid for. The holding period only applies to restricted stock, securities acquired in the public market are not restricted, there is no holding period for an affiliate who purchases securities of the issuer in the marketplace. But the resale of an affiliate's shares is subject to the other conditions of the rule.
2. Adequate Current Information. There must be adequate current public information about the issuer before the sale of restricted stock can be made. This generally means that the issuer has complied with the periodic reporting requirements of the Exchange Act.
3. Trading Volume Formula. If you are an affiliate, the amount of restricted stock you may sell during any three-month period cannot exceed the greater of 1% of the outstanding shares of the same class being sold, or if the class is listed on a stock exchange or quoted on NASDAQ, the greater of 1% or the average reported weekly trading volume during the four weeks preceding the filing of a notice of sale on Form 144. Restricted stock trading Over-the-counter, whether quoted on the OTC Bulletin Board or Pink Sheets, can only be sold using the 1% measurement.
4. Ordinary Brokerage Transactions. If you are an affiliate, the sales of restricted stock must be handled in all respects as routine trading transactions, and brokers may not receive more than a normal commission. Neither the seller nor the broker can solicit orders to buy the securities.
5. Filing a Notice With the SEC. If you are an affiliate, when selling restricted stock you must file a notice with the SEC on Form 144 if the sale involves more than 5,000 shares or the aggregate dollar amount is greater than $50,000 in any three-month period. The restricted stock sale must take place within three months of filing the Form and, if the restricted stock has not been sold, you must file an amended notice.
Selling Restricted Stock
You can not sell your restricted stock until the legend
has been removed from the restricted stock certificate. Only a transfer agent can remove
the legend. The transfer agent will wait for the consent of the issuer sometimes in the
form of an opinion letter from the issuer's counsel. when he is satisfied that all the rules
have been followed he will remove the legend from the restricted stock certificate
Kensington Capital Corporation can assist executives with restricted stock helping you comply with all requirements, helping you complete the all the necessary paperwork to gain tradability for your restricted stock. However, Rule 144 is very complex. One should not act without consulting an attorney experienced in this field.
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For more information on RESTRICTED STOCK Rule 144 for affiliates.