Rule 144
Rule 144 under the Securities Act of 1933 provides a safe harbor for selling restricted securities and control securities. It establishes specific conditions including holding periods, volume limitations, and manner of sale requirements that must be met before these securities can be sold.
The Trader's Take
The Signal
Large Form 144 filings can indicate upcoming selling pressure. Multiple insiders filing Form 144 simultaneously may signal coordinated selling.
The Noise
Many Rule 144 sales are routine monetization of compensation and don't indicate negative sentiment.
Actionable Insights
- 1Monitor Form 144 filings to anticipate selling pressure.
- 2Compare Form 144 amounts to actual Form 4 sales to see execution rates.
- 3Look for Form 144 filings that expire without execution—may indicate changed outlook.
- 4Track volume limitation compliance for large shareholders.
Regulatory Context & Context
| Timing / Deadline | Reporting Requirement |
|---|---|
| 6 Months | Minimum holding period for restricted securities of reporting companies. |
| 1 Year | Minimum holding period for non-reporting companies. |
Rule 144 vs Rule 10b5-1
Rule 144
Rule 144 under the Securities Act of 1933 provides a safe harbor for selling restricted securities and control securities. It establishes specific conditions including holding periods, volume limitations, and manner of sale requirements that must be met before these securities can be sold.
Rule 10b5-1
Rule 10b5-1 allows major holders of publicly traded corporations to set up a predetermined plan to sell company stocks in accordance with insider trading laws. It provides an affirmative defense against accusations of trading on non-public information.
Common Misconceptions
Rule 144 applies to both restricted securities and control securities (held by affiliates).
The volume limitations reset each quarter, not each transaction.
Non-affiliates who held securities for over 1 year have no volume limits.
Frequently Asked Questions
What is the Rule 144 holding period?
For restricted securities of SEC-reporting companies, the holding period is six months. For non-reporting companies, it is one year. The holding period begins when the securities are fully paid for.
What are Rule 144 volume limitations?
Affiliates can sell the greater of 1% of outstanding shares or the average weekly trading volume over the preceding four weeks during any three-month period.
What is the difference between Rule 144 and Rule 10b5-1?
Rule 144 governs when and how restricted/control securities can be sold. Rule 10b5-1 provides an affirmative defense against insider trading accusations through pre-planned trading. They serve different purposes and can be used together.