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Form 144: Definition, Filing Rules, and Example

File Photo: Form 144: Definition, Filing Rules, and Example
File Photo: Form 144: Definition, Filing Rules, and Example File Photo: Form 144: Definition, Filing Rules, and Example

What is SEC Form 144: Notice of Proposed Securities Sale?

The Securities and Exchange Commission (SEC) issues Form 144: Notice of Proposed Sale of Securities. For every three months with sales over 5,000 shares or units or an aggregate sales price above $50,000, an executive officer, director, or affiliate must register with the SEC when placing an order to sell a company’s stock. It is also known as Rule 144 of the Securities Act of 1933.

Understanding Form 144: Securities Sale Notice

Selling restricted, unregistered, and controlled securities in the US requires compliance with Rule 144 of the Securities Act of 1933, which was enacted to safeguard investors following the 1929 stock market crisis. Selling these securities can be challenging, so Rule 144 simplifies it. Sellers can avoid registering securities sales if they fulfill numerous requirements, as listed below. Any securities issuer, broker-dealer, or underwriter can sell.

Sellers must register Form 144 securities under Section 5 of the Securities Act because they commonly involve the issuing firm. Rules 144 can exempt resale if certain circumstances are satisfied. All parties must hire a transfer agent to remove the securities legend before selling.

Affiliates must file Form 144 with the SEC to notify the SEC of prospective securities sales exceeding 5,000 shares or units or $50,000 in aggregate sales price during three months. Form 144 filers must intend to sell the securities within a reasonable period. Although the SEC does not mandate electronic filing in the EDGAR database, some filers opt to do so. Others may print it.

The SEC 144 can be printed or filed electronically.

For Form 144, people may need a physical address, IRS number, payment type, and other comparable purchases within the past several months.

Special Considerations

Rule 144 requires specific conditions to sell these securities. They are:

  • Company holding or lock-up periods are six months for public firms and one year for others. Details underneath.
  • Public companies must provide information about their business, financial statements, disclosures, officers, and key staff.
  • Company affiliates are limited to reselling 1% of total outstanding shares.
  • Standard trading conditions apply.
  • As mentioned above, linked sellers must submit a securities sale notification. This is necessary if more than 5,000 shares are sold or the selling value will likely exceed $50,000 in three months.

Agreement to Lock Up

Underwriters need CEOs, managers, employees, and venture capitalists to sign lock-up agreements during an IPO to ensure stock price stability in the early months.

Lock-up agreements are legally enforceable contracts between underwriters and insiders that prevent insiders from selling stock for a set term. Lock-up periods usually last 180 days but can be 120 or 365 days.

Other Relevant Forms

Along with Form 144, the necessary SEC filing forms are:

  • Both S-1 and S-1/A are registration statements.
  • Annual and quarterly reports (10K/10Q)
  • Statement of Securities Beneficial Ownership Changes (SEC Form 4)
  • SEC Form 12b-25: Late Filing Notification
  • SEC Form 15: Certification and Registration Termination Notice

This isn’t an entire list of similar forms. Detailed descriptions and printable forms are available on the SEC website.

Sample Form 144: Notice of Proposed Securities Sale

Searching EDGAR for companies yields Form 144 examples. On April 26, 2018, Guaranty Bancshares director Lee Kirk advertised 20,891 shares of stock on Nasdaq for $686,896.08 in total value. The auction is expected between April 7 and June 12, 2018.

Conclusion

  • The SEC requires anyone who wants to sell a company’s stock within three months, and the sale exceeds 5,000 shares or units or $50,000, to register the order on Form 144.
  • The Form 144 filer must intend to sell the securities within a reasonable timeframe.
  • The issuing company must register securities sold under Form 144 under Section 5 of the Securities Act of 1933 due to their proximity to the company’s interests.

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