Unlocking the Potential: Understanding SEC Form 144

Harnessing the Value of SEC Form 144

SEC Form 144: Notice of Proposed Sale of Securities is essential for ensuring compliance when certain insiders intend to sell company stock. This form must be submitted to the Securities and Exchange Commission (SEC) by an executive officer, director, or affiliate of a company if the sale during any three-month period involves more than 5,000 shares or units or has an aggregate sales price exceeding $50,000.

Key Takeaways

Filing of Form 144 is mandatory when exceeding the thresholds of 5,000 shares or units or a sales price over $50,000.
The filer must have a genuine intention to sell the securities soon after the filing.
These sales often intertwine closely with company interests, hence the registration under Section 5 of the Securities Act of 1933 is required.

Unpacking Form 144: Notice of Proposed Sale of Securities

Selling restricted, unregistered, and control securities in the United States falls under the purview of Rule 144 of the Securities Act of 1933, introduced to safeguard investors post the 1929 stock market crash. Rule 144 streamlines the process, allowing sellers - whether they are the issuer, broker-dealers, or underwriters - to retain exemptions from registering their sales, provided specific conditions are met.

Sales under Form 144 require obtaining a transfer agent to remove the security’s legend before the sale. Without electronic filing to the SEC’s EDGAR database, paper submissions remain an option.

Special Considerations

Hyderabad Certain preconditions exist:

Holding periods: Six months for public companies, one year for others.
Public information: Adequate business descriptions, financial statements, disclosures.
Sales limit: Company affiliates cannot resell more than 1% of the shares outstanding.
Trading conditions: Must adhere to normal regulations.
File a notice: Required if sales exceed the specified thresholds.

Lock-Up Agreement

Underwriters typically have company insiders sign lock-up agreements before an initial public offering (IPO), to maintain stock price stability. These agreements prevent insiders from selling shares for a set duration - usually 180 days but can vary between 120 and 365 days.

Other Relevant SEC Forms

Key related forms include:

S-1 and S-1/A: Registration statements
10-K and 10-Q: Annual and quarterly reports
SEC Form 4: Changes in Beneficial Ownership of Securities
SEC Form 12b-25: Notification of Late Filing
SEC Form 15: Certification and Notice of Termination of Registration

For a comprehensive directory and additional details, consult the SEC’s official website.

Real-World Example

Illustrative opportunities arise via company lookups on EDGAR. On April 26, 2018, Lee Kirk, a director of Guaranty Bancshares, filed to sell 20,891 shares amounting to $686,896.08 in market value on Nasdaq. The stipulated sale window was April 7, 2018, to June 12, 2018.

Related Terms: Rule 144, Securities Act of 1933, affiliate, executive officer, stock, financial report.

References

U.S. Securities and Exchange Commission. “Rule 144: Selling Restricted and Control Securities”.
U.S. Securities and Exchange Commission. “Form 144”.
U.S. Securities and Exchange Commission. “SEC Proposes Amendments to Rule 144 and Form 144”.
U.S. Securities and Exchange Commission. “Forms List”.
U.S. Securities and Exchange Commission. “Form 144 Lee Kirk L”.

Get ready to put your knowledge to the test with this intriguing quiz!

--- primaryColor: 'rgb(121, 82, 179)' secondaryColor: '#DDDDDD' textColor: black shuffle_questions: true --- ## Which department of the U.S. government is Form 144 associated with? - [ ] Department of Commerce - [ ] Internal Revenue Service (IRS) - [x] Securities and Exchange Commission (SEC) - [ ] Department of Labor ## Form 144 is required when what type of shares are being sold? - [ ] Preferred shares - [x] Restricted shares and affiliates' securities - [ ] Common shares - [ ] Treasury shares ## How many days in advance must Form 144 be filed before the sale of securities? - [ ] 15 days - [ ] 30 days - [x] At least 90 days - [ ] No specific time period ## What is the purpose of Form 144? - [ ] To issue new securities - [x] To notify the SEC of the intention to sell restricted or control securities - [ ] To request a tax deferral on securities sales - [ ] To register a new brokerage account ## What is the maximum aggregate dollar amount of securities that can be sold in a 3-month period without filing Form 144? - [ ] $500,000 - [x] $50,000 - [ ] $250,000 - [ ] $100,000 ## Which of the following information must be included on Form 144? - [x] The number of shares to be sold - [x] The estimated date of sale - [ ] The expected sale price - [ ] The company’s profit forecast ## In which situation would Form 144 NOT need to be filed? - [x] The sale involves less than 5,000 shares and less than $50,000 in a three-month period - [ ] The sale involves restricted shares only - [ ] The seller is considered an affiliate of the company - [ ] The shares are sold during a private placement ## What disclosure timing is required when Form 144 is filed? - [ ] Immediately after the sale occurs - [x] Concurrently with or prior to the sale, within a 90-day window - [ ] Annually on a fixed date - [ ] During the next quarterly earnings release ## Which issuerrelated conditions could allow for the exemption from filing Form 144? - [ ] The issuer has filed for bankruptcy. - [ ] The issuer is hugely profitable. - [x] The issuer is a shell company. - [ ] The issuer is backed by the government ## Which of the following sales would typically require filing Form 144? - [ ] Sales under a dividend reinvestment plan (DRIP) - [ ] Sales of shares acquired through exercise of stock options in the open market - [ ] Sales initiated by non-affiliate shareholders - [x] Sales of control securities by a company officer