SECURITIES COMPLIANCE | 2026-09-28
SEC Rule 144: How California Holders Resell Restricted and Control Securities
Restricted stock and affiliate shares cannot simply be sold into the market. Rule 144 is the safe harbor that lets holders resell them — if the holding period, volume, and notice conditions are met.
Shares acquired in a private placement, or held by a company insider, are not freely tradable — they are “restricted” or “control” securities that cannot be resold into the public market without either registration or an exemption. Rule 144 is the exemption most holders rely on. For California found
Not all stock can be sold the day you want to sell it. Restricted securities (acquired in unregistered transactions) and control securities (held by affiliates) carry resale limits. Rule 144 provides a safe harbor for reselling them without registration — provided its conditions are satisfied.
Restricted vs. Control Securities
- Restricted securities are acquired in an unregistered, private transaction (for example, a private placement or as founder/employee equity) and bear a restrictive legend.
- Control securities are held by an affiliate of the issuer — typically an officer, director, or large shareholder who controls or is controlled by the company — regardless of how they were acquired.
The Rule 144 conditions that apply depend on which category the securities fall into and whether the seller is an affiliate.
The Holding Period
For restricted securities, Rule 144 requires a minimum holding period before resale: generally six months if the issuer is a reporting company subject to Exchange Act reporting, or one year if the issuer is not a reporting company. The holding period runs from the date the securities were acquired and fully paid for. Control securities that are not also restricted have no holding period, but affiliates remain subject to the other conditions below.
The Conditions for Affiliates
When the seller is an affiliate, Rule 144 imposes additional conditions on top of the holding period:
- Current public information — adequate current information about the issuer must be available.
- Volume limitations — in any three-month period, the amount sold generally may not exceed the greater of 1% of the outstanding shares of the class or the average weekly trading volume over a defined period.
- Manner of sale — equity sales generally must be made in ordinary brokers’ transactions.
- Form 144 — an affiliate selling more than a threshold amount must file a Form 144 notice with the SEC.
Non-affiliates who have satisfied the holding period can generally resell restricted securities without the volume, manner-of-sale, or Form 144 conditions once the applicable period has passed.
Legend Removal
Selling under Rule 144 usually requires removing the restrictive legend, which the transfer agent will do only with the issuer’s authorization — typically supported by a legal opinion confirming the Rule 144 conditions are met. Coordinating the opinion and the issuer’s instruction is a practical step that often delays sales if not planned in advance.
Frequently Asked Questions
How long must I hold restricted stock before selling under Rule 144?
Generally six months for a reporting-company issuer, or one year for a non-reporting issuer, from the date you acquired and paid for the securities.
Am I an affiliate?
Generally yes if you are an officer, director, or a shareholder who controls or is controlled by the issuer. Affiliates face volume, manner-of-sale, current-information, and Form 144 conditions.
What is Form 144?
A notice an affiliate files with the SEC when selling above a threshold amount of securities under Rule 144.
Do non-affiliates have the same limits?
No — once the holding period is met, non-affiliates can generally resell without the volume, manner-of-sale, or Form 144 conditions.
Related Securities & Governance Guides
Talk to a Securities Attorney About Rule 144
If you hold restricted or control securities and want to sell, the holding period and affiliate conditions determine how and when. Trembach Law Firm advises California holders on Rule 144 resales and legend removal. Call (818) 514-7680.
Contact Trembach Law Firm at (818) 514-7680 for a confidential consultation.
Trembach Law Firm | 27001 Agoura Road, Suite 350, Calabasas, CA 91301