Rule 144 and restricted securities
Securities bought in a private offering are restricted. Rule 144 is the main way investors can later resell them publicly.
Last reviewed November 2026
Restricted and control securities
Restricted securities are acquired in an unregistered sale from the issuer or an affiliate, including every Regulation D offering except a Rule 504 offering that meets Rule 504(b)(1). They usually carry a legend stating they can’t be resold without registration or an exemption. Control securities are held by affiliates of the issuer, such as officers, directors and large shareholders, whether or not they are restricted.
The holding period
- Six months if the issuer has been an SEC reporting company for at least 90 days and is current in its filings.
- One year if the issuer isn’t a reporting company, which covers most private companies.
After the holding period
Non-affiliates of a non-reporting issuer can sell freely once a year has passed. Affiliates must keep meeting these conditions:
- Current public information about the issuer must be available.
- Volume limit: in any three months, no more than the greater of 1% of the class outstanding or, for listed securities, the average weekly trading volume over the prior four weeks.
- Manner of sale: equity securities must be sold in ordinary brokerage transactions or through a market maker.
- Form 144: required if sales in three months exceed 5,000 shares or $50,000, filed electronically on EDGAR.
Shell companies
Rule 144 isn’t available for securities of shell companies, or former shells, until a year after the company files information equivalent to a registration statement and while it stays current in its reports.
Removing the legend
Meeting Rule 144 doesn’t remove a legend by itself. The transfer agent removes it, usually after the issuer’s counsel delivers an opinion. The SEC doesn’t step into legend disputes, which are governed by state law.
The reality for private companies
Most private company securities have no public market, and operating agreements and shareholder agreements often restrict transfers further. Investors who want to sell privately may use Section 4(a)(7), which allows resales to accredited investors when specific information and other conditions are met. Your PPM’s transfer restrictions section should explain all of this plainly.
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