What is Rule 144?
Under the Securities Act of 1933, every sale of securities has to be registered with the SEC or fit an exemption. Most open-market trades rely on an exemption without anyone thinking about it. Rule 144 is the exemption, technically a safe harbor, that lets two specific groups resell shares publicly without registration: holders of restricted securities and holders of control securities.
If you meet its conditions, you are not treated as an "underwriter" distributing stock to the public, and the sale can go through. If you do not, the sale may need to be registered or fit some other exemption.
Who it applies to
Restricted securities
Restricted securities are shares acquired in an unregistered transaction. Common sources include private placements, pre-IPO stock purchases, shares received as consideration when a private company is acquired, and some founder and early-employee grants. These certificates or book entries usually carry a restrictive legend.
Control securities
Control securities are any shares held by an affiliate of the company: a person who controls, is controlled by, or is under common control with the issuer. Directors, executive officers, and large shareholders are commonly treated as affiliates, although the determination depends on the facts and is usually made by company counsel.
This is the part executives most often miss. Shares from RSUs and options granted under a company's registered equity plan (typically registered on Form S-8) are not restricted securities. But if you are an affiliate, those same shares are control securities, and your sales still have to follow Rule 144's other conditions.
The holding period
For restricted securities, the holding period runs from the date the shares were bought and fully paid for:
- Six months if the issuer has been an SEC reporting company for at least 90 days.
- One year if the issuer is not a reporting company.
Control securities bought in the open market or received under a registered plan have no holding period. The affiliate conditions below still apply.
After the holding period, a non-affiliate holding restricted securities of a reporting company can generally sell, subject only to the current public information requirement until a full year has passed. After one year, a non-affiliate can generally sell without further Rule 144 conditions. Someone who was an affiliate is treated as a non-affiliate once they have not been one for 90 days.
The conditions for affiliates
Affiliates selling either restricted or control securities must meet four further conditions on every sale.
Current public information
The company must be current in its SEC reporting. If it falls behind on its filings, affiliate sales under Rule 144 generally stop until it catches up.
Volume limit
In any three-month period, an affiliate may sell no more than the greater of:
- 1% of the shares of that class outstanding, or
- the average weekly reported trading volume during the four calendar weeks before the Form 144 is filed (for listed securities).
The limit counts sales by certain related parties together. That can include family members sharing your home and some trusts and entities you control, so the share count is a household question rather than an individual one.
Hypothetical example: Meet "David," a director at a public company with 200 million shares outstanding. One percent is 2,000,000 shares. If average weekly volume over the prior four weeks was 1,500,000 shares, the higher figure, 2,000,000 shares, sets his maximum for any three-month period. For most executives the limit never binds. For founders and large holders, it can set the pace of diversification more than taxes do.
Manner of sale
Equity securities must be sold in ordinary brokers' transactions, directly with a market maker, or in riskless principal transactions. The seller and broker may not solicit buyers or pay more than the usual commission.
Form 144
An affiliate must file Form 144 with the SEC if sales in any three-month period exceed 5,000 shares or $50,000 in aggregate sale price. Since April 2023 the form has been filed electronically on EDGAR, and it is due no later than when the sell order is placed. In practice your broker's restricted stock desk usually prepares it with you.
How Rule 144 fits with a 10b5-1 plan
The two rules solve different problems. A 10b5-1 plan provides a defense against insider trading claims. Rule 144 governs whether the resale itself needs registration. An affiliate selling under a 10b5-1 plan still has to satisfy Rule 144, including the volume limit and Form 144. The form includes a place to disclose the plan's adoption date.
Section 16 reporting on Form 4 and the short-swing profit rule are separate again. One sale by an executive can touch all three.
Removing the restrictive legend
Meeting the conditions is not the same as being able to sell. If your shares carry a restrictive legend, the transfer agent usually needs an opinion from counsel, often the company's, before the legend comes off. That takes time, and the request typically goes through the company's legal team. Build the lead time into any plan that depends on a sale date.
Turning the rules into a selling plan
Rule 144 tells you what you are allowed to sell. The financial plan decides what you should sell and when. A few questions shape that schedule:
- How long will diversification take? If the volume limit binds, the answer is a schedule measured in quarters or years, and the plan should say so.
- Which lots go first? Shares with the smallest embedded gains generally cost the least tax to sell. Low-basis shares may be better used for charitable giving.
- How do the sales land across tax years? Spreading sales across calendar years gives more room to manage brackets and the net investment income tax. See our page on tax-aware strategies.
- Where do the proceeds go? Decide the reinvestment plan before the first trade, not after.
Common mistakes
- Assuming shares from a registered equity plan are freely tradeable when you are an affiliate.
- Counting only your own sales toward the volume limit and forgetting household members and controlled entities.
- Forgetting the Form 144 filing, or leaving it until the day of the trade.
- Planning a sale date without allowing time for legend removal and company approval.
- Treating Rule 144 compliance as the whole plan instead of one constraint inside it.
Important: Skyview Financial Group does not provide legal advice. Whether you are an affiliate, and whether a particular sale meets Rule 144, should be confirmed with your company's counsel or your own securities attorney. We coordinate the financial and tax strategy alongside them.
Related: our equity compensation planning service and our guide to diversifying a concentrated stock position.
Disclosure: Skyview Financial Group, LLC is an SEC-registered investment adviser (CRD #310581). This content is educational only and is not individualized tax, legal, or investment advice. Skyview Financial Group does not prepare or file tax returns. Figures and rules cited are current as of October 2026 and subject to change; please consult your CPA and, where applicable, legal counsel. Examples are hypothetical and do not reflect any specific client.