Rule 144: Restricted Stock & Control Stock

Rule 144 permits the sale of restricted stock and control stock under certain scenarios.

Restricted stock is any unregistered stock, including stock received as compensation or in a private placement. Restricted stock of a public company can be sold after a 6-month holding period.

Control stock is stock owned by a corporate insider. Corporate insiders are defined as officers, directors and greater than 10% shareholders. Under Rule 144, control stock can be sold over any 90-day period in an amount equal to the greater of:

• 1% of the outstanding shares; OR
• the average weekly trading volume over the previous four weeks.

It is important to note that stock could be both restricted stock and control stock. For example, stock paid to the CEO as compensation would be subject to both sets of rules.

The spouse of a corporate insider is also a corporate insider, but other family members are not. So, stock owned by a sibling of the CEO would not be considered control stock.