Rule 144: Rule 144 -- Are You an Affiliate?

Rule 144 at (a)(1) defines an “affiliate” of an issuing company as a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such issuer.” Rule 144 is important because it provides an exemption under which you can sell these securities in the public stock market without registering them with the SEC. Investors and shareholders in private offerings have the opportunity to resell their restricted securities, which makes them more valuable than if you held onto them indefinitely. The SEC staff and the courts utilize two rather imprecise tests in determining who is a control person, or - using the terminology of Rule 144 - an "affiliate. First, does the person in question have the power to direct corporate management and policies? Rule 144 creates a safe harbor from the Section 2(a)(11) definition of “underwriter.” A person satisfying the applicable conditions of the Rule 144 safe harbor is deemed not to be engaged in a distribution of the securities and therefore not an underwriter of the securities for purposes of Section 2(a)(11). Rule 144?" The SEC amended Rule 144 effective February 15, 2008. The amendments reduced the restrictions on unregistered resales of securities into the public markets. What are the basic requirements of Rule 144? There are five basic requirements of Rule 144, although not all requirements apply to every sale.

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