Form 144: What Is It, Who Files It and Who Gets It?

Form 144 is a document filed with the SEC to notify the agency of an insider’s intention to sell restricted or control securities of a public company. These are securities acquired through unregistered, private sales from the issuing company or an affiliate. It’s necessary to submit Form 144 before the sale to ensure compliance with Rule 144 under the Securities Act of 1933, which regulates the resale of these types of securities in the public market.

A financial advisor or securities attorney can help evaluate your status and ensure that any transaction follows SEC regulations.

Form 144: Notice of Proposed Sale of Securities – Requirements

Filing Form 144 is a key step for insiders or affiliates who intend to sell a significant amount of company stock. While the form itself is relatively short, the filing requirements are specific. Knowing when and how to file can help prevent regulatory missteps and ensure the proposed transaction remains compliant with SEC rules.

Here are the main points to know when filing Form 144:

Purpose: The purpose of Form 144 is to give the SEC and the public notice of a potential sale by insiders or affiliates. This promotes transparency and aims to prevent fraudulent or manipulative trading by alerting investors to large, possibly market-moving sales.
Filing requirements: Anyone who plans to sell restricted or controlled securities in amounts exceeding certain thresholds must file Form 144 with the SEC. The filer must also send a copy to the exchange where the security is traded. This filing applies only when the transaction falls under the conditions outlined in SEC Rule 144.
Thresholds: Filing is required if the amount sold during any three months exceeds either 5,000 shares or $50,000 in aggregate market value. If a proposed sale is below both of these thresholds, filing Form 144 is not necessary, even if the seller is an insider or affiliate.
Timing: You must file Form 144 at the time the order to sell is placed with a broker or directly with the market maker. The filing must occur no later than the same day the order is given.
Electronic filing: As of April 2023, filers must submit all Form 144 filings electronically through the SEC’s EDGAR system. Filers need to create an EDGAR account and obtain the appropriate access credentials to file successfully.

Who Must File Form 144: Notice of Proposed Sale of Securities?

Form 144 is not for the general investing public. It’s specifically required for individuals or entities classified as insiders or affiliates of the issuing company who plan to sell restricted or control securities. These classifications are defined by the SEC and include specific roles and relationships within the organization. Here’s who is required to file:

Corporate insiders: This includes officers, directors and key executives of a company. Because insiders have access to material, nonpublic information, their transactions are closely monitored for transparency and regulatory compliance.
Those selling restricted or controlled securities: Restricted securities are typically acquired through private placements or as compensation. They’re also not registered for resale. Control securities are held by affiliates who influence the company. It is necessary to file Form 144 before these securities are sold in the open market.
Affiliates of an issuer: Affiliates are individuals or entities that have a relationship with the issuer, allowing them to exercise control. They may have this through ownership, management or influence over corporate policy. Even if they are not officers or directors, their sales are still subject to Rule 144 and the filing requirement.

Form 144: Notice of Proposed Sale of Securities – Additional Considerations

Form 144: What Is It, Who Files It and Who Gets It?

Beyond the filing itself, there are several additional considerations tied to Form 144 that can impact timing, compliance and planning for your transaction. Many overlook these factors, which can affect how and when the sale can take place. Key considerations include:

Rule 144: Rule 144 governs the conditions under which you can sell restricted or control securities. It sets requirements for holding periods, volume limitations and manner of sale. You must comply with Rule 144 even if you don’t have to file Form 144.
EDGAR Account: As electronic filing is mandatory, you must set up an EDGAR (Electronic Data Gathering, Analysis and Retrieval) account with the SEC. The account setup process can take several days. It’s a good idea to start the process early if you anticipate a filing requirement.
Deadline: You must file Form 144 on or before the day the order to sell is placed. Missing the deadline can result in noncompliance, even if you meet all other conditions of Rule 144.
Resources: The SEC provides instructions and FAQs for Form 144 filings on its website. However, due to the high level of scrutiny on insider sales, you may consider working with a financial advisor or securities law professional to avoid errors or oversights.

Frequently Asked Questions

What is the purpose of Form 144?

Form 144 serves to notify the SEC and the public of an insider’s intention to sell restricted or control securities. It promotes transparency and helps prevent potential abuses of nonpublic information.

What happens if I don’t file Form 144?

Failure to file when required can result in penalties and may delay or block the proposed sale. It can also raise compliance issues with the SEC, especially if the filer is a corporate insider.

Can I submit Form 144 by mail?

No. As of April 2023, you must submit Form 144 filings electronically via the EDGAR system. The SEC no longer accepts paper filings.

Bottom Line

Form 144: Notice of Proposed Sale of Securities is a vital part of regulatory compliance for corporate insiders, affiliates and others looking to sell restricted or control shares. Filing helps to ensure transparency in the markets. It also provides investors with advanced notice of significant sales that could impact stock prices. As such, filing Form 144 correctly—and on time—is not just a legal obligation. It also helps build trust with shareholders and regulators.

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