Rule 144 Affiliate
A Rule 144 Affiliate is a person that directly or indirectly controls, is controlled by, or is under common control with an issuer for purposes of applying Rule 144 resale conditions.
How it works
Rule 144 uses a control-based definition rather than a fixed ownership percentage. Officers, directors, controlling stockholders and related entities can be affiliates depending on the facts, but title or percentage ownership is not the sole test. Rule 144 also applies affiliate resale conditions to a person who was an affiliate at any time during the 90 days immediately before the sale.
The rule focuses on control
Direct control, indirect control and common control can each create affiliate status.
There is no universal ownership cutoff
Ownership percentage is relevant evidence but Rule 144 does not define affiliate solely through a bright-line percentage.
Recent affiliate status still matters
The rule looks back 90 days for persons who were affiliates immediately before the sale.
Affiliate sales face more Rule 144 conditions
Current public information, volume, manner-of-sale and notice requirements can apply to affiliate resales.
Worked example: former executive
An executive resigns and ceases exercising control. A sale 30 days later can still be treated under the recent-affiliate provisions because the 90-day lookback has not expired.
Why the classification matters
The difference between affiliate and non-affiliate status can materially change how much may be sold, how it may be sold and whether Form 144 is required.
Common mistakes
Using 10% as an automatic Rule 144 threshold; assuming resignation ends all affiliate conditions immediately; ignoring control through entities; and confusing Section 16 insider thresholds with Rule 144 affiliate status.
Example
A founder owns 22% of an issuer, has board representation and substantial influence over company decisions. Those facts can support affiliate status, requiring the founder to apply the Rule 144 conditions applicable to affiliates when relying on the safe harbor.
Example
A founder owns 22% of an issuer, has board representation and substantial influence over company decisions. Those facts can support affiliate status, requiring the founder to apply the Rule 144 conditions applicable to affiliates when relying on the safe harbor.
Professional note
Affiliate analysis is facts-and-circumstances based. Do not assume that crossing below 10% ownership automatically ends affiliate status or that every officer is conclusively an affiliate in every context.
Related terms
- Insider Ownership
Insider ownership generally describes shares beneficially owned by officers, directors and other insiders or affiliated holders.
- Beneficial Ownership Limitation
A Beneficial Ownership Limitation is a contractual cap that restricts conversion or exercise of a security to the extent the transaction would cause the holder’s beneficial ownership to exceed a specified percentage.
- Control Securities
Control Securities are securities held by an affiliate of the issuer, such as a person who directly or indirectly controls, is controlled by, or is under common control with the issuer.
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