Rule 144 Holding Period
The Rule 144 Holding Period is the minimum time restricted securities generally must be held before they can be resold in reliance on Rule 144, subject to the issuer’s reporting status and the seller’s circumstances.
How it works
For a reporting issuer that has been subject to Exchange Act reporting for at least 90 days before the sale, Rule 144 generally requires six months between acquisition from the issuer or an affiliate and resale in reliance on the rule. For a non-reporting issuer, the general minimum is one year. The period generally does not begin until full purchase price or other consideration has been paid or given. Special tacking rules can apply to conversions, exchanges, gifts, trusts, estates, stock splits, recapitalizations and cashless exercises.
Reporting status determines the general minimum
The rule generally uses six months for qualifying reporting issuers and one year for non-reporting issuers.
The period applies to restricted securities
An affiliate who bought unrestricted shares in the public market does not need a Rule 144 holding period for those market-acquired shares, though other affiliate conditions can still apply.
Full payment can control the start
When securities are purchased, the holding period generally does not begin until the purchaser has fully paid or provided the required consideration.
Tacking rules can preserve earlier acquisition dates
Certain conversions, exchanges, gifts and cashless exercises can allow a later holder or resulting security to use an earlier acquisition date.
Worked example: conversion tacking
Restricted notes held for eight months are converted solely into common shares of the same issuer. If the Rule 144 tacking conditions are satisfied, the common shares can inherit the earlier holding period rather than starting at zero.
Why the one-year mark can matter
For a qualifying non-affiliate, reaching one year can eliminate the Rule 144 current-public-information condition that can apply between six months and one year for reporting issuers.
Common mistakes
Using trade date when full payment came later; assuming every conversion restarts the period; applying six months to a non-reporting issuer; and treating the generic investment Holding Period as the Rule 144 legal holding period.
Example
An investor pays in full for restricted shares of a reporting issuer on March 15. Assuming the issuer satisfies the relevant reporting-status condition, the earliest general six-month point is September 15, though other Rule 144 conditions may still apply.
Example
An investor pays in full for restricted shares of a reporting issuer on March 15. Assuming the issuer satisfies the relevant reporting-status condition, the earliest general six-month point is September 15, though other Rule 144 conditions may still apply.
Professional note
Do not calculate from the certificate date alone. Acquisition date, full payment and any permitted holding-period tacking can change the result materially.
Related terms
- Employee Stock Purchase Plan (ESPP)
An employee stock purchase plan lets eligible employees purchase employer shares, usually through payroll deductions and often at a discount.
- Restricted Securities
Restricted securities are securities acquired in specified unregistered transactions that cannot be freely resold into the public market unless the resale is registered or an exemption is available.
Related ROIStreet guides
- What Is the Rule of 55?
The Rule of 55 is an informal name for a federal exception to the 10% additional tax on certain early retirement-plan distributions. It can apply when a worker separates from the employer maintaining a qualified plan in or after the calendar year the worker reaches age 55. This guide explains the age test, eligible plans, IRA differences, taxes, rollovers and special public-safety rules.
- Stocks vs. Bonds: A Practical Comparison
Stocks represent ownership in companies; bonds generally represent lending to an issuer. This comparison explains how the two differ in return sources, volatility, income, maturity, priority, credit risk and liquidity.
- What Is a 401(k) Recordkeeper?
A 401(k) recordkeeper maintains the participant-level ledger: contributions, investments, gains and losses, fees, loans, distributions and account balances. The recordkeeping role is distinct from holding plan assets, writing the plan document or serving as the legal plan administrator, even when one financial company bundles several of those services.
- What Compensation Counts for a 401(k)?
There is no single universal 401(k) compensation number. A plan can use different definitions for deferrals, matching, profit sharing and testing, while statutory definitions govern limits such as Sections 401(a)(17), 414(s) and 415.