Manner of Sale Requirement
The Manner of Sale Requirement is a Rule 144 condition that limits how specified affiliate resales of equity securities may be executed when the seller relies on the safe harbor.
How it works
Rule 144(f) permits covered equity sales through brokers’ transactions, directly with a market maker, or through qualifying riskless principal transactions. The seller generally may not solicit or arrange solicitation of buy orders in anticipation of or connection with the transaction, and payments connected with the sale are limited as specified by the rule. Rule 144(f) does not apply to debt securities and includes other stated exceptions.
Permitted execution methods are identified
Covered sales can use brokers’ transactions, direct market-maker transactions or qualifying riskless principal transactions.
Solicitation is constrained
The affiliate seller generally may not solicit or arrange the solicitation of orders to buy in anticipation of or connection with the sale.
Broker compensation is constrained
The broker’s role and compensation must fit the rule’s requirements rather than functioning like a conventional underwriting distribution.
Debt securities are treated differently
Rule 144(f) expressly excludes debt securities from the manner-of-sale condition.
Worked example: brokered sale
An affiliate places an unsolicited sell order with a broker. The broker executes the order in the market for its usual commission and does not conduct a promotional selling effort.
Why execution method matters
A sale can satisfy holding-period and volume rules yet still fall outside the safe harbor if the transaction method violates the manner-of-sale condition.
Common mistakes
Assuming any brokered sale qualifies; applying the condition to every non-affiliate; overlooking solicitation restrictions; and assuming debt securities face the identical Rule 144 manner-of-sale test.
Example
An affiliate wants to sell a block of common stock under Rule 144. The transaction is executed through an ordinary broker that receives its customary commission without soliciting buyers in a manner prohibited by the rule.
Example
An affiliate wants to sell a block of common stock under Rule 144. The transaction is executed through an ordinary broker that receives its customary commission without soliciting buyers in a manner prohibited by the rule.
Professional note
Do not treat “ordinary brokerage transaction” as a generic phrase. Rule 144 contains specific execution, solicitation and broker conditions, and the requirement is not identical across equity and debt securities.
Related terms
- 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.
- 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.
- Rule 144 Volume Limitation
The Rule 144 Volume Limitation restricts the amount of securities an affiliate may sell in reliance on Rule 144 during a rolling three-month measurement period.
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