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.
How it works
For equity securities sold for an affiliate’s account, Rule 144(e) generally limits the amount sold during the relevant three-month period to the greatest of 1% of the outstanding shares of the class or specified average weekly reported trading-volume measures. For debt securities and non-participatory preferred stock, the rule provides a separate alternative based on 10% of the applicable tranche or class. Aggregation rules can combine sales by specified related persons or persons acting in concert.
Affiliate equity sales use a greater-of test
The rule compares 1% of outstanding shares with specified average weekly trading-volume measures when available.
Debt securities have a separate alternative
The rule can permit the greater of the equity-style limit or 10% of the tranche or applicable non-participatory preferred class.
Prior three-month sales matter
Sales of the same class for the affiliate’s account during the measurement period are included in the limit.
Aggregation can expand the counted sales
Concerted sellers, certain donees, trusts, estates and pledge-related sales can be aggregated under the rule.
Worked example: prior sales reduce remaining capacity
If the applicable limit is 900,000 shares and the affiliate already sold 300,000 counted shares during the prior three months, only about 600,000 shares of capacity remains before considering other aggregation.
Why volume limits affect block liquidity
A large affiliate position can take multiple periods to exit even when the security trades actively.
Common mistakes
Applying 1% without checking trading volume; ignoring sales already completed; using equity rules for debt securities; and failing to aggregate coordinated sellers.
Example
An affiliate wants to sell common stock. One percent of the outstanding class equals 600,000 shares, while the applicable four-week average weekly trading volume is 850,000 shares. Subject to the rule’s precise calculation and aggregation provisions, the higher trading-volume measure can govern.
Example
An affiliate wants to sell common stock. One percent of the outstanding class equals 600,000 shares, while the applicable four-week average weekly trading volume is 850,000 shares. Subject to the rule’s precise calculation and aggregation provisions, the higher trading-volume measure can govern.
Professional note
The volume test is not simply “1% every three months.” Exchange trading data, security type, prior sales, aggregation and whether a Form 144 notice is required can change the calculation.
Related terms
- 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.
- 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.
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