SEC Rule 144 Lawyers
If you are a shareholder, broker, or other entity that wants to publicly resell restricted securities, you need to consult with SEC Rule 144 lawyers beforehand. Rule 144 is one of the most commonly used exemptions for the sale of restricted securities. But it poses its own, unique challenges.
At Mangum & Associates, we assist our clients with Rule 144 compliance and help them get the opinion letters they need. To learn more about how we approach Rule 144’s safe harbors and exemptions, keep reading.
Helping Investors Navigate Their Sales of Restricted Securities
Under the Federal Securities Act of 1933, you typically must register them with the Securities Exchange Commission (SEC) or meet one of its specific safe harbors, such as SEC Rule 144. These rules apply to both securities stamped with a restricted legend and those that otherwise meet the criteria of Rule 144.
Notably, it is the seller’s responsibility to comply with SEC Rule 144 or another exemption — it is not the potential purchaser’s duty. Non-compliance may result in the rescission of the sale, civil penalties, and even criminal prosecution.
Therefore, before you sell a restricted security, it is in your best interest to consult with an experienced attorney who can identify the correct exemptions and craft a practical strategy that ensures your securities transactions are compliant and uneventful.
What Are the Requirements of Rule 144’s Safe Harbor?
Not all securities are easily sold in the public market. When you acquire them through a private placement offering (PPO), Regulation D, employee stock plan, or as part of a venture capital investment, you may receive restricted securities that are stamped with a specific legend that limits their public sale. Before you sell your restricted securities, you must either register them with the SEC or prove that they fall within an exemption. Rule 144 provides vital exemptions for both affiliates and non-affiliated individuals.
If you are have a relationship of control with the restricted securities issuer (for example, you are an officer, director, or major shareholder), the SEC considers you an affiliate. You fall into Rule 144’s safe harbor if you typically must:
- Complete a holding period, ranging between six months and one year
- Show that certain information about the issuing company’s leadership and finances is publicly available
- Meet volume requirements
- Treat it like a normal brokerage transaction and cannot solicit sales
- File a Form 144 with the SEC, notifying it of your proposed sale
If are not an affiliate, the rules are different. While you must complete a holding period before you publicly sell the shares, you typically can sell your restricted shares after one year.
While Rule 144’s requirements may sound relatively simple, they are much more complicated in practice. For example, it can be difficult to quantify your holding period if you used a promissory note to acquire the securities or obtained them during a stock split. When you work with SEC Rule 144 lawyers at Mangum & Associates, we’ll carefully assess your situation and help you identify any potential roadblocks to your proposed securities transaction.
Assessing the Availability of Public Information
Pursuant to SEC Rule 144, you must ensure that a potential buyer readily has access to information about the restricted security. Typically, this information must be similar to that contained within a reporting company’s annual report to shareholders.
In other words, you must disclose a variety of information, including:
- Name of the security’s issuer
- Its primary address and state of incorporation
- Nature of its business, services, and products
- Restricted security’s title and class
- Its par or stated value
- Number of outstanding shares
- Name and address of the issuer’s transfer agent
- Identities of the issuer’s CEO and board of directors
- Financial information, including the issuer’s most recent balance sheet, P&L statement, and retained earnings statements
- Whether you are affiliated with the issuer
If the issuer is now a reporting company, this data is easy to obtain. If you are an affiliate of a non-reporting company, you should work with your broker and securities lawyers to ensure that the information is publicly available.
Obtaining Rule 144 Opinion Letters
Even if you meet the requirements of Rule 144 and can legally remove the restricted legend from your securities, you still have work to do. Next, your SEC Rule 144 lawyers must obtain opinion letters and have a transfer agent remove the problematic legend. However, you’ll need the issuing company’s consent.
Your SEC Rule 144 lawyers will have to request an opinion letter from the issuing party or its counsel. Sometimes, the issuer will quickly consent to the sale and agree to remove the restricted legend. Other times, contentious disputes arise that require intense negotiation and litigation. Unfortunately, if the issuing company balks at your request for an opinion letter, the SEC will not intervene — although you may have recourse under state law.
We Can Guide You Through the SEC Rule 144 Process
Once you have the opinion letters you need, our experienced SEC Rule 144 lawyers can guide you through the sometimes complex and frustrating process of removing the restricted legend. We work closely with our clients and advocate on their behalf with:
- Issuing entities,
- Legal counsel,
- Transfer agents,
- Shareholders and
- Regulatory bodies.
Like you, we value transparency, strong communication skills, and tireless attention to detail.
The SEC Is Skeptical of Opinion Mills
You may see SEC Rule 144 lawyers touting their shockingly quick opinion letter turnaround times. However, the SEC is highly skeptical of these low-quality opinion mills. It has even filed charges against some of these firms for their reckless and fraudulent behavior. Rather than partner with one of these potentially unscrupulous businesses, you need an honest and professional team of SEC Rule 144 lawyers at your side.
Mangum & Associates is one of the country’s leading boutique securities law firms. With offices nationwide, you can consult with a respected Rule 144 attorney who will fairly and efficiently represent you. We help our clients both obtain opinion letters and draft them for issuing companies. Unlike the opinion letter factories that churn out documents, we take a careful and thorough approach to our research and assessments.
Identifying Other Restricted Securities Exemptions
Sometimes, your transaction may not fully meet the requirements of SEC Rule 144. In these situations, we work with our clients to identify an array of other exemptions that may apply to their restricted securities transactions.
Depending on your unique circumstances, they may include the Securities Act’s Section 4(a)(1) which permits individuals other than issuers, dealers, and underwriters, to sell restricted securities after certain time periods expire.
Request a Consultation With a SEC Rule 144 Lawyer
If you’re struggling with a sale of restricted securities, consult with SEC Rule 144 lawyers at Mangum & Associates. Our team is thorough, efficient, and strives to properly protect and advise our clients during these complicated transactions. Whether you are a shareholder, issuing company, broker, or other interested party, we’d love to help you navigate Rule 144. To request a consultation, complete our online contact form or call one of our offices today.