• Certain basic principles are essential to an understanding of the registration requirements in the Securities Act of 1933 (the Act or the Securities Act) and the purposes underlying Rule 144:
  
  1.  If any person sells a non-exempt security to any other person, the sale must be registered unless an exemption can be found for the transaction.
  
  2.  Section 4(1) of the Securities Act provides one such exemption for a transaction "by a person other than an issuer, underwriter, or dealer." Therefore, an understanding of the term underwriter is important in determining whether or not the Section 4(1) exemption from registration is available for the sale of the securities.
  
  The term "underwriter" is broadly defined in Section 2(a)(11) of the Securities Act to mean any person who has purchased from an issuer with a view to, or offers or sells for an issuer in connection with, the distribution of any security, or participates, or has a direct or indirect participation in any such undertaking, or participates or has a participation in the direct or indirect underwriting of any such undertaking. The interpretation of this definition traditionally has focused on the words with a view to in the phrase "purchased from an issuer with a view to . . . distribution." An investment banking firm which arranges with an issuer for the public sale of its securities is clearly an underwriter under that section. However, individual investors who are not professionals in the securities business also may be "underwriters" if they act as links in a chain of transactions through which securities move from an issuer to the public.
  
  Since it is difficult to ascertain the mental state of the purchaser at the time of an acquisition of securities, prior to and since the adoption of Rule 144, subsequent acts and circumstances have been considered to determine whether the purchaser took the securities "with a view to distribution" at the time of the acquisition. Emphasis has been placed on factors such as the length of time the person held the securities and whether there has been an unforeseeable change in circumstances of the holder. Experience has shown, however, that reliance upon such factors alone has led to uncertainty in the application of the registration provisions of the Act.
  
  The Commission adopted Rule 144 to establish specific criteria for determining whether a person is not engaged in a distribution. Rule 144 creates a safe harbor from the Section 2(a)(11) definition of "underwriter." A person satisfying the applicable conditions of the Rule 144 safe harbor is deemed not to be engaged in a distribution of the securities and therefore not an underwriter of the securities for purposes of Section 2(a)(11). Therefore, such a person is deemed not to be an underwriter when determining whether a sale is eligible for the Section 4(1) exemption for "transactions by any person other than an issuer, underwriter, or dealer." If a sale of securities complies with all of the applicable conditions of Rule 144:
  
  1.  Any affiliate or other person who sells restricted securities will be deemed not to be engaged in a distribution and therefore not an underwriter for that transaction;
  
  2.  Any person who sells restricted or other securities on behalf of an affiliate of the issuer will be deemed not to be engaged in a distribution and therefore not an underwriter for that transaction; and
  
  The purchaser in such transaction will receive securities that are not restricted securities.
  
  Rule 144 is not an exclusive safe harbor. A person who does not meet all of the applicable conditions of Rule 144 still may claim any other available exemption under the Act for the sale of the securities. The Rule 144 safe harbor is not available to any person with respect to any transaction or series of transactions that, although in technical compliance with Rule 144, is part of a plan or scheme to evade the registration requirements of the Act.

SEC release commentary

• Final release  §II.A  Dec 2007

• Rule 144 is designed to implement the fundamental purposes of the Act, as expressed in its preamble, To provide full and fair disclosure of the character of the securities sold in interstate commerce and through the mails, and to prevent fraud in the sale thereof * * * The rule is designed to prohibit the creation of public markets in securities of issuers concerning which adequate current information is not available to the public. At the same time, where adequate current information concerning the issuer is available to the public, the rule permits the public sale in ordinary transactions of limited amounts of securities owned by persons controlling, controlled by or under common control with the issuer and by persons who have acquired restricted securities of the issuer.
  
  1. Certain basic principles are essential to an understanding of the requirement of registration in the Act:
  
  2. If any person utilizes the jurisdictional means to sell any non-exempt security to any other person, the security must be registered unless a statutory exemption can be found for the transaction.
  
  In addition to the exemptions found in Section 3, four exemptions applicable to transactions in securities are contained in Section 4. Three of these Section 4 exemptions are clearly not available to anyone acting as an underwriter of securities. (The fourth, found in Section 4(4), is available only to those who act as brokers under certain limited circumstances.) An understanding of the term underwriter is therefore important to anyone who wishes to determine whether or not an exemption from registration is available for his sale of securities.
  
  The term underwriter is broadly defined in Section 2(a)(11) of the Act to mean any person who has purchased from an issuer with a view to, or offers or sells for an issuer in connection with, the distribution of any security, or participates or has a direct or indirect participation in any such undertaking, or participates or has a participation in the direct or indirect underwriting of any such undertaking. The interpretation of this definition has traditionally focused on the words with a view to in the phrase purchased from an issuer with a view to * * * distribution. Thus, an investment banking firm which arranges with an issuer for the public sale of its securities is clearly an underwriter under that Section. Individual investors who are not professionals in the securities business may also be underwriters within the meaning of that term as used in the Act if they act as links in a chain of transactions through which securities move from an issuer to the public. Since it is difficult to ascertain the mental state of the purchaser at the time of his acquisition, subsequent acts and circumstances have been considered to determine whether such person took with a view to distribution at the time of his acquisition. Emphasis has been placed on factors such as the length of time the person has held the securities and whether there has been an unforeseeable change in circumstances of the holder. Experience has shown, however, that reliance upon such factors as the above has not assured adequate protection of investors through the maintenance of informed trading markets and has led to uncertainty in the application of the registration provisions of the Act.
  
  It should be noted that the statutory language of Section 2(a)(11) is in the disjunctive. Thus, it is insufficient to conclude that a person is not an underwriter solely because he did not purchase securities from an issuer with a view to their distribution. It must also be established that the person is not offering or selling for an issuer in connection with the distribution of the securities, does not participate or have a direct or indirect participation in any such undertaking, and does not participate or have a participation in the direct or indirect underwriting of such an undertaking.
  
  In determining when a person is deemed not to be engaged in a distribution several factors must be considered.
  
  First, the purpose and underlying policy of the Act to protect investors requires that there be adequate current information concerning the issuer, whether the resales of securities by persons result in a distribution or are effected in trading transactions. Accordingly, the availability of the rule is conditioned on the existence of adequate current public information.
  
  Secondly, a holding period prior to resale is essential, among other reasons, to assure that those persons who buy under a claim of a Section 4(2) exemption have assumed the economic risks of investment, and therefore are not acting as conduits for sale to the public of unregistered securities, directly or indirectly, on behalf of an issuer. It should be noted, that there is nothing in Section 2(a)(11) which places a time limit on a person's status as an underwriter. The public has the same need for protection afforded by registration whether the securities are distributed shortly after their purchase or after a considerable length of time.
  
  A third factor, which must be considered in determining what is deemed not to constitute a distribution, is the impact of the particular transaction or transactions on the trading markets. Section 4(1) was intended to exempt only routine trading transactions between individual investors with respect to securities already issued and not to exempt distributions by issuers or acts of other individuals who engage in steps necessary to such distributions. Therefore, a person reselling securities under Section 4(1) of the Act must sell the securities in such limited quantities and in such a manner as not to disrupt the trading markets. The larger the amount of securities involved, the more likely it is that such resales may involve methods of offering and amounts of compensation usually associated with a distribution rather than routine trading transactions. Thus, solicitation of buy orders or the payment of extra compensation are not permitted by the rule.
  
  In summary, if the sale in question is made in accordance with all of the provisions of the rule, as set forth below, any person who sells restricted securities shall be deemed not to be engaged in a distribution of such securities and therefore not an underwriter thereof. The rule also provides that any person who sells restricted or other securities on behalf of a person in a control relationship with the issuer shall be deemed not to be engaged in a distribution of such securities and therefore not to be an underwriter thereof, if the sale is made in accordance with all the conditions of the rule.                                                            

• Non-exclusive rule. Although this rule provides a means for reselling restricted securities and securities held by affiliates without registration, it is not the exclusive means for reselling such securities in that manner. Therefore, it does not eliminate or otherwise affect the availability of any exemption for resales under Securities Act that a person or entity may be able to rely upon.                        

Rule 144(j) is being eliminated

• Language of rule moved to Preliminary Note
• See 2008 Changes
• Effective 2.15.08

SEC FAQs

• 124.01  Tender offer - Rule 144 not exclusive

Official source

• SEC website version

• Issued by SEC in April 2007
• Replaces 1997 and 1999 Telephone Manual interpretations

• Archive

• Telephone Manual Interpretations  1997
• Telephone Manual Interpretations  1999
• SEC Current Issues - 2000

• Supercedes Interpretive release 33-5306 1972

• §101  General guidance
• §102  Rule 144(a)(1)  None yet
• §103  Rule 144(a)(2)  None yet
• §104  Rule 144(a)(3) 
• §105  Rule 144(b)      None yet
• §106  Rule 144(c)      None yet
• §107  Rule 144(c)(1) 
• §108  Rule 144(c)(2) 
• §109  Rule 144(d)     
• §110  Rule 144(d)(1) 
• §111  Rule 144(d)(2)  None yet
• §112  Rule 144(d)(3) 
• §113  Rule 144(e)     
• §114  Rule 144(e)(1) 
• §115  Rule 144(e)(2)  None yet
• §116  Rule 144(e)(3) 
• §117  Rule 144(f)      
• §118  Rule 144(g)      None yet
• §119  Rule 144(g)(1)  None yet
• §120  Rule 144(g)(2)  None yet
• §121  Rule 144(g)(3)  None yet
• §122  Rule 144(h); Form 144
• §123  Rule 144(i)     
• §124  Rule 144(j)     
• §125  Rule 144(k)    

• §201  General guidance
• §202  Rule 144(a)(1)  None yet
• §203  Rule 144(a)(2) 
• §204  Rule 144(a)(3) 
• §205  Rule 144(b)      None yet
• §206  Rule 144(c)      None yet
• §207  Rule 144(c)(1) 
• §208  Rule 144(c)(2)  None yet
• §209  Rule 144(d)     
• §210  Rule 144(d)(1)  None yet
• §211  Rule 144(d)(2) 
• §212  Rule 144(d)(3) 
• §213  Rule 144(e)     
• §214  Rule 144(e)(1) 
• §215  Rule 144(e)(2)  None yet
• §216  Rule 144(e)(3) 
• §217  Rule 144(f)      None yet
• §218  Rule 144(g)      None yet
• §219  Rule 144(g)(1)  None yet
• §220  Rule 144(g)(2)  None yet
• §221  Rule 144(g)(3)  None yet
• §222  Rule 144(h); Form 144
• §223  Rule 144(i)      None yet
• §224  Rule 144(j)      None yet
• §225  Rule 144(k)