Rule 144 and Restricted Stock Resale

Once your private-company stock becomes publicly traded, Rule 144 — not the lock-up — is what eventually limits when and how much you can sell.

Last reviewed on 27 April 2026

If you held shares of a private company that goes public, your selling timeline does not end when the underwriter lock-up expires. Federal securities law steps in. The relevant rule is SEC Rule 144, the safe harbour under Section 4(a)(1) of the Securities Act that lets holders of restricted and control securities resell into the public market without registration.

Rule 144 is often confused with the IPO lock-up. They are distinct, they overlap, and they apply for very different reasons. The lock-up is a private contract with the underwriters. Rule 144 is statutory and applies to anyone holding restricted or control stock, regardless of whether a lock-up is in place. This page walks through how 144 actually works for the people most likely to need it: pre-IPO investors, employee shareholders, and post-IPO affiliates.

For the underwriter-lock-up timeline, see our IPO lock-up periods explainer. This page picks up where that one ends.

What Rule 144 Is and Isn't

Rule 144 is a safe harbour. The Securities Act prohibits the sale of unregistered securities. Rule 144 says: "You are deemed not to be engaged in a distribution if you meet the following conditions when you sell." Meet the conditions and the sale is presumed compliant. Miss them and you are exposed to the full registration requirement, which in practice means you cannot legally sell without separate paperwork.

It is not the only path to selling restricted stock — registered offerings, Section 4(a)(7) private resales, and Rule 144A transactions are alternatives — but it is by far the most common path for individual holders. The rule covers two categories of stock: restricted securities (acquired in unregistered transactions, including private-company stock issuance) and control securities (held by affiliates of the issuer regardless of how acquired).

Restricted Securities vs Control Securities

The two categories are not mutually exclusive. A founder's shares are both restricted and control. A retail investor's pre-IPO secondary purchase is restricted but not control.

  • Restricted securities are shares acquired directly or indirectly from the issuer or an affiliate in a transaction not involving a public offering. Almost all pre-IPO equity falls into this category — direct issuance, employee stock options exercised, RSU settlements, secondary purchases through SPVs or platforms, and shares acquired in a Reg D financing.
  • Control securities are any securities — restricted or unrestricted — held by an affiliate of the issuer. The shares themselves do not need to have been acquired in a private transaction. A director who buys shares on the open market post-IPO is selling control securities when they later sell.

Are You an Affiliate?

Affiliate status changes every other condition under Rule 144. The definition is broad: an affiliate is a person who, directly or indirectly, "controls, is controlled by, or is under common control with" the issuer. In practice the SEC and courts look for:

  • Officers and directors.
  • Holders of more than 10% of the outstanding voting securities (the bright-line that most counsel treat as the practical floor).
  • Anyone with a board seat, even nominally independent.
  • Family members or controlled entities of the above.
  • Investors with formal control rights — protective provisions that effectively veto major corporate actions.

Affiliate status is a question of fact, not just title. A 9% holder who in practice directs the company through informal arrangements can still be an affiliate. Conversely, a director who steps off the board and is no longer engaged in management may "wash out" of affiliate status after a reasonable period — typically three months under SEC guidance.

The Five Conditions Under Rule 144

To qualify for the safe harbour, the seller must satisfy a defined set of conditions. The number of conditions and the strictness depend on whether the issuer is a reporting company, whether the seller is an affiliate, and how long the shares have been held.

1. Holding Period

The minimum holding period restarts the moment the shares are acquired in a way that satisfies the rule's "tacking" provisions:

  • Six months if the issuer is, and has been for at least 90 days, a company that files reports with the SEC under the Exchange Act (a "reporting company"). Most post-IPO issuers fall into this bucket.
  • One year if the issuer is a non-reporting company.

The clock starts when the shares were acquired and fully paid for. Tacking lets you count earlier holding periods in some cases — for instance, when you receive shares as a gift, by inheritance, or through a pledge. Tacking does not apply to most option exercises; the holding period for shares acquired by exercising a compensatory option begins on the exercise date, not the grant date.

2. Current Public Information

The issuer must have made adequate current public information available. For reporting companies, this is satisfied if they are current with their Exchange Act filings — broadly, the most recent 10-K and all 10-Qs and 8-Ks have been filed on time. For non-reporting companies, the requirement is far stricter and depends on satisfying the disclosure requirements of Rule 15c2-11. In practice, non-reporting issuers rarely meet it.

The current-information requirement applies to all sales by affiliates and to sales by non-affiliates only during the period from six months to one year after acquisition. Once a non-affiliate has held shares of a reporting company for at least one year, the current-information condition drops away.

3. Volume Limitations (Affiliates Only)

Affiliates are subject to a volume cap, measured per three-month rolling window:

  • For listed securities: the greater of 1% of the outstanding shares of that class, or the average weekly reported trading volume during the four calendar weeks preceding the filing of Form 144.
  • For unlisted securities, only the 1% test applies.

Volume is aggregated across affiliates who are part of the same family or controlled-entity group. Two co-founders who file Form 144s in the same window cannot each take 1% — the cap applies to their aggregated holdings.

4. Manner of Sale (Affiliates Only)

For equity securities, affiliates must sell through a broker in routine trading transactions or directly to a market maker. Solicitation of buyers is prohibited, brokers cannot accept commissions other than usual, and certain block-trade exceptions apply. The rule keeps affiliate sales from looking like a marketed distribution.

5. Filing Form 144 (Affiliates Only)

If an affiliate intends to sell more than 5,000 shares or more than $50,000 of value during a three-month window, they must file Form 144 with the SEC at the time the order is placed. Form 144 is a notice, not an approval — it triggers no SEC review and the sale can proceed immediately. The filing is public, which is why insider sales attract attention even when fully compliant.

Non-Affiliate Sales: A Simpler Picture

For people who are not affiliates and have never been affiliates, Rule 144 is much lighter:

  • Six months to one year after acquisition (reporting company): may sell, subject only to the current-public-information condition.
  • One year and beyond (reporting company): may sell freely with no Rule 144 conditions whatsoever — no volume cap, no manner-of-sale rule, no Form 144.
  • For non-reporting issuers: must hold one year, then current-public-information applies. In practice, sales of non-reporting-company stock under Rule 144 are rare; most such sales use Section 4(a)(7) or are negotiated as private placements.

This is why the lock-up is so often the binding constraint for ordinary employees and investors: by the time the lock-up clears 180 days post-IPO, they are usually past the six-month Rule 144 holding period (which typically tacks to their pre-IPO acquisition date) and the current-information requirement is satisfied because the company is reporting. The rule fades into the background.

A Worked Example

Imagine three holders of a company that IPOs on 1 March 2026 with a 180-day lock-up that expires on 28 August 2026:

Holder A: Long-tenured employee, non-affiliate

  • Exercised ISOs on 1 February 2024 — two years before IPO.
  • Holding period under Rule 144: started at exercise. By the IPO date she has held more than two years.
  • Lock-up expires 28 August 2026. Rule 144 holding period was satisfied long before, and the company is reporting from the IPO date forward.
  • Effect: from day 181 onward, she sells freely. No Form 144, no volume caps, no manner-of-sale restrictions.

Holder B: Pre-IPO secondary investor, non-affiliate

  • Bought 1,000 shares from a former employee on 1 December 2025 through a platform-managed transfer.
  • Holding period started 1 December 2025. Six months elapses on 1 June 2026 — during the lock-up.
  • The IPO happens on 1 March 2026; the lock-up expires 28 August 2026.
  • By 28 August 2026, more than six months have passed since acquisition (six-month threshold cleared). However, the one-year mark hits on 1 December 2026.
  • Effect: from day 181 (lock-up release) until 1 December 2026, sales are subject to the current-public-information condition (effectively automatic for a reporting issuer). After 1 December 2026, all Rule 144 conditions drop.

Holder C: Founder and CEO, affiliate

  • Has held founder shares for ten years.
  • Lock-up expires 28 August 2026.
  • Holding period: irrelevant — far past any threshold.
  • Affiliate status: triggers ongoing volume caps (1% of outstanding shares per 90 days, or weekly-volume average if higher), Form 144 filings on every block above the de minimis threshold, manner-of-sale restrictions, and current-public-information requirement.
  • Effect: from day 181 onward she sells but only through a structured plan. A 10b5-1 trading plan is the standard tool — pre-arranged orders that execute on schedule and let her trade through company blackout windows.

Three holders, three timelines. The shape of each timeline is determined by affiliate status first, holding period second.

Rule 144 and 10b5-1 Trading Plans

For affiliates, a 10b5-1 plan is almost mandatory. Without one, a director or officer can only sell during a narrow window each quarter — typically a 30- to 45-day window that opens two trading days after earnings and closes two weeks before quarter-end. With a properly adopted 10b5-1 plan, sales execute according to a pre-arranged schedule even during blackout periods.

The plan must be adopted in good faith, when the affiliate has no material non-public information, and the SEC's 2022 amendments require a cooling-off period before the first sale: 90 days for ordinary insiders and the longer of 90 days or two business days after the next 10-Q/10-K filing for officers and directors. Once the cooling-off period clears, the plan trades on its own. Rule 144's volume caps and Form 144 filings still apply on every sale, but they are administered around the plan rather than reset by it.

Common Mistakes

  • Conflating the lock-up with Rule 144. The lock-up is contractual; 144 is statutory. Both apply, and the more restrictive one binds at any given moment.
  • Forgetting the affiliate volume cap is aggregated. Spouses, children sharing a household, and entities under common control are aggregated. Selling "your" 1% does not prevent your spouse's separate 1% trade from being lumped in.
  • Missing Form 144 deadlines. The form must be filed at the time the order is placed, not after the trade. Late filings can void the safe harbour for that trade.
  • Assuming option exercise tacks back to the grant date. It does not. The holding period starts at exercise, which often pushes a sale several months into the post-IPO window.
  • Treating non-affiliate status as permanent. Acquiring shares while not an affiliate, then becoming one (e.g., joining the board), can re-impose the affiliate conditions on those shares.
  • Ignoring the current-public-information condition. If the company misses a 10-Q filing deadline, the rule's safe harbour may not be available even months after the IPO.

If the Company Stays Private

Some private holdings never become public. For shares of a company that remains a non-reporting issuer, Rule 144 is a thin reed. The one-year holding period is just the start; the current-public-information condition is rarely satisfied without active company cooperation, and non-affiliates lose the convenient drop-off after one year that reporting-company holders enjoy.

In practice, most secondary sales of non-reporting-company stock proceed under Section 4(a)(7), a separate statutory exemption added in 2015 that permits private resales to accredited investors with limited restrictions, or under platform-administered private-resale procedures. The relevant guides on this site cover those alternatives — see how to sell unlisted shares and secondary market platforms.

Bottom Line

Rule 144 is the rule that takes over after the lock-up clears. For long-tenured employees and pre-IPO investors who are not affiliates, it usually disappears within a year of the IPO. For founders, directors, and large investors who are affiliates, it never disappears — they manage volume caps, filings, and manner-of-sale rules for the life of their position. Understand which category you are in before you draft a selling plan, because the rules that apply to you will not be the rules you read about in someone else's filings.