Unit 2 2 Control and Restricted Stock Rule144 Flashcards
How is Control and Restricted stock sold?
Sold under Rule 144
Define Control Stock
https://www.investopedia.com/terms/c/controlstock.asp
Stock of the corporation that is owned by:
1- an Officer
2- a Director
3- persons that own 10% or more of the outstanding shares.
https://www.investopedia.com/terms/c/controlstock.asp
Define Restricted Stock
1- Unregistered stock. Stock that has not been registered by the SEC.
Some stocks are exempt from registration.
Restricted stock is unregistered stock, owned by a Controlled person or a Non-controlled person.
2- What Is Restricted Stock?
Restricted stock refers to unregistered shares of ownership in a corporation that are issued to corporate affiliates, such as executives and directors. Restricted stock is nontransferable and must be traded in compliance with special Securities and Exchange Commission (SEC) regulations. The restrictions are intended to deter premature selling that might adversely affect the company. It typically becomes available for sale under a graded vesting schedule that lasts several years. Restricted stock is also referred to as “letter stock”
What is another name for a Controlled Person?
An Affiliate.
An Affiliate can own Controlled Stock.
An Affiliate can own Restricted Stock.
Can a Non-control person or Non-affiliate own Controlled Stock? No!
Can a Non-control person or Non-affiliate person own Controlled Stock? Yes!
What are Authorized, Float and Restricted Stock
Authorized are the total number of shares of a stock that a company issues. In order to issue more shares, they would have to have a vote by the board of shareholders.
Float shares are shares offered to the public or publicly traded shares.
Restricted shares are shares made available to key members of the corporation. The owners, partners and executive officers. These shares are sold only by satisfying certain conditions e.g. after the $1M dollar of profit, et al.
https://www.investopedia.com/terms/r/restrictedstock.asp
Can a Non-affiliate or non-control person own CONTROL STOCK?
No!
Can a Non-affiliate or non-control person own RESTRICTED STOCK?
Yes!
What is true and not true about a control person and non-control person in terms of ownership of Control and Restricted stock?
So, a control person can own control stock or restricted stock.
A non-control person can only own restricted stock.
What are 2 other names for Restricted stock?
Letter stock and/or Legend stock
What is Rule 144?
so if an investor owns control stock or restricted stock and they want to sell that stock those transactions must occur under rule 144
If an investor owns control stock or restricted stock and they want to sell that stock how must those transactions occur?
Under Rule 144
How must an investor handle the sale of control and/or restricted stock?
if an investor owns control stock or restricted stock and they want to sell that stock, those transactions must occur under rule 144.
After a six-month holding period restricted stock can be sold by a control person with volume limits. They can sell the greater of one percent of the shares outstanding or the average weekly trading volume of the past four weeks.
When does Rule 144 no longer apply?
When/after the stock is sold.
