Form 144 is a notice filed with the U.S. Securities and Exchange Commission (SEC) by an insider or affiliate of a publicly traded company who intends to sell a significant amount of restricted or controlled securities. The form is required under Rule 144 of the Securities Act of 1933, which provides a safe harbor for the resale of restricted, unregistered, and control securities without having to register them with the SEC, provided certain conditions are met. Form 144 notifies the SEC of the seller’s intention and helps ensure transparency in the sale of large blocks of securities by insiders or affiliates.

Key Aspects of Form 144:

1. Purpose:
   • Disclosure of Intent to Sell: Form 144 serves to notify the SEC, the company, and the public that an insider or affiliate intends to sell a significant amount of restricted or control securities. This helps maintain transparency and prevents market manipulation by providing advance notice of potential large sales.
   • Compliance with Rule 144: The filing of Form 144 is a prerequisite for selling restricted or control securities under Rule 144. It ensures that the sale complies with the conditions set forth in the rule, allowing the seller to avoid the need to register the securities with the SEC.
2. Who Must File:
   • Insiders and Affiliates: Form 144 must be filed by corporate insiders or affiliates, such as officers, directors, and significant shareholders, who intend to sell restricted or control securities.
   • Holders of Restricted Securities: Restricted securities are those acquired in unregistered, private sales from the issuing company or an affiliate. These securities are typically acquired through employee stock benefit plans, private placements, or as part of a merger or acquisition.
   • Holders of Control Securities: Control securities are owned by insiders or affiliates who have control over the issuing company, typically defined as owning 10% or more of the company’s voting stock or having significant influence over management.
3. Filing Thresholds:
   • Size of the Sale: Form 144 must be filed if the seller intends to sell more than 5,000 shares or if the aggregate dollar amount of the sale exceeds $50,000 within a three-month period.
   • Aggregate Sales: The form is required even if the seller intends to sell securities through multiple transactions over a three-month period, as long as the total number of shares or dollar value meets or exceeds the filing thresholds.
4. Filing Deadline:
   • Before the Sale: Form 144 must be filed with the SEC at the time or shortly before the sale of the securities. The form provides advance notice of the seller’s intent to the market.
   • Effective Period: The notice is effective for a period of 90 days from the date of filing. If the securities are not sold within this period, a new Form 144 must be filed before any further sales.
5. Information Required on Form 144:
   • Seller’s Information: The form requires details about the seller, including their name, address, relationship to the company (e.g., officer, director, 10% owner), and whether they have filed Form 4 or Form 5 with the SEC.
   • Details of the Securities: The form requires information about the securities being sold, including the type of security (e.g., common stock, preferred stock), the number of shares to be sold, and the approximate date of sale.
   • Broker and Market Information: The form also asks for details about the broker handling the sale and the market on which the securities will be sold, if applicable.
6. Conditions for Sales Under Rule 144:
   • Holding Period: Restricted securities must typically be held for a minimum period (usually six months to one year, depending on the issuer) before they can be sold under Rule 144.
   • Volume Limitations: The amount of securities sold within a three-month period cannot exceed the greater of 1% of the outstanding shares of the same class or the average weekly trading volume of the shares on all national securities exchanges and/or reported through the consolidated transaction reporting system during the four weeks preceding the filing.
   • Adequate Current Information: There must be adequate current public information available about the issuing company before the securities can be sold.
   • Manner of Sale: The securities must be sold in ordinary brokerage transactions or directly with a market maker without solicitation.
7. Public Availability:
   • EDGAR Database: Form 144 filings are available to the public through the SEC’s EDGAR (Electronic Data Gathering, Analysis, and Retrieval) database. This allows investors and analysts to monitor potential sales by insiders and affiliates.
8. Importance for Investors:
   • Market Impact: Investors often monitor Form 144 filings as they provide an early warning of significant insider sales that could potentially impact the stock price if large volumes of shares are sold.
   • Insider Sentiment: While the filing of Form 144 does not necessarily indicate a lack of confidence in the company, it does provide insight into insider activity and can be a factor in assessing insider sentiment.
9. Penalties for Non-Compliance:
   • Regulatory Action: Failure to file Form 144 when required, or failing to comply with Rule 144 conditions, can result in penalties from the SEC, including fines and other enforcement actions.

Summary:

Form 144 is an SEC filing required for corporate insiders or affiliates who intend to sell a significant amount of restricted or control securities under Rule 144. The form must be filed when the seller plans to sell more than 5,000 shares or securities worth more than $50,000 within a three-month period. It provides transparency by notifying the SEC and the public of the insider’s intention to sell, ensuring that the sale complies with SEC regulations. Form 144 helps prevent market manipulation and allows investors to monitor significant insider transactions that could impact the market.