Rule is not an exclusive safe harbor. A person who does not meet all of the applicable conditions of Rule still may claim any other available exemption under the Act for the sale of the securities.
The Rule safe harbor is not available to any person with respect to any transaction or series of transactions that, although in technical compliance with Rule , is part of a plan or scheme to evade the registration requirements of the Act. The following definitions shall apply for the purposes of this section. Subject to paragraph i of this section, the following conditions must be met:.
The requirements of paragraph c 1 of this section shall not apply to restricted securities sold for the account of a person who is not an affiliate of the issuer at the time of the sale and has not been an affiliate during the preceding three months, provided a period of one year has elapsed since the later of the date the securities were acquired from the issuer or from an affiliate of the issuer.
Any affiliate of the issuer , or any person who was an affiliate at any time during the 90 days immediately before the sale, who sells restricted securities, or any person who sells restricted or any other securities for the account of an affiliate of the issuer of such securities, or any person who sells restricted or any other securities for the account of a person who was an affiliate at any time during the 90 days immediately before the sale, shall be deemed not to be an underwriter of those securities within the meaning of section 2 a 11 of the Act if all of the conditions of this section are met.
Adequate current public information with respect to the issuer of the securities must be available. Such information will be deemed to be available only if the applicable condition set forth in this paragraph is met:. The issuer is, and has been for a period of at least 90 days immediately before the sale, subject to the reporting requirements of section 13 or 15 d of the Exchange Act and has:.
A statement in whichever is the most recent report, quarterly or annual, required to be filed and filed by the issuer that such issuer has:. A written statement from the issuer that it has complied with such reporting or submission requirements. Neither type of statement may be relied upon, however, if the person knows or has reason to believe that the issuer has not complied with such requirements.
If the securities sold are restricted securities, the following provisions apply:. Giving the issuer or affiliate of the issuer from whom the securities were purchased a promissory note or other obligation to pay the purchase price, or entering into an installment purchase contract with such seller, shall not be deemed full payment of the purchase price unless the promissory note, obligation or contract:.
The following provisions shall apply for the purpose of determining the period securities have been held:. Securities acquired from the issuer as a dividend or pursuant to a stock split, reverse split or recapitalization shall be deemed to have been acquired at the same time as the securities on which the dividend or, if more than one, the initial dividend was paid, the securities involved in the split or reverse split, or the securities surrendered in connection with the recapitalization.
If the securities sold were acquired from the issuer solely in exchange for other securities of the same issuer , the newly acquired securities shall be deemed to have been acquired at the same time as the securities surrendered for conversion or exchange, even if the securities surrendered were not convertible or exchangeable by their terms.
If the surrendered securities originally did not provide for cashless conversion or exchange by their terms and the holder provided consideration, other than solely securities of the same issuer , in connection with the amendment of the surrendered securities to permit cashless conversion or exchange, then the newly acquired securities shall be deemed to have been acquired at the same time as such amendment to the surrendered securities, so long as, in the conversion or exchange, the securities sold were acquired from the issuer solely in exchange for other securities of the same issuer.
Securities acquired as a contingent payment of the purchase price of an equity interest in a business, or the assets of a business, sold to the issuer or an affiliate of the issuer shall be deemed to have been acquired at the time of such sale if the issuer or affiliate was then committed to issue the securities subject only to conditions other than the payment of further consideration for such securities.
An agreement entered into in connection with any such purchase to remain in the employment of, or not to compete with, the issuer or affiliate or the rendering of services pursuant to such agreement shall not be deemed to be the payment of further consideration for such securities. Rule does not require you to get a legal opinion. However, the transfer agent and issuing company will need legal opinions before removing the restrictive legend on your stock certificates.
A legal opinion helps protect the transfer agent, issuer, and broker from a charge of violating the Securities Act of SecondMarket and SharesPost are secondary private markets for securities from private companies. Employees and investors can use these stock trading markets to sell shares that they received in a Regulation D offering or other private offerings and that meet the conditions of Rule It is important to note that Rule only applies to those who purchased securities for their own investment purposes, without the intention to distribute or resell from the outset.
If you buy restricted securities and publicly state or clearly show that you plan to resell as soon as legally possible, you may lose the ability to do so under Rule It was revised in to allow the use of general solicitation as long as the purchasers are limited to QIBs. Rule A has increased the liquidity of private securities by letting companies list them and trade among themselves, sidestepping limitations in place to protect the public.
Section 4 a 6 does not define these securities as restricted under Rule However, the section does explicitly subject the resale of such securities to a one-year holding period unless it is resold to the issuer, to an accredited investor , in a registered offering, or to a family member of the purchaser or related to the death, divorce or similar situation of the purchaser.
If you as a shareholder meet all the five conditions outlined above, Rule will allow you to sell your restricted securities and get the restrictive legend removed. You will need to obtain an opinion of counsel stating that the sale is eligible for the Rule exemption the Rule Opinion Letter.
You can work with your own securities broker who can help you to collect the necessary documents for the application. If the restricted securities were initially issued by a shell company or a former shell company, Rule imposes additional conditions.
Adequate current public information with respect to the company that issued securities must be available. For reporting companies, such information is deemed to be available only if the following conditions are satisfied:. Rule imposes a limit on the amount of securities sold for the account of an affiliate of a company. The amount of securities sold, together with all sales of securities of the same class sold for the account of the affiliate within the three months prior to the Rule sale cannot exceed the greatest of:.
C The requirements of paragraphs 1 b applicable to any markup or markdown, commission equivalent, or other fee , 1 c , and 1 d above are met. The Form must be filed concurrently with either the placing with a broker of an order to execute a sale of securities or the execution directly with a market maker of such a sale.
The person filing the Form must have a bona fide intention to sell the securities referred to in the Form within a reasonable time after the filing of the Form Rule imposes additional conditions for the resale of securities initially issued by a shell company or a former shell company.
A shell company is an issuer that has A no or nominal operations and B either: 1 no or nominal assets; 2 assets consisting solely of cash and cash equivalents; or 3 assets consisting of any amount of cash and cash equivalents and nominal other assets. Smart Intake Forms provide our clients with a secure program that generates a form to gather the necessary information from our clients to complete a request.
In the situation described above, Rule may be available for resale by a seller if the following conditions are satisfied: the seller owned the securities for at least six months; the company is current in its U.
Form 10 is the initial registration form used to register a company as a reporting company with the SEC under the Securities Exchange Act of Background Information For the background information about Rule , please see our blog post about Rule for non-affiliates. Reporting Company Rule has different conditions for reporting companies and non-reporting companies. This blog post discusses Rule as it applies to reporting companies only.
Affiliates Rule has different conditions for affiliates and non-affiliates.
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