What is the difference between 144 and 144a

This safe harbor loosens restrictions set forth by Rule under Section 5 of the Securities Act of required for sales of securities by the Securities and Exchange Commission SEC. Known as the Private Resales of Securities to Institutions, Rule A was introduced in and allows these investments to be traded among qualified institutional buyers QIB. It substantially increased the liquidity of the affected securities.

It also drew concern that it may help facilitate fraudulent foreign offerings and reduce the range of securities on offer to the general public. It allowed sales to take place to more sophisticated institutional investors , as they may not require the same type of information and protection as other investors. The Securities Act stipulates that securities issuers must register them with the SEC and provide extensive documentation through a filing with the agency before they can be offered to the general public.

A minimum level of public-accessible information is required of the selling party. For reporting companies, this issue is addressed as long as they are in compliance with their regular reporting minimums. For nonreporting companies also called non-issuers , basic information regarding the company, such as company name and the nature of its business, must be publicly available.

Rule A provides a mechanism for the sale of securities that are privately placed to QIBs that do not—and are not required—to have an SEC registration in place. Instead, securities issuers are only required to provide whatever information is deemed necessary for the purchaser before making an investment.

This creates a more efficient market for the sale of those securities. The sale must be handled by a brokerage or other registered firm in a manner deemed routine for affiliate sales. This requires that no more than a normal commission be issued, where neither the broker nor the seller can be involved in the solicitation of the sale of those securities.

Affiliate sales under both of these levels are not required to be filed with the SEC. For affiliates , there is a limit on the number of transactions, referred to as the volume, that cannot be exceeded.

Rule A relaxed the holding period regulations for securities before they can be offered or sold to qualified institutional buyers. Rather than the customary two-year holding period, a minimum six-month period applies to a reporting company, and a minimum one-year period applies to issuers who are not required to meet reporting requirements. These periods begin on the day the securities in question were bought and considered paid in full.

Rule A succeeded in increasing non-SEC trading activity. This led to concern over trading that was all but invisible to individual investors as well as to some institutional ones. Concerns still endure about the effects of Rule A, including how it may allow unscrupulous overseas companies to fly under the regulatory radar when offering investments in the U. Critics say the rule ultimately creates a shadow market , allowing foreign companies to avoid the scrutiny of the SEC while opening the U.

Morrison Foerster. Accessed May 9, Are you prepared for your financial future? Use this checklist to get started. Please enter some keywords to search. Breadcrumb Home Introduction to Investing Glossary. Securities Act Rule When you acquire restricted securities or hold control securities, you must find an exemption from the SEC's registration requirements to sell them in a public marketplace. Rule allows public resale of restricted and control securities if a number of conditions are met.

This overview tells you what you need to know about selling your restricted or control securities. It also describes how to have a restrictive legend removed.

Restricted securities are securities acquired in unregistered, private sales from the issuing company or from an affiliate of the issuer.

Investors typically receive restricted securities through private placement offerings, Regulation D offerings, employee stock benefit plans, as compensation for professional services, or in exchange for providing "seed money" or start-up capital to the company.

Rule a 3 identifies what sales produce restricted securities. Control securities are those held by an affiliate of the issuing company. An affiliate is a person, such as an executive officer, a director or large shareholder, in a relationship of control with the issuer. Control means the power to direct the management and policies of the company in question, whether through the ownership of voting securities, by contract, or otherwise.

If you buy securities from a controlling person or "affiliate," you take restricted securities, even if they were not restricted in the affiliate's hands. If you acquire restrictive securities, you almost always will receive a certificate stamped with a "restrictive" legend.

The legend indicates that the securities may not be resold in the marketplace unless they are registered with the SEC or are exempt from the registration requirements. Certificates for control securities usually are not stamped with a legend.

If you want to sell your restricted or control securities to the public, you can meet the applicable conditions set forth in Rule The rule is not the exclusive means for selling restricted or control securities, but provides a "safe harbor" exemption to sellers.

The rule's five conditions are summarized below:. Additional securities purchased from the issuer do not affect the holding period of previously purchased securities of the same class.