What are restricted securities?

Restricted securities, as the name implies, are subject to restrictions on when they can be sold or transferred following their issuance. Rule 144 of the 33 Act lays out the rules for restricted securities. It is also used to refer to securities that are subject to a vesting period.

What are Holder Restrictions? 

Restricted securities in public companies are those held by officers, directors, or major shareholders (10% of total shares). These individuals cannot sell a number of shares greater than 1) the average weekly trading volume for the shares during the prior 4 weeks of trading, or 2) a quantity equal to 1% of total shares outstanding.

What are Transactional Restrictions? 

Securities issued pursuant to a transactional exemption are also restricted from immediate resale. Regulation D exemptions prohibit resale for 12 months following the date of the issuance. This is to make certain that an exemption is not used as a straw transaction to transfer shares to individuals who could not otherwise be investors under the applicable exemption.

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