Securities Exchange Act of 1934
The Securities Exchange Act of 1934 is a federal law that regulates the trading of securities in the United States. It was enacted in response to the stock market crash of 1929 and the resulting Great Depression. The Act requires public companies to disclose certain financial information to investors and establishes rules for the trading of securities. It also created the Securities and Exchange Commission (SEC), which is responsible for enforcing the Act.
Restricted stock is a type of stock that is not freely tradable in the open market. It may be subject to certain restrictions, such as a lock-up period or insider trading rules. Restricted stock is often issued to employees of a company as part of their compensation package.
Rule 144 under the Securities Exchange Act of 1934 is a SEC rule that establishes the conditions under which restricted stock may be sold in the open market. The rule is designed to protect investors by ensuring that they have access to information about the company and the stock before they make a purchase. Rule 144 requires companies to file a registration statement with the SEC before selling their stock. The registration statement must provide information about the company’s financial condition, business operations, and the stock being offered for sale.
Rule 144 also requires that companies wait a certain period of time before selling their stock. The waiting period depends on the type of stock being sold and the SEC registration status of the company. For example, if a company is selling common stock that is not registered with the SEC, it must wait at least one year before selling the stock.