Form 144 explained: what a notice of proposed sale tells you about insider selling
What Form 144 is, who must file it under Rule 144, the 5,000 share or $50,000 threshold, how it differs from Form 4, and how to read a proposed insider sale.
Key takeaways
- Form 144 is a notice an affiliate of a public company files with the SEC when it plans to sell restricted or control securities under Rule 144.
- A Form 144 is required when the planned sales in any three-month period exceed 5,000 shares or $50,000 in aggregate sale price.
- The notice is filed concurrently with placing the sell order, and since April 13, 2023 it must be filed electronically on EDGAR for securities of reporting companies.
- Form 144 shows an intent to sell, while Form 4, due within 2 business days after the trade, confirms that a sale actually happened and at what price.
- Affiliates selling under Rule 144 are limited to the greater of 1% of shares outstanding or the average weekly trading volume over the prior four weeks in any three months.
Form 144 is a notice that an affiliate of a public company, such as an officer, director or large shareholder, files with the SEC when it intends to sell restricted or control securities under Rule 144. It is required when planned sales over any three-month period exceed 5,000 shares or $50,000, and it is filed at the same time the sell order is placed. Because it often appears before the trade is reported on Form 4, a Form 144 can be the earliest public sign that an insider plans to sell.
What is Rule 144?
Rule 144 is the SEC rule that provides a safe harbor for the public resale of restricted and control securities without registering the sale. Without it, an affiliate selling stock could be treated as an underwriter in an unregistered distribution. The SEC's overview is at https://www.sec.gov/about/reports-publications/investorpubsrule144, and the form itself is at https://www.sec.gov/files/form144.pdf.
Two terms matter:
- Restricted securities are shares acquired in unregistered transactions, such as private placements, pre-IPO stock or certain employee stock awards.
- Control securities are any shares held by an affiliate, even shares bought in the open market.
An affiliate is a person who controls, is controlled by, or is under common control with the company. Executive officers, directors and holders of roughly 10% or more of the voting stock are commonly treated as affiliates, though the test depends on the facts.
Who has to file Form 144?
An affiliate selling under Rule 144 must file Form 144 if the amount to be sold in any three-month period exceeds either:
- 5,000 shares, or
- $50,000 in aggregate sale price.
Non-affiliates selling restricted securities generally do not file Form 144. In practice, nearly all Form 144s are filed by officers, directors, founders, venture funds and other large holders, usually through their broker.
When is Form 144 filed?
Form 144 must be filed concurrently with either placing a sell order with a broker or executing a sale directly with a market maker. The seller must have a bona fide intention to sell within a reasonable time after filing.
Since April 13, 2023, Form 144 for securities of companies that report to the SEC must be filed electronically on EDGAR. Before that, many were filed on paper and were hard for the public to see. The electronic mandate is a main reason Form 144 data now flows into real-time news feeds.
Rule 144 conditions for affiliates
To use the safe harbor, an affiliate must meet five conditions:
| Condition | Requirement |
|---|---|
| Holding period | Restricted securities must be held at least 6 months if the company has been an SEC reporting company for at least 90 days, or 1 year otherwise. Control securities bought in the open market have no holding period. |
| Current public information | The company must be current in its SEC reports. |
| Volume limit | Sales in any three months cannot exceed the greater of 1% of shares outstanding or the average weekly trading volume over the four calendar weeks before the notice. |
| Manner of sale | Equity securities must be sold in ordinary brokers' transactions or directly with a market maker, without soliciting buyers or paying unusual commissions. |
| Notice of sale | File Form 144 if sales in three months exceed 5,000 shares or $50,000. |
The volume limit is why large holders often sell gradually over many months rather than in one block, unless they use a registered offering instead.
What is in a Form 144?
A Form 144 discloses:
- The seller and their relationship to the company (officer, director, 10% holder and so on).
- The broker handling the sale.
- The number of shares to be sold and their aggregate market value on the filing date.
- Shares outstanding for the class, which lets you compute the sale as a percentage of the company.
- The approximate date of sale and the exchange.
- How and when the shares were acquired, such as an option exercise, restricted stock vesting, a founder grant or an open-market purchase.
- Sales by the same person in the past three months.
- A representation that the seller does not know of material adverse information that has not been disclosed, and, if the sale is made under a Rule 10b5-1 trading plan, the date the plan was adopted.
Form 144 vs Form 4
| Form 144 | Form 4 | |
|---|---|---|
| Purpose | Notice of a proposed sale | Report of a completed transaction |
| Who files | Affiliates selling restricted or control stock | Officers, directors and 10% owners (Section 16 insiders) |
| Timing | When the sell order is placed | Within 2 business days after the trade |
| Covers buys | No, sales only | Yes, buys, sells, grants, exercises and gifts |
| Shows final price | No, shows estimated market value | Yes, actual price per share |
| Sale required | No, the seller may not sell everything | Reports what actually happened |
A Form 144 does not guarantee that any shares will be sold, and the actual sale may be smaller or spread out over time. The Form 4 is the confirmation. See Form 4 insider trading explained for transaction codes and how to read the confirmation.
How to read a Form 144
- Check the seller's role. A CEO planning to sell a meaningful part of their holdings reads differently from a venture fund distributing shares long after an IPO.
- Size it. Compare the shares to be sold with shares outstanding and with the seller's total holdings, which you can find in their latest Form 4 or the proxy statement.
- Look at how the shares were acquired. Sales of shares from vesting restricted stock or option exercises are often tied to compensation and taxes. Sales of shares bought in the open market are a different decision.
- Look for a 10b5-1 plan date. Sales under a Rule 10b5-1 plan were scheduled in advance, which generally makes them less informative about current views. Since 2023 amendments, directors and officers face a cooling-off period of at least 90 days after adopting a plan before trading under it.
- Watch for clusters. Several insiders filing Form 144s around the same time, especially outside of routine vesting dates, can be worth noting.
- Match it to the Form 4. Follow up within days to see whether the sale happened, at what price and in what size.
Worked example: a Form 144 at Acme Corp
Acme Corp (ticker ACME) has 80 million shares outstanding and an average weekly trading volume of 1.2 million shares over the past four weeks. Its CFO files a Form 144 on a Monday:
- Shares to be sold: 60,000
- Aggregate market value: $2,400,000 (about $40 per share)
- Acquired: restricted stock units that vested over the past year
- 10b5-1 plan: adopted five months earlier
- Sales in the past three months: 20,000 shares
How to read it:
- Threshold: 60,000 shares and $2.4 million are well above 5,000 shares and $50,000, so the notice is required.
- Volume limit: the cap is the greater of 1% of outstanding (800,000 shares) or average weekly volume (1.2 million shares), so 1.2 million. The CFO's 80,000 shares over three months is far below it.
- Context: the shares came from compensation, and the sale is under a pre-arranged plan adopted months earlier. This reads as a routine, scheduled sale rather than a reaction to new information.
- Confirmation: on Wednesday, the CFO files a Form 4 with code S showing 60,000 shares sold at an average of $39.85, along with a footnote referencing the 10b5-1 plan.
Compare that with a hypothetical director filing a Form 144 to sell 500,000 shares bought in the open market, with no trading plan, a week after the company lowered guidance. Same form, different information.
How to track Form 144 and insider selling on Quantisnow
- The insider trading feed streams insider filings, including proposed sales and completed trades, as they reach EDGAR.
- Form 4 filings show the completed transactions that follow a Form 144.
- The insiders page and per-company insider pages such as /insiders/AAPL summarize recent insider activity for a ticker.
- For the buy side, see insider buys and the guide on how to track insider buying.
FAQ
What is a Form 144 filing?
A Form 144 is a notice filed with the SEC by an affiliate of a public company who intends to sell restricted or control securities under Rule 144. It is required when planned sales in any three-month period exceed 5,000 shares or $50,000.
Does a Form 144 mean the insider sold shares?
No. Form 144 is a notice of a proposed sale, and the seller is not obligated to sell all, or any, of the shares listed. Completed sales by officers, directors and 10% owners are reported on Form 4 within 2 business days.
When must Form 144 be filed?
Form 144 must be filed concurrently with placing the sell order with a broker or executing the sale directly with a market maker. Since April 13, 2023, it must be filed electronically on EDGAR for securities of reporting companies.
What is the Rule 144 volume limit?
An affiliate may sell no more than the greater of 1% of the class's shares outstanding or the average weekly trading volume over the four calendar weeks before the notice, in any three-month period.
Is a Form 144 a bearish signal?
Not necessarily. Many Form 144 sales are routine, tied to compensation, taxes, diversification or pre-arranged 10b5-1 trading plans. The seller's role, the size relative to their holdings and the timing provide more context than the filing itself.
Do non-affiliates need to file Form 144?
Generally no. Non-affiliates can resell restricted securities under Rule 144 after the holding period, subject to current public information for a period, without filing Form 144.