SEC Form 144 โ A Complete Guide
1. What Is SEC Form 144?
SEC Form 144 is a notice filed with the U.S. Securities and Exchange Commission when an affiliate of a public company (an insider) intends to sell a significant amount of restricted or control securities.
It is filed under Rule 144, which provides a "safe harbor" for insiders to sell stock without being considered an illegal distribution of unregistered securities.
In practice, Form 144 = A notice of intent to sell.
It serves as an early warning system for the market that a large block of shares is about to be released.
2. When Is Form 144 Required?
A Form 144 must be filed if an insider plans to sell securities that meet the following thresholds within any three-month period:
- The number of shares exceeds 5,000, or
- The aggregate dollar amount exceeds $50,000.
Filing Deadline (Real-Time)
- The form must be filed concurrently with either the placement of the sell order with a broker or the execution of the trade.
- Once filed, the insider has a three-month window to complete the sale.
3. Who Files Form 144?
Form 144 is filed by Affiliates and holders of Restricted Securities:
- Affiliates: Directors, executive officers (CEO, CFO), or large shareholders who have the power to influence management.
- Restricted Security Holders: Anyone who acquired shares through a non-public transaction (e.g., private placements, stock options, or RSU settlements).
Note: Even if an executive buys shares on the open market (non-restricted), they are still "control securities" because of their executive status, and a Form 144 is required for sale.
4. What Does Form 144 Disclose?
Form 144 provides transparency regarding the source and nature of the shares being sold. It answers:
- Who is selling?
- How much are they planning to sell?
- How did they acquire the shares (and when)?
- Which broker is handling the transaction?
5. High-Level Structure of Form 144
While Form 4 focuses on the result of a trade, Form 144 focuses on the history of the shares.
Form 144
โโโ Issuer and Filer Information
โโโ Table I: Securities to be Sold (Shares, Value, Broker)
โโโ Table II: Securities Sold During the Past 3 Months
โโโ Source of Securities (Acquisition date and method)
6. Part-by-Part Deep Dive
Table I โ Securities To Be Sold
This section details the proposed transaction:
- Name of Broker: The firm executing the trade.
- Number of Shares: The specific amount of supply hitting the market.
- Approximate Market Value: The total dollar value of the intended sale.
Source of Securities
This is the most critical part for analysts. It requires the insider to list:
- Nature of Acquisition: Was it a "Gift," "Stock Option Exercise," or "Private Placement"?
- Date of Acquisition: Confirms if the insider has met the holding period (usually 6 months for reporting companies).
- Nature of Payment: How the insider paid for the shares (e.g., "Cash" or "Services").
7. Form 144 vs. Form 4
These two forms are often filed for the same transaction, but they serve different purposes.
| Feature | Form 144 | Form 4 |
|---|
| Purpose | Notice of Intent to sell | Notice of Change in ownership |
| Timing | At the time the order is placed | Within 2 business days of execution |
| Scope | Only applies to sales | Applies to buys and sells |
| Key Info | Share origin/acquisition history | Final transaction price/remaining balance |
8. Why Investors Care About Form 144
Form 144 is a powerful leading indicator:
- Supply Forecast: It helps investors gauge upcoming selling pressure before it fully reflects in the stock price.
- Cost Basis Analysis: By seeing when and how an insider got their shares, investors can estimate the insiderโs profit margin.
- Rule 10b5-1 Verification: Many 144 filings indicate if the sale is part of a pre-planned 10b5-1 trading program, which helps distinguish between "automated selling" and "active lack of confidence."
9. Common Pitfalls in Interpreting Form 144
- Intent vs. Execution: A Form 144 does not guarantee a sale. An insider can file the form and then decide not to sell.
- Missing the Form 4: Because Form 144 lists the intended sale, you must wait for the Form 4 to see the actual price at which the shares were sold.
- Paper vs. Digital: While most filings are now electronic, some smaller companies or older filings may still be buried in less accessible SEC formats.
10. Practical Takeaways
- Form 144 is the "heads up" before a major insider sale.
- Always check the "Nature of Acquisition" to see if the insider is selling "free" shares (RSUs) or shares they actually paid cash for.
- If you see multiple executives filing Form 144s at the same time, it often signals the end of a lock-up period.