Tag Archives: tacking under Rule 144

What is Tacking Under Rule 144?

Tacking under Rule 144 allows a holder of restricted securities to aggregate the separate holding periods of prior holders in order to meet the Rule 144 holding period requirement.

Rule 144 Holding Periods:  Either Six Months or One Year

The holding period for mandatory SEC filers is 6 months.  These are fully reporting Issuers filing 10-K, 10-Q and 8-Ks and “subject to” the requirements of the Securities Exchange Act of 1934.

In contrast, the Rule 144 holding period for voluntary SEC filers and non-reporting Pink Sheets is 12 months.

Rule 144 Tacking is Allowed for Restricted Stock and Convertible Debt

Tacking is used for both restricted stock, and for convertible promissory notes, as well.

For example, if a Note is documented at over a year old, the Rule 144 holding period is likely met even if the Note holder converts into common stock immediately prior to seeking a Rule 144 legal opinion.  This is because the Note holder is allowed to tack the age of the Note onto the age of the newly issued stock to meet the 12 month holding period.

Tacking Under Rule 144 is Only Permitted to Non Affiliates

By permitting tacking, the SEC allows a selling security holder to include the holding period of a prior non-affiliate holder.   However, if the securities were purchased from an affiliate, tacking is not permitted and the holding period starts over.

For example, if a non affiliate shareholder who owned stock in an SEC mandatory filer for seven months sells stock in a private Stock Purchase Agreement to a new non affiliate shareholder today, the new shareholder has already exceeded the 6 month holding period.

Removing the restricted legend on the stock will require the new shareholder to provide documentation which shows the origin and history of the shares, including the prior holder’s purchase date and non affiliate status.

OTC Securities Lawyer Answers Rule 144 Questions on Tacking

Shareholders with questions regarding tacking under SEC Rule 144 or Section 4(a)(1) can contact OTC Bulletin Board and OTCMarkets securities attorney Matt Stout at (410) 429-7076 or mstout@otclawyers.com.