How To Tell If You’re Buying Restricted Stock From An Affiliate

How Can I Tell If the Seller in a Private Sale is an Affiliate Under Rule 144?

Since an “Affiliate” is defined as a “control person” of the Issuer, ask what role the Seller may have played in the founding or operations of the Company.  It would be very clear that the Seller is an Affiliate if, of course, he or she was at one time an officer, director, founder or if the Seller owned more than ten (10%) of the Company’s shares.

Affiliate Status Is Not Always Obvious Under Rule 144

He or she could be classified as an Affiliate for either direct or indirect involvement–that is, perhaps they worked through another legal entity, company, partnership, LLC, or Trust controlled by an Affiliate of the Issuing Company.  Or perhaps they are a family member of an Affiliate, living in the same household.  These relationships matter since an Affiliate is someone who can, either directly or indirectly by owning stock, through a legal contract or in other ways, control or influence the operations of the Issuer.

 

 

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