Restricted Stock (US)

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Restricted shares should be stamped clearly showing that they are restricted, this is known as the stock legend.

There are two main forms of restriction: Restriction S and Rule144

Please note this is a very complicated issue and the following should only be used as a guide; most Brokers or Banks will run a mile at the mere mention of the word!

The regulations are laid down to protect members of the public buying something of which they have little or no knowledge (ha ha).


Basically if a stock is restricted under Rule 144 these are the rules:

After 1 year public resale is permitted if a number of conditions are met, these include how long the stock has been held, the manner in which they are sold and the amount that may be sold.

After a two-year period many of the conditions are relieved and the restriction may permanently be removed.

If this all sounds fairly simple- do not believe it!

Most of these restricted stocks (not all) are at the bottom of the barrel and if the share price seems to indicate that it might be worth shelling out a few hundred pounds to remove the legend- be careful: the share price may be based on one trade of 100 shares.

Regulation S has very similar rules but the stock is not allowed to be sold to US residents while restricted- so you are more likely to come across this in the UK.