Quick Answer
Restricted securities held from a reporting company generally require a six-month holding period before resale under the resale safe harbor, while securities from a non-reporting company generally require one year. Satisfying the applicable holding period is a condition relevant to removing a restrictive legend when the safe harbor requirements are met.
After identifying a restricted security and its legend, determine the issuer's reporting status. That status sets the holding period relevant to a resale and legend removal.
Holding Periods for Restricted Securities
| Issuer status | Holding period before resale under the safe harbor |
|---|---|
| Reporting company | Six months |
| Non-reporting company | One year |
- Reporting company: An issuer subject to the reporting requirements of the Securities Exchange Act of 1934.
- Non-reporting company: An issuer not subject to those reporting requirements.
- Legend removal: The holding period is a condition relevant to removing a restrictive legend when the resale safe harbor requirements are satisfied.
Issuer reporting status → applicable holding period → condition relevant to legend removal when safe harbor requirements are satisfied
Exam Tip: Gotchas
- Reporting company means six months; non-reporting company means one year. The distinction depends on whether the issuer is subject to the reporting requirements of the Securities Exchange Act of 1934.
- The holding period is relevant to legend removal only when the resale safe harbor requirements are satisfied.