How do I remove a stock restriction?
If you want to remove the restrictive legend, you should contact the company that issued the securities—or the transfer agent for the company’s securities—to ask about the procedures for removing a legend. If you have a broker, you may want to ask your broker to help you.
Removing the Legend
The corporation will send you a letter authorizing its transfer agent to remove the legend. Send the stock certificates to the issuer’s transfer agent, along with the authorization letter and a payment for the service.
Restricted shares may also be restricted by a double-trigger provision. That means that an employee’s shares become unrestricted if the company is acquired by another and the employee is fired in the restructuring that follows. Insiders are often awarded restricted shares after a merger or other major corporate event.
How do I get rid of restrictive legend?
The restrictive legend can only be removed by a transfer agent, who will typically require an opinion letter from the legal counsel of the issuing party.
Can registered securities be restricted?
Restricted securities are subject to resale limitations. They typically bear a “restrictive” legend clearly stating that you may not resell them in the public marketplace unless the sale is exempt from the SEC’s registration requirements.
How do you sell restricted security?
When you acquire restricted securities or hold control securities, you must find an exemption from the SEC’s registration requirements to sell them in a public marketplace. Rule 144 allows public resale of restricted and control securities if a number of conditions are met.
What is legend removal?
Having the Legend Removed
In order to have the legend on a stock certificate removed, investors should contact the company’s shareholder relations department to find out the details of the removal process. Following that, the company will send a confirmation authorizing its transfer agent to remove the legend.
Restricted Shares are not transferable. Further, nothing herein guarantees your status as an Employee for any specified period of time.
What is a restriction on a stock?
What Is Restricted Stock? Restricted stock refers to unregistered shares of ownership in a corporation that are issued to corporate affiliates, such as executives and directors. Restricted stock is non-transferable and must be traded in compliance with special Securities and Exchange Commission (SEC) regulations.
Restricted stock cannot be sold through public transactions due to securities laws and regulations. This class of stock was created as further regulation stemming from the Securities Act of 1933, which was intended to prevent market manipulation through selling large blocks of stock.
When must the individual dispose of the restricted stock?
Newly restricted investments must be disposed of within 5 business days of the notification. The Global Independence Group provides guidance and suggested procedures relating to the audit and inspection by KPMG member firms of personal compliance with KPMG’s independence policies.
How does a company issue restricted stock?
Restricted stock units are issued to employees through a vesting plan and distribution schedule after they achieve required performance milestones or upon remaining with their employer for a particular length of time. RSUs give employees interest in company stock but no tangible value until vesting is complete.
Who is a Rule 144 affiliate?
Rule 144 at (a)(1) defines an “affiliate” of an issuing company as a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such issuer.”
What is a restricted security?
Restricted securities are securities acquired in an unregistered, private sale from the issuing company or from an affiliate of the issuer.
What is restrictive legend?
Restrictive legends are stamped or printed on the certificate or instrument, face or reverse, of restricted securities and usually begin with “These securities are not registered . . . . ” Restricted securities that are not represented by a certificate (generally referred to as “book entry”) will have a notation of …