Rule 7 of 14 in this unit2.1.1
2.1.1 Equity Securities
SIE outline 2.1.1
Volume Cap: the GREATEST of the Two
In any three months an affiliate may sell no more than the greatest of (a) "one percent of the shares or other units of the class outstanding", or (b) the average weekly reported trading volume over the four preceding calendar weeks. Rule 144(h) then requires a Form 144 notice where the sale exceeds 5,000 shares or an aggregate sale price of $50,000 within any three-month period. NOT "the affiliate may sell 1% of outstanding shares." 1% is only one of the two candidates, and the rule takes the GREATEST: so on an actively traded stock the true cap is higher than 1%.
The method for this kind of question
- 1h45m ÷ 80 items = 78.75 seconds per item. A voting or Rule 144 item should cost about 45.
- Three facts decide which formula you are in: does the charter provide cumulative voting? does the issuer report? is the seller an affiliate?
- Cumulative voting = shares × seats, and it favours the MINORITY holder. Statutory = your share count per seat.
- Rule 144(e) takes the GREATEST of 1% outstanding and the 4-week average weekly volume: never automatically the 1%.
- Rule 144(d): 6 months if the issuer reports, 1 year if it does not. The clock runs from acquisition.
- Liquidation: sort by claim type, not by how safe the name sounds. A subordinated debenture still outranks preferred stock.
- Next: SIE Practice Quiz #5: Equity Securities, every answer explained.
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