Restricted & Control Stock
Restricted stock is unregistered stock acquired privately (e.g., in a private placement) that generally must be held six months before resale; control stock is registered stock held by affiliates (officers, directors, >10% owners), whose sales face volume limits under Rule 144.
The exam loves a two-part trap: it gives you a fact pattern and makes you decide which Rule 144 condition applies — the holding period or the volume cap. The tell is how the shares were acquired: privately/unregistered points to restricted stock and the holding period; held by an affiliate (officer, director, or >10% owner) points to control stock and the volume formula, regardless of how those shares were bought. Watch for the Form 144 trigger — filing is required only when a sale exceeds 5,000 shares or $50,000 in any 90-day period (the SEC text says “three months”), and the form is good for 90 days.
The classic mistake is thinking control stock has a holding period (it does not — only restricted does) or that restricted stock can never be sold (it can, after the hold). Don’t confuse this with treasury stock (issuer-owned, no vote/dividend) or a fresh issuer resale, and keep it separate from rights and warrants, which are purchase instruments, not resale restrictions. Hook: Restricted = Rest (hold it); control = count the volume.
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