Direct Participation Program (DPP) Limited Partnership Suitability
Which investor profile is MOST suitable for an investment in a Direct Participation Program (DPP) real estate limited partnership?
SEC Rule 144 Restricted & Control Stock: Volume Limits, Holding Periods & Form 144 Filings
An authoritative guide to SEC Rule 144 compliance. Master the distinctions between restricted stock (unregistered) and control stock (affiliate-owned), the 6-month holding rule, 90-day volume limitation calculations, Form 144 filing triggers, and de minimis exemptions.
Deconfusion Matrix
Core Differences & FINRA Exam Traps
| Strategy / Concept | Definition & Structure | Golden Rule | FINRA Exam Trap |
|---|---|---|---|
| Restricted Stock vs. Control Stock | Restricted = acquired through private placement (Reg D, unregistered). Control = stock owned by an affiliate (director, officer, or >10% voting shareholder). | Restricted stock has a holding period (6 months or 1 year). Control stock NEVER has a holding period unless it was ALSO acquired via an unregistered placement! | Assuming control stock purchased in the open market has a 6-month holding period. It does not! Open market control stock has no holding period, but is subject to volume limits. |
| Holding Periods (Restricted Stock) | Minimum time before restricted stock can be resold to the public | SEC Reporting Company: 6 months. Non-Reporting Company: 1 year. The holding period begins once the shares are fully paid for in cash (no promissory notes). | Candidates often memorize 6 months and forget that non-reporting issuers require 1 full year. |
| Volume Limit in Any 90-Day Period | Maximum number of shares an affiliate can sell in any 90-calendar-day window under Rule 144 | The GREATER of: 1% of total outstanding shares, OR the average weekly reported trading volume of the previous 4 calendar weeks. | Choosing the 'lesser of' or selecting the 3-week average instead of the 4-week average. |
| Form 144 Filing & De Minimis Exemption | Notice of proposed sale of restricted or control securities filed with the SEC | Must be filed concurrently with (or prior to) placing the sell order. Valid for 90 days. Exemption: < 5,000 shares AND < $50,000 aggregate dollar value. | Confusing 5,000 shares with $5,000. It is 5,000 shares OR $50,000 aggregate market value in any 90-day period. |
Step-by-Step Logic
Calculation Formulas & Worked Examples
Volume Limit Formula
Volume Cap = MAX [ 1% × Shares Outstanding, 4-Week Average Weekly Volume ]Calculate both numbers. The seller is legally permitted to sell up to the HIGHER figure within any rolling 90-day period.
Example: Company has 10,000,000 shares outstanding (1% = 100,000). Past 4 weeks trading volume: 80,000, 110,000, 95,000, 115,000 (Total = 400,000 ÷ 4 = 100,000 avg). Both equal 100,000. If 4-week avg was 120,000, max allowed = 120,000 shares.
De Minimis Filing Exemption Test
No Form 144 required if: Shares ≤ 5,000 AND Dollar Value ≤ $50,000 within 90 daysIf either threshold is exceeded, Form 144 MUST be submitted to the SEC concurrently with placing the sell order.
Example: An affiliate sells 4,000 shares at $12 ($48,000). Both tests met -> No Form 144 needed. If shares are sold at $15 ($60,000), Form 144 is required because value exceeds $50,000.
Targeted Drill Questions (7 Items)
Detailed explanations and distractor autopsies for every questionAmerican Depositary Receipts (ADRs) Currency Risk and Foreign Withholding
A U.S. investor purchases American Depositary Receipts (ADRs) representing shares of a Japanese electronics company. Even though ADRs trade in U.S. dollars on the NYSE, the investor remains exposed to:
Custodial Accounts (UGMA/UTMA): Taxation, Margin Prohibition, and Irrevocability
Which statement regarding a custodial account established under the Uniform Transfers to Minors Act (UTMA) is ACCURATE?
Corporate Accounts: Corporate Charter vs. Corporate Resolution
When opening a margin account for a corporation, which document specifies WHICH individuals have legal authority to trade on behalf of the corporation?
Discretionary Accounts: Written Authorization and Time/Price Discretion
A registered representative executes a trade for a client choosing the security and the number of shares without calling the client beforehand. Under FINRA rules, what documentation MUST be in place?
Statutory Disqualification under Exchange Act Section 3(a)(39)
Under the Securities Exchange Act of 1934 and FINRA bylaws, which event causes an individual to be subject to an automatic STATUTORY DISQUALIFICATION (SD) from the securities industry?
SEC Rule 14e-4: Short Tendering Prohibition and Net Long Requirement
Under SEC Rule 14e-4, an investor who wishes to participate in a corporate tender offer is legally permitted to tender shares ONLY if the investor: