Insider sale planning

Rule 144 affiliate sale plan: how insiders plan a staged stock liquidation

Executive officers, directors, 10%+ shareholders, and recent former affiliates face the most restrictive category of Rule 144 sale conditions. Unlike non-affiliates who simply need to meet a holding period, affiliates must comply with four ongoing conditions on every sale: current public information, volume limits, manner of sale, and Form 144 filing. For anyone holding a material position — typically $1M+ — an explicit sale plan is not optional. It is the only practical way to reduce concentration without violating securities law or creating an adverse market signal.

Who counts as an affiliate

Rule 144 defines an affiliate as any person who directly or indirectly controls the issuer through stock ownership, board position, or management authority. In practice, the SEC and courts treat the following as affiliates:

• Executive officers — CEO, CFO, COO, General Counsel, Chief Accounting Officer, and generally any officer named in proxy filings or identified as having policy-making authority.
• Directors — all board members, including non-management and independent directors.
• 10%+ shareholders — anyone who beneficially owns 10% or more of any class of voting securities, including shares held through funds or trusts they control.
• Former affiliates — anyone who stopped being an affiliate within the preceding 90 days remains subject to affiliate conditions during that look-back window.

If you fall into any category above, both shares received as compensation (restricted securities) and freely tradeable shares you purchased in the open market (control securities) are subject to volume limits on every sale. The label on the share certificate does not change the affiliate's obligation.

The quarterly volume ceiling

In any rolling three-month period, an affiliate may not sell more than the greater of:

• 1% of the shares of that class outstanding, or
• The average weekly reported trading volume over the four calendar weeks preceding the sale (exchange-listed and Nasdaq securities only — OTC is limited to the 1% cap).

This is a hard ceiling, not a reporting threshold. Exceeding it voids the Rule 144 safe harbor on those shares. Use the volume limit calculator to estimate your quarterly window before planning any sale cadence. The three-month window rolls continuously — it does not reset on a fixed calendar quarter — so sales from the prior 89 days count against the current cap.

Planning a multi-quarter sale cadence

The math for a large affiliate position almost always points to a multi-year exit. An executive with 1.5 million shares of a 150-million-share company, and average weekly trading volume of 800,000 shares, faces a cap of: greater of 1.5 million (1% cap) or 3.2 million (4-week volume cap) — so 3.2 million shares per quarter. If the full position is 4 million shares, the minimum legal exit is about two quarters even at the maximum allowable rate. In practice, executives rarely sell at the maximum because it signals aggressive insider selling to other investors.

A practical multi-quarter plan has three interlocking layers:

1. Volume ceiling per quarter. Compute the cap, then decide what fraction to use. Many advisors recommend selling 25–50% of the quarterly allowance to reduce scrutiny. This extends the timeline but avoids creating a market perception that insiders are rushing for the exits.
2. Tax year allocation. Each sale creates a capital gains event. Spreading sales across calendar years lets you manage exposure to the 15%/20% LTCG boundary and the NIIT phase-in (see table below). For founders or former executives with no other large W-2 income, the difference between staying in the 15% bracket and crossing into 20% + NIIT can be 8.8 percentage points — material on a $5M gain.
3. Concentration target. Define an endpoint: e.g., reduce the single-stock position from 70% of net worth to below 20% over three years. Work backward from the target to the annual sale quantity, then confirm that Rule 144 volume limits permit that pace. If they do not, the timeline must lengthen.

Tax scheduling across quarters

For most restricted securities, the long-term capital gains clock runs from the original acquisition date — not from legend removal or the date Rule 144 conditions were satisfied. Once the 12-month LTCG threshold is met, the tax rate depends on taxable income in the year of sale.³

IRS Rev. Proc. 2025-28 (2026 thresholds); IRC § 1411 (NIIT, not inflation-adjusted).

For active executives already earning $500K+ in W-2 income, LTCG is almost certainly taxed at 23.8% (20% + NIIT) regardless of how sales are spread across years. The tax priority there shifts to timing around blackout windows and minimizing state tax drag, not bracket management. For a retired founder with minimal other income, selling $400K of gain in year one versus $800K can be the difference between the 15% and 20%+ rates — a real dollar difference worth modeling before setting the sale cadence.

Layering in a 10b5-1 plan

A 10b5-1 plan is a pre-arranged written schedule for buying or selling issuer stock that provides an affirmative defense against insider trading allegations. For an active executive or director who wants to sell a material quantity of stock, a properly structured 10b5-1 plan is effectively required — selling without one exposes every transaction to scrutiny about whether MNPI existed at the time of the order.

Under the December 2022 SEC amendments, officers and directors must satisfy a cooling-off period before the first trade under a new plan: the later of (a) 90 days after the plan is adopted, or (b) two business days after the filing of the 10-Q or 10-K for the fiscal quarter in which the plan was adopted — capped at 120 days in total.¹ Non-executive insiders face a 30-day cooling-off. The plan must be adopted during an open trading window, and the officer or director must certify at adoption that they are not aware of any MNPI.

A 10b5-1 plan and Rule 144 operate in parallel. The plan is the insider-trading defense; Rule 144 is the resale exemption. Both must be satisfied on each sale. A well-structured plan pre-specifies the sale schedule — dates, quantities, and any price floors — within the Rule 144 quarterly volume limits, so each trade automatically complies with both frameworks without requiring a new decision at the time of execution.

Form 144 and Section 16 filings

Affiliates who sell more than 5,000 shares or more than $50,000 in proceeds in any three-month period must file Form 144 with the SEC at the time the sell order is placed.² The form discloses the number of shares to be sold, the nature of the seller's relationship with the issuer, and the date of the order. Most brokers require the filed form before executing the trade.

Section 16 (Form 4) reporting applies separately and on a faster timeline: officers, directors, and 10%+ shareholders of reporting companies must report each transaction within two business days of execution. These two disclosure obligations run independently — Form 144 goes in before the trade, Form 4 goes in after.

The professional team a sale plan requires

A Rule 144 affiliate sale plan is not a single-advisor workflow. The typical team includes:

• Securities counsel — confirms affiliate status, reviews the holding period, prepares the opinion letter for legend removal, advises on 10b5-1 plan structure, and handles Form 144 and Form 4 filings.
• Broker with a restricted-stock desk — receives the opinion letter from counsel, coordinates with the transfer agent for legend removal or delivery, and executes trades within the 10b5-1 plan parameters.
• Financial advisor — models the sale cadence, concentration reduction timeline, and reinvestment policy; integrates the financial plan with the legal and brokerage workflow; advises on tax allocation across quarters and years.
• CPA or tax advisor — estimates cost basis, models LTCG and NIIT exposure per year, and advises on tax-efficient strategies for large positions — charitable remainder trusts, donor-advised funds, qualified opportunity zone reinvestment, or installment-sale structures where available.

The financial advisor's role is integration. They hold the complete picture — total wealth, income, tax situation, goals — and make sure the sale cadence and reinvestment plan make sense as a whole. Securities counsel and the broker handle compliance and execution; the financial advisor handles everything that happens with the proceeds.

Read the Rule 144 sale checklist for the full pre-sale documentation list, the volume limit calculator to confirm your quarterly ceiling, and the holding period guide for the tax clock details.