Will the SEC Intervene in a Dispute With an Issuer Over Restricted Stock?

No, the SEC will not normally intervene to help a shareholder if a public company refuses to clear a restricted stock certificate.   Instead, to resolve a dispute, the shareholder needs a detailed Rule 144 or Section 4(1) legal opinion drafted by an experienced securities attorney.

According to the SEC, removing a restrictive legend is “solely in the discretion of the issuer” and that State law, rather than federal law, covers disputes over the removal of restrictive legends.

Even if a shareholder has technically met all the requirements of Rule 144, those shares cannot be sold on the public market until the restrictive legend is removed from the certificate.

Only the public company’s Transfer Agent can remove a restrictive legend. However, the Transfer Agent won’t remove the restrictive legend if the Issuer refuses.  Rule 144 legal opinions are addressed to the public company’s Transfer Agent, and cite specific documentation provided by the shareholder.