Frequently Asked Questions
Transferring securities is quite often an involved and complicated procedure, and at Pre Escrow we continuously field many inquiries and questions every day.
The following are some of our most frequently asked questions:
What is My Stock Worth?
Pre Escrow expert valuation team can give you the latest market evaluation of your securities both public and private. Private evaluations are a little tricky to get exactly right as often they depend on third party opinion and information from company directors and investors.
How Can I Change My Name On My Stock?
This is a pretty straight forward procedure, in order to do this a simple letter of instruction from yourself to Pre Escrow together with your relevant share certificates. You can sign the instruction ( Louise Smith formerly Louise Brown).
How Do I Change My Address?
It is important no matter which official body you have dealings with that you update your place of residence every time you change. In the case of securities the Transfer Agent always needs to know any change of address. To update us, simply send Pre Escrow an email (detailing your new address and certificate details) to info@preescrow.com
Please note if your securities are held with a broker then please contact them and not us.
How Do I Transfer Shares To My Spouse Or Anybody For That Matter?
To transfer ownership of any securities held please provide; A letter of instruction with all the details of name, address, social security number and number of shares for each new account and the actual certificates.
You Keep Records Of My Stock, Do I Have To Keep The Certificates?
Although we hold all your securities information, for you to actually sell or transfer the stock you need to have the physical certificates. You are strongly advised to place the certificates in a safe, strong box or with your bank. If you are forced to replace lost or missing certificates there will be a fee involved plus a % of the value of the stock.
To help this situation the SEC has approved a new system called DRS which is a new Direct Registration System. It is a type of book entry system which proves ownership so shareholders can hold and transfer stock in a new way. All the old traditional privileges and shareholder rights still apply without the necessity of having the physical certificate.
What Are Restricted Securities?
Securities that are acquired in unregistered, private sales from the issuer or an agent are classed as Restricted Securities. The type of securities are frequently given through private placement schemes, employee benefit plans, Regulation 144 offerings, in exchange for start up capital, as compensation for professional services. Rule 144a3 categorizes which sales result in restrictive securities.
Affiliate control securities are as the name implies, securities that are held with an affiliate of the issuing company. An affiliate is a person who is classed as a director or shareholder than has a relationship of control with the issuer. To have affiliate control means that the person holding the securities has the power to direct the running and policies of the firm in question, either through the ownership of voting stock, contracted, or differently. If you purchase stock from an affiliate, you may take affiliate controlled securities, even though they where not restricted in their hands. If the shares were otherwise registered and not restricted by Rule 144.
If you purchase restricted stock, then the certificate will almost certainly have a legend stamped on it. The restrictive legend clearly shows that the shares may not be resold in the open market unless the legend is taken off prior to sale by a transfer agent or are exempt from the registration requirements. If they are affiliate control certificates then they will be marked as such, and possibly also carry a legend somewhere on them, all depending if they are registered securities or not.
What Is Rule 144?
When you purchase or acquire restricted securities then you must go through a process of getting them de-restricted before you can consider offering them for sale in the open market. Rule 144 allows the resale of such stock if certain criteria is met.
What Are The Conditions Of Rule 144 For Affiliate Control Shares?
When you hold or purchase controlled stock, you must find a dispensation from the regulations in order to sell them on the open market. Rule 144 allows the public resale of restricted stock if the following criteria is met:
1. You must hold the restricted for at least 6 months if the issuing company is filing with the SEC, and twelve months for current filings. For a non-reporting company the terms are a little different and it is one year, together with a legal document stating the “Shell” status of the issuer.
2. Before any sale can go through there must be sufficient current financial information about the issuer of the stock.
3. An affiliate cannot sell any stock in a three month period that is over 1% of the outstanding securities of the same type being sold. Or if the securities are listed on the stock exchange, the greater of 1% of the average reported weekly trading volume during the month prior to the filing on notice of sale on Form 144. Over-the-counter securities, along with those stocks quoted on the OTC Bulletin Board and the Pink Sheets, may only be sold using the 1% calculation.
4. In affiliate controlled sales, the transactions must be exactly handled as routine trading transactions and no inflated commissions may be paid.
5. If an affiliate is selling the stock, a notice must be filed with the SEC by form 144 if the sale is over 5,000 shares or the total amount is not greater than $50,000 in any three month period. Also the sale has to be expedited within three months of filing the notice, and if the stock does not sell in this time frame, an amended notice must be filed.
If I Am Not An Affiliate Of The Issuer, What Conditions Of Rule 144 Must I Comply With?
If you are not an affiliate of the company that issued the stock or have not been for at least three months, and have held the restricted stock for twelve months and over, you are permitted to sell the stock without notice of the regulations of Rule 144. However, if the issuer of the stock is a reporting company under the Securities Act and you have held them for at least six months and under one year you can sell the stock as long as you qualify the current public information.
If the stock is less than six months old, Pre Escrow will not remove the legend with prior consent from the issuer. To facilitate this normally a legal opinion letter from the issuer’s lawyers stating that the restricted legend can be removed and the reasons behind this opinion.
If the securities have been bought from another non-affiliate, then the period of holding of this stock can be tacked on to yours. For any such gifts made by an affiliate, the holding period starts when the securities are acquired and not when actually given. Stock options, including employee options the holding period starts when the option is taken out and not when it was granted.
To initiate the procedure of removing a legend, simply contact us or you can get in touch with the company that issued the shares. It can be a very involved and complicated business transferring restricted stock so Pre Escrow advise taking legal advice from somebody who specializes in securities law.
How Do I Lift Restrictions?
Normally the restriction on securities lasts for one year especially if they were given in return for seed money, or part of an employee benefit scheme. After a year, you can request for the legend to be removed if the proper documentation has been completed and the original certificate is submitted.
This may be done by: Contacting the company responsible for the administration of the issue, the liquidating company or privately if you submit the following information.
144D Seller’s Representation Letter.
The Registered S Seller’s Representation Letter.
Both are available to download from the Transfer Securities website under Resources and Download Forms. We do advise that any shareholder thinking of doing this contact Pre Escrow prior to doing so. We can help to ensure that you are downloading the correct documentation and to advise if any fees are applicable. Once receipt is made, any all the documentation is correct the restriction can be lifted and new certification can be issued.
If the securities are issued by a “Shell” status company then restrictions cannot be lifted only if the one year reporting criteria have been met and current.