Hello,
I selected the third option as it was closest to the $50,000 exception, however, it’s still over $50,000. And it looks like there is no correct option on the list?
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Hi @Calm_scarlet_beetle! Thanks for reaching out about this.
This is a very tricky question. So tricky, that I had to study it for a few minutes myself to figure it out (I wrote the question a few years ago). As you know, the volume (dribble) portion of Rule 144 applies to affiliates (officers, directors, 10% shareholders). Typically, affiliates must report sales of the shares they’re affiliate of and cannot sell more than 1% of the outstanding shares or the 4 week trading average (every 90 days). This question specifically focuses on the reporting aspect of Rule 144.
The de minimis exception allows affiliates to avoid reporting requirements if selling no more than 5,000 shares worth $50,000 or less. Obviously, all of the wrong answers in this question exceed those numbers. This is even the case in the right answer.
So, why is the right answer still correct? It’s because there’s no indication the CFO of RST is an affiliate of PDQ Company. Is the CFO of RST an affiliate of RST? Yes, and Rule 144 reporting requirements would apply when they sell RST shares. However, they don’t apply when liquidating shares of another issuer.
I hope this helps!
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Wow, the CFO of RST sells PDQ - that was really tricky. A great reminder to read carefully through every word. Thank you!
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