Financial Industry Regulatory Authority (FINRA) Practice Exam 2026 - Free FINRA Practice Questions and Study Guide

When an officer of a public company purchases registered stock in the open market, they are subject to certain regulations regarding the subsequent sale of those shares. Specifically, the correct answer indicates that the officer can sell the stock immediately, but they must adhere to the volume limitations imposed by Rule 144.

Rule 144 is designed to impose guidelines around the sale of restricted and control securities. Control securities are typically owned by officers, directors, or major shareholders, and when these individuals sell their shares, they must follow specific volume restrictions to avoid flooding the market and potentially affecting stock prices adversely.

Under this rule, an officer can sell a certain percentage of the shares they own or a specific number of shares over a given timeframe, often calculated as 1% of the outstanding shares or the average weekly trading volume during the prior four weeks. This framework helps to ensure that such transactions don’t unduly disrupt the market while allowing the officer to liquidate their investment.

Options that suggest no restrictions or longer waiting periods do not align with the provisions set forth under Rule 144, making the understanding of these regulation nuances critical for compliance and trading practices for company insiders.