Rule 147 Holding Period Requirements and Resale Restrictions

Securities purchased in a Rule 147 offering carry a six-month holding period during which any resale must go to a resident of the issuer’s state. The Rule 147 holding period starts the day the issuer sells the security to you individually, not the day the overall offering closes, and once six months pass from that date you can sell to buyers anywhere.¹

When the Six-Month Clock Starts

Under 17 C.F.R. § 230.147(e), the resale restriction attaches to each security at the moment the issuer sells it to a purchaser. Your clock runs from your own purchase date. Someone who buys in the first week of an offering and someone who buys three months later will reach the end of the holding period at different times, even though they invested in the same deal.¹

That was not always the rule. Before the SEC modernized Rule 147 in 2016, the resale restriction did not begin ticking until the issuer completed the last sale in the offering. Early investors could be locked in well past six months if the offering took a long time to wind up. The current version replaces that offering-wide clock with a per-purchaser clock.²

Convertible instruments get one clock, not two. If you hold a convertible security, the six-month restriction covers both the convertible you bought and the underlying security you receive when you convert. A conversion under Section 3(a)(9) of the Securities Act does not reset the period.¹

Who You Can Resell To During the Holding Period

Every resale within the six-month window must go to a person or entity that qualifies as a resident of the issuer’s state or territory. For an individual, residency means the buyer’s principal residence is in that state at the time of the sale.³

Your own residency matters too. If you move out of state before the holding period ends, you cannot resell to a buyer in your new state, and your ability to buy more shares from the issuer may also be affected.

Business entities have their own residency test. A corporation, partnership, or trust qualifies as an in-state buyer only if its principal office sits in the issuer’s state. If the entity was formed for the purpose of buying these securities, every beneficial owner of that entity must also live in the state. That anti-evasion piece stops anyone from routing shares to out-of-state investors through a shell.⁴

Safeguards Built Into Your Shares

The holding period is enforced through mechanics the issuer is required to put in place. Under 17 C.F.R. § 230.147(f), an issuer using Rule 147 must do three things, and each of them shapes what you can do with the security during those six months.¹

Every certificate or ownership record carries a legend stating that the security is unregistered and that resale is restricted to in-state residents for six months.
The issuer directs its transfer agent or shareholder records department to block any transfer that would break the residency or timing rule.
The issuer collects a signed statement from each purchaser confirming their state of residence at the time of purchase.

Expect any resale attempt to be checked against these controls. A transfer agent that receives instructions to sell to an out-of-state buyer within the window will refuse to process it, and the legend on the security puts any prospective buyer on notice of the restriction.

What Happens If a Resale Breaks the Rule

A single out-of-state resale during the holding period can cost the issuer the entire Rule 147 exemption. Without the exemption, the offering becomes an unregistered sale of securities in violation of the Securities Act of 1933.⁵ Investors gain rescission rights, meaning they can demand their money back from the issuer, and the SEC can bring enforcement actions against the company and its principals.

There is a partial cushion. Rule 147 is a safe harbor under Section 3(a)(11) of the Securities Act, not the only path to the intrastate exemption. The text of the rule states that failing to satisfy every provision does not create a presumption that the Section 3(a)(11) exemption is unavailable. An offering that stumbles on a Rule 147 technicality might still qualify under the broader statutory language, though the certainty of the safe harbor is gone.³

The Rule 147A Version of the Holding Period

In 2016 the SEC adopted Rule 147A alongside the modernized Rule 147. For the holding period itself, the two rules work the same way: six months from the date the issuer sells to the purchaser, with all resales during that window restricted to in-state residents.⁴

The two rules diverge on issuer-side questions. Rule 147 requires the issuer to be organized in the offering state and restricts both offers and sales to in-state residents. Rule 147A allows out-of-state incorporation and restricts only sales, which lets the issuer advertise across state lines. Rule 147A is also a standalone exemption under the SEC’s Section 28 authority rather than a safe harbor under Section 3(a)(11), so it does not have the same statutory fallback if the requirements are missed.² None of that changes how long you hold or who you can sell to during the six months.

State Law Still Applies to the Resale

Federal Rule 147 compliance does not settle state securities law. Every state has its own registration or notice filing requirements, commonly called blue sky laws, and the SEC has explicitly left room for state regulators to impose additional investor protections on local offerings.⁶ The federal six-month rule tells you when you can sell out of state; state law may add its own requirements on how the resale is documented or filed. Check the law in the issuer’s state before arranging any sale, whether it falls inside the holding period or after it ends.

1
eCFR. 17 CFR 230.147 – Intrastate Offers and Sales
2
Federal Register. Exemptions To Facilitate Intrastate and Regional Securities Offerings
3
eCFR. 17 CFR 230.147 – Intrastate Offers and Sales
4
U.S. Securities and Exchange Commission. Intrastate Offerings
5
U.S. Government Publishing Office. Securities Act of 1933
6
Securities and Exchange Commission. Exemptions to Facilitate Intrastate and Regional Securities Offerings