US securities law start from the basic premise that every individual who wants to sell a secuirty must establish an exemption from applicable federal and state securities law registration requirements or must comply with such registration requirements. So when an investor wishes to resell registered securities, he or she will rely on the exemption in Section a(a)(1) of the 1933 Act, which exempts from further registration any transaction by a person other than an issuer, dealer or underwriter.
However these exemptions are not allways available such as when there are sales of unregistered securities othwerise known as "restricted stock" which are acquired by affiliates of the isuer and non affiliattes from the issuer, and it is not available for sales of issuer securities by affiliates despite the way they were acquired. This is known as "control stock". The applicable exemption from registration of such securites is provided by Rule 144 which is poromulgated under the 1933 Act. Rule 144 provides a save harbor (providing certain conditions are met), which allows directors and officer to sell securities without complying with the SEC's registration requirements.
Restricted stock is stock acquired from the issuer or an affiliate of the issuer in a transaction not involving a public offering. Thus shares of common stock which have been issued upon exercise of compensation stock options that have not been registered under the 1933 Act on For S-8 are restricted stock. Unless restricted stock is registered with the SEC or is specifically designated as exempt by the SEC (such as the case of 144 stock) no shares of restricted stock may be sold. Private sales may be eligibile for other exemptions. Generally speaking, Rule 144 provides essentially the only way to sell restricted stock in the public market.
"Affiliates" in general are people that are in a relationship of control with the issuer, examples might be people such as the director, executive officer, or large shareholder.
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