SEC Proposal Addresses Legend Removal Process

The SEC recently proposed updates to rules and forms applicable to transfer agents, including a new rule addressing the process to remove restrictive legends.¹ Comments should be received on or before November 3, 2026.

Proposed Exchange Act Rule 17ad-31: Restrictive Legends

Restricted securities are generally securities acquired in unregistered issuances from an issuer or in unregistered private transfers from affiliates. Typically, these securities bear legends indicating that they may not be resold without compliance with the registration requirements of Securities Act of 1933, as amended (Securities Act) unless an exemption from registration is available. Placement and removal of such legends are often the responsibility of transfer agents. Public resale of these securities typically requires removal of the legend, and transfer agents typically require an opinion of issuer’s counsel stating that the proposed sale is being made under a valid exemption from Securities Act