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https://www.investopedia.com/terms/u/unregistered-shares.asp

Unregistered shares have fewer investor protections and different risks compared to registered securities. As a result, companies can only sell unregistered shares to “qualified investors.”

Qualified investors consist of high-net-worth ($1 million or more) and/or high-income ($200,000 per year or more for individuals; $300,000 per year or more for married couples) investors that the SEC considers savvy enough to make such investments.

In the past, soliciting or advertising unregistered shares was prohibited, but in 2013, the SEC adopted Rule 506(c) as part of the Jumpstart Our Business Startups (JOBS) Act, allowing certain unregistered securities to be solicited and advertised.

The sale of unregistered shares is typically considered a felony, but there are exceptions to this rule.

SEC Rule 144 lays out the conditions under which unregistered shares may be sold:

They must be held for a prescribed period.

There must be adequate public information about the security’s historical performance.

The sale must be of less than one percent of shares outstanding and less than one percent of the previous four weeks’ average trading volume.

All normal trading conditions that apply to any trade must be met.

Sales of more than 500 shares or more than $10,000 worth must be preregistered with the SEC. An exception to this condition occurs if the seller is not associated with the company that issued the unregistered shares (and has not been associated with it for at least three months) and has owned the shares for more than one year.