Definition

Noun: A formal, written document in which the purchaser of a privately offered security (a "letter security") declares that the security is being acquired for long-term investment purposes and not with the intent of immediate resale. This declaration allows the transaction to be exempt from the registration requirements typically mandated by the U.S. Securities and Exchange Commission (SEC).

Usage

The term is used specifically in the context of U.S. securities law and private investment. It is a legal document that creates a contractual restriction on the sale of the security.

Examples

• The venture capital firm required an investment letter from the accredited investors before completing the private placement.
• By signing the investment letter, the buyer agreed not to resell the shares for at least one year.
• The exemption under Rule 144A often involves the use of an investment letter.

Advanced Usage

• Legal Context: The investment letter is a key component in private placements under regulations like Regulation D of the Securities Act of 1933. It helps issuers establish that the securities are not being offered to the general public, thus qualifying for an exemption from SEC registration.
• Restricted Securities: Securities acquired through an investment letter are typically classified as "restricted securities" and are subject to holding period requirements and resale limitations.

Variants and Related Words

• Letter Security (n): The actual stock or bond that is subject to the restrictions outlined in the investment letter. Also called a "restricted security" or "letter stock."
• Private Placement (n): The non-public offering of securities to a select number of investors, which commonly involves the use of investment letters.
• Rule 144 (n): An SEC rule that provides conditions under which restricted and control securities can be resold in the public market.

Synonyms

• Letter of Investment Intent
• Investment Representation Letter

Related Phrases

• To provide/submit an investment letter: The action of giving the signed document to the issuer or seller.
  • The investor was required to provide an investment letter to finalize the purchase.
• To hold securities pursuant to an investment letter: To own securities under the terms and restrictions of the letter.
  • The shares are held pursuant to an investment letter and cannot be freely traded.

Noun

1. a letter of intent saying that a letter security is being bought for investment and not for resale; avoids need for SEC registration