letter security
Noun: A letter security is a financial instrument, such as a stock or bond, that is issued without being registered with the Securities and Exchange Commission (SEC). Because it is unregistered, it cannot be offered or sold to the general public on the open market. Instead, it is typically sold directly to a specific, qualified investor through a private transaction, often accompanied by an investment letter.
This term is used primarily in formal financial, legal, and investment contexts to describe a specific class of restricted securities. - The company raised capital by issuing letter securities to a select group of institutional investors. - Before you can resell a letter security, you must ensure it complies with the applicable securities laws or obtain an effective registration statement.
- "To hold a letter security": To be in possession of such an unregistered investment.
- The fund continues to hold several letter securities acquired during the private placement.
- "Letter security transaction": A sale or purchase involving this type of restricted security.
- The legal team reviewed the documentation for the letter security transaction.
- Restricted security (n): A broader term for securities subject to sales and transfer restrictions, which includes letter securities.
- Private placement (n): A common method of selling securities (including letter securities) directly to a limited number of sophisticated investors without a public offering.
- Investment letter (n): A document from the purchaser stating the security is bought for investment and not for resale; often associated with the purchase of a letter security.
- Unregistered security
- Restricted stock (when referring to equity)
The term specifically denotes the legal status of the security (unregistered and restricted for public sale), not its inherent financial structure. It is defined by regulatory context rather than the type of asset (e.g., stock vs. bond).
- a stock or bond that is not registered with the Securities and Exchange Commission and cannot be sold in the public market