Restricted Securities
Securities acquired in unregistered, private transactions from an issuer that may not be resold without registration or an available exemption under securities law.
Full Definition
Restricted securities are typically acquired through private placements, Rule 144A offerings, employee stock plans, or other transactions exempt from SEC registration. They are evidenced by a restrictive legend printed on the physical certificate or, in book-entry systems, noted in the transfer agent's records. The legend restricts resale until certain conditions are met—most commonly, after a holding period of six or twelve months under SEC Rule 144. Transfer agents must verify that a valid legal opinion or Rule 144 opinion letter accompanies any request to remove the restrictive legend before allowing free transfer. Editors should hyphenate 'restricted' only when used as a compound modifier with a different noun ('restricted-legend shares'); 'restricted securities' itself is not hyphenated.
Usage
Usage note: Distinguish 'restricted securities' (acquired in unregistered transactions) from 'control securities' (held by affiliates, regardless of how acquired). Both may carry resale restrictions but for different legal reasons.
In Context
- "The transfer agent declined to process the transfer until counsel provided a Rule 144 opinion confirming the restricted securities were eligible for legend removal." — Legend removal request
- "Private placement shares are restricted securities and may not be resold without registration or an applicable exemption." — Stock purchase agreement