restricted security

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Restricted Security

A stock or right that one acquires through some means other than the open market. One may receive a restricted security through a merger or acquisition, private placement prior to an IPO, or sometimes through a stock option. A restricted security is not registered with the SEC and thus may not be sold publicly until registration has been made. It is less commonly called a letter security.

restricted security

A security that has not been registered with the SEC and therefore may not be sold publicly. These securities frequently enter portfolios of institutional investors through private placements and are sometimes registered at a later date. Also called letter bond, letter security, letter stock, unregistered security.

Restricted security.

Restricted securities are stocks or warrants that you acquire privately, through stock options or a corporate merger, rather than by buying them in the open market.

For example, you may receive restricted stock if you put money into a startup company.

If the company has not yet registered with the Securities and Exchange Commission (SEC) for an initial public offering (IPO), its securities cannot be transferred or resold until the issuing company meets the SEC registration requirements for publicly traded securities.

If you exercise stock options and buy stock at a reduced price, you may be required to hold those stocks for a period of time before liquidating them.

References in periodicals archive ?
Some creditors were especially troubled by Red Alert's inclusion of so much unregistered stock, which carried an audacious $1 billion valuation.
The SEC charged the operators of a South Florida-based microcap scheme with fraud and froze assets after it found that three boiler room brokers and their agents were selling unregistered stock.
The transfers of unregistered stock were not made on the open market, IPG said.
Investigators say Cooley and two others lured victims into purchasing unregistered stock in Bidbay.
Pallmeyer has ruled that Tribune and Zell should be dropped from the case, but her ruling on the unregistered stock opens the door for the Labor Department to file a civil suit against GreatBanc.
New York, NY 5/9/08 -- Enzo Biochem has acquired BIOMOL International for $15 million in cash, $3 million in unregistered stock, and earn outs over two year.
It has been bold in its use of unregistered stock to pay for operating expenses.
Violations of Federal and state securities laws, including an illegal sale of unregistered stock, are felonies.
The $1 billion claimed value of the unregistered stock is illusory at best.
Several times ICG also violated the securities registration provisions by distributing unregistered stock that it acquired from issuers or their affiliates.