Legend

AAA

DEFINITION of 'Legend'

A statement on a stock certificate noting restrictions on the transfer of the stock, often due to SEC requirements for unregistered securities. A legend may or may not be legally required on the certificate itself, depending on state laws. Restrictions on the sale or transfer of share ownership are common among privately held corporations.

BREAKING DOWN 'Legend'

The most common legend on private stock certificates contains language informing the holder of the restrictions on the sale or transfer of unregistered securities. SEC Rule 144 outlines the exemptions that allow one to sell unregistered securities. There may also be further restrictions on the sale of stock in private companies where shareholders have agreed to a shareholder buy-sell agreement. Often, these agreements are put in place to control who becomes a shareholder in the company.

RELATED TERMS
  1. Authorized Stock

    The maximum number of shares that a corporation is legally permitted ...
  2. Restricted Stock

    Insider holdings that are under some other kind of sales restriction. ...
  3. Stock Certificate

    The physical piece of paper representing ownership in a company. ...
  4. Rule 144

    A Securities and Exchange Commission rule that sets the conditions ...
  5. Insider

    A director or senior officer of a company, as well as any person ...
  6. Equity Market

    The market in which shares are issued and traded, either through ...
Related Articles
  1. Markets

    What Investors Can Learn From Insider Trading

    Some insider trading is actually legal - and can be extremely telling for investors.
  2. Investing Basics

    Old Stock Certificates: Lost Treasure Or Wallpaper?

    What if you've discovered some old shares in bearer form? Follow our tips and find out what they're worth.
  3. Bonds & Fixed Income

    Calculating Yield to Worst

    Yield to worst is the lowest possible yield on a bond that may be called in the future.
  4. Fundamental Analysis

    Explaining the Central Limit Theorem

    Central limit theorem is a fundamental concept in probability theory.
  5. Investing Basics

    What Happens in a Haircut?

    One meaning of haircut is the difference between prices at which a market maker can buy and sell a security.
  6. Investing Basics

    Explaining Delivery Versus Payment

    Delivery versus payment is a common procedure for settling the exchange of securities.
  7. Investing Basics

    What is Convertible Preferred Stock?

    Convertible preferred stock is preferred stock that can be converted into common stock as of a predetermined date at a specified ratio.
  8. Investing Basics

    What Does Clawback Mean?

    A clawback occurs when money or benefits that have been distributed are taken back because of unforeseen or unusual circumstances.
  9. Investing Basics

    What is the Theory of Backwardation?

    Backwardation occurs when the futures price of a commodity is lower than its market price today.
  10. Term

    What is Liquidity Risk?

    Liquidity risk is the risk of being unable to sell an asset fast enough to avoid loss.
RELATED FAQS
  1. Where do penny stocks trade?

    Generally, penny stocks are traded through the use of the Over the Counter Bulletin Board (OTCBB) and through pink sheets. ... Read Full Answer >>
  2. Where can I buy penny stocks?

    Some penny stocks, those using the definition of trading for less than $5 per share, are traded on regular exchanges such ... Read Full Answer >>
  3. What are the disclosure requirements for a private placement?

    The U.S. Securities and Exchange Commission (SEC) has set forth disclosure requirements for private placements, including ... Read Full Answer >>
  4. How does the stock market react to changes in the Federal Funds Rate?

    The stock market reacts to changes in the federal funds rate in various ways depending on where it is in the business cycle. ... Read Full Answer >>
  5. What are the requirements for being a Public Limited Company?

    The requirements for an entity to be considered a public limited company (PLC) include registration requirements, establishing ... Read Full Answer >>
  6. Is there a difference between financial spread betting and arbitrage?

    Financial spread betting is a type of speculation that involves a highly leveraged derivative product, whereas arbitrage ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Recession

    A significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, ...
  2. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  3. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  4. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  5. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  6. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!