Letter Security

AAA

DEFINITION of 'Letter Security'

A security that is not registered with the SEC, and therefore cannot be sold publicly in the marketplace. Letter securities are sold directly by the issuer to the investor. The term is derived from the SEC requirement for an "investment letter" from the purchaser, stating that the purchase is for investment purposes and is not intended for resale.


Also known as restricted security, letter stock or letter bond.

INVESTOPEDIA EXPLAINS 'Letter Security'

Letter securities are often offered by means of private placements to institutional investors. They may also be offered to accredited investors, who may need to demonstrate that they possess the financial means to invest in, and the expertise to assess the risks of, such securities. Letter securities may have conditions attached to them such as a mandatory hold period. They are sometimes registered with the SEC at a subsequent date.

RELATED TERMS
  1. Registration

    1. The process by which a company files required documents with ...
  2. Securities And Exchange Commission ...

    A government commission created by Congress to regulate the securities ...
  3. Offering Memorandum

    A legal document stating the objectives, risks and terms of investment ...
  4. Private Placement

    The sale of securities to a relatively small number of select ...
  5. Securities Exchange Act Of 1934

    The Securities Exchange Act of 1934 was created to provide governance ...
  6. Dividend

    A distribution of a portion of a company's earnings, decided ...
RELATED FAQS
  1. Why do we need a secondary market?

    In secondary markets, investors exchange with each other rather than with the issuing entity. Through massive series of independent ... Read Full Answer >>
  2. What is a direct rights offering?

    A direct rights offering is an offer made by a company, directly to existing shareholders, granting them rights to purchase ... Read Full Answer >>
  3. What are the types of share capital?

    Share capital refers to the funds a company receives from selling ownership shares to the public. A company that issues 1, ... Read Full Answer >>
  4. What are the pros and cons of using the S&P 500 as a benchmark?

    The Standard & Poor's 500 Index is the most commonly used benchmark for determining the state of the overall economy. ... Read Full Answer >>
  5. What does 100-plus accrued interest mean?

    The phrase "100-plus accrued interest" can be seen in reference to bond valuation and bond quotes. It means a bond has been ... Read Full Answer >>
  6. Are mid-cap stocks more profitable than large-cap stocks?

    A mid-cap stock may perform better than a large-cap stock. The stock market can be stable or volatile, and many factors affect ... Read Full Answer >>
Related Articles
  1. Investing Basics

    SEC Filings: Forms You Need To Know

    The forms companies are required to file provide a clear view of their histories and progress.
  2. Personal Finance

    Reg AC: What Does It Mean To Investors?

    In 2003, the SEC issued a new regulation meant to hold analysts more accountable for their reports. Find out what it means.
  3. Active Trading

    Using Public SEC Filings To Analyze Companies

    Reports from the Securities and Exchange Commission provide investors with an edge in determining the investment value of companies. Learn what to look for in these financial reports.
  4. Investing Basics

    Understanding Redemption

    In the investing world, redemption refers to cashing out the value of bonds or mutual funds.
  5. Investing

    When Will The Bull Market End?

    A few weeks ago, the current bull market celebrated its sixth anniversary, making it one of the longest in history.
  6. Investing Basics

    Explaining Rights Offering

    A rights offering is an offer by a company to its existing shareholders of the right to buy additional shares in proportion to the number they already own.
  7. Investing Basics

    What is a Stock Option?

    An employee stock option is a right given to an employee to buy a certain number of company stock shares at a certain time and price in the future.
  8. Investing Basics

    What is a Share?

    A share – also called a stock -- is a unit of ownership in a corporation or financial asset.
  9. Investing Basics

    What is a Forward Contract?

    A forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date.
  10. Investing Basics

    What is an Index?

    An index is a statistical means of calculating a change in an economy or market.

You May Also Like

Hot Definitions
  1. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  2. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  3. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  4. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  5. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  6. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
Trading Center