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.

BREAKING DOWN '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.

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RELATED FAQS
  1. When is it necessary to get a letter of credit?

    Capitalize on assets and negate risks by using a letter of credit. Letters of credit are often requested for buying, selling ... Read Answer >>
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    Learn more about the different types of letters of credit that are used to facilitate exchanges between parties that might ... Read Answer >>
  3. When do I need a letter of credit?

    Learn more about the function of a letter of credit for both the buyer and the seller, and get some examples showing when ... Read Answer >>
  4. When are you legally required to get a letter of credit?

    Learn how exporters or importers who deal in international trade use letters of credit to ensure that transactions are safe, ... Read Answer >>
  5. Can entities other than banks issue letters of credit?

    Obtaining a letter of credit from a non-bank is legally acceptable according to the ICC, but companies tend to prefer to ... Read Answer >>
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