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  • What is the purpose of a letter stock more than protect a resale of the stock?
  • Is it related to mutual funds in any way?
  • How can an investor have access to these stocks if are not traded publicly?
  • Where does these unregistered stocks can be found?
  • The transaction can be done between the issuer (I understand the company) and the investor (WHO? if it is not traded publicly)
  • Is it the letter stock a private equity hold by an employee of the company?
  • Or I am misunderstanding everything and it is only the formal contract when you buy shares from a company?

In trying to find information about this term that I read in a book.

As far as I understood, is a restricted and unregistered stock with SEC and cannot be accessible to the general public in the marketplace. And the SEC requires a letter at the moment of the purchase to avoid a resale of the stock.

  • 2
    This question has too much going on in it. Narrow down to just one question first. – Joe Jun 9 '16 at 21:19
  • All questions are related exclusively to letter stock. No purpose to split into many questions. I summarized it like mini questions because I think that someone can answer my question with maybe 2 or 3 well developed paragraphs. – Maximus Decimus Jun 9 '16 at 21:27
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    Sorry, but that's not how things work on this site (or really, most Stacks). It's not possible for me to see one single question to be answered up there as it stands. Perhaps it just needs to be clarified, but I would certainly remove the bullets, and put it in a single question form that is comprehensible as one question. – Joe Jun 9 '16 at 22:01
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It almost sounds like you're trying to describe restricted shares (Rule 144 stock). If that's the case, here's a quote from the SEC's website about it. This is what your explanation seems to be covering:

What Are Restricted and Control Securities?

Restricted securities are securities acquired in unregistered, private sales from the issuing company or from an affiliate of the issuer. Investors typically receive restricted securities through private placement offerings, Regulation D offerings, employee stock benefit plans, as compensation for professional services, or in exchange for providing "seed money" or start-up capital to the company. Rule 144(a)(3) identifies what sales produce restricted securities.

Control securities are those held by an affiliate of the issuing company. An affiliate is a person, such as an executive officer, a director or large shareholder, in a relationship of control with the issuer. Control means the power to direct the management and policies of the company in question, whether through the ownership of voting securities, by contract, or otherwise. If you buy securities from a controlling person or "affiliate," you take restricted securities, even if they were not restricted in the affiliate's hands.

If you acquire restrictive securities, you almost always will receive a certificate stamped with a "restrictive" legend. The legend indicates that the securities may not be resold in the marketplace unless they are registered with the SEC or are exempt from the registration requirements. Certificates for control securities usually are not stamped with a legend.

If you want to read more, check out this page from the SEC site.

I hope this is helpful to you. And it might be a good idea to keep your question(s) a bit shorter and more focused, my friend. You'll get a better reception from readers. Maybe you understand what you're asking, but others may not.

Good luck!

  • Thank you so much! That's what I was looking for! I'll follow your advice upon next question. Thanks for your understanding! – Maximus Decimus Jun 10 '16 at 13:12
  • Glad I could help. It's always fun to see people learning this stuff. – Daniel Anderson Jun 10 '16 at 13:16

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