Section 4(1 ½) provides a means for individuals to sell securities acquired in a private sale without the need for registration. This allows for private sales without the burden of excessive paperwork. Although not an official part of the law, it is based on two other sections, namely Section 4(a)(1) and Section 4(a)(2). Section 4(a)(2) permits companies to sell securities in a private sale without registration, but purchasers of these securities are generally unable to sell them without registration. On the other hand, Section 4(a)(1) allows individuals who acquired securities in a private sale to privately sell them without registration, as long as they are not attempting to sell a large quantity at once. This is referred to as being an “underwriter.” Therefore, if someone wishes to privately sell securities acquired in a private sale, they can utilise Section 4(1 ½) as long as they adhere to the regulations outlined in Section 4(a)(1) and Section 4(a)(2).
Section 4(1 ½) provides a means for individuals to sell securities that were initially sold in a private placement, which refers to the sale of securities to a limited group of individuals without the need for government registration. This section allows purchasers of these securities to sell them to others without the requirement of government registration. Section 4(1 ½) consists of two components: Section 4(a)(1) and Section 4(a)(2). Section 4(a)(2) permits companies to sell securities in a private placement without government registration, while Section 4(a)(1) allows individuals who purchased these securities to sell them to others without government registration. For instance, if a company sells stocks to a group of investors in a private placement, one of the investors can sell their stocks to another individual under Section 4(1 ½) by adhering to specific regulations. These regulations include selling the stocks only to another investor in the private placement and refraining from advertising the sale to the general public. Section 4(1 ½) is advantageous as it enables individuals to sell their securities without undergoing the costly and time-consuming process of government registration. However, it is crucial to meticulously follow the rules to avoid legal violations.
Section 4(1 ½) is a provision in the Securities Act that allows for the sale of securities without registration under certain circumstances.
Section 4(1 ½) applies to the sale of restricted securities, which are securities that are not registered with the SEC and are subject to certain resale restrictions.
Only certain types of sellers, such as issuers, affiliates, and certain accredited investors, can sell securities under Section 4(1 ½).
Securities sold under Section 4(1 ½) are subject to a one-year holding period, during which time they cannot be resold without registration or an exemption.
Accredited investors are defined by the SEC and include individuals with a certain level of income or net worth, as well as certain entities such as banks and investment companies.
No, securities sold under Section 4(1 ½) can only be sold to certain types of buyers, such as accredited investors or sophisticated investors.
The seller must comply with certain disclosure requirements and ensure that the buyer is eligible to purchase the securities under Section 4(1 ½).
Selling securities to someone who is not eligible under Section 4(1 ½) can result in legal and financial consequences, including fines and penalties.
No, Section 4(1 ½) only applies to private sales of securities.
While it is not required, it is recommended that sellers consult with a lawyer to ensure compliance with SEC regulations and to avoid legal and financial risks.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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