Resale Limitations for Securities from Private Placements

Another limitation under the SEC rules for a private placement which will be under the safe harbor provisions is that the issuer must take reasonable care to make sure the securities are not resold without registration or the application of an exemption. Specifically, this means the securities should not be issued to an underwriter, that is, someone who buys the securities to sell them again. Generally, this can be accomplished with a reasonable inquiry, a disclosure of the restriction on resale, and placing a legend on the certificates or documents evidencing the security which states they cannot be sold without registration or an exemption.

The rules involve other issues a conditions depending on various issues of the offering contemplated. As stated initially, it is extremely important that a person seeking investment obtain legal counsel to address both the application of federal and state law to the transaction.

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