Section 4(a)(7)

Section 4(a)(7) of the Securities Act is the codification of Section 4(1 ½). That is, Section 4(a)(7) allows an individual who holds a security issued in a private placement whose resale is restricted to resell that security in a subsequent private sale.  Find the statutory text in 15 U.S.C. 77d(a)(7), (d). 

Under Section 4(a)(7), an individual who is not an issuer may privately resell a security if the following conditions are met: 

  • the purchasers are accredited investors within the meaning of Regulation D. 
  • the seller does not generally solicit the securities;
  • if the initial issuer of the security is a non-reporting issuer, then the seller and prospective purchaser must have access to basic information on the issuer;
  • the seller is not a “bad actor” under Rule 506(d)(1) under Regulation D;
  • the initial issuer of the security is not in bankruptcy, a blank check company, or a shell company;
  • the securities cannot be part of an unsold allotment to an underwriter; and 
  • the securities must have been outstanding for at least 90 days prior to their resale. 

[Last reviewed in February of 2022 by the Wex Definitions Team]

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