Investors Knowledge Base

Restrictions on Resale

Once you buy a security ( e.g. , a promissory note), you aren’t allowed to sell or otherwise transfer the security for one year, except for sales or transfers:

  • Back to the Issuer;
  • To an “accredited investor”;
  • As part of an offering registered with the SEC; or
  • To a family member, to a trust you control, to a trust created for the benefit of your family member, or in connection with death or divorce.

The term “family member” includes a child, stepchild, grandchild, parent, stepparent, grandparent, spouse or spousal equivalent, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the purchaser, and includes adoptive relationships. The term “spousal equivalent” means a cohabitant occupying a relationship generally equivalent to that of a spouse.

An “accredited investor” means:

  • A natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person;
  • A natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year;
  • A trust with assets in excess of $5 million, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person;
  • A business in which all the equity owners are accredited investors;
  • An employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;
  • A bank, insurance company, registered investment company, business development company, or small business investment company;
  • A charitable organization, corporation, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets exceeding $5 million; and
  • A director, executive officer, or general partner of the company selling the securities, or any director, executive officer, or general partner of a general partner of that issuer.

If you hold a purchased security as specified above, there is no assurance of crowdfunding equity liquidity, even after one year.