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Abstract: 

Given the rapid growth in private securities markets, broker-dealers are increasingly being provided with opportunities to facilitate private secondary transactions. “Section 4(a)(1½)” offers flexibility to broker-dealers in effecting such transactions in a manner exempt from registration under the Securities Act of 1933. At the same time, however, since Section 4(a)(1½) is not a codified exemption from registration and is effectively an amalgamation of primary private placement and secondary market principles, it can create uncertainties for broker-dealers who wish to utilize it. In this article, we examine the legal analysis underlying Section 4(a)(1½) and the various regulatory considerations that should be taken into account by broker-dealers in relation to it.

Keywords: Rule 144 and Rule 144A; Underwriter Status; Private Secondary Transaction Guardrails

Affiliations:  1: Latham & Watkins LLP; 2: Latham & Watkins.