Section 4(a)(7)

Section 4(a)(7) addresses private secondary resales

Private securities often need liquidity before an issuer goes public or is acquired.

Section 4(a)(7) provides one statutory pathway for an existing holder to resell securities without Securities Act registration.^[1]

It is a resale exemption.

That distinguishes it from Section 4(a)(2), which addresses private transactions by the issuer itself.

Purchasers must be accredited investors

A qualifying Section 4(a)(7) resale is limited to purchasers that are accredited investors.^[1]

The transaction also cannot involve general solicitation or general advertising.

This keeps the resale private even though it may involve sophisticated institutional or high-net-worth buyers.

The seller cannot be the issuer or a subsidiary

Section 4(a)(7) is designed for secondary transactions.

The seller cannot use it as a substitute for an issuer capital raise.

That distinction helps separate:

• primary financing, where money goes to the company
• secondary liquidity, where an existing holder sells its securities to another investor

The economic result can look similar to the buyer, but the source and destination of the cash differ.

Information requirements can apply

For securities of a company that is not subject to Exchange Act reporting requirements, specified issuer information generally must be made available to the purchaser.^[1]

That information requirement addresses a central private-market problem: a buyer may be sophisticated but still needs enough company information to evaluate the investment.

The exemption is not based on sophistication alone.

Other transaction conditions matter

Section 4(a)(7) contains additional conditions concerning the issuer, the security and the transaction.

The security generally must have been outstanding for a specified period, and the transaction cannot involve certain disqualified issuers or prohibited circumstances.

The exact statutory checklist should be reviewed for a transaction rather than reduced to “accredited buyer equals exempt resale.”

Section 4(a)(7) versus Rule 144

Rule 144 can provide a safe harbor for public resales when its conditions are satisfied.

Section 4(a)(7) instead supports a private resale to accredited investors.^[1][2]

A holder might therefore evaluate different paths depending on:

• holding period
• affiliate status
• buyer type
• desired publicity
• available company information
• timing

Common mistakes

“Section 4(a)(7) lets the company raise money privately.”

No. It is a resale exemption for security holders, not the issuer’s ordinary capital-raising exemption.

“The buyer only needs to be sophisticated.”

The statutory path specifically requires accredited-investor purchasers.

“A Section 4(a)(7) resale makes the security unrestricted.”

No. Securities acquired in the transaction generally remain restricted.

“Private resale means state law is irrelevant.”

No. Federal preemption and state notice or anti-fraud authority still require analysis.^[1]

Section 4(a)(7) is useful because it provides a clearer statutory lane for private liquidity. The decisive question remains whether the transaction is truly a holder-to-investor resale and whether every condition for the exemption is documented.