Restricted securities are stocks, bonds, LLC units, limited-partnership interests, and other securities that were sold without registration under the Securities Act of 1933. Typically restricted securities are first sold in private placements under Regulation D, Rules 505 or 506. Restricted securities may not be resold absent an exemption or registration with the SEC.
Prior to an initial public offering, startup securities are restricted. The rules around restricted securities make it difficult for outsiders to acquire and insiders to sell equity in even the hottest non-public companies.