Which term refers to securities that cannot be sold immediately after purchase?

Which term refers to securities that cannot be sold immediately after purchase?

• A. Qualified securities
• B. Restricted securities
• C. Exempt securities
• D. Hot securities

Answer: (B)

The term that refers to securities that cannot be sold immediately after purchase is "restricted securities." These securities are typically subject to certain legal limitations that prevent their sale until certain conditions are met, such as the passage of a specified holding period or the registration of the securities with regulatory authorities. This restriction is often applied to shares acquired through private placements or in connection with employee compensation plans.

Restricted securities are designed to protect investors and stabilize market transactions by ensuring that they are not sold quickly into the market, which could potentially disrupt pricing and demand. When investing in restricted securities, it’s important for investors to understand the nature of these limitations and the reasons behind them, as they impact liquidity and the overall investment strategy.

The other terms do not accurately describe the specific nature of securities that cannot be sold immediately. Qualified securities often refer to securities that meet certain criteria established by regulatory bodies for investment; exempt securities are those that are not required to be registered with authorities; hot securities generally refer to those that have high demand or volatility but do not imply any restrictions on selling.