Purchase entirely for own account: Overview, definition, and example
What does purchase entirely for own account mean?
Purchase entirely for own account refers to a transaction in which a buyer purchases a financial instrument, asset, or property solely for their own benefit and not with the intention of reselling or transferring it to another party. The buyer is not acting as an intermediary or agent for others, nor are they purchasing on behalf of any third party. This term is often used in the context of securities, investments, or contracts to indicate that the purchaser is making the acquisition with no intention to distribute or transfer the purchased items.
This phrase is often included in contracts or securities offerings to ensure that the purchaser is making an investment decision based on their own risk tolerance and judgment, without any intention of reselling or offering the purchased goods or securities to others.
Why is purchase entirely for own account important?
The phrase purchase entirely for own account is important because it helps clarify the intention behind the purchase. For example, when buying securities or investments, this statement can protect the seller by confirming that the buyer is making the purchase based on their own financial interests and is not acquiring the asset to immediately distribute or resell it, which could affect the market or violate securities regulations.
It is particularly relevant in securities law and regulations, such as in private offerings or the sale of restricted securities, where it ensures that the buyer is not participating in the transaction with the intention of reselling the asset to the public, avoiding issues related to market manipulation or non-compliance with regulations.
Understanding purchase entirely for own account through an example
Imagine Investor A purchases a large number of shares from a private company, Company X. The purchase agreement includes a clause stating that Investor A is buying the shares entirely for their own account, meaning that Investor A is not purchasing the shares to resell them immediately or distribute them to others. Instead, Investor A is investing in the company for their own benefit, possibly to gain long-term value from the shares or participate in the company’s growth.
In another example, a collector buys a rare piece of art. The contract specifies that the purchase is being made entirely for their own account, meaning the buyer is not acquiring the art with the intention of reselling it, but instead to hold it as part of their personal collection.
An example of purchase entirely for own account clause
Here’s how a purchase entirely for own account clause might appear in a securities purchase agreement:
“The Purchaser acknowledges and agrees that the securities being purchased are for the Purchaser’s own account and not with a view to resale, distribution, or public offering. The Purchaser further represents that they have no intention of transferring or offering the securities to any third party, and the Purchaser has sufficient knowledge and experience to evaluate the risks of such an investment.”
Conclusion
Purchase entirely for own account is a term used to clarify that a transaction is being made solely for the buyer's benefit and not for resale or redistribution to third parties. This statement ensures that the buyer is acting on their own behalf and not engaging in activities that could violate securities laws or regulations, such as reselling restricted securities. Understanding this concept is crucial in investment agreements, securities offerings, and other contractual arrangements where the buyer's intent needs to be clearly established.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.