what are unregistered shares 
unregistered shares also known as restricted stock are securities that are not registered with the securities and exchange commission sec they are usually issued through private placements regulation d offerings or employee stock benefit plans as compensation for professional services or in exchange for funding a startup company for example a privately held company might issue unregistered shares to its executives and board members as part of their compensation package understanding unregistered sharesunregistered shares have fewer investor protections and pose different kinds of risks than registered securities as a result companies can only sell unregistered shares to qualified investors to be considered a qualified investor you must be a high net worth individual hnwi or a high income investor who qualifies as an hnwi differs by the financial institution but typically you must have liquid assets that range from six to seven figures a high income investor typically has an income of at least 200 000 per year or at least 300 000 per year for married couples in the past soliciting or advertising unregistered shares was prohibited however in 2013 the sec adopted rule 506 c as part of the jumpstart our business startups jobs act allowing certain unregistered securities to be solicited and advertised 1 selling unregistered shares is typically considered a felony but there are exceptions to this rule sec rule 144 lays out the conditions under which unregistered shares may be sold unregistered stock scamssometimes investors can be taken advantage of through unregistered securities scams these scams usually advertise the sales as private offerings with little to no risk plus high returns the sec recommends that investors should be on the lookout for some of these common signs of potential fraud when considering investing in an unregistered offering investors can also find out if a particular security is registered by looking it up in the sec s edgar database online stocks traded by the average investor will all be registered in the database 3 