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What is a big boy letter?

Big boy letter

A big boy letter is an agreement between a seller and a buyer of a security before a sale that confirms the buyer will not sue over non-disclosure of material non-public information.

Where have you heard about big boy letters?

Big boy letters are used by accredited investors in sales where the security has non-public information attached to it. They are controversial within the United States due to the dispute about the legality of the letters.

What you need to know about big boy letters.

When sellers make a transaction in the knowledge that there is non-public information about the company, this is known as inside trading - a practice that crosses legal boundaries in some countries. Sellers seek assurance from buyers through big boy letters that they will not sue based on inside trading once the transaction is complete.

If a letter wasn't presented and the buyer didn't know there was non-public information about the company, that could be a very serious lawsuit in itself - so sophisticated investors use big boy letters to cover themselves.

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